Question 1

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 assets at the end of April?

Accepted Answer

A)  $335,000.
B)  $249,000.
C)  $345,000.
D)  $250,000.E) None of the above
F) A) and C)

Question 2

Borrowing cash from a bank would result in which of the following?

Accepted Answer

A)  A debit to cash and a credit to notes payable.
B)  A debit to notes payable and a credit to cash.
C)  A debit to both cash and notes payable.
D)  A debit to cash and a credit to additional paid-in capital.E) A) and B)
F) All of the above

Question 3

Which of the following best describes financing activities?

Accepted Answer

A)  They primarily deal with securing money by bank loans or selling stock to investors.
B)  They primarily are connected to the income-producing activities of the company as reported on the income statement.
C)  They primarily deal with buying buildings to be used over many years by the business.
D)  They primarily deal with selling facilities once used by the business.E) A) and D)
F) None of the above

Question 4

Which of the following transactions would not be considered an external exchange?

Accepted Answer

A)  The purchase of supplies on credit.
B)  Cash received from the issuance of common stock.
C)  Cash paid to a bank for interest on a loan.
D)  Using up insurance, which had been paid for in advance.E) B) and C)
F) B) and D)

Question 5

A company's assets and stockholders' equity both increase when the company sells additional shares of stock in exchange for cash.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following assumptions implies that a business can continue to remain in operation into the foreseeable future?

Accepted Answer

A)  Historical cost principle.
B)  Monetary unit assumption.
C)  Continuity assumption.
D)  Separate-entity assumption.E) A) and B)
F) None of the above

Question 7

Which of the following describes the impact on the balance sheet of paying a current liability using cash?

Accepted Answer

A)  Current assets will decrease.
B)  Current liabilities will increase.
C)  Stockholders' equity will decrease.
D)  Total assets will remain the same.E) A) and B)
F) All of the above

Question 8

How is the current ratio calculated and what does it measure?

Accepted Answer

The current ratio is current assets divi...

Question 9

Describe both the investing activities and financing activities section of the statement of cash flows. Provide some examples of each activity.

Accepted Answer

The investing activities section of the ...

Question 10

A corporation has $80,000 in total assets, $36,000 in total liabilities, and a $12,000 credit balance in retained earnings. What is the balance in the contributed capital accounts?

Accepted Answer

A)  $56,000.
B)  $44,000.
C)  $48,000.
D)  $32,000.E) A) and B)
F) C) and D)

Question 11

Which of the following statements is true?

Accepted Answer

A)  Contributed capital is a noncurrent asset.
B)  Current liabilities are debts expected to be paid within the next year.
C)  Current assets are resources of a company that might include cash and copyrights.
D)  Patents, copyrights, and research and development expense are classified as intangible assets on the balance sheet.E) A) and B)
F) A) and C)

Question 12

The T-account is an actual account in the general ledger of the accounting records.

Accepted Answer

A) True 
 B)False

Question 13

Issuing stock in exchange for cash creates an increase in cash from a financing activity.

Accepted Answer

A) True 
 B)False

Question 14

In order for information to be relevant, the information needs to be complete, neutral, and free from error.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following reflects the impact of a transaction where $200,000 cash was invested by stockholders in exchange for stock?

Accepted Answer

A)  Assets and retained earnings each increased $200,000.
B)  Assets and revenues each increased $200,000.
C)  Stockholders' equity and revenues each increased $200,000.
D)  Stockholders' equity and assets each increased $200,000.E) B) and C)
F) A) and B)

Question 16

Selling stock to investors for cash would result in which of the following?

Accepted Answer

A)  A debit to additional paid-in capital and a credit to cash.
B)  A credit to both cash and additional paid-in capital.
C)  A debit to cash and a credit to common stock.
D)  A debit to cash and a credit to the investment account.E) A) and D)
F) B) and D)

Question 17

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 18

Which of the following is not considered to be a recordable transaction?

Accepted Answer

A)  Signing a contract to have an outside cleaning service clean offices nightly.
B)  Paying employees 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.E) None of the above
F) A) and B)

Question 19

A company with a high current ratio should never have liquidity problems.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following would not be considered a current asset?

Accepted Answer

A)  Inventory.
B)  Prepaid expenses.
C)  Land used in daily operations.
D)  Accounts receivable.E) A) and B)
F) C) and D)

Exam 2: Investing and Financing Decisions and the Accounting System

Describe both the investing activities and financing activities section of the statement of cash flows. Provide some examples of each activity.

Correct Answer
verified
The investing activities section of the ...
View Answer

Which of the following best describes financing activities?

Correct Answer
verified

The T-account is an actual account in the general ledger of the accounting records.

Correct Answer
verified

Selling stock to investors for cash would result in which of the following?

Correct Answer
verified

Which of the following reflects the impact of a transaction where $200,000 cash was invested by stockholders in exchange for stock?

Correct Answer
verified

Which of the following is not considered to be a recordable transaction?

Correct Answer
verified

How is the current ratio calculated and what does it measure?

Correct Answer
verified
The current ratio is current assets divi...
View Answer

The normal balance for an asset account is a debit and the normal balance for a liability account is a credit.

Correct Answer
verified

Issuing stock in exchange for cash creates an increase in cash from a financing activity.

Correct Answer
verified

In order for information to be relevant, the information needs to be complete, neutral, and free from error.

Correct Answer
verified

Which of the following would not be considered a current asset?

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

A corporation has $80,000 in total assets, $36,000 in total liabilities, and a $12,000 credit balance in retained earnings. What is the balance in the contributed capital accounts?

Correct Answer
verified

A company with a high current ratio should never have liquidity problems.

Correct Answer
verified

A company's assets and stockholders' equity both increase when the company sells additional shares of stock in exchange for cash.

Correct Answer
verified

Which of the following describes the impact on the balance sheet of paying a current liability using cash?

Correct Answer
verified

Which of the following assumptions implies that a business can continue to remain in operation into the foreseeable future?

Correct Answer
verified

Which of the following transactions would not be considered an external exchange?

Correct Answer
verified

Correct Answer
verified

Borrowing cash from a bank would result in which of the following?

Correct Answer
verified

Exam 2: Investing and Financing Decisions and the Accounting System

Describe both the investing activities and financing activities section of the statement of cash flows. Provide some examples of each activity.

Correct AnswerverifiedThe investing activities section of the ...View AnswerShow Answer

Which of the following best describes financing activities?

Correct AnswerverifiedShow Answer

The T-account is an actual account in the general ledger of the accounting records.

Correct AnswerverifiedShow Answer

Selling stock to investors for cash would result in which of the following?

Correct AnswerverifiedShow Answer

Which of the following reflects the impact of a transaction where $200,000 cash was invested by stockholders in exchange for stock?

Correct AnswerverifiedShow Answer

Which of the following is not considered to be a recordable transaction?

Correct AnswerverifiedShow Answer

How is the current ratio calculated and what does it measure?

Correct AnswerverifiedThe current ratio is current assets divi...View AnswerShow 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

Issuing stock in exchange for cash creates an increase in cash from a financing activity.

Correct AnswerverifiedShow Answer

In order for information to be relevant, the information needs to be complete, neutral, and free from error.

Correct AnswerverifiedShow Answer

Which of the following would not be considered a current asset?

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

A corporation has $80,000 in total assets, $36,000 in total liabilities, and a $12,000 credit balance in retained earnings. What is the balance in the contributed capital accounts?

Correct AnswerverifiedShow Answer

A company with a high current ratio should never have liquidity problems.

Correct AnswerverifiedShow Answer

A company's assets and stockholders' equity both increase when the company sells additional shares of stock in exchange for cash.

Correct AnswerverifiedShow Answer

Which of the following describes the impact on the balance sheet of paying a current liability using cash?

Correct AnswerverifiedShow Answer

Which of the following assumptions implies that a business can continue to remain in operation into the foreseeable future?

Correct AnswerverifiedShow Answer

Which of the following transactions would not be considered an external exchange?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Borrowing cash from a bank would result in which of the following?

Correct AnswerverifiedShow Answer

Correct Answer
verified
The investing activities section of the ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The current ratio is current assets divi...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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