References
Essay Difficulty: 1 Easy Learning Objective: 01-01 Identify the ways accounting benefits
society.
Indicate whether each of the following statements about accounting information is true or false.
a. Financial accounting is primarily intended to satisfy the information needs of internal stakeholders.
b. Managerial accounting information includes financial and nonfinancial information.
c. The accounting information intended to satisfy the needs of a company's employees is managerial accounting information.
d. GAAP requires that companies adhere to financial accounting standards.
e. Managerial accounting information is usually less detailed than financial accounting information.
a. F
b. T
c. T
d. T
e. F
Financial accounting is primarily intended for external, not internal, stakeholders. Managerial accounting information is usually more detailed than financial
accounting information.
References
Essay Difficulty: 1 Easy Learning Objective: 01-01 Identify the ways accounting benefits
society.
35.
Award: 10.00 points
36.
Award: 10.00 points
Indicate whether each of the following statements about liabilities is true or false.
a. A net loss on the income statement decreases liabilities.
b. The acquisition of a bank loan increases both assets and liabilities.
c. The accounting equation requires that liabilities be equal to stockholders' equity.
d. The amount of a company's liabilities is equal to its assets minus its stockholders' equity.
e. Liabilities are reported on the statement of cash flows of a business.
a. F
b. T
c. F
d. T
e. F
A net loss decreases a company's stockholders' equity, not its liabilities. The accounting equation requires that assets be equal to liabilities plus stockholders'
equity. Liabilities are reported on the balance sheet, not on the statement of cash flows.
References
Essay Learning Objective: 01-04 Show
how business events affect the
accounting equation.
Difficulty: 2 Medium Learning Objective: 01-08
Prepare a statement of cash
flows.
ABC Company earned $2,000 cash for providing services to customers. Indicate whether each of the following statements about the transaction is true or
false.
a. Total liabilities would decrease.
b. Total stockholders' equity would increase.
c. The operating activities section of the statement of cash flows would show a cash inflow.
d. This is an asset exchange transaction.
a. F
b. T
c. T
d. F
Earning cash revenue for providing services to customers will increase assets (cash) and increase stockholders’ equity (retained earnings). Total liabilities will
not be affected. It will be reported as a cash inflow from operating activities on the statement of cash flows. It is an asset source transaction.
References
Essay Learning Objective: 01-04 Show
how business events affect the
accounting equation.
Learning Objective: 01-10 Record business events using a horizontal
financial statements model.
Difficulty: 2 Medium Learning Objective: 01-06 Classify
business events as asset source,
use, or exchange transactions.
37.
Award: 10.00 points
38.
Award: 10.00 points
Indicate whether each of the following statements about retained earnings is true or false.
a. A dividend paid to stockholders decreases retained earnings.
b. Issuing common stock for cash increases retained earnings.
c. The amount of net income for a period must equal retained earnings.
d. The purchase of a truck decreases retained earnings.
e. The amount of net income for a period increases retained earnings.
a. T
b. F
c. F
d. F
e. T
Issuing common stock for cash increases the common stock account, not retained earnings. Net income increases retained earnings, but does not equal its
total. The purchase of a truck increases one asset (truck) and decreases another asset (cash) or increases a liability (note payable). Retained earnings includes
all net income that a company has earned in its existence that has not been paid out in dividends.
References
Essay Learning Objective: 01-04 Show
how business events affect the
accounting equation.
Difficulty: 2 Medium Learning Objective: 01-07
Prepare an income statement, a
statement of changes in
stockholders equity, and a
balance sheet.
Indicate whether each of the following statements about the types of transactions is true or false.
a. An asset source transaction increases total assets and increases claims to assets.
b. The issuance of stock to stockholders for cash would be an example of an asset exchange transaction.
c. Purchasing equipment for cash is an example of an asset use transaction.