Exam (elaborations)
Financial Accounting Robert Libby 10th Edition- Test Bank
- Course
- Institution
Financial Accounting Robert Libby 10th Edition- Test Bank
[Show more]
Seller
Follow
evileye251
Reviews received
Content preview
,Financial Accounting, 10e (Libby)Chapter 1 Financial Statements and Business Decisions
1) A business entity's accounting system creates financial accounting reports which are provided
to external decision makers.
Answer: TRUE
Explanation: The accounting system collects financial data and produces reports used by both
internal decision makers and external decision makers.
Difficulty: 1 Easy
Topic: Accounting system-Information users
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2) Business managers utilize managerial accounting reports to plan and manage the daily
operations.
Answer: TRUE
Explanation: Managerial accounting reports are for internal use to assist managers with day-to-
day operations. Unlike financial accounting reports, managerial reports are for internal use.
Difficulty: 1 Easy
Topic: Accounting system-Information users
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
3) Borrowing money is an investing activity.
Answer: FALSE
Explanation: Borrowing money is a form of financing and therefore is a financing activity.
Difficulty: 1 Easy
Topic: Accounting system-Information conveyed
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
1
Copyright © 2020 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written onsent of McGraw-Hill Education.
,4) The balance sheet includes assets, liabilities, and stockholders' equity as of a point in time.
Answer: TRUE
Explanation: The balance sheet reports the amount of assets, liabilities, and stockholders' equity
of an entity at a point in time.
The balance sheet is referred to as a financial position statement; listing assets, liabilities, and
equity accounts as of a specific date.
Difficulty: 1 Easy
Topic: Financial statements—Balance sheet
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
5) Revenue is recognized within the income statement during the period in which cash is
collected.
Answer: FALSE
Explanation: Revenue is recognized within the income statement during the period in which
revenue is earned.
Difficulty: 1 Easy
Topic: Financial statements—Income statement
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
6) Total assets are $37,500, total liabilities are $20,000 and common stock is $10,000; therefore,
retained earnings are $7,500.
Answer: TRUE
Explanation: $37,500 = $20,000 + $10,000 + X; X = $7,500
Difficulty: 2 Medium
Topic: Financial statements—Balance sheet
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
2
Copyright © 2020 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written onsent of McGraw-Hill Education.
, 7) For the current year, net income of Carol Company is $20,000 and dividends declared are
$6,000; therefore, retained earnings have increased $26,000 during the year.
Answer: FALSE
Explanation: Retained earnings = Net income less dividends declared. Therefore, retained
earnings have increased by $20,000 less $6,000 = $14,000.
Difficulty: 1 Easy
Topic: Financial statements—Stockholders equity
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
8) The income statement is a measure of an entity's economic performance for a period of time.
Answer: TRUE
Explanation: The income statement reports the performance of a business during the accounting
period.
Difficulty: 1 Easy
Topic: Financial statements—Income statement
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
9) The accounting equation states that Assets = Liabilities + Stockholders' Equity.
Answer: TRUE
Explanation: The accounting equation, also known as the balance sheet equation, states that
Assets = Liabilities + Stockholders' Equity.
Difficulty: 1 Easy
Topic: Financial statements—Balance sheet
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
3
Copyright © 2020 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written onsent of McGraw-Hill Education.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller evileye251. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $26.78. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
62890 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now