CHapter 2. The balance Sheet

When a business issues common stock, what does it give to its owners?

Stock certificates

A debit to Cash and a credit to Common Stock is recorded when a company:

incorporates and its owners contribute cash.

Company X receives $10,000 from issuing common stock to its owners. The effect on the accounting equation is a(n) _____. (Check all that apply.)

increase in stockholders' equity increase in assets

Events that do not involve exchanges between the company and someone else but affect assets, liabilities and/or stockholders' equity are called

internal

Assets = + Stockholders' equity

liabilities

A company purchased a new cash register in exchange for a cash payment of $1,200. As a result of recording the purchase, ______. (Check all that apply.)

one asset is exchanged for another total assets remain the same

Z Best, Inc. issued $1,000,000 of common stock for cash. By accident, Z Best recorded the transaction by increasing cash and decreasing stockholders' equity. As a result of this entry, ______. (Check all that apply.)

stockholders' equity is understated common stock is understated the accounting equation is out of balance

Which of the following are possible effects on the accounting equation when recording a transaction that increases a liability by $100? (Select all that apply.)

An asset increases by $100 A stockholders' equity account decreases by $100

A transaction that involves an exchange of assets, liabilities and/or stockholders' equity between the company and someone else is called a(n)

external exchange

The duality of effects refers to the fact that each transaction ______.

has at least two effects on the basic accounting equation

The Common Stock account is increased with an entry on the side of the T-account.

right

Which of the following are possible effects on the accounting equation when recording a transaction that increases an asset by $100?

A stockholders' equity account increases by $100 A liability account increases by $100 A decrease in another asset by $100

Lox, Stock and Bagel, Inc., issued $100,000 of common stock. It recorded the transaction by increasing Cash and decreasing Common Stock. As a result of this entry,:

the accounting equation will be out of balance.

Morris Lest, Inc. purchased machinery for $10,000 cash. The effect of this transaction is to cause ______.

total assets to remain the same

When should the total dollar value of debits equal the total dollar value of credits in a transaction?

alaways

The accounting cycle consists of 3 steps, place the following steps in their correct order with the first step listed first.

analyze, record, summarize

A transaction may be recorded with an increase in an asset and a decrease in a(n) ______.

another asset

All accounting systems ______. (Select all that apply.)

combine beginning balances with the activity during the accounting cycle to yield the ending balances for each account. record and summarize financial effects of transactions follow the accounting cycle

A company purchased land in exchange for a $25,000, 10-year note payable. The increase in the Notes Payable account would be recorded with a ______.

credit

The beginning balance in Acme's Cash account was $100,000. During the month, Acme issued $25,000 of common stock for cash. The balance in Acme's Cash account is now a:

debit of $125,000.

X Company purchased land for $30,000 cash. The journal entry to record this transaction would include a ______. (Check all that apply.)

debit to Land of $30,000 credit to Cash of $30,000

When a company issues common stock, it gives cash to its owners in exchange for stock.

False

Company X issued $10,000 of common stock to its owners for cash. It recorded the transaction by increasing assets and increasing liabilities. Which of the following statements are correct? (Select all that apply)

Liabilities will be too high. Stockholders' equity will be too low.

What is the effect on total assets when a company purchases a cash register for a cash payment of $1,200?

No effect

What is the effect on total stockholders' equity when a company purchases a cash register for a cash payment of $1,200?

No effect