Verified Test Bank for Fundamental Financial Accounting Concepts (11th Edition) – Edmonds | Full Exam Pack

Test Bank for Fundamental Financial Accounting Concepts
11th Edition
by Thomas Edmonds, Philip Olds, Christopher Edmonds

,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) Indicatewhether eachofthe following statements about liabilities is trueor false.
* * * * * * * * * * * *




a)Anet loss onthe income statement decreases liabilities.
* * * * * * * * *




b)The acquisitionofa bank loan increases bothassets and liabilities.
* * * * * * * * * * *




c)The accounting equationrequires that liabilities be equalto stockholders’ equity.
* * * * * * * * * * *




d)The amount ofa company's liabilities isequalto thedifference between itsassets and its
* * * * * * * * * * * * * * * *




*stockholders’ equity.
*




e)Liabilities are reportedonthe statement ofcash flows ofa business.
* * * * * * * * * * * *

,4) Indicatewhether eachofthe following statements about retained earnings is trueor false.
* * * * * * * * * * * * *




a)Adividend paid to stockholders decreases retained earnings.
* * * * * * * *




b) Issuing commonstock forcash increases retained earnings.
* * * * * * * *




c)The amount ofnet income for a periodmust equalretained earnings.
* * * * * * * * * * * *




d)The purchase ofa truck decreases retained earnings.
* * * * * * * *




e)Net income increasesretained earnings.
* * * * *




5) Indicate whether eachofthe following statements about thetypes oftransactions is true or
* * * * * * * * * * * * * *




false.
*




a)Anasset sourcetransaction increases totalassets and increases claims to assets.
* * * * * * * * * * * *




b) The issuance ofstockto owners for cashwould be an example ofan asset
* * * * * * * * * * * * * * *




*exchange transaction.
*




c)Purchasing equipment for cash is anexample ofanasset usetransaction.
* * * * * * * * * * * *




d)Paying a dividend to stockholders is anexample ofanasset usetransaction.
* * * * * * * * * * * * *




e)Making a payment ona bank loan is anexample ofan asset exchange transaction.
* * * * * * * * * * * * * * *




6) Indicate whether eachofthe following statements about financialstatements is trueor false.
* * * * * * * * * * * * *




a)Acashdividend paid to stockholders isreportedinthe investing activitiessection of the
* * * * * * * * * * * * * * *




*statement of cash flows.
* * *




b) Acashdividend paid to stockholders is reportedonthe statement ofchanges in
* * * * * * * * * * * * * *




*stockholders' equity. *




c)Acashdividend paid to stockholders is reportedonthe income statement.
* * * * * * * * * * * *




d)The balance sheet reportsthe ending balances ofpermanent accounts asofthe last day of
* * * * * * * * * * * * * * * *




*the accounting period.
* *




e)Changes inretained earnings during the accounting period are reportedonthe
* * * * * * * * * * * *




*income statement.
*

, 7) Indicate whether eachofthe following statements about stockholders’ equityis trueor false.
* * * * * * * * * * * * *




a)Expenses decrease retained earnings. * * * *




b) Stockholders'equityand liabilities can be viewed either as sources ofassetsor claims
* * * * * * * * * * * * * *




*to assets of the business.
* * * *




c)Retained earnings is increased byloans received froma bank. * * * * * * * * * *




d)Dividends paid to stockholders decrease commonstock. * * * * * * *




e)Generally, assets are reportedat theactualprice paid forthemwhenpurchased
* * * * * * * * * * * * *




*regardless of subsequent changes in market value. * * * * * *




8) Jessup Company was founded in Year 1. It acquired $45,000 cash by issuing stock to investors
* * * * * * * * * * * * * * *




and anadditional$15,000 cashbyborrowing fromcreditors.During Year 1 it received
* * * * * * * * * * * * * *




$25,000 cashrevenues and paid $32,000 incashexpenses. The companythenwent out of business.
* * * * * * * * * * * * * * *




Required:
a) Explaintheterm, "business liquidation." * * * *




b) What amount ofcashshouldJessupCompanyhave hadonhand immediatelybeforegoing out of
* * * * * * * * * * * * * * *




business?
*




c) What amount ofcashwillJessup's creditorsreceive?
* * * * * * *




d) What amount ofcashwillJessup's stockholders receive?
* * * * * * *




9) BatesCompanyenteredintothe followingtransactionsduring its first year inbusiness.
* * * * * * * * * * * *




Assume that all transactions involve the receipt or payment of cash.
* * * * * * * * * * *




1) Issued commonstockto investors for $25,000cash.
* * * * * * *




2) Borrowed $18,000fromthe localbank. * * * * *




3) Providedservicesto customers for $28,000. * * * * *




4) Paid expensesamounting to $21,400.
* * * *




5) Purchaseda plot ofland costing $22,000. * * * * * *




6) Paid a dividend of$15,000to its stockholders.
* * * * * * *




7) Repaid $12,000 ofthe loan listed in item2. * * * * * * * *




Required:
(a) Fillin the three column headings ofthe accounting equation inthe first rowofthe table shown
* * * * * * * * * * * * * * * * *




*below.
(b) Showthe effects ofthe above transactions onthe accounting equation.
* * * * * * * * * *