Prax Quiz 1

Prax Quiz 1 - equation is Revenue minus Expense =...

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UNIVERSITY OF CALIFORNIA SAN DIEGO Econ 4 Summer 2008 Practice Quiz 1 Choose the best answer: NOTE - if “no choices”, then - True = A and False = B; with choices, (e) always defaults to “none of the above”, unless otherwise identified. 1. The basic accounting equation is: A = L + Eq 2. The correct response to #1 above reflects the: (A) Entity concept (B) Duality concept (C) Money-measurement concept 3. Accrual accounting profits are a good measure of cash flow. 4. The RHS of the Balance sheet lists the company’s sources of financial capital. 5. Equity holders are also called Creditors. 6. The basic purpose of an audit is to prevent financial fraud. 7. Once we had the Big Five accounting firms. But, now it is the Big Four . This is “True”. The firm that is no longer in existence is KPMG. 8. The most basic Income Statement
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Unformatted text preview: equation is Revenue minus Expense = Liabilities . 9. All of the assets that are owned by a business are reported on its balance sheet. Consider the following transactions that occurred during an accounting period. a) Borrow $500 at 10% interest per accounting period. The bank expects you to pay only interest and to do so in the next accounting period. b) Purchase 50 T-shirts @ $5 each; pay in cash. c) Sell 35 T-shirts @ $ 10 each; receive payment in cash. 10. According to the Accrual method, the Companys profits would be: (a) ($ 150) (b) $ 100 (c) $ 50 (d) $ 175 11. Using the Cash-basis method of accounting, the Companys profits from operations would be: (a) ($ 650) (b) ($ 100) (c) $ 225 (d) $ 725 12. The Companys cash flow for the period is: (a) $ 50 (b) $ 150 (c) $ 425 (d) $ 550...
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