Acct 100 - Ch. 1

Label each of the following accounts as asset, liability, owner's equity, revenue, or expense. a) Supplies b) Professional Fees c) Prepaid Insurance d) M. Jones, Drawing e) Accounts Payable f) Service Income g) M. Jones, Capital h) Office Equipment i) Accounts Receivable j) Salary Expense

a) Asset b) Revenue c) Asset d) Owner's equity e) Liability f) Revenue g) Owner's equity h) Asset i) Asset j) Expense

Expenses incurred by a business results in: a) a decrease in its liabilities. b) a decrease in the owner's equity. c) an increase in the assets. d) an increase in the drawing.

b) a decrease in the owner's equity.

Rent received from tenants will result in: a) an increase in liabilities. b) an increase in revenue. c) a decrease in expense. d) a decrease in assets.

b) an increase in revenue.

Cash is a(n) _____ account, and Rent from Tenant is a(n) _____ account. a) equity; liability b) asset; revenue c) capital; asset d) revenue; equity

b) asset; revenue

The effect of expenses on the fundamental accounting equation is a(n) a) increase to assets. b) decrease to owner's equity. c) increase to liabilities. d) increase to owner's equity.

b) decrease to owner's equity.

Michael is the owner of Azure Company. At the end of a fiscal year, the company has total assets of $56,000 and Michael's equity is $40,000. Azure Company has liabilities equal to _____. a) $106,000 b) $0 c) $56,000 d) $16,000

d) $16,000

Professional Fees is a(n) a) liability. b) asset. c) expense. d) revenue.

d) revenue.

A) Assets of $40,000 = Liabilities of $17,200 + Owner's Equity of $? B) Assets of $? - Liabilities of $18,000 = Owner's Equity of $22,000 C) Assets of $27,000 - Owner's Equity of $15,000 = Liabilities of $?

A) $40,000 - $17,200 = $22,800 B) $18,000 + $22,000 = $40,000 C) $27,000 - $15,000 = $12,000

Describe a transaction that resulted in each of the following entries affecting the accounting equation. Assets=Liabilities + Owner's Equity Cash + Office Equipment + Professional Equipment = Accounts Payable + B. Lake, Capital (a)+18,200+18,200 (b)-1,375+1,375 Bal. 16,825+ 1,375= 18,200 (c)+640+640Bal. 16,825+ 640+ 1,375= 640+ 18,200 (d)-2,200+7,000+4,800 Bal. 14,625+ 640+ 8,375= 5,440+ 18,200 (e)-1,000-1,000Bal. 13,625+ 640+ 8,375= 4,440+ 18,200 22,640 22,640

A) Company received $18,200 cash from the owner, who was investing in the business. B) Company paid $1,375 cash to buy professional equipment. C) Company bought office equipment costing $640 and promised to pay that amount in the future (on account). D) Company bought professional equipment costing $7,000, paid $2,200 in cash, and promised to pay the remaining $4,800 in the future (on account). E) Company paid $1,000 cash to a creditor to pay an amount owed on account.

Describe a transaction that resulted in the following changes in accounts. A) Rent Expense is increased by $1,050, and Cash is decreased by $1,050. B) Advertising Expense is increased by $835, and Accounts Payable is increased by $835. C) Accounts Receivable is increased by $372, and Service Income is increased by $372. D) Cash is decreased by $410, and C. Tryon, Drawing, is increased by $410. E) Equipment is increased by $1,850, Cash is decreased by $850, and Accounts Payable is increased by $1,000. F) Cash is increased by $1,650, and Accounts Receivable is decreased by $1,650.

A) Paid the rent for the month. B) Bought advertising on account. C) Sold services on account. D) Owner withdrew cash for personal use. E) Bought equipment, paying part in cash and placing the balance on account. F) Customers paid off the amount owed on account.

Dr. L. M. Patton is an ophthalmologist. As of December 31, Dr. Patton owned the following property that related to his professional practice, Patton Eye Clinic: Cash, $2,995 Professional Equipment, $63,000 Office Equipment, $8,450 On the same date, he owed the following business creditors: Munez Supply Company, $3,816 Martin Equipment Sales, $3,728 Compute the following amounts in the accounting equation. Assets $ = Liabilities $ + Owner's Equity $

Assets = $2,995 + $63,000 + $8,450 = $74,445 Liabilities = $3,816 + $3,728 = $7,544 Owner's Equity = $74,445 - $7,544 = $66,901 Equation: $74,445 = $7,544 + $66,901

Magna Company paid $2,400 for a 6-month liability insurance policy. At the time of payment, this transaction should be recorded as A) insurance expense, $2,400 B) prepaid insurance, $2,400 C) insurance expense, $400 D) prepaid insurance, $400

B) prepaid insurance, $2,400

Describe a business transaction that will do the following: a) Increase an asset and increase a liability b) Decrease an asset and decrease a liability c) Decrease an asset and increase an expense d) Increase an asset and increase owner's equity e) Increase an asset and decrease an asset f) Increase an asset and increase revenue

a) Buy an asset on account b) Pay a creditor on account c) Pay a bill with cash d) Owner invests cash or other assets in the business e) Sell an asset for cash or buy an asset for cash f) Sell services either for cash or on account

Which of the following mathematical equations computes owner's equity? a) Owner's Equity = Capital - Drawing + Revenue − Expenses b) Owner's Equity = Capital + Drawing + Revenue + Expenses c) Owner's Equity = Capital + Drawing - Revenue + Expenses d) Owner's Equity = Capital - Drawing - Revenue − Expenses

a) Owner's Equity = Capital - Drawing + Revenue − Expenses

Which of the following is an example of an asset? a) Prepaid Insurance b) Capital c) Accounts Payable d) Outstanding Rent

a) Prepaid Insurance

Lia's business has assets of $30,000, and it owes $10,000 to its creditors. Lia's equity is equal to _____. a) $10,000 b) $20,000 c) $30,000 d) $40,000

b) $20,000

Short-term obligations to be paid at a later time involve _____. a) Capital b) Accounts Payable c) Accounts Receivable d) Revenue

b) Accounts Payable

Which of the following is a thing of value, such as cash, equipment, a copyright, a building, and land, owned and controlled by an economic unit or a business entity? a) Owner's capital b) An asset c) A liability d) Owner's drawing

b) An asset

Which of the following terms is used to express an owner's right, claim, or financial interest in a business? a) Drawings b) Capital c) Asset d) Liabilities

b) Capital

Which of the following is the correct order of the steps involved in analyzing a transaction? (I) Identify the accounts involved. (II) Decide on the classifications of the accounts involved. (III)After recording the transaction, make sure the accounting equation is in balance. (IV) Decide whether the accounts are increased or decreased. a) II, I, III, IV b) I, II, IV, III c) I, II, III, IV d) II, I, IV, III

b) I, II, IV, III

Otto Company paid a credit on account, $1,500. Which of the following is true in regards to the fundamental accounting equation? a) Assets increased by $1,500. b) Liabilities decreased by $1,500. c) Owner's equity increased by $1,500. d) Liabilities increased by $1,500. e) Owner's equity decreased by $1,500.

b) Liabilities decreased by $1,500.

Which of the following is true about the fundamental accounting equation? a) Total owner's equity must equal to the total of liabilities and assets. b) Total assets must equal the total of liabilities and owner's equity. c) Total assets must be more than the total of liabilities and owner's equity. d) Total liabilities must be more than the total of owner's equity and assets.

b) Total assets must equal the total of liabilities and owner's equity.

The purchase of an asset (like Equipment) on account will a) have no effect on total assets or total liabilities. b) increase total assets and increase total liabilities. c) increase total assets and decrease owner's equity. d) increase total assets and increase owner's equity. e) increase total liabilities and decrease total assets.

b) increase total assets and increase total liabilities.

Zia, Inc., has the following ending balances for the current year: Cash$10,000 Accounts Payable $20,000 Equipment $50,000 Zia, Capital $40,000 Supplies $10,000 Revenue $30,000 Prepaid Insurance $5,000 Expenses $15,000 The total assets of Zia, Inc. is equal to: a) $70,000. b) $90,000. c) $75,000. d) $60,000.

c) $75,000

Which of the following is the effect of a cash withdrawal by an owner on the accounting equation? a) An increase in assets b) An increase in capital c) A decrease in owner's equity d) A decrease in liabilities

c) A decrease in owner's equity

Azure Company bought equipment on account from a supplier, $4,000. Which of the following statements depicts the effect of this transaction on Azure's accounts? a) Equipment will increase by $4000, and Capital will decrease by $4000. b) Equipment will increase by $4000, and Cash will decrease by $4000. c) Both Equipment and Supplier will increase by $4,000. d) Both Capital and Supplier account will increase by $4,000.

c) Both Equipment and Supplier will increase by $4,000.

The fundamental accounting equation is in balance when: a) assets are equal to revenue. b) owner's equity is equal to the sum of capital and revenue. c) assets are equal to the sum of liabilities and owner's equity. d) revenue is equal to expenses.

c) assets are equal to the sum of liabilities and owner's equity.

An increase in the capital of a business indicates that the: a) liabilities of the business have decreased. b) drawing in the business has increased. c) owner's investment in the business has increased. d) revenue earned by the business has decreased.

c) owner's investment in the business has increased.

Following are the ending balances for the current year of Miama Company: Capital $40,000 Drawing $5,000 Revenue $35,000 Expenses $22,000 If Miama's liabilities amount to $20,000, the amount of assets is _____. a) $28,000 b) $52,000 c) $60,000 d) $68,000

d) $68,000 $40,000 (capital) - $5,000 (drawing) + $35,000 (revenue) - $22,000 (expenses) + $20,000 (liabilities) = $68,000

Print Item When an owner withdraws cash from the business, it results in a decrease in: a) Cash and Accounts Receivable. b) Cash and Accounts Payable. c) Cash and Contingent Liabilities. d) Cash and Capital. e) Cash and Long-term Liabilities.

d) Cash and Capital.

Which of the following is not considered an account? a) Equipment b) Cash c) Accounts Receivable d) Revenues e) Accounts Payable

d) Revenues