A100 Exam 1
Material from Spring 1 2005, Spring 2 2005, Fall 1 2006, and Fall 2 2006
SOLUTIONS – Some of these have been re-formatted
from the original multiple-choice format so that
they will be more useful for study/review purposes.
1. Which of the following is a not a Big 4 accounting firm?
Ernst & Young.
2. With respect to the stock markets and the price of a company’s common stock, the most important
financial accounting ratio is:
profit-to-sales ratio (net income/sales).
gross profit ratio (gross profit/sales).
debt to equity ratio (total liabilities/total stockholders’ equity).
current ratio (current assets/current liabilities).
earnings per share (net income/ number of shares of common stock).
3. When completing the financial statements for a company at the end of an accounting period, the order in
which they must be completed
is important, and logically related to their purpose.
This order is:
income statement, statement of retained earnings, balance sheet, statement of cash flows.
4. The report that a large public company must file with the SEC in the event of a significant event (e.g.,
hiring/firing a new CEO, entering a new international market, disagreeing with an auditor) is the:
5. A Corporation was started when a group of people invested $20,000 in it.
During the first four years of A
Corporation’s existence, it had net income of $20,000 each year, In year five, A Corporation had a
net loss of $20,000.
During these same years, it paid dividends of $10,000, $15,000, $15,000,
$10,000, and $ 0.
At the end of year 5, the company’s balance sheet showed total liabilities of
A Corporation’s total assets at the end of year five were:
6. As a result of selling inventory to a customer on account, the following numbers would change on a
company’s financial statements for that period:
revenues, current assets, retained earnings, and cash from operating activities.
gross profit, current assets, and total liabilities.
gross profit, total assets, and retained earnings.
revenues, total assets, and cash from investing activities.
gross profit, current assets, and cash from operating activities.
7. A Company started year x with salaries payable of $10,000, and ended the same year with salaries
payable of $15,000.
During the year, the company paid salaries of $125,000.
The amount of
salaries expense the company reported on its income statement for that year was: