Questions and Answers > ECONO 101/ ECONOMICS 101.

Question 1. Question 1 a)The goal of financial accounting is: b)To make work for accountants c)To accurately reflect the current market value of all items owned d)To provide information to decision makers ...

Question 1. Question 1 a)The goal of financial accounting is: b)To make work for accountants c)To accurately reflect the current market value of all items owned d)To provide information to decision makers To calculate (and minimize) taxes owed 1 point 2. Question 2 Accounting was created Independently across many ancient societies as a tool to organize as economies became more complicated In 18th century Britain as a tool of the trading companies In 16th century Italy as a tool of the newly wealthy merchant class Around the same time as the computer. Accounting has become more complicated as computer abilities have grown. 1 point 3. Question 3 "Where do we stand at a given point in time?" is one of the two big questions in life. Which financial statement was created to answer this question? The cash flow statement The balance sheet The income statement 1 point 4. Question 4 Accrual accounting is designed to Provide companies with a tool for computing taxes Reflect the current value of all items owned or owed by the organization Record an economic event in the period in which it occurs 1 point 5. Question 5 Athena firm started the year with retained earnings of $1,300,000. Their net income during the year was $250,000. They paid dividends of $25,000. They also borrowed $100,000 that they will have to pay next year. How much is retained earnings at the end of the year? (Note - for all questions asking for numerical answers, write the number only, no dollar sign ($)) 1 point 6. Question 6 If assets go down and stock holders equity stays the same, what must have happened to liabilities? It stayed the same We cannot tell It went down It went up 1 point 7. Question 7 If Kirsten's boss ask her how much the company spent on the inventory they sold this year, she should look at the Income statement Cash flow statement Balance sheet 1 point 8. Question 8 If Luis' boss ask him how much their competitors raised in financing last year, he should look at the Cash flow statement Income statement Balance sheet 1 point 9. Question 9 If Iullia's boss asked her how much they owed to vendors, she should look at the Balance sheet Income statement Cash flow statement 1 point 10. Question 10 Which are criteria of revenue recognition Earned Customer signs an agreement that goods were delivered Items to be sold are completely built Realized or Realizable 1 point 11. Question 11 Caroline has a retail bike company called "One Price Bike". She charges $100 for each bike. In one week, she has four customers who purchase bikes by paying cash and taking the bikes immediately. Another customers pays for a bike, but says they will come in next week to pick it up on their child's birthday. There are also two customers who take bikes, but have not yet paid. They both are trying the bikes out and will either pay next week or return the bike. Caroline knows that about 50% of the people end up buying the bike after a week trail. How much should Caroline recognize in revenue for this week? 1 point 12. Question 12 Kelly owns a catering company that focuses on burritos. She provides clients with food and bills them later. At the end of the year she is owed $70,000, but believes there are about $4,000 she will not be paid. What amount should she report on the face of her financial statements? $74,000 $70,000 $66,000 1 point 13. Question 13 At the beginning of the year, a company had $80,000 in its allowance for doubtful accounts and $9,000,000 in accounts receivable. During the year they had $23,000,000 in credit sales. By the end of the year, they had $9,700,000 in accounts receivable and believed they would not collect $92,000 of it. Assuming there were no write offs or other items to impact the allowance for doubtful accounts, what would bad debt expense be for the current year? 1 point 14. Question 14 Renata inc. had their year end on December 31. At that time they were owed accounts receivable of $970,000 and had an allowance for doubtful accounts of $21,000. On January 3rd they were notified that one of their customers had gone bankrupt and would not be paying the $3,200 they owed Renata. By how much will this transaction decrease the accounts receivable balance Renata shows on their balance sheet? 1 point 15. Question 15 The inventory method applied by a firm should be applied consistently from year to year, but does not have to match actual flow. the method that most closely approximates the physical flow in the year being reported. the one used by most firms in their industry 1 point 16. Question 16 Hiroaki is calculating costs of goods sold for his company. They sell toasters. He spent $4,000 on raw material, paid employees who built the toasters $7,000, spent $5,000 on advertising and had depreciation of $1,000 on a machine used to build the toasters. How much should he report as his costs of goods sold? 1 point 17. Question 17 Paula owns a company that distributes products to coffee shops. This is her second year of operations. At the beginning of the year, she had 120 pounds of coffee that cost $15 each. She purchased 200 pounds of coffee during the year, but the cost increased to $20. At the end of the year she had 130 pounds left. How much would cost of goods sold be if she used LIFO inventory method? 1 point 18. Question 18 Paula owns a company that distributes products to coffee shops. This is her second year of operations. At the beginning of the year, she had 120 pounds of coffee that cost $15 each. She purchased 200 pounds of coffee during the year, but the cost increased to $20. At the end of the year she had 130 pounds left. How much would the inventory balance be if she used LIFO inventory method? 1 point 19. Question 19 Matthew purchased a new motorcycle for his delivery company. It cost him $12,000. He spent $2,000 more to add storage bags and have it painted with his company colors. It is a high quality bike that will last 14 years. However, Matthew intends to sell it to an employee after 5 years. He believes it will still be worth $4,000 and views this as an easy way to make an employee happy. He purchased the bike on the first day of the year. How much depreciation expense would he recognize at the end of the year? You can assume he uses straight-line depreciation. 1 point 20. Question 20 Matthew also owns a truck that he purchased three years ago. He plans to depreciate it over 6 years. At the time of purchase, he believed he would be able to resell the truck for $10,000. He still thinks that is correct (that is about what 6 year old trucks are selling for now). However, his current bookvalue is $18,000 and he was surprised to see that similar trucks are only selling for $16,000. How much additional depreciation expense should Matthew take this year? Assume he uses straight line depreciation. 1 point 21. Question 21 Emily purchased a tractor for her farm four years ago. She paid $100,000 for it, planned to use it for 10 years and then to sell it $20,000. However, she has now decided to plow using Oxen as part of a bioorganic certification. It will take her two years to train the Oxen, and then she plans to sell the tractor. She believes she will be able to sell it for $35,000 at that time. How much depreciation expense should she recognize in the fifth year of use? 1 point 22. Question 22 Joshua purchased an airplane 12 years ago. He paid $1,200,000 for the airplane. The last day of the current year he sold the plane, which had $800,000 in accumulated depreciation. He received $430,000 in cash. What impact does this sale have on his income statement for this year? Feel free to ignore taxes (as we have the entire course). $30,000 gain, which creates $30,000 more in net income $0 on income statement, but retained earnings increases by $30,000 $30,000 loss, which creates $30,000 less net income 1 point 23. Question 23 A loss on the sale of an item indicates Management is bad a negotiating deals. Management over depreciated the item over its life. Management under depreciated the item over its life. Management owes more money to the company that sold them the item. 1 point 24. Question 24 Depreciation and amortization are conceptually similar expenses. False True 1 point 25. Question 25 Which is not part of the definition of an asset? Probable future economic benefit Tangible in nature From a past transaction Under the firm's control 1 point 26. Question 26 Tocoa corp. purchases a new company for $1,000,000 in cash. The company has liabilities listed on their books for $600,000, but Tocoa believes the fair value of the liabilities is actually $550,000. The company had assets with a bookvalue of $800,000, which Tocoa believes would cost $900,000 if purchased separately. How much, if any, goodwill does Tocoa recognize for this transaction? 1 point 27. Question 27 Tocoa had purchased another company 3 years ago. That purchase has been very successful and Tocoa has grown their sales each year. The purchase had included $400,000 of goodwill. Tocoa believes that most of her acquisitions payoff for at least 20 years. How much goodwill amortization should she recognized for this year? 1 point 28. Question 28 Egge corp. sells souvenirs for exotic locations. A toy Komodo dragon has been a top seller for several years, selling for $25 each. Egge only paid $15 per unit, so this was a nice mark up. Unfortunately, new restrictions on how close visitors can get to take pictures has reduced interest. While the Egge corp believes they will be able to sell the 1,000 units they have in stock by shipping to toy stores, they will have to spend $2 per unit for shipping on average and sell the toys for $13. How much, if any, of a charge should Egge corp. take in their current year financial statements? 1 point 29. Question 29 Egge corp. also sells a replica of the lost city of Petra in Jordan. She has been selling them for $50 and they only cost $20 to make. She has been able to sustain such a large mark up because she was the only company to make the replicas with Jordan dirt as one input. However, a competitor has now come into the market and she can only sell her replicas for $30 now. How much, if any, of a charge should she take in the current year financial statements? 1 point