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

TestBankfor FundamentalFinancialAccountingConcepts
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11thEdition
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byThomasEdmonds,PhilipOlds,ChristopherEdmonds
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1) Indicatewhether eachofthe following statements about markets istrueor false.
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a)Financialresourcescan beprovided to abusinessby investors.
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b) Resourceownersarethebusinessesthat transformresources into productsthat
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satisfy consumer desires.
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c)Labor resourcesincludeboththephysicaland intellectuallabor ofabusiness's
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employees.
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d)Businessespurchase their resourcesfromresourceowners.
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e)Consumersarethe mainprovidersofresources inany market.
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2) Indicatewhethereachofthefollowingstatementsabout accounting informationistrueor false.
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a)Financialaccounting isprimarilyintendedto satisfythe informationneedsof
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internal stakeholders.
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b)Managerialaccountinginformationincludesfinancialandnonfinancial
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information.
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c)Theaccounting informationintendedto satisfytheneeds ofacompany's
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employees is managerial accounting information.
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d)GAAPrequiresthat companiesadhereto financialaccountingstandards.
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e)Managerialaccounting informationisusuallylessdetailedthanfinancial
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accounting information.
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3) Indicatewhether eachofthe following statementsabout liabilities istrueorfalse.
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a)Anet lossonthe incomestatement decreases liabilities.
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b)Theacquisitionofabank loanincreases bothassetsand liabilities.
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c)The accounting equationrequiresthat liabilities be equalto stockholders’ equity.
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d)Theamount ofacompany's liabilities isequaltothedifference betweenitsassets and its
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stockholders’ equity.
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e)Liabilities are reportedonthe statement ofcash flowsofa business.
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,4) Indicatewhether eachofthe following statements about retained earnings istrueorfalse.
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a)Adividend paid tostockholdersdecreases retained earnings.
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b)Issuingcommonstockforcash increasesretained earnings.
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c)Theamount ofnet income for aperiodmust equalretained earnings.
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d)Thepurchase ofatruck decreasesretained earnings.
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e)Net income increasesretainedearnings.
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5) Indicatewhether eachofthefollowingstatementsaboutthetypesoftransactions istrue or
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false.
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a)Anasset sourcetransaction increasestotalassetsand increases claimsto assets.
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b) Theissuance ofstockto ownersforcashwould beanexampleofanasset
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exchange transaction.
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c)Purchasing equipment for cash isanexampleofanasset usetransaction.
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d)Paying adividend to stockholders isanexampleofanasset usetransaction.
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e)Making apayment onabank loan is anexampleofanasset exchangetransaction.
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6) Indicatewhether eachofthefollowing statementsabout financialstatementsistrueor false.
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a)Acashdividendpaidto stockholders isreportedinthe investingactivitiessection of the
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statement of cash flows.
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b) Acashdividend paidtostockholders isreportedonthestatement ofchanges in
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stockholders' equity.
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c)Acashdividend paid to stockholders is reportedonthe income statement.
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d)Thebalancesheet reportstheendingbalancesofpermanent accountsasofthelast day of
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the accounting period.
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e)Changes inretained earningsduring theaccounting periodarereportedonthe
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income statement.
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, 7) Indicatewhether eachofthefollowing statementsabout stockholders’ equityistrueor false. t t t t t t t t t t t t t




a)Expensesdecreaseretainedearnings. t t t t




b) Stockholders'equityand liabilitiescan beviewed either assourcesofassetsor claims
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to assets of the business.
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c)Retained earnings is increased by loansreceived fromabank. t t t t t t t t t t




d)Dividendspaid to stockholdersdecreasecommonstock. t t t t t t t




e)Generally, assetsarereportedat theactualpricepaid forthemwhenpurchased t t t t t t t t t t t t t




regardless of subsequent changes in market value.
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8) Jessup Company was founded in Year 1. It acquired $45,000 cash by issuing stock to investors t t t t t t t t t t t t t t t




andanadditional$15,000cashbyborrowing fromcreditors.DuringYear1it received
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$25,000cashrevenuesand paid$32,000 incashexpenses. Thecompanythenwentoutof business.
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Required:
a) Explaintheterm,"business liquidation." t t t t




b) What amount ofcashshouldJessupCompanyhave hadonhand immediatelybeforegoing out of
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business?
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c) What amount ofcashwillJessup'screditorsreceive?
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d) What amount ofcashwillJessup'sstockholders receive?
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9) BatesCompanyenteredintothe followingtransactionsduringitsfirst year inbusiness.t t t t t t t t t t t t




Assume that all transactions involve the receipt or payment of cash.
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1) Issuedcommonstockto investorsfor $25,000cash.t t t t t t t




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




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




4) Paidexpensesamountingto $21,400.
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5) Purchasedaplotofland costing$22,000. t t t t t t




6) Paid a dividend of$15,000to itsstockholders.
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7) Repaid$12,000 oftheloan listed in item2. t t t t t t t t




Required:
(a) Fillinthethreecolumnheadingsoftheaccounting equationinthe first rowofthetable shown
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below.
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(b) Showthe effects ofthe above transactionsonthe accounting equation.
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