Test Bank for Fundamental Financial Accounting Concepts
b b b b b b
11th Edition
b
by Thomas Edmonds, Philip Olds, Christopher Edmonds
b b b b b b
,Student name: b
1) Indicate whether each of the following statements about markets is true or false.
b b b b b b b b b b b b
a) Financial resources can be provided to a business by investors.
b b b b b b b b b b
b) Resource owners are the businesses that transform resources into products that
b b b b b b b b b b b
b satisfy consumer desires.
b b
c) Labor resources include both the physical and intellectual labor of a business's
b b b b b b b b b b b b
b employees.
d) Businesses purchase their resources from resource owners.
b b b b b b b
e) Consumers are the main providers of resources in any market.
b b b b b b b b b b
2) Indicate whether each of the following statements about accounting information is true or
b b b b b b b b b b b b
false.
b
a) Financial accounting is primarily intended to satisfy the information needs of
b b b b b b b b b b b
b internal stakeholders.
b
b) Managerial accounting information includes financial and nonfinancial
b b b b b b b
b information.
c) The accounting information intended to satisfy the needs of a company's
b b b b b b b b b b b
b employees is managerial accounting information.
b b b b
d) GAAP requires that companies adhere to financial accounting standards.
b b b b b b b b b
e) Managerial accounting information is usually less detailed than financial
b b b b b b b b b
b accounting information.b
3) Indicate whether each of the following statements about liabilities is true or false.
b b b b b b b b b b b b
a) A net loss on the income statement decreases liabilities.
b b b b b b b b b
b) The acquisition of a bank loan increases both assets and liabilities.
b b b b b b b b b b b
c) The accounting equation requires that liabilities be equal to stockholders’ equity.
b b b b b b b b b b b
d) The amount of a company's liabilities is equal to the difference between its assets and
b b b b b b b b b b b b b b b
b its stockholders’ equity.
b b
e) Liabilities are reported on the statement of cash flows of a business.
b b b b b b b b b b b b
,4) Indicate whether each of the following statements about retained earnings is true or false.
b b b b b b b b b b b b b
a) A dividend paid to stockholders decreases retained earnings.
b b b b b b b b
b) Issuing common stock for cash increases retained earnings.
b b b b b b b b
c) The amount of net income for a period must equal retained earnings.
b b b b b b b b b b b b
d) The purchase of a truck decreases retained earnings.
b b b b b b b b
e) Net income increases retained earnings.
b b b b b
5) Indicate whether each of the following statements about the types of transactions is true or
b b b b b b b b b b b b b b
false.
b
a) An asset source transaction increases total assets and increases claims to assets.
b b b b b b b b b b b b
b) The issuance of stock to owners for cash would be an example of an asset
b b b b b b b b b b b b b b b
b exchange transaction.
b
c) Purchasing equipment for cash is an example of an asset use transaction.
b b b b b b b b b b b b
d) Paying a dividend to stockholders is an example of an asset use transaction.
b b b b b b b b b b b b b
e) Making a payment on a bank loan is an example of an asset exchange transaction.
b b b b b b b b b b b b b b b
6) Indicate whether each of the following statements about financial statements is true or
b b b b b b b b b b b b
false.
b
a) A cash dividend paid to stockholders is reported in the investing activities section of
b b b b b b b b b b b b b b
b the statement of cash flows.
b b b b
b) A cash dividend paid to stockholders is reported on the statement of changes in
b b b b b b b b b b b b b b
b stockholders' equity. b
c) A cash dividend paid to stockholders is reported on the income statement.
b b b b b b b b b b b b
d) The balance sheet reports the ending balances of permanent accounts as of the last day
b b b b b b b b b b b b b b b
b of the accounting period.
b b b
e) Changes in retained earnings during the accounting period are reported on the
b b b b b b b b b b b b
b income statement.
b
, 7) Indicate whether each of the following statements about stockholders’ equity is true or
b b b b b b b b b b b b
false.
b
a) Expenses decrease retained earnings.b b b b
b) Stockholders' equity and liabilities can be viewed either as sources of assets or
b b b b b b b b b b b b b
b claims to assets of the business.
b b b b b
c) Retained earnings is increased by loans received from a bank.
b b b b b b b b b b
d) Dividends paid to stockholders decrease common stock.
b b b b b b b
e) Generally, assets are reported at the actual price paid for them when purchased
b b b b b b b b b b b b b
b regardless of subsequent changes in market value.
b b b b b b
8) Jessup Company was founded in Year 1. It acquired $45,000 cash by issuing stock to
b b b b b b b b b b b b b b
investors and an additional $15,000 cash by borrowing from creditors. During Year 1 it received
b b b b b b b b b b b b b b b
$25,000 cash revenues and paid $32,000 in cash expenses. The company then went out of
b b b b b b b b b b b b b b
business.
b
Required:
a) Explain the term, "business liquidation."
b b b b
b) What amount of cash should Jessup Company have had on hand immediately before going out
b b b b b b b b b b b b b b
of business?
b b
c) What amount of cash will Jessup's creditors receive?
b b b b b b b
d) What amount of cash will Jessup's stockholders receive?
b b b b b b b
9) Bates Company entered into the following transactions during its first year in business.
b b b b b b b b b b b b
Assume that all transactions involve the receipt or payment of cash.
b b b b b b b b b b b
1) Issued common stock to investors for $25,000 cash.
b b b b b b b
2) Borrowed $18,000 from the local bank. b b b b b
3) Provided services to customers for $28,000.
b b b b b
4) Paid expenses amounting to $21,400.
b b b b
5) Purchased a plot of land costing $22,000. b b b b b b
6) Paid a dividend of $15,000 to its stockholders.
b b b b b b b
7) Repaid $12,000 of the loan listed in item 2.
b b b b b b b b
Required:
(a) Fill in the three column headings of the accounting equation in the first rowof the table
b b b b b b b b b b b b b b b b
b shown below.
b
(b) Show the effects of the above transactions on the accounting equation.
b b b b b b b b b b
b b b b b b
11th Edition
b
by Thomas Edmonds, Philip Olds, Christopher Edmonds
b b b b b b
,Student name: b
1) Indicate whether each of the following statements about markets is true or false.
b b b b b b b b b b b b
a) Financial resources can be provided to a business by investors.
b b b b b b b b b b
b) Resource owners are the businesses that transform resources into products that
b b b b b b b b b b b
b satisfy consumer desires.
b b
c) Labor resources include both the physical and intellectual labor of a business's
b b b b b b b b b b b b
b employees.
d) Businesses purchase their resources from resource owners.
b b b b b b b
e) Consumers are the main providers of resources in any market.
b b b b b b b b b b
2) Indicate whether each of the following statements about accounting information is true or
b b b b b b b b b b b b
false.
b
a) Financial accounting is primarily intended to satisfy the information needs of
b b b b b b b b b b b
b internal stakeholders.
b
b) Managerial accounting information includes financial and nonfinancial
b b b b b b b
b information.
c) The accounting information intended to satisfy the needs of a company's
b b b b b b b b b b b
b employees is managerial accounting information.
b b b b
d) GAAP requires that companies adhere to financial accounting standards.
b b b b b b b b b
e) Managerial accounting information is usually less detailed than financial
b b b b b b b b b
b accounting information.b
3) Indicate whether each of the following statements about liabilities is true or false.
b b b b b b b b b b b b
a) A net loss on the income statement decreases liabilities.
b b b b b b b b b
b) The acquisition of a bank loan increases both assets and liabilities.
b b b b b b b b b b b
c) The accounting equation requires that liabilities be equal to stockholders’ equity.
b b b b b b b b b b b
d) The amount of a company's liabilities is equal to the difference between its assets and
b b b b b b b b b b b b b b b
b its stockholders’ equity.
b b
e) Liabilities are reported on the statement of cash flows of a business.
b b b b b b b b b b b b
,4) Indicate whether each of the following statements about retained earnings is true or false.
b b b b b b b b b b b b b
a) A dividend paid to stockholders decreases retained earnings.
b b b b b b b b
b) Issuing common stock for cash increases retained earnings.
b b b b b b b b
c) The amount of net income for a period must equal retained earnings.
b b b b b b b b b b b b
d) The purchase of a truck decreases retained earnings.
b b b b b b b b
e) Net income increases retained earnings.
b b b b b
5) Indicate whether each of the following statements about the types of transactions is true or
b b b b b b b b b b b b b b
false.
b
a) An asset source transaction increases total assets and increases claims to assets.
b b b b b b b b b b b b
b) The issuance of stock to owners for cash would be an example of an asset
b b b b b b b b b b b b b b b
b exchange transaction.
b
c) Purchasing equipment for cash is an example of an asset use transaction.
b b b b b b b b b b b b
d) Paying a dividend to stockholders is an example of an asset use transaction.
b b b b b b b b b b b b b
e) Making a payment on a bank loan is an example of an asset exchange transaction.
b b b b b b b b b b b b b b b
6) Indicate whether each of the following statements about financial statements is true or
b b b b b b b b b b b b
false.
b
a) A cash dividend paid to stockholders is reported in the investing activities section of
b b b b b b b b b b b b b b
b the statement of cash flows.
b b b b
b) A cash dividend paid to stockholders is reported on the statement of changes in
b b b b b b b b b b b b b b
b stockholders' equity. b
c) A cash dividend paid to stockholders is reported on the income statement.
b b b b b b b b b b b b
d) The balance sheet reports the ending balances of permanent accounts as of the last day
b b b b b b b b b b b b b b b
b of the accounting period.
b b b
e) Changes in retained earnings during the accounting period are reported on the
b b b b b b b b b b b b
b income statement.
b
, 7) Indicate whether each of the following statements about stockholders’ equity is true or
b b b b b b b b b b b b
false.
b
a) Expenses decrease retained earnings.b b b b
b) Stockholders' equity and liabilities can be viewed either as sources of assets or
b b b b b b b b b b b b b
b claims to assets of the business.
b b b b b
c) Retained earnings is increased by loans received from a bank.
b b b b b b b b b b
d) Dividends paid to stockholders decrease common stock.
b b b b b b b
e) Generally, assets are reported at the actual price paid for them when purchased
b b b b b b b b b b b b b
b regardless of subsequent changes in market value.
b b b b b b
8) Jessup Company was founded in Year 1. It acquired $45,000 cash by issuing stock to
b b b b b b b b b b b b b b
investors and an additional $15,000 cash by borrowing from creditors. During Year 1 it received
b b b b b b b b b b b b b b b
$25,000 cash revenues and paid $32,000 in cash expenses. The company then went out of
b b b b b b b b b b b b b b
business.
b
Required:
a) Explain the term, "business liquidation."
b b b b
b) What amount of cash should Jessup Company have had on hand immediately before going out
b b b b b b b b b b b b b b
of business?
b b
c) What amount of cash will Jessup's creditors receive?
b b b b b b b
d) What amount of cash will Jessup's stockholders receive?
b b b b b b b
9) Bates Company entered into the following transactions during its first year in business.
b b b b b b b b b b b b
Assume that all transactions involve the receipt or payment of cash.
b b b b b b b b b b b
1) Issued common stock to investors for $25,000 cash.
b b b b b b b
2) Borrowed $18,000 from the local bank. b b b b b
3) Provided services to customers for $28,000.
b b b b b
4) Paid expenses amounting to $21,400.
b b b b
5) Purchased a plot of land costing $22,000. b b b b b b
6) Paid a dividend of $15,000 to its stockholders.
b b b b b b b
7) Repaid $12,000 of the loan listed in item 2.
b b b b b b b b
Required:
(a) Fill in the three column headings of the accounting equation in the first rowof the table
b b b b b b b b b b b b b b b b
b shown below.
b
(b) Show the effects of the above transactions on the accounting equation.
b b b b b b b b b b
