Financial Accounting, 11e (Harrison/Horngren/Thomas)

,Financial Accounting, 11e (Harrison/Horngren/Thomas)
Chapter 2 Transaction Analysis

1 Learning Objective 2--‐‐1

1) A transaction is any event that has a financial impact on the business and that can be measured
reliably.
Answer: TRUE
Diff: 1 Var: 1
LO: 2--‐‐1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement


2) Business events are recorded even if the financial impact cannot be measured.
Answer: FALSE
Diff: 1 Var: 1
LO: 2--‐‐1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement

3) Transactions provide objective information about the financial impact of an exchange on an entity.
Answer: TRUE
Diff: 1 Var: 1
LO: 2--‐‐1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement

4) Which of the following is NOT a business transaction?
A) A company buys goods on account.
B) A company sells land for cash.
C) A company fired 10 percent of the employees due to lackluster sales.
D) A company borrows money from the bank.
Answer: C
Diff: 2 Var: 1
LO: 2--‐‐1
AACSB: Analytical Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement

,5) Which of the following is a business transaction?
A) A company signs a contact for services to be provided during the first quarter of the next fiscal year.
B) A company pays its employees a year--‐‐end bonus.
C) A company hires a new marketing manager.
D) A company applies for a mortgage that will be used to purchase a new office building.
Answer: B
Diff: 2 Var: 1
LO: 2--‐‐1
AACSB: Analytical Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement


2 Learning Objective 2--‐‐2

1) The account is the basic summary device of accounting.
Answer: TRUE
Diff: 1 Var: 1
LO: 2--‐‐2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement

2) An accounts receivable represents the promise of the business to pay a debt.
Answer: FALSE
Diff: 2 Var: 1
LO: 2--‐‐2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement

3) Prepaid rent is an expense because the payment provides a future benefit of the company.
Answer: FALSE
Diff: 2 Var: 1
LO: 2--‐‐2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement

4) Assets include cash, land, and accounts payable.
Answer: FALSE
Diff: 2 Var: 1
LO: 2--‐‐2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement, Reporting

, 5) Cost of goods sold is an example of a revenue account.
Answer: FALSE
Diff: 2 Var: 1
LO: 2--‐‐2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement, Reporting

6) An accrued liability is a liability for an expense that has not yet been paid.
Answer: TRUE
Diff: 2 Var: 1
LO: 2--‐‐2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement, Reporting

7) A prepaid expense is an asset.
Answer: TRUE
Diff: 2 Var: 1
LO: 2--‐‐2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement, Reporting

8) A record of all the changes in a particular asset during a period of time is found in a(n):
A) transaction.
B) trial balance.
C) prior period''s balance sheet.
D) account.
Answer: D
Diff: 1 Var: 1
LO: 2--‐‐2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement

9) All of the following accounts would be considered assets EXCEPT for:
A) Cash.
B) Retained Earnings.
C) Prepaid Expenses.
D) Notes Receivable.
Answer: B
Diff: 2 Var: 1
LO: 2--‐‐2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement