Question 1

On January 6, the cash balance is:

Accepted Answer

A)  $127,050. 
B)  $138,600. 
C)  $165,000. 
D)  $202,950 
A)  $127,050. 
B)  $138,600. 
C)  $165,000. 
D)  $202,950

Question 2

A balance sheet is designed to show the financial position of an entity:

Accepted Answer

A)  At a single point in time. 
B)  Over a period of time such as a year or quarter. 
C)  At December 31 of the current year. 
D)  At January 1 of the coming year. 
A)  At a single point in time. 
B)  Over a period of time such as a year or quarter. 
C)  At December 31 of the current year. 
D)  At January 1 of the coming year.

Question 3

If a company has a profit:

Accepted Answer

A)  Assets will be equal to liabilities plus owners' equity. 
B)  Assets will be less than liabilities plus owners' equity. 
C)  Assets will be greater than liabilities plus owners' equity. 
D)  Owners' equity will be greater than its assets. 
A)  Assets will be equal to liabilities plus owners' equity. 
B)  Assets will be less than liabilities plus owners' equity. 
C)  Assets will be greater than liabilities plus owners' equity. 
D)  Owners' equity will be greater than its assets.

Question 4

Which of the following statements relating to the role of professional judgment in the financial reporting process are valid?

Accepted Answer

A)  Different accountants may evaluate similar situations differently. 
B)  The determination of which items should be disclosed in notes to financial statements requires professional judgment. 
C)  Once a complete list of generally accepted accounting principles is prepared, judgment need no longer enter into the financial reporting process. 
D)  The possibility always exists that professional judgment later may prove to have been incorrect. 
A)  Different accountants may evaluate similar situations differently. 
B)  The determination of which items should be disclosed in notes to financial statements requires professional judgment. 
C)  Once a complete list of generally accepted accounting principles is prepared, judgment need no longer enter into the financial reporting process. 
D)  The possibility always exists that professional judgment later may prove to have been incorrect.

Question 5

On January 6, the accounts receivable balance is:

Accepted Answer

A)  $24,750. 
B)  $38,775. 
C)  $77,550. 
D)  $63,525. 
A)  $24,750. 
B)  $38,775. 
C)  $77,550. 
D)  $63,525.

Question 6

If total assets equal $270,000 and total liabilities equal $202,500, the total owners' equity must equal:

Accepted Answer

A)  $472,500. 
B)  $67,500. 
C)  $270,000. 
D)  Cannot be determined from the information given. 
A)  $472,500. 
B)  $67,500. 
C)  $270,000. 
D)  Cannot be determined from the information given.

Question 7

Effects of transactions on elements of the accounting equation. Some of the transactions carried out by Tudor Wholesale during the first month of the company's operations are listed below. You are to determine the effect of each transaction on the total assets, the total liabilities, and the owners' equity. Prepare your answer in columnar form, identifying each transaction by letter and using the symbols (+) for increase, (-) for decrease, and (NC) for no change. An answer is provided for the first transaction to serve as an example.

Accepted Answer

The answer of Effects of transactions on elements of the...

Question 8

The accounting equation may be stated as "assets minus liabilities equals owners' equity."

Accepted Answer

A) True 
 B)False

Question 9

In a business organized as a corporation, it is not necessary to list the equity of each stockholder on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements regarding liquidity and profitability is not true?

Accepted Answer

A)  If a business is unable to pay its debts as they come due, it is operating unprofitably. 
B)  A business may be liquid, yet operate unprofitably for several years. 
C)  A business may operate profitably, yet be unable to meet its obligations. 
D)  In order to survive in the long-run, a business must both remain liquid and operate profitably. 
A)  If a business is unable to pay its debts as they come due, it is operating unprofitably. 
B)  A business may be liquid, yet operate unprofitably for several years. 
C)  A business may operate profitably, yet be unable to meet its obligations. 
D)  In order to survive in the long-run, a business must both remain liquid and operate profitably.

Question 11

If a company purchases equipment for $65,000 by issuing a note payable:

Accepted Answer

A)  Total assets will increase by $65,000. 
B)  Total assets will decrease by $65,000. 
C)  Total assets will remain the same. 
D)  The company's total owners' equity will decrease. 
A)  Total assets will increase by $65,000. 
B)  Total assets will decrease by $65,000. 
C)  Total assets will remain the same. 
D)  The company's total owners' equity will decrease.

Question 12

The amount of owners' equity in a business is not affected by:

Accepted Answer

A)  The percentage of total assets held in cash. 
B)  Investments made in the business by the owner. 
C)  The profitability of the business. 
D)  The amount of dividends paid to stockholders. 
A)  The percentage of total assets held in cash. 
B)  Investments made in the business by the owner. 
C)  The profitability of the business. 
D)  The amount of dividends paid to stockholders.

Question 13

If a company purchases equipment by issuing a note payable, its total assets will not change.

Accepted Answer

A) True 
 B)False

Question 14

A net profit results from having more revenues than liabilities.

Accepted Answer

A) True 
 B)False

Question 15

On January 6, the accounts payable balance is:

Accepted Answer

A)  $136,950. 
B)  $36,300. 
C)  $24,750. 
D)  $99,000. 
A)  $136,950. 
B)  $36,300. 
C)  $24,750. 
D)  $99,000.

Question 16

Valuation of assets under generally accepted accounting principles. Under generally accepted accounting principles, the assets owned by a business are reported in the balance sheet at their historical cost. Identify and briefly explain two accounting principles other than the cost principle that support the valuation of assets at cost in the balance sheet.

Accepted Answer

Student may choose any two of the follow

Question 17

Total assets must always equal total liabilities plus total owners' equity.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is the primary objective of financial statements?

Accepted Answer

A)  Providing managers with detailed information tailored to the managers' specific information needs. 
B)  Providing users outside the business organization with information about the company's financial position and operating results. 
C)  Reporting to the Internal Revenue Service the company's taxable income. 
D)  Indicating to investors in a particular company the current market values of their investments. 
A)  Providing managers with detailed information tailored to the managers' specific information needs. 
B)  Providing users outside the business organization with information about the company's financial position and operating results. 
C)  Reporting to the Internal Revenue Service the company's taxable income. 
D)  Indicating to investors in a particular company the current market values of their investments.

Exam 2: Basic Financial Statements

On January 6, the cash balance is:

A balance sheet is designed to show the financial position of an entity:

If a company has a profit:

Which of the following statements relating to the role of professional judgment in the financial reporting process are valid?

On January 6, the accounts receivable balance is:

If total assets equal $270,000 and total liabilities equal $202,500, the total owners' equity must equal:

The accounting equation may be stated as "assets minus liabilities equals owners' equity."

In a business organized as a corporation, it is not necessary to list the equity of each stockholder on the balance sheet.

Which of the following statements regarding liquidity and profitability is not true?

If a company purchases equipment for $65,000 by issuing a note payable:

The amount of owners' equity in a business is not affected by:

If a company purchases equipment by issuing a note payable, its total assets will not change.

A net profit results from having more revenues than liabilities.

On January 6, the accounts payable balance is:

Total assets must always equal total liabilities plus total owners' equity.

Which of the following is the primary objective of financial statements?

Accounting: Information for Decision Making

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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