Solutions and Test Bank For Fundamentals of Financial Accounting 7th Edition By Fred Phillips PDF

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Solutions, Test Bank & Ebook for Fundamentals of Financial Accounting 7th Edition By Fred Phillips, Shana Clor-Proell, Robert Libby, Patricia Libby ; 9781260771381, 1260771385 + CONNECT assignments, CONNECT Homeworks, LearnSmart Quizzes Available....

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Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 1) A transaction is an exchange or event that directly affects the assets, liabilities, or stockholders' equity of a company. ⊚ ⊚

true false

2) General Motors (GM) signs a new labor agreement that its workers will receive a 5% wage increase next year. This transaction affects GM's financial statements in the current year.

⊚ ⊚

true false

3) If total assets decrease, then either total liabilities or total stockholders' equity must also decrease. ⊚ ⊚

true false

4) Goodrich, Incorporated signed an agreement to rent a warehouse from Ellie Company This is an example of a transaction that should not be recorded in the accounting system.

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5)

true false

A business is obligated to repay both debt and equity financing. ⊚ ⊚

true false

6) You are pleasantly surprised to discover that a popular actress appears on The Tonight Show wearing your company's jeans. As a result, your company's sales increase by $500,000 in the following weeks. When the actress first appeared on TV, you would have recorded an asset because the TV appearance was expected to bring future economic benefits to your company. ⊚ ⊚

true false

7) Eagle Company used $50,000,000 of its cash to pay off debt, as a result, Eagle’s stockholders' equity will decrease $50,000,000.

⊚ ⊚

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true false

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For All Chapters à [email protected] 8) Puffin, Incorporated issues $1,000,000 of new stock for cash. Puffin’s stockholders' equity does not change because as new shares are sold, the value of its existing shares falls. ⊚ ⊚

true false

9) The analyze-record-summarize process is applied only to daily transactions, month-end adjustments do not need to be analyzed and summarized. ⊚ ⊚

true false

10) The list of account names and reference numbers that the company will use when accounting for transactions is called the chart of accounts. ⊚ ⊚

11)

true false

A debit may increase or decrease an account, depending on the type of account. ⊚ ⊚

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true false

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12)

The normal balance of an account is on the same side that decreases the account. ⊚ ⊚

true false

13) If the total dollar value of debits in accounts receivable exceeds the total dollar value of credits in the same account , the ending balance will be a debit balance.

⊚ ⊚

14)

Every transaction increases at least one account and decreases at least one account. ⊚ ⊚

15) SE.

true false

true false

An account increases on the same side as they appear in the accounting equation: A = L +

⊚ ⊚

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true false

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16) Journal entries show the effects of transactions on the elements of the accounting equation, as well as the account balances. ⊚ ⊚

true false

17) The general ledger is an internal report that lists all the accounts and their balances and is used to check that total debits equal total credits. ⊚ ⊚

18)

true false

A trial balance shows a subtotal for current assets and current liabilities.

⊚ ⊚

true false

19) When a company prepares a classified balance sheet, liability accounts must be shown in subcategories of current and noncurrent.

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true false

20) The trial balance is a financial statement that reports the assets, liabilities, and equity of a business at a point in time. ⊚ ⊚

true false

21) The acquisition of inventory in an exchange for a company's stock would increase the current ratio of the company. ⊚ ⊚

true false

22) The current ratio can be used to evaluate a company's ability to pay liabilities in the short term, and in general, a higher ratio means better ability to pay.

⊚ ⊚

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true false

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For All Chapters à [email protected] 23) If the debits equal the credits in the trial balance, it verifies that all transactions are accurate. ⊚ ⊚

true false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 24) Owners of a company:

A) B) C) D)

hold promissory notes as evidence of their ownership claim. are entitled to repayment of their investment. have a claim that is secondary to creditor's claims. have a claim equal to the amount of liabilities a company owes.

25) If a company borrows money from a bank and signs an agreement to repay the loan several years from now, in which account would the company report the amount borrowed?

A) B) C) D)

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Common Stock Accounts Payable Notes Payable (long-term) Retained Earnings

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For All Chapters à [email protected] 26) The Sweet Smell of Success Fragrance Company borrowed $60,000 from the bank to be paid back in five years and used all of the money to purchase land for a new store. Sweet Smell's balance sheet would show this as:

A) B) C) D)

$60,000 under Land and $60,000 under Notes Payable (long-term). $60,000 under Depreciation Expense and $60,000 under Notes Payable (long-term). $60,000 under Land and $60,000 under Notes Receivable (long-term). $60,000 under Other Assets and $60,000 under Other Liabilities.

27) Typical business activities needed before a business can start selling goods and/or services to customers include:

A) B) C) D)

28)

Who has first claim to a business's assets should the company go out of business?

A) B) C) D)

29)

financing and investing activities. only financing activities. only investing activities. only operating activities.

Creditors Stockholders Customers Management

The creditors' claims to a company's resources are represented by:

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A) B) C) D)

30)

common stock. total stockholder's equity. total liabilities. retained earnings.

A difference between debt financing and equity financing is that:

A) debt financing must be repaid, while repayment of equity financing is not required. B) equity financing must be repaid, while repayment of debt financing is not required. C) only debt financing can be used to purchase assets. D) only equity financing can be used to purchase assets.

31)

Debt financing is financing obtained from:

A) B) C) D)

32)

stockholders. creditors. selling goods or services on credit. both creditors and stockholders.

Equity financing is financing obtained from:

A) creditors. B) stockholders. C) selling goods or services on credit.

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For All Chapters à [email protected] D) both creditors and stockholders.

33)

The cost principle is used:

A) B) C) D)

34)

Transactions include which two types of events?

A) B) C) D)

35)

to refer to the two sources of financing available to businesses. to measure the amount used to record assets on the date of the transaction. by small businesses, but not by large businesses. to measure internal events, but not external exchanges.

Direct events, indirect events Monetary events, production events External exchanges, internal events Past events, future events

Which of the following is an accounting transaction?

A) B) C) D)

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A manager hires an employee. A manager orders supplies. A manager signs a promissory note and receives cash. A manager agrees to deliver their product in three weeks.

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For All Chapters à [email protected] 36) Your company places an order for inventory with a supplier to be delivered in two weeks. Which of the following statements is true?

A) B) C) D)

37)

The characteristic shared by all liabilities is that they:

A) B) C) D)

38)

provide a future economic benefit. result in an inflow of resources to the company. always end in the word "payable." obligate the company to do something in the future.

Which of the following is a financing activity?

A) B) C) D)

39)

This is an internal event and it does not affect the balance sheet. This is an activity that does not affect the balance sheet. This is an internal event that affects the balance sheet. This is an external exchange and it affects the balance sheet.

The business receives land and gives a check for $1,000. The business receives $1,000 cash and in exchange gives a promissory note. The business promises to hire an employee on the 15th of the month. The business orders supplies and promises to pay for them at the end of the month.

Which of the following would not be recorded as an accounting transaction?

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A) B) C) D)

Issuing stock to owners in exchange for cash Ordering supplies to be delivered next month Selling inventory to customers in exchange for cash to be received next month Paying the bank for a portion of a notes payable

40) The Flynn Company started business by obtaining financing through debt financing and equity financing. Which of the following statements is not correct?

A) Equity financing refers to the money obtained through owners' contributions and reinvestments of profit. B) Debt financing refers to the money obtained through loans. C) The business is obligated to repay debt financing. D) The business is obligated to repay equity financing.

41)

Which of the following is an asset?

A) B) C) D)

Common Stock Retained Earnings Notes Receivable Notes Payable

42) Which of the following transactions for Bill's Fish 'n Chips restaurant would be treated as an accounting transaction?

A) Bill distributed coupons to local hotels for 10% off and requested that the coupons be

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For All Chapters à [email protected] distributed to hotel guests. B) Bill spoke to a local high school about the rewards and challenges of being an entrepreneur. C) Bill signed an agreement with a local fisherman to purchase 20 pounds of halibut each month. D) Bill purchased a fryer and a dishwasher, which will be paid for next month.

43) _________________ are of special importance because they are the only activities that enter the financial accounting system.

A) B) C) D)

44)

Which account is affected by recording the buying of goods on credit?

A) B) C) D)

45)

External exchanges Internal events Documents Transactions

Cash Retained Earnings Common Stock Accounts Payable

Which of the following is not true regarding the double-entry system?

A) Transactions must be recorded twice to ensure accuracy. B) Debits must equal credits.

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For All Chapters à [email protected] C) Assets must equal liabilities plus stockholders' equity. D) Both what is received and what is given in exchange must be recorded.

46)

Every transaction involves a(n):

A) B) C) D)

47)

receiving and giving something of value. increase in assets. increase in stockholder's equity. exchange of promises.

Which events are recorded in the accounting system?

A) B) C) D)

External exchanges only Internal events only Both external exchanges and internal events Transactions are not recorded in the accounting system

48) Doug's Doodle Shop, specializing in dog supplies, signs a contract with a pet groomer. Next month, the groomer will begin leasing a portion of Doug's store and provide grooming services. The signing of the contract:

A) B) C) D)

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has no effect on the accounting equation. increases assets. increases liabilities. decreases stockholders' equity.

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49) Spin Company has $52,000 in its Cash account, $20,000 in its Inventory account, and $12,000 in its Notes Payable (short-term) account. If Spin's only other account is Common Stock, what is the balance of that account?

A) B) C) D)

50)

Amounts invested and reinvested by a company's owners is called:

A) B) benefits. C) D)

51)

$20,000. $84,000. $60,000. $44,000.

stockholders' equity in a corporation. assets, or the resources presently owned by a business that generate future economic a trial balance, proving that all amounts are accounted for. liabilities, or the amounts presently owed by a business.

Typical cash flows from investing activities include:

A) B) C) D)

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payments to purchase property and equipment. repayment of loans. proceeds from issuing notes payable. receipts from cash sales.

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For All Chapters à [email protected] 52) The requirement that transactions be recorded at their exchange price at the transaction date is called the:

A) B) C) D)

conservatism exception. separate entity assumption. cost principle. unit of measure assumption.

53) Candy Cane opened an ice cream store on June 1 and hired an accounting intern to help her establish the business. The intern has identified the following transactions. Which of these transactions is not an accounting transaction?

A) B) C) D)

Purchased $3,400 of milk and cream from a local dairy Signed a contract to deliver $1,200 of ice cream for a July 4th party Paid June rent of $2,300 Borrowed money from the bank by signing a promissory note for $5,000

54) Candy Cane's ice cream shop, which opened in June, is a local hit. In July, Candy Cane hired a new employee at a rate of $1,200 per month to start work at the beginning of August. In July, Candy Cane should record:

A) B) C) D)

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nothing, because an exchange of promises is not a transaction. a $1,200 increase to Prepaid Wages and a $1,200 decrease to Cash. a $1,200 increase to Wage Expense and a $1,200 decrease to Cash. a $1,200 increase in Wages Payable and a $1,200 increase in Wages Expense.

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For All Chapters à [email protected] 55) A ____________ is a list of account titles with corresponding reference numbers used by companies so that transaction items are consistently named.

A) B) C) D)

56)

What does a business typically receive when it issues stock to owners?

A) B) C) D)

57)

Promissory note Stock certificate Equipment Cash

When a business issues stock, what does it give to its owners?

A) B) C) D)

58)

chart of accounts trial balance classified balance sheet ledger

Notes Payable Common Stock Retained Earnings Cash

Transactions are entered into a ____________ each day they occur.

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A) B) C) D)

journal ledger trial balance classified balance sheet

59) A ___________ is a collection of records that summarizes the effects of multiple transactions whereas a ___________ is a record of each day's transactions.

A) B) C) D)

60)

Account titles in the chart of accounts are:

A) B) C) D)

61)

ledger; journal journal; ledger trial balance; journal trial balance; ledger

general purpose and do not indicate the nature of the account. consistent with those used by other companies. linked to account numbers. the names mandated for use by the FASB.

Every transaction:

A) increases one account and decreases another account. B) has at least two effects on the basic accounting equation. C) affects only balance sheet accounts or only income statement accounts.

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For All Chapters à [email protected] D) is analyzed from the standpoint of the business owners.

62) Charlie Company buys its inventory from Tilly, Incorporated and owes $800,000 to Tilly, Incorporated. Which account would Charlie Company use to report the amount owed?

A) B) C) D)

Cash Accounts Payable Notes Payable Accounts Receivable

63) Bolt Enterprises receives $100,000 cash from its customers on account. Bolt uses the cash to pay off $100,000 on a bank loan, the net result is that:

A) assets would increase by $100,000 while liabilities would decrease by $100,000. B) liabilities would decrease by $100,000 while stockholders' equity would increase by $100,000. C) assets would decrease by $100,000 and liabilities would decrease by $100,000. D) liabilities would decrease by $100,000 and stockholders' equity would decrease by $100,000.

64)

What is the minimum number of accounts that must be involved in any transaction?

A) One B) Two C) Three

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For All Chapters à [email protected] D) There is no minimum.

65)

Amounts owed to suppliers for goods purchased on credit are called:

A) B) C) D)

Common Stock. Retained Earnings. Accounts Payable. Inventory.

66) Assuming a transaction affects the accounting equation by decreasing a liability and has no effect on assets, which of the following statements is correct with regards to this transaction?

A) B) C) D)

If other liabilities are unchanged, stockholders' equity must be decreasing. If other liabilities are unchanged, stockholders' equity must be increasing. If stockholders' equity is unchanged, another liability must be decreasing. If stockholders' equity is unchanged, other liabilities must be unchanged.

67) Sue Shells, Incorporated pays back $200,000 on a loan it had obtained earlier from a bank. What is the effect of this transaction?

A) Assets decrease by $200,000; liabilities and stockholders' equity are both unchanged. B) Assets decrease by $200,000, liabilities decrease by $200,000, and stockholders' equity is unchanged. C) Assets decrease by $200,000 and liabilities increase by $200,000. D) Assets decrease by $200,000, liabilities are unchanged, and stockholders' equity

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68) Sue Shells, Incorporated issues $400,000 in new stock. It later uses the cash received to purchase land. What accounts are affected by these two transactions?