Accounting 101 Final Exam with
Complete Solutions
What are assets recorded at? - ANSWER-The historical/original cost because it is
objective and verifiable.
Left side - ANSWER-Debit
Right side - ANSWER-Credit
The 3 forms of business entities - ANSWER-Proprietorship, Partnership, Corperation
What is the definition of a revenue? - ANSWER-inflows of resources that increase
retained earnings by delivering goods or service to customers
What is the definition of an expense? - ANSWER-resource outflows that decrease
retained earnings due to operations
What is the difference between internal and external users? - ANSWER-Financial
accounting is for those externally - that way investors, creditors, government agencies,
and the public can make decisions.
Management accounting is for those internally - information for managers to base their
decisions upon.
What is the difference between Accounts Receivable and Notes Receivable? -
ANSWER-Anything labeled as a "note" has interest attached to it.
What are the two methods for Bad Debts? - ANSWER-Allowances & Write Offs
How do you calculate Net Realizable Value of Accounts Receivable? - ANSWER-
Accounts Receivable - Allowance for doubtful expense (bad-debt expense)
How do you calculate interest for a Note Receivable? - ANSWER-Principle x Rate x
Time
How do you calculate Gross Profit? - ANSWER-Sales - Cost Of Goods Sold (COGS)
What is the disclosure principle? - ANSWER-a company's financial statement should
report enough information for outsiders to make a decision
, What is an example of the matching principle? - ANSWER-Inventory is an asset/current
asset. When inventory is sold it becomes an expense (COGS)
What is indicated by the inventory turnover? - ANSWER-how rapidly inventory is sold
What does FIFO mean? - ANSWER-First in-First out
What does LIFO mean? - ANSWER-Last in- First out
What is weighted-average method? - ANSWER-Also known as the average cost.
What is specific identification cost? - ANSWER-For unique items such as cars at a
dealorship
What method gets the highest gross profit? - ANSWER-FIFO
What method gets the highest COGS? - ANSWER-LIFO
What is Lower of Cost or Market? - ANSWER-LCM requires that inventory be reported
in the financial statement at whichever is lower-- the historical cost or market value
How do you calculate the book value of an asset? - ANSWER-Cost - Accumulated
Depreciation
What asset cannot be depreciated? - ANSWER-Land
What 3 things do you need to calculate depreciation? - ANSWER-Cost, Estimated
useful life, and estimated residual value
What is estimated residual value? - ANSWER-scarp value or salvage value
What is the definition of amortization? - ANSWER-title of the expenses associated with
intangibles
How do you figured gains and losses? - ANSWER-The difference between Book Value
and amount realized
What does the term "parent" mean in accounting? - ANSWER-Parenting is owning more
than 50% of the investee's voting stock
What are current liabilities? - ANSWER-obligations due within one year or within the
company's normal operating cycle if longer than a year
What are examples of currents liabilities? - ANSWER-Accounts Payable, (Short-
Term)Notes Payable, Sales Tax Payable, Accrued Liabilities, Payroll Liabilities,
Unearned Revenues, and current portions of Long-Term Debts
Complete Solutions
What are assets recorded at? - ANSWER-The historical/original cost because it is
objective and verifiable.
Left side - ANSWER-Debit
Right side - ANSWER-Credit
The 3 forms of business entities - ANSWER-Proprietorship, Partnership, Corperation
What is the definition of a revenue? - ANSWER-inflows of resources that increase
retained earnings by delivering goods or service to customers
What is the definition of an expense? - ANSWER-resource outflows that decrease
retained earnings due to operations
What is the difference between internal and external users? - ANSWER-Financial
accounting is for those externally - that way investors, creditors, government agencies,
and the public can make decisions.
Management accounting is for those internally - information for managers to base their
decisions upon.
What is the difference between Accounts Receivable and Notes Receivable? -
ANSWER-Anything labeled as a "note" has interest attached to it.
What are the two methods for Bad Debts? - ANSWER-Allowances & Write Offs
How do you calculate Net Realizable Value of Accounts Receivable? - ANSWER-
Accounts Receivable - Allowance for doubtful expense (bad-debt expense)
How do you calculate interest for a Note Receivable? - ANSWER-Principle x Rate x
Time
How do you calculate Gross Profit? - ANSWER-Sales - Cost Of Goods Sold (COGS)
What is the disclosure principle? - ANSWER-a company's financial statement should
report enough information for outsiders to make a decision
, What is an example of the matching principle? - ANSWER-Inventory is an asset/current
asset. When inventory is sold it becomes an expense (COGS)
What is indicated by the inventory turnover? - ANSWER-how rapidly inventory is sold
What does FIFO mean? - ANSWER-First in-First out
What does LIFO mean? - ANSWER-Last in- First out
What is weighted-average method? - ANSWER-Also known as the average cost.
What is specific identification cost? - ANSWER-For unique items such as cars at a
dealorship
What method gets the highest gross profit? - ANSWER-FIFO
What method gets the highest COGS? - ANSWER-LIFO
What is Lower of Cost or Market? - ANSWER-LCM requires that inventory be reported
in the financial statement at whichever is lower-- the historical cost or market value
How do you calculate the book value of an asset? - ANSWER-Cost - Accumulated
Depreciation
What asset cannot be depreciated? - ANSWER-Land
What 3 things do you need to calculate depreciation? - ANSWER-Cost, Estimated
useful life, and estimated residual value
What is estimated residual value? - ANSWER-scarp value or salvage value
What is the definition of amortization? - ANSWER-title of the expenses associated with
intangibles
How do you figured gains and losses? - ANSWER-The difference between Book Value
and amount realized
What does the term "parent" mean in accounting? - ANSWER-Parenting is owning more
than 50% of the investee's voting stock
What are current liabilities? - ANSWER-obligations due within one year or within the
company's normal operating cycle if longer than a year
What are examples of currents liabilities? - ANSWER-Accounts Payable, (Short-
Term)Notes Payable, Sales Tax Payable, Accrued Liabilities, Payroll Liabilities,
Unearned Revenues, and current portions of Long-Term Debts
