Acctg 101 chapter 2 - Smart learning

Long issued 5,000 shares of stock for $10,000. Long used $2,000 of the proceeds to purchase supplies, and borrowed $8,000 cash from the bank. Long's total assets are

$18,000

Sampson Corporation issues common stock for $25,000 cash and uses some of the proceeds to purchase equipment for $10,000 cash. Sampson also purchases $4,000 of supplies on account. After recording these transactions total assets are

$25,000 + $0 + $4,000 = $29,000 total assets.

If a transaction decreases cash by $100, the balance sheet will balance if what occurs?

- Another asset is increased- A liability is decreased

London Corp. issues 1,000 shares of stock for $20 per share. what are the effects of this transaction on the balance sheet?

- Assets increase- Stockholders equity increases

If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs?

- another asset is increased - a liability is decreased

A journal entry should contain which of the following information?

-Description of the transaction -The date -Accounts and amounts debited -Accounts and amounts credited

On Feb 1, Domino Corporation ordered inventory. The inventory was purchased on account and was received on February 15. Domino paid for the inventory on February 27. On which of the following dates will Domino record a transaction?

-February 15& -February 27

Company borrows $25,000 from a bank & signs a two-year promissory note. What accounts will be affected by this transaction & what is the effect?

-cash & -stock holders equity increase

Ramirez purchases $50,000 of equipment by signing a note payable. The effects are

-increase in assets -increase in liabilities

London Corp. uses 1,000 shares of stock for $20 per share. What are the effects of this transaction?

1.) Cash is increased 2.) Common stock is increased

Jeremy issues 5,000 shares of common stock for $10 per share. Which of the following accounts are affected?

1.) Common stock 2.) Cash

Which of the following are stockholder equity accounts?

1.) Common stock 2.) Retained earnings

Place the three steps for analyzing the effect of transactions in the correct order.

1.) Determine one account in the accounting equation that will increase or decrease. 2.) Determine a second account in the accounting equation that will increase or decrease. 3.) Confirm that assets are equal to liabilities plus stockholders' equity.

Which of the following are external transactions?

1.) Paying salaries to employees 2.) Borrowing money from the bank 3.) Purchasing inventory from suppliers

Arrange the steps for measuring transactions in the correct order:

1.) Use a source document to identify accounts affected. 2.) Analyze the impact of the transaction on the accounting equation. 3.) Asses whether the transaction results in a debit or credit to account balances. 4.) Record the transaction in the journal. 5.) Post the transaction to the general ledger.

When supplies are purchased on account, which of the following occurs?

A liability increases.

The full set of accounting procedures used to measure and communicate business transactions is referred to as the _____.

Accounting Cycle

When a company performs services for a customer, and the customer agrees to pay for the services at a later date, the transaction is recorded in which account?

Accounts receivable

The accounting equation is ______.

Assets = Liabilities + Stockholders Equity

Analysis of Mueller Company's accounts show that as a result of a single transaction, both cash and notes payable increased by $10,000. Which of the following transactions would have caused this increase?

Borrowing cash; signing a promissory note.

Which of the following accounts would normally have a debit balance on the trial balance?

Cash Supplies Utility Expense Equipment Accounts receivable Dividends

Slim purchases equipment with cash. The accounts affected are:

Cash and equipment.

Wolfgang Company's assets and stockholders' equity both increased by $50,000 as a result of a single transaction. Which of the following transactions would explain this increase?

Common stock was sold for cash

The last step for analyzing the effect of a transaction

Confirm that the assets are equal to liabilities to stockholders' equity

Oasis Company provides services to customers for $10,000 cash. Which of the following is used to record this transaction?

Debit cash; credit revenue.

What is the effect of dividends on retained earnings?

Decrease

What is the effect of expenses on stockholders' equity?

Decrease

True or false: A balance sheet is a list of all accounts and their balances showing that debits equals credits.

False

True or false: A ledger provides a chronological record of all transactions affecting the firm.

False

True or false: The term debit means increase, and the term credit means decrease.

False

Rice borrows $20,000 from the bank. Which of the following is a balance sheet effect of this transaction?

Increase Liabilities

What are the effects of providing services on account to customers?

Increase assets Increase retained earnings

LMN Enterprises performs accounting services for a client for $3,000 cash. What is the effect on the accounting equation?

Increase assets and increase retained earnings

What effect does revenue have on retained earnings?

Increases

What is the effect of net income on retained earnings?

Increases retained earnings

An event that affects the financial position of a company but does not include an exchange with a separate economic entity is an _____.

Internal transactions

Which of the following includes the list of transactions affecting each individual account and the account's balance?

Ledger

How is deferred revenue classified?

Liability

On May 1, Ace Electronics ordered office equipment. The equipment was delivered to Ace on May 15, and Ace agreed to pay for it by the end of the month. Ace paid for the equipment on May 31. When will Ace make the first entry in its accounting system for this purchase?

May 15

Shriver Corp. borrows $25,000 from a bank and signs a two-year promissory note. What accounts will be affected by this transaction and what is the effect?

Notes payable increases; Cash increases

Neumann Company's journal shows a debit to salaries expense and a credit to cash. What is the transaction that required this journal entry?

Payment of salaries to employees

Rent paid in advance and classified as an asset is referred to as:

Prepaid rent

Analyze the following t-accounts and postings for item (5). What is the transaction that required this posting?

Purchase supplies on account

Cray purchases equipment for cash. Total assets will

Remain the same

Which of the following accounts would normally have a credit balance on the trial balance?

Retained earnings Deferred revenue

What are the three components of retained earnings?

Revenues, expenses, and dividends

Three components of retained earnings

Revenues, expenses, dividends

The purpose of an account is to _____.

Summarize all transactions for that item.

Lim Corporation purchases $10,000 of equipment for cash. The balance sheet effects of this transaction are _____.

Total assets will remain the same.

True or false: A trial balance is used for internal purpose to check that debits equal credits.

True

True or false: After posting all journal entries to accounts. the sum of accounts with debit balances should equal the sum of accounts with credit balances.

True

True or false: For each journal entry, debits must be equal to credits.

True

True or false: Revenue is recorded when services are performed, whereas deferred revenue is recorded when cash is received from customers in advance before services are performed.

True

True or false: The accounting equation must always remain in balance.

True

When should revenue be recorded?

When the services are performed

When cash is received in advance for services to be performed at a later date, an asset is increased and

a liability is increased.

A(n) ______ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.

account; general ledger

The term ___ cycle refers to the full set of procedures utilized to measure and communicate business transactions to external decision makers.

accounting

Which of the following is used to record the summary of effects on one particular item?

an account

Accounts receivable are:

assets

Marcy receives $10,000 cash in advance from customers for services to be performed in the following year. This transaction would cause

assets to increase and liabilities to increase.

A list of all account names used to record transactions of a company is referred to as the

chart of accounts

A journal provides a

chronological record of all transactions affecting a firm.

The two components of stockholders' equity are

common stock and retained earnings

Jeremy issues 5,000 shares of common stock for $10 per share. Which of the following accounts are affected?

common stock; cash

Because dividends reduce retained earnings, a ______ to dividends is essentially a ______ to retained earnings.

debit; debit

Because expenses reduce retained earnings, a ______ to expense is essentially a(n) ______ to retained earnings.

debit; debit

Dividends paid to stockholders will cause retained earnings to

decrease

Expenses will cause retained earnings to

decrease

What is the effect of expenses on retained earnings?

decrease

When a company pays salary expense, the effects are to

decrease assets. decrease stockholders' equity.

When a company receives cash in advance from customers for services to be performed in the future, the transaction affects the ______ account.

deferred revenue

After the accountant analyzes the impact of a transaction on the accounting equation, the next step in the measurement process is to

determine the accounts to debit or credit

Crane purchases equipment by signing a note payable with the equipment dealer for $10,000. The accounts affected for Crane are

equipment and notes payable

The acronym DEALOR can be used to remember how debits and credits affect different accounts. The three types of accounts that are increased with debits (represented by the DEA in the acronym) are (Select all the apply):

expenses.dividends.assets.

A(n) ___ transaction involves an exchange between the company and a separate economic entity.

external

True or false: The two functions of financial accounting are to measure business activities and prepare tax returns.

false

On January 1, Kim pays for two years of rent in advance. The effect of this transaction

has no effect on total assets

Revenues cause retained earnings to

increase

When services are provided on account, what is the effect on stockholders' equity?

increase

Zelda purchases $10,000 of supplies on account. The effects of this transaction are to

increase assets; increase liabilities

A(n) ___ transaction is an event that affects the financial position of the company but does not include an exchange with a separate economic entity.

internal

Transactions that are typically recognized at the end of the period and do not include an exchange with a separate company are referred to as ___ transactions.

internal

What type(s) of transactions are typically measured only at the end of the accounting period?

internal

A(n) _______ entry describes the format for recording a transaction.

journal

The commonly used format for recording a transaction is referred to as a(n)

journal entry.

If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs? (Select all that apply)

liability is decreased; another asset is increased

The two roles of financial accounting are to:

measure business activities of the company; communicate information to external parties for decision making purposes

An increase in revenues increases ________________ , which increases retained earnings, which increases stockholders' equity. (Enter one word per blank)

net income

The acronym DEALOR can be used to remember how debits and credits affect different accounts. The three types of accounts that are increased with credits (represented by the LOR in the acronym) are

owners' equity. revenues. liabilities.

The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as ________

posting

The purpose of a general ledger is to

provide in a single location the list of transactions affecting each account and the account's balance.

Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company

provided goods or services to a customer

Prepaid rent is:

rent paid in advance

Consistent with the _______ recognition principle, companies record revenue at the time goods are provided to customers. (Enter only one word.)

revenue

The two basic components for calculating net income _____ are _____ and . (Enter one word per blank.)

revenues, expenses

The types of accounts which affect retained earnings are

revenues. expenses. dividends.

Claire purchases equipment for $10,000 by paying $3,000 in cash and borrowing $7,000 from the bank. The number of accounts affected by this transaction is

three

Rory purchases supplies for cash. Which of the following occurs?

total asset to remain the same

A transaction will always affect at least ____ accounts

two