Question 1

Liability accounts are reported on the statement of financial position..

Accepted Answer

A) True 
 B)False

Question 2

Transactions have a dual economic effect on the fundamental accounting model.

Accepted Answer

A) True 
 B)False

Question 3

Winsome Inc.reports total assets and total liabilities of $225,000 and $100,000,respectively,at the conclusion of its first year of business.The company earned $75,000 during the first year and distributed $30,000 in dividends.What was the corporation's share capital?

Accepted Answer

A)  $125,000
B)  $95,000
C)  $80,000
D)  $50,000E) A) and D)
F) A) and C)

Question 4

The debt-to-equity ratio indicates how much debt has been used to finance the company's acquisition of assets relative to equity financing that is supplied by creditors.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is the principle that requires us to record assets at the historical cash-equivalent cost?

Accepted Answer

A)  Cost-benefit.
B)  Cost principle.
C)  Full disclosure.
D)  Revenue recognition.E) A) and C)
F) C) and D)

Question 6

The word debit means to increase an account by an entry on its left side.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following liability accounts is usually not satisfied by payment of cash?

Accepted Answer

A)  Trade payables.
B)  Unearned revenues.
C)  Taxes payable.
D)  All of the mentioned are satisfied by paying cash.E) None of the above
F) All of the above

Question 8

A primary objective of accounting is to provide the fair market value of assets on the statement of financial position..

Accepted Answer

A) True 
 B)False

Question 9

Which of the following defines assets?

Accepted Answer

A)  Probable future economic benefits owned by an entity as a result of past transactions.
B)  Possible future economic benefits owed by an entity as a result of past transactions.
C)  Probable future economic benefits owned by an entity as a result of future transactions.
D)  Possible future economic benefits owed by an entity as a result of future transactions.E) All of the above
F) B) and D)

Question 10

The separate-entity assumption assumes a stable monetary unit (not affected by inflation or deflation).

Accepted Answer

A) True 
 B)False

Question 11

Which of the following direct effects on the fundamental accounting model is not possible as a result of transaction analysis?

Accepted Answer

A)  Increase a liability and increase an asset.
B)  Decrease shareholders' equity and increase an asset.
C)  Increase an asset and decrease an asset.
D)  Decrease shareholders' equity and decrease an asset.E) None of the above
F) C) and D)

Question 12

The unit-of-measure assumption states that financial information is reported in the national monetary unit.

Accepted Answer

A) True 
 B)False

Question 13

An accountant has debited an asset account for $500 and credited a revenue account for $1,000.What can be done to complete the recording of the transaction?

Accepted Answer

A)  Nothing further must be done.
B)  Debit a shareholders' equity account for $500.
C)  Debit another asset account for $500.
D)  Credit a different asset account for $500.E) B) and D)
F) B) and C)

Question 14

Liabilities are generally classified on a statement of financial position as

Accepted Answer

A)  small liabilities and large liabilities.
B)  present liabilities and future liabilities.
C)  tangible liabilities and intangible liabilities.
D)  current liabilities and non-current liabilities.E) A) and B)
F) A) and C)

Question 15

The purchase of a delivery truck for cash increases assets and shareholders' equity.

Accepted Answer

A) True 
 B)False

Question 16

Everest Acres Development Corporation recently sold a parcel of land for $50,000 more than its cost.This transaction:

Accepted Answer

A)  Increased assets and liabilities.
B)  Increased shareholders' equity and assets.
C)  Reduced assets and shareholder's equity.
D)  Increased assets and left liabilities and shareholder's equity unchanged.E) A) and D)
F) A) and B)

Question 17

Three of the four basic assumptions that underlie accounting measurement and reporting relate to the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 18

Abe Cox is the sole owner and manager of Cox Auto Repair Shop.In 20A,Cox purchased a new automobile for personal use and continued to use an old truck in the business.Which of the following fundamentals prevents Cox from recording the cost of the new automobile as an asset to the business?

Accepted Answer

A)  Separate-entity assumption.
B)  Revenue principle.
C)  Full disclosure.
D)  Cost principle.E) A) and C)
F) A) and B)

Question 19

Which of the following will not result in recording a transaction?

Accepted Answer

A)  Signing a contract to have an outside cleaning service clean offices nightly.
B)  Paying our employees their wages.
C)  Selling shares to investors.
D)  Buying equipment and agreeing to pay a note payable and interest at the end of a year.E) A) and B)
F) A) and C)

Question 20

Payment of a liability would do which of the following?

Accepted Answer

A)  Decrease shareholders' equity.
B)  Decrease assets.
C)  Not affect assets.
D)  Increase shareholders' equity.E) None of the above
F) A) and C)

Exam 2: Investing and Financing Decisions and the Accounting System

Liability accounts are reported on the statement of financial position..

Correct AnswerverifiedShow Answer

The debt-to-equity ratio indicates how much debt has been used to finance the company's acquisition of assets relative to equity financing that is supplied by creditors.

Correct AnswerverifiedShow Answer

Which of the following liability accounts is usually not satisfied by payment of cash?

Correct AnswerverifiedShow Answer

Three of the four basic assumptions that underlie accounting measurement and reporting relate to the statement of financial position.

Correct AnswerverifiedShow Answer

Transactions have a dual economic effect on the fundamental accounting model.

Correct AnswerverifiedShow Answer

The word debit means to increase an account by an entry on its left side.

Correct AnswerverifiedShow Answer

Which of the following defines assets?

Correct AnswerverifiedShow Answer

The separate-entity assumption assumes a stable monetary unit (not affected by inflation or deflation).

Correct AnswerverifiedShow Answer

The unit-of-measure assumption states that financial information is reported in the national monetary unit.

Correct AnswerverifiedShow Answer

Which of the following will not result in recording a transaction?

Correct AnswerverifiedShow Answer

Which of the following direct effects on the fundamental accounting model is not possible as a result of transaction analysis?

Correct AnswerverifiedShow Answer

Everest Acres Development Corporation recently sold a parcel of land for $50,000 more than its cost.This transaction:

Correct AnswerverifiedShow Answer

A primary objective of accounting is to provide the fair market value of assets on the statement of financial position..

Correct AnswerverifiedShow Answer

An accountant has debited an asset account for $500 and credited a revenue account for $1,000.What can be done to complete the recording of the transaction?

Correct AnswerverifiedShow Answer

The purchase of a delivery truck for cash increases assets and shareholders' equity.

Correct AnswerverifiedShow Answer

Payment of a liability would do which of the following?

Correct AnswerverifiedShow Answer

Which of the following is the principle that requires us to record assets at the historical cash-equivalent cost?

Correct AnswerverifiedShow Answer

Liabilities are generally classified on a statement of financial position as

Correct AnswerverifiedShow Answer

Abe Cox is the sole owner and manager of Cox Auto Repair Shop.In 20A,Cox purchased a new automobile for personal use and continued to use an old truck in the business.Which of the following fundamentals prevents Cox from recording the cost of the new automobile as an asset to the business?

Correct AnswerverifiedShow Answer

Winsome Inc.reports total assets and total liabilities of $225,000 and $100,000,respectively,at the conclusion of its first year of business.The company earned $75,000 during the first year and distributed $30,000 in dividends.What was the corporation's share capital?

Correct AnswerverifiedShow Answer

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