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Exam 2: Investing and Financing Decisions and the Accounting System

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Question 31

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The Lake Company has provided the following account balances: Cash $76,000; Short-term investments $8,000; Accounts receivable $96,000; Supplies $12,000; Long-term notes receivable $4,000; Equipment $192,000; Factory Building $360,000; Intangible assets $12,000; Accounts payable $90,000; Accrued liabilities payable $12,000; Short-term notes payable $42,000; Long-term notes payable $184,000. Requirement: What is Lake's current ratio?

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Current assets = $192,000 = $7...

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Question 32

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Which of the following best describes liabilities?

A) Possible debts or obligations of an entity as a result of future transactions, which will be paid with assets or services.
B) Possible debts or obligations of an entity as a result of past transactions, which will be paid with assets or services.
C) Probable debts or obligations of an entity as a result of future transactions, which will be paid with assets or services.
D) Probable debts or obligations of an entity as a result of past transactions, which will be paid with assets or services.

E) C) and D)
F) All of the above

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Question 33

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An accounts payable would be reported within which of the following financial statements?

The stockholders' equity section of a balance sheet includes capital contributed by owners and also retained earnings.

Which of the following correctly describes retained earnings?

Unearned revenue is reported on the balance sheet as a liability and represents amounts paid to an entity in exchange for future services and/or goods.

Which of the following would be classified as investing cash flows on a cash flow statement? 1. Acquiring a building by signing a long-term mortgage payable. 2) Lending cash to others. 3) Issuing stock for cash. 4) Purchasing long-term assets for cash. 5) Selling stock investments for cash.

The current assets section of a balance sheet includes both inventory and prepaid expenses.

Which of the following transactions will not change a company's total stockholders' equity?

The ABC Corporation was formed on January 1, 2016. The three initial owners each invested $100,000 cash and each received 10,000 shares of $1 par value common stock. Below are selected transactions that were completed during January, 2016. 1. Issue shares of common stock to the owners. 2. Borrowed $80,000 on a one-year note payable. 3. Purchased land by signing a $70,000 note payable. 4. Paid $10,000 of accounts payable. 5. Purchased two service vehicles for cash at a cost of $24,000 each. 6. Purchased $2,000 of supplies on credit. Requirement: Prepare the journal entry on ABC's books for each transaction. Include a brief explanation for each entry.

The current ratio is current assets divided by current liabilities.

A corporation purchased factory equipment using cash. Which of the following statements regarding this purchase is correct?

The accounting equation does not have to be in balance after the recording of each transaction.

Which of the following best describes assets?

For each of the transactions listed below, indicate whether it is an investing (I) or financing (F) activity on the statement of cash flows. Also, indicate if the transaction increases (+) or decreases (-) cash.

The dual effects concept states that:

Which of the following transactions will cause both the left and right side of the accounting equation to decrease?

Tiger Company's total stockholders' equity at the beginning of the year was $175,000. During the year Tiger reported the following: Net income of $79,000. Dividend declarations totaling $17,000. Issued stock to stockholders in exchange for $42,000 cash. Borrowed $20,000 from a stockholder. What is Tiger's total stockholders' equity at the end of the year?

Under the monetary unit assumption, accounting information should be measured and reported in terms of the national monetary unit, with an adjustment for changes in purchasing power.

Chad Jones is the sole owner and manager of Jones Glass Repair Shop. Jones purchased a truck, to be used in the business, for its market value of $35,000. Which of the following fundamentals requires Jones to record the truck at the price paid to buy it?