TestBank for FundamentalFinancialAccounting Concepts
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11th Edition
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by ThomasEdmonds, Philip Olds, Christopher Edmonds
s s s s s s
,Studentname: s
1) Indicatewhether eachofthe following statements about markets is trueor false.
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a)Financialresources can beprovided to abusinessby investors.
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b) Resourceownersarethe businessesthat transformresources into productsthat
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satisfy consumer desires.
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c)Labor resourcesinclude boththephysicaland intellectuallabor ofabusiness's
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employees.
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d)Businesses purchase their resources fromresourceowners.
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e)Consumersare the mainprovidersofresources inany market.
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2) Indicatewhether eachofthefollowing statementsabout accounting information istrueor false.
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a)Financialaccounting isprimarilyintended to satisfythe informationneedsof
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internal stakeholders.
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b)Managerialaccounting informationincludesfinancialandnonfinancial
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information.
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c)Theaccounting informationintendedto satisfytheneeds ofacompany's
s s s s s s s s s s s
employees is managerial accounting information.
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d)GAAP requiresthat companiesadhereto financialaccounting standards.
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e)Managerialaccounting informationisusuallylessdetailedthanfinancial
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accounting information.
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3) Indicatewhether eachofthe following statements about liabilities is trueor false.
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a)Anet loss onthe incomestatement decreases liabilities.
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b)Theacquisitionofabank loanincreases bothassetsand liabilities.
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c)The accounting equationrequires that liabilities be equalto stockholders’ equity.
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d)Theamount ofacompany's liabilities isequaltothedifference between itsassets and its
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stockholders’ equity.
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e)Liabilities are reportedonthe statement ofcash flows ofa business.
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,4) Indicatewhether eachofthe following statements about retained earnings is trueorfalse.
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a)Adividend paid to stockholdersdecreases retained earnings.
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b)Issuing commonstock forcash increases retained earnings.
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c)The amount ofnet income for aperiodmust equalretained earnings.
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d)Thepurchase ofa truck decreases retained earnings.
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e)Net income increasesretainedearnings.
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5) Indicatewhether eachofthefollowing statements about thetypesoftransactions is true or
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false.
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a)Anasset sourcetransaction increases totalassets and increases claims to assets.
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b) The issuance ofstockto ownersforcashwould be anexampleofanasset
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exchange transaction.
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c)Purchasing equipment for cash isanexample ofanasset usetransaction.
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d)Paying adividend to stockholders is anexample ofanasset usetransaction.
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e)Making apayment onabank loan is anexample ofanasset exchangetransaction.
s s s s s s s s s s s s s s s
6) Indicate whether eachofthefollowing statements about financialstatements is trueor false.
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a)Acashdividend paid to stockholders isreportedinthe investing activitiessection of the
s s s s s s s s s s s s s s s
statement of cash flows.
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b) Acashdividend paid tostockholders isreportedonthestatement ofchanges in
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stockholders' equity.
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c)Acashdividend paid to stockholders is reportedonthe income statement.
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d)Thebalancesheet reportstheending balancesofpermanent accountsasofthelast day of
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the accounting period.
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e)Changes inretained earningsduring the accounting period arereportedonthe
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income statement.
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, 7) Indicate whether eachofthefollowing statements about stockholders’ equityis trueor false. s s s s s s s s s s s s s
a)Expensesdecrease retained earnings. s s s s
b) Stockholders'equityand liabilities can beviewed either as sources ofassetsor claims
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to assets of the business.
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c)Retained earnings is increased by loansreceived fromabank. s s s s s s s s s s
d)Dividendspaid to stockholdersdecrease commonstock. s s s s s s s
e)Generally, assets arereportedat theactualprice paid forthemwhenpurchased
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regardless of subsequent changes in market value.
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8) Jessup Company was founded in Year 1. It acquired $45,000 cash by issuing stock to investors s s s s s s s s s s s s s s s
andanadditional$15,000 cashbyborrowing fromcreditors.During Year 1 it received
s s s s s s s s s s s s s s
$25,000cashrevenues and paid $32,000 incashexpenses. The companythenwent out of business.
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Required:
a) Explaintheterm,"business liquidation." s s s s
b) What amount ofcashshouldJessupCompanyhave hadonhand immediatelybeforegoing out of
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business?
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c) What amount ofcashwillJessup's creditorsreceive?
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d) What amount ofcashwillJessup'sstockholders receive?
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9) BatesCompanyenteredintothe followingtransactionsduringitsfirst year inbusiness.
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Assume that all transactions involve the receipt or payment of cash.
s s s s s s s s s s s
1) Issued commonstockto investors for $25,000cash.
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2) Borrowed $18,000fromthe localbank. s s s s s
3) Providedservicesto customers for$28,000. s s s s s
4) Paid expensesamounting to $21,400.
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5) Purchasedaplot ofland costing $22,000. s s s s s s
6) Paid a dividend of$15,000to its stockholders.
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7) Repaid $12,000 ofthe loan listed in item2. s s s s s s s s
Required:
(a) Fillinthethreecolumn headingsoftheaccounting equation inthe first rowofthetable shown
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below.
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(b) Showthe effects ofthe above transactions onthe accounting equation.
s s s s s s s s s s
s s s s s s
11th Edition
s
by ThomasEdmonds, Philip Olds, Christopher Edmonds
s s s s s s
,Studentname: s
1) Indicatewhether eachofthe following statements about markets is trueor false.
s s s s s s s s s s s s
a)Financialresources can beprovided to abusinessby investors.
s s s s s s s s s s
b) Resourceownersarethe businessesthat transformresources into productsthat
s s s s s s s s s s s
satisfy consumer desires.
s s s
c)Labor resourcesinclude boththephysicaland intellectuallabor ofabusiness's
s s s s s s s s s s s s
employees.
s
d)Businesses purchase their resources fromresourceowners.
s s s s s s s
e)Consumersare the mainprovidersofresources inany market.
s s s s s s s s s s
2) Indicatewhether eachofthefollowing statementsabout accounting information istrueor false.
s s s s s s s s s s s s s
a)Financialaccounting isprimarilyintended to satisfythe informationneedsof
s s s s s s s s s s s
internal stakeholders.
s s
b)Managerialaccounting informationincludesfinancialandnonfinancial
s s s s s s s
information.
s
c)Theaccounting informationintendedto satisfytheneeds ofacompany's
s s s s s s s s s s s
employees is managerial accounting information.
s s s s s
d)GAAP requiresthat companiesadhereto financialaccounting standards.
s s s s s s s s s
e)Managerialaccounting informationisusuallylessdetailedthanfinancial
s s s s s s s s s
accounting information.
s s
3) Indicatewhether eachofthe following statements about liabilities is trueor false.
s s s s s s s s s s s s
a)Anet loss onthe incomestatement decreases liabilities.
s s s s s s s s s
b)Theacquisitionofabank loanincreases bothassetsand liabilities.
s s s s s s s s s s s
c)The accounting equationrequires that liabilities be equalto stockholders’ equity.
s s s s s s s s s s s
d)Theamount ofacompany's liabilities isequaltothedifference between itsassets and its
s s s s s s s s s s s s s s s s
stockholders’ equity.
s s
e)Liabilities are reportedonthe statement ofcash flows ofa business.
s s s s s s s s s s s s
,4) Indicatewhether eachofthe following statements about retained earnings is trueorfalse.
s s s s s s s s s s s s s
a)Adividend paid to stockholdersdecreases retained earnings.
s s s s s s s s
b)Issuing commonstock forcash increases retained earnings.
s s s s s s s s
c)The amount ofnet income for aperiodmust equalretained earnings.
s s s s s s s s s s s s
d)Thepurchase ofa truck decreases retained earnings.
s s s s s s s s
e)Net income increasesretainedearnings.
s s s s s
5) Indicatewhether eachofthefollowing statements about thetypesoftransactions is true or
s s s s s s s s s s s s s s
false.
s
a)Anasset sourcetransaction increases totalassets and increases claims to assets.
s s s s s s s s s s s s
b) The issuance ofstockto ownersforcashwould be anexampleofanasset
s s s s s s s s s s s s s s s
exchange transaction.
s s
c)Purchasing equipment for cash isanexample ofanasset usetransaction.
s s s s s s s s s s s s
d)Paying adividend to stockholders is anexample ofanasset usetransaction.
s s s s s s s s s s s s s
e)Making apayment onabank loan is anexample ofanasset exchangetransaction.
s s s s s s s s s s s s s s s
6) Indicate whether eachofthefollowing statements about financialstatements is trueor false.
s s s s s s s s s s s s s
a)Acashdividend paid to stockholders isreportedinthe investing activitiessection of the
s s s s s s s s s s s s s s s
statement of cash flows.
s s s s
b) Acashdividend paid tostockholders isreportedonthestatement ofchanges in
s s s s s s s s s s s s s s
stockholders' equity.
s s
c)Acashdividend paid to stockholders is reportedonthe income statement.
s s s s s s s s s s s s
d)Thebalancesheet reportstheending balancesofpermanent accountsasofthelast day of
s s s s s s s s s s s s s s s s
the accounting period.
s s s
e)Changes inretained earningsduring the accounting period arereportedonthe
s s s s s s s s s s s s
income statement.
s s
, 7) Indicate whether eachofthefollowing statements about stockholders’ equityis trueor false. s s s s s s s s s s s s s
a)Expensesdecrease retained earnings. s s s s
b) Stockholders'equityand liabilities can beviewed either as sources ofassetsor claims
s s s s s s s s s s s s s s
to assets of the business.
s s s s s
c)Retained earnings is increased by loansreceived fromabank. s s s s s s s s s s
d)Dividendspaid to stockholdersdecrease commonstock. s s s s s s s
e)Generally, assets arereportedat theactualprice paid forthemwhenpurchased
s s s s s s s s s s s s s
regardless of subsequent changes in market value.
s s s s s s s
8) Jessup Company was founded in Year 1. It acquired $45,000 cash by issuing stock to investors s s s s s s s s s s s s s s s
andanadditional$15,000 cashbyborrowing fromcreditors.During Year 1 it received
s s s s s s s s s s s s s s
$25,000cashrevenues and paid $32,000 incashexpenses. The companythenwent out of business.
s s s s s s s s s s s s s s s
Required:
a) Explaintheterm,"business liquidation." s s s s
b) What amount ofcashshouldJessupCompanyhave hadonhand immediatelybeforegoing out of
s s s s s s s s s s s s s s s
business?
s
c) What amount ofcashwillJessup's creditorsreceive?
s s s s s s s
d) What amount ofcashwillJessup'sstockholders receive?
s s s s s s s
9) BatesCompanyenteredintothe followingtransactionsduringitsfirst year inbusiness.
s s s s s s s s s s s s
Assume that all transactions involve the receipt or payment of cash.
s s s s s s s s s s s
1) Issued commonstockto investors for $25,000cash.
s s s s s s s
2) Borrowed $18,000fromthe localbank. s s s s s
3) Providedservicesto customers for$28,000. s s s s s
4) Paid expensesamounting to $21,400.
s s s s
5) Purchasedaplot ofland costing $22,000. s s s s s s
6) Paid a dividend of$15,000to its stockholders.
s s s s s s s
7) Repaid $12,000 ofthe loan listed in item2. s s s s s s s s
Required:
(a) Fillinthethreecolumn headingsoftheaccounting equation inthe first rowofthetable shown
s s s s s s s s s s s s s s s s s
below.
s
(b) Showthe effects ofthe above transactions onthe accounting equation.
s s s s s s s s s s
