Accounting Chapters 1-3

If a company is considering the purchase of a parcel of land that was acquired by the seller for $85,000, is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by the purchaser as easily being worth $140,000, and is purchased for $137,000, the land should be recorded in the purchaser's books at:

$137,000.

On April 1, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What amount of the insurance expense will be reported on the annual income statement for the year ended December 31?

$337.50.

On May 31, the Cash account of Bottle's R US had a normal balance of $5,000. During May, the account was debited for a total of $12,200 and credited for a total of $11,500. What was the balance in the Cash account at the beginning of May?

A $4,300 debit balance.

The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the:

Accounting Equation

A debit is used to record an increase in all of the following accounts except:

Accounts Payable (Liabilites, Revenue, Retained Earnings)

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

Accrual basis accounting.

If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be:

Assets increase $4,500 and liabilities increase $4,500.

The basic financial statements include all of the following:

Balance Sheet, Income Statement, Statement of Retained Earnings, Statement of Cash Flows.

A law firm billed a client $1,800 for work performed in the current month. Which of the following general journal entries will the firm make to record this transaction?

Debit Accounts Receivable, $1,800; credit Legal Fees Revenue, $1,800.

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

Debit Office Supplies Expense $254 and credit Office Supplies $254.

A company pays each of its two office employees each Friday at the rate of $100 per day for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:

Debit Salaries Expense $400 and credit Salaries Payable $400.

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the:

Income Summary account.

Financial statements are typically prepared in the following order:

Income statement, statement of retained earnings, balance sheet.

The record of all accounts and their balances used by a business is called a:

Ledger (or General Ledger).

Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins?

One asset would increase $1,750 and a different asset would decrease $1,750, causing no net change in the accounting equation.

The primary objective of financial accounting is to:

Provide accounting information that serves external users.

Temporary accounts include all of the following except:

Temporary accounts include all of the following except:

A report that lists a business's accounts and their balances, in which the total debit balances should equal the total credit balances, is called a(n):

Trial balance.

A credit is used to record an increase in all of the following accounts except:

Wages Expense (Assets, Expenses, Dividends)