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WGU C214 Study Guide Multi Choice version 1.Trading on the NYSE is executed without a specialist (i.e. a market maker). (T/F) ANS F 2.Stocks and bonds are two types of financial instruments (T/F) ANS True 3.The matching principle in accrual accounting requires that a.Revenues be recognized when the earnings process is complete and match- es expenses to revenues recognized.b.Expenses are matched to the year in which they are incurred c.Revenues are matched to the year in which they are booked d.Revenues should be large enough to match expenses ANS a 4.A high-quality customer just purchased $500,000 worth of product from your company. The contract calls for immediate delivery of the product with 1 / 4
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a cash payment of $300,000 today and $200,000 to be paid 60 days. The expense associated with the product is $300,000, of which $100,000 has not been paid to your supplier. Under accrual based accounting system, you will most likely report a.revenues of $300,000 and expenses of $300,000.b.revenues of $300,000 and expenses of $200,000.c.revenues of $500,000 and expenses of $300,000.d.revenues of $500,000 and expenses of $200,000.ANS c 5.A firm reported retained earnings of $300 in 12/31/20x2. For 12/31/20x3, the firm reports retained earnings of $400 and pays dividends of $25. What was net income in 20x3
- 300
- 400
- 125
- 100
ANS c 6.A basic equation for the balance sheet is a.Equity = Assets - Liabilities 2 / 4
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b.Liabilities = Equity + Assets c.Assets = Liabilities - Equity d.Assets = Equity - Liabilities ANS a 7.Why is the Balance Sheet known as a permanent statement?a.Because the statement is sent to the SEC.b.Because the other statements are reset at the end of the fiscal year c.Because it is printed out and archived d.Because it persists in the minds of the shareholders.ANS b 8.How do you calculate the change in Retained Earnings?a.Ending Retained Earnings - Change in Cash b.EBIT divided by Total Assets + Dividends 3 / 4
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c.EBIT - Change in Cash - Dividends d.Net Income - Dividends ANS d 9.Which of the following is generally true?a.Gross Profit and Operating Income are the same b.Cost of Goods Sold + Operating Expenses = Net Income c.Operating Income and EBIT are the same d.EBIT + Income Taxes = Net income ANS c 10.Which components are part of total assets?a.Cash, Accounts Receivable, Short Term Debt b.Cash Accounts Receivable, Inventory, Long Term Assets c.Accounts Payable, Long Term Assets, Long Term Debt d.Accounts Payable, Net Income, Equity ANS b 11.Which components are part of current assets?a.Cash, Accounts Receivable, Property Plant & Equipment b.Accounts Receivable, Accounts Payable, Inventory c.Long Term Debt, Property Plant & Equipment, Common Stock
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