Question 1

A transaction is an exchange or event that directly affects the assets, liabilities, or stockholders' equity of a company.

Accepted Answer

A) True 
 B)False

Question 2

Choose the TRUE statement.

Accepted Answer

A)   All asset accounts have a normal debit balance with the exception of cash which has a normal credit balance.
B)   Contributed capital account is increased by debits.
C)   When payment is made on a liability such as accounts payable, the liability account is decreased with a credit.
D)   The total amount of debits to asset accounts must equal the total amount of credits to liability and stockholders' equity accounts.E) B) and C)
F) A) and D)

Question 3

A company buys equipment for $500,000 and signs a promissory note for the full amount. How does this transaction affect the accounting equation?

Accepted Answer

A)   .Assets:  Property and equipment,  Cash; Liabilities: no change; Stockholders' Equity: no change.
B)   Assets:  Property and equipment; Liabilities:  Notes payable; Stockholders' Equity; no change.
C)   Assets:  Property and equipment; Liabilities: no change; Stockholders' Equity:  Retained earnings.
D)   Assets:  Property and equipment; Liabilities: no change; Stockholders' Equity:  Contributed capital.E) B) and C)
F) B) and D)

Question 4

If total liabilities decreased by $25,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during the same time period?

Accepted Answer

A)   $20,000 increase.
B)   $20,000 decrease.
C)   $30,000 increase.
D)   $30,000 decrease.E) All of the above
F) B) and D)

Question 5

What is the amount of stockholders' equity at January 1, 2011?

Accepted Answer

A)   $9,450
B)   $15,750
C)   $15,050
D)   $14,450E) None of the above
F) A) and C)

Question 6

General Motors (GM) signs a new labor agreement that its workers will receive a 5% wage increase next year. This is considered a transaction that affects GM's financial statements in the current year.

Accepted Answer

A) True 
 B)False

Question 7

Company X issues $40 million in new stock for cash. This does not affect stockholders' equity because as new shares are sold the value of existing shares falls.

Accepted Answer

A) True 
 B)False

Question 8

If total assets increase, then either liabilities or stockholders' equity also must increase.

Accepted Answer

A) True 
 B)False

Question 9

If a company is trying to maximize its perceived value to external decision makers, the company is most likely to

Accepted Answer

A)   understate the current assets.
B)   understate the long-term liabilities.
C)   understate the retained earnings.
D)   understate the contributed capital.E) A) and B)
F) All of the above

Question 10

How much financing did the stockholders of Purrfect Pets, Inc., directly contribute to the company?

Accepted Answer

A)   $117,900.
B)   $662,100.
C)   $780,000.
D)   $1,398,100.E) All of the above
F) A) and D)

Question 11

Assets are listed on a classified balance sheet in which of the following ways?

Accepted Answer

A)   In alphabetical order.
B)   From the largest dollar amount to the lowest dollar amount.
C)   Beginning with non-current assets and ending with current assets.
D)   Starting with cash.E) None of the above
F) A) and B) D

Question 12

Journal entries show the effects of transactions on the elements of the accounting equation, as well as the amount of the account balances.

Accepted Answer

A) True 
 B)False

Question 13

What is the amount of total assets?

Accepted Answer

A)   $16,000
B)   $5,600
C)   $15,000
D)   $15,600E) A) and B)
F) None of the above D

Question 14

How many of the following statements regarding the concepts underlying the balance sheet are true?
A company buys land for $5 million dollars in 1983. The land is now worth $15 million. The company should increase the book value of this asset on its balance sheet to reflect its current value.
All events affecting the current value of a company are reported on the balance sheet.
According to the cost principle, assets are valued at their replacement cost.

Accepted Answer

A)   None
B)   One
C)   Two
D)   ThreeE) C) and D)
F) All of the above A

Question 15

If a company uses $100 million in cash to pay off debt, its stockholders' equity will rise $100 million.

Accepted Answer

A) True 
 B)False

Question 16

The requirement that transactions be recorded at their exchange price at the transaction date is called the

Accepted Answer

A)   conservatism exception.
B)   separate entity assumption.
C)   cost principle.
D)   monetary unit assumption.E) A) and C)
F) C) and D)

Question 17

Which concept should be applied when reporting a piece of land that was bought for $50,000 five years ago, and which would probably now sell for $80,000?

Accepted Answer

A)   The cost principle.
B)   The asset principle.
C)   The separate entity concept.
D)   The monetary concept.E) B) and C)
F) A) and D)

Question 18

The journal is a chronological record of transactions using a debit/credit framework.

Accepted Answer

A) True 
 B)False

Question 19

When accounts receivable are collected

Accepted Answer

A)   Stockholders' equity increases,
B)   Total assets increase,
C)   Total assets decrease,
D)   The amount of total assets is unchanged.E) A) and B)
F) A) and C)

Question 20

Which of the following statements is FALSE?

Accepted Answer

A)   A transaction is an exchange or event that has a direct and measurable financial effect.
B)   Every transaction has at least 2 effects.
C)   Current assets are economic resources to be used or turned into cash within one year
D)   Notes payable is the account debited when money is borrowed from a bank using a promissory note.E) B) and C)
F) A) and D)

Exam 2: Reporting Investing and Financing Results on the Balance Sheet

A transaction is an exchange or event that directly affects the assets, liabilities, or stockholders' equity of a company.

Correct Answer
verified

Choose the TRUE statement.

Correct Answer
verified

A company buys equipment for $500,000 and signs a promissory note for the full amount. How does this transaction affect the accounting equation?

Correct Answer
verified

If total liabilities decreased by $25,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during the same time period?

Correct Answer
verified

What is the amount of stockholders' equity at January 1, 2011?

Correct Answer
verified

General Motors (GM) signs a new labor agreement that its workers will receive a 5% wage increase next year. This is considered a transaction that affects GM's financial statements in the current year.

Correct Answer
verified

Company X issues $40 million in new stock for cash. This does not affect stockholders' equity because as new shares are sold the value of existing shares falls.

Correct Answer
verified

If total assets increase, then either liabilities or stockholders' equity also must increase.

Correct Answer
verified

If a company is trying to maximize its perceived value to external decision makers, the company is most likely to

Correct Answer
verified

How much financing did the stockholders of Purrfect Pets, Inc., directly contribute to the company?

Correct Answer
verified

Assets are listed on a classified balance sheet in which of the following ways?

Correct Answer
verified
D

Journal entries show the effects of transactions on the elements of the accounting equation, as well as the amount of the account balances.

Correct Answer
verified

What is the amount of total assets?

Correct Answer
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D

Correct Answer
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A

If a company uses $100 million in cash to pay off debt, its stockholders' equity will rise $100 million.

Correct Answer
verified

The requirement that transactions be recorded at their exchange price at the transaction date is called the

Correct Answer
verified

Which concept should be applied when reporting a piece of land that was bought for $50,000 five years ago, and which would probably now sell for $80,000?

Correct Answer
verified

The journal is a chronological record of transactions using a debit/credit framework.

Correct Answer
verified

When accounts receivable are collected

Correct Answer
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Which of the following statements is FALSE?

Correct Answer
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Exam 2: Reporting Investing and Financing Results on the Balance Sheet

A transaction is an exchange or event that directly affects the assets, liabilities, or stockholders' equity of a company.

Correct AnswerverifiedShow Answer

Choose the TRUE statement.

Correct AnswerverifiedShow Answer

A company buys equipment for $500,000 and signs a promissory note for the full amount. How does this transaction affect the accounting equation?

Correct AnswerverifiedShow Answer

If total liabilities decreased by $25,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during the same time period?

Correct AnswerverifiedShow Answer

What is the amount of stockholders' equity at January 1, 2011?

Correct AnswerverifiedShow Answer

General Motors (GM) signs a new labor agreement that its workers will receive a 5% wage increase next year. This is considered a transaction that affects GM's financial statements in the current year.

Correct AnswerverifiedShow Answer

Company X issues $40 million in new stock for cash. This does not affect stockholders' equity because as new shares are sold the value of existing shares falls.

Correct AnswerverifiedShow Answer

If total assets increase, then either liabilities or stockholders' equity also must increase.

Correct AnswerverifiedShow Answer

If a company is trying to maximize its perceived value to external decision makers, the company is most likely to

Correct AnswerverifiedShow Answer

How much financing did the stockholders of Purrfect Pets, Inc., directly contribute to the company?

Correct AnswerverifiedShow Answer

Assets are listed on a classified balance sheet in which of the following ways?

Correct AnswerverifiedD

Journal entries show the effects of transactions on the elements of the accounting equation, as well as the amount of the account balances.

Correct AnswerverifiedShow Answer

What is the amount of total assets?

Correct AnswerverifiedD

Correct AnswerverifiedA

If a company uses $100 million in cash to pay off debt, its stockholders' equity will rise $100 million.

Correct AnswerverifiedShow Answer

The requirement that transactions be recorded at their exchange price at the transaction date is called the

Correct AnswerverifiedShow Answer

Which concept should be applied when reporting a piece of land that was bought for $50,000 five years ago, and which would probably now sell for $80,000?

Correct AnswerverifiedShow Answer

The journal is a chronological record of transactions using a debit/credit framework.

Correct AnswerverifiedShow Answer

When accounts receivable are collected

Correct AnswerverifiedShow Answer

Which of the following statements is FALSE?

Correct AnswerverifiedShow Answer

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D

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D

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A

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