C214 - Financial Management Exam
Actual Questions with Complete
Solution 2024/2025
Trading on the NYSE is executed without a specialist (i.e. a
... [Show More] market maker). ✔✔False
Accruals ✔✔are expenses a firm owes but hasn't paid yet. (Like wages - the employee has
worked, but his check hasn't been cut yet.)
Which of the following best describes the guiding principle for revenue recognition within
accrual accounting system: ✔✔Revenue is reported when the earnings process is complete
A high-quality customer just purchased $500,000 worth of product from your company. The
contract calls for immediate delivery of the product with a cash payment of $300,000 today and
$200,000 to be paid 60 days. The expense associated with the product is $300,000, of which
$100,000 has not been paid to your supplier. Under accrual based accounting system, you will
most likely report:
revenues of $300,000 and expenses of $300,000.
revenues of $500,000 and expenses of $300,000.
revenues of $500,000 and expenses of $200,000. ✔✔Revenues of $500,000 and expenses of
$300,000.
Solution: Under accrual accounting system, you record the revenues when the earnings process is
complete and match the expense with the revenues. In this case, we delivered the product and
have a contract for payment with a high-quality firm. Hence, the earnings process is complete
(including reasonable assurance of payment) so the firm will recognize $500,000 in revenue.
On the balance sheet, Gross Fixed Assets represent: ✔✔The original cost of the fixed assets
currently owned by the firm.
A firm purchased equipment three years ago for $500,000. The equipment is the only fixed asset
the firm has ever owned. If the firm claimed depreciation of $20,000 the first year, $35,000 the
second year and $32,500 the third year, the Gross Fixed Assets should be equal to:
$445,000
$480,000
$500,000
$412,000 ✔✔$500,000
Solution: GROSS fixed assets represent the original cost of the firm's fixed assets before
accumulated depreciation. [Show Less]