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