KU ACCOUNTING 200 FINAL EXAM 2025 QUESTIONS AND ANSWERS

Fundamental Accounting Equation - ANS Assets = Liabilities + Owners' Equity What are the two components of stockholder's equity? - ANS Common Stock and Retained Earnings Current Ratio - ANS Current Asset / Current Liabilities Quick Ratio - ANS (Cash+Short Term Investment + Net Rec)/Current Liabilities Debt Ratio - ANS Total Liabilities/Total Assets Working Capital - ANS Current Assets - Current Liabilities What does the current ratio show? - ANS If the company has assets to cover near-term liabilities What does quick ratio show? - ANS How fast a company can pay off debts What does working capital show? - ANS How much extra resources a company has What does debt ratio measure? - ANS The long-term capability of the company KU ACCOUNTING 200 FINAL EXAM 2025 QUESTIONS AND ANSWERS Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 2 What is the group that creates accounting standards? - ANS Financial Accounting Standards Board What gives the board of directors the right to change a company's CEO? - ANS The stockholders elect the B of D and give the board the right to hire and fire executives What 3 things do you need to recognize revenue according to the revenue recognition concept? - ANS Implicit or explicit agreement, known price, substantial effort to complete transaction What is the purpose of adjusting entries? - ANS To assign revenue and expenses to their correct period. (There is no trigger event). Classified as whether to precede or follow the flow of cash Accrual - ANS revenue or expense precedes the cash flow Deferral - ANS revenue or expense follows the cash flow What is the revenue concept? - ANS When and how much to record (implicit or explicit agreement, known price, substantial effort to complete requirements to sell) What is the matching concept? - ANS Expenses recorded in the same period that any revenue associated with teh expenses is generated When to recognize revenues and expenses under cash accounting? - ANS When there is an exchange of cash When to recognize revenues and expenses under accrual accounting - ANS When earned (economic performance) Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 3 When can you use reversing entries? - ANS When in the course of the adjusting process you increase an asset or liability account Where do we close dividends - ANS Retained Earnings What is double taxation? - ANS Double taxation occurs only in corporations. Corporation pays tax on its net income. Then, when it pays dividends, the shareholders are taxed on the dividend income they receive. Therefore, the same money has been taxed twice, by the corporation and the shareholder How do you compute gross margin? - ANS Sales - COGS = GM What type of account is COGS? - ANS Expense account What is COGS? - ANS Cost of goods sold represents the price you paid for the goods that you sold. It is an expense account and closed to income summary. At the end of October, XYZ's bank statement arrives. When preparing the bank reconciliation, it is discovered that there were deposits in transit of $2,000, an NSF check for $200, outstanding checks for $1,400, and a bank service charge of $15. If the ledger account cash balance on 10/31 was $9,800, what should be the correct cash balance after reconciling the cash account? a. $9,800 Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 4 b. $9,585 c. $10,400 d. $12,015 e. None of the above are correct. - ANS b) 9,585 The deposits in transit ($2000) and outstanding checks ($1400) were represented on the company's books but not the bank's. The NSF check ($200) and the service fee ($15) were Which of the following descriptions accurately describes the concept of reliability? a. A number can be objectively determined using a consistent technique. b. Two different accountants using the same approach would determine different values for the same asset. c. Estimating ending inventory for quarterly reporting emphasizes reliability over timeliness. d. All numbers on financial statements are subjective. - ANS a) A number can be accurately determined using a consistent technique Which of the following accurately describes the concept of relevance? a. A sole-proprietor's purchase of a car for personal use should be recorded on the financial statements of the sole proprietor's business. b. Accountants only record information that is useful for decision making and determining the economic performance of the company. c. A number can be objectively determined using a consistent technique. d. All assets should be recorded at their historical cost. - ANS b) accountants only record information that is usefu