Sample Final Exam Questions
1. Which of the following transactions will cause both the left and right side of the fundamental
accounting equation to increase
A. We collect cash from a customer who owed us money
B. We pay a supplier for inventory we previously bought on account
C. We borrow money from the bank
D. We purchase equipment for cash
E. None of the above will cause both sides of the equation to increase
2. As of 12/31/08, Alamo Autoworks, Inc. is involved in a lawsuit related to work performed in 2008.
It is probable that the jury will find in favor of the plaintiff and Alamo
though the trial is not yet complete, Alamo should:
Only disclose the possibility of losing $2,000,000 in a footnote to its 2008 financial
Report a $2,000,000 liability on its 2008 balance sheet and a $2,000,000 loss on its 2008
Report a $2,000,000 liability on its 2008 balance sheet but report nothing related to the
lawsuit on its 2008 Income statement.
Report a $2,000,000 loss on its 2008 income statement but report nothing
related to the
lawsuit on its 2008 balance sheet.
3. Shelley's Steel Company had the following transactions during 2008, its first year of operations.
On 1/l/08sold 10,000 shares of no par common stock for $200,000 cash
On 4/l/08 paid $60,000 cash to repurchase 2,000 shares of its common stock
On 12/20/08 declared and paid cash dividends of $32,000
Shelley's reported net income of $75,000 on its 2008 income statement
What amount of
total stockholders' equity
did Shelley's report on its 12/31/08 balance sheet?