Test Bank for Fundamental Financial Accounting Concepts
r r r r r r
11th Edition
r
by Thomas Edmonds, Philip Olds, Christopher Edmonds
r r r r r r
,Student rname:
1) Indicate rwhether reach rof rthe rfollowing rstatements rabout rmarkets ris rtrue ror rfalse.
a) rFinancial rresources rcan rbe rprovided rto ra rbusiness rby rinvestors.
b) rResource rowners rare rthe rbusinesses rthat rtransform rresources rinto rproducts
rthat rsatisfy rconsumer rdesires.
c) rLabor rresources rinclude rboth rthe rphysical rand rintellectual rlabor rof ra
rbusiness's remployees.
d) rBusinesses rpurchase rtheir rresources rfrom rresource rowners.
e) rConsumers rare rthe rmain rproviders rof rresources rin rany rmarket.
2) Indicate rwhether reach rof rthe rfollowing rstatements rabout raccounting rinformation ris rtrue
ror rfalse.
a) rFinancial raccounting ris rprimarily rintended rto rsatisfy rthe rinformation rneeds
rof rinternal rstakeholders.
b) rManagerial raccounting rinformation rincludes rfinancial rand rnonfinancial
rinformation.
c) rThe raccounting rinformation rintended rto rsatisfy rthe rneeds rof ra
rcompany's remployees ris rmanagerial raccounting rinformation.
d) rGAAP rrequires rthat rcompanies radhere rto rfinancial raccounting rstandards.
e) rManagerial raccounting rinformation ris rusually rless rdetailed rthan
rfinancial raccounting rinformation.
3) Indicate rwhether reach rof rthe rfollowing rstatements rabout rliabilities ris rtrue ror rfalse.
a) rA rnet rloss ron rthe rincome rstatement rdecreases rliabilities.
b) rThe racquisition rof ra rbank rloan rincreases rboth rassets rand rliabilities.
c) rThe raccounting requation rrequires rthat rliabilities rbe requal rto rstockholders’ requity.
d) rThe ramount rof ra rcompany's rliabilities ris requal rto rthe rdifference rbetween rits
rassets rand rits rstockholders’ requity.
e) rLiabilities rare rreported ron rthe rstatement rof rcash rflows rof ra rbusiness.
,4) Indicate rwhether reach rof rthe rfollowing rstatements rabout rretained rearnings ris rtrue ror rfalse.
a) rA rdividend rpaid rto rstockholders rdecreases rretained rearnings.
b) rIssuing rcommon rstock rfor rcash rincreases rretained rearnings.
c) rThe ramount rof rnet r income rfor ra rperiod rmust requal rretained rearnings.
d) rThe rpurchase rof ra rtruck rdecreases rretained rearnings.
e) rNet rincome rincreases rretained rearnings.
5) Indicate rwhether reach rof rthe rfollowing rstatements rabout rthe rtypes rof rtransactions ris
rtrue ror rfalse.
a) rAn rasset rsource rtransaction rincreases rtotal rassets rand rincreases rclaims rto rassets.
b) rThe rissuance rof rstock rto rowners rfor rcash rwould rbe ran rexample rof ran
rasset rexchange rtransaction.
c) rPurchasing requipment rfor rcash ris ran rexample rof ran rasset ruse rtransaction.
d) rPaying ra rdividend rto rstockholders ris ran rexample rof ran rasset ruse rtransaction.
e) rMaking ra rpayment ron ra rbank rloan ris ran rexample rof ran rasset rexchange rtransaction.
6) Indicate rwhether reach rof rthe rfollowing rstatements rabout rfinancial rstatements ris rtrue
ror rfalse.
a) rA rcash rdividend rpaid rto rstockholders ris rreported rin rthe rinvesting ractivities
rsection rof rthe rstatement rof rcash rflows.
b) rA rcash rdividend rpaid rto rstockholders ris rreported ron rthe rstatement rof rchanges
rin rstockholders' requity.
c) rA rcash rdividend rpaid rto rstockholders ris rreported ron rthe rincome rstatement.
d) rThe rbalance rsheet rreports rthe rending rbalances rof rpermanent raccounts ras rof rthe
rlast rday rof rthe raccounting rperiod.
e) rChanges rin rretained rearnings rduring rthe raccounting rperiod rare rreported ron
rthe rincome rstatement.
, 7) Indicate rwhether reach rof rthe rfollowing rstatements rabout rstockholders’ requity ris rtrue
ror rfalse.
a) rExpenses rdecrease rretained rearnings.
b) rStockholders' requity rand rliabilities rcan rbe rviewed reither ras rsources rof rassets
ror rclaims rto rassets rof rthe rbusiness.
c) rRetained rearnings ris rincreased rby rloans rreceived rfrom ra rbank.
d) rDividends rpaid rto rstockholders rdecrease rcommon rstock.
e) rGenerally, rassets rare rreported rat rthe ractual rprice rpaid rfor rthem rwhen
rpurchased rregardless rof rsubsequent rchanges rin rmarket rvalue.
8) Jessup rCompany rwas rfounded rin rYear r1. rIt racquired r$45,000 rcash rby rissuing rstock rto
rinvestors rand ran radditional r$15,000 rcash rby rborrowing rfrom rcreditors. rDuring rYear r1 rit
rreceived
$25,000 rcash rrevenues rand rpaid r$32,000 rin rcash rexpenses. rThe rcompany rthen rwent rout rof
rbusiness.
Required:
a) Explain rthe rterm, r"business rliquidation."
b) What ramount rof rcash rshould rJessup rCompany rhave rhad ron rhand rimmediately rbefore
rgoing rout rof rbusiness?
c) What ramount rof rcash rwill rJessup's rcreditors rreceive?
d) What ramount rof rcash rwill rJessup's rstockholders rreceive?
9) Bates rCompany rentered rinto rthe rfollowing rtransactions rduring rits rfirst ryear rin
rbusiness. rAssume rthat rall rtransactions rinvolve rthe rreceipt ror rpayment rof rcash.
1) Issued rcommon rstock rto rinvestors rfor r$25,000 rcash.
2) Borrowed r$18,000 rfrom rthe rlocal rbank.
3) Provided rservices rto rcustomers rfor r$28,000.
4) Paid rexpenses ramounting rto r$21,400.
5) Purchased ra rplot rof rland rcosting r$22,000.
6) Paid ra rdividend rof r$15,000 rto rits rstockholders.
7) Repaid r$12,000 rof rthe rloan rlisted rin ritem r2.
Required:
(a) Fill rin rthe rthree rcolumn rheadings rof rthe raccounting requation rin rthe rfirst rrow rof rthe
rtable rshown rbelow.
(b) Show rthe reffects rof rthe rabove rtransactions ron rthe raccounting requation.
r r r r r r
11th Edition
r
by Thomas Edmonds, Philip Olds, Christopher Edmonds
r r r r r r
,Student rname:
1) Indicate rwhether reach rof rthe rfollowing rstatements rabout rmarkets ris rtrue ror rfalse.
a) rFinancial rresources rcan rbe rprovided rto ra rbusiness rby rinvestors.
b) rResource rowners rare rthe rbusinesses rthat rtransform rresources rinto rproducts
rthat rsatisfy rconsumer rdesires.
c) rLabor rresources rinclude rboth rthe rphysical rand rintellectual rlabor rof ra
rbusiness's remployees.
d) rBusinesses rpurchase rtheir rresources rfrom rresource rowners.
e) rConsumers rare rthe rmain rproviders rof rresources rin rany rmarket.
2) Indicate rwhether reach rof rthe rfollowing rstatements rabout raccounting rinformation ris rtrue
ror rfalse.
a) rFinancial raccounting ris rprimarily rintended rto rsatisfy rthe rinformation rneeds
rof rinternal rstakeholders.
b) rManagerial raccounting rinformation rincludes rfinancial rand rnonfinancial
rinformation.
c) rThe raccounting rinformation rintended rto rsatisfy rthe rneeds rof ra
rcompany's remployees ris rmanagerial raccounting rinformation.
d) rGAAP rrequires rthat rcompanies radhere rto rfinancial raccounting rstandards.
e) rManagerial raccounting rinformation ris rusually rless rdetailed rthan
rfinancial raccounting rinformation.
3) Indicate rwhether reach rof rthe rfollowing rstatements rabout rliabilities ris rtrue ror rfalse.
a) rA rnet rloss ron rthe rincome rstatement rdecreases rliabilities.
b) rThe racquisition rof ra rbank rloan rincreases rboth rassets rand rliabilities.
c) rThe raccounting requation rrequires rthat rliabilities rbe requal rto rstockholders’ requity.
d) rThe ramount rof ra rcompany's rliabilities ris requal rto rthe rdifference rbetween rits
rassets rand rits rstockholders’ requity.
e) rLiabilities rare rreported ron rthe rstatement rof rcash rflows rof ra rbusiness.
,4) Indicate rwhether reach rof rthe rfollowing rstatements rabout rretained rearnings ris rtrue ror rfalse.
a) rA rdividend rpaid rto rstockholders rdecreases rretained rearnings.
b) rIssuing rcommon rstock rfor rcash rincreases rretained rearnings.
c) rThe ramount rof rnet r income rfor ra rperiod rmust requal rretained rearnings.
d) rThe rpurchase rof ra rtruck rdecreases rretained rearnings.
e) rNet rincome rincreases rretained rearnings.
5) Indicate rwhether reach rof rthe rfollowing rstatements rabout rthe rtypes rof rtransactions ris
rtrue ror rfalse.
a) rAn rasset rsource rtransaction rincreases rtotal rassets rand rincreases rclaims rto rassets.
b) rThe rissuance rof rstock rto rowners rfor rcash rwould rbe ran rexample rof ran
rasset rexchange rtransaction.
c) rPurchasing requipment rfor rcash ris ran rexample rof ran rasset ruse rtransaction.
d) rPaying ra rdividend rto rstockholders ris ran rexample rof ran rasset ruse rtransaction.
e) rMaking ra rpayment ron ra rbank rloan ris ran rexample rof ran rasset rexchange rtransaction.
6) Indicate rwhether reach rof rthe rfollowing rstatements rabout rfinancial rstatements ris rtrue
ror rfalse.
a) rA rcash rdividend rpaid rto rstockholders ris rreported rin rthe rinvesting ractivities
rsection rof rthe rstatement rof rcash rflows.
b) rA rcash rdividend rpaid rto rstockholders ris rreported ron rthe rstatement rof rchanges
rin rstockholders' requity.
c) rA rcash rdividend rpaid rto rstockholders ris rreported ron rthe rincome rstatement.
d) rThe rbalance rsheet rreports rthe rending rbalances rof rpermanent raccounts ras rof rthe
rlast rday rof rthe raccounting rperiod.
e) rChanges rin rretained rearnings rduring rthe raccounting rperiod rare rreported ron
rthe rincome rstatement.
, 7) Indicate rwhether reach rof rthe rfollowing rstatements rabout rstockholders’ requity ris rtrue
ror rfalse.
a) rExpenses rdecrease rretained rearnings.
b) rStockholders' requity rand rliabilities rcan rbe rviewed reither ras rsources rof rassets
ror rclaims rto rassets rof rthe rbusiness.
c) rRetained rearnings ris rincreased rby rloans rreceived rfrom ra rbank.
d) rDividends rpaid rto rstockholders rdecrease rcommon rstock.
e) rGenerally, rassets rare rreported rat rthe ractual rprice rpaid rfor rthem rwhen
rpurchased rregardless rof rsubsequent rchanges rin rmarket rvalue.
8) Jessup rCompany rwas rfounded rin rYear r1. rIt racquired r$45,000 rcash rby rissuing rstock rto
rinvestors rand ran radditional r$15,000 rcash rby rborrowing rfrom rcreditors. rDuring rYear r1 rit
rreceived
$25,000 rcash rrevenues rand rpaid r$32,000 rin rcash rexpenses. rThe rcompany rthen rwent rout rof
rbusiness.
Required:
a) Explain rthe rterm, r"business rliquidation."
b) What ramount rof rcash rshould rJessup rCompany rhave rhad ron rhand rimmediately rbefore
rgoing rout rof rbusiness?
c) What ramount rof rcash rwill rJessup's rcreditors rreceive?
d) What ramount rof rcash rwill rJessup's rstockholders rreceive?
9) Bates rCompany rentered rinto rthe rfollowing rtransactions rduring rits rfirst ryear rin
rbusiness. rAssume rthat rall rtransactions rinvolve rthe rreceipt ror rpayment rof rcash.
1) Issued rcommon rstock rto rinvestors rfor r$25,000 rcash.
2) Borrowed r$18,000 rfrom rthe rlocal rbank.
3) Provided rservices rto rcustomers rfor r$28,000.
4) Paid rexpenses ramounting rto r$21,400.
5) Purchased ra rplot rof rland rcosting r$22,000.
6) Paid ra rdividend rof r$15,000 rto rits rstockholders.
7) Repaid r$12,000 rof rthe rloan rlisted rin ritem r2.
Required:
(a) Fill rin rthe rthree rcolumn rheadings rof rthe raccounting requation rin rthe rfirst rrow rof rthe
rtable rshown rbelow.
(b) Show rthe reffects rof rthe rabove rtransactions ron rthe raccounting requation.
