Accounting Chapter 2 Quiz Solutions

What is the name for a list that designates a name and reference number that the company will use when accounting for each item it exchanges? a. Chart of accounts b. List of items c. Exchange list d. Register of titles

a. Chart of accounts

If a company expects to use or turn an asset into cash within 12 months of the balance sheet date, it will classify the asset as a a. Current asset b. Noncurrent asset c. Classified balance d. Stockholder equity

a. Current asset

If Nike purchases supplies on account for $500, what is the journal entry? a. Debit Supplies $500; Credit Accounts Payable $500 b. Debit Supplies $500; Credit Cash $500 c. Debit Accounts Payable $500; Credit Supplies $500 d. Debit Cash $500; Credit Supplies $500

a. Debit Supplies $500; Credit Accounts Payable $500

What is the term for the idea that every transaction has at least two effects on the basic accounting equation? a. Duality of effects b. Financing c. External exchange d. Cost principle

a. Duality of effects

When a company invests in equipment in exchange for a promise to pay, the journal entry consists of a debit to a. Equipment b. Accounts payable c. Cash d. Notes payable

a. Equipment

Which of the following accounts is best described as "Accumulated earnings (not yet distributed as dividends)?" a. Retained Earnings b. Cash c. Common Stock d. Accounts Receivable

a. Retained Earnings

An internal report that lists all accounts and their balances to check the equality of debits and credits is called a. Trial balance b. Classified balance sheet c. General ledger d. Chart of accounts

a. Trial balance

In order, what are the three steps of the accounting cycle? a. Classify, prepare, record b. Analyze, record, summarize c. Record, report, analyze d. Observe, understand, share

b. Analyze, record, summarize

If a company were to issue stock for $15,000, the accompanying journal entries would include a debit to cash and a credit to a. Notes payable b. Common stock c. Expense d. None of the above

b. Common stock

Which ratio is most useful in assessing a company's ability to pay off its liabilities? a. Cash ratio b. Current ratio c. Quick ratio d. Debt ratio

b. Current ratio

A transaction in which ABC Company receives $10,000 in exchange for giving out $10,000 worth of common stock to stockholders would result in which of the following journal entries? a. Debit Common Stock 10,000; Credit Cash 10,000 b. Debit Cash 10,000; Credit Common Stock 10,000 c. Debit Cash 10,000; Credit Accounts Payable 10,000 d. No entry

b. Debit Cash 10,000; Credit Common Stock 10,000

If company ABC were to purchase supplies for $5,000, paying $3,000 cash now and the rest at a later date, what would be the journal entry to record this? a. Debit: Supplies $5,000 Credit: Cash $3,000 Credit: Common Stock $2,000 b. Debit: Supplies $5,000 Credit: Cash $3,000 Credit: Accounts Payable $2,000 c. Debit: Supplies $5,000 Credit: Supplies Expense $5,000 d. Debit: Supplies $5,000; Credit: Cash $5,000

b. Debit: Supplies $5,000 Credit: Cash $3,000 Credit: Accounts Payable $2,000

How should assets be listed on the balance sheet? a. In alphabetical order b. In the order in which they will be used up or turned into cash c. From highest value to lowest value d. From lowest value to highest value

b. In the order in which they will be used up or turned into cash

A credit for a liability or owner's equity transaction a. Has no impact on the account balance b. Increases the account balance c. Decreases the account balance d. Has the same impact as a credit for an asset account

b. Increases the account balance

Which of the following is used to record the effects of each day's transactions? a. Ledger b. Journals c. Chart of Accounts d. Agenda

b. Journals

Which of the following is not an asset account? a. Cash b. Accounts Receivable c. Common Stock d. Equipment

c. Common Stock

Assets and liabilities should be initially recorded at their ________ to the company. a. Historical value b. Future value c. Cost d. Markup

c. Cost

Which of the following is NOT true in regard to the Debit/Credit Framework? a. Asset accounts increase with a debit b. Liability accounts decrease with a debit c. The normal balance for an account is the side on which it decreases d. Stockholders' equity accounts increase with a credit

c. The normal balance for an account is the side on which it decreases

Which of the following is a current liability? a. Cash b. Supplies c. Equipment d. Accounts payable

d. Accounts payable

What are current liabilities? a. Debts or other obligations that will be paid within 5 years b. Debts or other obligations that will be paid within 18 months c. Debts or other obligations that will be paid within 54 weeks d. Debts or other obligations that will be paid within 1 year

d. Debts or other obligations that will be paid within 1 year

Which of the following won't result in a debit? a. Increases in cash b. Increase in equipment c. Decrease in accounts payable d. Increase in common stock

d. Increase in common stock

Each of the following are true regarding journal entries EXCEPT a. A date should be included for the transaction b. Debits appear first on the top; credits appear below the debits and indented to the right c. Total debits equal total credits for each transaction d. Only one debit and one credit may be included for each transaction

d. Only one debit and one credit may be included for each transaction