11.The valuation of assets in the balance sheet is based primarily upon: What it would cost to replace the assets. Cost, because cost is usually factual and verifiable. Current fair market value as established by independent appraisers. Cost, because in the event of liquidation, the assets would be sold at an amount equal to their original cost.12.Which one of the following equations correctly expresses the relationship between assets (A), liabilities (L), revenues (R), expenses (E) and capital (C)? (a) A = L + R + E + C (b) A = C + L + (R-E) (c) A = C - (R - E) + L (d) A = (L - C) + (R - E)13.Which of the following would be added to net income using the indirect method? An increase in accounts receivable An increase in prepaid expenses Depreciation expense A decrease in accounts payable14.Unpaid expenses may be included as an expense on the income statement. True False15.According to the rules of debit and credit for balance sheet accounts? (a) Increase in assets, liabilities and owner equity recorded by debit (b) Decrease in asset and liability are recorded by credit (c) Increase in asset and owner’s equity are recorded by debit (d) Decrease in liability and owner’s equity are recorded by debit16.An increase in a liability is recorded by a credit; an increase in owners' equity by a debit. True False17.A transaction that causes an increase in an asset may also cause a decrease in another asset, an increase in a liability, or an increase in owners' equity. True False18.In a ledger, debit entries cause: Increases in owners' equity, decreases in liabilities, and increases in assets. Decreases in liabilities, increases in assets, and decreases in owners' equity. Decreases in assets, decreases in liabilities, and increases in owners' equity. Decreases in assets, increases in liabilities, and increases in owners' equity.19.In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is deducted from net income. added to net income. ignored because it does not affect income. ignored because it does not affect expenses.20.Fixed Assets are held by business for ______ Converting into Cash Generating Revenue Resale None of the above

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Answered: st is usually factual and verifiable.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

11.

The valuation of assets in the balance sheet is based primarily upon:

		What it would cost to replace the assets.
		Cost, because cost is usually factual and verifiable.
		Current fair market value as established by independent appraisers.
		Cost, because in the event of liquidation, the assets would be sold at an amount equal to their original cost.

12.

Which one of the following equations correctly expresses the relationship between assets (A), liabilities (L), revenues (R), expenses (E) and capital (C)?

		(a) A = L + R + E + C
		(b) A = C + L + (R-E)
		(c) A = C - (R - E) + L
		(d) A = (L - C) + (R - E)

13.

Which of the following would be added to net income using the indirect method?

		An increase in accounts receivable
		An increase in prepaid expenses
		Depreciation expense
		A decrease in accounts payable

14.

Unpaid expenses may be included as an expense on the income statement.

True

False

15.

According to the rules of debit and credit for balance sheet accounts?

		(a) Increase in assets, liabilities and owner equity recorded by debit
		(b) Decrease in asset and liability are recorded by credit
		(c) Increase in asset and owner’s equity are recorded by debit
		(d) Decrease in liability and owner’s equity are recorded by debit

16.

An increase in a liability is recorded by a credit; an increase in owners' equity by a debit.

True

False

17.

A transaction that causes an increase in an asset may also cause a decrease in another asset, an increase in a liability, or an increase in owners' equity.

True

False

18.

In a ledger, debit entries cause:

		Increases in owners' equity, decreases in liabilities, and increases in assets.
		Decreases in liabilities, increases in assets, and decreases in owners' equity.
		Decreases in assets, decreases in liabilities, and increases in owners' equity.
		Decreases in assets, increases in liabilities, and increases in owners' equity.

19.

In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is

		deducted from net income.
		added to net income.
		ignored because it does not affect income.
		ignored because it does not affect expenses.

20.

Fixed Assets are held by business for ______

		Converting into Cash
		Generating Revenue
		Resale
		None of the above

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