Question 1

Which of the following journal entries is correct when a business entity uses cash to pay an account payable?

Accepted Answer

A)   Accounts Payable   \quad     \quad  Cash
B)   Retained Earnings   \quad     \quad  Cash
C)   Cash   \quad  Accounts Payable
D)   Cash   \quad  Notes Payable E) None of the above
F) A) and D)

Question 2

Which of the following happens when equipment is purchased using cash?

Accepted Answer

A)  Total assets decrease.
B)  Current assets don't change.
C)  Current assets increase.
D)  Stockholders' equity doesn't change.E) C) and D)
F) B) and D)

Question 3

In what order would the following assets be listed on a balance sheet?

Accepted Answer

A)  Cash, Accounts Receivable, Inventory, Plant and Equipment.
B)  Cash, Intangible Assets, Accounts Receivable, Plant and Equipment.
C)  Cash, Accounts Receivable, Plant and Equipment, Inventory.
D)  Cash, Inventory, Intangible Assets, Accounts Receivable.E) A) and B)
F) A) and C)

Question 4

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)  Contributed capital
D)  InventoryE) B) and D)
F) A) and B)

Question 5

In order for information to be relevant the information should have both predictive and

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

The dual effects concept implies that every transaction has at least two effects on the accounting equation.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following transactions will cause both the left and right side of the accounting equation to decrease?

Accepted Answer

A)  Collecting cash from a customer who owed us money.
B)  Paying a supplier for inventory we previously purchased on account.
C)  Borrowing money from a bank.
D)  Purchasing equipment using cash.E) C) and D)
F) B) and D)

Question 9

Which of the following would result when a company lends cash to a franchisee in exchange for a ten-month note receivable?

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 a financing cash flow are created.
D)  A current asset and an investing cash flow are created.E) All of the above
F) C) and D)

Question 10

Unearned revenue is reported on the balance sheet as a liability and represents amounts paid to an entity for which the entity has an obligation to provide future services and/or goods.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would cause a cash outflow from investing activities?

Accepted Answer

A)  Purchasing shares of stock of another company.
B)  Paying a cash dividend to stockholders.
C)  Issuing additional shares a company's stock.
D)  Using cash to purchase inventory.E) All of the above
F) B) and C)

Question 12

Which of the following journal entries is correct when a business entity purchases a building by paying cash and signing a note payable?

Accepted Answer

A)   Building   \quad  Cash   \quad  Notes Payable
B)   Building   \quad  Cash
C)   CashNotes Payable   \quad     \quad  Building
D)   BuildingCash   \quad  Notes Payable E) B) and D)
F) A) and B)

Question 13

Current assets include accounts receivable and prepaid expenses.

Accepted Answer

A) True 
 B)False

Question 14

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

Question 15

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 16

A business transaction consists of an exchange of assets or services for assets,services,or promises to pay between a business and an external party to the business.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

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) B) and D)
F) All of the above

Question 18

The Lake Company has provided the following account balances:
Cash $76,000;
Short-term investments $8,000;
Accounts receivable $12,000;
Inventory $96,000;
Long-term notes receivable $4,000;
Equipment $192,000;
Factory Building $360,000;
Intangible assets $12,000;
Accounts payable $90,000;
Accrued liabilities payable $12,000;
Short-term notes payable $42,000;
Long-term notes payable $184,000.
Requirement:
What is Lake's current ratio?

Accepted Answer

The answer of The Lake Company has provided the following...

Question 19

A company purchases a delivery van by paying $5,000 cash and by signing a $25,000 note payable.Which of the following correctly describes the recording of the delivery van purchase?

Accepted Answer

A)  The delivery van account is debited for $25,000.
B)  Notes payable is debited for $25,000.
C)  The delivery van account is debited for $30,000.
D)  Cash is debited for $5,000.E) None of the above
F) All of the above

Question 20

Chad Jones is the sole owner and manager of Jones Glass Repair Shop.Jones purchased 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 it?

Accepted Answer

A)  Separate-entity assumption
B)  Revenue principle
C)  Unit-of-measure assumption
D)  Historical cost principleE) C) and D)
F) None of the above

Exam 2: Investing and Financing Decisions and the Balance Sheet

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

Correct Answer
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Unearned revenue is reported on the balance sheet as a liability and represents amounts paid to an entity for which the entity has an obligation to provide future services and/or goods.

Correct Answer
verified

Which of the following journal entries is correct when a business entity purchases a building by paying cash and signing a note payable?

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

Which of the following happens when equipment is purchased using cash?

Correct Answer
verified

Correct Answer
verified

Which of the following journal entries is correct when a business entity uses cash to pay an account payable?

Correct Answer
verified

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

Correct Answer
verified

Chad Jones is the sole owner and manager of Jones Glass Repair Shop.Jones purchased 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 it?

Correct Answer
verified

Current assets include accounts receivable and prepaid expenses.

Correct Answer
verified

A business transaction consists of an exchange of assets or services for assets,services,or promises to pay between a business and an external party to the business.

Correct Answer
verified

In order for information to be relevant the information should have both predictive and

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

The dual effects concept implies that every transaction has at least two effects on the accounting equation.

Correct Answer
verified

Which of the following would result when a company lends cash to a franchisee in exchange for a ten-month note receivable?

Correct Answer
verified

Which of the following would cause a cash outflow from investing activities?

Correct Answer
verified

A company purchases a delivery van by paying $5,000 cash and by signing a $25,000 note payable.Which of the following correctly describes the recording of the delivery van purchase?

Correct Answer
verified

In what order would the following assets be listed on a balance sheet?

Correct Answer
verified

Which of the following transactions will cause both the left and right side of the accounting equation to decrease?

Correct Answer
verified

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

Correct Answer
verified

Exam 2: Investing and Financing Decisions and the Balance Sheet

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

Correct AnswerverifiedShow Answer

Unearned revenue is reported on the balance sheet as a liability and represents amounts paid to an entity for which the entity has an obligation to provide future services and/or goods.

Correct AnswerverifiedShow Answer

Which of the following journal entries is correct when a business entity purchases a building by paying cash and signing a note payable?

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

Which of the following happens when equipment is purchased using cash?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following journal entries is correct when a business entity uses cash to pay an account payable?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Chad Jones is the sole owner and manager of Jones Glass Repair Shop.Jones purchased 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 it?

Correct AnswerverifiedShow Answer

Current assets include accounts receivable and prepaid expenses.

Correct AnswerverifiedShow Answer

A business transaction consists of an exchange of assets or services for assets,services,or promises to pay between a business and an external party to the business.

Correct AnswerverifiedShow Answer

In order for information to be relevant the information should have both predictive and

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

The dual effects concept implies that every transaction has at least two effects on the accounting equation.

Correct AnswerverifiedShow Answer

Which of the following would result when a company lends cash to a franchisee in exchange for a ten-month note receivable?

Correct AnswerverifiedShow Answer

Which of the following would cause a cash outflow from investing activities?

Correct AnswerverifiedShow Answer

A company purchases a delivery van by paying $5,000 cash and by signing a $25,000 note payable.Which of the following correctly describes the recording of the delivery van purchase?

Correct AnswerverifiedShow Answer

In what order would the following assets be listed on a balance sheet?

Correct AnswerverifiedShow Answer

Which of the following transactions will cause both the left and right side of the accounting equation to decrease?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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