TEST BANK
Fundamental Financial Accounting Concepts
Thomas Edmonds
10th Edition
PR
O
FD
O
C
,Table of Contents
1. An Introduction to Accounting
2. Accounting for Accruals and Deferrals
3. The Double-Entry Accounting System
4. Accounting for Merchandising Businesses
5. Accounting for Inventories
6. Internal Control and Accounting for Cash
7. Accounting for Receivables
8. Accounting for Long-Term Operational Assets
9. Accounting for Current Liabilities and Payroll
10.Accounting for Long-Term Debt
PR
11.Proprietorships, Partnerships, and Corporations
12.Statement of Cash Flows
13.Financial Statement Analysis
Appendix A: Accessing the EDGAR Database through the
Internet
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Appendix B: Portion of the Form 10-K for Target
Corporation
FD
Appendix C: Summary of Financial Ratios
Appendix D: Annual Report and Financial Statement
Analysis Projects
Appendix E: Accounting for Investment Securities
Appendix F: Time Value of Money
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C
,Fundamental Financial Accounting Concepts, 10e (Edmonds)
Chapter 1 An Introduction to Accounting
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 amounts.
(Note that "No Effect" means that the event does not effect that element of the financial
statements or that the event causes an increase in that element is offset by a decrease in that same
element.)
Increase = I Decrease = D No Effect = NA
1) Walker Co. issued common stock for $150,000 cash.
Stmt of Cash
Assets Liabilities Equity Revenues Expenses Net Income Flows
PR
Answer: (I) (NA) (I) (NA) (NA) (NA) (I)
Issuing common stock is an asset source transaction that increases the business's assets (cash)
and its stockholders' equity (common stock). It does not affect the income statement, but is
reported as a cash flow from financing activities in the statement of cash flows.
O
Difficulty: 2 Medium
Topic: The Horizontal Financial Statements Model
Learning Objective: 01-10 Record business events using a horizontal financial statements
FD
model.
Bloom's: Analyze
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
2) Nguyen Co. borrowed $50,000 cash from Metropolitan Bank.
O
Stmt of Cash
Assets Liabilities Equity Revenues Expenses Net Income Flows
C
Answer: (I) (I) (NA) (NA) (NA) (NA) (I)
Borrowing cash is an asset source transaction that increases a business's assets (cash) and its
liabilities (notes payable). It does not affect the income statement, but is reported as a cash flow
from financing activities in the statement of cash flows.
Difficulty: 2 Medium
Topic: The Horizontal Financial Statements Model
Learning Objective: 01-10 Record business events using a horizontal financial statements
model.
Bloom's: Analyze
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
, 3) Bell Co. provided consulting services for $20,000 cash.
Stmt of Cash
Assets Liabilities Equity Revenues Expenses Net Income Flows
Answer: (I) (NA) (I) (I) (NA) (I) (I)
This is an asset source transaction that increases the business's assets (cash). When a business
provides services, it earns revenue. Revenue increases net income, which will increase equity
(retained earnings) at the end of the accounting period. This event is reported as a cash flow from
operating activities in the statement of cash flows.
Difficulty: 2 Medium
Topic: The Horizontal Financial Statements Model
Learning Objective: 01-10 Record business events using a horizontal financial statements
PR
model.
Bloom's: Analyze
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
4) Pierce Co. paid $40,000 cash to purchase land.
O
Stmt of Cash
Assets Liabilities Equity Revenues Expenses Net Income Flows
FD
Answer: (NA) (NA) (NA) (NA) (NA) (NA) (D)
Purchasing land for cash is an asset exchange transaction that increases one asset (land) and
decreases another asset (cash). It does not affect the income statement, and is reported as an
O
investing activity in the statement of cash flows.
Difficulty: 2 Medium
Topic: The Horizontal Financial Statements Model
C
Learning Objective: 01-10 Record business events using a horizontal financial statements
model.
Bloom's: Analyze
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
Fundamental Financial Accounting Concepts
Thomas Edmonds
10th Edition
PR
O
FD
O
C
,Table of Contents
1. An Introduction to Accounting
2. Accounting for Accruals and Deferrals
3. The Double-Entry Accounting System
4. Accounting for Merchandising Businesses
5. Accounting for Inventories
6. Internal Control and Accounting for Cash
7. Accounting for Receivables
8. Accounting for Long-Term Operational Assets
9. Accounting for Current Liabilities and Payroll
10.Accounting for Long-Term Debt
PR
11.Proprietorships, Partnerships, and Corporations
12.Statement of Cash Flows
13.Financial Statement Analysis
Appendix A: Accessing the EDGAR Database through the
Internet
O
Appendix B: Portion of the Form 10-K for Target
Corporation
FD
Appendix C: Summary of Financial Ratios
Appendix D: Annual Report and Financial Statement
Analysis Projects
Appendix E: Accounting for Investment Securities
Appendix F: Time Value of Money
O
C
,Fundamental Financial Accounting Concepts, 10e (Edmonds)
Chapter 1 An Introduction to Accounting
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 amounts.
(Note that "No Effect" means that the event does not effect that element of the financial
statements or that the event causes an increase in that element is offset by a decrease in that same
element.)
Increase = I Decrease = D No Effect = NA
1) Walker Co. issued common stock for $150,000 cash.
Stmt of Cash
Assets Liabilities Equity Revenues Expenses Net Income Flows
PR
Answer: (I) (NA) (I) (NA) (NA) (NA) (I)
Issuing common stock is an asset source transaction that increases the business's assets (cash)
and its stockholders' equity (common stock). It does not affect the income statement, but is
reported as a cash flow from financing activities in the statement of cash flows.
O
Difficulty: 2 Medium
Topic: The Horizontal Financial Statements Model
Learning Objective: 01-10 Record business events using a horizontal financial statements
FD
model.
Bloom's: Analyze
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
2) Nguyen Co. borrowed $50,000 cash from Metropolitan Bank.
O
Stmt of Cash
Assets Liabilities Equity Revenues Expenses Net Income Flows
C
Answer: (I) (I) (NA) (NA) (NA) (NA) (I)
Borrowing cash is an asset source transaction that increases a business's assets (cash) and its
liabilities (notes payable). It does not affect the income statement, but is reported as a cash flow
from financing activities in the statement of cash flows.
Difficulty: 2 Medium
Topic: The Horizontal Financial Statements Model
Learning Objective: 01-10 Record business events using a horizontal financial statements
model.
Bloom's: Analyze
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
, 3) Bell Co. provided consulting services for $20,000 cash.
Stmt of Cash
Assets Liabilities Equity Revenues Expenses Net Income Flows
Answer: (I) (NA) (I) (I) (NA) (I) (I)
This is an asset source transaction that increases the business's assets (cash). When a business
provides services, it earns revenue. Revenue increases net income, which will increase equity
(retained earnings) at the end of the accounting period. This event is reported as a cash flow from
operating activities in the statement of cash flows.
Difficulty: 2 Medium
Topic: The Horizontal Financial Statements Model
Learning Objective: 01-10 Record business events using a horizontal financial statements
PR
model.
Bloom's: Analyze
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
4) Pierce Co. paid $40,000 cash to purchase land.
O
Stmt of Cash
Assets Liabilities Equity Revenues Expenses Net Income Flows
FD
Answer: (NA) (NA) (NA) (NA) (NA) (NA) (D)
Purchasing land for cash is an asset exchange transaction that increases one asset (land) and
decreases another asset (cash). It does not affect the income statement, and is reported as an
O
investing activity in the statement of cash flows.
Difficulty: 2 Medium
Topic: The Horizontal Financial Statements Model
C
Learning Objective: 01-10 Record business events using a horizontal financial statements
model.
Bloom's: Analyze
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
