Question 1

If total liabilities increased by $25,000 and shareholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

A)   $20,000 increase
B)   $25,000 increase
C)   $30,000 increase
D)   $20,000 decreaseE) C) and D)
F) B) and C)

Question 2

Cash and supplies are both classified as current assets.

Accepted Answer

A) True 
 B)False

Question 3

(A) Complete the following schedule for Gold Eye Company.
  (B) How much did cash change during the period?

Accepted Answer

(A)

(B) Cash incre...

Question 4

Some legal contracts, such as the signing of a contract to hire a new employee, are not reflected in the financial statements.

Accepted Answer

A) True 
 B)False

Question 5

For each of the following events, which ones result in an exchange transaction for the O'Brien Company?

Accepted Answer

(a) Y, (b)...

Question 6

Where would we report changes in shareholders' equity caused by operating activities?

Accepted Answer

A)   In a liability account.
B)   In a contributed capital account.
C)   In an asset account.
D)   In the retained earnings account.E) C) and D)
F) A) and D)

Question 7

Long-term investments appear in the property, plant, and equipment section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 8

An individual accounting record for a specific asset, liability or shareholders' equity item is called an account.

Accepted Answer

A) True 
 B)False

Question 9

On January 1, 20A, Hux Cliffable started a new professional corporation, Hux Cliffable, P. C., to
practice medicine with an initial investment of $50,000. On June 30, 20A the accounting records contained the following amounts:
  Prepare a statement of financial position at June 30, 20A.

Accepted Answer

The answer of On January 1, 20A, Hux Cliffable started...

Question 10

When a company buys equipment for $60,000 and pays for one third in cash and the other two thirds is financed by a note payable, which of the following are the effects on the accounting equation?

Accepted Answer

A)   Equipment increases by $20,000.
B)   Cash decreases by $60,000.
C)   Total assets increase by $60,000.
D)   Liabilities increase by $40,000.E) None of the above
F) A) and B)

Question 11

Liabilities are generally classified on a statement of financial position as

Accepted Answer

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

Question 12

The best interpretation of the word credit is the

Accepted Answer

A)   right side of an account.
B)   offset side of an account.
C)   increase side of an account.
D)   decrease side of an account.E) A) and B)
F) A) and C)

Question 13

Borrowing $100,000 of cash from First National Bank, signing a note to be paid, would do which of the following?

Accepted Answer

A)   Increase notes payable by a debit.
B)   Decrease cash by a debit.
C)   Increase cash by a credit.
D)   Increase notes payable by a credit.E) B) and C)
F) C) and D)

Question 14

When a business pays a previously recorded bill, the liabilities of the business decrease.

Accepted Answer

A) True 
 B)False

Question 15

Usually when a short-term, interest-bearing note payable is paid on its maturity date, an asset is credited and a liability is debited.

Accepted Answer

A) True 
 B)False

Question 16

The collection of a trade receivable from a customer would do which of the following?

Accepted Answer

A)   Decrease shareholders' equity.
B)   Not affect liabilities.
C)   Increase liabilities.
D)   Decrease liabilities.E) A) and C)
F) B) and C)

Question 17

The purchase of an asset on credit

Accepted Answer

A)   increases assets and liabilities.
B)   has no effect on total assets.
C)   increases assets and shareholders' equity.
D)   decreases assets and increases liabilities.E) None of the above
F) A) and D)

Question 18

A T account is

Accepted Answer

A)   a way of depicting the basic form of an account.
B)   is the actual account form used in real accounting systems.
C)   a special account used instead of a trial balance.
D)   a special account used instead of a journal.E) B) and D)
F) C) and D)

Question 19

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 contributed capital?

Accepted Answer

A)   $95,000
B)   $125,000
C)   $80,000
D)   $50,000E) All of the above
F) B) and C)

Question 20

On a classified balance sheet, prepaid expenses are classified as

Accepted Answer

A)   a long-term investment.
B)   a current asset.
C)   property, plant, and equipment.
D)   a current liability.E) A) and D)
F) A) and B)

Exam 2: Investing and Financing Decisions and the Accounting System

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 contributed capital?

Correct AnswerverifiedShow Answer

The best interpretation of the word credit is the

Correct AnswerverifiedShow Answer

The collection of a trade receivable from a customer would do which of the following?

Correct AnswerverifiedShow Answer

When a business pays a previously recorded bill, the liabilities of the business decrease.

Correct AnswerverifiedShow Answer

(A) Complete the following schedule for Gold Eye Company. (B) How much did cash change during the period?

Correct Answerverified(A) (B) Cash incre...View AnswerShow Answer

Where would we report changes in shareholders' equity caused by operating activities?

Correct AnswerverifiedShow Answer

An individual accounting record for a specific asset, liability or shareholders' equity item is called an account.

Correct AnswerverifiedShow Answer

A T account is

Correct AnswerverifiedShow Answer

If total liabilities increased by $25,000 and shareholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Correct AnswerverifiedShow Answer

On January 1, 20A, Hux Cliffable started a new professional corporation, Hux Cliffable, P. C., to practice medicine with an initial investment of $50,000. On June 30, 20A the accounting records contained the following amounts: Prepare a statement of financial position at June 30, 20A.

Correct AnswerverifiedShow Answer

On a classified balance sheet, prepaid expenses are classified as

Correct AnswerverifiedShow Answer

Cash and supplies are both classified as current assets.

Correct AnswerverifiedShow Answer

Some legal contracts, such as the signing of a contract to hire a new employee, are not reflected in the financial statements.

Correct AnswerverifiedShow Answer

Liabilities are generally classified on a statement of financial position as

Correct AnswerverifiedShow Answer

Long-term investments appear in the property, plant, and equipment section of the balance sheet.

Correct AnswerverifiedShow Answer

When a company buys equipment for $60,000 and pays for one third in cash and the other two thirds is financed by a note payable, which of the following are the effects on the accounting equation?

Correct AnswerverifiedShow Answer

Usually when a short-term, interest-bearing note payable is paid on its maturity date, an asset is credited and a liability is debited.

Correct AnswerverifiedShow Answer

For each of the following events, which ones result in an exchange transaction for the O'Brien Company?

Correct Answerverified(a) Y, (b)...View AnswerShow Answer

Borrowing $100,000 of cash from First National Bank, signing a note to be paid, would do which of the following?

Correct AnswerverifiedShow Answer

The purchase of an asset on credit

Correct AnswerverifiedShow Answer

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(A)
(B) Cash incre...
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(a) Y, (b)...
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