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
|investors |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
|business.
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
|investors |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
|business.
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.
