Acct Ch3

A firm would record which of the following accounting entries after purchasing $1,750 of supplies on account? a $1,750 decrease to Cash, along with a $1,750 decrease to Retained Earnings a $1,750 decrease to Supplies, along with a $1,750 increase to Notes Payable a $1,750 increase to Supplies, along with a $1,750 increase to Accounts Payable a $1,750 increase to Supplies, along with a $1,750 decrease to Cash

$1,750 increase to Supplies, along with a $1,750 increase to Accounts Payable When $1,750 in supplies are purchased, the company must record the receipt of these supplies on the financial statements. Therefore, the supplies account balance increases by $1,750. When a purchase is made on account, this means that the cash outlay has not yet occurred and the company must make this payment in the future. To record the future payment owed, the company increases the accounts payable balance by $1,750.

Meadows Manufacturing has a March 15th year-end date. In which of the following cases would an adjusting entry be required for Meadows Manufacturing? Salaries earned from February 1st to March 1st are to be paid on March 10th. Cash is paid for supplies to be used from January 1st to March 1st. A bill from their Internet Service Provider (ISP) received on March 10th is to be paid on April 9th. A three-month insurance policy is purchased on December 6th.

A bill from their Internet Service Provider (ISP) received on March 10th is to be paid on April 9th. An internet bill received on March 10th, but paid on April 9th, would require an adjusting entry. An adjusting entry ensures that an expense is recognized in the period incurred. Meadows Manufacturing has a year-end date of March 15th. The adjusting entry is required because the expense has occurred in one accounting period, but the payment will not be made until the subsequent accounting period.

Which of the following statements is correct? A post-closing trial balance will show a zero balance for the balance sheet accounts. A post-closing trial balance will show only balance sheet accounts. A post-closing trial balance will show a zero balance for all accounts. A post-closing trial balance will show only income statement accounts.

A post-closing trial balance will show only balance sheet accounts. The correct answer is that a post-closing trial balance will show only balance sheet accounts. The post-closing trial balance is a list of all permanent accounts and their balances after all entries have been journalized and posted. Income statement accounts are closed directly into retained earnings. All temporary accounts will have zero balance, but all permanent accounts will carry forward their balances into the next accounting period.

If customers owe a company $10,000, which account in the ledger would reflect this? Accounts Receivable would have a debit of $10,000. Accounts Payable would have a debit of $10,000. Notes Payable would have a credit of $10,000. Cash would have a debit of $10,000.

Accounts Receivable would have a debit of $10,000. On the company's books, the amount the customers owe would be recorded as a debit (increase) to Accounts Receivable for $10,000. Cash would not be debited (increased) because the customers have not paid the money yet. The money is owed to the company and is an asset, therefore the liability accounts, Accounts Payable and Notes Payable, would not be appropriate.

What will happen if expenses are paid in cash? Assets will decrease. Liabilities will decrease. Assets will increase. Stockholders' equity will increase.

Assets will decrease. Expenses paid in cash will cause a decrease in the cash account. Since cash is an asset account, assets will decrease

On July 1, Cooper Corporation received $20,000 from Smith Industries in exchange for services performed. What accounting entries should Cooper make to record this event, and why? Cooper should record a $20,000 increase in unearned service revenue along with a $20,000 increase in cash, because this way the firm's retained earnings will increase by the same amount as its assets. Cooper should record a $20,000 increase in unearned service revenue along with a $20,000 increase in cash, because this way the firm's liabilities will increase by the same amount as its assets. Cooper should record a $20,000 increase in revenue along with a $20,000 increase in cash, because this way the firm's retained earnings will increase by the same amount as its assets. Cooper should record a $20,000 increase in revenue along with a $20,000 increase in cash, because this way the firm's liabilities will increase by the same amount as its assets.

Cooper should record a $20,000 increase in revenue along with a $20,000 increase in cash, because this way the firm's retained earnings will increase by the same amount as its assets. Cooper will record the $20,000 payment as an increase in revenue, as this payment was for services performed. Revenue is an element of retained earnings, therefore the firm's retained earnings, and thus its stockholders' equity, will increase by $20,000. Cooper must also record a $20,000 increase in the asset account 'Cash' to record the receipt of the payment. Analyzing the expanded accounting equation, both assets and revenue increased by $20,000 creating a balanced equation: Assets = Liabilities + Common Stock + Revenue - Expenses - Dividends. ($20,000 = $0 + $0 + $20,000 -$0 - $0)

Which of the following statements about credits is true? Credits increase assets and decrease liabilities. Credits increase both assets and liabilities. Credits decrease both assets and liabilities. Credits decrease assets and increase liabilities.

Credits decrease assets and increase liabilities. Credits increase liability, stockholders' equity, and revenue accounts. Credits decrease asset and expense accounts.

A flower shop makes a large sale for $1,500 on June 30. The customer is sent a statement on July 5 and a check is received on July 10. The flower shop follows GAAP and applies the revenue recognition principle. When should the $1,500 be recognized? July 5 July 1 July 10 June 30

June 30th The flower shop should recognize the $1,500 sale on June 30th, the day the services were rendered. According to the revenue recognition principle, companies should recognize revenue in the period in which the service was performed

On February 2, Miles Inc. pays $800 to purchase a one-year insurance policy that will expire next year on January 31. Miles indicates this transaction in its books by recording an $800 reduction in cash and an $800 increase in expenses. Did Miles make the proper accounting entries? Why or why not? Yes, Miles made the proper accounting entries. In order to keep the accounting equation in balance, the firm had to increase its expenses and thus decrease its stockholders' equity by the same amount as it decreased its assets. No, Miles did not make the proper accounting entries. Prepaid insurance is a liability, not an expense. Thus, the firm should have offset the $800 decrease in cash (an asset account) with an $800 increase in prepaid insurance (a liability account). No, Miles did not make the proper accounting entries. Prepaid insurance is an asset, not an expense. Thus, the firm should have offset the $800 decrease in cash (an asset account) with an $800 increase in prepaid insurance (also an asset account). No, Miles did not make the proper accounting entries. Prepaid insurance is a liability, not an expense. Thus, the firm should have offset the $800 decrease in cash (an asset account) with an $800 decrease in prepaid insurance (a liability account).

No, Miles did not make the proper accounting entries. Prepaid insurance is an asset, not an expense. Thus, the firm should have offset the $800 decrease in cash (an asset account) with an $800 increase in prepaid insurance (also an asset account). Prepaid insurance is an asset, not a liability or expense. Thus, this transaction should not affect either the liabilities or stockholders' equity portion of the balance sheet. Instead, only the assets portion should be affected. Specifically, the $800 reduction in cash should be offset by an $800 increase in prepaid insurance.

Stockholders' equity and liabilities both have normal credit balances. Why are the stockholders' equity debit/credit rules more complex than liabilities? The elements of Stockholders' Equity are broken into different types of accounts; some are increased with debits and some with credits. Dividends are paid to common stockholders, thus reducing Common Stock. Stockholders' equity is composed of both Common Stock and Retained Earnings, one of which is increased with debits and the other with credits. Net income can be a loss, thus changing the debit/credit relationship.

The elements of Stockholders' Equity are broken into different types of accounts; some are increased with debits and some with credits. Stockholders' equity is comprised of the balances of Common Stock & Retained Earnings, both of which are increased with credits. Retained Earnings is further broken down into revenues, expenses, and dividends. While common stock and revenues are increased with credits, expenses, and dividends are increased with debits.

Meadows Manufacturing follows the accrual basis. An accrual results when ____________ and a deferral results when a customer has been billed before $6,000 cash is received, $4,500 cash is paid for previous quarter's insurance for property. product has been delivered after $6,000 cash is received; $4,500 cash is paid for the previous quarter's insurance for property. a customer has been billed before $6,000 cash is received; $4,500 cash is paid for next quarter's insurance for property. product has been delivered after $6,000 cash is received; $4,500 cash is paid for next quarter's insurance for property.

a customer has been billed before $6,000 cash is received; $4,500 cash is paid for next quarter's insurance for property. An accrual results when revenue is earned and billed, but payment is received later. On the other hand, to defer means to delay. A deferral results when costs or revenues are recognized at a later date than when cash was originally exchanged. In this scenario, an accrual results when a customer has been billed before a $6,000 cash payment is received. And a deferral results when $4,500 is paid in advance for next quarter's property insurance.

An individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity items is a(n) trial balance. note. summary of transactions. account.

account An account provides an individual accounting record of all increases and decreases in a specific asset, liability, or stockholders' equity item. For assets, any increases will be debits and any decreases will be credits. For liabilities and stockholders' equity, any increases will be credits and any decreases will be debits.

Liability with a credit balance is the classification and normal balance of Accumulated Depreciation. Accounts Payable. Retained Earnings. Dividends.

accounts payable Accounts Payable is a liability account, and its normal balance is a credit. Dividends are a component of Stockholders' Equity, and its normal balance is a debit. Retained Earnings is a component of Stockholders' Equity, and its normal balance is a credit. Accumulated Depreciation is an asset account, and its normal balance is a credit.

At the end of March, Paul's Painting hired five temporary employees to work on a project that began on April 5 and ended on April 28. Paul's received 100% of the total payment for the project on May 3. In this situation, both ________ accounting and GAAP require that Paul's recognize the employees' total salary expense in ____ accrual-basis; April. cash-basis; April. accrual-basis; May. cash-basis; May.

accrual-basis; April.

Which of the following gives the usual sequence of steps in the transaction recording process? analyze, journalize, post to the ledger journalize, analyze, post to the ledger journalize, post to the ledger, analyze post to the ledger, journalize, analyze

analyze, journalize, post to the ledger The three steps in recording a transaction include first analyzing the transaction to determine its effect on the accounts. Next, entering the transaction information into a journal. And finally, transferring the journal information to the appropriate accounts on the ledger.

Are prepaid expenses an asset or a liability?

asset

If a company is using the double-entry system, each transaction is required to be recorded in two places under stockholders' equity. a journal and in a ledger. the earnings report and checkbook register. at least two different accounts.

at least two different accounts.

Cash increases and accounts receivable decreases when a business forgives an account receivable. records an account receivable. pays on an account payable. collects an account receivable.

collects an account receivable. Upon collection of an account receivable, the company records an increase in cash and the corresponding decrease in the account receivable. As an example, a customer pays cash on their account. The business records this as a collection on the customer's account. The cash provided by the customer is an increase (debit) to Cash and a decrease (credit) to the customer's Account Receivable.

Henna Hair Salon purchased supplies for $6,000 and debited Supplies for the full amount. At the end of the accounting period, $1,800 worth of supplies were still on hand. Identify the adjusting entry needed at the end of the period. debit Supplies Expense $4,200; credit Supplies $4,200 debit Supplies $1,800; credit Supplies Expense $1,800 debit Supplies $4,200; credit Supplies Expense $4,200 debit Supplies Expense $7,800; credit Supplies $7,800

debit Supplies Expense $4,200; credit Supplies $4,200 $6,000 - $1,800 = $4,200 The formula to calculate the amount of the adjusting entry is purchased supplies - the amount of supplies still on hand. The adjusting entry would be a debit to Supplies for $4200 and a credit to Supplies Expense for $4200

During the month of July, Falcon Industries has cash receipts of $2,000, $7,000, and $5,500 and makes cash payments of $1,800, $7,200, and $3,000. If the Cash account started with a $0 balance, Falcon's Cash account balance at the end of July would have a credit balance of $2,500. debit balance of $2,500. credit balance of $3,500. debit balance of $3,500.

debit balance of $2,500. All receipts of cash are recorded as debits to Falcon's Cash account; thus, the total debits are $2,000 + $7,000 + $5,500 = $14,500. Conversely, all payments of cash should be recorded as credits; thus, the total credits to Falcon's Cash account are $1,800 + $7,200 + $3,000 = $12,000. The debits total exceeds the credits total resulting in the cash account debit balance of $2,500. A debit balance in an asset account represents a positive balance or cash retained by the company.

Collecting, processing, and communicating financial information to decision-makers are characteristics of every accounting system. electronic data processing (EDP) systems only. government accounting systems only. public accounting systems only.

every accounting system.

Transactions are entered in the journal and then transferred to source documents. ledger accounts. trial balance sheets. a statement of cash flows.

ledger accounts he final step in recording a transaction is to transfer the journal entry to the appropriate accounts in the ledger.

Transactions are entered in the journal and then transferred to source documents. ledger accounts. trial balance sheets. a statement of cash flows.

ledger accounts. The final step in recording a transaction is to transfer the journal entry to the appropriate accounts in the ledger.

What are accounts receivable?

oral promises to pay debts, generally classified as current assets; classified as either trade receivables ( from purchasers of company's goods and services) or non-trade receivables (from persons other than customers such as advances to employees, tax refunds, etc.) money owed to a company by its debtors. An example of accounts receivable includes an electric company that bills its clients after the clients received the electricity. The electric company records an account receivable for unpaid invoices as it waits for its customers to pay their bills.

Evidence for a transaction comes in the form of source documents. a balance sheet. a ledger. a journal.

source documents A source document provides evidence of a transaction. Examples of source documents include a sales slip, a check, a bill, or a cash register document. Source documents provide evidence so that the transaction can be recorded in the journal, then transferred to the ledger, and finally reported on the financial statements.

The classification and normal balance of the Retained Earnings account is expense, debit. stockholders' equity, credit. revenues, credit. asset, debit.

stockholders' equity, credit. Retained earnings is a balance sheet account, properly recorded in the stockholders' equity section. The common balance for this account is a credit balance representing a positive value for retained earnings.

What does a trial balance prove? the mathematical equality of debits and credits after the posting process that all transactions have been posted that the ledger is posted correctly that all transactions have been recorded correctly

the mathematical equality of debits and credits after the posting process

A journal is used as proof that the financial statements were properly prepared. to enter transactions. as evidence upon which to determine which financial statement to which a transaction will be transferred. as evidence to determine a transaction's effects on specific accounts.

to enter transactions.