73 free test bank for financial accounting information for decisions 6th edition

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73 Free Test Bank for Financial Accounting

Information for Decisions 6th Edition

Ingram

Multiple Choice Questions

Which of the following events is properly classified as an investing activity?

1 a.purchase of equipment

2 b.borrowing money from creditors

3 c.selling goods to customers

4 d.running the factory

Which of the following is a financing activity?

1 a.inventory for resale is purchased on credit

2 b.equipment to be used in the firm is purchased with cash

3 c.employees are paid their weekly wages in cash

4 d.a loan is obtained from the bank

Paying off of a bank loan is a(n) activity?

1 a.operating

2 b.financing

3 c.investing

4 d.operating if it was a short-term loan; financing if it was a long-term loan

The Fast Freight Company purchased a new delivery truck by making a cash down payment and signing a note payable for the balance How will assets, liabilities, and owners’ equity be

affected by this transaction? Assets; Liabilities; Equity

(respectively )

1 a decreased increased no change

2 b increased increased no change

3 c increased decreased increased

4 d no change increased decreased

5 e no change decreased increased

Which of the following is NOT one of the categories of accounts used by the accounting information system?

1 a.asset

2 b.liability

3 c.cash flow

4 d.expense

The Angstrom Company was established at the beginning of

2007 with the following capital: Owners' cash

contributions$46,000; Cash obtained from a group of

creditors30,000; Loan obtained from the local bank 10,000;

Total$86,000 What is the amount of the contributed capital for this firm?

1 a.$10,000

2 b.$40,000

4 d.$76,000

5 e.$86,000

When starting a new business, in general, which of the following types of activities would have to occur before operating activities could begin?Investing Activities; Financing Activities

(respectively)

1 a Yes Yes

2 b Yes No

3 c No Yes

4 d No No

Match the event below to the proper category of activity.Operating Activity; Financing Activity (respectively )

1 a.paying employee salaries paying off a bank loan

2 b.obtaining a loan designing a new product

3 c.buying factory equipment refunding a customer's money

4 d.paying off a bank loan buying new tools

Liabilities can be defined as

1 a.resources under an organization's legal control

2 b.obligations owed by an organization to its creditors

3 c.the amount of investment made by owners in a business

4 d.the profits earned by a corporation

Which type of activity is involved when goods are produced and delivered to customers or when services are provided to

customers?

1 a.financing activities

2 b.investing activities

3 c.operating activities

4 d.accounting activities

activities result when a company obtains financial

resources from owners

1 a.Investing

2 b.Operating

3 c.Financing

4 d.Risk free

What effect do revenues and expenses eventually have on Retained Earnings?Revenues; Expenses (respectively)

1 a.decrease decrease

2 b.decrease increase

3 c.increase increase

4 d.increase decrease

Orlando owns a supper club and needed to obtain funds for the business A bank loaned the supper club $20,000 Concerning the supper club, which of the following increased as a result of this loan?

1 a.owners' equity

2 b.liabilities

3 c.revenues

4 d.expenses

Which one of the following is an investing activity?

1 a.sale of worn out factory equipment

2 b.sale of inventory to customers

3 c.collection of a loan

4 d.borrowing money from a bank

Which one of the following statements is generally TRUE

regarding the relationship between the items mentioned?

1 a.an increase in assets will always cause an increase in owners' equity

2 b.a decrease in assets will always cause a decrease in liabilities

3 c.an increase in revenues increases owners' equity

4 d.expenses decrease revenues

Owners’equity will decrease when

1 a.owners receive money from their corporation

2 b.an organization's profits are reinvested in the company

3 c.an organization borrows money

4 d.an organization pays cash for equipment

The following amounts of capital were obtained to start operations

of Lightning Enterprises at the beginning of 2007: Owners'

contribution of cash$80,000; Owners' contribution of machinery & equipment18,000; Loan from the bank 46,000 $144,000 What is the amount of liabilities for this firm?

1 a.$18,000

3 c.$98,000

4 d.$126,000

5 e.$144,000

Lunar Company sold goods to customers from its inventory at a price greater than its cost Which of the following effects would occur as part of this event? Total assets(would increase); Total owners (equity would increase)(respectively)

1 a No No

2 b No Yes

3 c Yes No

4 d Yes Yes

Revenues are recorded when a business

1 a.creates resources by selling goods or services

2 b.borrows money

3 c.receives money from owners of the business

4 d.pays its employees

During an accounting period, total assets increased by $500 while owners’ equity increased by $800 The change in total liabilities during this period must have been a

1 a.$300 increase

3 c.$1,300 increase

4 d.$1,300decrease

Assets can be defined as

1 a.resources under an organization's legal control

2 b.obligations of the organization

3 c.the amount of investment made by owners in a business

4 d.the profits earned by a corporation

Which of the following is an operating activity?

1 a.purchase of equipment

2 b.payment of cash dividends

3 c.sale of equipment

4 d.purchase of inventory

At the end of an accounting period, the amount of net income earned by a company is transferred to the balance sheet and reported under which one of the following categories?

1 a.owners' equity

2 b.liabilities

3 c.assets

4 d.all of the above

Arch Company is a retailer It sold goods to customers for cash, from its inventory Which of the following effects would occur as part of this event? An asset would(be decreased); An asset would (be increased)(respectively)

1 a Yes Yes

2 b Yes No

3 c No Yes

4 d No No

Expenses are recorded when a business

1 a.sells equipment

2 b.consumes resources during the production and sale of goods or services

3 c.distributes money to owners

4 d.hires employees

Investing activities involve

1 a.the purchase of machinery and equipment

2 b.purchasing office supplies

3 c.obtaining financial resources from financial markets

4 d.payment of employee salaries

A decision whether to borrow money or sell stock is an example

of

1 a.a financing decision

2 b.an investing decision

3 c.an operating decision

4 d.a future decision

The methods an organization uses to obtain financial resources from investors, owners, and creditors are called

1 a.operating activities

2 b.financing activities

3 c.investing activities

4 d.marketing activities

Which of these is NOT an expense?

1 a.cost of goods sold

2 b.wages paid to employees for services consumed

3 c.merchandise inventory purchased

4 d.taxes paid to government

Which of the following accounts is a liability?

1 a.interest expense

2 b.interest payable

3 c.interest revenue

4 d.interest receivable

Marvin and Clark formed a sports marketing partnership Each contributed $60,000 cash to the new company When this

information is recorded in the new company's accounting system,

it will affect which of the following?

1 a.assets only

2 b.assets and liabilities

3 c.assets and owners' equity

4 d.liabilities and owners' equity

Tiger Associates provided business services to another

organization As a result of this transaction, Tiger's assets

increased Which accounting term best describes the concept involved in this situation?

1 a.liability

3 c.financing activity

4 d.investing activity

The record that reflects changes in dollar amounts associated with a specific resource or activity is referred to as a(n)

1 a.transaction

2 b.system

3 c.balance

A transaction is

1 a.a record of increases and decreases in the dollar amount associated with

a resource

2 b.an event that causes increases or decreases in an account balance

3 c.another term for the accounting process

4 d.a check register for a bank account

Which of the following is not an asset?

1 a.inventory

2 b.contributed capital

3 c.equipment

4 d.furniture

Which one of the following is NOT an asset?

2 b.cash

3 c.inventory

4 d.equipment

Which of the following is the correct representation of the

accounting equation?

1 a.Assets = Liabilities + Owners' Equity - (Revenues - Expenses)

2 b.Assets + (Revenues + Expenses) = Liabilities + Owners' Equity

3 c.Assets + Liabilities + Owners' Equity = Revenues - Expenses

4 d.Assets - Liabilities = Owners' Equity + (Revenues - Expenses)

73 Free Test Bank for Financial Accounting

Information for Decisions 6th Edition Ingram Multiple Choice Questions - Page 2

Which of the following shows the typical order of the types of activities in the transformation process that takes place in

organizations?

1 a.operating, investing, financing

2 b.financing, investing, operating

3 c.investing, operating, financing

4 d.operating, financing, investing

A credit entry is used to record increases to

1 a.cost of goods sold

2 b.notes payable

3 c.wages expense

4 d.cash

Cat Production Company began operations and acquired

inventory for $80,000 on the first day of August One-half of the inventory purchase price was paid in cash with the balance due in

60 days During August, one-fourth of the inventory was sold to customers for $64,000 cash Wages of $10,000 were paid to employees in cash By month-end, a $600 electric bill had been received but not paid Determine net cash flow from operations for August Net Cash Flow

1 a $14,000

2 b $64,000

3 c $(26,000)

4 d $13,400

The accounting records of Sonia’s Catering show the following balances at December 31:Cash $ 6,000; Notes payable $2,000; Equipment 24,000; Owners' investment 10,000; Merchandise 4,000; Revenue from catering 18,000; Owed to Owners 8,000; Expenses 4,000 Total assets as of December 31 are

1 a.$24,000

2 b.$44,000

4 d.$38,000

Connie started a business by contributing $30,000 cash and a truck worth $34,000 The company then purchased equipment by making a $24,000 down payment (which accounted for half its purchase price) and financed the other half by signing a note payable at the bank After the above transactions, Connie's

company balance sheet is composed of Assets; Liabilities; Equity (respectively)

1 a.$64,000 $0 $64,000

2 b.$88,000 $0 $88,000

3 c.$88,000 $24,000 $64,000

4 d.$112,000 $24,000 $88,000

Which of the following is a cash flow from an investing activity?

1 a.payment for advertising

2 b.cash receipt from a customer for a previous credit sale

3 c.cash received from sale of equipment

4 d.purchase of inventory

Tyler & Company had the following account balances at the end

of September: Cash received from customers$5,400; Sales revenue (all on account) 7,000; Purchase of land (all for

cash)700; Cash paid for equipment2,200; ;Cost of goods

sold3,000; Other operating expenses900 What amounts should

be reported for each of the following? Net Income; Cash Flow

1 a.$8,500 $1,600

2 b.$3,800 $3,200

3 c.$6,300 $(500)

4 d.$3,100 $2,500

On June 1, Tropical Tours started business when Fernando and Juanita each contributed $8,000 to the firm That same day, the company borrowed $10,000 to purchase a truck Immediately after these transactions, total assets equal

1 a.$18,000

3 c.$8,000

4 d.$16,000

Net income can be expressed as

1 a.the excess of revenues over expenses that a business records during a period

2 b.the excess of expenses over revenues that a business records during a period

3 c.the amount of sales that a business reports during a period

4 d.the amount of resources created by a business during a period

Harrison, Inc., had the following transactions during the month of August: 1,sold merchandise for $500,000 cash; 2,paid wages of

$30,000; 3,sold equipment for $100,000; 4,paid $60,000 cash for utilities What was the cash flow from operating activities?

1 a.$510,000

3 c.$470,000

4 d.$540,000

A firm must depend on its _ activities to generate profits

1 a.investing

2 b.operating

3 c.nonrecurring

4 d.financing

On October 1, Hanover Trucking started business when Ed and Ralph each contributed $15,000 to the firm That same day, a

$20,000 truck was purchased with a cash down payment of 5,000 and a loan to be paid in the future for $15,000 No other

transactions occurred in October What were total assets equal to immediately after these transactions:

1 a.$50,000

2 b.$45,000

3 c.$30,000

4 d.$15,000

During the first month of operations, Rodriguez Tax Service

provided services and billed customers in the amount of $7,000

By the end of the first month, $4,600 had been collected and it was expected that the other $2,400 would be collected during the following month On Rodriguez' income statement for the first month, what amount of revenue should be reported?

1 a.$0

2 b.$2,400

3 c.$4,600

Quick Frame Corporation had the following transactions during the month of August:1,Owners started the company by investing

$500,000 in cash; 2,Purchased $100,000 of equipment by making

a $50,000 cash down payment and signed a 90-day note payable for the balance; 3,Purchased a building for $220,000, paying

$20,000 cash and signing a note payable for the remaining

amount; 4,Earned $60,000 of services revenue.What are total assets for the Quick Frame Corporation at the end of August?

1 a.$600,000

2 b.$550,000

3 c.$750,000

Which of the following is an operating activity?

1 a.acquisition of inventory

2 b.contribution of cash from the owner(s) of the business

3 c.sale of long-term fixed assets

4 d.purchase of new factory building

Cohen Enterprises sold inventory for which it had paid $20,000 When this event is recorded in the company's accounting system,

it will affect which of the following categories?

1 a.assets only

2 b.liabilities and owners' equity

3 c.assets, revenues, and expenses

4 d.owners' equity only

Activities that involve the production or delivery of goods for sale

or the providing of services for sale should be listed under which classification on a statement of cash flows?

1 a.financing activities

2 b.refunding activities

3 c.operating activities

4 d.investing activities

When an organization purchases a machine for $12,000 cash, which of the following is true?

1 a.total equity stays the same

2 b.total liabilities decrease

3 c.total expenses increase

4 d.total assets increase

The statement of cash flows reflects

1 a.the costs of resources consumed in producing, selling, and distributing goods and services and the prices of goods and services sold during a period

2 b.the cash consequences of financing, investing, and operating activities during a period

3 c.the resources available for use in the transformation process and claims

to those resources at a point in time

4 d.summaries of accounts by general categories

After months of planning, Alana opened a Natural Foods store on April 1 by investing $15,000 of her own money She spent

$10,000 on furnishings and fixtures that had been delivered and set up the night before A friend had loaned Alana $5,000 which she used to purchase inventory prior to opening When Alana opened for business on April 1, her accounting system should have contained what balances for total assets and total liabilities? Total Assets; Total Liabilities(respectively)

1 a.$20,000 $0

2 b.$20,000 $5,000

3 c.$15,000 $5,000

4 d.$15,000 $0

Which of the following financial statements reports the resources available for use in the transformation process and claims to

those resources at a point in time?

1 a.the income statement

2 b.the cash-flow statement

3 c.the balance sheet

4 d.the retained earnings statement

Which of the following accounts would be increased as a result of the sale of inventory to a customer?

1 a.cost of goods sold

2 b.owners' equity