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