(Test Bank) Introductory Financial Accounting for Business

Edmonds, 2

Business

Test Bank

2nd Edition

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Test Bank for Introductory Financial Accounting for Business, The downloadable file consists of 1529 pages, and the total size of the file is 8.95 MB. Purchase now only for highly discounted price.

Author(s): Edmonds

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Version 1 1 CHAPTER 1: PROBLEM MATERIAL SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. 1) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Increase = IDecrease = DNot Affected = NA Walker Company issued common stock for $150,000 cash. 2) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Increase = IDecrease = DNot Affected = NA Nguyen Company borrowed $50,000 cash from Metropolitan Bank. 3) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Increase = IDecrease = DNot Affected = NA Bell Company provided consulting services for $20,000 cash. Version 1 2 4) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Increase = IDecrease = DNot Affected = NA Pierce Company paid $40,000 cash to purchase land. 5) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Increase = IDecrease = DNot Affected = NA Perez Company paid $220,000 cash for salaries expense. 6) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Increase = IDecrease = DNot Affected = NA Jones Company paid $20,000 in cash dividends to its owners. Version 1 3 7) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Increase = IDecrease = DNot Affected = NA North Company issued a note to purchase a building. 8) Name the group that has the primary authority for establishing U.S. GAAP. 9) Who are the three distinct types of participants in the market for business resources? Briefly describe the role of each group of participants. 10) What is meant by the term "stakeholders"? 11) What is meant by the term "global GAAP"? How does it impact U.S. companies? What body is responsible for setting global standards? 12) Briefly distinguish between financial accounting and managerial accounting.Version 1 4 13) Explain some of the similarities and differences between not-for-profit organizations and other types of businesses. 14) What financial statement elements are reported on a balance sheet? 15) From what three sources does a business obtain its assets? 16) How does providing services for cash affect the accounting equation? Is it considered an asset source, asset use, or asset exchange transaction? 17) How does the payment of cash dividends to stockholders affect the accounting equation? Is it considered an asset source, asset use, or asset exchange transaction? Version 1 5 18) If total stockholder's equity is $150,000 and liabilities are $75,000, what are total assets? 19) What is meant by the term stockholders' equity? 20) Give three examples of asset use transactions. 21) What does a company's statement of cash flows tell you about the company? 22) If a corporation issues common stock for $50,000 cash, in which section of the statement of cash flows will this transaction be reported? 23) Which financial statement reports revenue and expenses? Version 1 6 24) Name and briefly describe each of the four financial statements. 25) Define the term "accounting period." How does this term relate to the "matching concept" as it pertains to the income statement? ESSAY. Write your answer in the space provided or on a separate sheet of paper. 26) Indicate whether each of the following statements about markets is true or false. 1.a) Financial resources can be provided to a business by consumers. 2.b) Resource owners are the businesses that transform resources into products that satisfy consumer desires. 3.c) Labor resources include both the physical and intellectual labor of a business's employees. 4.d) Businesses purchase their resources from resource owners. 5.e) Consumers are the main providers of resources in any market. Version 1 7 27) Indicate whether each of the following statements about accounting information is true or false. 1.a) Financial accounting is primarily intended to satisfy the information needs of internal stakeholders. 2.b) Managerial accounting information includes financial and nonfinancial information. 3.c) The accounting information intended to satisfy the needs of a company's employees is managerial accounting information. 4.d) GAAP requires that companies adhere to financial accounting standards. 5.e) Managerial accounting information is usually less detailed than financial accounting information. 28) Indicate whether each of the following statements about liabilities is true or false. 1.a) Liabilities are reported on the balance sheet. 2.b) The acquisition of a bank loan increases both assets and liabilities. 3.c) The accounting equation requires that liabilities be equal to stockholders’ equity. 4.d) The amount of a company's liabilities is equal to the difference between its assets and its stockholders’equity. 5.e) Liabilities are reported on the statement of cash flows of a business. Version 1 8 29) Indicate whether each of the following statements about retained earnings is true or false. 1.a) A dividend paid to stockholders decreases retained earnings. 2.b) Issuing common stock for cash increases retained earnings. 3.c) The amount of net income for a period must equal retained earnings. 4.d) The purchase of a truck decreases retained earnings. 5.e) Net income increases retained earnings. 30) Indicate whether each of the following statements about the types of transactions is true or false. 1.a) An asset source transaction increases total assets and increases claims to assets. 2.b) The issuance of stock to owners for cash would be an example of an asset exchange transaction. 3.c) Purchasing equipment for cash is an example of an asset use transaction. 4.d) Paying a dividend to stockholders is an example of an asset use transaction. 5.e) Making a payment on a bank loan is an example of an asset exchange transaction. Version 1 9 31) Indicate whether each of the following statements about financial statements is true or false. 1.a) A cash dividend paid to stockholders is reported in the investing activities section of the statement of cash flows. 2.b) A cash dividend paid to stockholders is reported on the statement of changes in stockholders' equity. 3.c) A cash dividend paid to stockholders is reported on the income statement. 4.d) The balance sheet reports the ending balances of permanent accounts as of the last day of the accounting period. 5.e) Changes in retained earnings during the accounting period are reported on the income statement. 32) Indicate whether each of the following statements about equity is true or false. 1.a) Expenses decrease retained earnings. 2.b) Stockholders' equity and liabilities can be viewed either as sources of assets or claims to assets of the business. 3.c) Retained earnings is increased by loans received from a bank. 4.d) Dividends paid to stockholders decrease common stock. 5.e) Generally, assets are reported at the actual price paid for them when purchased regardless of subsequent changes in market value. Version 1 10 33) Bates Company entered into the following transactions during its first year in business. Assume that all transactions involve the receipt or payment of cash. 1.1) Issued common stock to investors for $25,000 cash. 2.2) Borrowed $18,000 from the local bank. 3.3) Provided services to customers for $28,000. 4.4) Paid expenses amounting to $21,400. 5.5) Purchased a plot of land costing $22,000. 6.6) Paid a dividend of $15,000 to its stockholders. 7.7) Repaid $12,000 of the loan listed in item 2. Required: 1.(a) Fill in the three column headings of the accounting equation in the first row of the table shown below. 2.(b) Show the effects of the above transactions on the accounting equation. a. ________ = ________ + ________ b. Event Number 1.1) 2.2) 3.3) 4.4) 5.5) 6.6) 7.7) Version 1 11 34) Each of the following requirements is independent of the others. 1.a) Valdez Corporation has liabilities of $95,000 and stockholders’ equity of $115,000. What is the amount of Valdez's assets? ________ 2.b) Global Company has assets of $320,000 and liabilities of $95,000. What is the amount of Global's stockholders’ equity? ________ 3.c) Brown Company has assets of $90,000 and liabilities of $25,000. What is the amount of Brown's claims? ________ 35) The following business events occurred for Ringgold Company during Year 1, its first year in operation: 1.1. Issued stock to investors for $45,000 cash 2.2. Borrowed $25,000 cash from the local bank 3.3. Provided services to its customers and received $32,000 cash 4.4. Paid expenses of $28,000 5.5. Paid $22,000 cash for land 6.6. Paid dividend of $12,000 to stockholders 7.7. Repaid $10,000 of the loan listed in item 2 Required: 1.a) Show the effects of the above transactions on the accounting equation, below. Include dollar amounts of increases and decreases. Enter "NA" for elements of the accounting equation that are not affected by the transaction. If one element of the accounting equation is affected by an increase and also by a decrease, enter each part on a separate line (i.e. asset exchange transaction where one asset increases and another asset decreases). (The effects of the first transaction is shown below.) 2.b) After entering all the events, calculate the total amounts of assets, liabilities, and equity at the end of the year. Event number Assets = Liabilities + Equity Version 1 12 1. 45,000 NA 45,000 2. 3. 4. 5. 6. 7. Total 36) Ramirez Company experienced the following events during Year 1: 1.Acquired $50,000 cash by issuing common stock 2.Borrowed $25,000 cash from a creditor 3.Provided services to customers for $38,000 cash 4.Paid $32,000 cash for operating expenses 5.Paid a cash dividend of $2,500 to stockholders 6.Purchased land with cash, $20,000 Required: 1.a) Show how each of these events affects the accounting equation. Enter "NA" for elements of the accounting equation that are not affected by the transaction. If one element of the accounting equation is affected by an increase and also by a decrease, enter each part on a separate line (i.e. asset exchange transaction where one asset increases and another asset decreases). (The effects of the first event are shown below.) 2.b) Calculate the total amount of assets, liabilities, common stock, and retained earnings at the end of the period. Event number Assets = Liabilities + Stockholder's Equity Common Stock + Retained Version 1 13 Earnings 1. 50,000 NA 50,000 NA 2. 3. 4. 5. 6. Total 37) At the beginning of Year 2, the accounting records of Grace Company included the accounts and balances shown on the first row of the table below. During Year 2, the following transactions occurred: 1.Received $95,000 cash for providing services to customers 2.Paid salaries expense, $50,000 3.Purchased land for $12,000 cash 4.Paid $4,000 on note payable 5.Paid operating expenses, $22,000 6.Paid cash dividend, $2,500 Required: 1.a) Record the transactions in the appropriate accounts. Record the amounts of revenue, expense, and dividends in the retained earnings column. Enter 0 for items not affected. Provide appropriate titles for these accounts in the last column of the table. (The effects of the first event are shown below.) Event Assets = Liabilities + Stockholder's Equity Accounts Titles for RE Cash Land Notes Payable Common Stock + Retained Earnings Version 1 14 Beginning 29,000 32,000 18,000 33,000 10,000 1 2 3 4 5 6 1.b) What is the amount of total assets as of December 31, Year 2? 2.c) What is the amount of total stockholders' equity as of December 31, Year 2? 38) Montgomery Company experienced the following events during Year 1 (all were cash events): 1.Issued a note 2.Paid operating expenses 3.Issued common stock 4.Provided services to customers 5.Repaid part of the note in event 1 6.Paid dividends to stockholders Required: Indicate how each of these events affects the accounting equation by writing the letter "I" for increase, the letter "D" for decrease, and "NA" for no effect under each of the elements of the accounting equation. Use only one item of entry in each column. (The effects of the first event are shown below.) Event number Assets = Liabilities + Stockholder's Equity Common Stock + Retained Earnings Version 1 15 1. I I NA NA 2. 3. 4. 5. 6. 39) Indicate how each of the following transactions affects assets by entering "+" for increase, "−" for decrease, or "+/− " if an event increases one asset account and decreases another asset account. Enter only one item for each answer. ________ 1) Issued stock to investors. ________ 2) Borrowed cash from the bank. ________ 3) Provided services for cash. ________ 4) Paid operating expenses. ________ 5) Purchased land for cash. ________ 6) Paid cash dividend to the stockholders. ________ 7) Repaid the bank loan.