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1 Copyright © 2015 Pearson Education, Inc.Financial Accounting, 10e (Harrison/Horngren/Thomas) Chapter 2 Transaction Analysis
2.1 Learning Objective 2-1
1) A transaction is any event that has a financial impact on the business and that can be measured reliably.
Answer: TRUE
Diff: 1
LO: 2-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
2) Which of the following is NOT a business transaction?
- A company buys goods on account.
- A company sells land for cash.
- A company fired 10 percent of the employees due to lackluster sales.
- A company borrows money from the bank.
Answer: C
Diff: 2
LO: 2-1
AACSB: Analytical Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement
2.2 Learning Objective 2-2
1) The account is the basic summary device used in accounting.
Answer: TRUE
Diff: 1
LO: 2-2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
2) An accounts receivable usually specifies an interest rate.
Answer: FALSE
Diff: 2
LO: 2-2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
Financial Accounting 10th Edition Harrison Test Bank Visit TestBankDeal.com to get complete for all chapters
2 Copyright © 2015 Pearson Education, Inc.3) Assets include cash, land, and accounts payable.
Answer: FALSE
Diff: 2
LO: 2-2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement, Reporting
4) Prepaid expenses are an asset.
Answer: TRUE
Diff: 2
LO: 2-2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement, Reporting
5) A record of all the changes in a particular asset during a period of time is found in a(n):
- transaction.
- trial balance.
- prior period's balance sheet.
- account.
Answer: D
Diff: 1
LO: 2-2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
6) All of the following accounts would be considered assets EXCEPT for:
- Cash.
- Retained Earnings.
- Prepaid Expenses.
- Notes Receivable.
Answer: B
Diff: 2
LO: 2-2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
3 Copyright © 2015 Pearson Education, Inc.7) Which account includes bank account balances in multiple checking accounts?
- Accounts Receivable
- Notes Receivable
- Cash
- Prepaid Expenses
Answer: C
Diff: 1
LO: 2-2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
8) Which of the following is a CORRECT statement?
- Shareholders' equity is also called Proprietorship Equity.
- A proprietorship has more than one capital account.
- A partnership has a separate owner's equity account for each partner.
- Retained earnings is the owner's investment in the corporation.
Answer: C
Diff: 2
LO: 2-2
AACSB: Reflective Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement
9) Notes payable, accounts payable, taxes payable and salaries payable are all examples of:
- liabilities.
- revenues.
- expenses.
- assets.
Answer: A
Diff: 1
LO: 2-2
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement, Reporting
10) Which transaction increases stockholders' equity?
- sale of common stock
- declared dividends
- Total expenses for the period exceed total revenues for the period.
- payment of operating expenses
Answer: A
Diff: 1
LO: 2-2
AACSB: Analytical Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement, Reporting
4 Copyright © 2015 Pearson Education, Inc.
11) Which transaction decreases stockholders' equity?
- sale of common stock
- purchase of equipment with cash
- Total revenues for the period exceed total expenses for the period.
- Total expenses for the period exceed total revenues for the period.
Answer: D
Diff: 1
LO: 2-2
AACSB: Analytical Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement
12) Which transaction decreases stockholders' equity?
- purchase inventory on account
- provided services on account
- provided services and received cash from the customer immediately
- Employees worked one week and were paid at the end of the week.
Answer: D
Diff: 1
LO: 2-2
AACSB: Analytical Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement
2.3 Learning Objective 2-3
1) If a company declares and pays a dividend to its stockholders, both cash and expenses will decrease.
Answer: FALSE
Diff: 2
LO: 2-3
AACSB: Analytical Thinking
AICPA Bus Persp: Strategic/Critical Thinking
AICPA Functional: Measurement
2) Generally companies will prepare financial statements:
- after every transaction.
- only when both the balance sheet and income statement are affected.
- at the end of the accounting period.
- at the close of every business day.
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