Question 1

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.

Question 2

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 3

For each of the transactions listed below, indicate whether it is an investing (I) or financing (F) activity on the statement of cash flows. Also, indicate if the transaction increases (+) or decreases (-) cash.

Accepted Answer

The answer of For each of the transactions listed below,...

Question 4

A corporation purchased factory equipment using cash. Which of the following statements regarding this purchase is correct?

Accepted Answer

A) The cost of the factory equipment is an expense at the time of purchase. 
B) The total assets will not change. 
C) The total liabilities will increase. 
D) The current stockholders' equity will decrease. 
A) The cost of the factory equipment is an expense at the time of purchase. 
B) The total assets will not change. 
C) The total liabilities will increase. 
D) The current stockholders' equity will decrease.

Question 5

Which of the following transactions will not change a company's total stockholders' equity?

Accepted Answer

A) Reporting of net income. 
B) Issuing stock to stockholders in exchange for cash. 
C) The declaration of a cash dividend. 
D) The purchase of a factory building. 
A) Reporting of net income. 
B) Issuing stock to stockholders in exchange for cash. 
C) The declaration of a cash dividend. 
D) The purchase of a factory building.

Question 6

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 7

The stockholders' equity section of a balance sheet includes capital contributed by owners and also retained earnings.

Accepted Answer

A) True 
 B)False

Question 8

The ABC Corporation was formed on January 1, 2016. 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, 2016.
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.
Requirement:
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 9

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 10

The current ratio is current assets divided by current liabilities.

Accepted Answer

A) True 
 B)False

Question 11

An accounts payable would be reported within which of the following financial statements?

Accepted Answer

A) Statement of cash flows. 
B) Income statement. 
C) Balance sheet. 
D) Statement of stockholders' equity. 
A) Statement of cash flows. 
B) Income statement. 
C) Balance sheet. 
D) Statement of stockholders' equity.

Question 12

Which of the following correctly describes retained earnings?

Accepted Answer

A) It is the cumulative earnings of a company. 
B) It represents the investments by stockholders in a company. 
C) It equals total assets minus total liabilities. 
D) It is the cumulative earnings of a company less dividends declareD.Retained earnings are the cumulative earnings not distributed to the owners.That is the cumulative net income less dividends declared. 
A) It is the cumulative earnings of a company. 
B) It represents the investments by stockholders in a company. 
C) It equals total assets minus total liabilities. 
D) It is the cumulative earnings of a company less dividends declareD.Retained earnings are the cumulative earnings not distributed to the owners.That is the cumulative net income less dividends declared.

Question 13

Under the monetary unit assumption, accounting information should be measured and reported in terms of the national monetary unit, with an adjustment for changes in purchasing power.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Chad Jones is the sole owner and manager of Jones Glass Repair Shop. Jones purchased a truck, to be used in the business, for its market value of $35,000. Which of the following fundamentals requires Jones to record the truck at the price paid to buy it?

Accepted Answer

A) Separate-entity assumption. 
B) Revenue principle. 
C) Monetary unit assumption. 
D) Historical cost principle. 
A) Separate-entity assumption. 
B) Revenue principle. 
C) Monetary unit assumption. 
D) Historical cost principle.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Tiger Company's total stockholders' equity at the beginning of the year was $175,000. During the year Tiger reported the following: Net income of $79,000.
Dividend declarations totaling $17,000.
Issued stock to stockholders in exchange for $42,000 cash.
Borrowed $20,000 from a stockholder.
What is Tiger's total stockholders' equity at the end of the year?

Accepted Answer

A) $296,000. 
B) $279,000. 
C) $290,000. 
D) $273,000. 
A) $296,000. 
B) $279,000. 
C) $290,000. 
D) $273,000.

Question 18

Which of the following would be classified as investing cash flows on a cash flow statement? 1. Acquiring a building by signing a long-term mortgage payable.
2) Lending cash to others.
3) Issuing stock for cash.
4) Purchasing long-term assets for cash.
5) Selling stock investments for cash.

Accepted Answer

A) 1, 4, 5. 
B) 1, 2, 4. 
C) 1, 3, 5. 
D) 2, 4, 5. 
A) 1, 4, 5. 
B) 1, 2, 4. 
C) 1, 3, 5. 
D) 2, 4, 5.

Question 19

The Lake Company has provided the following account balances:
Cash $76,000;
Short-term investments $8,000;
Accounts receivable $96,000;
Supplies $12,000;
Long-term notes receivable $4,000;
Equipment $192,000;
Factory Building $360,000;
Intangible assets $12,000;
Accounts payable $90,000;
Accrued liabilities payable $12,000;
Short-term notes payable $42,000;
Long-term notes payable $184,000.
Requirement:
What is Lake's current ratio?

Accepted Answer

Current assets = $192,000 = $7

Question 20

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.

The dual effects concept states that:

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

For each of the transactions listed below, indicate whether it is an investing (I) or financing (F) activity on the statement of cash flows. Also, indicate if the transaction increases (+) or decreases (-) cash.

A corporation purchased factory equipment using cash. Which of the following statements regarding this purchase is correct?

Which of the following transactions will not change a company's total stockholders' equity?

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.

The stockholders' equity section of a balance sheet includes capital contributed by owners and also retained earnings.

Which of the following best describes liabilities?

The current ratio is current assets divided by current liabilities.

An accounts payable would be reported within which of the following financial statements?

Which of the following correctly describes retained earnings?

Under the monetary unit assumption, accounting information should be measured and reported in terms of the national monetary unit, with an adjustment for changes in purchasing power.

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

Chad Jones is the sole owner and manager of Jones Glass Repair Shop. Jones purchased a truck, to be used in the business, for its market value of $35,000. Which of the following fundamentals requires Jones to record the truck at the price paid to buy it?

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

Which of the following would be classified as investing cash flows on a cash flow statement? 1. Acquiring a building by signing a long-term mortgage payable. 2) Lending cash to others. 3) Issuing stock for cash. 4) Purchasing long-term assets for cash. 5) Selling stock investments for cash.

Which of the following best describes assets?

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

PPA: Reporting and Interpreting Investments in Other Corporations

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Exam 2: Investing and Financing Decisions and the Accounting System

The dual effects concept states that:

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

For each of the transactions listed below, indicate whether it is an investing (I) or financing (F) activity on the statement of cash flows. Also, indicate if the transaction increases (+) or decreases (-) cash.

A corporation purchased factory equipment using cash. Which of the following statements regarding this purchase is correct?

Which of the following transactions will not change a company's total stockholders' equity?

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.

The stockholders' equity section of a balance sheet includes capital contributed by owners and also retained earnings.

Which of the following best describes liabilities?

The current ratio is current assets divided by current liabilities.

An accounts payable would be reported within which of the following financial statements?

Which of the following correctly describes retained earnings?

Under the monetary unit assumption, accounting information should be measured and reported in terms of the national monetary unit, with an adjustment for changes in purchasing power.

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

Chad Jones is the sole owner and manager of Jones Glass Repair Shop. Jones purchased a truck, to be used in the business, for its market value of $35,000. Which of the following fundamentals requires Jones to record the truck at the price paid to buy it?

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

Which of the following would be classified as investing cash flows on a cash flow statement? 1. Acquiring a building by signing a long-term mortgage payable. 2) Lending cash to others. 3) Issuing stock for cash. 4) Purchasing long-term assets for cash. 5) Selling stock investments for cash.

Which of the following best describes assets?

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

PPA: Reporting and Interpreting Investments in Other Corporations

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