WorksheetsAccounting Study Guide 2
Total questions: 36
Worksheet time: 18mins
A transaction is an exchange or event that directly affects the assets, liabilities, or stockholders' equity of a company
True
False
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
If total assets increase, then either total liabilities or total stockholders' equity must also increase
True
False
A company signed an agreement to rent store space from another company. This is an example of a transaction that should be recorded
True
False
A business is obliged to repay both debt and equity financing
True
False
If a company uses $100 million of its cash to pay off debt, its stockholders' equity will increase $100 million.
True
False
Company X issues $40 million in new stock for cash. This does not affect stockholders' equity because as new shares are sold, the value of existing shares falls
True
False
The analyze-record-summarize process is applied to daily transactions, to month-end adjustments, and as part of the year-end closing process
True
False
The list of account names and reference numbers that the company will use when accounting for transactions is called the chart of accounts.
True
False
A debit may increase or decrease an account, depending on the type of account
True
False
The normal balance of an account is on the same side that increases the account
True
False
If the total dollar value of credits to an account exceeds the total dollar value of debits to that account, the ending balance of the account will be a debit balance
True
False
Every transaction increases at least one account and decreases at least one account
True
False
Journal entries show the effects of transactions on the elements of the accounting equation, as well as the account balances
True
False
The general ledger is an internal report that lists all the accounts and their balances and is used to check that total debits equals total credits
True
False
A classified balance sheet shows a subtotal for current assets and current liabilities
True
False
When a company prepares a classified balance sheet, stockholders’ equity accounts must be shown in subcategories of current and noncurrent
True
False
The trial balance is a financial statement that reports the assets, liabilities, and equity of a business at a point in time.
True
False
Owners of a company
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
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?
Common Stock
Accounts Payable
Notes Payable (long-term)
Retained Earnings
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:
$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
Transactions include which two types of events?
Direct events, indirect events
Monetary events, production events
External exchanges, internal events
Past events, future events
Your company places an order with suppliers for inventory for delivery in two weeks
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 characteristic shared by all liabilities is that they
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?
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?
Putting a deposit down on a new vehicle
Hiring a new employee
Receiving cash upon signing a note
Receiving a deposit from a customer
The Flynn Company started business by obtaining financing through debt financing and equity financing. Which of the following statements is not correct?
Equity financing refers to the money obtained through owners’ contributions and reinvestments of profit
Debt financing refers to the money obtained through loans
The business is obligated to repay debt financing
The business is obligated to repay equity financing
Which of the following is not an asset?
Cash
Notes Receivable
Common Stock
Land
Which of the following would be treated as an accounting transaction for a gardening supply store?
The company signed an agreement to rent store space at $200 month
The vice president of the company spoke at a luncheon that contributed to enhancing the company’s reputation as a responsible company
The company ordered supplies for $500
The company loaned $500 to an employee
_________________ are of special importance because they are the only activities that enter the financial accounting system
External exchanges
Internal exchanges
Documents
Transactions
A company has $26,000 in its Land account, $10,000 in its Inventory account, and $6,000 in its Notes Payable (short-term) account. If its only other account is Common Stock, what is the balance of that account?
$10,000
$42,000
$30,000
$22,000
Stockholders’ equity in a corporation consists of
Amounts invested and reinvested by a company’s owners.
Resources presently owned by a business that generate future economic benefits
Amounts invested in assets that will be used for one or more years
Amounts presently owed by a business
Typical cash flows from investing activities include
payments to purchase property and equipment
repayment of loans
proceeds from issuing notes payable
receipts from cash sales
The requirement that transactions be recorded at their exchange price at the transaction date is called the:
conservatism exception
separate entity assumption
cost principle
monetary unit assumption
Which of the following is not an accounting transaction?
Issued shares of stock to investors in exchange for cash contributions of $4,000
Ordered inventory from suppliers for $3,000
Sold equipment to another company for $3,000 and accepted a note from the company promising payment in 6 months
Borrowed money from the bank by signing a promissory note for $2,000
The Buddy Burger Corporation owes $1.5 million to the Texas Wholesale Meat Company from whom Buddy Burger buys its burger meat. Which account would Buddy Burger use to report the amount owed?
Cash
Accounts Payable
Notes Payable
Account Receivable
