Chapter 02 – Investing and Financing Decisions and the Balance Sheet
49. Which of the following would not be currently reported as an expense on the income
statement?
50. Which of the following liability accounts does not usually require a future cash payment?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
51. Which of the following transactions wouldn’t be considered an external exchange?
52. Which of the following reflects the impact of a transaction where $200,000 cash was
invested by stockholders in exchange for stock?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
53. A corporation purchased factory equipment using cash. Which of the following statements
regarding this purchase is false?
54. Which of the following direct effects on the accounting equation isn’t possible as a result
of a single business transaction which impacts only two accounts?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
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55. Which of the following direct effects on the accounting equation isn’t possible as a result
of a single business transaction?
56. A company’s January 1, 2010 balance sheet reported total assets of $150,000 and total
liabilities of $60,000. During January 2010, 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, 2010 balance sheet would report which of the following?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
57. Which of the following happens when equipment is purchased using cash?
58. Which of the following describes the impact of purchasing supplies for cash on the
balance sheet?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
59. Which of the following describes the impact of paying a current liability using cash on the
balance sheet?
60. Which of the following describes the impact on the balance sheet when cash is received
from the collection of an account receivable?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
61. A corporation has $80,000 in total assets, $36,000 in total liabilities, and a $12,000 credit
balance in retained earnings. What is the balance in the contributed capital account?
62. The duality (or duality of effects) concept states that
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
63. Which of the following is not considered to be a recordable transaction?
64. Which of the following transactions will cause both the left and right side of the
accounting equation to decrease?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
65. When a company buys equipment for $150,000 and pays for one third in cash and the
other two thirds is financed by a note payable, which of the following are the effects on the
accounting equation?
66. Which of the following describes the impact on the balance sheet when a company uses
cash to purchase the stock of another company?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
67. Which of the following statements is incorrect?
68. Selling stock to investors for cash would result in which of the following?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
69. Borrowing cash from a bank would result in which of the following?
70. 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?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
71. Cadet Company paid an accounts payable of $1,000. This transaction should be recorded
as follows on the payment date.
72. Which of the following correctly describes the recording of a dividend declaration by a
company’s board of directors?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
73. Which of the following statements is correct?
74. Which of the following journal entries is correct when a business entity purchases land
costing $30,000 by signing a one-year note payable?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
75. Which of the following journal entries is correct when a business entity issues stock to
stockholders in exchange for cash?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
76. Which of the following journal entries is correct when a business entity purchases a
building by paying cash and signing a note payable?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
77. Which of the following journal entries is correct when a business entity builds an addition
to the factory building by paying cash to a contractor?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
78. Which of the following journal entries is correct when a business entity uses cash to pay
an account payable?
79. Which of the following transactions would result in an increase in the current ratio?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
80. Which of the following transactions would result in a decrease in the current ratio?
81. Which of the following account balances would not be included in the calculation of the
current ratio?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
82. Which of the following statements does not properly describe the current ratio?
Chapter 02 – Investing and Financing Decisions and the Balance Sheet
83. The Pioneer Company has provided the following account balances:
Cash $38,000;
Short-term investments $4,000;
Accounts receivable $6,000;
Inventory $48,000;
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;
Contributed capital $180,000;
Retained earnings $60,000.
What is Pioneer’s current ratio?