ACCT 2000 LOWE-ARDOIN ACTUAL EXAM 1

ACCT 2000 LOWE-ARDOIN (ACTUAL / ) EXAM 1

NEWEST QUESTIONS AND WITH VERIFIED ANSWERS

/GRADED A+/

Which of the following is one measure of liquidity?

• debt to assets ratio
• earnings per share
• profit margin
• working capital - ---Answers----D

Under which of the following circumstances would the classification of a parcel of land change from a long-term investment to property, plant, and equipment on a balance sheet?

• if the property was initially used for operating activities but

later stopped being used for operating activities

• if the property was initially purchased but not used for

operating activities and this continued on past a one-year operating cycle

• if the property was initially purchased but not used for

operating activities and then later began to be used for operating activities

• if the property was initially used for operating activities and

those activities continued on past a one-year operating cycle - ---Answers----C

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The short-term ability of a company to a pay its maturing obligations and to meet unexpected needs for cash is measured by the

• profitability ratios
• solvency ratios
• liquidity ratios
• free cash flow - ---Answers----C

Within the past two weeks, Fanny's Flowers has completed each of the activities listed below. Of these activities, which should be recorded in the company's accounting records?

• entered into contract negotiations with a new floral

wholesaler

• fired one full-time employee
• purchased a new walk-in order
• hired two part-time employees - ---Answers----C

What circumstances makes it more appropriate to use the fair value principle rather than the historical cost principle in reporting an asset?

• the market price of the asset is readily available and

accurate

• the asset undergoes depreciation over time
• the value of the asset depends on the specific agreement

between the buyer and seller 2 / 4

• the asset never undergoes depreciation, but the seller

reports a gain or loss upon sale of the asset. - ---Answers--- -

A book designer purchased a new computer monitor for $1,800 cash. As a result of this purchase,

• stockholders' equity decreased by $1,800
• total assets remained unchanged
• both assets and stockholders' equity decreased by $1800
• assets increased by $1800 - ---Answers----B

Under which assumption would it mean that the activities of one auto maker can be distinguished from activities of another auto maker?

• monetary unit assumption
• economic entity assumption
• periodicity assumption
• full disclosure assumption - ---Answers----B

What is the effect on the accounting equation when services are performed on account?

• liabilities increase
• stockholders' equity increases
• assets decrease
• liabilities decrease - ---Answers----B
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Which of the following assumptions requires that only items that can be expressed in terms of money be included in the accounting records?

• going concern assumption
• monetary unit assumption
• periodicity assumption
• economic entity assumption - ---Answers----B

Jennifer's Dress Boutique makes custom wedding gowns and requires customers to pay in advance for the work performed.When a customer pays $6,000 for a gown to be received at a future date, the company will

• Decrease Cash $6,000 and decrease Unearned Service

Revenue $6,000

• Decrease Cash $6,000 and increase Service Revenue $6,000
• Increase Cash $6,000 and decrease Unearned Service

Revenue $6,000

• Increase Cash $6,000 and increase Unearned Service

Revenue $6,000 - ---Answers----D

Which of the following statements is the best application of the economic entity assumption?

• "We are a small, family-owned company, but my son plans

to take over as CEO when i retire, so all our employees should still have jobs."

• "Make sure you compile the results of the employees

satisfaction survey so we can include the relevant information in our next financial statements?

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