Test Bank for Fundamental Financial Accounting Concepts
c c c c c c
11th Edition
c
by Thomas Edmonds, Philip Olds, Christopher Edmonds
c c c c c c
,Studentname: c
1) Indicate whether eachofthe following statements about markets is trueor false.
c c c c c c c c c c c c
a)Financialresources can be provided to a businessby investors.
c c c c c c c c c c
b) Resourceownersarethe businessesthat transformresources into productsthat
c c c c c c c c c c c
c satisfy consumer desires.
c c
c)Labor resourcesinclude boththe physicaland intellectuallabor ofa business's
c c c c c c c c c c c c
c employees.
d)Businesses purchase their resources fromresourceowners.
c c c c c c c
e)Consumers are the mainproviders ofresources inany market.
c c c c c c c c c c
2) Indicatewhether eachofthefollowing statementsabout accounting information istrueor false.
c c c c c c c c c c c c c
a)Financialaccounting isprimarilyintended to satisfythe informationneedsof
c c c c c c c c c c c
c internal stakeholders.
c
b)Managerialaccounting informationincludesfinancialandnonfinancial
c c c c c c c
c information.
c)Theaccounting informationintendedto satisfytheneeds ofacompany's
c c c c c c c c c c c
c employees is managerial accounting information.
c c c c
d)GAAP requiresthat companiesadhereto financialaccounting standards.
c c c c c c c c c
e)Managerialaccounting informationisusuallylessdetailedthanfinancial
c c c c c c c c c
c accounting information.
c
3) Indicatewhether eachofthe following statements about liabilities is trueor false.
c c c c c c c c c c c c
a)Anet loss onthe income statement decreases liabilities.
c c c c c c c c c
b)The acquisitionofa bank loan increases bothassetsand liabilities.
c c c c c c c c c c c
c)The accounting equationrequires that liabilities be equalto stockholders’ equity.
c c c c c c c c c c c
d)Theamount ofacompany's liabilities isequaltothedifference between itsassets and its
c c c c c c c c c c c c c c c c
c stockholders’ equity. c
e)Liabilities are reportedonthe statement ofcash flows ofa business.
c c c c c c c c c c c c
,4) Indicatewhether eachofthe following statements about retained earnings is trueor false.
c c c c c c c c c c c c c
a)Adividend paid to stockholders decreases retained earnings.
c c c c c c c c
b)Issuing commonstock forcash increases retained earnings.
c c c c c c c c
c)The amount ofnet income for a periodmust equalretained earnings.
c c c c c c c c c c c c
d)The purchase ofa truck decreases retained earnings.
c c c c c c c c
e)Net income increasesretained earnings.
c c c c c
5) Indicate whether eachofthe following statements about thetypes oftransactions is true or
c c c c c c c c c c c c c c
false.
c
a)Anasset sourcetransaction increases totalassets and increases claims to assets.
c c c c c c c c c c c c
b) The issuance ofstockto owners forcashwould be anexample ofanasset
c c c c c c c c c c c c c c c
c exchange transaction.
c
c)Purchasing equipment for cash isanexample ofanasset usetransaction.
c c c c c c c c c c c c
d)Paying a dividend to stockholders is anexample ofanasset usetransaction.
c c c c c c c c c c c c c
e)Making a payment ona bank loan is anexample ofanasset exchange transaction.
c c c c c c c c c c c c c c c
6) Indicate whether eachofthe following statements about financialstatements is trueor false.
c c c c c c c c c c c c c
a)Acashdividend paid to stockholders isreportedinthe investing activitiessection of the
c c c c c c c c c c c c c c c
c statement of cash flows.
c c c
b) Acashdividend paid to stockholders isreportedonthe statement ofchanges in
c c c c c c c c c c c c c c
c stockholders' equity. c
c)Acashdividend paid to stockholders is reportedonthe income statement.
c c c c c c c c c c c c
d)The balance sheet reportsthe ending balancesofpermanent accounts asofthe last day of
c c c c c c c c c c c c c c c c
c the accounting period.
c c
e)Changes inretained earningsduring the accounting period are reportedonthe
c c c c c c c c c c c c
c income statement.
c
, 7) Indicate whether eachofthe following statements about stockholders’ equityis trueor false. c c c c c c c c c c c c c
a)Expensesdecrease retained earnings. c c c c
b) Stockholders'equityand liabilities can be viewed either as sources ofassetsor claims
c c c c c c c c c c c c c c
c to assets of the business.
c c c c
c)Retained earnings is increased by loansreceived froma bank. c c c c c c c c c c
d)Dividends paid to stockholders decrease commonstock. c c c c c c c
e)Generally, assets are reportedat theactualprice paid forthemwhenpurchased
c c c c c c c c c c c c c
c regardless of subsequent changes in market value. c c c c c c
8) Jessup Company was founded in Year 1. It acquired $45,000 cash by issuing stock to investors c c c c c c c c c c c c c c c
and anadditional$15,000 cashby borrowing fromcreditors.During Year 1 it received
c c c c c c c c c c c c c c
$25,000 cashrevenues and paid $32,000 incashexpenses. The companythenwent out of business.
c c c c c c c c c c c c c c c
Required:
a) Explaintheterm, "business liquidation." c c c c
b) What amount ofcashshouldJessupCompanyhave hadonhand immediatelybeforegoing out of
c c c c c c c c c c c c c c c
business?
c
c) What amount ofcashwillJessup's creditorsreceive?
c c c c c c c
d) What amount ofcashwillJessup'sstockholders receive?
c c c c c c c
9) BatesCompanyenteredintothe followingtransactionsduring itsfirst year inbusiness.
c c c c c c c c c c c c
Assume that all transactions involve the receipt or payment of cash.
c c c c c c c c c c c
1) Issued commonstockto investors for $25,000cash.
c c c c c c c
2) Borrowed $18,000fromthe localbank. c c c c c
3) Providedservicesto customers for $28,000. c c c c c
4) Paid expensesamounting to $21,400.
c c c c
5) Purchaseda plot ofland costing $22,000. c c c c c c
6) Paid a dividend of$15,000to its stockholders.
c c c c c c c
7) Repaid $12,000 ofthe loan listed in item2. c c c c c c c c
Required:
(a) Fillin the three column headingsofthe accounting equation inthe first rowofthe table shown
c c c c c c c c c c c c c c c c c
c below.
(b) Showthe effects ofthe above transactions onthe accounting equation.
c c c c c c c c c c
c c c c c c
11th Edition
c
by Thomas Edmonds, Philip Olds, Christopher Edmonds
c c c c c c
,Studentname: c
1) Indicate whether eachofthe following statements about markets is trueor false.
c c c c c c c c c c c c
a)Financialresources can be provided to a businessby investors.
c c c c c c c c c c
b) Resourceownersarethe businessesthat transformresources into productsthat
c c c c c c c c c c c
c satisfy consumer desires.
c c
c)Labor resourcesinclude boththe physicaland intellectuallabor ofa business's
c c c c c c c c c c c c
c employees.
d)Businesses purchase their resources fromresourceowners.
c c c c c c c
e)Consumers are the mainproviders ofresources inany market.
c c c c c c c c c c
2) Indicatewhether eachofthefollowing statementsabout accounting information istrueor false.
c c c c c c c c c c c c c
a)Financialaccounting isprimarilyintended to satisfythe informationneedsof
c c c c c c c c c c c
c internal stakeholders.
c
b)Managerialaccounting informationincludesfinancialandnonfinancial
c c c c c c c
c information.
c)Theaccounting informationintendedto satisfytheneeds ofacompany's
c c c c c c c c c c c
c employees is managerial accounting information.
c c c c
d)GAAP requiresthat companiesadhereto financialaccounting standards.
c c c c c c c c c
e)Managerialaccounting informationisusuallylessdetailedthanfinancial
c c c c c c c c c
c accounting information.
c
3) Indicatewhether eachofthe following statements about liabilities is trueor false.
c c c c c c c c c c c c
a)Anet loss onthe income statement decreases liabilities.
c c c c c c c c c
b)The acquisitionofa bank loan increases bothassetsand liabilities.
c c c c c c c c c c c
c)The accounting equationrequires that liabilities be equalto stockholders’ equity.
c c c c c c c c c c c
d)Theamount ofacompany's liabilities isequaltothedifference between itsassets and its
c c c c c c c c c c c c c c c c
c stockholders’ equity. c
e)Liabilities are reportedonthe statement ofcash flows ofa business.
c c c c c c c c c c c c
,4) Indicatewhether eachofthe following statements about retained earnings is trueor false.
c c c c c c c c c c c c c
a)Adividend paid to stockholders decreases retained earnings.
c c c c c c c c
b)Issuing commonstock forcash increases retained earnings.
c c c c c c c c
c)The amount ofnet income for a periodmust equalretained earnings.
c c c c c c c c c c c c
d)The purchase ofa truck decreases retained earnings.
c c c c c c c c
e)Net income increasesretained earnings.
c c c c c
5) Indicate whether eachofthe following statements about thetypes oftransactions is true or
c c c c c c c c c c c c c c
false.
c
a)Anasset sourcetransaction increases totalassets and increases claims to assets.
c c c c c c c c c c c c
b) The issuance ofstockto owners forcashwould be anexample ofanasset
c c c c c c c c c c c c c c c
c exchange transaction.
c
c)Purchasing equipment for cash isanexample ofanasset usetransaction.
c c c c c c c c c c c c
d)Paying a dividend to stockholders is anexample ofanasset usetransaction.
c c c c c c c c c c c c c
e)Making a payment ona bank loan is anexample ofanasset exchange transaction.
c c c c c c c c c c c c c c c
6) Indicate whether eachofthe following statements about financialstatements is trueor false.
c c c c c c c c c c c c c
a)Acashdividend paid to stockholders isreportedinthe investing activitiessection of the
c c c c c c c c c c c c c c c
c statement of cash flows.
c c c
b) Acashdividend paid to stockholders isreportedonthe statement ofchanges in
c c c c c c c c c c c c c c
c stockholders' equity. c
c)Acashdividend paid to stockholders is reportedonthe income statement.
c c c c c c c c c c c c
d)The balance sheet reportsthe ending balancesofpermanent accounts asofthe last day of
c c c c c c c c c c c c c c c c
c the accounting period.
c c
e)Changes inretained earningsduring the accounting period are reportedonthe
c c c c c c c c c c c c
c income statement.
c
, 7) Indicate whether eachofthe following statements about stockholders’ equityis trueor false. c c c c c c c c c c c c c
a)Expensesdecrease retained earnings. c c c c
b) Stockholders'equityand liabilities can be viewed either as sources ofassetsor claims
c c c c c c c c c c c c c c
c to assets of the business.
c c c c
c)Retained earnings is increased by loansreceived froma bank. c c c c c c c c c c
d)Dividends paid to stockholders decrease commonstock. c c c c c c c
e)Generally, assets are reportedat theactualprice paid forthemwhenpurchased
c c c c c c c c c c c c c
c regardless of subsequent changes in market value. c c c c c c
8) Jessup Company was founded in Year 1. It acquired $45,000 cash by issuing stock to investors c c c c c c c c c c c c c c c
and anadditional$15,000 cashby borrowing fromcreditors.During Year 1 it received
c c c c c c c c c c c c c c
$25,000 cashrevenues and paid $32,000 incashexpenses. The companythenwent out of business.
c c c c c c c c c c c c c c c
Required:
a) Explaintheterm, "business liquidation." c c c c
b) What amount ofcashshouldJessupCompanyhave hadonhand immediatelybeforegoing out of
c c c c c c c c c c c c c c c
business?
c
c) What amount ofcashwillJessup's creditorsreceive?
c c c c c c c
d) What amount ofcashwillJessup'sstockholders receive?
c c c c c c c
9) BatesCompanyenteredintothe followingtransactionsduring itsfirst year inbusiness.
c c c c c c c c c c c c
Assume that all transactions involve the receipt or payment of cash.
c c c c c c c c c c c
1) Issued commonstockto investors for $25,000cash.
c c c c c c c
2) Borrowed $18,000fromthe localbank. c c c c c
3) Providedservicesto customers for $28,000. c c c c c
4) Paid expensesamounting to $21,400.
c c c c
5) Purchaseda plot ofland costing $22,000. c c c c c c
6) Paid a dividend of$15,000to its stockholders.
c c c c c c c
7) Repaid $12,000 ofthe loan listed in item2. c c c c c c c c
Required:
(a) Fillin the three column headingsofthe accounting equation inthe first rowofthe table shown
c c c c c c c c c c c c c c c c c
c below.
(b) Showthe effects ofthe above transactions onthe accounting equation.
c c c c c c c c c c
