Principles of Accounting (BUS251)
Final Exam – Spring 2025 (With Answers)
Instructions: You will have the full 2 hours of our exam period to complete this final exam.
You are allowed two pages of notes (back-to-back) as well as a calculator to complete this
exam. You can earn a total of 105 points on this exam, but it is out of 100 points. The exam
consists of 29 multiple choice and True/False questions (3 points each), one short answer
question (15 points), an one extra credit question (up to 3 points).
Accounting Fundamentals
1. Which of the following is the Accounting Equation?
a. Assets = Liabilities + Common Stock + Net Income
b. Net Income = Revenue – Expense
c. Assets = Liabilities + Stockholders’ Equity ✅
d. Assets = Liabilities
2. Which of the following is an asset?
a. Accounts Receivable ✅
b. Accounts Payable
c. Sales Returns & Allowances
d. Dividends
3. On which financial statement would you find a company’s cost of goods sold?
a. Balance Sheet
b. Income Statement ✅
c. Statement of Retained Earnings
d. All of the above
4. On which of the following statements will you find a company’s
accounts payable balance?
a. Balance Sheet ✅
b. Income Statement
c. Statement of Retained Earnings
d. All of the above
5. Which of the following formulas shows how to calculate Gross Profit?
a. Revenue – Expenses
b. Gross Profit – Operating Expenses
c. Revenue – Expenses – Dividends
d. Revenue – Cost of Goods Sold ✅
6. What is the order used to prepare financial statements?
a. Income Statement → Retained Earnings → Balance Sheet ✅
b. Income Statement → Balance Sheet → Retained Earnings
c. Balance Sheet → Income Statement → Retained Earnings
d. Balance Sheet → Retained Earnings → Income Statement
, 7. A company purchases land for $100,000 in 1995. The market value of the
land is now
$5,000,000, but the company maintains the land on its books at $100,000. This
is an example of the company following the:
a. Monetary Unit Assumption
b. Historic Cost Principle ✅
c. Economic Entity Assumption
d. Fair Value Principle
8. Which of the following statements is true about financial statements
prepared under Generally Accepted Accounting Principles (“GAAP”)?
a. The cash basis of accounting is acceptable; accrual accounting is not allowed
b. All assets are adjusted to fair value at the end of each quarter
c. Companies under different ownership are commonly combined for
analytical purposes
d. Revenues are recorded when earned; expenses are recorded when incurred ✅
9. Which of the following statements defines an asset?
a. Resources a business owns ✅
b. Obligations to employees and suppliers
c. Future services to be provided to customers
d. All of the above
10. A company has retained earnings to start the year of $100,000. It has
net income in the year of $50,000 and it pays a dividend of $30,000. What
is the company’s retained earnings at the end of the year?
a. $20,000
b. $120,000 ✅
c. $250,000
d. $150,000
11. For the most recent year, a company has sales of $500,000 and cost of
goods sold of $200,000. It also has Operating Expenses of $100,000 and it
pays a dividend to shareholders of $50,000. Based on this information,
what is the company’s operating income?
a. $150,000
b. $200,000 ✅
c. $250,000
d. $300,000
12. Under what type of an inventory system are goods only counted – and
cost of goods sold recorded – at the end of the accounting period (e.g.
month-end)?
a. LIFO
b. FIFO
c. Perpetual
d. Periodic ✅
Final Exam – Spring 2025 (With Answers)
Instructions: You will have the full 2 hours of our exam period to complete this final exam.
You are allowed two pages of notes (back-to-back) as well as a calculator to complete this
exam. You can earn a total of 105 points on this exam, but it is out of 100 points. The exam
consists of 29 multiple choice and True/False questions (3 points each), one short answer
question (15 points), an one extra credit question (up to 3 points).
Accounting Fundamentals
1. Which of the following is the Accounting Equation?
a. Assets = Liabilities + Common Stock + Net Income
b. Net Income = Revenue – Expense
c. Assets = Liabilities + Stockholders’ Equity ✅
d. Assets = Liabilities
2. Which of the following is an asset?
a. Accounts Receivable ✅
b. Accounts Payable
c. Sales Returns & Allowances
d. Dividends
3. On which financial statement would you find a company’s cost of goods sold?
a. Balance Sheet
b. Income Statement ✅
c. Statement of Retained Earnings
d. All of the above
4. On which of the following statements will you find a company’s
accounts payable balance?
a. Balance Sheet ✅
b. Income Statement
c. Statement of Retained Earnings
d. All of the above
5. Which of the following formulas shows how to calculate Gross Profit?
a. Revenue – Expenses
b. Gross Profit – Operating Expenses
c. Revenue – Expenses – Dividends
d. Revenue – Cost of Goods Sold ✅
6. What is the order used to prepare financial statements?
a. Income Statement → Retained Earnings → Balance Sheet ✅
b. Income Statement → Balance Sheet → Retained Earnings
c. Balance Sheet → Income Statement → Retained Earnings
d. Balance Sheet → Retained Earnings → Income Statement
, 7. A company purchases land for $100,000 in 1995. The market value of the
land is now
$5,000,000, but the company maintains the land on its books at $100,000. This
is an example of the company following the:
a. Monetary Unit Assumption
b. Historic Cost Principle ✅
c. Economic Entity Assumption
d. Fair Value Principle
8. Which of the following statements is true about financial statements
prepared under Generally Accepted Accounting Principles (“GAAP”)?
a. The cash basis of accounting is acceptable; accrual accounting is not allowed
b. All assets are adjusted to fair value at the end of each quarter
c. Companies under different ownership are commonly combined for
analytical purposes
d. Revenues are recorded when earned; expenses are recorded when incurred ✅
9. Which of the following statements defines an asset?
a. Resources a business owns ✅
b. Obligations to employees and suppliers
c. Future services to be provided to customers
d. All of the above
10. A company has retained earnings to start the year of $100,000. It has
net income in the year of $50,000 and it pays a dividend of $30,000. What
is the company’s retained earnings at the end of the year?
a. $20,000
b. $120,000 ✅
c. $250,000
d. $150,000
11. For the most recent year, a company has sales of $500,000 and cost of
goods sold of $200,000. It also has Operating Expenses of $100,000 and it
pays a dividend to shareholders of $50,000. Based on this information,
what is the company’s operating income?
a. $150,000
b. $200,000 ✅
c. $250,000
d. $300,000
12. Under what type of an inventory system are goods only counted – and
cost of goods sold recorded – at the end of the accounting period (e.g.
month-end)?
a. LIFO
b. FIFO
c. Perpetual
d. Periodic ✅
