ASU ACC502 Financial Accounting Practice Exam Study Guide

ASU ACC502 FINANCIAL

ACCOUNTING PRACTICE

EXAM STUDY GUIDE

Question 1: Which �nancial statement reports a company's assets, liabilities, and shareholders' equity at a speci�c date?

Choices:

1) Income statement 2) Balance sheet 3) Statement of cash �ows 4) Statement of shareholders' equity

Correct Answer: Balance sheet

Explanation: The balance sheet presents assets, liabilities, and shareholders' equity at a point in time, showing the accounting equation Assets = Liabilities + Shareholders' Equity.Page 1

Question 2: A company provides services for $18,000 on account. What is the

immediate e�ect on the accounting equation?

Choices:

1) Assets increase $18,000 and shareholders' equity increases $18,000 2) Assets decrease $18,000 and liabilities decrease $18,000 3) Assets increase $18,000 and liabilities increase $18,000 4) Liabilities decrease $18,000 and shareholders' equity increases $18,000 Correct Answer: Assets increase $18,000 and shareholders' equity increases $18,000 Explanation: Accounts receivable increases by $18,000 and service revenue increases retained earnings through net income by $18,000.Question 3: A company pays $7,500 cash to settle an account payable. What is the e�ect?

Choices:

1) Assets decrease $7,500 and liabilities decrease $7,500 2) Assets decrease $7,500 and expenses increase $7,500 3) Liabilities decrease $7,500 and equity increases $7,500 4) Assets increase $7,500 and liabilities decrease $7,500

Correct Answer: Assets decrease $7,500 and liabilities decrease $7,500

Explanation: Cash decreases and accounts payable decreases by the same amount. Paying a previously recorded liability does not create a new expense.Page 2

Question 4: Beginning retained earnings are $120,000. Net income is $35,000 and

dividends are $12,000. What is ending retained earnings?

Choices:

1) $73,000

2) $143,000

3) $155,000

4) $167,000

Correct Answer: $143,000

Explanation: Ending retained earnings = $120,000 + $35,000 - $12,000 = $143,000.Question 5: At year-end, employees have earned $9,000 of wages that will be paid next period. Which adjusting entry is required?

Choices:

1) Debit Wages Payable and credit Wages Expense 2) Debit Wages Expense and credit Wages Payable 3) Debit Cash and credit Wages Revenue 4) Debit Prepaid Wages and credit Cash

Correct Answer: Debit Wages Expense and credit Wages Payable

Explanation: Accrued wages are recognized as an expense in the period earned and as a

liability until paid: debit Wages Expense and credit Wages Payable.

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