Test Bank for Financial Accounting, 6th Edition by David Spiceland

Version 1 1 CHAPTER 01 TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 1) Accounting is a system of maintaining records of a company's operations and communicating that information to decision makers. ⊚ true ⊚ false 2) Accounting information is used by investors to decide whether to invest in a company's stock. ⊚ true ⊚ false 3) Accounting information is used by creditors to decide whether to invest in a company's stock. ⊚ true ⊚ false 4) The primary functions of financial accounting are to measure business activities of a company and to communicate those measurements to internal parties for decision-making purposes. ⊚ true ⊚ false 5) Financing activities include transactions the company has with investors and creditors. ⊚ true ⊚ false 6) Investing activities include transactions involving the purchase and sale of resources that are expected to benefit the company for several years. ⊚ true ⊚ false Version 1 2 7) Operating activities include transactions that relate to the primary operations of the company, such as providing products and services to customers and the associated costs. ⊚ true ⊚ false 8) A corporation is an entity that is legally separate from its owners. ⊚ true ⊚ false 9) Cash, inventory for sale to customers, supplies, and buildings are examples of liabilities. ⊚ true ⊚ false 10) Amounts owed to suppliers, employees, the government in the form of taxes, and utility companies are examples of liabilities. ⊚ true ⊚ false 11) If total assets of a company equal $12,000 and total stockholders' equity equals $4,000, then total liabilities equal $8,000. ⊚ true ⊚ false 12) If total liabilities of a company equal $16,000 and total stockholders' equity equals $9,000, then total assets equal $7,000. ⊚ true ⊚ false 13) The accounting equation shows that a company's total resources equal creditors' and owners' claims to those resources. ⊚ true ⊚ false