Robert Half Assessment Test Core Accounting Principles 3 — Questions and Answers
Question 1: Which inventory costing method assumes the most recently purchased items are sold first?
- FIFO
- LIFO (Correct answer)
- Weighted average
- Specific identification
Correct answer: LIFO
LIFO (Last-In, First-Out) assumes the newest inventory items are sold before older ones.
Question 2: A $1,200 insurance premium was paid on October 1 for 12 months of coverage. How much is prepaid insurance on December 31?
- $300
- $900 (Correct answer)
- $1,200
- $600
Correct answer: $900
Three months have expired (Oct–Dec), leaving 9 months prepaid: $1,200 × 9/12 = $900.
Question 3: Which of the following transactions increases both total assets and total liabilities?
- Paying off a bank loan with cash
- Borrowing money from a bank (Correct answer)
- Issuing stock for cash
- Collecting an account receivable
Correct answer: Borrowing money from a bank
Borrowing from a bank increases cash (asset) and increases notes payable (liability) by equal amounts.
Question 4: Under GAAP, intangible assets with indefinite useful lives (like goodwill) are:
- Amortized over 40 years
- Amortized over their useful life
- Tested annually for impairment instead of amortized (Correct answer)
- Expensed immediately when acquired
Correct answer: Tested annually for impairment instead of amortized
ASC 350 requires goodwill and other indefinite-lived intangibles to be tested for impairment at least annually rather than amortized.
Question 5: A credit entry to Accounts Receivable indicates:
- A customer made a purchase on account
- A customer paid their outstanding balance (Correct answer)
- Revenue was earned
- An expense was accrued
Correct answer: A customer paid their outstanding balance
Crediting Accounts Receivable reduces the balance, reflecting that a customer has paid what they owed.
Question 6: Which of the following correctly describes working capital?
- Total assets minus total liabilities
- Current assets minus current liabilities (Correct answer)
- Long-term assets minus long-term liabilities
- Cash plus accounts receivable
Correct answer: Current assets minus current liabilities
Working capital = Current Assets − Current Liabilities and measures short-term liquidity.
Question 7: The lower-of-cost-or-net-realizable-value rule for inventory is an application of which accounting principle?
- Revenue recognition principle
- Full disclosure principle
- Conservatism (prudence) (Correct answer)
- Going concern principle
Correct answer: Conservatism (prudence)
Conservatism requires that potential losses be recognized immediately while gains are only recorded when realized.
Robert Half Assessment Test Core Accounting Principles 3
Which inventory costing method assumes the most recently purchased items are sold first?