Ch. 2 questions

The equipment account is increased with an entry on the ________side of the Equipment T-account.

Left

These are a few financing activities

Issuing stock, Issuing a note payable

Assets have a normal ____balance.

debit

Accounts________is a liability account and represents amounts owed to suppliers.

payable

In this order, these assets will appear on a company's balance sheet.

1. cash 2. supplies 3. equipment

Possible effects on the accounting equation when recording a transaction that increases an asset by $100?

A liability account increases by $100, A stockholders equity account increases by $100 or An asset decreases by $100.

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

A stockholders' equity account decreases by $100 and another asset increases by $100.

The line item, land, on the balance sheet results from a(n)

Investing activity

Accounts payable is increased with an entry on the ______side of the T-account.

right

Liabilities and stockholders have a normal______balance.

credit

Internal events

these do not involve exchanges with others outside the business, but rather occur within the company itself.

MMM Pizza bought $1,500 of supplies on account. What is the effect of recording this transaction on the company's total assets?

total assets will increase. Since the supplies were purchased "on account", MMM pizza receives supplies, an asset, in exchange for a promise to pay, a liability. Thus, assets, Supplies, and liabilities, Accounts Payable, will both increase.

These are a few assets

Equipment, Land, Cash

In May, Pasta Disasta Inc. paid its suppliers $500 that it owed for the pizza pans purchased and received in April. Which accounts are affected?

-Accounts payable is decreased and cash is decreased.

These would be captured and reported by an accounting system.

-Purchase of equipment on account -Financing activities -Investing activities

Two sources of equity financing which increases stockholders equity are______.

Common stock and retained earnings

Acme Enterprise borrowed $20k from Last bank on a 5-year note payable. Acme's journal entry to record this transaction will include a ________ of $20k.

Credit to Notes Payable and debit to cash

The line item, Common Stock, on the balance sheet results from a(n)

Financing

The first step in starting a business is to obtain cash from owners and/or creditors. Is this activity an investing activity or a financing activity?

Financing activity

A company paid $5k cash to purchase equipment. The company recorded a debit to Equipment of $5k and a credit to Cash of only $500. This company's accounting records are _________.

Incorrect because debits do not equal credits, which they should.

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

What is the effect on total assets when a company purchases a cash register for a cash payment of $1200?

No effect

The Retained Earnings account is increased with an entry on the _____ side of the account.

Right, Retained earnings, a stockholders equity account, is increased with an entry on the right side.

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, Common stock is understated, stockholders equity is understated.

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

Total assets to remain the same. The increase to the asset, Machinery, is offset by the decrease to the asset, Cash. Thus, total assets remain the same. Equipment is asset: +10K Cash is asset: -10k it balances out

A company purchased a $100,000 building in exchange for a 20-year note payable. The company recorded a $100,000 increase in the building account and a $100,000 decrease in cash. As a result of this error,________.

Total liabilities are too low. Total assets are too low because the Cash, an asset, was decreased and should not have been. Instead, Notes Payable, a liability, should have been increased.

Transactions

are of special importance because they are the only activities that enter the financial accounting system. Transactions include two types of events. External exchanges and internal events.

A company typically receives________, an asset, when it issues stock to its owners.

cash

Acme Enterprises issued $20,000 of stock in exchange for cash. The posting of the journal entry will result in a $20,000_______ to the common stock account.

credit

On the balance sheet, equipment is reported at its__________.

original cost

List the components of a classified balance sheet in the proper order in accordance with GAAP.

1. current assets 2. non-current assets 3. current liabilities 4. non-current Liabilities 5. Stockholder's equity

A company paid $500 for supplies that it purchased last month. The decrease in liabilities would be recorded with a___ to accounts payable.

Debit

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

Debit to Logo/Trademarks and Credit to Cash. Cash is decreased with a credit. Debits cause Cash to increase.

Events that do not involve exchanges between the company and someone else but affect assets, liabilities and/or stockholder's equity are called__________events.

Internal