Fin Acct - CH 2

The entry to record the purchase of supplies on account includes a credit to: A. Accounts Payable. B. Cash. C. Supplies Expense. D. Supplies.

A. Accounts Payable.

A business received the current month's utility bill for $1625, and immediately paid it. Which journal entry is prepared? A. Debit Utilities Expense for $1625 and credit Cash for $1625. B. Debit Accounts Payable for $1625 and credit Cash for $1625. C. Debit Operating Expense for $1625 and credit Accounts Payable for $1625. D. Debit Utilities Payable for $1625 and credit Cash for $1625.

A. Debit Utilities Expense for $1625 and credit Cash for $1625.

Which transaction decreases stockholders' equity? A. Employees worked one week and were paid at the end of the week. B. Services were performed and cash was immediately received from the customers. C. Inventory was purchased on account. D. Services were performed on account.

A. Employees worked one week and were paid at the end of the week.

Two employees worked one week and were paid salaries of $1600. The journal entry would: A. debit Salary Expense for $1600 and credit Cash for $1600. B. debit Accounts Payable for $1600 and credit Salary Payable for $1600. C. debit Cash for $1600 and credit Salary Expense for $1600. D. debit Cash for $1600 and credit Salaries Payable for $1600.

A. debit Salary Expense for $1600 and credit Cash for $1600.

An owner makes an investment of cash into the business and receives shares of stock. This transaction is recorded as a: A. debit to Cash and a credit to Common Stock. B. debit to Common Stock and a credit to Cash. C. debit to Cash and a credit to Stockholder Revenue. D. debit to Cash and a credit to Retained Earnings.

A. debit to Cash and a credit to Common Stock.

Decreases in stockholders' equity that result from the cost of operating the business are: A. expenses. B. assets. C. liabilities. D. revenues.

A. expenses.

Receiving a payment from a customer on account: A. has no effect on total assets. B. decreases liabilities. C. increases stockholders' equity. D. decreases stockholders' equity.

A. has no effect on total assets.

Which transaction increases stockholders' equity? A. sale of common stock B. payment of operating expenses C. dividends that are declared and paid D. expenses greater than revenues for the period

A. sale of common stock

Yellow Company had a balance of $30,000 in Accounts Payable at the beginning of June, and purchased $103,000 of merchandise on account during the month. At the end of June, Yellow's Account Payable balance was $33,000. What amount did Yellow pay on account during June? A. $40,000 B. $100,000 C. $103,000 D. $70,000

B. $100,000 $30,000 + $103,000 - $33,000 = $100,000

Yellow Company had a balance of $33,000 in Accounts Payable at the beginning of June, and purchased $101,000 of merchandise on account during the month. At the end of June, Yellow's Account Payable balance was $29,000. What amount did Yellow pay on account during June? A. $72,000 B. $105,000 C. $39,000 D. $101,000

B. $105,000 $33,000 + $101,000 - $29,000 = $105,000

Which of the following is a business transaction? A. A company signs a contact for services to be provided during the first quarter of the next fiscal year. B. A company pays its employees a year-end bonus. C. A company applies for a mortgage that will be used to purchase a new office building. D. A company hires a new marketing manager.

B. A company pays its employees a year-end bonus.

The debt created by a business when it makes a purchase of inventory on account is a(n): A. note payable. B. account payable. C. revenue. D. account receivable.

B. account payable.

When computing the normal balance of an account: A. salaries expense should have a credit balance. B. accounts payable should have a credit balance. C. notes payable should have a debit balance. D. equipment should have a credit balance.

B. accounts payable should have a credit balance.

When a company pays an amount it owes a creditor: A. assets are decreased and liabilities are increased. B. assets are decreased and liabilities are decreased. C. assets are decreased and net income is decreased. D. liabilities are decreased and net income is increased.

B. assets are decreased and liabilities are decreased.

The normal balance of an expense account is a ________ because expenses decrease ________. A. credit; retained earnings B. debit; retained earnings C. debit; expenses D. debit; assets

B. debit; retained earnings

Muddle Company performs a service for one of its customers and immediately collects the cash. This transaction will: A. decrease Retained Earnings. B. have no effect on liabilities. C. decrease net income. D. increase Accounts Receivable.

B. have no effect on liabilities.

A company receives an utility bill and immediately pays it. With this transaction: A. expenses are decreased. B. stockholders' equity is decreased. C. assets are increased. D. liabilities are increased.

B. stockholders' equity is decreased.

Which transaction decreases stockholders' equity? A. total revenues greater than total expenses for the period B. total expenses greater than total revenues for the period C. cash purchase of land D. sale of common stock

B. total expenses greater than total revenues for the period

For a new business, the beginning balance of retained earnings equals: A. cash invested by the stockholders. B. zero. C. budgeted net income for the first year. D. beginning balance of the common stock account.

B. zero.

When services are performed on account: A. revenue will not be recorded until the cash is received from the customer. B. accounts payable is increased. C. accounts receivable is increased. D. cash is increased.

C. accounts receivable is increased.

If a journal entry includes a debit to Accounts Payable and a credit to Cash: A. Accounts Payable is increased. B. Cash is increased. C. Accounts Payable is decreased. D. Cash will have a credit balance.

C. Accounts Payable is decreased.

Which account has a normal debit balance? A. Common Stock B. Service Revenue C. Advertising Expense D. Salaries Payable

C. Advertising Expense

On May 1, a business provided legal services to a client and billed the client $3700. The client promised to pay the business in one month. Which journal entry should the business record on May 1? A. Debit Cash for $3700 and credit Retained Earnings for $3700. B. Debit Cash for $3700 and credit Service Revenue for $3700. C. Debit Accounts Receivable for $3700 and credit Service Revenue for $3700. D. Debit Accounts Payable for $3700 and credit Service Revenue for $3700.

C. Debit Accounts Receivable for $3700 and credit Service Revenue for $3700.

On May 10, a business collected $3300 on account. What journal entry is needed on that date? A. Debit Cash for $3300 and credit Revenue for $3300. B. Debit Accounts Payable for $3300 and credit Revenue for $3300. C. Debit Cash for $3300 and credit Accounts Receivable for $3300. D. Debit Accounts Receivable for $3300 and credit Revenue for $3300.

C. Debit Cash for $3300 and credit Accounts Receivable for $3300.

All of the following accounts would be considered assets EXCEPT for: A. Prepaid Expenses. B. Notes Receivable. C. Retained Earnings. D. Cash.

C. Retained Earnings.

Interest payable, income tax payable and salary payable are all examples of: A. prepaid expenses. B. retained earnings. C. accrued liabilities. D. expenses of future periods.

C. accrued liabilities.

A business paid $48,000 cash to purchase equipment. The business would: A. debit Equipment for $48,000 and credit Accounts Payable for $48,000. B. debit Accounts Payable for $48,000 and credit Cash for $48,000. C. debit Equipment for $48,000 and credit Cash for $48,000. D. debit Cash for $48,000 and credit Notes Payable for $48,000.

C. debit Equipment for $48,000 and credit Cash for $48,000.

Which of the following transactions would decrease an asset and decrease stockholders' equity? A. performance of a service for a client on account B. payment of an accounts payable C. declaration and payment of a dividend to the shareholders D. borrowing money from the bank for thirty days

C. declaration and payment of a dividend to the shareholders

The normal balance of an account: A. must be computed after every transaction. B. falls on the side where decreases are recorded. C. falls on the side where increases are recorded. D. cannot be computed in a manual accounting system.

C. falls on the side where increases are recorded.

An account will have a debit balance if: A. it is a liability account. B. the account has more debit entries than credit entries. C. the amount of the debits exceeds the amount of the credits. D. the amount of the credits exceeds the amount of the debits.

C. the amount of the debits exceeds the amount of the credits.

Which of the following transactions will increase one asset and decrease another asset? A. the performance of services on account B. the purchase of office supplies on account C. the purchase of equipment for cash D. the performance of services for cash

C. the purchase of equipment for cash

A company performs services for a client on account. When the company receives the cash from the customer one month later: A. an expense account is decreased. B. a revenue account is increased. C. there is no change in total assets. D. a liability account is decreased.

C. there is no change in total assets.

When working with T accounts, an important rule to remember is: A. the debit side of a T account is on the right-hand side of the T account for assets and expenses. B. an increase to accounts payable will be recorded as a debit. C. to credit an account means to enter an amount on the right-hand side of the T account. D. when an account is debited, an amount is entered on the right-hand side on the T account.

C. to credit an account means to enter an amount on the right-hand side of the T account.

CH 2 - LO1/2

CH 2 - LO1/2

CH 2 - LO3

CH 2 - LO3

CH 2 - LO4

CH 2 - LO4

CH 2 - LO5

CH 2 - LO5

CH 2 - LO6

CH 2 - LO6

The Accounts Receivable account for Johnny's Mechanic Shop had a beginning balance of $35,000. During the month, Johnny made sales on account of $42,000. The ending balance in the Accounts Receivable account is $32,000. What are cash collections for the month? A. $42,000 B. $35,000 C. $77,000 D. $45,000

D. $45,000 $35,000 + $42,000 - $32,000 = $45,000

Which of the following statements, regarding the rules of debits and credits, is CORRECT? A. A liability is increased by a debit. B. An asset is increased by a credit. C. Dividends are decreased by debits. D. Revenue is increased by a credit.

D. Revenue is increased by a credit.

Which of the following transactions will increase stockholders' equity? A. The company makes a payment on account. B. The company purchases equipment. C. The company pays a dividend to its shareholders. D. The company issues common stock to new shareholders.

D. The company issues common stock to new shareholders.

A business paid $1900 on account. The journal entry would: A. debit Cash for $1900 and credit Accounts Payable for $1900. B. debit Accounts Receivable for $1900 and credit Revenue for $1900. C. debit Cash for $1900 and credit Retained Earnings for $1900. D. debit Accounts Payable for $1900 and credit Cash for $1900.

D. debit Accounts Payable for $1900 and credit Cash for $1900.

The left side of a T-account is always the: A. credit side. B. decrease side. C. increase side. D. debit side.

D. debit side.

Purchasing supplies on account would: A. increase total assets and decrease total liabilities. B. increase total liabilities and decrease total assets. C. increase total liabilities and increase stockholders' equity. D. increase total assets and increase total liabilities.

D. increase total assets and increase total liabilities.

A company performed services for a customer for cash. This transaction increased assets and: A. increased liabilities. B. decreased stockholders' equity. C. increased expenses. D. increased revenues.

D. increased revenues.

A partner in Sturm Company purchased a new yacht, for personal use, with his own funds. Sturm Company would: A. credit a revenue account. B. credit a liability account. C. debit an asset account. D. not record the transaction in its books.

D. not record the transaction in its books.

Which of the following transactions includes a credit to cash? A. the collection of cash from an accounts receivable B. the purchase of supplies on account C. receipt of cash from a customer when service is provided D. the payment of an accounts payable

D. the payment of an accounts payable

The proper order for the accounting process is: A. transaction occurs, posting, journalizing. B. transaction occurs, posting, transaction analyzed, journalizing. C. posting, transaction occurs, journalizing. D. transaction occurs, transaction analyzed, journalizing, and posting.

D. transaction occurs, transaction analyzed, journalizing, and posting.

Accounts Receivable is increased with a credit. True False

False

An accounts receivable represents the promise of the business to pay a debt. True False

False

Assets include cash, land, and accounts payable. True False

False

Assets, revenues, and dividends are all increased with debits. True False

False

Common stock and retained earnings are increased with debits. True False

False

Cost of goods sold is an example of a revenue account. True False

False

If a company declares and pays a dividend to its stockholders, both cash and expenses will decrease. True False

False

If a company performs services on account, the revenue is not earned until the cash is collected. True False

False

A prepaid expense is an asset. True False

True

An accrued liability is a liability for an expense that has not yet been paid. True False

True

Each transaction has either an equal effect on both the left- and right-sides of the accounting equation, or an offsetting effect (both positive and negative) on the same side of the equation. True False

True

The account is the basic summary device of accounting. True False

True

The double-entry system of accounting records the dual effects of transactions on the entity. True False

True

The left hand side of a T account is the debit side and the right hand side is the credit side. True False

True

The trial balance summarizes all the account balances for the financial statements and shows whether total debits equal total credits. True False

True