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Exam 2: Investing and Financing Decisions and the Accounting System

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Question 71

Multiple Choice

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Which of the following statements is false?

A) The benefits of providing financial reporting information should outweigh the costs.
B) An item is considered relevant if it has the ability to influence a decision.
C) Information is considered to be faithfully represented when it is complete, neutral, and free from error.
D) Accounting information should be reported in the national monetary unit with adjustment for inflation.

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

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Question 72

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A journal entry is a written expression of the effects of a transaction on accounts and has equal debits and credits.

A) True
B) False

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Question 73

Multiple Choice

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Which of the following statements is correct?

The current ratio measures the ability of a company to pay its short-term obligations with short-term assets.

Where would changes in stockholders' equity resulting from financing provided by operations be reported?

Superior has provided the following information for its recent year of operation: The common stock account balance at the beginning of the year was $20,000 and the year-end balance was $25,000. The additional paid-in capital account balance increased $2,500 during the year. The retained earnings balance at the beginning of the year was $75,000 and the year-end balance was $91,000. Net income was $26,000. How much did Superior sell its common stock for during the year?

The Pioneer Company has provided the following account balances: Cash $38,000; Short-term investments $4,000; Accounts receivable $48,000; Supplies $6,000; Long-term notes receivable $2,000; Equipment $96,000; Factory Building $180,000; Intangible assets $6,000; Accounts payable $30,000; Accrued liabilities payable $4,000; Short-term notes payable $14,000; Long-term notes payable $92,000; Common stock $180,000; Retained earnings $60,000. What are Pioneer's total current liabilities?

ABC Company's total stockholders' equity at the beginning of the year was $200,000. During the year ABC reported the following: Net loss of $30,000. Stock issued in exchange for land totaling $80,000. Collections of accounts receivable $40,000. Dividends declared and paid totaling $2,000. What is ABC's total stockholders' equity at the end of the year?

Classify the following balance sheet accounts as current assets, noncurrent assets, current liabilities, noncurrent liabilities, or stockholders' equity. 1. Building 2. Retained earnings 3. Notes payable due in 3 months 4. Land 5. Prepaid expenses 6. Supplies inventory 7. Common stock 8. Notes payable due in 5 years 9. Income taxes payable 10. Accounts receivable

The primary objective of financial reporting is to provide useful information to external decision makers.

Which of the following is a constraint in providing useful financial reporting information to decision-makers?

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

At the beginning of April, Warren Corporation's assets totaled $240,000 and liabilities totaled $60,000. During April the following summarized transactions occurred: Additional shares of stock were sold for $20,000 cash. A building costing $95,000 was purchased using $10,000 cash and by signing an $85,000 long-term note payable. Short-term investments costing $9,000 were purchased using cash. $10,000 was paid to an employee as a loan; the employee signed a six-month note in exchange for the loan. How much are Warren's total liabilities at the end of April?

Alpha Company issued 1,000 shares of $10 par value common stock to stockholders, in exchange for $15,000 cash. Which of the following correctly describes the impact of this transaction on Alpha's financial statements?

Additional-paid in capital is reported on the balance sheet as a component of shareholders' equity.

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

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

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

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.