Accounting - chapter 1

All accounting systems ______.

-follow the accounting cycle -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

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

False - When a company issues common stock, it receives cash and give stock certificates to its owners.

A company paid $5,000 cash to purchase equipment. The company recorded a debit to equipment of $5,000 and a credit to cash of $500. This company's accounting records are ______.

Incorrect because debits do not equal credits

Accounts payable is increased with an entry on the ______ side of the T-account. (Enter one word per blank.)

Right

The Retained earnings account is increased with an entry on the ______ side of the account. (Enter one word per blank.)

Right or credit

A debit to cash and 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 assets and increase stockholders' equity.

The land account is increased with an entry on the ______ side of the land T-account.

left

The equipment account is increased with an entry on the _______ side of the equipment T-account. (Enter one word per blank.)

left or debit

What is the effect on total assets when a company purchases land for cash payment of $10,000?

no effect

Identify the account title that may be used to record borrowing cash in exchange for a promissory note.

note payable

On the balance sheet, Land is reported at its ______.

original cost

A classified balance sheet _____

shows subtotals for current assets and current liabilities

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

always

When a company purchases an asset in exchange for a promise to pay later, the company records _______.

an increase in a liability account

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

analyze the transaction, record the transaction, summarize the transaction

A classified balance sheet shows subtotals for current ______ and current ______.

asset, liability

Which transactions are recorded in the accounting system?

both external and internal events

What does a business typically receive when it issues stock to owners?

cash

Which of the following is a current asset

cash

A company paid $2,000 cash to an employee for this month's salary. The entry to record this transaction would include a ______ to Cash.

credit

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

An increase in retained earnings would be recorded with a _______.

credit

The current ratio equals _____ _____ divided by ______ _______

current assets - current liabilities

The formula for calculating the current ratio is ______.

current assets divided by current liabilities

The journal entry to record the purchase of land for $30,000 cash includes ______.

debit land, credit cash

Which of the following are possible effects on the accounting equation when recording a transaction that affects two accounts?

-One asset account increases and one stockholders' equity account increases -One asset account increases and one asset account decreases.

The beginning balance in Amce's Accounts Payable was $40,000. Amce then bought $100 of supplies on account and paid $700 of the amount that it owed for supplies purchased on account last month. The ending balance in Amce's Accounts Payable was a credit of _______.

$3,400

A company's beginning Cash is $10,000. It had a $100,000 of cash receipts and $70,000 of cash payments during the period. The company's ending cash balance equals a _____ balance.

$40,000 debit

A company's beginning Notes Payable is $100,000. It borrowed $50,000 by issuing a promissory note to the bank and repaid $60,000 of the amounts owed. The Notes Payable ending balance equals a ______ balance.

$90,000 credit

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

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

Which of the following are on the credit side of the accounts payable T-account? (Select all that apply.)

- Beginning balance - Ending balance - Purchases on account

Which of the following are non-current assets that are found on the balance sheet? (Check all that apply.)

- Buildings - Equipment - Land - Machinery

When a company buys an asset on account ______.

- Liabilities increase - Assets increase

When a company borrows from a bank by signing a formal agreement an asset titled cash is increased and a ______ titled _______ _______ is increased.

- Liability. - Notes Payable.

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.)

- Total assets remain the same - One asset is exchanged for another

Noodlecake pays $300 cash to create the company's logo. The journal entry to record this transaction would include a ______ for $300.

- credit to cash - debit to logo/trademarks.

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, ______.

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

Given a company's accounting equation at the end of the accounting period consists of Assets of $100,000, liabilities of $60,000 and Stockholders' Equity of $40,000, match the correct amount the following descriptions.

Assets of $100,000 > Economic resources owned, liabilities of $60,000 > Creditors' claims to the economic resources, Stockholders' Equity of $40,000 > Owners' claims to the economic resources

Burrows, Inc. borrowed $100,000 from Last Bank by signing a formal agreement to repay the bank in 10 years. Burrows' journal entry to record this transaction will include a debit to ______.

Cash; Cash is debited and Notes Payable is credited.

The issuance of common stock is recorded with a debit to ______ and a credit to _____

Cash; Common Stock

Which of the following have a normal credit balances? (Select all the apply.)

Common stock, notes payable, accounts payable

A company paid $500 for supplies that it purchased last month. The decrease in liabilities would be recorded with a ______ to Accounts Payable.

Debit

Assets have a normal ___ balance

Debit

Acme Enterprises borrowed $20,000 from Last Bank on a 5-year note payable. Amce's journal entry to record this transaction will include a ______ of $20,000. (Select all that apply.)

Debit to cash, credits to notes payable

On the balance sheet, equipment is reported as its ______.

Original cost

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

Total assets to remain the same

True or false: A transaction can cause one asset to increase and different asset to decrease and still have the accounting equation balance.

True-Transactions do not have to straddle the equal sign of A=L+SE. One asset may be exchanged for another and still balance. Total assets remain the same as do total liabilities plus stockholders' equity.