ACCNT 1303 Chap. 2

Which financial statement is a representation of the accounting equation?

Balance Sheet

What is the correct order in which to prepare the three financial statements?

Income Statement; Statement of Owner's Equity; Balance Sheet

Owner's equity is alternatively referred to as which of the followng?

Net worth

If the income statement covered a six-month period ending on Nov. 20, 2019, the third line of the income statement heading would read

Six-month Period Ended Nov. 30, 2019

If a business issues a check for $100 to purchase office supplies, what is the effect on the accounting equation?

Total Assets will remain the same

Which of the following is a liability account?

accounts payable

When equipment is purchased on credit?

assets and liabilities increase

Amounts that a business must pay in the future are known as

liabilities

The debts or obligations of a business are known as its ____________________

liabilities

On the income statement, revenues minus expenses equals _____________ for a period of time.

net income or net loss

The account used to record amounts that will be collected from charge account customers in the future is referred to as ____________

Accounts receviable

At the end of the first month of operations for Jackson's Catering Service, the business had the following accounts: Cash, $20,750; Prepaid Rent, $500; Equipment, $7,500 and Accounts Payable $4,000. By the end of the month, Jackson's had earned $32,900 of Revenues, and used $1,870 of Utilities Expenses, $4,150 of Rent Expense and $3,640 of Salaries Expenses. Calculate the net income to be reported by the company for this first month.

Answer: $23,240 Explanation: Revenues $32,900 − Utilities Expense $1,870 − Rent Expense $4,150 − Salaries Expense $3,640 = Net Income $23,240.

At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $12,400; Prepaid Insurance, $400; Equipment, $28,300 and Cash, $22,700. On the same date, SloMo owed the following creditors: Simpson Supply Company, $19,100; Allen Office Equipment, $16,600. The total amount of Liabilities is:

Answer: $35,700 Explanation: Liabilities = Simpson Supply Company, $19,100 + Allen Office Equipment, $16,600 = $35,700.

If the following are the only accounts of Jones Supply Company, what is the missing Supplies balance?Cash: $8,000Supplies: ?????Accounts Payable: $4,000John Smith, Capital: $9,000

Answer: $5,000 Explanation: The fundamental accounting equation dictates that assets (cash & supplies) equal liabilities (accounts payable) plus owner's equity (John Smith, capital). Therefore $8,000 + $5,000 = $4,000 + $9,000

If the following are the only accounts of Jones Supply Company, what is the missing Supplies balance?Cash: $9,130Supplies: ?????Accounts Payable: $4,000John Smith, Capital: $10,430

Answer: $5,300 Explanation: The fundamental accounting equation dictates that assets (cash & supplies) equal liabilities (accounts payable) plus owner's equity (John Smith, capital). Therefore $9,130 + $5,300 = $4,000 + $10,430

The Daniel Insurance Agency reported revenues of $30,000 and expenses of $32,460 for the current period. What was the final figure reported on the company's income statement?

Answer: $2,460 net loss Explanation: Revenues ($30,000) minus expenses ($32,460) equals net loss (−$2,460). The calculation would have been categorized as net income if it was a positive amount.

When the owner withdraws cash for personal use

assets decrease and owner's equity decreases

The ___________ reports the changes that have occurred in the owner's financial interest during the reporting period.

statement of owner's equity

Owner's equity is:

the financial interest of the owner of a business

Which of the following is an example of an expense?

the payment of the monthly utility bill