ACC 207 Ch. 2

Which of the following have normal credit balances?

-common stock -notes payable -accounts payable

A current ratio that equals 2.0 suggests that a ______________.

-company has the ability to pay its current liabilities -company's current assets are larger than its current liabilities

In May, Pizza Aroma ordered $1,200 of supplies and promised to pay the supplier next month. As soon as it receives the supples in May, Pizza Aroma should record a __________ of $1,200.

-credit to Accounts Payable -debit to Supplies

Able Company purchased $25,000 worth of equipment for $5,000 cash and a $20,000, 5-year note payable. The journal entry to record this transaction would include a ____________.

-credit to Cash of $5,000 -debit to Equipment of $25,000 -credit to Notes Payable of $20,000

On May 10, BC Company ordered $500 of supplies, promising to pay for them in June. The supplies were received and recorded on May 15. BC paid the $500 on June 1. The journal entry that BC makes on June 1 would include a ______________.

-credit to Cash of $500 -debit to Accounts Payable of $500

Acme Enterprises issued 20,000 of stock in exchange for cash. The journal entry to record this transaction will include a _____________ of $20,000.

-credit to Common Stock -debit to Cash

MMM Pizza purchased a $25,000 pizza delivery truck in exchange for a 4-year promissory note. The journal entry to record this transaction would include a ________ of $25,000.

-credit to Notes Payable -debit to Equipment

The Equipment account is increased with an entry on the ______________ side of the Equipment T-account.

left

A chart of accounts is a ____________.

list of account titles with corresponding reference numbers used by companies so that transaction items are consistently named

Which of these is a non-current liability?

mortgage Payable due in 20 years

Buildings and equipment owned and used by a company are __________.

non-current assets

Businesses typically buy goods or services from others __________.

on account

On the balance sheet, Equipment is reported at its

original cost

When a company pays its supplier for amounts owed, its Cash and Accounts ______________ accounts are decreased.

payable

Every transaction involves a(n) _______________.

receiving and giving something of value

When a company purchases an asset but only pays for a portion of it and owes the remainder, which of the following is true?

the asset is debited for the amount paid plus the amount owed

A company has current liabilities of $3,000 and current assets of $1,000. From this information we can conclude that ___________.

the company may not be able to pay its current liabilities on time

To see the detail of increases and decreases in a company's Cash account, you should look at _____________.

the company's general ledger (T-accounts)

The trial balance at year end shows ____________.

the ending balance in each T-account

What is the effect on total assets when a company buys a building in exchange for a 20-year note payable?

total assets will increase

Show the order in which these asset accounts would appear on a company's balance sheet.

-cash -supplies -equipment

Melon-Cauli Grocers, Inc., had a $10,000 balance in its Accounts Payable account at the beginning of the month. During the month, it made $60,000 purchases on account due within 1 month and paid $40,000 of the amounts owed. The Accounts Payable balance at the end of the month has a ______________ balance.

$30,000 credit

Squid Roe, Inc., purchased equipment that cost $20,000 by issuing a 6%, $15,000 promissory note and paying the remainder in cash. The effects on the accounting equation are __________.

-Cash, an asset, is decreased by $5,000 -Notes Payable, a liability is increased by $15,000 -Equipment, an asset, is increased by $20,000

Increases and decreases in individual accounts, as well as an ending balance, are shown in a(n) _______________.

-T-account -Ledger

Which of the following is an example of proper accounting when it comes to reporting values on a company's balance sheet?

-X company reported its inventory at its current market value, which is lower than its original cost -X company reported its damaged equipment at an amount lower than it originally cost

Able Company purchased $25,000 worth of equipment in exchange for a promise to pay at the end of the month. The journal entry to record this transaction would include _____________ of $25,000.

-a credit to Accounts Payable -a debit to Equipment

All transactions _____________.

-affect assets, liabilities, and/or stockholders' equity -have at least two effects on the accounting equation

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

-an asset decreases by $100 -a liability account increases by $100 -a stockholders' equity account increases by $100

Which of the following are similarities between Notes Payable and Accounts Payable? They both _______________.

-are liabilities -are amounts owed to creditors

A classified balance sheet shows subtotals for current __________ and current _________.

-assets -liabilities

Which of the following are true about Notes Payable and Accounts Payable?

-both Notes Payable and Accounts Payable are liabilities -Notes Payable are interest-bearing, Accounts Payable are not

Squid Roe, Inc., purchased equipment that cost $20,000 by promising to pay $15,000 next month and paying the remainder in cash. The journal entry to record this transaction included a _________.

-debit to Equipment of $20,000 -credit to Cash of $5,000 -credit to Accounts Payable of $15,000

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

Which of the following are considered business documents?

-invoices -stock certificates -bills

Identify what a company gives and receives when it invests in equipment by paying cash and signing a two-year note.

-it gives a promissory note -it receives equipment -it gives cash

Which of the following are non-current assets that are found on the balance sheet?

-land -equipment -machinery -buildings

List these liability accounts in the order in which they would appear on a company's balance sheet.

-note payable (due in 5 months) -note payable (due in 5 years) -mortgage payable (due in 25 years)

Which of the following are characteristics of Notes Payable and not Accounts Payable?

-only notes Payable have interest charges -Notes Payable are amounts borrowed from a bank; Accounts Payable are not -Notes Payable are documented with formal documents called notes

A company purchased $2,200 of equipment in exchange for a cash payment of $1,200 and a $1,000 promise to pay. The company recorded a $1,200 increase in the Equipment and a $1,200 decrease in the Cash account. No entry was made to the Accounts Payable account. As a result, _________________.

-total assets are too low -the accounting equation is in balance

A company purchased a new cash register in exchange for a cash payment of $1,200. As a result of recording the purchase, ____________.

-total assets remain the same -one asset is exchanged for another

On December 31, 2017, Accounts Payable had a balance of $10,000. During the period 2018, there were $500,000 purchases on account and $490,000 payments of accounts payable. The December 31, 2018 balance must equal $____.

20,000

The formal document that lists all of the daily journal entries, but does not provide account balances, is the ________________.

journal

On July 19, WX Company ordered $100 of supplies, promising to pay for them in August. The supplies were delivered and invoiced to WX on July 21 and WX paid $100 for them on August 10. The journal entry that WX made on August 10 would include a debit to ___________.

Accounts Payable

A company has developed an exceptional customer base. The company may include this as an asset on its balance sheet. T/F

False

Big Company's current ratio is 1.2 and Little Company's current ratio is 1.4. Which company is better able to pay it current liabilities?

Little Company

The effect of journal entries on each account is summarized in the ____________.

ledger

Financial information needed to manage a company is provided by a(n) _______________ system

accounting

Which of these is a current liability?

accounts Payable

When a company receives an invoice for goods purchased and received from a supplier, it records __________.

an increase in Accounts Payable

The prior period's ending balances become the next period's _____________ balances.

beginning

The _______________ principle requires that assets be recorded at the amount exchanged for them at the time of purchase.

cost

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

The beginning balance in Ace's Accounts Payable was $3,000. Ace then bought $200 of supplies for cash. It also paid $500 of the amount that it owed for supplies purchased on account last month. The ending balance in Ace's Accounts Payable is a _________.

credit of $2,500

Who has first claim to a business's assets should the company go out of business?

creditors

Assets that will be used up or converted to cash within 12 months are _____________ assets.

current

Liabilities that will be paid or fulfilled within 12 months are ______________ liabilities.

current

A company made a $1,000 payment on its $100,000, 20-year mortgage. The decrease in liabilities would be recorded with a ________________ to Notes Payable.

debit

Assets have a normal ______________ balance.

debit

The beginning balance in Acme's Cash account was $2,400. During the month, Acme issued $25,000 of stock for cash and repaid a $15,000 note payable. The balance in Acme's Cash account is now a _____________.

debit of $12,400

On a trial balance, _____________.

debits should equal credits

A difference between debt financing and equity financing is that ______________.

debt financing must be repaid, while repayment of equity financing is not required

A non-current liability

does not need to be repaid in the next 12 months

Which of the following accounting cycle steps describes the summarizing in ledger accounts?

dollars amounts from journal entries are copied (posted) to the appropriate accounts in the ledger, so that account balances can be totaled

Which of these is a non-current asset?

equipment

An exchange of promises is a transaction that affects the accounting equation. T/F

false

An advantage of a classified balance sheet is that it is easy to see _______________.

if current assets are large enough to pay current liabilities

Given that there is no change in stockholders' equity, which of the following will keep the accounting equation in balance?

increase equipment by $20,000, decrease Cash by $5,000, and increase Notes Payable by $15,000

Entries are first recorded in the _______________ and then summarized in the ledger.

journal

The Cash T-account is increased with an entry on the _____________ side of the T-account.

left