Question 1

Which of the following journal entries is correct when a business entity purchases land costing $30,000 by signing a one-year note payable?

Accepted Answer

A)   Option A
B)   Option B
C)  Option C
D)  Option DE) B) and C)
F) A) and D)

Question 2

Which of the following account balances would not be included in the calculation of the current ratio?

Accepted Answer

A)   Accounts receivable.
B)   Short-term notes payable.
C)  Equipment.
D)  Supplies.E) A) and B)
F) C) and D)

Question 3

Which of the following assumptions implies that a business can continue to remain in operation into the foreseeable future?

Accepted Answer

A)   Historical cost principle.
B)   Stable monetary unit assumption.
C)  Continuity assumption.
D)  Separate-entity assumption.E) B) and C)
F) All of the above

Question 4

When a company buys equipment for $150,000 and pays for one third in cash and the other two thirds is financed by a note payable, which of the following are the effects on the accounting equation?

Accepted Answer

A)   Total assets increase $150,000.
B)   Total liabilities increase $150,000.
C)  Total liabilities decrease $50,000.
D)  Total assets increase $100,000.E) B) and D)
F) None of the above

Question 5

Which of the following journal entries is correct when a business entity issues common stock, above par value, to stockholders in exchange for cash? A. Cash
 \quad Common stock
 \quad Retained Earnings
B. Cash
 \quad Common stock
 \quad Additional paid-in capital
C. Cash
 \quad Investments
D. Common stock
 \quad Cash

Accepted Answer

A)   Option A
B)   Option B
C)  Option C
D)  Option D E) A) and B)
F) All of the above

Question 6

The normal balance for an asset account is a debit and the normal balance for a liability account is a credit.

Accepted Answer

A) True 
 B)False

Question 7

Current liabilities are defined as obligations to be paid within six months.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following would be classified as financing cash flows on a cash flow statement? 1. Paying cash dividends.
2)  Lending cash to others.
3)  Issuing stock for cash.
4)  Purchasing long-term assets for cash.
5)  Repurchasing stock with cash.

Accepted Answer

A)   1, 2, 5.
B)   2, 3, 4.
C)  1, 3, 5.
D)  2, 4, 5.E) A) and B)
F) All of the above

Question 9

Which of the following would not be included under the account category of expenses within the chart of accounts?

Accepted Answer

A)   Cost of goods sold.
B)   Interest expense.
C)  Prepaid insurance expense.
D)  Income tax expense.E) A) and D)
F) B) and D)

Question 10

Which of the following best describes assets?

Accepted Answer

A)   Resources with possible future economic benefits owed by an entity as a result of past transactions.
B)   Resources with probable future economic benefits owned by an entity as a result of past transactions.
C)  Resources with probable future economic benefits owned by an entity as a result of future transactions.
D)  Resources with possible future economic benefits owed by an entity as a result of future transactions.E) A) and D)
F) A) and C)

Question 11

Which of the following would result when a company pays a previously declared cash dividend?

Accepted Answer

A)   Current liabilities are reduced and a financing cash flow is created.
B)   Stockholders' equity is reduced and a financing cash flow is created.
C)  Current assets are reduced and an investing cash flow is created.
D)  Stockholders' equity is reduced and an investing cash flow is createD.Declaring a dividend creates a dividend payable. Paying the dividend reduces this current liability account. Paying dividends are classified as financing cash flows.E) A) and B)
F) A) and C)

Question 12

A company's January 1, 2014 balance sheet reported total assets of $150,000 and total liabilities of $60,000. During January 2014, the company completed the following transactions: (A)  paid a note payable using $10,000 cash (no interest was paid) ; (B)  collected a $9,000 accounts receivable; (C)  paid a $5,000 accounts payable; and (D)  purchased a truck for $5,000 cash and by signing a $20,000 note payable from a bank. The company's January 31, 2014 balance sheet would report which of the following?

Accepted Answer

A)   Option A
B)   Option B
C)  Option C
D)  Option DE) C) and D)
F) B) and C)

Question 13

Which of the following would result when a company purchases a factory building using cash?

Accepted Answer

A)   A noncurrent asset and an investing cash flow are created.
B)   A noncurrent asset and a financing cash flow are created.
C)  A current asset and an investing cash flow are created.
D)  A current asset and a financing cash flow are createD.Buildings are classified as noncurrent assets. Investing cash flows are created with the purchase or sale of noncurrent assets.E) A) and B)
F) A) and C)

Question 14

Which of the following describes the impact on the balance sheet of purchasing supplies for cash?

Accepted Answer

A)   Current assets will decrease.
B)   Current assets will increase.
C)  Stockholders' equity will decrease.
D)  Total assets remain the same.E) A) and D)
F) A) and C)

Question 15

Which of the following best describe financing activities?

Accepted Answer

A)   They primarily deal with securing money by bank loans or selling stock to investors.
B)   They primarily are connected to the income-producing activities of the company as reported on the income statement.
C)  They primarily deal with buying buildings to be used over many years by the business.
D)  They primarily deal with selling facilities once used by the business.E) A) and B)
F) C) and D)

Question 16

A transaction may be an exchange of assets or services by one business for assets, services, or promises to pay from a different business.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following describes the impact on the balance sheet when a company uses cash to purchase the stock of another company?

Accepted Answer

A)   Total assets increase.
B)   Stockholders' equity increases.
C)  Stockholders' equity decreases.
D)  Total assets remain the same.E) C) and D)
F) All of the above

Question 18

Chad Jones is the sole owner and manager of Jones Glass Repair Shop. Jones purchased a truck, to be used in the business, for its market value of $35,000. Which of the following fundamentals requires Jones to record the truck at the price paid to buy it?

Accepted Answer

A)   Separate-entity assumption.
B)   Revenue principle.
C)  Stable monetary unit assumption.
D)  Historical cost principle.E) B) and D)
F) A) and D)

Question 19

Which of the following describes the impact on the balance sheet when cash is received from the collection of an account receivable?

Accepted Answer

A)   Current assets will not change.
B)   Current assets will increase.
C)  Stockholders' equity will increase.
D)  Total assets will increase.E) A) and D)
F) A) and C)

Question 20

Which of the following transactions will not change a company's total stockholders' equity?

Accepted Answer

A)   Reporting of net income.
B)   Issuing stock to stockholders in exchange for cash.
C)  The declaration of a cash dividend.
D)  The purchase of a factory building.E) B) and D)
F) A) and B)

Exam 2: Investing and Financing Decisions and the Accounting System

Which of the following best describes assets?

Correct Answer
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Current liabilities are defined as obligations to be paid within six months.

Correct Answer
verified

Chad Jones is the sole owner and manager of Jones Glass Repair Shop. Jones purchased a truck, to be used in the business, for its market value of $35,000. Which of the following fundamentals requires Jones to record the truck at the price paid to buy it?

Correct Answer
verified

A transaction may be an exchange of assets or services by one business for assets, services, or promises to pay from a different business.

Correct Answer
verified

Which of the following describes the impact on the balance sheet when cash is received from the collection of an account receivable?

Correct Answer
verified

Which of the following assumptions implies that a business can continue to remain in operation into the foreseeable future?

Correct Answer
verified

Which of the following transactions will not change a company's total stockholders' equity?

Correct Answer
verified

Which of the following describes the impact on the balance sheet of purchasing supplies for cash?

Correct Answer
verified

Which of the following would result when a company pays a previously declared cash dividend?

Correct Answer
verified

When a company buys equipment for $150,000 and pays for one third in cash and the other two thirds is financed by a note payable, which of the following are the effects on the accounting equation?

Correct Answer
verified

Which of the following would be classified as financing cash flows on a cash flow statement? 1. Paying cash dividends. 2) Lending cash to others. 3) Issuing stock for cash. 4) Purchasing long-term assets for cash. 5) Repurchasing stock with cash.

Correct Answer
verified

Which of the following would not be included under the account category of expenses within the chart of accounts?

Correct Answer
verified

Which of the following best describe financing activities?

Correct Answer
verified

Which of the following would result when a company purchases a factory building using cash?

Correct Answer
verified

Which of the following account balances would not be included in the calculation of the current ratio?

Correct Answer
verified

Correct Answer
verified

The normal balance for an asset account is a debit and the normal balance for a liability account is a credit.

Correct Answer
verified

Which of the following journal entries is correct when a business entity purchases land costing $30,000 by signing a one-year note payable?

Correct Answer
verified

Correct Answer
verified

Which of the following describes the impact on the balance sheet when a company uses cash to purchase the stock of another company?

Correct Answer
verified

Exam 2: Investing and Financing Decisions and the Accounting System

Which of the following best describes assets?

Correct AnswerverifiedShow Answer

Current liabilities are defined as obligations to be paid within six months.

Correct AnswerverifiedShow Answer

Chad Jones is the sole owner and manager of Jones Glass Repair Shop. Jones purchased a truck, to be used in the business, for its market value of $35,000. Which of the following fundamentals requires Jones to record the truck at the price paid to buy it?

Correct AnswerverifiedShow Answer

A transaction may be an exchange of assets or services by one business for assets, services, or promises to pay from a different business.

Correct AnswerverifiedShow Answer

Which of the following describes the impact on the balance sheet when cash is received from the collection of an account receivable?

Correct AnswerverifiedShow Answer

Which of the following assumptions implies that a business can continue to remain in operation into the foreseeable future?

Correct AnswerverifiedShow Answer

Which of the following transactions will not change a company's total stockholders' equity?

Correct AnswerverifiedShow Answer

Which of the following describes the impact on the balance sheet of purchasing supplies for cash?

Correct AnswerverifiedShow Answer

Which of the following would result when a company pays a previously declared cash dividend?

Correct AnswerverifiedShow Answer

When a company buys equipment for $150,000 and pays for one third in cash and the other two thirds is financed by a note payable, which of the following are the effects on the accounting equation?

Correct AnswerverifiedShow Answer

Which of the following would be classified as financing cash flows on a cash flow statement? 1. Paying cash dividends. 2) Lending cash to others. 3) Issuing stock for cash. 4) Purchasing long-term assets for cash. 5) Repurchasing stock with cash.

Correct AnswerverifiedShow Answer

Which of the following would not be included under the account category of expenses within the chart of accounts?

Correct AnswerverifiedShow Answer

Which of the following best describe financing activities?

Correct AnswerverifiedShow Answer

Which of the following would result when a company purchases a factory building using cash?

Correct AnswerverifiedShow Answer

Which of the following account balances would not be included in the calculation of the current ratio?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The normal balance for an asset account is a debit and the normal balance for a liability account is a credit.

Correct AnswerverifiedShow Answer

Which of the following journal entries is correct when a business entity purchases land costing $30,000 by signing a one-year note payable?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following describes the impact on the balance sheet when a company uses cash to purchase the stock of another company?

Correct AnswerverifiedShow Answer

Correct Answer
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