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Exam 2: Investing and Financing Decisions and the Accounting System

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Question 21

Multiple Choice

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Which of the following transactions would result in an increase in the current ratio?

A) Collection of cash from an account receivable.
B) Selling shares of stock to stockholders in exchange for cash.
C) Purchasing a building with cash.
D) Declaration of a cash dividend by the board of directors.

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

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Question 22

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Which of the following would result when a company lends cash to a customer in exchange for a ten-month note receivable?

A) A noncurrent asset and an investing cash flow are created.
B) A noncurrent asset and a financing cash flow are created.
C) A current asset and a financing cash flow are created.
D) A current asset and an investing cash flow are created.

E) None of the above
F) All of the above

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Question 23

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The recording of a journal entry precedes the posting to the general ledger.

Accounts payable would be reported within which of the following financial statements?

Complete the following schedule for Blue Eye Company.

Alpha Company issued 1,000 shares of $10 par value common stock to stockholders,in exchange for $15,000 cash.Which of the following correctly describes the impact of this transaction on Alpha's financial statements?

The dual effects concept implies that every transaction has at least two effects on the accounting equation.

Which of the following is not considered to be a recordable transaction?

Which of the following reflects the impact of a transaction where $200,000 cash was invested by stockholders in exchange for stock?

Many valuable internally-developed intangible assets such as trademarks and copyrights are not reported on a company's balance sheet.

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 are Pioneer's total current liabilities?

Selling stock to investors for cash would result in which of the following?

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

Which of the following direct effects on the accounting equation is not possible as a result of a single business transaction which impacts only two accounts?

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.

The Alex Company,a consulting firm,recorded the following selected business transactions during May,2019.Indicate whether each transaction would increase,decrease,or have no effect on the total assets of the company.

For each of the following accounts,indicate whether the account is an asset (A),liability (L),or stockholders' equity (SE)and whether the account has a normal debit (Dr)or normal credit (Cr)balance. 1.Retained Earnings 2.Supplies 3.Additional paid-in capital 4.Accounts payable 5.Accounts receivable 6.Property and equipment 7.Wages payable 8.Prepaid expenses

Which of the following journal entries is correct when a business entity issues common stock,above par value,to stockholders in exchange for cash?

How is the current ratio calculated and what does it measure?

Which of the following statements is correct?