# Financial Accounting 1 Essay

4902 Words Oct 8th, 2015 20 Pages
FINAL EXAM 1
1. Which of the following is the fundamental accounting equation?
Current assets + Current liabilities = Owners' equity
Assets + Owners' equity = Liabilities
Cash = Debts + Common stock
Assets = Liabilities + Owners' equity
2. On December 31, 2014, Track Record Inc.'s sales people have ﬁrm outstanding orders totaling
\$1.66 million, which, it has guaranteed its customers, will be fulﬁlled during the month of January 2015. If
Track Record includes the \$1.66 million in its sales ﬁgures for 2014, it will be violating the:
Materiality concept
Historical cost concept
Dual-aspect concept
Realization concept
3. Which one of the following best describes a balance sheet?
A description of the entity's operations over a period of time
A
How would this transaction be recorded by Silica Labs?
Debit patent account \$700,000; credit cash \$500,000; credit common stock \$200,000
Debit cash \$500,000; debit common stock \$200,000; credit patent account \$700,000
Debit cash \$500,000; credit patent account \$500,000
Debit patent account \$500,000; credit cash \$500,000
7. Consider the same scenario as in the previous question: Assuming that Silica Labs holds some long-term debt, which of the following describes the effect of the transaction on Silica Labs?
Current ratio will decrease and total debt to equity ratio will increase
Current ratio will increase and total debt to equity ratio will decrease
Current ratio will increase and total debt to equity ratio will increase
Current ratio will decrease and total debt to equity ratio will decrease

8. Lucky Lee, a video-game store in New York city, purchases a game machine directly from Taiwan for \$30,000. In the U.S., the same machine will probably cost at least \$36,000. Pick the most appropriate accounting action for Lucky Lee:
Record the machine at \$36,000
Record the machine at \$30,000
Record the machine for [(\$30,000+\$36,000)/2] = \$33,000
Have the machine examined by an independent appraiser and record it at the appraised value
9. Which one of the following is an item of owners' equity?
Bank loan
Suppliers' monetary claims
Prepaid expenses
Earnings generated by the entity
10. Complete the following sentence: The Conservatism Concept directs an entity to

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