Robert Half Assessment Test Core Accounting Principles 4 — Questions and Answers
Question 1: Which section of the statement of cash flows reflects proceeds from issuing long-term bonds?
- Operating activities
- Investing activities
- Financing activities (Correct answer)
- Supplemental disclosures
Correct answer: Financing activities
Issuing bonds is a financing activity because it involves obtaining capital from creditors.
Question 2: Deferred revenue appears on the balance sheet as a:
- Current asset
- Long-term asset
- Liability (Correct answer)
- Component of equity
Correct answer: Liability
Deferred revenue is a liability representing cash received before the related service or goods have been delivered.
Question 3: If a company has a current ratio of 2.0 and current liabilities of $50,000, what are its current assets?
- $25,000
- $50,000
- $100,000 (Correct answer)
- $150,000
Correct answer: $100,000
Current Ratio = Current Assets / Current Liabilities → 2.0 = CA / $50,000 → CA = $100,000.
Question 4: Which of the following is NOT a characteristic of a liability?
- It represents a present obligation
- It will likely require an outflow of resources
- It arises from a past transaction or event
- It represents an ownership claim on assets (Correct answer)
Correct answer: It represents an ownership claim on assets
Ownership claims on assets describe equity, not liabilities; liabilities are obligations to outside parties.
Question 5: What effect does declaring (but not yet paying) a cash dividend have on the balance sheet?
- Decreases cash; decreases retained earnings
- Decreases retained earnings; increases dividends payable (Correct answer)
- No effect until payment is made
- Increases retained earnings; increases liabilities
Correct answer: Decreases retained earnings; increases dividends payable
Declaration debits Retained Earnings and credits Dividends Payable, creating a liability before cash is disbursed.
Question 6: Under the straight-line depreciation method, an asset costing $24,000 with a $4,000 salvage value and a 5-year life results in annual depreciation of:
- $4,800
- $4,000 (Correct answer)
- $5,000
- $6,000
Correct answer: $4,000
Straight-line depreciation = (Cost − Salvage) / Useful life = ($24,000 − $4,000) / 5 = $4,000 per year.
Question 7: The debt-to-equity ratio measures:
- Short-term liquidity
- A company's reliance on creditor financing relative to owner financing (Correct answer)
- How efficiently assets generate revenue
- The proportion of assets financed by current liabilities
Correct answer: A company's reliance on creditor financing relative to owner financing
Debt-to-equity = Total Liabilities / Total Equity and indicates how leveraged a company is.
Robert Half Assessment Test Core Accounting Principles 4
Which section of the statement of cash flows reflects proceeds from issuing long-term bonds?