ACCOUNTING PEREGRINE COMPREHENSIVE EXAM
QUESTIONS AND CORRECT ANSWERS | GRADED A+ |
LATEST UPDATE 2026/2027 | 100% ASSURED PASS.
Question 1
Which financial statement reports a company’s financial position at a specific
point in time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Retained Earnings
Correct Answer: C
Rationale: The balance sheet presents assets, liabilities, and equity at a specific
date, reflecting the company’s financial position.
Question 2
Under accrual accounting, revenue is recognized when it is:
A. Cash is received
B. Earned and realizable
C. Invoiced
D. Collected
Correct Answer: B
Rationale: Accrual accounting requires revenue recognition when it is earned and
realizable, regardless of when cash is received.
,Question 3
Which of the following is classified as an operating activity on the statement of
cash flows?
A. Issuance of common stock
B. Purchase of equipment
C. Payment to suppliers
D. Repayment of long-term debt
Correct Answer: C
Rationale: Payments to suppliers relate to day-to-day operations and are
classified as operating activities.
Question 5
Which inventory valuation method generally results in the lowest taxable income
during periods of rising prices?
A. FIFO
B. LIFO
C. Weighted Average
D. Specific Identification
Correct Answer: B
Rationale: LIFO assigns higher recent costs to cost of goods sold, reducing
taxable income during inflationary periods.
Question 6
Depreciation is best described as:
A. A method of asset valuation
B. A process of allocating asset cost over its useful life
C. A measure of asset market value decline
D. A cash outflow
,Correct Answer: B
Rationale: Depreciation allocates the cost of a tangible asset over its useful life;
it does not measure market value or involve cash outflows.
Question 4
If total assets equal $500,000 and total liabilities equal $300,000, total equity is:
A. $200,000
B. $800,000
C. $500,000
D. $300,000
Correct Answer: A
Rationale: Equity equals assets minus liabilities ($500,000 − $300,000).
Question 7
Which ratio best measures short-term liquidity?
A. Debt-to-equity ratio
B. Gross profit margin
C. Current ratio
D. Return on assets
Correct Answer: C
Rationale: The current ratio compares current assets to current liabilities to assess
liquidity.
Question 8
Unearned revenue should be reported as:
A. Revenue
, B. Expense
C. Asset
D. Liability
Correct Answer: D
Rationale: Unearned revenue represents an obligation to provide goods or
services in the future.
Question 11
Which of the following increases retained earnings?
A. Net loss
B. Dividends declared
C. Net income
D. Treasury stock purchase
Correct Answer: C
Rationale: Net income increases retained earnings, while losses and dividends
decrease it.
Question 12
The break-even point occurs when:
A. Contribution margin is zero
B. Total revenue equals total costs
C. Fixed costs equal variable costs
D. Profit is maximized
Correct Answer: B
Rationale: Break-even occurs when revenue covers all fixed and variable costs,
resulting in zero profit.
Question 13
Which principle requires companies to use the same accounting methods
from period to period? A. Materiality
QUESTIONS AND CORRECT ANSWERS | GRADED A+ |
LATEST UPDATE 2026/2027 | 100% ASSURED PASS.
Question 1
Which financial statement reports a company’s financial position at a specific
point in time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Retained Earnings
Correct Answer: C
Rationale: The balance sheet presents assets, liabilities, and equity at a specific
date, reflecting the company’s financial position.
Question 2
Under accrual accounting, revenue is recognized when it is:
A. Cash is received
B. Earned and realizable
C. Invoiced
D. Collected
Correct Answer: B
Rationale: Accrual accounting requires revenue recognition when it is earned and
realizable, regardless of when cash is received.
,Question 3
Which of the following is classified as an operating activity on the statement of
cash flows?
A. Issuance of common stock
B. Purchase of equipment
C. Payment to suppliers
D. Repayment of long-term debt
Correct Answer: C
Rationale: Payments to suppliers relate to day-to-day operations and are
classified as operating activities.
Question 5
Which inventory valuation method generally results in the lowest taxable income
during periods of rising prices?
A. FIFO
B. LIFO
C. Weighted Average
D. Specific Identification
Correct Answer: B
Rationale: LIFO assigns higher recent costs to cost of goods sold, reducing
taxable income during inflationary periods.
Question 6
Depreciation is best described as:
A. A method of asset valuation
B. A process of allocating asset cost over its useful life
C. A measure of asset market value decline
D. A cash outflow
,Correct Answer: B
Rationale: Depreciation allocates the cost of a tangible asset over its useful life;
it does not measure market value or involve cash outflows.
Question 4
If total assets equal $500,000 and total liabilities equal $300,000, total equity is:
A. $200,000
B. $800,000
C. $500,000
D. $300,000
Correct Answer: A
Rationale: Equity equals assets minus liabilities ($500,000 − $300,000).
Question 7
Which ratio best measures short-term liquidity?
A. Debt-to-equity ratio
B. Gross profit margin
C. Current ratio
D. Return on assets
Correct Answer: C
Rationale: The current ratio compares current assets to current liabilities to assess
liquidity.
Question 8
Unearned revenue should be reported as:
A. Revenue
, B. Expense
C. Asset
D. Liability
Correct Answer: D
Rationale: Unearned revenue represents an obligation to provide goods or
services in the future.
Question 11
Which of the following increases retained earnings?
A. Net loss
B. Dividends declared
C. Net income
D. Treasury stock purchase
Correct Answer: C
Rationale: Net income increases retained earnings, while losses and dividends
decrease it.
Question 12
The break-even point occurs when:
A. Contribution margin is zero
B. Total revenue equals total costs
C. Fixed costs equal variable costs
D. Profit is maximized
Correct Answer: B
Rationale: Break-even occurs when revenue covers all fixed and variable costs,
resulting in zero profit.
Question 13
Which principle requires companies to use the same accounting methods
from period to period? A. Materiality
