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Accounting Practice QuestionsThe fundamental accounting equation states that:a)assets = liabilities + owner’s equityb)assets = liabilities + drawingsc)assets = liabilities + net incomed)assets = liabilities + net income – owner’s equitye)assets = liabilities - owner’s equityIf Net Income is $25,600 Gross Income is $32,505, and Revenue is $45,500 then:a)Cost of Goods Sold is $19,900 and expenses is $6,905b)Cost of Goods Sold is $12,995 and expenses is $6,905c)Cost of Goods Sold is $12,995 and expenses is $16,448d)Cost of Goods Sold is $19,900 and expenses is $16,448e)Cost of Goods Sold is $6,905 and expenses is $12,995Calculate the amount of simple interest that would be charged if $5 500 is borrowed for 3 years at an interest rate of 6%. a)$860b)$900 c)$990d)$1,080e)$1,170When Business X owes money to Business Y for supplies or materials purchased on credit, Business X calls this an:a)accounts receivableb)accounts payablec)assetd)interest accounte)expenseAn asset loses value over time through the process of:a)depreciation.b)deprecation.c)capitalization.d)appreciation.e)depression.Unlimited liability means that:a)as many people as you want may be involved as customers.b)there is no limit to the amount of ownership.c)the owner’s personal belongings may be sold to cover the debts of a business.d)shareholders are responsible for corporation liabilities.e)shareholders may only lose the amount of their investment in a business.ABC Company sells product Y for a price of $50 per unit. The fixed cost associated with product Y is $85 000 and the variable cost is $12.50 per unit. What is the quantity of product Y that ABC Company will need to produce and sell to break-even?a)1,700b)2,267c)3,500d)6,800e)break-even cannot be calculatedAssume you are reviewing a student budget you have prepared for yourself. You find that your ‘net income’ for each month is negative. Your best option to quickly reverse this situation is...Increase your expenses.Decrease your expenses and increase your income.Decrease your expenses and make strategic use of a credit card to build credit.Decrease your expenses.Decrease your expenses and work to get a student loan approved.About 30% of Charlie's pay goes to income taxes and other government deductions. If he borrows $1 000 at 5% interest, roughly how much will he need to earn to pay it off in one year?$1,050$1300$1,500$1,005None of the aboveChris bought a hockey stick that regularly sold for $175. He received a 20 percent discount. How much did the stick cost before tax?$140$205$35$125$145An example of a monthly variable expense for a household is:RentUtilitiesProperty taxHouse insuranceCar paymentIf Net Income is $83,550, Gross Income is $98,700, and Revenue is $128,000 then:Cost of Goods Sold is 34.73% of Revenue and expenses are 11.84% of RevenueCost of Goods Sold is 22.89% of Revenue and expenses are 11.84% of RevenueCost of Goods Sold is 22.89% of Revenue and expenses are 28.81% of RevenueCost of Goods Sold is 34.73% of Revenue and expenses are 28.81% of RevenueCost of Goods Sold is 11.84% of Revenue and expenses are22.89% of RevenueAs the owner of a catering business, you are required to provide a quote for possible events. You have been asked to provide a quote for wedding for 200 people. You know it will cost $32.00 per person in raw materials, and estimate it will take 12 people to work an eight hour shift each. Each staff member is paid $15.00 per hour. The customer will also be renting 20 tables at $10 per table from you. How much should you quote if you want to make a 20% profit?$8,040$9,648$6,432$10,420$8,128The financial statement that indicates how well the business has been doing over a period of time is called thebalance sheetinventory sheetledger statementincome statementjournal sheetThe amount that an asset is worth at the end of the lease is referred to as theface valueoperating valueresidual valuelease valuegross valueThe financial statement that best demonstrates that a business has enough funds to meet its current obligations isa balance sheetan income statementa statement of shareholder's equitya statement of cash-flowthese are all equally goodIf assets total $375,000 and owner’s equity equal $125 000, then liabilities would total$500,000$250,000$225,000$375,000$125,000What effect does a low inventory turnover have on a company?None, only the level of sales is important.Negative, inventory that moves slowly costs money Positive, low levels of inventory turnover indicates less holding costsPositive, low turnover indicates increased cash flowNone, low turnover indicates lower assets on the balance sheet onlyPick the valid formula.Revenue – Fixed Cost = ProfitFixed Cost + Variable Cost = Gross SalesRevenue – Expenses = ProfitExpenses – Profit = RevenueRevenue – Variable Cost + Fixed Cost = ProfitBusiness owners use income statements in order to:Increase assetsDecrease liabilitiesDetermine the amount of profit or lossCalculate the original owner’s equityCalculate if they should expand the businessThe length of a fiscal period may be:3 monthsa year6 monthsa monthany length of timeAn item that will be used up or converted to cash during the fiscal year is:a current liabilityan expensea fixed asseta plant asseta current assetThe shareholders of a corporation elect:the executivesthe Board of Directorsthe employeesthe proxythe CEOFigure 1Statement of Net Incomefor the year ending December 31, 2011???Company ACompany B??Sales Revenue $ 379,600 $ 159,740 Cost of Goods Sold 205,000 104,000 Gross Margin on Sales $ 174,600 $ 55,740 Advertising Expense 15,200 4,853 Rent Expense 32,000 10,700 Salaries Expense 103,000 30,600 Telephone Expense 7,350 1,175 Utilities Expense 10,550 3,125 Total Operating Expenses $ 168,100 $ 50,453 ??Net Income $ 6,500 $ 5,287 By examining the Statement of Net Income (figure 1 above) for Company A and Company B, the reader can conclude that:Company A has a higher return on sales than Company BCompany B has a higher return on sales than Company ACompany A’s advertising is more effective in generating salesCompany B’s advertising is more effective in generating salesCompany A has a better telephone plan than Company B don’t understand this question. Net Income can be found by calculating:Assets – LiabilitiesLiabilities – AssetsRevenue – ExpensesExpenses – RevenueCost - ExpensesAbout 25% of Zach's pay goes to income taxes and other government deductions. If he borrows $1,000 at 6% interest, roughly how much will he need to earn to pay it off in one year?$1,060$1300$1,410$1,005None of the aboveChris bought a iPad mini that regularly sold for $325. He received a 20 percent discount. How much did the iPad cost after tax (13 % GST)?$299.99$325.00$367.25$260.00$293.80Which type of business has the greatest control over its expenses?BakeryConsultingManufacturingUtilityAirlineAccount Receivable is Money owed by the company Computer accounts you have still to activateA company expense Money owed to the company Nothing important in businessThe Financial Literacy Competition Practice Questions are the sole and exclusive property of the School of Accounting and Finance (SAF) at the University of Waterloo. Access to these questions are granted exclusively to teachers who have registered for the Financial Literacy Competition and are to be used to enhance teaching in the classroom. Registered FLC teachers can make sufficient copies of the Practice Questions for their students, but copying is limited to students within the academic year. ................
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