Finance Questions

Which of the following is true regarding accounts receivable?A) Both revenue and liabilities are increased when the sale is made.B) Revenue is increased when the cash is collected.C) Total assets do not change when the cash is collected.D) Total assets do not change when the sale is made.

When a company make an end-of-the-period adjustment for depreciation,A) it decreases retained earnings.B) there is no impact on total assets.C) the Balance Sheet stays in balance because total assets and total liabilities are decreased by the same amount.D) the cash paid for depreciation reduces total assets.

Elyptical, Inc. paid three months of rent for $9,000 on April 1st. At April 30th, which of the following would correctly state Elyptical's accounts?A) Prepaid rent $0; rent expense $9,000B) Prepaid rent $0; rent expense $3,000C) Prepaid rent $6,000; rent expense $3,000D) Prepaid rent $3,000; rent expense $6,000

Which of the following is true regarding the Statement of Cash Flows?A) It must be prepared prior to the Income Statement.B) It is the one statement that relies on accrual accounting.C) This statement is based on the principles of double-entry bookkeeping.D) The beginning balance of this statement is the ending balance of cash at the end of the prior period.

During January, Bradbury Co. made $46,000 in total sales. All of the sales were for cash, except one sale to Lima for $1,500, which was on account. When Lima pays Bradbury in February, which of the following will be true?A) Both Bradbury's total revenue and cash will increase by $1,500 in February.B) There will be no change to either Bradbury's total assets or net income for February.C) Bradbury's total assets will increase by $1,500 when the cash is received, but no other accounts will be changed.D) Bradbury's net income will increase by $1,500, but no other accounts will be impacted.

Which of the following is true?A) Total expenses always equals the amount of cash paid for them during the period.B) Revenue can include some amounts that have not yet been received by the companyC) Ending balances on the Balance Sheet are zeroed out before starting the new period.D) Expenses are recorded as an expense only after they have been paid.

Which of the following is true?A) Depreciation expense on the Income Statement is never for more than one year.B) Depreciation expense always equals accumulated depreciation.C) Accumulated depreciation is a liability account on the company's Balance Sheet.D) Depreciation expense is the amount of cash paid for depreciation during the year.

During the month, Pinto Company earned $12,000 in revenue, but only $10,000 of that had been received by the end of the month. Pinto's only expense was advertising of $3,000, but the company will pay for that next month. How much did Pinto report in net income for the month?A) $10,000B) $9,000C) $7,000D) $12,000

Which of the following is true?A) Assets + liabilities = stockholders' equityB) Assets - liabilities = stockholders' equityC) Assets = stockholders' equity - liabilitiesD) Assets = liabilities + retained earningsE) Assets - retained earnings = liabilities

On October 1, 2025, Wolfie Co. bought equipment for $12,000. Wolfie expects the equipment will last for three years and then be worthless. Which of the following is correct for the company's annual financial statements at December 31, 2026?A) Depreciation expense $4,000; accumulated depreciation $7,000B) Depreciation expense $5,000; accumulated depreciation $5,000C) Depreciation expense $4,000; accumulated depreciation $5,000D) Depreciation expense $5,000; accumulated depreciation $4,000

Unearned revenue isA) cash that has been received from customers but not yet earned.B) revenue that has not yet been received.C) revenue that has been earned but not yet received.D) a concept used only in cash-basis accounting.E) cash that has not been either earned or received.

Morgan Company paid $400 for advertising brochures when it went into business on January 1. By January 31st, Morgan had given away one-fourth of these flyers. Which entry should Morgan make at January 31 to correctly state its accounts?A) Decrease cash by $100, and increase supplies expense by $100B) Decrease the asset account supplies by $100, and increase supplies expense by $100.C) Increase both the asset account supplies and the expense account supplies expense by $100.D) Make no entry to the asset accounts, and increase supplies expense by $100.

A company with $500,000 in operating assets is considering the purchase of a machine that costs $60,000 and which is expected to reduce operating costs by $15,000 each year. These reductions in cost occur evenly throughout the year. The payback period for this machine in years is closest to:A) 8.3 yearsB) 0.25 yearsC) 4 yearsD) 33.3 years

Which of the following is correctly classified?A) Borrowing money from the bank is an operating cash flow.B) Buying a building is an investing cash flow.C) Selling stock to stockholders is an investing cash flow.D) Paying for operations of the business is an investing cash flow.

Which of the following is true?A) The ending balances in the stockholders' equity accounts will always become the beginning balances at the start of the next period.B) Ending retained earnings will always equal ending stockholders' equity if the books are in balance.C) Assets minus liabilities must equal stockholders' equity.D) Stockholders equity is the total cash the company earned as well as received from stockholders.

Which of the following is true of the IASB?A) It is responsible for IFRS.B) It is the new accounting standard established by Sarbanes-Oxley.C) This is a company's internal accounting standards book.D) It is the rule-making body of the SEC.E) It is responsible for the accounting rules used in the U.S.

Which of the following is true when a company borrows money from the bank?A) The amount borrowed will eventually become an expense on the company's Income Statement.B) The interest that must be paid increases both assets and liabilities.C)The interest associated with the loan will eventually be shown as an expense on the company's Income Statement.D) When the cash is received by the company, both assets and stockholders' equity are increased.

Which of the following is true of the Statement of Retained Earnings?A) This statement must be prepared before the Income Statement can be completed.B) The ending balance on this statement is the total of stockholders' equity.C) The ending balance on this statement is the cash that is available for dividends.D) The ending retained earnings always becomes the beginning retained earnings at the start of the next period.

Which of the following accurately describes retained earnings?A) All the net incomes of the company minus any net losses or dividends paid.B) A fund of cash that has been set aside until the company pays dividends to stockholders.C) This account plus the company's total liabilities must equal the company's total assets.D) The cash remaining from the company's net income for the year minus any dividends the company paid during the year.

Which of the following transactions will increase a current ratio, which is currently 2.5?A) Using cash to pay an account payable.B) Collecting an account receivable.C) Receiving cash from signing a 6-month note payable.D) Accruing (Recording, Increasing) an expense.