ACC 250 Test #2 Study
Otto's Auto Repair Shop repairs a car for a customer on August 29th. The customer picks up the car on September 1st. The customer mails a check in payment of the repair to Otto on September 5th. Otto receives the check on September 6. According to GAAP, Otto must record the revenue on _____?
August 29th
On January 1, 2018, M. Johanson Company purchased equipment for $36,000. The company is depreciating the equipment at the rate of $500 per month. The book value of the equipment at December 31, 2018 is:
$30,000
Revenues and Expenses appear on which financial statement?
Income Statement
Alas Corporation's customer, Mr. Jones, cannot afford to pay his account receivable on the due date; so he gives Alas Corporation a note promising to pay the amount at a later date. When Mr. Jones gives the note to Alas Corporation, Alas Corporation will:
Make a journal entry debiting the Note Receivable account and crediting the Accounts Receivable account
The Hodi Company's balance sheets on December 31, 2018 and 2019 show accounts receivable of $80,000 and $70,000 respectively. And the company's net credit sales for 2018 and 2019 respectively were: $410,000 and $500,000. Hodi Company's average collection period for accounts receivable for 2019 is:
54.7 days
Notes payable is where?
Balance Sheet
Which of the following is not a stockholders' equity account?
Cash
If you were going to start a business, which type of business would best protect your personal assets?
Corporation
The Vintage Laundry Company began business on June 1st. On June 10th it purchased $6,500 worth of supplies and recorded the purchase as an asset (i.e., it debited the Supplies account). On June 30, only $1,000 of supplies were left in the supply cabinet. The adjusting entry that should be made by the company on June 30 is:
Debit Supplies Expense, $5,500; Credit Supplies, $5,500
A debit always increases an account's balance
False
A debit decreases an expense account while a credit increases an expense account
False
Debit and credit can be interpreted to mean "bad" and "good", respectively.
False
Debits do not always have to equal Credits
False
Expense Accounts normally have a credit balance
False
Land improvement costs (e.g., fencing around the perimeter of the land) are debited to the Land account. T/F
False
Liability, Equity, and Revenue Accounts normally have a debit balance
False
On the balance sheet on textbook page 49, the $11,000 balance of notes payable is indented because it has a debit balance.
False
The Left Side of an account represents the Credit Side
False
The normal balance of an asset is a credit.
False
On April 6th, a law firm received $2,000 cash from a client for legal services to be rendered in the future. The law firm debited cash for $2,000 and credited the liability account Unearned Service Revenue for $2,000. If the legal services have been completed by April 30th and no adjusting entry is made, this would cause:
Revenues to be understated
"A balance sheet must always be in balance." What does this mean? Answer by giving the accounting equation
Total Assets = Total Liabilities + Stockholders' Equity
A T account has a left side, called the debit side, and a right side, called the credit side.
True
A credit can represent an increase or decrease to an account's balance
True
A debit can represent an increase or a decrease to an account's balance
True
A debit decreases a revenue account, while a credit increase a revenue account
True
Liability and Equity Accounts normally have credit balance
True
Revenue Accounts normally have a credit balance
True
A credit always increases an account's balance
False
A debit increases a liability account while a credit decreases a liability account
False
Allowance for Doubtful Accounts is an expense account and, therefore, it is deducted from revenue in arriving at net income on the income statement. T/F
False
All accounts have a normal balance that is either a debit balance or a credit balance
True
An increase in an asset is recorded by a debit.
True
Asset, Expense, and Draw Accounts normally have a debit balance
True
A debit to an account always indicates an increase in that account.
False
Asset Accounts normally have credit balances
False
When a business purchases a truck, sales taxes and the annual license tab cost should be debited to the Truck account. T/F
False
You are the accountant for Smith Plumbing Corporation. Jim Lime, a customer of Smith Plumbing Corporation, just paid for services that were rendered and billed last month. As a result of Mr. Lime's payment to Smith Plumbing Corporation, which of the following statements is correct? [Hint: make and analyze the journal entry for the receipt of the customer's money]
The amount of Smith Corporation's total assets will not change.
A debit increases an asset account's balance while a credit decreases an asset's balance.
True
A debit increases an expense account's balance while a credit reduces an expense account's balance
True
A decrease in a liability is recorded by a debit.
True
Allowance for Doubtful Accounts is a contra asset account that is deducted from Accounts Receivable on the balance sheet. T/F
True
An account's structure has an increase side and also a decrease side
True
Debits and Credits are crucial concepts needed in order to understand bookkeeping
True
Debits and Credits are the accounting terms used to identify increases and decreases to an account's balance
True
If a debit increases a specific type of account's balance then it logically follows that a credit reduces that type of account's balance
True
If a revenue account is credited, the revenue account is increased.
True
In a journal entry, the total dollar amount of debits must always equal the total dollar amount of credits (see page 127 for sample journal entries).
True
The "Right Side" of an account's structure is the Credit Side
True
The major types of accounts are Assets, Liabilities, Equity, Revenue, Expenses, and Draws
True
Whether a debit or credit increases or decreases an account's balance depends on the type of account
True
