Question 1

Which of the following statements does not properly describe the current ratio?

Accepted Answer

A) It measures the ability of a firm to pay its debts in the short-run. 
B) It is current assets divided by current liabilities. 
C) It is a measure of a firm's short-run liquidity. 
D) It measures a firm's ability to pay its long-term debts as they mature. 
A) It measures the ability of a firm to pay its debts in the short-run. 
B) It is current assets divided by current liabilities. 
C) It is a measure of a firm's short-run liquidity. 
D) It measures a firm's ability to pay its long-term debts as they mature.

Question 2

Which of the following best describes liabilities?

Accepted Answer

A) Possible debts or obligations of an entity as a result of future transactions,which will be paid with assets or services. 
B) Possible debts or obligations of an entity as a result of past transactions,which will be paid with assets or services. 
C) Probable debts or obligations of an entity as a result of future transactions,which will be paid with assets or services. 
D) Probable debts or obligations of an entity as a result of past transactions,which will be paid with assets or services. 
A) Possible debts or obligations of an entity as a result of future transactions,which will be paid with assets or services. 
B) Possible debts or obligations of an entity as a result of past transactions,which will be paid with assets or services. 
C) Probable debts or obligations of an entity as a result of future transactions,which will be paid with assets or services. 
D) Probable debts or obligations of an entity as a result of past transactions,which will be paid with assets or services.

Question 3

ABC Company's total stockholders' equity at the beginning of the year was $200,000.During the year ABC reported the following: Net loss of $30,000.
Stock issued in exchange for land totaling $80,000.
Collections of accounts receivable $40,000.
Dividends declared and paid totaling $2,000.
What is ABC's total stockholders' equity at the end of the year?

Accepted Answer

A) $348,000. 
B) $288,000. 
C) $248,000. 
D) $168,000. 
A) $348,000. 
B) $288,000. 
C) $248,000. 
D) $168,000.

Question 4

A company with a high current ratio should never have liquidity problems.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a result of equipment purchased with cash?

Accepted Answer

A) Total assets decrease. 
B) Current assets do not change. 
C) Current assets increase. 
D) Stockholders' equity does not change. 
A) Total assets decrease. 
B) Current assets do not change. 
C) Current assets increase. 
D) Stockholders' equity does not change.

Question 6

The accounting equation does not have to be in balance after the recording of each transaction.

Accepted Answer

A) True 
 B)False

Question 7

For accounting information to be useful,it must be which of the following?

Accepted Answer

A) It must be consistent and comparable. 
B) It must be a faithful representation and relevant. 
C) It must be comparable and reliable. 
D) It must be relevant and consistent. 
A) It must be consistent and comparable. 
B) It must be a faithful representation and relevant. 
C) It must be comparable and reliable. 
D) It must be relevant and consistent.

Question 8

Which of the following describes the primary objective of financial accounting?

Accepted Answer

A) To provide useful financial information only to stockholders. 
B) To provide information about a business' future business strategies. 
C) To provide useful financial information about a business to help external parties make informed decisions. 
D) To provide useful financial information about a business to help internal parties make informed decisions. 
A) To provide useful financial information only to stockholders. 
B) To provide information about a business' future business strategies. 
C) To provide useful financial information about a business to help external parties make informed decisions. 
D) To provide useful financial information about a business to help internal parties make informed decisions.

Question 9

At the beginning of April,Warren Corporation's assets totaled $240,000 and liabilities totaled $60,000.During April the following summarized transactions occurred: Additional shares of stock were sold for $20,000 cash.
A building costing $95,000 was purchased using $10,000 cash and by signing an $85,000 long-term note payable.
Short-term investments costing $9,000 were purchased using cash.
$10,000 was paid to an employee as a loan;the employee signed a six-month note in exchange for the loan.
How much are Warren's total assets at the end of April?

Accepted Answer

A) $335,000. 
B) $249,000. 
C) $345,000. 
D) $250,000. 
A) $335,000. 
B) $249,000. 
C) $345,000. 
D) $250,000.

Question 10

When a company buys equipment for $150,000 and pays for one third in cash and the other two thirds is financed by a note payable,which of the following are the effects on the accounting equation?

Accepted Answer

A) Total assets increase $150,000. 
B) Total liabilities increase $150,000. 
C) Total liabilities decrease $50,000. 
D) Total assets increase $100,000. 
A) Total assets increase $150,000. 
B) Total liabilities increase $150,000. 
C) Total liabilities decrease $50,000. 
D) Total assets increase $100,000.

Question 11

Which of the following best describes assets?

Accepted Answer

A) Resources with possible future economic benefits owed by an entity as a result of past transactions. 
B) Resources with probable future economic benefits owned by an entity as a result of past transactions. 
C) Resources with probable future economic benefits owned by an entity as a result of future transactions. 
D) Resources with possible future economic benefits owed by an entity as a result of future transactions. 
A) Resources with possible future economic benefits owed by an entity as a result of past transactions. 
B) Resources with probable future economic benefits owned by an entity as a result of past transactions. 
C) Resources with probable future economic benefits owned by an entity as a result of future transactions. 
D) Resources with possible future economic benefits owed by an entity as a result of future transactions.

Question 12

The ABC Corporation was formed on January 1,2019.The three initial owners each invested $100,000 cash and each received 10,000 shares of $1 par value common stock.Below are selected transactions that were completed during January,2019.
1.Issue shares of common stock to the owners.
2.Borrowed $80,000 on a one-year note payable.
3.Purchased land by signing a $70,000 note payable.
4.Paid $10,000 of accounts payable.
5.Purchased two service vehicles for cash at a cost of $24,000 each.
6.Purchased $2,000 of supplies on credit.
Prepare the journal entry on ABC's books for each transaction.Include a brief explanation for each entry.

Accepted Answer

The answer of The ABC Corporation was formed on January...

Question 13

Why is the historical cost principle so important for balance sheet reporting?

Accepted Answer

The historical cost principle is importa

Question 14

Which of the following would result when a company pays a previously declared cash dividend?

Accepted Answer

A) Current liabilities are reduced and a financing cash flow is created. 
B) Stockholders' equity is reduced and a financing cash flow is created. 
C) Current assets are reduced and an investing cash flow is created. 
D) Stockholders' equity is reduced and an investing cash flow is created. 
A) Current liabilities are reduced and a financing cash flow is created. 
B) Stockholders' equity is reduced and a financing cash flow is created. 
C) Current assets are reduced and an investing cash flow is created. 
D) Stockholders' equity is reduced and an investing cash flow is created.

Question 15

Which of the following does not correctly describe business transactions or events?

Accepted Answer

A) They include exchanges of assets or services by one business for assets,services,or promises to pay from another business. 
B) They include the using up of insurance paid for in advance. 
C) They have an economic impact on a business entity. 
D) They do not include measurable internal events such as the use of assets in operations. 
A) They include exchanges of assets or services by one business for assets,services,or promises to pay from another business. 
B) They include the using up of insurance paid for in advance. 
C) They have an economic impact on a business entity. 
D) They do not include measurable internal events such as the use of assets in operations.

Question 16

The accounts with identification letters for Ward Company are listed below.
   During 2019,the company completed the transactions given below.You are to indicate the appropriate journal entry for each transaction by giving the account letter and amount.Some entries may need three letters.The first transaction is provided as an example.
Transaction Debit Credit

Accepted Answer

Transactio

Question 17

Which of the following describes the impact on the balance sheet when a company uses cash to purchase the stock of another company?

Accepted Answer

A) Total assets increase. 
B) Stockholders' equity increases. 
C) Stockholders' equity decreases. 
D) Total assets remain the same. 
A) Total assets increase. 
B) Stockholders' equity increases. 
C) Stockholders' equity decreases. 
D) Total assets remain the same.

Question 18

The T-account is very useful for accumulating the effects of transactions on account balances and for determining individual account balances.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following best describes financing activities?

Accepted Answer

A) They primarily deal with securing money by bank loans or selling stock to investors. 
B) They primarily are connected to the income-producing activities of the company as reported on the income statement. 
C) They primarily deal with buying buildings to be used over many years by the business. 
D) They primarily deal with selling facilities once used by the business. 
A) They primarily deal with securing money by bank loans or selling stock to investors. 
B) They primarily are connected to the income-producing activities of the company as reported on the income statement. 
C) They primarily deal with buying buildings to be used over many years by the business. 
D) They primarily deal with selling facilities once used by the business.

Question 20

The dual effects concept states that:

Accepted Answer

A) Both the income statement and balance sheet are impacted by every transaction. 
B) Every transaction has an impact on assets and stockholders' equity. 
C) There are only two accounts involved in every transaction. 
D) Every transaction has at least two effects on the accounting equation. 
A) Both the income statement and balance sheet are impacted by every transaction. 
B) Every transaction has an impact on assets and stockholders' equity. 
C) There are only two accounts involved in every transaction. 
D) Every transaction has at least two effects on the accounting equation.

Which of the following statements does not properly describe the current ratio?

Which of the following best describes liabilities?

A company with a high current ratio should never have liquidity problems.

Which of the following is a result of equipment purchased with cash?

The accounting equation does not have to be in balance after the recording of each transaction.

For accounting information to be useful,it must be which of the following?

Which of the following describes the primary objective of financial accounting?

When a company buys equipment for $150,000 and pays for one third in cash and the other two thirds is financed by a note payable,which of the following are the effects on the accounting equation?

Which of the following best describes assets?

Why is the historical cost principle so important for balance sheet reporting?

Which of the following would result when a company pays a previously declared cash dividend?

Which of the following does not correctly describe business transactions or events?

Which of the following describes the impact on the balance sheet when a company uses cash to purchase the stock of another company?

The T-account is very useful for accumulating the effects of transactions on account balances and for determining individual account balances.

Which of the following best describes financing activities?

The dual effects concept states that:

Financial Statements and Business Decisions

Operating Decisions and the Accounting System

Adjustments,financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue,receivables,and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property,plant,and Equipment;intangibles;and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters

Exam 2: Investing and Financing Decisions and the Accounting System

Which of the following statements does not properly describe the current ratio?

Which of the following best describes liabilities?

A company with a high current ratio should never have liquidity problems.

Which of the following is a result of equipment purchased with cash?

The accounting equation does not have to be in balance after the recording of each transaction.

For accounting information to be useful,it must be which of the following?

Which of the following describes the primary objective of financial accounting?

When a company buys equipment for $150,000 and pays for one third in cash and the other two thirds is financed by a note payable,which of the following are the effects on the accounting equation?

Which of the following best describes assets?

Why is the historical cost principle so important for balance sheet reporting?

Which of the following would result when a company pays a previously declared cash dividend?

Which of the following does not correctly describe business transactions or events?

Which of the following describes the impact on the balance sheet when a company uses cash to purchase the stock of another company?

The T-account is very useful for accumulating the effects of transactions on account balances and for determining individual account balances.

Which of the following best describes financing activities?

The dual effects concept states that:

Financial Statements and Business Decisions

Operating Decisions and the Accounting System

Adjustments,financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue,receivables,and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property,plant,and Equipment;intangibles;and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters