Finance Exam 1 Essay

2487 Words Jun 13th, 2015 10 Pages
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1.

Which of the following is the fundamental accounting equation?



Assets = Liabilities + Owners' equity





2.

On December 31, 2004, Track Record Inc.'s sales people have firm outstanding orders totaling $1.66 million, which, it has guaranteed its customers, will be fulfilled during the month of January 2005.



If Track Record includes the $1.66 million in its sales figures for 2004, it will be
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Consider the same scenario as in the previous question:



June Smith, a process engineer, has sold her 15-year patent for a new etching process to Silica Labs, Inc. In return, she has received $500,000 in cash and, based on its value on the sale date, $200,000 in common stock in Silica Labs. The stock is forecasted to double in market value over the next two months.



Assuming that Silica Labs holds some long-term debt, which of the following describes the effect of the transaction on Silica Labs?



Current ratio will decrease and total debt to equity ratio will decrease



8.

Lucky Lee, a video-game store in New York city, purchases a game machine directly from Taiwan for $30,000. In the U.S., the same machine will probably cost at least $36,000. Pick the most appropriate accounting action for Lucky Lee:



Record the machine at $30,000





9.

Which one of the following is an item of owners' equity?





Earnings generated by the entity



10.

Complete the following sentence: The Conservatism Concept directs an entity to consider recognizing a liability when it is __________________.





reasonably certain economic resources may be sacrificed in the future



11.

The realization concept states that revenue is recorded when:



It has been earned and realized or realizable





12.

On its June 30, 2005 balance sheet, Barrows Corporation has total assets of $100,000,…

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