Final Exam, Part 1 :Introduction to Financial Accounting (Business Foundations Specialization) Answers 2026

Question-wise Correct Answers

Q1. Sale on credit ($10,000 sale; cost $8,000)

✅ Total Assets (A/R increase)
❌ Inventory (inventory decreases)
❌ Total Liabilities
✅ Revenue
✅ Accounts Receivable

Q2. Inventory purchased on credit ($50,000)

✅ Current Liabilities (A/P increases)
❌ Cash from Operations (no cash yet)
✅ Inventory
❌ Total Stockholders’ Equity
❌ Cost of Goods Sold

Q3. Cash collected for last quarter’s sale

❌ Total Stockholders’ Equity
✅ Cash from Operations
✅ Total Assets (cash increases)
❌ Revenue (already recorded last quarter)
❌ Accounts Receivable (it decreases)

Q4. Cash received as deposit (unearned revenue)

❌ Revenue
✅ Total Assets (cash ↑)
✅ Total Liabilities (unearned revenue ↑)
❌ Cash from Operations
❌ Accounts Receivable

Q5. Issued stock for cash ($100,000)

✅ Total Assets
✅ Additional Paid-in Capital
❌ Total Liabilities
❌ Cash from Operations
❌ Revenue

Q6. Bank loan received ($75,000)

✅ Total Assets
❌ Interest Payable
❌ Interest Expense
✅ Cash from Financing
✅ Total Liabilities

Q7. Dividends declared (not yet paid)

❌ Net Income
✅ Total Liabilities (dividends payable)
❌ Cash from Financing
❌ Retained Earnings (it decreases)
❌ Dividend Expenses

Q8. Insurance prepaid ($50,000)

✅ Total Assets
❌ Net Income
❌ Current Liabilities
❌ Insurance Expense
✅ Prepaid Insurance

Q9. Adjusting entry: prepaid advertising used

✅ Advertising Expense
❌ Cost of Goods Sold
❌ Cash from Operations
❌ Total Liabilities
❌ Prepaid Advertising (it decreases)

Q10. Loan + equipment purchase ($500,000)

✅ Total Assets
✅ Notes Payable
❌ Inventory
❌ Cash from Investing (equipment purchase is an outflow)
✅ Cash from Financing

Q11. Depreciation adjusting entry ($5,000)

❌ Cash from Operations
❌ Retained Earnings (it decreases)
❌ Total Assets (they decrease)
❌ Cost of Goods Sold
✅ Depreciation Expense

Q12. Equipment sold at gain ($30,000 cash; gain $5,000)

❌ Cash from Operations
✅ Cash from Investing
✅ Retained Earnings (via gain in net income)
❌ Cash from Financing
❌ Cost of Goods Sold

🧾 Final Summary Table