MBA 601 STUDY GUIDE 2026 QUESTIONS AND
ANSWERS GRADED A+
✔✔On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a
truck. The truck was expected to have a four year useful life and an $8,000 salvage
value. If Marino uses the straight-line method, which of the following shows how the
adjusting entry to recognize depreciation expense at the end of Year 3 will affect the
Company's financial statements? - ✔✔assets (cash + truck - Acc Dep.) = Liab + Equity
Na + Na - 10,000 = Na + (10,000)
Rev- exp = net income
NA - 10,000 = (10,000)
statement of cash flows
NA
✔✔When double-declining balance depreciation is used for the recognition of
depreciation expense, the statement of cash flows will show an outflow from - ✔✔NOT
ANY FROM BELOW:
operating activity.
investing activity.
financing activity.
✔✔On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a
truck. The truck was expected to have a four year useful life and an $8,000 salvage
value. If Marino uses the double-declining-balance method, the amount of depreciation
expense recognized on the Year 3 income statement is - ✔✔$4,000
Dep. exp. = Book value at beginning of year x (2 x Straight-line rate)
Book value at beginning of year = (Cost of the asset - Beginning balance in
accumulated depreciation)
Straight-line rate = 1 ÷ 4 = 25%
Year 1 Dep. exp. = ($48,000 Cost - $0 Accumulated Depreciation) x (2 x .25) = $24,000
Year 2 Dep. exp. = ($48,000 Cost - $24,000 Accumulated Depreciation) x (2 x .25) =
$12,000
Year 3 Dep. exp. = ($48,000 Cost - $36,000 accumulated Depreciation) x (2 x .25) =
$6,000;
Max amount of depreciation expense that can be recognized over the life of the asset is
$40,000 ($48,000 cost - $8,000 salvage). Since the company has already recognized
$36,000 of depreciation,
,$40,000 Maximum depreciation allowed - $36,000 previously recognized= $4,000
✔✔On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a
truck. The truck was expected to have a four year useful life and an $8,000 salvage
value. If Marino uses the double-declining-balance method, the amount of accumulated
depreciation shown on the Year 3 balance sheet is - ✔✔$40,000
Year 1 Dep. exp. = ($48,000 Cost - $0 Accumulated Depreciation) × (2 × .25) = $24,000
Year 2 Dep. exp. = ($48,000 Cost - $24,000 Accumulated Depreciation) × (2 × .25) =
$12,000
Year 3 Dep. exp. = ($48,000 Cost - $36,000 accumulated Depreciation) × (2 × .25) =
$6,000; $4,000
Accumulated depreciation at the end of Year 3 is $40,000 ($24,000 from Year 1 +
$12,000 from Year 2 + $4,000 from Year 3).
✔✔On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a
truck. The truck was expected to have a four year useful life and an $8,000 salvage
value. If Marino uses the double-declining-balance method, the amount of book value
shown on the Year 3 balance sheet is - ✔✔$8,000
Book value at the end of Year 3 = $48,000 Cost - $40,000 Accumulated Depreciation =
✔✔On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a
truck. The truck was expected to have a four year useful life and an $8,000 salvage
value. If Marino uses the double-declining-balance method, Which of the following
shows how the adjusting entry to recognize depreciation expense at the end of Year 3
will affect the Company's financial statements? - ✔✔Assets = Liab + Equity
Cash+Truck−Acc. Dep.=Liab.+Equity
NA + NA - 4,000 = NA + (4,000)
Income Statement
Rev- Exp = NI
NA - $4,000 = (4,000)
Cash Flow Statement
NA
✔✔A classified balance sheet separates assets and liabilities into categories that
distinguish between accounts that are identified as current from those that are identified
as long-term. This statement is (true/false) - ✔✔true
✔✔Which of the following would not likely appear on a classified balance sheet?
, -Current assets
-Long-term liabilities
-Current retained earnings
-Long-term assets - ✔✔current retained earnings
✔✔The length of an operating cycle is the time it takes to turn cash into inventory, then
inventory into accounts receivable, and then accounts receivable back into cash. This
statement is (true/false) - ✔✔true
✔✔A current asset is an asset that is cash or an asset that will be converted into cash
within one year or one operating cycle whichever is shorter. (true/false) - ✔✔false
*whichever is GREATER/LONGER
✔✔Which of the following would not likely appear in the current liabilities section of a
classified balance sheet?
-Taxes payable
-Accounts payable
-Salaries payable
-Bonds payable - ✔✔bonds payable
✔✔A balance sheet that displays assets and liabilities into current versus noncurrent
categories is commonly called a - ✔✔classified balance sheet
✔✔The current ratio is calculated by - ✔✔dividing current assets by current liabilities
✔✔Which of the following statements is true?
-Lower current ratios suggest greater liquidity.
-Companies should maintain the highest current ratio possible.
-Higher current ratios suggest greater liquidity.
-Companies should maintain the lowest current ratio possible. - ✔✔Higher current ratios
suggest greater liquidity.
✔✔The debt to asset ratio is a measure of - ✔✔solvency
✔✔The debt to assets ratio is calculated by - ✔✔dividing total liabilities by total assets.
✔✔Omar Company reported $1,000 of current assets, $3,000 of long-term assets, $400
of current liabilities and $2,600 of long-term liabilities on its Year 1 balance sheet.
Based on this information, Omar's current ratio is. - ✔✔2.50
Current Ratio: Current Assets ÷ Current Liabilities = $1,000 ÷ $400 = 2.5
ANSWERS GRADED A+
✔✔On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a
truck. The truck was expected to have a four year useful life and an $8,000 salvage
value. If Marino uses the straight-line method, which of the following shows how the
adjusting entry to recognize depreciation expense at the end of Year 3 will affect the
Company's financial statements? - ✔✔assets (cash + truck - Acc Dep.) = Liab + Equity
Na + Na - 10,000 = Na + (10,000)
Rev- exp = net income
NA - 10,000 = (10,000)
statement of cash flows
NA
✔✔When double-declining balance depreciation is used for the recognition of
depreciation expense, the statement of cash flows will show an outflow from - ✔✔NOT
ANY FROM BELOW:
operating activity.
investing activity.
financing activity.
✔✔On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a
truck. The truck was expected to have a four year useful life and an $8,000 salvage
value. If Marino uses the double-declining-balance method, the amount of depreciation
expense recognized on the Year 3 income statement is - ✔✔$4,000
Dep. exp. = Book value at beginning of year x (2 x Straight-line rate)
Book value at beginning of year = (Cost of the asset - Beginning balance in
accumulated depreciation)
Straight-line rate = 1 ÷ 4 = 25%
Year 1 Dep. exp. = ($48,000 Cost - $0 Accumulated Depreciation) x (2 x .25) = $24,000
Year 2 Dep. exp. = ($48,000 Cost - $24,000 Accumulated Depreciation) x (2 x .25) =
$12,000
Year 3 Dep. exp. = ($48,000 Cost - $36,000 accumulated Depreciation) x (2 x .25) =
$6,000;
Max amount of depreciation expense that can be recognized over the life of the asset is
$40,000 ($48,000 cost - $8,000 salvage). Since the company has already recognized
$36,000 of depreciation,
,$40,000 Maximum depreciation allowed - $36,000 previously recognized= $4,000
✔✔On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a
truck. The truck was expected to have a four year useful life and an $8,000 salvage
value. If Marino uses the double-declining-balance method, the amount of accumulated
depreciation shown on the Year 3 balance sheet is - ✔✔$40,000
Year 1 Dep. exp. = ($48,000 Cost - $0 Accumulated Depreciation) × (2 × .25) = $24,000
Year 2 Dep. exp. = ($48,000 Cost - $24,000 Accumulated Depreciation) × (2 × .25) =
$12,000
Year 3 Dep. exp. = ($48,000 Cost - $36,000 accumulated Depreciation) × (2 × .25) =
$6,000; $4,000
Accumulated depreciation at the end of Year 3 is $40,000 ($24,000 from Year 1 +
$12,000 from Year 2 + $4,000 from Year 3).
✔✔On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a
truck. The truck was expected to have a four year useful life and an $8,000 salvage
value. If Marino uses the double-declining-balance method, the amount of book value
shown on the Year 3 balance sheet is - ✔✔$8,000
Book value at the end of Year 3 = $48,000 Cost - $40,000 Accumulated Depreciation =
✔✔On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a
truck. The truck was expected to have a four year useful life and an $8,000 salvage
value. If Marino uses the double-declining-balance method, Which of the following
shows how the adjusting entry to recognize depreciation expense at the end of Year 3
will affect the Company's financial statements? - ✔✔Assets = Liab + Equity
Cash+Truck−Acc. Dep.=Liab.+Equity
NA + NA - 4,000 = NA + (4,000)
Income Statement
Rev- Exp = NI
NA - $4,000 = (4,000)
Cash Flow Statement
NA
✔✔A classified balance sheet separates assets and liabilities into categories that
distinguish between accounts that are identified as current from those that are identified
as long-term. This statement is (true/false) - ✔✔true
✔✔Which of the following would not likely appear on a classified balance sheet?
, -Current assets
-Long-term liabilities
-Current retained earnings
-Long-term assets - ✔✔current retained earnings
✔✔The length of an operating cycle is the time it takes to turn cash into inventory, then
inventory into accounts receivable, and then accounts receivable back into cash. This
statement is (true/false) - ✔✔true
✔✔A current asset is an asset that is cash or an asset that will be converted into cash
within one year or one operating cycle whichever is shorter. (true/false) - ✔✔false
*whichever is GREATER/LONGER
✔✔Which of the following would not likely appear in the current liabilities section of a
classified balance sheet?
-Taxes payable
-Accounts payable
-Salaries payable
-Bonds payable - ✔✔bonds payable
✔✔A balance sheet that displays assets and liabilities into current versus noncurrent
categories is commonly called a - ✔✔classified balance sheet
✔✔The current ratio is calculated by - ✔✔dividing current assets by current liabilities
✔✔Which of the following statements is true?
-Lower current ratios suggest greater liquidity.
-Companies should maintain the highest current ratio possible.
-Higher current ratios suggest greater liquidity.
-Companies should maintain the lowest current ratio possible. - ✔✔Higher current ratios
suggest greater liquidity.
✔✔The debt to asset ratio is a measure of - ✔✔solvency
✔✔The debt to assets ratio is calculated by - ✔✔dividing total liabilities by total assets.
✔✔Omar Company reported $1,000 of current assets, $3,000 of long-term assets, $400
of current liabilities and $2,600 of long-term liabilities on its Year 1 balance sheet.
Based on this information, Omar's current ratio is. - ✔✔2.50
Current Ratio: Current Assets ÷ Current Liabilities = $1,000 ÷ $400 = 2.5
