Exam (elaborations)
Fundamentals of Financial Accounting 6Th Edition by Fred Phillips - Test Bank
- Course
- Institution
Test Bank For Fundamentals of Financial Accounting 6Th Edition by Fred Phillips
[Show more]
Seller
Follow
ExamsExpert
Reviews received
Content preview
,Fundamentals of Financial Accounting, 6e (Phillips)Chapter 1 Business Decisions and Financial Accounting
1) Stockholders are owners of a corporation.
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.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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
companies ("go public") if they need a lot of financing. Financing can also be acquired by
borrowing from banks.
Difficulty: 2 Medium
Topic: Organizational Forms
Learning Objective: 01-01 Describe various organizational forms and business decision makers.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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
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
both legal and accounting perspectives. This means that a corporation, not its owners, is legally
responsible for its own taxes and debts.
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
Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
,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
5) Borrowing money from a bank is a financing activity on the statement of cash flows.
Answer: TRUE
Explanation: On the statement of cash flows, borrowing and repaying bank loans are financing
activities.
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
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.
Answer: TRUE
Explanation: Buying supplies and paying salaries and wages are normal operating costs 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
2
Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
, 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
8) A company owes $200,000 on a bank loan. It will be reported by the company as Accounts
Payable.
Answer: FALSE
Explanation: Formal debt, evidenced by a written contract or note, is reported as Notes Payable.
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
9) Amounts reported on financial statements are sometimes rounded to the nearest million.
Answer: TRUE
Explanation: Large businesses often round the numbers on their financial statements to the
nearest thousand or million.
Difficulty: 1 Easy
Topic: Financial Statements
Learning Objective: 01-02 Describe the purpose, structure, and content of the four basic
financial statements.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
3
Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent 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 ExamsExpert. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $30.76. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
83637 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now