Finance Exam 1

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1.

Which of the following is the fundamental accounting equation?

Assets = Liabilities + Owners' equity

2.

On December 31, 2004, 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 2005.

If Track Record includes the $1.66 million in its sales figures for 2004, it will be violating the:

Realization concept

3.

Which one of the following best describes a balance sheet?

A snapshot at a point in time of an entity's assets, liabilities and owners' equity

4.

To be recorded as an asset, an item must meet four specific conditions. Three of them are: it must have been acquired at measurable cost, it must be obtained or controlled by the entity, and it must have been obtained or controlled in a past transaction.

Which one of the following is the fourth condition?

It must be expected to have future economic benefits

5.

NeuraPharma, Inc. has purchased a drug patent with a remaining useful life of 13 years. How should this new asset be classified?

A non-current intangible asset

6.

June Smith, a process engineer, has sold her 15-year patent for a new etching process to Silica Labs, Inc. In return, she has received $500,000 in cash and, based on its value on the sale date, $200,000 in common stock in Silica Labs. The stock is forecasted to double in market value over the next two months.

How would this transaction be…...

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