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For accounting information to be useful, it must be which of the following?


A) It must be consistent and comparable.
B) It must be a faithful representation and relevant.
C) It must be comparable and reliable.
D) It must be relevant and consistent.

E) None of the above
F) B) and C)

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Which of the following journal entries is correct when a business entity pays cash for advertising to be used next year?


A) Which of the following journal entries is correct when a business entity pays cash for advertising to be used next year? A) B) C) D)
B) Which of the following journal entries is correct when a business entity pays cash for advertising to be used next year? A) B) C) D)
C) Which of the following journal entries is correct when a business entity pays cash for advertising to be used next year? A) B) C) D)
D) Which of the following journal entries is correct when a business entity pays cash for advertising to be used next year? A) B) C) D)

E) None of the above
F) A) and B)

Correct Answer

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


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 D)
F) A) and C)

Correct Answer

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Assets, liabilities, and stockholders' equity are all found within which of the following financial statements?


A) Balance sheet.
B) Income statement.
C) The investing activities section of the Statement of Cash Flows.
D) Statement of stockholders' equity.

E) B) and C)
F) A) and D)

Correct Answer

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Which of the following correctly describes the recording of a dividend declaration by a company's board of directors?


A) A debit to retained earnings and a credit to cash.
B) A debit to additional paid-in capital and a credit to dividends payable.
C) A debit to cash and a credit to retained earnings.
D) A debit to retained earnings and a credit to dividends payable.

E) B) and C)
F) A) and D)

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An asset account normally has a debit balance and is increased by debiting the account.

A) True
B) False

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Which of the following does not correctly describe business transactions or events?


A) They include exchanges of assets or services by one business for assets, services, or promises to pay from another business.
B) They include the using up of insurance paid for in advance.
C) They have an economic impact on a business entity.
D) They do not include measurable internal events such as the use of assets in operations.

E) All of the above
F) C) and D)

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The Smith Corporation has provided the following information: Cash dividend payments were $25,000. Long-term investments were sold for $79,000 cash. A building costing $198,000 was purchased using $19,800 cash, and the balance was financed with a mortgage note payable. Stock was issued to stockholders in exchange for $110,000 cash. A $44,000 loan was made to a local inventory supplier; the loan will be repaid in twelve months. Equipment used in operations was sold for $37,000. Repaid a long-term note payable for $92,000 cash. Cash received from short-term bank loans totaled $71,000. Land costing $57,000 was purchased in exchange for a long-term note payable. Requirement: Determine Smith's cash flows to be reported on the statement of cash flows for 1. investing activities, and 2. financing activities

Correct Answer

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1. Investing activities cash f...

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Which of the following direct effects on the accounting equation is not possible as a result of a single business transaction which impacts only two accounts?


A) An increase in a liability and a decrease in an asset.
B) An increase in stockholders' equity and an increase in an asset.
C) An increase in an asset and a decrease in an asset.
D) A decrease in stockholders' equity and a decrease in an asset.

E) A) and D)
F) C) and D)

Correct Answer

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The T-account is very useful for accumulating the effects of transactions on account balances and for determining individual account balances.

A) True
B) False

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Which of the following is a result of equipment purchased with cash?


A) Total assets decrease.
B) Current assets do not change.
C) Current assets increase.
D) Stockholders' equity does not change.

E) B) and D)
F) A) and D)

Correct Answer

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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) 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) B) C) D)
B) 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) B) C) D)
C) 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) B) C) D)
D) 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) B) C) D)

E) C) and D)
F) A) and B)

Correct Answer

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Centex, Inc. issued 50,000 shares of its $1 par value common stock for $20 per share. The journal entry to record the stock issue would include which of the following?


A) A credit to cash for $1,000,000.
B) A credit to additional paid-in capital for $1,000,000.
C) A credit to additional paid-in capital for $50,000.
D) A credit to common stock for $50,000.

E) A) and B)
F) B) and C)

Correct Answer

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Stockholders' equity reflects the financing provided by owners.

A) True
B) False

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Common stock and additional-paid in capital represent the financing sources from shareholders.

A) True
B) False

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Which of the following statements is false?


A) The common stock account has a credit balance.
B) The additional paid-in capital account has a credit balance.
C) Common stock may be issued for more than par value.
D) The par value of common stock represents the stock's market value.

E) None of the above
F) B) and D)

Correct Answer

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Assets are reported on the balance sheet in the order of liquidity.

A) True
B) False

Correct Answer

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Which of the following statements about stockholders' equity is false?


A) Stockholders' equity is the shareholders' residual interest in the company resulting from the difference in assets and liabilities.
B) Stockholders' equity accounts are increased with credits.
C) Stockholders' equity results only from contributions of the owners.
D) The purchase of land for cash has no effect on stockholders' equity.

E) None of the above
F) All of the above

Correct Answer

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When a company borrows money from a bank, the statement of cash flows will report a cash increase from an investing activity.

A) True
B) False

Correct Answer

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Which of the following liability accounts does not usually require a future cash payment?


A) Accounts payable.
B) Unearned revenues.
C) Taxes payable.
D) Notes payable.

E) A) and D)
F) A) and C)

Correct Answer

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