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Exam 2: Investing and Financing Decisions and the Accounting System

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Question 51

Multiple Choice

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In what order are current assets listed on a balance sheet?

A) By dollar amount (largest first) .
B) By date of acquisition (earliest first) .
C) By liquidity.
D) By relevance to the operation of the business.

E) A) and B)
F) B) and D)

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Question 52

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Which of the following describes the impact on the balance sheet when cash is received from the collection of an account receivable?

A) Current assets will not change.
B) Current assets will increase.
C) Stockholders' equity will increase.
D) Total assets will increase.

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

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Question 53

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Liability and stockholders' equity accounts normally have credit balances and are decreased by debiting the accounts.

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

In order for information to be relevant, the information should have both predictive and/or feedback value.

Which of the following journal entries is correct when a business entity purchases land costing $30,000 by signing a one-year note payable?

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 were Superior's dividend declarations during its recent year of operation?

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, which of the following are the effects on the accounting equation?

Purchasing supplies for cash results in an increase in total assets for the purchasing company.

The Alex Company, a consulting firm, recorded the following selected business transactions during May, 2016. Indicate whether each transaction would increase, decrease, or have no effect on the total assets of the company.

Which of the following journal entries is correct when common stock is sold for cash at a price greater than par value?

Which of the following events will cause retained earnings to increase?

For each of the following accounts, indicate whether the account is an asset (A), liability (L), or stockholders' equity (SE) and whether the account has a normal debit (Dr) or normal credit (Cr) balance. 1. Retained Earnings 2. Supplies 3. Additional paid-in capital 4. Accounts payable 5. Accounts receivable 6. Property and equipment 7. Wages payable 8. Prepaid expenses

Complete the following schedule for Red Eye Company.

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

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 assets?

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

A transaction may be an exchange of assets or services by one business for assets, services, or promises to pay from a different business.

Complete the following schedule for Blue Eye Company.

On January 1, 2016, Dr. Beth Hill started a new professional corporation, Beth Hill, P. C., to practice medicine with an initial investment of $100,000 in exchange for 20,000 shares of $2 par value common stock.On June 30, 2016, the accounting records showed the following amounts: Requirement: 1.Calculate the amounts for common stock and additional paid-in capital.2.Prepare a balance sheet as of June 30, 2016.