Accounting exam testbank.pdf

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1. Financing that individuals or institutions have provided to a company is A. always classified as liabilities. B. classified as liabilities when provided by creditors and shareholders' equity when... provided by owners. C. always classified as shareholders' equity. D. classified as shareholders' equity when provided by creditors and liabilities when provided by owners. 2. Which of the following would affect shareholders' equity? A. A company borrows $100 million and buys $100 million in equipment. B. A company pays $100 million to shareholders as a dividend. C. A company sells $100 million in assets for $100 million cash. D. A company receives payment for $100 million in accounts receivable. 3. During 2007, a company's assets rise $56,000 and its liabilities rise $38,000. If no dividend is paid and no further capital is contributed, shareholders' equity would: A. rise $56,000. B. rise $18,000. C. fall $38,000. D. fall $94,000. 4. Which of the following is incorrect about the notes to the financial statements: A. explain what accounting policies were used to prepare the financial statements. B. provide additional information about what is included in the financial statements. C. provide additional information about financial matters that are not included in the financial statements. D. certify to the fact that the statements have been audited. 5. Investors are often interested in the amount distributed as dividends. In which section of the financial statements would investors look to find this amount? A. Statement of retained earnings. B. Balance sheet. C. Notes to the financial statements. D. Income statement 6. When is the financial information relevant? A. If it makes a difference in decision making. B. Meets the requirement of Toronto Stock Exchange. C. If it fully depicts the economic substance of business activities. D. If it allows management the discretion when to release it to investors and general public. 7. When is the financial information a faithful representation? A. If it fully depicts the economic substance of business activities B. If it allows management to be faithful to its shareholders C. Meets the requirements of the stock exchanges D. If it makes a difference in decision making 8. The Sweet Smell of Success Fragrance Company borrowed $60,000 from the bank and used all of the money to re-design its new store. Sweet Smell's balance sheet would show this as: A. $60,000 under Furnishings & Equipment and $60,000 under Notes Payable. B. $60,000 under Supplies and $60,000 under Accounts Payable. C. $60,000 under Prepaid Expenses and $60,000 under Accrued Liabilities. D. $60,000 under Other Assets and $60,000 under Other Liabilities. 9. Your company pays back $2 million on a loan it had received earlier from a bank. How does this transaction affect the accounting equation? A. Assets are unchanged, liabilities and shareholders' equity both increase by $2 million. B. Assets decrease by $2 million, liabilities decrease by $2 million, shareholders' equity is unchanged. C. Assets are unchanged, liabilities increase by $2 million, contributed capital decreases by $2 million. D. Assets decrease by $2 million, liabilities are unchanged, contributed capital decreases by $2 million. 10. Which of t [Show More]

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