财务会计Investing and Financing Decisions and the Balance Sheet.doc

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1、Chapter 02Investing and Financing Decisions and the Balance Sheet True / False Questions1.A balance sheet format reports that assets equal liabilities plus stockholders equity.TrueFalse2.Liability accounts are reported on the income statement as they represent goods or services consumed or used.True

2、False3.A primary objective of accounting is to disclose the fair market value of assets on the balance sheet so investors and creditors know their current value.TrueFalse4.Under the separate entity assumption, it is assumed that a business will continue to operate into the foreseeable future.TrueFal

3、se5.The historical cost principle measures assets and liabilities at the historical cash-equivalent amounts.TrueFalse6.Liabilities are listed on the balance sheet in the order of their maturity, meaning how soon they are due to be paid.TrueFalse7.An account is a standardized format used to accumulat

4、e the effects of transactions on each financial statement item.TrueFalse8.The payment of a liability in cash will decrease stockholders equity.TrueFalse9.The purchase of equipment for cash has no effect on total assets.TrueFalse10.The duality of effects means that every transaction must affect both

5、sides of the accounting equation.TrueFalse11.When a business borrows money from a bank, both the left and right sides of the accounting equation increase.TrueFalse12.It is not possible for the left side of the accounting equation to both increase and decrease as a result of the same transaction.True

6、False13.A T-account shows total debits of $26,000 and total credits of $20,000; therefore, it has a $6,000 debit balance.TrueFalse14.Debits always increase and credits always decrease an account.TrueFalse15.The chart of accounts of a company is the complete listing of all accounts and accounts numbe

7、rs.TrueFalse16.If you want to know the balance of the supplies account, that information would be found in the general ledger.TrueFalse17.The normal balance for an asset account is a debit and the normal balance for a liability account is a credit.TrueFalse18.The financial leverage ratio is computed

8、 by dividing average total assets by average stockholders equity.TrueFalse19.When a company borrows money from a bank, it leads to a cash inflow from an investing activity.TrueFalse20.When a loan is repaid to the bank it leads to an inflow of cash from a financing activity.TrueFalseMultiple Choice Q

9、uestions21.Which of the following statements about stockholders equity is not correct?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 res

10、ults only from contributions of the owners.D.The purchase of land for cash has no effect on stockholders equity.22.All liabilities appear on theA.Balance sheet.B.Income statement.C.Statement of stockholders equity.D.Statement of cash flows.23.Morgan Company owes Regan Company $1,000, Morgan would re

11、flect this on itsA.statement of cash flows.B.income statement.C.balance sheet.D.statement of stockholders equity.24.The assumption that a business can continue to remain in operation into the future is theA.historical cost principle.B.unit-of-measure assumption.C.continuity assumption.D.separate-ent

12、ity assumption.25.Assets are defined asA.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

13、 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.26.The assumption that the assets and liabilities of the business are accounted for on the books of the company but not included in the records of

14、the owner is theA.unit-of-measure assumption.B.continuity assumption.C.historical cost principle.D.separate entity assumption.27.Liabilities are defined asA.possible debts or obligations of an entity as a result of future transactions which will be paid with assets or services.B.possible debts or ob

15、ligations of an entity as a result of past transactions which will be paid with assets or services.C.probable debts or obligations of an entity as a result of future transactions which will be paid with assets or services.D.probable debts or obligations of an entity as a result of past transactions

16、which will be paid with assets or services.28.Stockholders equity isA.probable debts or obligations of an entity as a result of past transactions which will be paid with assets or services.B.assets minus liabilities.C.probable future economic benefits owned by an entity as a result of past transacti

17、ons.D.the financing provided by the creditors of a business.29.Chad Jones is the sole owner and manager of Jones Glass Repair Shop. In 2009, Jones purchases a truck for $30,000 to be used in the business. Which of the following fundamentals requires Jones to record the truck at the price paid to buy

18、 it?A.Separate-entity assumption.B.Revenue principle.C.Full disclosure.D.Historical cost principle.30.On a balance sheet, assets are listed in the order ofA.dollar amount (largest first).B.date of acquisition (earliest first).C.ease of conversion to cash.D.importance to the operation of the business

19、.31.In what order would the assets of Mertz Company be listed on their balance sheet?A.Cash, Accounts Receivable, Inventory, Plant and EquipmentB.Cash, Inventory, Accounts Receivable, Plant and EquipmentC.Cash, Accounts Receivable, Marketable Securities, InventoryD.None of these are in correct order

20、32.We would report changes in stockholders equity caused by operating activitiesA.in an asset account.B.in a contributed capital account.C.in a liability account.D.in the retained earnings account.33.Which of the following events will cause retained earnings to increase?A.Dividends declared by the B

21、oard of Directors.B.Net income reported for the period.C.Net loss reported for the period.D.Issuance of stock in the business34.Which of the following transactions would cause retained earnings to increase?A.Collection of a customers account.B.Loan from a bank.C.Sale of service to a customer.D.Wage

22、costs owed to employees.35.The primary objective of financial accounting is toA.provide information about a business to internal parties.B.provide information about a business future business strategies.C.provide useful economic information about a business to help external parties make sound financ

23、ial decisions.D.provide predictions of future stock price.36.Which of the following would not be considered a current liability?A.Accounts PayableB.Prepaid ExpensesC.Taxes PayableD.Utilities Payable37.Which of the following would not be considered a current asset?A.InventoriesB.Prepaid ExpensesC.Lan

24、dD.Accounts Receivable38.Accounts Payable refers toA.an amount owed to a business.B.an amount a business owes to a third party.C.the bottom line on the income statement.D.the total cash paid by a business during the year.39.Which of the following is not a liability?A.Accounts payable.B.Retained earn

25、ings.C.Notes payable.D.Unearned Revenue.40.Which of the following liability accounts is usually not satisfied by payment of cash?A.Accounts payableB.Unearned revenuesC.Taxes payableD.All of these are satisfied by paying cash41.An example of an external exchange would beA.the purchase of inventory on

26、 credit from a supplier.B.cash received from a credit customer.C.cash paid for wages to employees.D.all answers show external exchanges.42.Michael Corporation received $200,000 cash invested by its owners. The effect on the accounting equation wasA.assets and liabilities each increased by $200,000.B

27、.assets and revenues each increased by $200,000.C.stockholders equity and revenues each increased by $200,000.D.stockholders equity and assets each increased by $200,000.43.WindNet Corporation purchased factory equipment for $38,000 cash. Which of the following statements regarding this purchase is

28、incorrect?A.The net income for Mika will be reduced by the $38,000 expense of the factory equipment.B.The total amount of assets on Mikas balance sheet will not change.C.The total liabilities will not change.D.The amount of the stockholders equity on Mikas balance sheet will not change.44.Which of t

29、he following direct effects on the accounting equation is not possible as a result of transaction analysis?A.Increase a liability and decrease an asset.B.Increase stockholders equity and increase an asset.C.Increase an asset and decrease an asset.D.Decrease stockholders equity and decrease an asset.

30、45.Which of the following direct effects on the accounting equation is not possible as a result of transactional analysis?A.An increase in an asset and a decrease in another asset.B.A decrease in a liability and an increase in an asset.C.A decrease in stockholders equity and a decrease in an asset.D

31、.An increase in an asset and an increase in stockholders equity.46.Assume a companys January 1, 2009, financial position was: Assets, $150,000 and Liabilities, $60,000. During January 2009, the company completed the following transactions: (A) paid on a note payable $10,000 (no interest was paid); (

32、B) collected an accounts receivable, $9,000; (C) paid an accounts payable, $5,000; and (D) purchased a truck, $5,000 cash, and a $20,000 note payable from a bank. The companys January 31, 2009 financial position is A.B.C.D.47.The purchase of equipment with a note payable wouldA.increase cash.B.decre

33、ase cash.C.increase a liability.D.decrease a liability.48.The purchase of supplies for cash wouldA.not change total assets.B.increase total assets.C.increase liabilities.D.decrease liabilities.49.Payment of a liability wouldA.decrease stockholders equity.B.decrease assets.C.not affect assets.D.incre

34、ase stockholders equity.50.The collection of an account receivable from a customer wouldA.increase liabilities.B.decrease liabilities.C.not affect liabilities.D.decrease stockholders equity.51.The Mariah Company has an $80,000 debit in its assets, a $36,000 credit in its liabilities, and a $12,000 c

35、redit in retained earnings. What is the balance in the contributed capital account?A.$44,000 credit.B.$32,000 credit.C.$48,000 creditD.$44,000 debit.52.The duality (or duality of effects) concept statesA.there is more than one way of looking at any situation.B.every transaction has good and bad rami

36、fications.C.there are two entities involved in every transaction.D.every transaction has at least two effects on the accounting equation.53.Which of the following will not result in recording a transaction?A.Signing a contract to have an outside cleaning service clean offices nightly.B.Paying employ

37、ees their wages.C.Selling stock to investors.D.Buying equipment and agreeing to pay a note payable and interest at the end of a year.54.Which of the following transactions will cause both the left and right side of the accounting equation to decrease?A.We collect cash from a customer who owed us mon

38、ey.B.We pay a supplier for inventory we previously bought on account.C.We borrow money from the bank.D.We purchase equipment for cash.55.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, the following are the effects on

39、the accounting equation:A.cash decreases by $50,000.B.equipment increases by $100,000.C.liabilities increase by $150,000.D.total assets increase by $200,000.56.The effect on total assets of the purchase of land for cash isA.an increase in total assets.B.a decrease in total assets.C.total assets rema

40、in unchanged.D.an increase in total assets and total liabilities.57.Which of the following is not one of the three steps in the transaction analysis process?A.Identify the accounts affected and classify them by type of account.B.Determine the direction of the effect on each account.C.Transfer the ef

41、fects of the transaction to the balance sheet.D.Verify that the accounting equation remains in balance.58.Sale of stock to investors for $300,000 cash wouldA.increase cash by a debit and increase contributed capital by a credit.B.increase cash by a credit and increase contributed capital by a debit.

42、C.increase retained earnings by a debit and increase cash by a credit.D.increase cash by a debit and increase retained earnings by a credit.59.Borrowing $100,000 of cash from First National Bank wouldA.increase cash by a credit and increase notes payable by a debit.B.increase notes payable by a debi

43、t and increase cash by a debit.C.increase notes payable by a credit and increase cash by a debit.D.decrease cash by a debit and decrease notes payable by a credit.60.Water Corporation was organized on October 1, 2009. Water Corporation issued shares of capital stock to each of the five owners who pa

44、id in a total of $250,000. On the basis of transactional analysis, the following entry should be recorded.A.A debit (increase) to cash for $250,000 and a credit (increase) to revenue for $250,000.B.A credit (decrease) to cash for $250,000 and a debit (increase) to retained earnings for $250,000.C.A

45、credit (decrease) to cash for $250,000 and a debit (decrease) to contributed capital for $250,000.D.A debit (increase) to cash for $250,000 and a credit (increase) to contributed capital for $250,000.61.Cadet Company paid an accounts payable of $1,000. This transaction should be recorded as follows

46、on the payment date.A.B.C.D.62.The word credit meansA.an increase to an account.B.a decrease to an account.C.an entry to the right side of an account.D.an entry to the left side of an account.63.Which of the following is true?A.Assets increase on their right side because they are on the right side of the accounting equation.B.Liabilities increase on their right side