Chapter 2 Homework Questions

Which of the following statements is accurate regarding the building account?

A Building asset account is used to record the costs of purchasing a store, office, warehouse or factory.

Which of the following statements is (are) correct regarding a T-account? (Check all that apply)

A T-account may be used as a tool to visualize the effects of a transaction. A T-account will show the debit and credit effects of transactions. A T-account represents a ledger account.

Which of the following statements explains what a trial balance is?

A trial balance confirms that the sum of debit account balances equals the sum of credit account balances.

An annual insurance policy is paid in advance by a company. How will the company treat this initial payment and the subsequent expiration of a portion of the policy over time? (Check all that apply.)

As a portion of the policy expires, the expired portion will be removed and transferred to an expense account. Over time, the expired portion of the policy must be removed from the asset account as it has been used up and is no longer considered an asset. The initial payment will be recorded as an increase to a Prepaid Insurance account.

Match the items on the left with their definition on the right. Assets/equity/revenues/liabilities

Assets: resources owned or controlled by the business Equity: The residual interest in the assets of a business after deducting the business's debts Revenues: sales of products and services to customers Liabilities: The obligations owed by the business to creditors

Supplies are (assets/expenses/liabilities) until they are used. When they are used up, their costs are reported as (assets/expenses/liabilities).

Blank 1: assets Blank 2: expenses

Match the item on the left side with the correct definition on the right. Creditors/liabilities/assets/expenses.

Creditors: individuals or organizations that have rights to receive payments from a business. Liabilities: claims against the assets of a business Assets: things of value owned by a business Expenses: the cost of doing business

Paul's Programming services paid $1,000 in cash dividends to its shareholders. Show how to use T-accounts to record this transaction by selecting the correct answer below.

Debit dividends; credit cash

Which of the following statements about the dividends account is (are) correct? (Check all that apply)

Dividends is used to record distributions of assets to the owners of a business. Dividends decrease equity. Dividends are increased on the left side of the T-account.

Stan Programming Services provided $8,000 of services and received payment immediately. Show how to record this transaction to the T-accounts by selecting the correct answer below.

Enter $8,000 on left side of Cash; enter $8,000 on the right side of Service revenue.

Smith company purchased $8,000 on supplies on credit. Show how to record this transaction to the T-accounts by selecting the correct answer below.

Enter $8,000 on left side of the Supplies account; enter $8,000 on the right side of the Accounts payable account.

Which of the following statements is the correct definition of equity?

Equity is the owner's claim on a company's assets.

Select all that apply. Given the description below, which is (are) true regarding notes receivable?

It is the promise of another entity to pay a specific sum of money on a specified future date Another name for a note receivable in a promissory note Notes receivable is classified as an asset

Given the following information for Jackson's boots, calculate its debit ration for the current year.

Liabilities/assets $100/$250= .40

Which of the following describes a general ledger?

The general ledger is a record containing all accounts used by a company.

Match the definition on the left with the terms on the right.

Trial balance: it is a list of each account and it's balance at any given time and is used to verify that debit = credits Chart of accounts: it is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account Journal: it is a book of original entry that includes a chronological record of all transactions that have occurred within a business during a period occurred General ledger: it is a collective n of all accounts with their activity and balances that exist in a business

Which of the following statements best describes the purpose of the owner, capital account?

When an owner invests in a business, the invested amount is recorded in the common stock account

Sunshine Company received and paid for a utility bill of $50. Show how to record this transaction to the T-accounts by selecting the correct answer below.

$50 on left side of the Utility expense account; $50 on the right side of the Cash account.

Gunner Company purchased a piece of equipment costing $6000. $1000 is paid immediately and the balance is on account. Show how to record this transaction to the T-accounts

$6000 on left side of the Equipment account; $5000 on the right side of the Accounts payable account; $1000 on the right side of the Cash account

Which of the following statements is (are) accurate regarding equipment purchased within a business?

- Equipment purchases are reported on the balance sheet. - Equipment is an asset. - Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed. - Equipment is reported on the left side of the accounting equation.

Which of the following statements is (are) correct regarding the definition of a liability? (Check all that apply)

-A liability can be settled by transferring assets or providing products or services to others. -A liability is a debt owed by the business. -A liability is a claim by creditors against the assets of a business.

Choose the account(s) below, that would have a normal credit balance.

-Common stock -Accounts Payable -Unearned Revenues -Revenues

Which of the following statements correctly explains how to prepare a trial balance?

-List each account title and its amount from the ledger -Verify that the total debit balances equals the total credit balances -Compute the total of debit balances and the total of credit balances

Which of the following would be included on an income statement?

-Net income -Total expenses -Total revenues

Drag the elements in order.

1. Enter date of transaction in date column 2. Enter name of accounts debited and their amounts 3. Enter name of accounts credited and their amounts 4. Enter explanation

Click and drag on elements in order. When preparing a trial balance, there are certain steps that need to be followed. Place the following steps in the correct order.

1. List each account title and it's amount from the general ledger. 2. Compute the total of debit balances and the total of credit balances. 3. Verify that total debit balances equal total credit balances

Choose the statement below that correctly explains a general journal.

A journal is a complete record of each transaction in one place and includes the debit and credit of each transaction.

Which of the following statements is the correct definition of a liability?

A liability is a claim by a creditor against the assets of a business.

In defining a reporting period, which of the following statements is (are) correct?

A reporting period can be one month, one quarter or one year. A one-year reporting period is known as the fiscal year. A reporting period is determined by the business.

Which of the following is the best definition of a source document in the accounting process?

A source document identifies and describes transactions and is the basis for entering an event into the accounting system.

Which of the following statements is accurate regarding Accounts payable?

Accounts payable refer to promises to pay later, which may arise from the purchase of supplies or services.

Which statement is correct regarding entering transactions into the accounting equation?

After recording a transaction, the total of the right side of the accounting equation must equal the total of the left side of the accounting equation.

The Building account is a(n) (asset/liability/expense) account and is reported on the (left/right) side of the accounting equation.

Asset Left

Which of the following formulas is correct in depicting the expanded accounting equation?

Assets = Liabilities + Common Stock - Dividends + Revenues - Expenses

Fill in the blank: When financial statements are prepared, unexpired prepaid accounts are recorded as (expenses/assets/liabilities) and the expired portion of the prepaid account is reported as a(n) (expense/asset/liability)

Assets and Expenses

When the stockholders receive a dividend, how would this affect the equity of a business?

Assets are decreased and equity is decreased.

The stockholders of a business received a $1000 dividend. How would this affect the total equity of the business?

Assets would be decreased and total equity would decrease as well.

Equipment is a(n) (asset/liability/expense) account. It is reported on the (left/right) side of the accounting equation and is (increased/decreased) when equipment is purchased.

Blank 1: asset Blank 2: left Blank 3: increased

Holt Computer Services purchased $2,000 of new equipment and paid immediately. Illustrate how to record the transaction into T-accounts of Holt Services by completing the following sentence. The Equipment account would be __________ (debited/credited) on the ______________ (left/right) side of the T-account and the Cash account would be ____________ (debited/credited) on the ________________ (left/right) side of the T-account.

Blank 1: debited Blank 2: left Blank 3: credited Blank 4: right

Which of the following would be considered a source document in an accounting system?

Checks, sales receipt, purchase order, payroll records

Cash can take many forms. From the lists of items below, choose the one which includes only items that would be defined as cash.

Coins, checks, money orders

Jeff, the owner of a business, invests an additional $100 into his business. How would this affect the equity of his business?

Common stock would be increased and total equity would also increase

Simon, the owner of a business, invests $10,000 in his new business, Simon's Sports. How would this affect the equity of a business?

Common stock would be increased, so the equity is increased

Brown company purchased $900 of supplies on credit. Illustrate how to record the transaction to T-accounts by completing the following sentence. Accounts payable would be (debited/credited) on the (left/right) side of the T-account, and supplies would be (debited/credited) on the (left/right) side of the T-account.

Credited/right Debited/left

Which of the following statements about the dividends account is (are) correct? (Check all that apply)

Dividends is used to record distributions of assets to the owners of a business. Dividends decrease equity. Dividends are increased when assets are paid to the owners

Jeff, a shareholder of a business, received dividends of $100. How would this affect the total equity of the business?

Dividends would be increased and total equity would decrease as well

Which set of accounts below would have a normal debit balance?

Expenses; Dividends; Cash

True or false: The cost of land owned by a business is recorded in the land account and this account is classified as an expense?

False

Which of the following statements is (are) correct regarding a journal? (Check all that apply)

In a journal, both the debit and credit side of the transaction can be seen. A journal is used to record business transactions. Transactions are generally entered in chronological order.

After entering a transaction into the accounting equation, an increase in total assets can be accompanied by a(n) (increase/decrease) in total liabilities or equity.

Increase

From the lists of accounts below, which one contains only revenue accounts?

Interest revenue, Professional fees earned, Sales

Which of the following items would be considered "cash" and reflected in a company's cash account?

Money orders, coins, and checks

Which of the following statements is (are) correct regarding the note's payable account? (Click all that apply)

Notes payable is a liability account Notes payable is reported on the balance sheet Notes payable is a formal promise to pay a certain sum of money on a specified future date.

Which of the following are accurate statements regarding how to report or treat prepaid accounts? (Check all that apply)

Over time, the expired portion of prepaid accounts is removed from the account and reported as an expense. The unexpired portion of prepaid accounts are treated as assets. The expired portion of prepaid accounts is reported on the income statement as an expense.

Which of the following is correct regarding posting a transaction?

Posting means to transfer journal information to a ledger.

Select the statement below that best defines prepaid accounts.

Prepaid accounts are assets that represent prepayments of future expenses.

Which of the following statements is correct about prepaid expenses?

Prepaid expenses are also called prepaid accounts and are considered assets.

Which of the following statements about revenue is correct?

Revenues cause equity to increase, and they are increased on the right side of the accounting equation

Select all that apply. Which of the following accounts are examples of revenue? (Check all that apply)

Sales Fees earned Service revenue

On Nov.1, Lyons company pays $2,400 cash for supplies. Show how to use T-accounts to record this transaction by selecting the correct answer below.

Supplies would be debited, and Cash would be credited.

Which of the following statements is accurate about the land account? (Check all that apply)

The Land account is an asset. The Land account is used to record the costs of land purchased by the business. The Land account is increased on the left side of its T-account.

Select all that apply. Which of the following statements is (are) correct regarding the common stock account? (Check all that apply)

The common stock account is increased on the right side of the T-account The common stock account is used to record investments by the owner The common stock account is an equity account

Identify which of the following formulas correctly defines how to calculate the debit ratio

Total liabilities / total assets

Which of the following statements are accurate regarding supplies?

Unused supplies are treated as assets. Unused supplies can be recorded as Store Supplies, Office Supplies or Supplies. Supplies are assets until they are used. When supplies are purchased, they are added to the Supplies account.

Which of the following statements are accurate regarding supplies? (Check all that apply)

Unused supplies are treated as assets. Unused supplies can be recorded as Store Supplies, Office Supplies or Supplies. Supplies are assets until they are used. When supplies are purchased, they are added to the Supplies account.

Which of the following accounts would be considered an asset?

accounts receivable, building, cash, supplies

Notes receivable is considered a(n)

asset

Fill in the blank: Accounts payable refer to obligations owned (by/to) the business and are classified as a(n) (asset/liability/expense) account.

by Liability

Brown Company provided services to a customer and immediately collected $1900 cash. Show how to record the transaction to the T-accounts by completing the following sentence: Service Revenue would be ______ on the ______ side of the T-account, and Cash would be ________ on the _______ side of the T-account

credited; right; debited; left

J. Jackson invested $1,000 in his business in exchange for common stock. Show how to use T-accounts to record this transaction by selecting the correct answer below.

debit cash, credit common stock

When entering a transaction into a general journal, the entry would be dated; then the accounts (debited/credited) would be listed first; then the accounts (debited/credited) would be listed next.

debited and credited

Butter Company purchased $300 of supplies for cash. Illustrate how to record the transaction into T-accounts by completing the following sentence: The Supplies account would be ______ on the ______ side of the T-account and the Cash account would be ________ on the ________ side of the T-account.

debited; left; credited; right

The statement of retained earnings reports

how equity changed over a period of time

Transferring entries from the journal to the ledger is called

posting

An income statement reports

the revenues minus the expenses incurred by a business

Financial statements are prepared from a(n)

trial balance

Name the accounting document or report that is completed just prior to preparing financial statements and assists in preparing the financial statements.

trial balance

Which statement best describes a T-account?

A T-account represents a ledger account and is a tool used to understand the effects of one or more transactions.

Which of the following statements is the correct definition of a creditor?

A creditor is an individual or organization that has a right to receive payments from a business.

Dividends of $50 are paid to the shareholders of a company. How would this affect the equity of a business?

Assets are decreased and equity is decreased

Which of the following statements is the best definition of an asset?

Assets are resources owned or controlled by a company and that have expected future benefits.

A trial balance is a(n) (list/balance/chart) of accounts and their balances at a point in time and is used to confirm that the sum of debit account balances equals the sum of ( ) account balances. Use one word for each blank.

Blank 1: list Blank 2: credit

Which of the statements below is true regarding the statement of retained earnings?

Both the beginning and ending retained earnings balances are reported on the statement.

Identify which of the following lists include only examples of assets?

Building, cash, accounts receivable

Select all that apply. Which of the following accounts impact equity? (Check all that apply)

Common stock Dividends Revenues Expenses

There are several types of accounts that impact equity. Which of the accounts below cause equity to increase?

Common stock and revenues

A business paid dividends to its shareholders. Show how to record the transactions to the T-accounts by completing the following sentence. Dividends would be (debited/credited) on the (left/right) side of the T-account, and cash would be (debited/credited) on the (left/right) side of the T-account

Debited/left Credited/right

Brown company paid its employees his weekly salaries of $400. Show how to record the transaction of the T-accounts by completing the following sentence. The salaries expense account would be (debited/credited) on the (left/right) side of the T-account, and the cash account would be (debited/credited) on the (left/right) side of the T-account.

Debited/left Credited/right

L.Lyons started a business and invested $4,000 in exchange for common stock. Illustrate how to record the transaction in the T-accounts by completing the following sentence. The cash account would be (debited/credited) on the (left/right) side of the T-account and the common stock account would be (debited/credited) on the (left/right) side of the T-account.

Debited/left Credited/right

Which of the following would be included on a statement of retained earnings? (Check all that apply)

Dividends Retained earnings at end of period Retained earnings at beginning of period Net income (loss)

The dividends account is used to record (investments/dividends/expenses/revenues) paid to the owner and has a (positive/negative) impact on equity.

Dividends Negative

Which of the following statements is the best definition of the chart of accounts?

It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account.

Enter one word for each blank. The expanded accounting equation is:( ) = ( ) + common stock +( ) -( ) - dividends. Do not include the word "account(s)" in your answers. Note: order of the equation is important.

asset; liability; revenues; expense

Which of the following financial statements report(s) the financial position of a business over a period of time?

income statement, statement of retained earnings, statement of cash flows

Revenues cause equity to _____ and they are increased on the _____ side of the T-account.

increase; right

The notes payable account is a(n) (asset/liability/expense) account and is increased on the (left/right) side of the T-account?

liability, right

The general ledger can be used to determine which of the following (select all answers which apply)

which accounts are being used by a company and their balances at any given time. common and unique accounts used by a business. increases and decreases in all accounts in a business.