Exam (elaborations)

TEST BANK for Fundamentals of Financial Accounting 6th Edition by Fred Phillips, Shana Clor-Proell, Robert Libby, Patricia Libby

0 purchase

Course
Accounting

Institution
Accounting

TEST BANK for Fundamentals of Financial Accounting 6th Edition by Fred Phillips, Shana Clor-Proell, Robert Libby, Patricia Libby. Chapter 1: Business Decisions and Financial Accounting Chapter 2: The Balance Sheet Chapter 3: The Income Statement Chapter 4: Adjustments, Financial Statements, And Fin...

[Show more]

Preview 4 out of 1675 pages

View example

Uploaded on October 16, 2024
Number of pages 1675
Written in 2024/2025
Type Exam (elaborations)
Contains Questions & answers

test bank

DreamAchievers Member since 1 year 251 documents sold

$19.99

Add to cart

Add to wishlist

100% satisfaction guarantee
Immediately available after payment
Both online and in PDF
No strings attached

MEDEXCELLENCE

Fundamentals of Financial Accounting, 6e (Phillips)
Chapter 1 Business Decisions and Financial Accounting

1) Stockholders are owners of a corporation. All Chapters
Answers Included
Answer: TRUE
Explanation: Stockholders are the owners of a corporation.
Difficulty: 1 Easy
Topic: Accounting for Business Decisions
Learning Objective: 01-01 Describe various organizational forms and business decision makers.

S
Bloom's: Understand
AACSB: Analytical Thinking

R
Accessibility: Keyboard Navigation

VE
2) All corporations acquire financing by issuing stock for sale on public stock exchanges.

Answer: FALSE
Explanation: Most corporations start out as private companies and will apply to become public

borrowing from banks.
Difficulty: 2 Medium
IE
companies ("go public") if they need a lot of financing. Financing can also be acquired by
H
Topic: Organizational Forms
Learning Objective: 01-01 Describe various organizational forms and business decision makers.
AC

Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
M

3) You paid $10,000 to buy 1% of the stock in a corporation that is now bankrupt. The company
owes $10 million dollars to its creditors. As a result of the bankruptcy, you are responsible for
EA

paying $100,000 (or $10 million × 1%) of the amount owed to the creditors.

Answer: FALSE
Explanation: Unlike sole proprietorships and partnerships, a corporation is a separate entity from
R

both legal and accounting perspectives. This means that a corporation, not its owners, is legally
responsible for its own taxes and debts.
D

Difficulty: 2 Medium
Topic: Organizational Forms
Learning Objective: 01-01 Describe various organizational forms and business decision makers.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

1

, MEDEXCELLENCE

4) Cash paid for wages is an example of an operating activity on the statement of cash flows.

Answer: TRUE
Explanation: Cash flows from running the business, including cash paid for wages, are operating
activities on the statement of cash flows.
Difficulty: 1 Easy
Topic: Financial Statements
Learning Objective: 01-02 Describe the purpose, structure, and content of the four basic
financial statements.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

S
R
5) Borrowing money from a bank is a financing activity on the statement of cash flows.

VE
Answer: TRUE
Explanation: On the statement of cash flows, borrowing and repaying bank loans are financing
activities.
Difficulty: 1 Easy
Topic: Financial Statements
IE
Learning Objective: 01-02 Describe the purpose, structure, and content of the four basic
financial statements.
H
Bloom's: Understand
AACSB: Analytical Thinking
AC

Accessibility: Keyboard Navigation

6) The daily activities involved in running a business, such as buying supplies and paying
salaries and wages, are classified as operating activities on the statement of cash flows.
M

Answer: TRUE
EA

Explanation: Buying supplies and paying salaries and wages are normal operating costs on the
statement of cash flows.
Difficulty: 1 Easy
Topic: Financial Statements
R

Learning Objective: 01-02 Describe the purpose, structure, and content of the four basic
financial statements.
D

Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

2

, MEDEXCELLENCE

7) Stockholders' equity is the difference between a company's assets and its liabilities.

Answer: TRUE
Explanation: Assets = Liabilities + Stockholders' Equity; therefore, Assets – Liabilities =
Stockholders' Equity
Difficulty: 2 Medium
Topic: The Basic Accounting Equation
Learning Objective: 01-02 Describe the purpose, structure, and content of the four basic
financial statements.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

S
R
8) A company owes $200,000 on a bank loan. It will be reported by the company as Accounts
Payable.

VE
Answer: FALSE
Explanation: Formal debt, evidenced by a written contract or note, is reported as Notes Payable.
Difficulty: 1 Easy
Topic: Financial Statements
IE
Learning Objective: 01-02 Describe the purpose, structure, and content of the four basic
financial statements.
H
Bloom's: Understand
AACSB: Analytical Thinking
AC

Accessibility: Keyboard Navigation

9) Amounts reported on financial statements are sometimes rounded to the nearest million.
M

Answer: TRUE
Explanation: Large businesses often round the numbers on their financial statements to the
EA

nearest thousand or million.
Difficulty: 1 Easy
Topic: Financial Statements
Learning Objective: 01-02 Describe the purpose, structure, and content of the four basic
R

financial statements.
Bloom's: Remember
D

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

3

, MEDEXCELLENCE

10) Accounts Payable, Notes Payable, and Salaries and Wages Payable are examples of
liabilities.

Answer: TRUE
Explanation: An account with the word "payable" in its title is a liability.
Difficulty: 1 Easy
Topic: Financial Statements
Learning Objective: 01-02 Describe the purpose, structure, and content of the four basic
financial statements.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

S
R
11) Dividends are subtracted from revenues on the income statement.

VE
Answer: FALSE
Explanation: The income statement reports revenues and expenses. Dividends are not expenses.
Rather, dividends are an optional distribution of earnings to stockholders, approved by the
company's board of directors, and are presented on the statement of retained earnings.
Difficulty: 2 Medium
Topic: Financial Statements IE
Learning Objective: 01-02 Describe the purpose, structure, and content of the four basic
H
financial statements.
Bloom's: Understand
AC

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

12) If a company reports net income on the income statement, then the statement of cash flows
M

will report the same amount as cash flows from operating activities for the period.
EA

Answer: FALSE
Explanation: Net income is not the same as cash flows from operating activities. Net income is
not necessarily equal to cash because revenues are reported when earned and expenses when
incurred regardless of when cash is received or paid.
R

Difficulty: 2 Medium
Topic: Financial Statements
D

Learning Objective: 01-02 Describe the purpose, structure, and content of the four basic
financial statements.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

4

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 DreamAchievers. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $19.99. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

68175 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 15 years now

Start selling

Exam (elaborations)

TEST BANK for Fundamentals of Financial Accounting 6th Edition by Fred Phillips, Shana Clor-Proell, Robert Libby, Patricia Libby

Document information

Subjects

Written for

Seller

Reviews received

Content preview