ACG 2021 Exam 1 Practice Questions
and Correct Answers
A business organized as a corporation - ✅is considered to be a legal entity that is
separate from its owners.
The common characteristic possessed by all assets is that they ✅are resources
owned.
Which of the following involves collecting funds from creditors? ✅Financing
Which of the following would appear on a balance sheet? ✅Unearned revenue
Retained earnings at the end of the period is equal to which of the following?
✅Retained earnings in the beginning of the period plus net income minus dividends
A corporation began the year with retained earnings of $460,000.
During the year, it issued common stock for $840,000, incurred expenses of
$2,000,000, and declared and paid dividends of $50,000.
The ending retained earnings is $760,000. What was the revenue for the year?
✅$2,350,000
At the end of the year, a corporation has liabilities of $6,000 and equity of $2,000. How
much are the company's assets at the end of the year? ✅$8,000
Publicly traded US companies must provide shareholders with an annual report. Which
of the following is not part of the annual report? ✅General ledger
Which of the following is considered property, plant, and equipment on a classified
balance sheet? ✅Land
Determine the amount of current assets to be reported on the balance sheet.
Accounts Payable $160,000
Accounts Receivable $100,000
Accumulated depreciation $40,000
Buildings $210,000
Cash $130,000
Common stock $600,000
Inventory $110,000
, Land $180,000
Prepaid insurance $60,000
Retained earnings $130,000
Trademarks $140,000 ✅$400,000
(100,000 + 130,000 + 110,000 + 60,000)
A corporation had beginning retained earnings of $724,000 and ending retained
earnings of $833,000.
During the year, it issued common stock for $47,000 and declared and paid dividends of
$50,000.
What is its net income for the year? ✅$159,000
(833,000 - 724,000 + 50,000)
Alpha Inc.'s current ratio is 1.8
Omega Inc.'s current ratio is 1.6
Compared to Alpha Inc., Omega Inc. has - ✅Lower liquidity
Which of the following would increase a company's current ratio? ✅Negotiate with a
creditor to reclassify a note payable in three months into a note payable due in two
years.
A company reported $250,000 cash inflow provided by operating activities. Also, it
issued $40,000 of common stock, paid $70,000 for equipment, and paid $20,000 in
dividends. Shortly before year end, it paid a $50,000 note payable.
What is the free cash flow? ✅$160,000
(250,000 - 70,000 - 20,000)
The rules and practices that are recognized as general guides for financial reporting are
called - ✅Generally Accepted Accounting Principles (GAAP)
The primary objective of financial reporting is to provide financial information that is
useful. Which of the following is a characteristic of relevance? ✅Predictive value
The effects of paying rent for the month of the basic accounting equation are to -
✅Decrease assets and decrease stockholder's equitt
