Accounting 1 C1P2 Study Book

True or false: Dividends are resources paid to the stockholders.

True

A company pays dividends to its shareholders. Record this transaction in the accounting equation by decreasing the (cash/dividends) __________ account and (increasing/decreasing) __________ the Dividends account.

- cash - increasing

Melton's Door Company pays rent on the building facilities of $5,000 on May 1. Show how to record this transaction in the accounting equation of Melton's Door Company.

Rent Expense will be increased.

Which of the following statements below lists the rules of entering transactions into the accounting equation?

The accounting equation must always remain in balance so that assets always equal the sum of liabilities and equity.

Jackson Company purchased office equipment costing $3,000 for his business and paid immediately. Record this transaction in the accounting equation by:

decreasing Cash; increasing Equipment

On May 1, Mary's Morsels Company provided catering services at a wedding. The bride is billed $4,000 and will pay the following month. Record this transaction on May 1 in the accounting equation of Mary's Morsels by:

increasing Accounts Receivable and increasing Revenue

If a customer makes a partial payment of $100 on a service which has already been billed, you would record this transaction into the accounting equation by:

increasing Cash and decreasing Accounts Receivable.

Sally Smith decided to start a sea shell business organized as a corporation. Her initial investment in the business consisted of $10,000 in cash in exchange for common stock. Record this transaction in the accounting equation of the new business by:

increasing Cash; increasing Common Stock

The accounts payable account is a(n) ______ account.

liability

On 6/25, supplies costing $1,000 were purchased on credit, but only $400 of this amount was paid on 6/25. The remainder of the bill is owed on account. To record this transaction on 6/25: Supplies would be increased by $ __________ (1,000/400/600); Cash would be decreased by $ __________ (1,000/400/600) and Accounts Payable would be increased by $ __________ (1,000/400/600).

- 1000 - 400 - 600

On 8/1, supplies costing $500 were purchased on credit. Record this transaction in the accounting equation by:

increasing Supplies, and increasing Accounts Payable

On February 1, Russell's Consulting Services Company provided $1,000 of services to the local college. On February 1, Russell's collected $700, and the college will pay the balance next month. Record this transaction in the accounting equation on February 1 for Russell's Consulting Service by:

increasing both Cash and Accounts Receivable; and increasing Revenues

When recording transactions into the accounting equation, which of the following statements are correct?

- After recording the transaction, total assets will always equal total liabilities plus equity. - The accounting equation must always remain in balance.

Johna's Plant Nursery Company pays the salaries of its two employees. How will this transaction affect the accounting equation?

- Equity will be decreased. - Salaries expense will be increased.

Given the accounts below, choose all of the ones that affect equity.

- Revenues - Common Stock - Expenses - Dividends

When supplies are purchased on credit it means that:

- a liability has been incurred. - the Accounts Payable account will be increased. - the business will pay for the supplies at a later time.

Jackson's Programming paid its June rent of $500 cash. Demonstrate how to use the accounting equation to record the transaction by completing the following sentence. Jackson would decrease ___________ (expenses/cash/revenues) and increase __________ (expenses/equity/revenues) in the accounting equation.

- cash - expenses

Dividends of $60 cash are paid to the corporation's stockholders. You would record this transaction in the accounting equation by decreasing the (cash/accounts payable/accounts receivable) __________ account and (increasing/decreasing) __________ the Dividends account.

- cash - increasing

Select the account that would be decreased if Hillary's Hair Salon decides to pay $40 cash dividends to its shareholders.

Cash

Select the account that would be decreased if Hillary's Hair Salon pays $40 in dividends.

Cash

Smith Company purchased $100 of supplies for her business and paid immediately. She would record this transaction in the accounting equation by which of the following?

Decrease Cash; increase Supplies.

Jack Pickle decided to start a small business as a corporation. His initial investment was $4,000 cash in exchange for common stock. Demonstrate how to record this transaction in the accounting equation.

Increase Cash by $4,000; Increase Common Stock by $4,000.

Bob's Bakery receives its utility bill of $800 for the month and pays it immediately. Record this transaction in the accounting equation.

Increase Expenses and decrease Cash.

Jackson's Catering Company provided cookies worth $3,000 to the local college. The college paid immediately. Record this transaction in Jackson's accounting equation by:

increasing Cash; increasing Revenues

During September, Sally's Hair Salon purchased $900 of supplies on credit. In October, Sally's makes a payment of $200 on this bill. Record the October transaction into Sally's accounting equation by:

- decreasing Accounts Payable, $200. - decreasing Cash, $200.

When using the accounting equation, recording the purchase of equipment for cash would include an increase to the __________ (Cash/Equipment/Supplies) account and a decrease to the __________ (Cash/Equipment/Supplies) account.

- equipment - cash

A customer of Landen Consulting Company makes a $400 payment of cash on a bill for services provided last month. Record the receipt of cash in the accounting equation of Landen Consulting by:

- increasing Cash, $400. - decreasing Accounts Receivable, $400.

Bob's Bakery is making a partial payment of $70 for baking supplies it purchased in a previous month. Record this payment in the accounting equation of Bob's Bakery by decreasing the Accounts __________ (Payable/Receivable/Supplies) account and decreasing the __________ (Cash/Supplies) account.

- payable - cash

ABC Co. performs $200 of services for a customer, but does not get paid right away. Demonstrate how ABC Co. would record this transaction in the accounting equation by completing the following sentence. Note: Enter one word for each blank. ABC Co. would increase the Accounts (Payable/Receivable) __________ account and increase the (Cash/Revenue) __________ account in the accounting equation.

- receivable - revenue

To record the purchase of supplies for cash, the correct entry into the accounting equation would include an increase to (Equipment/Supplies/Cash) __________ and a decrease to (Equipment/Supplies/Cash) __________

- supplies - cash