MGT 8803 Exam 1 Test Questions With
Well Elaborated Solutions
discount bond - ANSWER -A savings bond that is purchased for less than its
maturity value - discount. Less contract rate than the market rate.
premium bond - ANSWER -a bond that is selling above its par value - premium.
Higher contract rate than the market rate.
Notes Receivable - ANSWER -A written promise that a customer will pay a fixed
amount of principal plus interest by a certain date in the future.
Balance Sheet - ANSWER -A financial statement that reports assets, liabilities,
and owner's equity on a specific date. Assets = Liabilities + Owner's Equity
Income Statement - ANSWER -Revenues - Expenses = Net Income; Shows
activity over a time period
Accrural basis accounting - ANSWER -Accounting basis in which companies
record transactions that change a company's financial statements in the periods in
which the events occur.
Cash Basis Accounting - ANSWER -Reporting income when the cash is received
and expenses when the cash is paid.
Matching Principle (Expense Recognition Principle) - ANSWER -Guides
accounting for expenses, ensures that all expenses are recorded when they are
incurred during the period, and matches those expenses against the revenues of the
period.
Gross Margin - ANSWER -Net sales - COGS
Earnings Per Share (EPS) - ANSWER -net income/shares outstanding
FIFO method - ANSWER -an inventory costing method that assumes that the
earliest goods purchased are the first to be sold
, LIFO - ANSWER -inventory accounting in which the most recently acquired
items are assumed to be the first sold; method is supposed to create the lowest
ending inventory in a period of rising prices. Also create a lower taxable income,
lower gross profit.
weighted average - ANSWER -the sum of the product of the number of units and
the value per unit divided by the sum of the number of units, represented by M
Cash Flow Statement - ANSWER -A financial statement that shows the flow of
money in and out of the business.
FS: Cash - ANSWER -Current Asset
FS: Interest Expense - ANSWER -Expense
FS: Sales Returns - ANSWER -Contra-revenue
FS: Wages Payable - ANSWER -Current liability
FS: Taxes payable - ANSWER -Current liability
FS: Marketable Securities - ANSWER -Current asset
FS: Mortgage payable - ANSWER -Long term liability
FS: Common Stock Paid in Capital - ANSWER -Equity
FS: Rent expense - ANSWER -Expenses
FS: Deferred revenues - ANSWER -current liability
FS: Interest payable - ANSWER -current liability
FS: discounts on bonds payable - ANSWER -contra-liability (long term)
FS: Common Stock at Par Value - ANSWER -Equity
FS: Prepaid expenses - ANSWER -Current asset
FS: Allowance for Doubtful accounts - ANSWER -Contra-asset
Well Elaborated Solutions
discount bond - ANSWER -A savings bond that is purchased for less than its
maturity value - discount. Less contract rate than the market rate.
premium bond - ANSWER -a bond that is selling above its par value - premium.
Higher contract rate than the market rate.
Notes Receivable - ANSWER -A written promise that a customer will pay a fixed
amount of principal plus interest by a certain date in the future.
Balance Sheet - ANSWER -A financial statement that reports assets, liabilities,
and owner's equity on a specific date. Assets = Liabilities + Owner's Equity
Income Statement - ANSWER -Revenues - Expenses = Net Income; Shows
activity over a time period
Accrural basis accounting - ANSWER -Accounting basis in which companies
record transactions that change a company's financial statements in the periods in
which the events occur.
Cash Basis Accounting - ANSWER -Reporting income when the cash is received
and expenses when the cash is paid.
Matching Principle (Expense Recognition Principle) - ANSWER -Guides
accounting for expenses, ensures that all expenses are recorded when they are
incurred during the period, and matches those expenses against the revenues of the
period.
Gross Margin - ANSWER -Net sales - COGS
Earnings Per Share (EPS) - ANSWER -net income/shares outstanding
FIFO method - ANSWER -an inventory costing method that assumes that the
earliest goods purchased are the first to be sold
, LIFO - ANSWER -inventory accounting in which the most recently acquired
items are assumed to be the first sold; method is supposed to create the lowest
ending inventory in a period of rising prices. Also create a lower taxable income,
lower gross profit.
weighted average - ANSWER -the sum of the product of the number of units and
the value per unit divided by the sum of the number of units, represented by M
Cash Flow Statement - ANSWER -A financial statement that shows the flow of
money in and out of the business.
FS: Cash - ANSWER -Current Asset
FS: Interest Expense - ANSWER -Expense
FS: Sales Returns - ANSWER -Contra-revenue
FS: Wages Payable - ANSWER -Current liability
FS: Taxes payable - ANSWER -Current liability
FS: Marketable Securities - ANSWER -Current asset
FS: Mortgage payable - ANSWER -Long term liability
FS: Common Stock Paid in Capital - ANSWER -Equity
FS: Rent expense - ANSWER -Expenses
FS: Deferred revenues - ANSWER -current liability
FS: Interest payable - ANSWER -current liability
FS: discounts on bonds payable - ANSWER -contra-liability (long term)
FS: Common Stock at Par Value - ANSWER -Equity
FS: Prepaid expenses - ANSWER -Current asset
FS: Allowance for Doubtful accounts - ANSWER -Contra-asset
