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 fCompany fwas ffounded fin fYear f1. fIt facquired f$45,000 fcash fby fissuing fstock
fto finvestors fand fan fadditional f$15,000 fcash fby fborrowing ffrom fcreditors. fDuring fYear f1 fit
freceived
$25,000 fcash frevenues fand fpaid f$32,000 fin fcash fexpenses. fThe fcompany fthen fwent fout
fof fbusiness.
Required:
a) Explain fthe fterm, f"business fliquidation."
b) What famount fof fcash fshould fJessup fCompany fhave fhad fon fhand fimmediately fbefore
fgoing fout fof fbusiness?
c) What famount fof fcash fwill fJessup's fcreditors freceive?
d) What famount fof fcash fwill fJessup's fstockholders freceive?
9) Bates fCompany fentered finto fthe ffollowing ftransactions fduring fits ffirst fyear fin
fbusiness. fAssume fthat fall ftransactions finvolve fthe freceipt for fpayment fof fcash.
1) Issued fcommon fstock fto finvestors ffor f$25,000 fcash.
2) Borrowed f$18,000 ffrom fthe flocal fbank.
3) Provided fservices fto fcustomers ffor f$28,000.
4) Paid fexpenses famounting fto f$21,400.
5) Purchased fa fplot fof fland fcosting f$22,000.
6) Paid fa fdividend fof f$15,000 fto fits fstockholders.
7) Repaid f$12,000 fof fthe floan flisted fin fitem f2.
Required:
(a) Fill fin fthe fthree fcolumn fheadings fof fthe faccounting fequation fin fthe ffirst frow fof fthe
ftable fshown fbelow.
(b) Show fthe feffects fof fthe fabove ftransactions fon fthe faccounting fequation.
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 fCompany fwas ffounded fin fYear f1. fIt facquired f$45,000 fcash fby fissuing fstock
fto finvestors fand fan fadditional f$15,000 fcash fby fborrowing ffrom fcreditors. fDuring fYear f1 fit
freceived
$25,000 fcash frevenues fand fpaid f$32,000 fin fcash fexpenses. fThe fcompany fthen fwent fout
fof fbusiness.
Required:
a) Explain fthe fterm, f"business fliquidation."
b) What famount fof fcash fshould fJessup fCompany fhave fhad fon fhand fimmediately fbefore
fgoing fout fof fbusiness?
c) What famount fof fcash fwill fJessup's fcreditors freceive?
d) What famount fof fcash fwill fJessup's fstockholders freceive?
9) Bates fCompany fentered finto fthe ffollowing ftransactions fduring fits ffirst fyear fin
fbusiness. fAssume fthat fall ftransactions finvolve fthe freceipt for fpayment fof fcash.
1) Issued fcommon fstock fto finvestors ffor f$25,000 fcash.
2) Borrowed f$18,000 ffrom fthe flocal fbank.
3) Provided fservices fto fcustomers ffor f$28,000.
4) Paid fexpenses famounting fto f$21,400.
5) Purchased fa fplot fof fland fcosting f$22,000.
6) Paid fa fdividend fof f$15,000 fto fits fstockholders.
7) Repaid f$12,000 fof fthe floan flisted fin fitem f2.
Required:
(a) Fill fin fthe fthree fcolumn fheadings fof fthe faccounting fequation fin fthe ffirst frow fof fthe
ftable fshown fbelow.
(b) Show fthe feffects fof fthe fabove ftransactions fon fthe faccounting fequation.
