Generally Accepted Accounting Principles and Cash
1. Which of the following is the fundamental accounting equation?
a. Current assets + Current liabilities = Owners' equity
b. Assets + Owners' equity = Liabilities
c. Cash = Debts + Common stock
d. Assets = Liabilities + Owners' equity
2. Which one of the following best describes a balance sheet?
a. A description of the entity's operations over a period of time
b. A snapshot at a point in time of an entity's assets, liabilities and owners' equity
c. A reconciliation of an entity's bank account balance
d. A description of the company's cash flows over a period of time
3. Which one of the following is the best definition of owners' equity?
a. The market value of the outstanding common stock
b. The amount that owners would receive if they sold the entity
c. The cash balance less outstanding debts
d. The difference between assets and liabilities
4. Neura Pharma, Inc. has purchased a drug patent with a remaining useful life of 13 years. How should this new asset be classified?
a. A current tangible asset
b. A non-current tangible asset
c. A non-current intangible asset
d. A current intangible asset
5. On January 1, 2005, Mansfield Company has a retained earnings balance of $256,000. During 2005, its net income is $44,000 and it announces and pays $12,000 in dividends. There is no other dividend-related activity during the year. Its December 31, 2005 retained earnings balance is:
6. On April 30, Jemison Engineering receives a special order for a swing set, to be delivered to the customer in a month's time. Jemison purchases a number of items specifically for the construction of the swing set: lumber, chains, railings and paint. According to the matching concept, when will Jemison Engineering record the cost of those special items as a cost of goods sold expense:
a. As each item is purchased
b. As each item is used in the