CBAD 201 Final Exam questions with
complete solution
Net working capital:
a. should be the same for all companies
b. represents the company's ability to pay its long-term debts
c. is computed by subtracting total current liabilities from total current assets
d. should be a negative number to ensure the profitability of the company. - correct answer ✔✔c. is
computed by subtracting total current liabilities from total current assets
What type of business organization transacts much more business and is larger in terms of assets,
income, and number of employees?
a. partnership
b. limited liability company
c. corporation
d. proprietorship - correct answer ✔✔c. corporation
The accounting assumption that states that the business, rather than its owners, is the reporting unit is
the:
a. entity assumption
b. stable-monetary-unit assumption
c. going concern assumption
d. historical cost assumption - correct answer ✔✔a. entity assumption
The accounting equation can be stated as:
,a. Assets = Liabilities - Stockholders' Equity
b. Assets -Liabilities = Stockholders' Equity
c. Assets + Stockholders' Equity = Liabilities
d. Assets - Stockholders' Equity + Liabilities = Zero - correct answer ✔✔b. Assets -Liabilities =
Stockholders' Equity
Which of the following statements is TRUE?
a. Dividends reduce retained earnings.
b. Dividends are expenses of a business.
c. Dividends reduce net income.
d. Dividends increase retained earnings. - correct answer ✔✔a. Dividends reduce retained earnings.
Which financial statement is dated at the moment in time when the accounting period ends?
a. Statement of retained earnings and income statement
b. Statement of cash flows
c. Balance sheet
d. Income statement - correct answer ✔✔c. Balance sheet
The Balance Sheet is used to prepare the:
a. Income Statement
b. Statement of Stockholders' Equity
c. Statement of Cash Flows
d. Statement of Retained Earnings - correct answer ✔✔c. Statement of Cash Flows
Which transaction decreases stockholders' equity?
, a. sale of common stock
b. cash purchase of land
c. total expenses greater than total revenues for the period
d. total revenues greater than total expenses for the period - correct answer ✔✔c. total expenses
greater than total revenues for the period
Which of the following is NOT a business transaction?
a. A company buys goods on account.
b. A company sells land for cash.
c. A company borrows money from the bank.
d. A company fired 10 percent of the employees due to lackluster sales. - correct answer ✔✔d. A
company fired 10 percent of the employees due to lackluster sales.
A company performed services for a customer for cash. This transaction increased assets and:
a. increased revenues
b. increased expenses
c. increased liabilities
d. decreased stockholders' equity - correct answer ✔✔a. increased revenues
The debt created by a business when it makes a purchase of inventory on account is a:
a. account receivable
b. note payable
c. revenue
d. account payable - correct answer ✔✔d. account payable
complete solution
Net working capital:
a. should be the same for all companies
b. represents the company's ability to pay its long-term debts
c. is computed by subtracting total current liabilities from total current assets
d. should be a negative number to ensure the profitability of the company. - correct answer ✔✔c. is
computed by subtracting total current liabilities from total current assets
What type of business organization transacts much more business and is larger in terms of assets,
income, and number of employees?
a. partnership
b. limited liability company
c. corporation
d. proprietorship - correct answer ✔✔c. corporation
The accounting assumption that states that the business, rather than its owners, is the reporting unit is
the:
a. entity assumption
b. stable-monetary-unit assumption
c. going concern assumption
d. historical cost assumption - correct answer ✔✔a. entity assumption
The accounting equation can be stated as:
,a. Assets = Liabilities - Stockholders' Equity
b. Assets -Liabilities = Stockholders' Equity
c. Assets + Stockholders' Equity = Liabilities
d. Assets - Stockholders' Equity + Liabilities = Zero - correct answer ✔✔b. Assets -Liabilities =
Stockholders' Equity
Which of the following statements is TRUE?
a. Dividends reduce retained earnings.
b. Dividends are expenses of a business.
c. Dividends reduce net income.
d. Dividends increase retained earnings. - correct answer ✔✔a. Dividends reduce retained earnings.
Which financial statement is dated at the moment in time when the accounting period ends?
a. Statement of retained earnings and income statement
b. Statement of cash flows
c. Balance sheet
d. Income statement - correct answer ✔✔c. Balance sheet
The Balance Sheet is used to prepare the:
a. Income Statement
b. Statement of Stockholders' Equity
c. Statement of Cash Flows
d. Statement of Retained Earnings - correct answer ✔✔c. Statement of Cash Flows
Which transaction decreases stockholders' equity?
, a. sale of common stock
b. cash purchase of land
c. total expenses greater than total revenues for the period
d. total revenues greater than total expenses for the period - correct answer ✔✔c. total expenses
greater than total revenues for the period
Which of the following is NOT a business transaction?
a. A company buys goods on account.
b. A company sells land for cash.
c. A company borrows money from the bank.
d. A company fired 10 percent of the employees due to lackluster sales. - correct answer ✔✔d. A
company fired 10 percent of the employees due to lackluster sales.
A company performed services for a customer for cash. This transaction increased assets and:
a. increased revenues
b. increased expenses
c. increased liabilities
d. decreased stockholders' equity - correct answer ✔✔a. increased revenues
The debt created by a business when it makes a purchase of inventory on account is a:
a. account receivable
b. note payable
c. revenue
d. account payable - correct answer ✔✔d. account payable
