FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 2: Investing and Financing Decisions and the Accounting System

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

Abe Cox is the sole owner and manager of Cox Auto Repair Shop. In 20A, Cox purchased a new automobile for personal use and continued to use an old truck in the business. Which of the following fundamentals prevents Cox from recording the cost of the new automobile as an asset to the business?

A) Full disclosure.
B) Revenue principle.
C) Separate-entity assumption.
D) Historical cost principle.

Correct Answer

verified

Show Answer

Question 32

Multiple Choice

Review LaterAdd Note

Review Later

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

A) We collect cash from a customer who owed us money
B) We borrow money from the bank
C) We pay a supplier for inventory we previously bought on account
D) We purchase equipment for cash

Correct Answer

verified

Show Answer

Question 33

Essay

Review LaterAdd Note

Match the terminology with the description by entering the proper letter in the space to the left. A. Credits B. Share Capital C. Cost principle D. Transaction E. Debits F. Liability G. Statement of financial position H. Primary objective of external financial reporting I. Separate-entity assumption J. Retained earnings K. As at December 31, 20A L. For the period ended December 31, 20A M. None of the above is correct 1. Increase assets and decreases shareholders'' equity. 2. An exchange between an entity and another party. ____ 3. Normal balances for liabilities. ____ 4. To provide useful economic information about a business to help external parties make sound financial decisions. 5. Accounting assumption that requires assets to be recorded at their cash equivalent cost. ____ 6. Cumulative earnings that have not been distributed to the owners. ____ 7. A debt owed by the entity. ____ 8. Statement of financial position. 9. Account for a business separate from its owners. 10. Dating of the statement of financial position (20A).

Scott, Kim and Koko organized the SKK Corporation on January 1, 20A. Each of these owners invested $30,000 cash and received shares. Below are selected transactions that were completed during January. (A) Give the entry on SKK's books for each transaction: (1) Sold shares to the owners. (2) Borrowed $100,000 on one-year note payable. (3) Purchased land by signing a $20,000 note payable. (4) Paid $5,000 of trade payables. (5) Purchased two service vehicles, $21,000 each; paid cash. (6) Accepted a promissory note of $1,000 from a customer. (B) Complete the following based only on the 6 transactions above: Assets $ Liabilities $ Shareholders' equity $

Dow Construction Company reports a net use of cash for investing activities of $1.2 million and a net source of cash provided by financing of $.8 million. What was the effect on the cash balance?

Collection of a $600 accounts receivable

Normally, asset accounts will have credit balances and liability accounts will have debit balances.

Which of the following would cause an inflow of cash?

The payment of a liability in cash will decrease shareholders' equity.

The trade payables account has a beginning balance of $1,000 and we purchased $3,000 of inventory on credit during the month. The ending balance was $800. How much did we pay our creditors during the month?

Faithful representation means information must be free from material error, neutral and complete.

Assets are economic resources controlled by an entity as a result of past transactions or events and for which future economic benefits may be obtained.

It is assumed that the activities of Petro Canada Corporation can be distinguished from those of Imperial Oil Limited because of the

Investing activities include

The continuity assumption is inappropriate when

On the income statement, assets should always equal liabilities plus shareholders' equity.

Which one of the following represents the expanded basic accounting equation?

Calculating financial ratios can give clues to underlying conditions that may not be noticed by examining each financial statement item separately.

Analyze the transactions of a business organized as a corporation described below and indicate their effect on the basic accounting equation. Use a plus sign (+) to indicate an increase and a minus sign ( to indicate a decrease.

When recording transactions in T-account format, we must add an additional step to the transaction analysis process. Which of the following is the additional step?