ch2 - ch2 Student: _ 1. A balance sheet format reports that...

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ch2 Student: ___________________________________________________________________________ 1. A balance sheet format reports that assets equal liabilities plus stockholders' equity. True False 2. Liability accounts are reported on the income statement as they represent goods or services consumed or used. True False 3. A primary objective of accounting is to disclose the fair market value of assets on the balance sheet so investors and creditors know their current value. True False 4. Under the separate entity assumption, it is assumed that a business will continue to operate into the foreseeable future. True False 5. The historical cost principle measures assets and liabilities at the historical cash-equivalent amounts. True False 6. Liabilities are listed on the balance sheet in the order of their maturity, meaning how soon they are due to be paid. True False 7. An "account" is a standardized format used to accumulate the effects of transactions on each financial statement item. True False 8. The payment of a liability in cash will decrease stockholders' equity. True False 9. The purchase of equipment for cash has no effect on total assets. True False 10. The duality of effects means that every transaction must affect both sides of the accounting equation. True False 11. When a business borrows money from a bank, both the left and right sides of the accounting equation increase. True False 1
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12. It is not possible for the left side of the accounting equation to both increase and decrease as a result of the same transaction. True False 13. A T-account shows total debits of $26,000 and total credits of $20,000; therefore, it has a $6,000 debit balance. True False 14. Debits always increase and credits always decrease an account. True False 15. The chart of accounts of a company is the complete listing of all accounts and accounts numbers. True False 16. If you want to know the balance of the supplies account, that information would be found in the general ledger. True False 17. The normal balance for an asset account is a debit and the normal balance for a liability account is a credit. True False 18. The financial leverage ratio is computed by dividing average total assets by average stockholders' equity. True False 19. When a company borrows money from a bank, it leads to a cash inflow from an investing activity. True False 20. When a loan is repaid to the bank it leads to an inflow of cash from a financing activity. True False 21. Which of the following statements about stockholders' equity is not correct? A. Stockholders' equity is the shareholders' residual interest in the company resulting from the difference in assets and liabilities. B. Stockholders' equity accounts are increased with credits. C. Stockholders' equity results only from contributions of the owners.
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ch2 - ch2 Student: _ 1. A balance sheet format reports that...

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