FOR INSTRUCTOR USE ONLY

FOR INSTRUCTOR USE ONLY

CHAPTER 2

A FURTHER LOOK AT FINANCIAL STATEMENTS

SUMMARY OF QUESTIONS BY LEARNING OBJECTIVE AND BLOOM’S TAXO NOMY

Item LO BT Item LO BT Item LO BT Item LO BT Item LO BT True-False Statements

1. 1 K 12. 3 C 23. 5 K 34. 7 K 45. 7 K

2. 1 K 13. 3 C 24. 5 K 35. 7 C 46. 7 K

3. 1 K 14. 3 K 25. 5 C 36. 7 K 47. 7 K

4. 1 K 15. 4 K 26. 6 K 37. 7 K 48. 7 K

5. 1 C 16. 4 C 27. 6 K 38. 7 C 49. 7 K

6. 1 K 17. 4 K 28. 6 K 39. 7 K 50. 7 K

7. 1 C 18. 4 K 29. 7 K 40. 7 K 51. 7 K

8. 2 K 19. 4 K 30. 7 K 41. 7 K 52. 7 K

9. 2 C 20. 5 K 31. 7 K 42. 7 K 53. 7 K

10. 2 K 21. 5 K 32. 7 C 43. 7 K 54. 7 K

11. 3 K 22. 5 K 33. 7 K 44. 7 K 55. 7 K

Multiple Choice Questions

56. 1 K 86. 1 AP 116. 4 K 146. 4 AP 176. 7 K

57. 1 K 87. 1 AP 117. 4 K 147. 4 AP 177. 7 C

58. 1 K 88. 1 AP 118. 4 C 148. 4 K 178. 7 C

59. 1 K 89. 1 AP 119. 4 K 149. 5 K 179. 7 C

60. 1 K 90. 4 AP 120. 4 K 150. 5 K 180. 7 K

61. 1 K 91. 4 AP 121. 4 K 151. 5 K 181. 7 C

62. 1 K 92. 2 K 122. 4 K 152. 5 AP 182. 7 C

63. 1 K 93. 2 AP 123. 4 C 153. 5 AP 183. 7 C

64. 1 K 94. 2 AP 124. 4 C 154. 5 AN 184. 7 C

65. 1 K 95. 2 K 125. 4 K 155. 5 AP 185. 7 K

66. 1 K 96. 2 K 126. 4 K 156. 5 AP 186. 7 C

67. 1 K 97. 2 C 127. 1 AP 157. 5 C 187. 7 C

68. 1 K 98. 2 K 128. 4 AP 158. 6 K 188. 7 K

69. 1 K 99. 2 AN 129. 4 AP 159. 6 K 189. 7 K

70. 1 K 100. 2 AN 130. 4 AP 160. 6 K 190. 7 K

71. 1 K 101. 2 AP 131. 2 AP 161. 6 K 191. 7 K

72. 1 AP 102. 2 AN 132. 4 AP 162. 7 K 192. 7 C

73. 1 K 103. 3 AP 133. 4 AP 163. 7 K 193. 7 K

74. 2 K 104. 3 AP 134. 4 AP 164. 7 K 194. 7 K

75. 1 AP 105. 3 C 135. 2 AP 165. 7 K 195. 7 K

76. 1 AP 106. 3 K 136. 4 AP 166. 7 K 196. 7 K

77. 1 AP 107. 3 K 137. 4 K 167. 7 K 197. 7 K

78. 4 AP 108. 3 C 138. 4 K 168. 7 K 198. 7 C

79. 4 AP 109. 3 C 139. 4 K 169. 7 K 199. 7 C

80. 1 AP 110. 3 C 140. 4 C 170. 7 K 200. 7 K

81. 1 AP 111. 3 AP 141. 4 C 171. 7 K 201. 7 K

82. 1 AP 112. 3 AP 142. 4 C 172. 7 K 202. 7 C

83. 4 AP 113. 3 AN 143. 4 C 173. 7 K 203. 7 C

84. 4 AP 114. 3 AN 144. 4 AP 174. 7 K 204. 7 C

85. 1 AP 115. 4 K 145. 4 AP 175. 7 K

Brief Exercises

205. 1 AP 207. 3 C 209. 7 K 211. 7 C 213. 7 C

206. 2 AP 208. 4 AP 210. 7 K 212. 7 C 214. 7 K

Financial Accounting International Student 7th Edition Kimmel Test Bank Visit TestBankDeal.com to get complete for all chapters

Test Bank for Financial Accounting: Tools for Business Decision Making, Seventh Edition

FOR INSTRUCTOR USE ONLY

2-2

Exercises

215. 1 AP 219. 1, 2, 4 AP 223. 2, 4 AP 227. 2, 4, 5 K

216. 1 K 220. 1, 3 AP 224. 2, 4, 5 AP 228. 2, 4 AP

217. 1. AP 221. 1, 3 AP 225. 2, 4 AP 229. 3 AP

218. 1, 2, 3, 4 AP 222. 2 AP 226. 2, 4, 5 AN 230. 4 AN

Completion Statements

231. 6 K 233. 7 K 235. 4 K 237. 4 K 238. 5 K

232. 7 K 234. 7 K 236. 1 K

Matching

239. 1-7 K

Short Answer Essay

240. 1 K 243. 2, 4 C 246. 7 C 249. 4 E 250. 7 E

241. 2,4 K 244. 7 C 247. 7 K

242. 1, 4 K 245. 7 C 248. 7 K

SUMMARY OF LEARNING OBJECTIVES BY QUE STION TYPE

Learning Objective 1 Item Type Item Type Item Type Item Type Item Type Item Type

1. TF 58. MC 67. MC 77. MC 127. MC 236. CS

• TF 59. MC 68. MC 80. MC 205. BE 239. Ma
• TF 60. MC 69. MC 81. MC 215. Ex 240. SA
• TF 61. MC 70. MC 82. MC 216. Ma 242. SA
• TF 62. MC 71. MC 85. MC 217. Ma
• TF 63. MC 72. MC 86. MC 218. Ma
• TF 64. MC 73. MC 87. MC 219. Ex
• MC 65. MC 75. MC 88. MC 220. Ma
• MC 66. MC 76. MC 89. MC 221. Ma

Learning Objective 2 Item Type Item Type Item Type Item Type Item Type Item Type

• TF 93. MC 98. MC 131. MC 222. Ma 227. Ex
• TF 94. MC 99. MC 135. MC 223. Ex 228. Ma
• TF 95. MC 100. MC 206. BE 224. Ma 239. Ma
• MC 96. MC 101. MC 218. Ma 225. Ma 241. SA
• MC 97. MC 102. MC 219. Ex 226. Ma 243. SA

Learning Objective 3 Item Type Item Type Item Type Item Type Item Type Item Type

• TF 103. MC 107. MC 111. MC 207. BE 229. Ma
• TF 104. MC 108. MC 112. MC 218. Ma 239. Ma
• TF 105. MC 109. MC 113. MC 220. Ma
• TF 106. MC 110. MC 114. MC 221. Ma

A Further Look at Financial Statements

FOR INSTRUCTOR USE ONLY

2-3

Learning Objective 4 Item Type Item Type Item Type Item Type Item Type Item Type

• TF 91. MC 124. MC 137. MC 147. MC 228. Ma
• TF 115. MC 125. MC 138. MC 148. MC 230. Ma

17. TF 116. MC 126. MC 139. MC 208. BE 235. CS

• TF 117. MC 128. MC 140. MC 218. Ex 237. CS
• TF 118. MC 129. MC 141. MC 219. Ex 239. Ma
• MC 119. MC 130. MC 142. MC 223. Ex 241. SA
• MC 120. MC 132. MC 143. MC 224. Ma 242. SA
• MC 121. MC 133. MC 144. MC 225. Ma 243. SA
• MC 122. MC 134. MC 145. MC 226. Ma 249. SA
• MC 123. MC 136. MC 146. MC 227. Ex

Learning Objective 5 Item Type Item Type Item Type Item Type Item Type Item Type

• TF 24. TF 151. MC 155. MC 226. Ma
• TF 25. TF 152. MC 156. MC 227. Ex

22. TF 149. MC 153. MC 157. MC 238. CS

• TF 150. MC 154. MC 224. Ex 239. Ma

Learning Objective 6 Item Type Item Type Item Type Item Type Item Type Item Type

• TF 28. TF 159. MC 161. MC 239. Ma

27. TF 158. MC 160. MC 231. CS

Learning Objective 7 Item Type Item Type Item Type Item Type Item Type Item Type

29. TF 44. TF 165. MC 180. MC 195. MC 214. BE

30. TF 45. TF 166. MC 181. MC 196. MC 232. CS

31. TF 46. TF 167. MC 182. MC 197. MC 233. CS

32. TF 47. TF 168. MC 183. MC 198. MC 234. CS

• TF 48. TF 169. MC 184. MC 199. MC 239. Ma

34. TF 49. TF 170. MC 185. MC 200. MC 244. SA

35. TF 50. TF 171. MC 186. MC 201. MC 245. SA

36. TF 51. TF 172. MC 187. MC 202. MC 246. SA

37. TF 52. TF 173. MC 188. MC 203. MC 247. SA

38. TF 53. TF 174. MC 189. MC 204. MC 248. SA

39. TF 54. TF 175. MC 190. MC 209. BE 250. SA

40. TF 55. TF 176. MC 191. MC 210. BE

41. TF 162. MC 177. MC 192. MC 211. BE

42. TF 163. MC 178. MC 193. MC 212. BE

43. TF 164. MC 179. MC 194. MC 213. BE

Note: TF = True-False C = Completion

MC = Multiple Choice Ex = Exercise Ma = Matching SA = Short Answer Essay

Test Bank for Financial Accounting: Tools for Business Decision Making, Seventh Edition

FOR INSTRUCTOR USE ONLY

2-4

CHAPTER LEARNING OBJECTIVES

• Identify the sections of a classified balance sheet. In a classified balance sheet,

companies classify assets as current assets; long-term investments; property, plant, and equipment; and intangibles. They classify liabilities as either current or long-term. A stockholders’ equity section shows common stock and retained earnings.

• Identify tools for analyzing financial statements and ratios for computing a company’s

profitability. Ratio analysis expresses the relationship among selected items of financial statements data. Profitability ratios, such as earnings per share (EPS), measure aspects of the operating success of a company for a given period of time.

• Explain the relationship between a retained earnings statement and a statement of

stockholders’ equity. The retained earnings statement presents the factors that changed the retained earnings balance during the period. A statement of stockholders’ equity presents the factors that changed stockholders’ equity during the period, including those that changed retained earnings. Thus, a statement of stockholders’ equity is more inclusive.

• Identify and compute ratios for analyzing a company’s liquidity and solvency using a

balance sheet. Liquidity ratios, such as the current ratio, measure the short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash. Solvency ratios, such as the debt to assets ratio, measure the ability of a company to survive over a long period.

• Use the statement of cash flows to evaluate solvency. Free cash flow indicates a

company’s ability to generate cash from operations that is sufficient to pay debts, acquire assets, and distribute dividends.

• Explain the meaning of generally accepted accounting principles. Generally accepted

accounting principles are a set of rules and practices recognized as a general guide for financial reporting purposes. The basic objective of financial reporting is to provide information that is useful for decision making.

• Discuss financial reporting concepts. To be judged useful, information should have the

primary characteristics of relevance and faithful representation. In addition, useful information is comparable, consistency, verifiable, timely, and understandable.The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in terms of money. The economic entity assumption states that economic events can be identified with a particular unit of accountability. The periodicity assumption states that the economic life of a business can be divided into artificial time periods and that meaningful accounting reports can be prepared for each period. The going concern assumption states that the company will continue in operation long enough to carry out its existing objectives and commitments.The historical cost principle states that the companies should record assets at their cost. The fair value principle indicates that assets and liabilities should be reported at fair value. The full disclosure principle requires that companies disclose circumstances and events that matter to financial statement users.The cost constraint weighs the cost that companies incur to provide a type of information against its benefit to financial statement users.