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Exam 2: The Balance Sheet

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Question 1

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Your company's president donates a large amount of her own money to charity and receives significant publicity that includes the company's name.How would the benefits of this publicity appear on the balance sheet?

A) It would appear as a current asset.
B) It would appear as a liability.
C) It would appear as a long-term asset.
D) It would not appear on the balance sheet.

E) C) and D)
F) None of the above

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Question 2

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For each of the following,indicate how the event would most likely be categorized. OE (Observable External Event) OI (Observable Internal Event) UE (Unobservable Event) NT (No transaction) ____ A company sells $2 million in goods for immediate payment. ____ The company uses up office supplies. ____ The stock market rises 10% and the value of a company's stock increases. ____ Each day the company owes more interest on a loan. ____ A company pays cash to an inventor for the legal rights to produce a new product. ____ Management pays workers an overtime bonus as required by their union contract. ____ A company uses up supplies to manufacture a product. ____ A company receives orders worth $1 million but no down payments.

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OE,OI,NT,U...

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Question 3

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The local branch of the Universal Bank System (UBS) receives money from some of its customers as deposits and lends it to other customers as loans.Which of the following would be true about UBS's financial statements?

If a $100 debit is erroneously posted to an account as a $100 credit,the accounts will be out of balance by $100.

The current ratio will remain unaffected for a company that has simply declared a cash dividend (as opposed to paying it out).

A creditor's claim on a company's assets will always take precedence over the owners of the company.

Which of the following is $\bold{not}$ an example of an asset?

All liabilities require that the company to pay or settle the amount owed at some time in the future.

Within a journal entry,credits are written first and debits are written beneath them indented to the right.

The accounting equation will still balance if a $5,000 liability is misclassified as shareholders' equity.

General Motors (GM)signs a new labour agreement agreeing to give its workers a 5% wage increase next year.This transaction will affect GM's financial statements in the current year.

A chart of accounts is a list of account titles used to record financial transactions.

Park & Company was recently formed with a $5,000 investment in the company by shareholders.The company then borrowed $2,000 from a local bank,purchased $1,000 of supplies on account,and also purchased $5,000 of equipment by paying $2,000 in cash and signing a promissory note for the balance.Based on these transactions,the company's total assets are:

A company disposes of $1 million of its assets.Which of the following could not be true about its effects on the basic accounting equation?

In a T-account debits appear in what manner?

It is possible for a firm to have a negative balance in the retained earnings account.

The Supply Company buys $30,000 of equipment and funds the purchase through liquidating common shares that it owns.What is the impact of this transaction on the basic accounting equation?

According to the principle of conservatism,when faced with uncertainty about the value of an item,a company should use the measure that avoids:

Which of the following would be listed as a noncurrent asset?

Pizza Place Co.went ahead and prepaid one of its expenses,but the clerk looking after the transaction mistakenly debited the transaction as an expense.As a result,: