Watson Energy decided to borrow cash from the bank in order to build a new office building

1. Watson Energy decided to borrow cash from the bank in order to build a new office building. The board of directors was arguing about which type of business activity this was. Diane stated that it was a financing activity, but Paul stated that it was an investing activity. Who was correct?

Both. Borrowing the cash is a financing activity, but building the new office building is an investing activity.

2. On July 29, 2016, Wagner Trucking recorded $24,000 in services that they had performed but had not yet been paid by the customer. On the same day, Dixon Trucking recorded $24,000 that they need to pay to their suppliers for gas and oil. What is the difference between how these two transactions will be recorded?

Wagner Trucking will record their transaction as an asset in accounts receivable, whereas Dixon Trucking will record their transaction as a liability in accounts payable.

3. Brooks Flooring is a national supplier of all types of flooring. Their biggest customer is Jenkins Construction Company. On July 8, 2016, Brooks Flooring purchased 100 shares of Jenkins stock. Later that year, on November 14, 2016, Brooks decided to sell 1,000 shares of Brooks stock to investors. What is the difference between these two transactions involving stock?

The first transaction is an investing activity, whereas the second transaction is a financing activity.

4. Jason and Hernando both decided to invest in the same company. Jason expects to be paid back in full for his investment plus some interest, whereas Hernando only expects to receive dividends from his investment. What is the difference between Jason's and Hernando's investments?

Jason invested in a debt security, whereas Hernando invested in an equity security.

5. On May 31, 2016, Hughes Construction recorded $50,000 in bonds payable, $30,000 in notes payable, $9,000 in wages payable, $3,000 in accounts payable, and $1,450 in taxes payable. How are all of these accounts similar?

All of them represent liabilities that must be paid back at some specified point in the future.

6. Porter Veterinary Services recently purchased several new stock trailers for their equine and bovine clients. The stock trailers increased their long-term assets by 50%. Porter Veterinary Services most likely used cash obtained from ________ activities to purchase these trailers.

financing

7. Hefty Haulers Moving Company decided to use cash to purchase a second moving truck. How will this purchase affect Hefty Hauler's operating activities?

It will help increase their service revenue.

8. Which of the following is required in order for a company to participate in investing activities?

adequate amounts of cash

9. Homeland Furniture wants to expand their company by opening a new store. The building they would like to purchase will cost them $480,000. They were unable to get a loan from the bank, but they prefer to use debt financing rather than equity financing to pay for the building. Which of the following would be their best option for raising $480,000?

Sell bonds to raise $480,000

10. Jane gave money to a company with the specification that she would be repaid at the end of three months. Based on this information, Jane is an example of a(n)

creditor