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Exam 2: The Balance Sheet

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Question 51

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Which of the following is not an example of an asset?

A) Notes receivable.
B) Supplies.
C) Prepaid Insurance.
D) Unearned revenues.

E) A) and D)
F) B) and C)

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Question 52

Multiple Choice

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A company borrows $2 million from its bank.It then uses this money to buy equipment.How does this transaction affect the accounting equation?

A) Assets and Liabilities both rise $2 million.
B) Assets and Shareholders' Equity both fall $2 million.
C) Assets,Liabilities,and Shareholders' Equity are unchanged.
D) Shareholders' Equity rises $2 million and Liabilities fall $2 million.

E) A) and D)
F) B) and D)

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Question 53

Multiple Choice

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Which concept should be applied when reporting a piece of land that was bought for $50,000 five years ago,and which would probably now sell for $80,000?

A credit would decrease the balance in which of the following account?

Across all accounts,the total value of all debits must equal the total value of all credits. BT: Comprehension

Your company pays back $2 million on a loan it had received earlier from a bank.How does this transaction affect the accounting equation?

The final balance of the Cash account would be:

The basic accounting equation must always balance for each transaction. BT: Knowledge

The total value of all debits to a particular account must equal the total value of all credits to that account. BT: Comprehension

According to the cost principle,assets are valued at their replacement cost. BT: Comprehension

If a company borrows money from a bank and signs an agreement to repay the loan several years from now,in which account would the company report the amount borrowed?

Consider the data in the Inventories T-account shown below and the partial listing of account balances at the end of the year. Partial listing of account balances at the end of the year: The amount of Total Current Assets that would be reported on the company's balance sheet at the end of the year would be:

A "classified" balance sheet is one that contains privileged information. BT: Comprehension

Which of the following is true?

The balance sheet for Toronto Pets Inc.,as of June 30,2011 is shown below.During July,2011,shareholders contribute $300,000 cash for additional ownership shares.The company pays $550,000 in cash and signs $150,000 in promissory notes to buy some new stores. Show the journal entries and the effects of these transactions on the basic accounting equation. Show the balance sheet as of July 31,2008,after these transactions have been made,assuming there was no other activities in July 2011. $\begin{array}{c}\text {TORONTO PETS Inc.,}\\\text { BAL ANCE SHEET}\\\text { At JUNE 30, 2011}\\\\\begin{array}{lllr}\text { Assets}&&\text { Liabilities}\\\text { Cash } & \$ 732,600 & \text { Accounts Payable } & \$ 349,200 \\\text { Accounts Receivable } & 419,200 & \text { Notes Payable } & \underline{268.900} \\\text { Inventories } & 58,400 & & \\& & \text { Total Liabilities } & \underline{618,100}\\\text { Property, Plant and } \\\text { Equipment } & 118,500 \\\text { Other Assets } & \underline{69,400} &\text { Shareholders' Equity }\\&&\text { Contributed Capital } & 662,100 \\&&\text { Retained Earnings } & \underline{117,900} \\&&\text { Total Shareholders' Equity } & \underline{\underline{780,000}}\\\text { Total Assets } & \$ 1.398 .100 & \text { Total Liabilities and } &\$1.398.100\\&&\text { Shareholders' Equity }\end{array}\end{array}$

On January 1,2010,Yukon Inc.,had assets of $156,000 and shareholders's equity of $88,000.During the year assets increased by $35,000 and shareholders's equity decreased by $27,500.What were the liabilities on December 31,2011?

Which of the following is the financing that a business acquires through owners' contributions and reinvestment of profits?

What would be the current ratio for the above company?

Your company orders and broadcasts a 30 second advertisement during the Super Bowl for $1.2 million.It is legally obligated to pay for this service but has not yet done so.

You are pleasantly surprised to discover that a popular actress appears on The Tonight Show wearing your company's jeans.As a result of that your company's sales increase by $500,000.When the actress appeared on TV,you would have recorded an asset because the TV appearance was expected to bring future economic benefits to your company. BT: Evaluation