Test Bank for Fundamental Financial Accounting Concepts, 2024 Release by Thomas Edmonds.pdf

,FundamentalmFinancialmAccountingmConcepts,m10em (Edmonds)mC
hapterm1m AnmIntroductionmtomAccounting

Indicatemhow meachmevent maffectsmthemelementsmof mfinancialmstatements.mUsemthemfollowingmlettersm
tomrecord myourmanswerminmthemboxmshownmbelow meachmelement.mYoumdomnot mneed mtomentermamoun
ts.m(Notemthat m"NomEffect"mmeansmthat mthemevent mdoesmnot meffectmthatmelement mof mthemfinancialmsta
tementsmormthat mthemevent mcausesmanmincreaseminmthat melement mismoffset mbymamdecreaseminmthat msam
emelement.)

Increasem=mI Decreasem=mDm NomEffect m=mNA

1) WalkermCo.missued mcommonmstockmform$150,000mcash.

Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows


Answer:m (I)m(NA)m(I)m(NA)m(NA)m(NA)m(I)
Issuingmcommonmstockmismanmasset msourcemtransactionmthat mincreasesmthembusiness'smassetsm(cas
h)mand mitsmstockholders'mequitym(commonmstock).mIt mdoesmnot maffect mthemincomemstatement,mbut
mismreported masmamcashmflow mfrommfinancingmactivitiesminmthemstatement mof mcashmflows.

Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement

2) NguyenmCo.mborrowed m$50,000mcashmfrommMetropolitanmBank.

Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows


Answer:m (I)m(I)m(NA)m(NA)m(NA)m(NA)m(I)
Borrowingmcashmismanmasset msourcemtransactionmthat mincreasesmambusiness'smassetsm(cash)mand mitsmli
abilitiesm(notesmpayable).mIt mdoesmnot maffect mthemincomemstatement,mbut mismreported masmamcashmflow
mfrommfinancingmactivitiesminmthemstatement mof mcashmflows.

Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement
1
Copyright m©m2019 mMcGraw-HillmEducation.mAllmrightsmreserved.
No mreproduction mormdistribution mwithout mthempriormwritten mconsent mof mMcGraw-
HillmEducation.

,3) BellmCo.mprovided mconsultingmservicesmform$20,000mcash.

Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows


Answer:m (I)m(NA)m(I)m(I)m(NA)m(I)m(I)
Thismismanmasset msourcemtransactionmthat mincreases mthembusiness'smassetsm(cash). mWhenmambusinessm
providesmservices,mit mearnsmrevenue.mRevenuemincreasesmnet mincome,mwhichmwillm increasemequitym(
retained mearnings)mat mthemend mof mthemaccountingmperiod.mThismevent mismreported masmamcashmflow mfro
mmoperatingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement

4) PiercemCo.mpaid m$40,000mcashmtompurchasemland.

Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows


Answer:m (NA)m(NA)m(NA)m(NA)m(NA)m(NA)m(D)
Purchasingm land mformcashmismanmasset mexchangemtransactionmthat mincreasesmonemasset m(land)ma
nd mdecreasesmanothermasset m(cash).mIt mdoesmnot maffect mthemincomemstatement,mand mismreported
masmanminvestingmactivityminmthemstatement mof mcashmflows.

Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement




2
Copyright m©m2019 mMcGraw-HillmEducation.mAllmrightsmreserved.
No mreproduction mormdistribution mwithout mthempriormwritten mconsent mof mMcGraw-
HillmEducation.

, 5) PerezmCo.mpaid m$220,000mcashmformsalariesmexpense.

Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows


Answer:m (D)m(NA)m(D)m(NA)m(I)m(D)m(D)
Payingmexpensesmismanmasset musemtransactionmthat mdecreasesmthembusiness'smassetsm(cash)mand mdecr
easesmitsmequitym(retained mearnings).mNotemthat mthemexpensemdecreasesmnet mincome,mand mwillmdecre
asemretained mearningsmat mthemend mof mthemaccountingmperiod.mIt mismreported masmamcashmflow mformoper
atingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement

6) EpsteinmCo.mpaid m$20,000minmcashmdividendsmtomitsmowners.

Stmt mof mCashm
Assets Liabilities Equity Revenues Expenses Net mIncome Flows


Answer:m (D)m(NA)m(D)m(NA)m(NA)m(NA)m(D)
Payingmamcashmdividend mismanmasset musemtransactionmthat mdecreasesmambusiness'smassetsm(cash)mand m
itsmequitym(retained mearnings).Themdividendsmaccount mwillmdecreasemthemretained mearningsmat mtheme
nd mof mthemaccountingmperiod.mIt mdoesmnot maffectmnet mincome,mand mismreported masmamcashmflow mformfi
nancingmactivitiesminmthemstatement mof mcashmflows.
Difficulty:m2mMedium
Topic:m ThemHorizontalmFinancialmStatementsmModel
LearningmObjective:m 01-
10mRecord mbusinessmeventsmusingmamhorizontalmfinancialmstatementsmmodel.
Bloom's:m Analyze
AACSB:m AnalyticalmThinking
AICPA:m BBmCriticalmThinking;mFNmMeasurement




3
Copyright m©m2019 mMcGraw-HillmEducation.mAllmrightsmreserved.
No mreproduction mormdistribution mwithout mthempriormwritten mconsent mof mMcGraw-
HillmEducation.