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Which of the following statements does not properly describe the current ratio?


A) It measures the ability of a firm to pay its debts in the short-run.
B) It is current assets divided by current liabilities.
C) It is a measure of a firm's short-run liquidity.
D) It measures a firm's ability to pay its long-term debts as they mature.

E) All of the above
F) A) and D)

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The accounts with identification letters for Ward Company are listed below. The accounts with identification letters for Ward Company are listed below. During 2016, the company completed the transactions given below. You are to indicate the appropriate journal entry for each transaction by giving the account letter and amount. Some entries may need three letters. The first transaction is provided as an example. During 2016, the company completed the transactions given below. You are to indicate the appropriate journal entry for each transaction by giving the account letter and amount. Some entries may need three letters. The first transaction is provided as an example. The accounts with identification letters for Ward Company are listed below. During 2016, the company completed the transactions given below. You are to indicate the appropriate journal entry for each transaction by giving the account letter and amount. Some entries may need three letters. The first transaction is provided as an example.

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Which of the following statements is false?


A) Investing cash flows include the cash flows associated with lending money to others.
B) Financing cash flows include the cash flows associated with issuing stock and paying dividends.
C) Financing cash flows include the cash flows associated with borrowing and repaying debt excluding short-term bank loans.
D) Investing cash flows include the cash flows associated with buying and selling noncurrent assets.

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

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Which of the following statements is incorrect?


A) Stockholders' equity accounts normally have credit balances.
B) Liability accounts are decreased by credits.
C) Stockholders' equity accounts are increased by credits.
D) Asset accounts are increased by debits.

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

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For each of the accounts listed below, indicate whether the typical or normal balance is a debit or credit. A. Supplies B. Notes payable C. Retained earnings D. Equipment E. Prepaid insurance expense F. Accounts receivable G. Land H. Additional paid-in capital I. Accounts payable J. Unearned revenue

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A. Debit.
B. Credit.
C. Credit...

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Why is the continuity assumption so important for balance sheet reporting?

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The continuity assumption is also known ...

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A company purchases a delivery van by paying $5,000 cash and by signing a $25,000 note payable. Which of the following correctly describes the recording of the delivery van purchase?


A) The delivery van account is debited for $25,000.
B) Notes payable is debited for $25,000.
C) The delivery van account is debited for $30,000.
D) Cash is debited for $5,000.

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

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Which of the following transactions would create an increase in cash from a financing activity?


A) Issuing shares of common stock to stockholders in exchange for cash.
B) Selling a short-term stock investment in exchange for cash.
C) Selling used equipment, which was a part of property, and equipment for cash.
D) The payment of an account payable.

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

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Which of the following assumptions implies that the assets and liabilities of the business are accounted for separately from the assets and liabilities of the owners?


A) Monetary unit assumption.
B) Continuity assumption.
C) Historical cost principle.
D) Separate entity assumption.

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

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Which of the following transactions would result in a decrease 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 delivery vehicle by signing a long-term note payable.
D) Purchasing land by paying cash.

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

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Why is the historical cost principle so important for balance sheet reporting?

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The historical cost principle is importa...

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The continuity assumption states that a business will continue to operate into the foreseeable future.

A) True
B) False

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The Superior Company has provided the following account balances: Cash $152,000; Short-term investments $18,000; Accounts receivable $36,000; Inventory $116,000; Long-term notes receivable $44,000; Equipment $174,000; Factory Building $270,000; Intangible assets $33,000; Accounts payable $130,000; Accrued liabilities payable $19,000; Short-term notes payable $84,000; Long-term notes payable $169,000. Requirement: What is Superior's stockholders' equity?

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An objective of preparing the trial balance is to test the equality of debits and credits.

A) True
B) False

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A company's January 1, 2016 balance sheet reported total assets of $150,000 and total liabilities of $60,000. During January 2016, 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, 2016 balance sheet would report which of the following?


A) A company's January 1, 2016 balance sheet reported total assets of $150,000 and total liabilities of $60,000. During January 2016, 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, 2016 balance sheet would report which of the following? A) B) C) D)
B) A company's January 1, 2016 balance sheet reported total assets of $150,000 and total liabilities of $60,000. During January 2016, 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, 2016 balance sheet would report which of the following? A) B) C) D)
C) A company's January 1, 2016 balance sheet reported total assets of $150,000 and total liabilities of $60,000. During January 2016, 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, 2016 balance sheet would report which of the following? A) B) C) D)
D) A company's January 1, 2016 balance sheet reported total assets of $150,000 and total liabilities of $60,000. During January 2016, 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, 2016 balance sheet would report which of the following? A) B) C) D)

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

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Which of the following would cause a decrease in cash from investing activities?


A) Purchasing shares of stock of another company.
B) Paying a cash dividend to stockholders.
C) Issuing additional shares of the company's common stock.
D) Using cash to purchase supplies.

E) A) and B)
F) None of the above

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Cadet Company paid an accounts payable of $1,000. This transaction should be recorded on the payment date as follows:


A) Cadet Company paid an accounts payable of $1,000. This transaction should be recorded on the payment date as follows: A) B) C) D)
B) Cadet Company paid an accounts payable of $1,000. This transaction should be recorded on the payment date as follows: A) B) C) D)
C) Cadet Company paid an accounts payable of $1,000. This transaction should be recorded on the payment date as follows: A) B) C) D)
D) Cadet Company paid an accounts payable of $1,000. This transaction should be recorded on the payment date as follows: A) B) C) D)

E) B) and C)
F) All of the above

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The following journal entries with the amounts omitted were taken from the records of Lena Company: The following journal entries with the amounts omitted were taken from the records of Lena Company: Requirement: Write a brief explanation for each of the above transactions. Requirement: Write a brief explanation for each of the above transactions.

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1. Stockholders invested cash into the c...

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Which of the following account balances would not be included in the calculation of the current ratio?


A) Accounts receivable.
B) Short-term notes payable.
C) Equipment.
D) Supplies.

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

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Current assets include accounts receivable and prepaid expenses.

A) True
B) False

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