Test Bank for Fundamental Financial Accounting Concepts
11th Edition
by Thomas Edmonds, Philip Olds, Christopher Edmonds
,Student name:
1) Indicate whether each of the following statements about markets is true or false.
a) Financial resources can be provided to a business by investors.
b) Resource owners are the businesses that transform resources into products that
satisfy consumer desires.
c) Labor resources include both the physical and intellectual labor of a business's
employees.
d) Businesses purchase their resources from resource owners.
e) Consumers are the main providers of resources in any market.
2) Indicate whether each of the following statements about accounting information is true or
false.
a) Financial accounting is primarily intended to satisfy the information needs of
internal stakeholders.
b) Managerial accounting information includes financial and nonfinancial
information.
c) The accounting information intended to satisfy the needs of a company's
employees is managerial accounting information.
d) GAAP requires that companies adhere to financial accounting standards.
e) Managerial accounting information is usually less detailed than financial
accounting information.
3) Indicate whether each of the following statements about liabilities is true or false.
a) A net loss on the income statement decreases liabilities.
b) The acquisition of a bank loan increases both assets and liabilities.
c) The accounting equation requires that liabilities be equal to stockholders’ equity.
d) The amount of a company's liabilities is equal to the difference between its assets
and its stockholders’ equity.
e) Liabilities are reported on the statement of cash flows of a business.
,4) Indicate rwhether reach rof rthe rfollowing rstatements rabout rretained rearnings ris rtrue ror rfalse.
a) rA rdividend rpaid rto rstockholders rdecreases rretained rearnings.
b) rIssuing rcommon rstock rfor rcash rincreases rretained rearnings.
c) rThe ramount rof rnet rincome rfor ra rperiod rmust requal rretained rearnings.
d) rThe rpurchase rof ra rtruck rdecreases rretained rearnings.
e) rNet rincome rincreases rretained rearnings.
5) Indicate rwhether reach rof rthe rfollowing rstatements rabout rthe rtypes rof rtransactions ris
rtrue ror rfalse.
a) rAn rasset rsource rtransaction rincreases rtotal rassets rand rincreases rclaims rto rassets.
b) rThe rissuance rof rstock rto rowners rfor rcash rwould rbe ran rexample rof ran
rasset rexchange rtransaction.
c) rPurchasing requipment rfor rcash ris ran rexample rof ran rasset ruse rtransaction.
d) rPaying ra rdividend rto rstockholders ris ran rexample rof ran rasset ruse rtransaction.
e) rMaking ra rpayment ron ra rbank rloan ris ran rexample rof ran rasset rexchange rtransaction.
6) Indicate rwhether reach rof rthe rfollowing rstatements rabout rfinancial rstatements ris
rtrue ror rfalse.
a) rA rcash rdividend rpaid rto rstockholders ris rreported rin rthe rinvesting ractivities
rsection rof rthe rstatement rof rcash rflows.
b) rA rcash rdividend rpaid rto rstockholders ris rreported ron rthe rstatement rof
rchanges rin rstockholders' requity.
c) rA rcash rdividend rpaid rto rstockholders ris rreported ron rthe rincome rstatement.
d) rThe rbalance rsheet rreports rthe rending rbalances rof rpermanent raccounts ras rof rthe
rlast rday rof rthe raccounting rperiod.
e) rChanges rin rretained rearnings rduring rthe raccounting rperiod rare rreported ron
rthe rincome rstatement.
, 7) Indicate rwhether reach rof rthe rfollowing rstatements rabout rstockholders’ requity ris
rtrue ror rfalse.
a) rExpenses rdecrease rretained rearnings.
b) rStockholders' requity rand rliabilities rcan rbe rviewed reither ras rsources rof
rassets ror rclaims rto rassets rof rthe rbusiness.
c) rRetained rearnings ris rincreased rby rloans rreceived rfrom ra rbank.
d) rDividends rpaid rto rstockholders rdecrease rcommon rstock.
e) rGenerally, rassets rare rreported rat rthe ractual rprice rpaid rfor rthem rwhen
rpurchased rregardless rof rsubsequent rchanges rin rmarket rvalue.
8) Jessup rCompany rwas rfounded rin rYear r1. rIt racquired r$45,000 rcash rby rissuing rstock
rto rinvestors rand ran radditional r$15,000 rcash rby rborrowing rfrom rcreditors. rDuring rYear r1 rit
rreceived
$25,000 rcash rrevenues rand rpaid r$32,000 rin rcash rexpenses. rThe rcompany rthen rwent rout
rof rbusiness.
Required:
a) Explain rthe rterm, r"business rliquidation."
b) What ramount rof rcash rshould rJessup rCompany rhave rhad ron rhand rimmediately rbefore
rgoing rout rof rbusiness?
c) What ramount rof rcash rwill rJessup's rcreditors rreceive?
d) What ramount rof rcash rwill rJessup's rstockholders rreceive?
9) Bates rCompany rentered rinto rthe rfollowing rtransactions rduring rits rfirst ryear rin
rbusiness. rAssume rthat rall rtransactions rinvolve rthe rreceipt ror rpayment rof rcash.
1) Issued rcommon rstock rto rinvestors rfor r$25,000 rcash.
2) Borrowed r$18,000 rfrom rthe rlocal rbank.
3) Provided rservices rto rcustomers rfor r$28,000.
4) Paid rexpenses ramounting rto r$21,400.
5) Purchased ra rplot rof rland rcosting r$22,000.
6) Paid ra rdividend rof r$15,000 rto rits rstockholders.
7) Repaid r$12,000 rof rthe rloan rlisted rin ritem r2.
Required:
(a) Fill rin rthe rthree rcolumn rheadings rof rthe raccounting requation rin rthe rfirst rrow rof rthe
rtable rshown rbelow.
(b) Show rthe reffects rof rthe rabove rtransactions ron rthe raccounting requation.
11th Edition
by Thomas Edmonds, Philip Olds, Christopher Edmonds
,Student name:
1) Indicate whether each of the following statements about markets is true or false.
a) Financial resources can be provided to a business by investors.
b) Resource owners are the businesses that transform resources into products that
satisfy consumer desires.
c) Labor resources include both the physical and intellectual labor of a business's
employees.
d) Businesses purchase their resources from resource owners.
e) Consumers are the main providers of resources in any market.
2) Indicate whether each of the following statements about accounting information is true or
false.
a) Financial accounting is primarily intended to satisfy the information needs of
internal stakeholders.
b) Managerial accounting information includes financial and nonfinancial
information.
c) The accounting information intended to satisfy the needs of a company's
employees is managerial accounting information.
d) GAAP requires that companies adhere to financial accounting standards.
e) Managerial accounting information is usually less detailed than financial
accounting information.
3) Indicate whether each of the following statements about liabilities is true or false.
a) A net loss on the income statement decreases liabilities.
b) The acquisition of a bank loan increases both assets and liabilities.
c) The accounting equation requires that liabilities be equal to stockholders’ equity.
d) The amount of a company's liabilities is equal to the difference between its assets
and its stockholders’ equity.
e) Liabilities are reported on the statement of cash flows of a business.
,4) Indicate rwhether reach rof rthe rfollowing rstatements rabout rretained rearnings ris rtrue ror rfalse.
a) rA rdividend rpaid rto rstockholders rdecreases rretained rearnings.
b) rIssuing rcommon rstock rfor rcash rincreases rretained rearnings.
c) rThe ramount rof rnet rincome rfor ra rperiod rmust requal rretained rearnings.
d) rThe rpurchase rof ra rtruck rdecreases rretained rearnings.
e) rNet rincome rincreases rretained rearnings.
5) Indicate rwhether reach rof rthe rfollowing rstatements rabout rthe rtypes rof rtransactions ris
rtrue ror rfalse.
a) rAn rasset rsource rtransaction rincreases rtotal rassets rand rincreases rclaims rto rassets.
b) rThe rissuance rof rstock rto rowners rfor rcash rwould rbe ran rexample rof ran
rasset rexchange rtransaction.
c) rPurchasing requipment rfor rcash ris ran rexample rof ran rasset ruse rtransaction.
d) rPaying ra rdividend rto rstockholders ris ran rexample rof ran rasset ruse rtransaction.
e) rMaking ra rpayment ron ra rbank rloan ris ran rexample rof ran rasset rexchange rtransaction.
6) Indicate rwhether reach rof rthe rfollowing rstatements rabout rfinancial rstatements ris
rtrue ror rfalse.
a) rA rcash rdividend rpaid rto rstockholders ris rreported rin rthe rinvesting ractivities
rsection rof rthe rstatement rof rcash rflows.
b) rA rcash rdividend rpaid rto rstockholders ris rreported ron rthe rstatement rof
rchanges rin rstockholders' requity.
c) rA rcash rdividend rpaid rto rstockholders ris rreported ron rthe rincome rstatement.
d) rThe rbalance rsheet rreports rthe rending rbalances rof rpermanent raccounts ras rof rthe
rlast rday rof rthe raccounting rperiod.
e) rChanges rin rretained rearnings rduring rthe raccounting rperiod rare rreported ron
rthe rincome rstatement.
, 7) Indicate rwhether reach rof rthe rfollowing rstatements rabout rstockholders’ requity ris
rtrue ror rfalse.
a) rExpenses rdecrease rretained rearnings.
b) rStockholders' requity rand rliabilities rcan rbe rviewed reither ras rsources rof
rassets ror rclaims rto rassets rof rthe rbusiness.
c) rRetained rearnings ris rincreased rby rloans rreceived rfrom ra rbank.
d) rDividends rpaid rto rstockholders rdecrease rcommon rstock.
e) rGenerally, rassets rare rreported rat rthe ractual rprice rpaid rfor rthem rwhen
rpurchased rregardless rof rsubsequent rchanges rin rmarket rvalue.
8) Jessup rCompany rwas rfounded rin rYear r1. rIt racquired r$45,000 rcash rby rissuing rstock
rto rinvestors rand ran radditional r$15,000 rcash rby rborrowing rfrom rcreditors. rDuring rYear r1 rit
rreceived
$25,000 rcash rrevenues rand rpaid r$32,000 rin rcash rexpenses. rThe rcompany rthen rwent rout
rof rbusiness.
Required:
a) Explain rthe rterm, r"business rliquidation."
b) What ramount rof rcash rshould rJessup rCompany rhave rhad ron rhand rimmediately rbefore
rgoing rout rof rbusiness?
c) What ramount rof rcash rwill rJessup's rcreditors rreceive?
d) What ramount rof rcash rwill rJessup's rstockholders rreceive?
9) Bates rCompany rentered rinto rthe rfollowing rtransactions rduring rits rfirst ryear rin
rbusiness. rAssume rthat rall rtransactions rinvolve rthe rreceipt ror rpayment rof rcash.
1) Issued rcommon rstock rto rinvestors rfor r$25,000 rcash.
2) Borrowed r$18,000 rfrom rthe rlocal rbank.
3) Provided rservices rto rcustomers rfor r$28,000.
4) Paid rexpenses ramounting rto r$21,400.
5) Purchased ra rplot rof rland rcosting r$22,000.
6) Paid ra rdividend rof r$15,000 rto rits rstockholders.
7) Repaid r$12,000 rof rthe rloan rlisted rin ritem r2.
Required:
(a) Fill rin rthe rthree rcolumn rheadings rof rthe raccounting requation rin rthe rfirst rrow rof rthe
rtable rshown rbelow.
(b) Show rthe reffects rof rthe rabove rtransactions ron rthe raccounting requation.
