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Exam 2: Investing and Financing Decisions and the Accounting System

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Question 41

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Under the stable 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.

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Question 42

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The T-account is very useful for accumulating the effects of transactions on account balances and for determining individual account balances.

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Question 43

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Where would changes in stockholders' equity resulting from financing provided by operations be reported?

The current ratio measures the ability of a company to pay its short-term obligations with short-term assets.

Which of the following would result when a company borrows cash and signs a note payable that is due in two years?

The Superior Company has provided the following account balances: Cash $152,000; Short-term investments $18,000; Accounts receivable $36,000; Inventory $116,000; Long-term notes receivable $44,000; Equipment $174,000; Factory Building $270,000; Intangible assets $33,000; Accounts payable $130,000; Accrued liabilities payable $19,000; Short-term notes payable $84,000; Long-term notes payable $169,000. Requirement: What is Superior's stockholders' equity?

Which of the following assumptions implies that the assets and liabilities of the business are accounted for separately from the assets and liabilities of the owners?

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?

Which of the following transactions would result in a decrease in the current ratio?

Cadet Company paid an account payable of $1,000. This transaction should be recorded on the payment date as follows: A. $\begin{array}{|c|c|c|}\hline \text { Accounts payable } & 1,000 & \\\hline \text { Cash } & & 1,000 \\\hline\end{array}$ B. $\begin{array}{|c|c|c|}\hline \text { Cash } & 1,000 & \\\hline \text { Accounts payable } & & 1,000 \\\hline\end{array}$ C. $\begin{array}{|c|c|c|}\hline \text { Notes Payable } & 1,000 & \\\hline \text { Cash } & & 1,000 \\\hline\end{array}$ D. $\begin{array}{|c|c|c|}\hline \text { Cash } & 1,000 & \\\hline \text { Cost of Goods Sold } & & 1,000 \\\hline\end{array}$

Current assets include accounts receivable and prepaid expenses.

The continuity assumption states that a business will continue to operate into the foreseeable future.

Describe the general journal and the general ledger.

Assets, liabilities, and stockholders' equity are all found within which of the following financial statements?

In what order would the following assets be listed on a balance sheet?

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?

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 is Pioneer's current ratio?

Which of the following statements is false?

Which of the following is a result of equipment purchased with cash?

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