Financial Accounting 7e Libby Test bank ch.1.pdf

Chapter 001: Financial Statements and Business Decisions 1-1 True / False Questions 1. Accounting is a system that collects and processes financial information about an organization and reports that information to decision makers. TRUE AACSB Tag: Communications Difficulty: Easy L.O.: 1 2. Assets on the balance sheet are recorded at market value or replacement cost. FALSE AACSB Tag: Reflective Thinking Difficulty: Easy L.O.: 1 3. In accounting and reporting for a business entity, the accounting and reporting for the business must be kept separate from other economic affairs of its owners. TRUE AACSB Tag: Reflective Thinking Difficulty: Easy L.O.: 1 4. The accounting period in which service revenue is recognized (i.e., revenue for services rendered) is generally the period in which the cash is collected. FALSE AACSB Tag: Reflective Thinking Difficulty: Medium L.O.: 1 ?2009 McGraw-Hill Inc. Test Bank to accompany Libby Financial Accounting 6/e To download more slides, ebook, solutions and test bank, visit To download more slides, ebook, solutions and test bank, visit Chapter 001: Financial Statements and Business Decisions 1-2 5. Total assets are $70,000, total liabilities, $40,000 and contributed capital is $20,000; therefore, retained earnings are $15,000. FALSE AACSB Tag: Analytic Difficulty: Medium L.O.: 1 6. The payment of a cash dividend to stockholders increases stockholders equity. FALSE AACSB Tag: Reflective Thinking Difficulty: Medium L.O.: 1 7. The accounting model for the balance sheet is: Assets + Liabilities = Stockholders Equity. FALSE AACSB Tag: Reflective Thinking Difficulty: Easy L.O.: 1 8. A decision maker who wants to understand a companys financial statements must carefully read the notes to the financial statements because the notes provide useful supplemental information. TRUE AACSB Tag: Communications Difficulty: Easy