ACCT CH 2

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

Creditors

Which of the following would not be recorded as an accounting transaction

Ordering supplies to be delivered next month

If total assets decrease, then either total liabilities or total stockholders' equity must also decrease.

TRUE - The accounting equation (Assets = Liabilities + Stockholders' Equity) must balance. If one side of the equation decreases, the other side must decrease.

The list of account names and reference numbers that the company will use when accounting for transactions is called the chart of accounts

TRUE - The chart of accounts is a summary of all account names (and corresponding account numbers) used to record financial results in the accounting system.

On January 1, Kirk Corporation had total assets of $425,000. During the month, the following activities occurred: What is the amount of total assets of Kirk Corporation at the end of the month?

$428,000

A company was formed with $300,000 cash contributed by its owners in exchange for common stock. The company borrowed $150,000 from a bank. The company purchased $50,000 of inventory and paid cash for it. The company also purchased $350,000 of equipment by paying $50,000 in cash and issuing a note for the remainder. What is the amount of the total liabilities to be reported on the balance sheet?

$450,000

The Sweet Smell of Success Fragrance Company borrowed $60,000 from the bank to be paid back in five years and used all of the money to purchase land for a new store. Sweet Smell's balance sheet would show this as:

$60,000 under Land and $60,000 under Notes Payable (long-term).

Spin Company has $52,000 in its Cash account, $20,000 in its Inventory account, and $12,000 in its Notes Payable (short-term) account. If Spin's only other account is Common Stock, what is the balance of that account?

$60,000.

A company was formed with $300,000 cash contributed by its owners in exchange for common stock. The company borrowed $150,000 from a bank. The company purchased $50,000 of inventory and paid cash for it. The company also purchased $350,000 of equipment by paying $50,000 in cash and issuing a note for the remainder. What is the amount of the total assets to be reported on the balance sheet?

$750,000

Which of the following transactions for Bill's Fish 'n Chips restaurant would be treated as an accounting transaction?

Bill purchased a fryer and a dishwasher, which will be paid for next month.

Which of the following is an asset

Notes Receivable

_________________ are of special importance because they are the only activities that enter the financial accounting system

Transactions

Which of the following is not true regarding the double-entry system?

Transactions must be recorded twice to ensure accuracy

The requirement that transactions be recorded at their exchange price at the transaction date is called the:

cost principle

Equity financing is financing obtained from:

stockholders.

The cost principle is used

to measure the amount used to record assets on the date of the transaction