TEST BANK for Fundamentals of Financial Accounting 6th Edition by Fred Phillips

,FundamentalspofpFinancialpAccounting,p6ep(Phillips)pCha
pterp1p BusinesspDecisionspandpFinancialpAccounting

1) Stockholdersparepownerspofpapcorporation.

Answer:p TRUE
Explanation:pStockholdersparepthepownerspofpapcorporation.pD
ifficulty:p1pEasy
Topic:p AccountingpforpBusinesspDecisions
LearningpObjective:p01-
01pDescribepvariousporganizationalpformspandpbusinesspdecisionpmakers.pBloom's:pUnderstand
AACSB:pAnalyticalpThinkingpAcces
sibility:p KeyboardpNavigation

2) Allpcorporationspacquirepfinancingpbypissuingpstockpforpsaleponppublicpstockpexchanges.

Answer:p FALSE
Explanation:pMostpcorporationspstartpoutpaspprivatepcompaniespandpwillpapplyptopbecomeppublicpco
mpaniesp("goppublic")pifptheypneedpaplotpofpfinancing.pFinancingpcanpalsopbepacquiredpbypborrowing
pfrompbanks.

Difficulty:p2pMedium
Topic:p OrganizationalpForms
LearningpObjective:p01-
01pDescribepvariousporganizationalpformspandpbusinesspdecisionpmakers.pBloom's:pUnderstand
AACSB:pAnalyticalpThinkingpAcces
sibility:p KeyboardpNavigation

3) Youppaidp$10,000ptopbuyp1%pofpthepstockpinpapcorporationpthatpispnowpbankrupt.pThepcompanypo
wesp$10pmillionpdollarsptopitspcreditors.pAspapresultpofpthepbankruptcy,pyouparepresponsiblepforppayi
ngp$100,000p(orp$10pmillionp×p1%)pofpthepamountpowedptopthepcreditors.

Answer:p FALSE
Explanation:pUnlikepsolepproprietorshipspandppartnerships,papcorporationpispapseparatepentitypfrompb
othplegalpandpaccountingpperspectives.pThispmeanspthatpapcorporation,pnotpitspowners,pisplegallypres
ponsiblepforpitspownptaxespandpdebts.
Difficulty:p2pMedium
Topic:p OrganizationalpForms
LearningpObjective:p01-
01pDescribepvariousporganizationalpformspandpbusinesspdecisionpmakers.pBloom's:pApply
AACSB:pAnalyticalpThinkingpAcces
sibility:p KeyboardpNavigation




1
Copyrightp2019p©pMcGraw-
HillpEducation.pAllprightspreserved.pNopreproductionporpdistributionpwithoutptheppriorpwrittenpconsentpofpMcGraw-
HillpEducation.

,4) Cashppaidpforpwagespispanpexamplepofpanpoperatingpactivityponpthepstatementpofpcashpflows.

Answer:p TRUE
Explanation:p Cashpflowspfromprunningpthepbusiness,pincludingpcashppaidpforpwages,parepoperatingpactivit
iesponpthepstatementpofpcashpflows.
Difficulty:p1pEasy
Topic:p FinancialpStatements
LearningpObjective:p01-
02pDescribeptheppurpose,pstructure,pandpcontentpofpthepfourpbasicpfinancialpstatements.
Bloom's:p UnderstandpAACSB
:p AnalyticalpThinking
Accessibility:p KeyboardpNavigation

5) Borrowingpmoneypfrompapbankpispapfinancingpactivityponpthepstatementpofpcashpflows.

Answer:p TRUE
Explanation:p Onpthepstatementpofpcashpflows,pborrowingpandprepayingpbankploansparepfinancingpactivitie
s.
Difficulty:p1pEasy
Topic:p FinancialpStatements
LearningpObjective:p01-
02pDescribeptheppurpose,pstructure,pandpcontentpofpthepfourpbasicpfinancialpstatements.
Bloom's:p UnderstandpAACSB
:p AnalyticalpThinking
Accessibility:p KeyboardpNavigation

6) Thepdailypactivitiespinvolvedpinprunningpapbusiness,psuchpaspbuyingpsuppliespandppayingps
alariespandpwages,parepclassifiedpaspoperatingpactivitiesponpthepstatementpofpcashpflows.

Answer:p TRUE
Explanation:p Buyingpsuppliespandppayingpsalariespandpwagesparepnormalpoperatingpcostsponpthepstateme
ntpofpcashpflows.
Difficulty:p1pEasy
Topic:p FinancialpStatements
LearningpObjective:p01-
02pDescribeptheppurpose,pstructure,pandpcontentpofpthepfourpbasicpfinancialpstatements.
Bloom's:p UnderstandpAACSB
:p AnalyticalpThinking
Accessibility:p KeyboardpNavigation




2
Copyrightp2019p©pMcGraw-
HillpEducation.pAllprightspreserved.pNopreproductionporpdistributionpwithoutptheppriorpwrittenpconsentpofpMcGraw-
HillpEducation.

, 7) Stockholders'pequitypispthepdifferencepbetweenpapcompany'spassetspandpitspliabilities.

Answer:p TRUE
Explanation:p Assetsp=pLiabilitiesp+pStockholders'pEquity;ptherefore,pAssetsp–
pLiabilitiesp=p
Stockholders'pEquity
Difficulty:p2pMedium
Topic:p ThepBasicpAccountingpEquation
LearningpObjective:p01-
02pDescribeptheppurpose,pstructure,pandpcontentpofpthepfourpbasicpfinancialpstatements.
Bloom's:p UnderstandpAACSB
:p AnalyticalpThinking
Accessibility:p KeyboardpNavigation

8) Apcompanypowesp$200,000ponpapbankploan.pItpwillpbepreportedpbypthepcompanypaspAccountspP
ayable.

Answer:p FALSE
Explanation:pFormalpdebt,pevidencedpbypapwrittenpcontractporpnote,pispreportedpaspNotespPayable.pDi
fficulty:p1pEasy
Topic:p FinancialpStatements
LearningpObjective:p01-
02pDescribeptheppurpose,pstructure,pandpcontentpofpthepfourpbasicpfinancialpstatements.
Bloom's:p UnderstandpAACSB
:p AnalyticalpThinking
Accessibility:p KeyboardpNavigation

9) Amountspreportedponpfinancialpstatementsparepsometimesproundedptopthepnearestpmillion.

Answer:p TRUE
Explanation:pLargepbusinessespoftenproundpthepnumbersponptheirpfinancialpstatementsptopthepnearestp
thousandporpmillion.
Difficulty:p1pEasy
Topic:p FinancialpStatements
LearningpObjective:p01-
02pDescribeptheppurpose,pstructure,pandpcontentpofpthepfourpbasicpfinancialpstatements.
Bloom's:pppRememberpAACSB
:p AnalyticalpThinking
Accessibility:p KeyboardpNavigation




3
Copyrightp2019p©pMcGraw-
HillpEducation.pAllprightspreserved.pNopreproductionporpdistributionpwithoutptheppriorpwrittenpconsentpofpMcGraw-
HillpEducation.