Exam (elaborations) Test Bank for Fundamentals of Financial Accounting 3rd Edition Phillips, Libby, Libby

TEST BANK with Complete Questions and Solutions. To clarify, this is the TEST BANK, not the textbook. You get immediate access to download your test bank. You will receive a complete test bank; in other words, all chapters will be there. Test banks come in PDF format; therefore, you do not need specialized software to open them. Exam (elaborations) Test Bank for Fundamentals of Financial Accounting 3rd Edition Phillips, Libby, Libby Libby,-Libby Chapter 02 Reporting Investing and Financing Results on the Balance Sheet True / False Questions 1. A transaction is an exchange or event that directly affects the assets, liabilities, or stockholders' equity of a company. True False 2. A transaction can cause only one account on the balance sheet to change. True False 3. If a company uses $100 million in cash to pay off debt, its stockholders' equity will rise $100 million. True False 4. 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. True False 5. All of a company's business activities have a direct economic effect on the company. True False 6. If total assets increase, then either liabilities or stockholders' equity also must increase. True False 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. True False 2-1 Full file at Libby,-Libby 8. Transactions are analyzed from the point of view of the company, not the company's owners. True False 9. You are pleasantly surprised to discover that a popular actress appears on The Tonight Show wearing your company's jeans. Later, your company's sales increase by $500,000 as a result. When the actress appeared on TV, you would have recorded an asset because the TV appearance was expected to bring future economic benefits to your company. True False 10. If the total dollar value of credits to an account exceeds the total dollar value of debits to that account, the ending balance of the account will be a debit balance. True False 11. A company signed an agreement to rent store space from another company. This is an example of a recordable transaction. True False 12. Retained earnings is the cumulative earnings of a company which have not been distributed to owners. True False 13. An internal accounting report called a Trial Balance checks whether recorded debits equal recorded credits. True False 14. The journal is a chronological record of transactions using a debit/credit framework. True False 2-2 Full file at Libby,-Libby 15. The ledger consists of all of the accounts used by a business. True False 16. A business is obliged to repay debt and equity financing. True False 17. The list of names and reference numbers that the company will use when accounting for transactions is called the Chart of Accounts. True False 18. Journal entries show the effects of transactions on the elements of the accounting equation, as well as the amount of the account balances. True False 19. The acquisition of equipment in an exchange for a company's stock would increase the current ratio of the company. the accounts in this transaction is classified as current. True False 20. The current ratio can be used to evaluate a company's ability to pay liabilities in the shortterm, and in general, a lower ratio means better ability to pay. True False 2-3 Full file at Libby,-Libby Multiple Choice Questions 21. How many of the following statements regarding the balance sheet are true?  A "classified" balance sheet is one that contains privileged information.  All liabilities require that the company sacrifice resources at some time in the future.  All companies use an identical list of account names defined by the Financial Accounting Standards Board (FASB). A. None B. One C. Two D. Three 22. How many of the following statements regarding debits and credits are true?  A decrease in assets will result in a credit to an asset account.  Across all accounts, the total value of all debits must equal the total value of all credits.  The total value of all debits to a particular account must equal the total value of all credits to that account. A. None B. One C. Two D. Three 23. How many of the following statements regarding the balance sheet are true?  Any item on a balance sheet labeled payable is a liability of that company.  Current Assets are listed on the balance sheet in order of how fast they are used up or can be turned into cash.  The basic accounting equation must always balance. A. None B. One C. Two D. Three 2-4 Full file at Libby,-Libby 24. How many of the following statements regarding posting and classification are true?  Posting journal entries involves copying the dollar amounts from the journal into the ledger.  If a $100 debit is erroneously posted to an account as a $100 credit, the accounts will be out of balance by $100.  If a $5,000 liability is misclassified as stockholders' equity then the accounting equation will still balance. A. None B. One C. Two 25. 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. A. None B. One C. Two D. Three 26. Which of the following would be listed as a long-term asset? A. Cash. B. Supplies. C. Buildings and equipment. D. Total assets. 27. Which of the following would be listed as a current liability? A. Cash in the bank. B. Notes payable due in two years. C. Supplies. D. Accounts payable. 2-5 Full file at Libby,-Libby 28. A long-term liability is one that the company: A. has owed for over one year. B. has owed for over five years. C. will not pay off for over one year. D. will not pay off for over five years. 29