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Exam 2: Investing and Financing Decisions and the Balance Sheet

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Question 61

Multiple Choice

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Which of the following would result when a company pays a previously declared cash dividend?

A) Current liabilities are reduced and a financing cash flow is created.
B) Stockholders' equity is reduced and a financing cash flow is created.
C) Current assets are reduced and an investing cash flow is created.
D) Stockholders' equity is reduced and an investing cash flow is created.

E) A) and B)
F) C) and D)

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Question 62

Multiple Choice

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A corporation has $80,000 in total assets,$36,000 in total liabilities,and a $12,000 credit balance in retained earnings.What is the balance in the contributed capital account?

A) $56,000
B) $44,000
C) $48,000
D) $32,000

E) A) and B)
F) A) and C)

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Question 63

True/False

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In order for information to be reliable the information needs to be provided on a timely basis.

The Pioneer Company has provided the following account balances: Cash $38,000; Short-term investments $4,000; Accounts receivable $6,000; Inventory $48,000; 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; Contributed capital $180,000; Retained earnings $60,000. What are Pioneer's total current assets?

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

For each of the accounts listed below,indicate whether the typical or normal balance is a debit or credit. $\begin{array}{l}\begin{array}{l}\text { 1. Unearned revenue } \\\text {2. Accounts receivable } \\\text {3. Retained earnings } \\\text {4. Prepaid insurance } \\\text { 5. Notes payable } \\\text { 6. Contributed capital} \\\text { 7. Accounts payable} \\\text { 8. Land }\\\text { 9. Inventory }\\\text { 10. Equipment }\\\end{array}\begin{array}{rl}\text {Debit 9}\\\text {Credit 5}\\\text {Credit 3}\\\text {Debit 10}\\\text {Debit 4}\\\text {Debit 2}\\\text {Debit 8}\\\text {Credit 6}\\\text {Credit 7}\\\text {Credit 1}\\\end{array}\end{array}$

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. $\begin{array} { | l | l | l | l | } \hline { \text { Transaction } } && \text { Type of Activity } & \text { Effect on Cash } \\\hline \text { Ex. } & \text { Paid dividends to the owners } & \text { F } & - \\\hline \text { A. } & \begin{array} { l } \text { Purchased equipment to use in the } \\\text { business. }\end{array} & & \\\hline \text { B. } & \text { Issued stock for cash. } & & \\\hline \text { C. } & \text { Borrowed money at the bank. } & & \\\hline \text { D. } & \begin{array} { l } \text { Sold a piece of land adjacent to the } \\\text { plant. }\end{array} & & \\\hline \text { E. } & \begin{array} { l } \text { Paid the principal balance of a note } \\\text { payable. }\end{array} & & \\\hline\end{array}$

Which of the following does not correctly describe a business transaction?

Which of the following statements about stockholders' equity is false?

What is the primary objective of financial reporting?

For each of the following accounts,indicate whether the account is an asset (A),liability (L),or stockholders' equity (SE)and whether the account usually has a debit (Dr)or credit (Cr)balance. $\begin{array}{l}\begin{array}{l}\text { 1. Inventory } \\\text { 2. Accounts receivable } \\\text { 3. Contributed Capital } \\\text { 4. Prepaid expenses } \\\text { 5. Wages payable } \\\text { 6. Property and equipment } \\\text { 7. Retained Earnings } \\\text { 8. Accounts payable }\end{array}\begin{array}{rl}\mathrm{SE}, \mathrm{Cr} & 7 \\\mathrm{A}, \mathrm{Dr} & 1 \\\mathrm{SE}, \mathrm{Cr} &3 \\\mathrm{~L}, \mathrm{Cr} & 8 \\\mathrm{~A}, \mathrm{Dr} & 2 \\\mathrm{~A}, \mathrm{Dr} & 6 \\\mathrm{~L}, \mathrm{Cr} & 5 \\\mathrm{~A}, \mathrm{Dr} & 4\end{array}\end{array}$

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 lent to an employee; the employee signed a six-month note in exchange for the loan. How much are Warren's total assets at the end of April?

The current assets section of a balance sheet includes both inventory and accounts receivable.

Which of the following direct effects on the accounting equation isn't possible as a result of a single business transaction?

A company's January 1,2010 balance sheet reported total assets of $150,000 and total liabilities of $60,000.During January 2010,the company completed the following transactions: (A) paid a note payable using $10,000 cash (no interest was paid) ; (B) collected a $9,000 accounts receivable; (C) paid a $5,000 accounts payable; and (D) purchased a truck for $5,000 cash and by signing a $20,000 note payable from a bank.The company's January 31,2010 balance sheet would report which of the following? $\begin{array} { l l c } { \text { Assets } } & \text { Liabilities } & \text { Stockholders’ Equity } \\\text { A. } \$ 150,000 & \$ 60,000 & \$ 90,000 \\\text { B. } \$ 155,000 & \$ 65,000 & \$ 90,000 \\\text { C. } \$ 160,000 & \$ 75,000 & \$ 85,000 \\\text { D. } \$ 170,000 & \$ 100,000 & \$ 70,000\end{array}$

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

Which of the following statements is false?

Which of the following best describe financing activities?

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

Which of the following statements is correct?