Chapter 2 homework

On January 14, Edamame Industries purchased supplies of $700 on account. The entry to record the purchase will include: a. a debit to Supplies and a credit to Accounts Payable. b. a debit to Supplies Expense and a credit to Accounts Receivable. c. a debit to Supplies and a credit to Cash. d. a debit to Accounts Receivable and a credit to Supplies

a. a debit to Supplies and a credit to Accounts Payable.

Which of the following statements is incorrect? a. Expenses increase stockholders' equity. b. Expenses have normal debit balances. c. Expenses decrease stockholders' equity. d. Expenses are a negative factor in the computation of net income.

a. Expenses increase stockholders' equity.

Which of the following is not true of the terms debit and credit? a. They can be abbreviated as Dr. and Cr. b. They can be interpreted to mean increase and decrease. c. They can be used to describe the balance of an account. d. They can be interpreted to mean left and right.

b. They can be interpreted to mean increase and decrease.

Which one of the following is not a part of an account? a. Credit side b. Trial balance c. Debit side d. Title

b. Trial balance

For the basic accounting equation to stay in balance, each transaction recorded must: a. affect two or less accounts. b. affect two or more accounts. c. always affect exactly two accounts. d. affect the same number of asset and liability accounts.

b. affect two or more accounts

An accounting convention is best described as a. an absolute truth. b. an accounting custom. c. an optional rule. d. something that cannot be changed.

b. an accounting custom.

In the first month of operations, the total of the debit entries to the cash account amounted to $1,200 and the total of the credit entries to the cash account amounted to $800. The cash account has a(n) a. $800 credit balance. b. $1,200 debit balance. c. $400 debit balance. d. $400 credit balance.

c. $400 debit balance.

The left side of an account is: a. blank. b. a description of the account. c. the debit side. d. the balance of the account.

c. the debit side

An account consists of: a. one part. b. two parts. c. three parts. d. four parts

c. three parts

Which account below is not a subdivision of retained earnings? a. Dividends b. Revenues c. Expenses d. Common stock

d. Common stock

An accountant has debited an asset account for $1,200 and credited a liability account for $500. What can be done to complete the recording of the transaction? a. Nothing further must be done. b. Debit a Stockholders' equity account for $700. c. Debit another asset account for $700. d. Credit a different asset account for $700.

d. Credit a different asset account for $700.

An accountant has debited an asset account for $1,300 and credited a liability account for $500. Which of the following would be an incorrect way to complete the recording of the transaction? a. Credit an asset account for $800. b. Credit another liability account for $800. c. Credit a Stockholders' account for $800. d. Debit a Stockholders' account for $800.

d. Debit a Stockholders' account for $800.

A debit to an asset account indicates: a. an error. b. a credit was made to a liability account. c. a decrease in the asset. d. an increase in the asset.

d. an increase in the asset.

TransAm Mail Service purchased equipment for $2,500. TransAm paid $400 in cash and signed a note for the balance. TransAm debited the Equipment account, credited Cash and: a. nothing further must be done. b. debited the retained earnings account for $2,100. c. credited another asset account for $400. d. credited a liability account for $2,100.

d. credited a liability account for $2,100.

Assets normally show: a. credit balances. b. debit balances. c. debit and credit balances. d. debit or credit balances.

b. debit balances.

If a company has overdrawn its bank balance, then: a. its cash account will show a debit balance. b. its cash account will show a credit balance. c. the cash account debits will exceed the cash account credits. d. it cannot be detected by observing the balance of the cash account.

b. its cash account will show a credit balance.

At January 1, 2015, Alligator Industries reported retained earnings of $150,000. During 2015, Alligator had a net loss of $30,000 and paid dividends of $15,000. At December 31, 2015, the amount of retained earnings is: a. $105,000. b. $120,000. c. $135,000. d. $165,000.

a. $105,000

On June 1, 2015, Portugal Inc. reported a cash balance of $12,000. During June, Portugal made deposits of $5,000 and made disbursements totalling $14,000. What is the cash balance at the end of June? a. $3,000 debit balance b. $17,000 debit balance c. $3,000 credit balance d. $2,000 credit balance

a. $3,000 debit balance

When a company pays dividends: a. it doesn't have to be cash, it could be another asset. b. the dividends account will be increased with a credit. c. the retained earnings account will be directly increased with a debit. d. the dividends account will be decreased with a debit.

a. it doesn't have to be cash, it could be another asset.

Which one of the following represents the expanded basic accounting equation? a. Assets = Liabilities + Common stock + Retained Earnings + Dividends - Revenues - Expenses. b. Assets + Dividends + Expenses = Liabilities + Common stock + Retained Earnings + Revenues. c. Assets - Liabilities - Dividends = Common stock + Retained Earnings + Revenues - Expenses. d. Assets = Revenues + Expenses - Liabilities.

b. Assets + Dividends + Expenses = Liabilities + Common stock + Retained Earnings + Revenues.

In the first month of operations for Gallowsbird Industries, the total of the debit entries to the cash account amounted to $36,000 ($16,000 investment by stockholders and revenues of $20,000). The total of the credit entries to the cash account amounted to $22,000 (purchase of equipment $8,000 and payment of expenses $14,000). At the end of the month, the cash account has a(n) a. $6,000 credit balance. b. $6,000 debit balance. c. $14,000 debit balance. d. $14,000 credit balance.

c. $14,000 debit balance.

Which of the following statements is true? a. Debits increase assets and increase liabilities. b. Credits decrease assets and decrease liabilities. c. Credits decrease assets and increase liabilities. d. Debits decrease liabilities and decrease assets.

c. Credits decrease assets and increase liabilities.

Mt. Zion Inc. pays its employees twice a month, on the 7th and the 21st. On June 21, Mt. Zion Inc. paid employee salaries of $5,000. This transaction would: a. increase stockholders' equity by $5,000. b. decrease the balance in Salaries and Wages Expense by $5,000. c. decrease net income for the month by $5,000. d. be recorded by a $5,000 debit to Salaries and Wages Payable and a $4,000 credit to Salaries and Wages Expense.

c. decrease net income for the month by $5,000.