MGT 8803 Week 1 Exam Questions And Answers Verified 100% Correct

MGT 8803 Week 1 Exam Questions And Answers Verified 100% Correct The ___ measures financial position at a point in time, and summarizes what the company has and what it owes. - ANSWER balance sheet What are the 3 components of the balance sheet? - ANSWER 1. Assets 2. Liabilities 3. Owner's equity What is the accounting equation? - ANSWER Assets = Liabilities + Owner's Equity What does the left side of the accounting equation represent? - ANSWER Resources of the company, i.e., the assets are the resources What does the right side of the accounting equation represent? - ANSWER Sources of the funding provided by the creditors, i.e., who has claims to the assets. Liabilities represent the creditor's claims. Owner's equity represents the sources provided by the owners and the owner's claims. ___ are the resources owned or the rights to receive resources. - ANSWER Assets Assets can be ___ (cash, buildings, inventory, equipment), ___ (copyrights, patents, or trademarks), or ___ (e.g., legal right to receive payment). - ANSWER physical, intangible, legal rights Cash, accounts receivable & notes receivable, inventory, investments, buildings & equipment, and copyrights & patents are all examples of ___. - ANSWER Assets The order of presentation on the balance sheet is generally in terms of ___. - ANSWER liquidity (the closer they are to being cash, the more liquid they are) Historical cost, sales value, replacement value, and general price-level adjusted costs are all ___. - ANSWER valuation metrics ___ is the price that was paid to either manufacture or purchase an asset. - ANSWER Historical cost ___ is what an asset can be sold for. - ANSWER Sales value (AKA market value) ___ is what it would cost you to replace an asset with an identical asset. - ANSWER Replacement cost --- takes the original cost of an asset and adjusts it for inflation. - ANSWER General price-level adjusted costs What is the cost principle? - ANSWER Assets must be valued at their historical cost on the balance sheet. ___ are obligations owed to creditors. - ANSWER Liabilities T/F: Liabilities can come in the form of money or goods/services. - ANSWER True Accounts payable, notes payable, interest payable, accrued salaries, and deferred (unearned) revenues are all examples of ___. - ANSWER common liability accounts ___ is when a company receives money in advance of providing the goods or services, and therefore have a liability to provide those goods and services. - ANSWER Deferred revenues ___ balance sheets make distinctions between current and long-term assets and current and long-term liabilities. - ANSWER Classified What's the difference between current and long-term assets? - ANSWER Current assets can be converted to cash within 1 year. Long-term assets would take longer than 1 year to convert. What's the difference between current and long-term liabilities? - ANSWER Current liabilities have due dates within 1 year, while long-term liabilities are due more than 1 year out. T/F: Long-term assets/liabilities are usually called out with their own section in classified balance sheets. - ANSWER False. If it's not called out as a current asset/liability, it is assumed that it is a long-term asset. ___ represents the residual interest of owners to assets. - ANSWER Owner's equity For corporations, owner's equity is referred to as ___. - ANSWER stockholder's equity Stockholder's equity consists of two components: ___ and ___. - ANSWER capital stock & retained earnings ___ is what the company received when selling shares of its stock. - ANSWER Capital stock ___ is accumulated earnings less dividends. - ANSWER Retained earnings ___ are a distribution of earnings, which only occurs when the board of directors decides to distribute the earnings. - ANSWER Dividends ___ are value received for goods sold or services performed. - ANSWER Revenues ___ are payment, or obligations, for goods or services received. - ANSWER Expenses With ___, revenues will be recognized when cash is received, and expenses will be recognized when cash is paid out. - ANSWER cash basis accounting T/F: Income statements use cash basis accounting. - ANSWER False. Income statements use accrual accounting. Explain the revenue recognition principle. - ANSWER Revenue is recognized when earned. The earning process is considered to be complete even though cash has not yet been collected. There are two parts to the Matching Principle (for expense recognition). Explain them. - ANSWER 1. Costs are reported as expenses in the same time period as their related revenues. 2. Costs that cannot be matched with specific revenues are matched with future time periods that benefit from the cost. While a balance sheet gives us a snapshot of financial position for a certain point in time, the ___ focuses on what happened over a certain time interval (1 year+) to show the results/success of a company's operations. - ANSWER income statement The ___ lists all revenues and all expenses using the simple formula: revenues earned - expenses incurred = net income. - ANSWER single step income statement What is gross margin? (Explain in formula) - ANSWER Net sales - cost of goods sold ___ represents profit after day-to-day (selling, general, and admin) activities are deducted. - ANSWER Operating income What is the formula for operating income? - ANSWER Gross margin - operating expenses == Net sales - COGS - operating expenses