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ACCY 501 MIDTERM 1 2026
LATEST QUESTIONS AND
ANSWERS| ACE YOUR GRADES.
An item not generally classified as a current asset is a:
Patent.
Trade receivables.
Prepaid rent.
Inventories. - correct answer -Patent
The ending balance of retained earnings can best be described
as:
The amount of cash received from stockholders over the life of
the company.
The amount of net income over the life of the company not paid to
owners in the form of dividends.
The amount of dividends paid over the life of the company.
The amount of net income over the life of the company - correct
answer -the amount of net income over the life of the company
not paid to owners in form of dividends
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T/F:
Horizontal analysis involves expressing each item in the financial
statements as a percentage of an appropriate total, or base
amount, within the same year. - correct answer -False
T/F:
Vertical analysis involves expressing each item in the financial
statements as a percentage of an appropriate total, or base
amount, within the same year. - correct answer -True
T/F:
An example of vertical analysis would be comparing inventory this
year to inventory last year to calculate the percentage change in
inventory. - correct answer -False
T/F:
An example of vertical analysis would be stating each individual
asset as a percentage of total assets. - correct answer -True
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Which ratio most directly indicates the extent of the company's
reliance on financial leverage?
Times interest earned.
Debt to equity.
Return on shareholders' equity.
Current ratio. - correct answer -Debt to equity
Assuming a current ratio of 1.2 and an acid-test ratio of 0.80, how
will the purchase of inventory with cash affect each ratio?
No change to the current ratio and decrease the acid-test ratio.
Increase the current ratio and increase the acid-test ratio.
Decrease the current ratio and decrease the acid-test ratio.
Decrease the current ratio and increase the acid-test ratio -
correct answer -no change in current ratio and decrease in acid
test ratio
classify: Purchase of equipment for cash. - correct answer -CFI
Classify: Payment of employee salaries. - correct answer -CFO
ACCY 501 MIDTERM 1 2026
LATEST QUESTIONS AND
ANSWERS| ACE YOUR GRADES.
An item not generally classified as a current asset is a:
Patent.
Trade receivables.
Prepaid rent.
Inventories. - correct answer -Patent
The ending balance of retained earnings can best be described
as:
The amount of cash received from stockholders over the life of
the company.
The amount of net income over the life of the company not paid to
owners in the form of dividends.
The amount of dividends paid over the life of the company.
The amount of net income over the life of the company - correct
answer -the amount of net income over the life of the company
not paid to owners in form of dividends
, Page | 2
T/F:
Horizontal analysis involves expressing each item in the financial
statements as a percentage of an appropriate total, or base
amount, within the same year. - correct answer -False
T/F:
Vertical analysis involves expressing each item in the financial
statements as a percentage of an appropriate total, or base
amount, within the same year. - correct answer -True
T/F:
An example of vertical analysis would be comparing inventory this
year to inventory last year to calculate the percentage change in
inventory. - correct answer -False
T/F:
An example of vertical analysis would be stating each individual
asset as a percentage of total assets. - correct answer -True
, Page | 3
Which ratio most directly indicates the extent of the company's
reliance on financial leverage?
Times interest earned.
Debt to equity.
Return on shareholders' equity.
Current ratio. - correct answer -Debt to equity
Assuming a current ratio of 1.2 and an acid-test ratio of 0.80, how
will the purchase of inventory with cash affect each ratio?
No change to the current ratio and decrease the acid-test ratio.
Increase the current ratio and increase the acid-test ratio.
Decrease the current ratio and decrease the acid-test ratio.
Decrease the current ratio and increase the acid-test ratio -
correct answer -no change in current ratio and decrease in acid
test ratio
classify: Purchase of equipment for cash. - correct answer -CFI
Classify: Payment of employee salaries. - correct answer -CFO
