CBAD 201 FINAL EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
Net working capital:
a. should be the same for all companies
b. represents the company's ability to pay its long-term debts
c. is computed by subtracting total current liabilities from total current assets
d. should be a negative number to ensure the profitability of the company. - Answers c. is computed
by subtracting total current liabilities from total current assets
What type of business organization transacts much more business and is larger in terms of assets,
income, and number of employees?
a. partnership
b. limited liability company
c. corporation
d. proprietorship - Answers c. corporation
The accounting assumption that states that the business, rather than its owners, is the reporting unit
is the:
a. entity assumption
b. stable-monetary-unit assumption
c. going concern assumption
d. historical cost assumption - Answers a. entity assumption
The accounting equation can be stated as:
a. Assets = Liabilities - Stockholders' Equity
b. Assets -Liabilities = Stockholders' Equity
c. Assets + Stockholders' Equity = Liabilities
d. Assets - Stockholders' Equity + Liabilities = Zero - Answers b. Assets -Liabilities = Stockholders'
Equity
Which of the following statements is TRUE?
a. Dividends reduce retained earnings.
b. Dividends are expenses of a business.
c. Dividends reduce net income.
d. Dividends increase retained earnings. - Answers a. Dividends reduce retained earnings.
Which financial statement is dated at the moment in time when the accounting period ends?
a. Statement of retained earnings and income statement
b. Statement of cash flows
c. Balance sheet
d. Income statement - Answers c. Balance sheet
The Balance Sheet is used to prepare the:
a. Income Statement
b. Statement of Stockholders' Equity
c. Statement of Cash Flows
d. Statement of Retained Earnings - Answers c. Statement of Cash Flows
Which transaction decreases stockholders' equity?
a. sale of common stock
b. cash purchase of land
c. total expenses greater than total revenues for the period
d. total revenues greater than total expenses for the period - Answers c. total expenses greater than
total revenues for the period
Which of the following is NOT a business transaction?
, a. A company buys goods on account.
b. A company sells land for cash.
c. A company borrows money from the bank.
d. A company fired 10 percent of the employees due to lackluster sales. - Answers d. A company fired
10 percent of the employees due to lackluster sales.
A company performed services for a customer for cash. This transaction increased assets and:
a. increased revenues
b. increased expenses
c. increased liabilities
d. decreased stockholders' equity - Answers a. increased revenues
The debt created by a business when it makes a purchase of inventory on account is a:
a. account receivable
b. note payable
c. revenue
d. account payable - Answers d. account payable
A company had credit sales of $30,000 and cash sales of $23,000 during the month of May. Also
during May, the company paid wages of $21,000 and utilities of $11,000. It also received payments
from customers on account totaling $4200. What was the company's net income for the month?
a. $21,000
b. $53,000
c. $85,000
d. $23,000 - Answers a. $21,000
A company performed tax services for a client on account. The amount billed to the client was $6000.
How does this transaction affect the accounting equation?
a. Add $6000 to Cash and add $6000 to Retained Earnings.
b. Add $6000 to Accounts Receivable and add $6000 to Retained Earnings.
c. Add $6000 to Cash and add $6000 to Service Revenue.
d. Add $6000 to Accounts Payable and add $6000 to Service Revenue. - Answers b. Add $6000 to
Accounts Receivable and add $6000 to Retained Earnings.
Which accounts are increased by debits?
a. Cash and Accounts Payable
b. Accounts Payable and Service Revenue
c. Salaries Expense and Common Stock
d. Accounts Receivable and Utilities Expense - Answers d. Accounts Receivable and Utilities Expense
If a journal entry includes a debit to Accounts Payable and a credit to Cash:
a. Cash is increased.
b. Accounts Payable is increased.
c. Cash will have a credit balance.
d. Accounts Payable is decreased. - Answers d. Accounts Payable is decreased.
A journal entry that debits Cash and credits Accounts Receivable indicates that:
a. revenue increased
b. payment was received on account
c. payment was made on account
d. revenue decreased - Answers b. payment was received on account
On May 10, a business collected $2200 on account. What journal entry is needed on that date?
a. Debit Cash for $2200 and credit Accounts Receivable for $2200
b. Debit Accounts Receivable for $2200 and credit Revenue for $2200
c. Debit Cash for $2200 and credit Revenue for $2200
Net working capital:
a. should be the same for all companies
b. represents the company's ability to pay its long-term debts
c. is computed by subtracting total current liabilities from total current assets
d. should be a negative number to ensure the profitability of the company. - Answers c. is computed
by subtracting total current liabilities from total current assets
What type of business organization transacts much more business and is larger in terms of assets,
income, and number of employees?
a. partnership
b. limited liability company
c. corporation
d. proprietorship - Answers c. corporation
The accounting assumption that states that the business, rather than its owners, is the reporting unit
is the:
a. entity assumption
b. stable-monetary-unit assumption
c. going concern assumption
d. historical cost assumption - Answers a. entity assumption
The accounting equation can be stated as:
a. Assets = Liabilities - Stockholders' Equity
b. Assets -Liabilities = Stockholders' Equity
c. Assets + Stockholders' Equity = Liabilities
d. Assets - Stockholders' Equity + Liabilities = Zero - Answers b. Assets -Liabilities = Stockholders'
Equity
Which of the following statements is TRUE?
a. Dividends reduce retained earnings.
b. Dividends are expenses of a business.
c. Dividends reduce net income.
d. Dividends increase retained earnings. - Answers a. Dividends reduce retained earnings.
Which financial statement is dated at the moment in time when the accounting period ends?
a. Statement of retained earnings and income statement
b. Statement of cash flows
c. Balance sheet
d. Income statement - Answers c. Balance sheet
The Balance Sheet is used to prepare the:
a. Income Statement
b. Statement of Stockholders' Equity
c. Statement of Cash Flows
d. Statement of Retained Earnings - Answers c. Statement of Cash Flows
Which transaction decreases stockholders' equity?
a. sale of common stock
b. cash purchase of land
c. total expenses greater than total revenues for the period
d. total revenues greater than total expenses for the period - Answers c. total expenses greater than
total revenues for the period
Which of the following is NOT a business transaction?
, a. A company buys goods on account.
b. A company sells land for cash.
c. A company borrows money from the bank.
d. A company fired 10 percent of the employees due to lackluster sales. - Answers d. A company fired
10 percent of the employees due to lackluster sales.
A company performed services for a customer for cash. This transaction increased assets and:
a. increased revenues
b. increased expenses
c. increased liabilities
d. decreased stockholders' equity - Answers a. increased revenues
The debt created by a business when it makes a purchase of inventory on account is a:
a. account receivable
b. note payable
c. revenue
d. account payable - Answers d. account payable
A company had credit sales of $30,000 and cash sales of $23,000 during the month of May. Also
during May, the company paid wages of $21,000 and utilities of $11,000. It also received payments
from customers on account totaling $4200. What was the company's net income for the month?
a. $21,000
b. $53,000
c. $85,000
d. $23,000 - Answers a. $21,000
A company performed tax services for a client on account. The amount billed to the client was $6000.
How does this transaction affect the accounting equation?
a. Add $6000 to Cash and add $6000 to Retained Earnings.
b. Add $6000 to Accounts Receivable and add $6000 to Retained Earnings.
c. Add $6000 to Cash and add $6000 to Service Revenue.
d. Add $6000 to Accounts Payable and add $6000 to Service Revenue. - Answers b. Add $6000 to
Accounts Receivable and add $6000 to Retained Earnings.
Which accounts are increased by debits?
a. Cash and Accounts Payable
b. Accounts Payable and Service Revenue
c. Salaries Expense and Common Stock
d. Accounts Receivable and Utilities Expense - Answers d. Accounts Receivable and Utilities Expense
If a journal entry includes a debit to Accounts Payable and a credit to Cash:
a. Cash is increased.
b. Accounts Payable is increased.
c. Cash will have a credit balance.
d. Accounts Payable is decreased. - Answers d. Accounts Payable is decreased.
A journal entry that debits Cash and credits Accounts Receivable indicates that:
a. revenue increased
b. payment was received on account
c. payment was made on account
d. revenue decreased - Answers b. payment was received on account
On May 10, a business collected $2200 on account. What journal entry is needed on that date?
a. Debit Cash for $2200 and credit Accounts Receivable for $2200
b. Debit Accounts Receivable for $2200 and credit Revenue for $2200
c. Debit Cash for $2200 and credit Revenue for $2200
