Question 1

Which of the following transactions would result in an increase in the current ratio?

Accepted Answer

A)  Collection of cash from an account receivable. 
B)  Selling shares of stock to stockholders in exchange for cash. 
C) Purchasing a building with cash. 
D) Declaration of a cash dividend by the board of directors. 
A)  Collection of cash from an account receivable. 
B)  Selling shares of stock to stockholders in exchange for cash. 
C) Purchasing a building with cash. 
D) Declaration of a cash dividend by the board of directors.

Question 2

In order for information to be relevant, the information should have both predictive and/or feedback value.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following direct effects on the accounting equation is not possible as a result of a single business transaction which impacts only two accounts?

Accepted Answer

A)  An increase in a liability and a decrease in an asset. 
B)  An increase in stockholders' equity and an increase in an asset. 
C) An increase in an asset and a decrease in an asset. 
D) A decrease in stockholders' equity and a decrease in an asset. 
A)  An increase in a liability and a decrease in an asset. 
B)  An increase in stockholders' equity and an increase in an asset. 
C) An increase in an asset and a decrease in an asset. 
D) A decrease in stockholders' equity and a decrease in an asset.

Question 4

The ABC Corporation was formed on January 1, 2014. 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, 2014.
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 5

In what order are current assets listed on a balance sheet?

Accepted Answer

A)  By dollar amount (largest first). 
B)  By date of acquisition (earliest first). 
C) By liquidity. 
D) By relevance to the operation of the business. 
A)  By dollar amount (largest first). 
B)  By date of acquisition (earliest first). 
C) By liquidity. 
D) By relevance to the operation of the business.

Question 6

Which of the following transactions will cause both the left and right side of the accounting equation to decrease?

Accepted Answer

A)  Collecting cash from a customer who owed us money. 
B)  Paying a supplier for inventory we previously purchased on account. 
C) Borrowing money from a bank. 
D) Purchasing equipment using cash. 
A)  Collecting cash from a customer who owed us money. 
B)  Paying a supplier for inventory we previously purchased on account. 
C) Borrowing money from a bank. 
D) Purchasing equipment using cash.

Question 7

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 8

Which of the following statements is incorrect?

Accepted Answer

A)  Stockholders' equity accounts normally have credit balances. 
B)  Liability accounts are decreased by credits. 
C) Stockholders' equity accounts are increased by credits. 
D) Asset accounts are increased by debits. 
A)  Stockholders' equity accounts normally have credit balances. 
B)  Liability accounts are decreased by credits. 
C) Stockholders' equity accounts are increased by credits. 
D) Asset accounts are increased by debits.

Question 9

What is the primary objective of financial reporting?

Accepted Answer

The primary objective of financial repor

Question 10

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 11

Unearned revenue is reported on the balance sheet as a liability and represents amounts paid to an entity in exchange for future services and/or goods.

Accepted Answer

A) True 
 B)False

Question 12

The Pioneer Company has provided the following account balances: Cash $38,000;
Short-term investments $4,000;
Accounts receivable $48,000;
Supplies $6,000;
Long-term notes receivable $2,000;
Equipment $96,000;
Factory Building $180,000;
Intangible assets $6,000;
Accounts payable $30,000;
Accrued liabilities payable $4,000;
Short-term notes payable $14,000;
Long-term notes payable $92,000;
Common stock $180,000;
Retained earnings $60,000.
What are Pioneer's total current assets?

Accepted Answer

A)  $48,000. 
B)  $96,000. 
C) $90,000. 
D) $42,000. 
A)  $48,000. 
B)  $96,000. 
C) $90,000. 
D) $42,000.

Question 13

The accounts with identification letters for Ward Company are listed below. $$\begin{array} { | l | l | } 
\hline \text { Letter } & \text { Account Title } \
\hline \text { A } & \text { Cash } \
\hline \text { B } & \text { Accounts receivable } \
\hline \text { C } & \text { Office supplies inventory } \
\hline \text { D } & \text { Equipment } \
\hline \text { E } & \text { Land } \
\hline \text { F } & \text { Accounts payable } \
\hline \text { G } & \text { Notes payable } \
\hline \text { H } & \text { Common stock } \
\hline \text { I } & \text { Additional paid-in capital } \
\hline \text { J } & \text { Retained earnings } \
\hline
\end{array}$$ During 2014, 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 given as an example.

Accepted Answer

The answer of The accounts with identification letters for Ward...

Question 14

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 15

Which of the following direct effects on the accounting equation is not possible as a result of a single business transaction?

Accepted Answer

A)  An increase in an asset and a decrease in another asset. 
B)  An increase in an asset and an increase in stockholders' equity. 
C) A decrease in stockholders' equity and an increase in an asset. 
D) An increase in a liability and an increase in an asset. 
A)  An increase in an asset and a decrease in another asset. 
B)  An increase in an asset and an increase in stockholders' equity. 
C) A decrease in stockholders' equity and an increase in an asset. 
D) An increase in a liability and an increase in an asset.

Question 16

The current assets section of a balance sheet includes both inventory and prepaid expenses.

Accepted Answer

A) True 
 B)False

Question 17

Why is the continuity assumption so important for balance sheet reporting?

Accepted Answer

The continuity assumption is also known

Question 18

Superior has provided the following information for its recent year of operation: The common stock account balance at the beginning of the year was $20,000 and the year-end balance was $25,000.
The additional paid-in capital account balance increased $2,500 during the year.
The retained earnings balance at the beginning of the year was $75,000 and the year-end balance was $91,000.
Net income was $26,000.
How much were Superior's dividend declarations during its recent year of operation?

Accepted Answer

A)  $10,000. 
B)  $42,000. 
C) $26,000. 
D) The dividend declarations can not be determined given the above information. 
A)  $10,000. 
B)  $42,000. 
C) $26,000. 
D) The dividend declarations can not be determined given the above information.

Question 19

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 liabilities at the end of April?

Accepted Answer

A)  $145,000. 
B)  $155,000. 
C) $165,000. 
D) $135,000. 
A)  $145,000. 
B)  $155,000. 
C) $165,000. 
D) $135,000.

Question 20

Assets are reported on the balance sheet in the order of liquidity.

Accepted Answer

A) True 
 B)False

Which of the following transactions would result in an increase in the current ratio?

In order for information to be relevant, the information should have both predictive and/or feedback value.

Which of the following direct effects on the accounting equation is not possible as a result of a single business transaction which impacts only two accounts?

In what order are current assets listed on a balance sheet?

Which of the following transactions will cause both the left and right side of the accounting equation to decrease?

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

Which of the following statements is incorrect?

What is the primary objective of financial reporting?

Which of the following best describes liabilities?

Unearned revenue is reported on the balance sheet as a liability and represents amounts paid to an entity in exchange for future services and/or goods.

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

Which of the following direct effects on the accounting equation is not possible as a result of a single business transaction?

The current assets section of a balance sheet includes both inventory and prepaid expenses.

Why is the continuity assumption so important for balance sheet reporting?

Assets are reported on the balance sheet in the order of liquidity.

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 Bonds

Reporting and Interpreting Owners 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 transactions would result in an increase in the current ratio?

In order for information to be relevant, the information should have both predictive and/or feedback value.

Which of the following direct effects on the accounting equation is not possible as a result of a single business transaction which impacts only two accounts?

In what order are current assets listed on a balance sheet?

Which of the following transactions will cause both the left and right side of the accounting equation to decrease?

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

Which of the following statements is incorrect?

What is the primary objective of financial reporting?

Which of the following best describes liabilities?

Unearned revenue is reported on the balance sheet as a liability and represents amounts paid to an entity in exchange for future services and/or goods.

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

Which of the following direct effects on the accounting equation is not possible as a result of a single business transaction?

The current assets section of a balance sheet includes both inventory and prepaid expenses.

Why is the continuity assumption so important for balance sheet reporting?

Assets are reported on the balance sheet in the order of liquidity.

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 Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters