acct 1 ch 3 sample questions
On January 14, Welsford Agency purchased supplies of $500 on account. The entry to record the purchase will include a debit to
Supplies and a credit to Accounts Payable.
When a company performs a service for which it has not been paid, it will create a(n)
account receivable.
A clothing manufacturing company purchasing a sewing machine is an example of
an investing activity
The first step in the recording process is to
analyze the transaction.
Stockholders' equity is not affected when
the company pays a portion of an account payable
Which of the following would be considered an economic event that requires an accounting transaction?
the purchase of new computers
Moran Steel started the year with total assets of $210,000 and total liabilities of $95,000. During the year, the business recorded $200,000 in revenues, $110,000 in expenses, and dividends of $45,000. Stockholders' equity at the end of the year was
$160,000
At January 1, 2016, Troyer Industries reported Retained Earnings of $280,000. During 2016, Troyer had a net loss of $60,000 and paid dividends to the stockholders of $40,000. At December 31, 2016, the balance in Retained Earnings is
$180,000 credit
Carlson Company compiled the following financial information as of December 31, 2017: Service revenue: $800,000 Common stock: $650,000 Equipment: $150,000 Operating expenses: $575,000 Cash: $190,000 Dividends: $40,000 Supplies: $35,000 Accounts payable: $95,000 Accounts receivable: $70,000 Retained earnings, 1/1/17: $275,000 Carlson's assets on December 31, 2017, are
445,000
What happens when a business receives cash in advance from a customer?
Assets and liabilities increase
What must have happened if total liabilities decreased by $4,000?
Assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000
Sam's Surf Shop's has the following balances on their June 30th trial balance. If the total of the debit column is $880,000, what accounts were used to calculate this total? Account Payable.................$110,000 Land...............................$300,000 Notes Payable....................$260,000 Equipment........................$160,000 Cash................................$80,000 Accounts Receivable............$100,000 Buildings..........................$240,000 Common Stock...................$340,000 Retained Earnings................$70,000
Cash, accounts receivable, land, equipment, and building
Which of the following statements is true?
Credits decrease assets and increase liabilities
Which of the following statements about credits is true?
Credits decrease assets and increase liabilities.
Suppose that, as a firm, you have sought to raise capital and were able to do this by issuing $750,000 of common stock and taking on a $500,000 debt. What would your journal entries be?
Debit Cash $1,250,000, Credit Common Stock $750,000 and Credit Notes Payable $500,000
An accountant has debited an asset account for $800 and credited a liability account for $700. Which of the following would be an incorrect way to complete the recording of the transaction?
Debit a stockholders' equity account for $100
In 2016, Alexander Industries had two major transactions involving stocks. The first transaction was a financing activity, and the second transaction was an investing activity. Which of the following transactions likely occurred?
In the first transaction, Alexander Industries sold company stock to investors. In the second transaction, Alexander Industries purchased stock of another company.
Stockholders' equity accounts
Include revenues, Common Stock, and Retained Earnings with normal credit balances, but expenses and Dividends have normal debit balances.
Which of the following MOST accurately describes the function of the balance sheet?
The balance sheet reports the assets, liabilities, and stockholders' equity at a specific date.
Which statement is true concerning an account?
The right side is the credit and the left side is the debit
Geyer Company has the following account balances: Accounts Receivable: $40, Accounts Payable: $45, Cash: $70 and Notes Payable: $65. If the Notes Payable balance is listed as $56 in the trial balance, what impact will this have on the accounts?
The total credit balance will be $9 less than the total debit balance.
As of March 31, Sweeney Inc. has the following account balances: Cash....................................$220 Notes Payable...................$180 Accounts Receivable........$150 Accounts Payable.............$140 Equipment.........................$60 Service Revenue...............$110 When creating a trial balance, Sweeney's accounting staff accidentally enters an Accounts Receivable balance of $105. What effect will this error have on the firm's trial balance?
The total debit balance will be $45 less than the total credit balance.
On March 15, Morgan Corporation paid $1,000 to buy a one-year insurance policy that will expire exactly one year after the date of purchase. Morgan's accounting clerk tells his supervisor that this transaction will affect only the assets portion of the company's balance sheet. Is the clerk correct? Why or why not?
Yes, the clerk is correct. Because the insurance policy will benefit more than one accounting period, it should be treated as an asset, not as a liability or expense.
Which of the following is a definition of a partnership?
a business owned by two or more persons who have specific duties and responsibilities
When a company performs a service but has not yet received payment, it
debits Accounts Receivable and credits Service Revenue
Total assets will remain unchanged if
equipment is purchased for $1,800 cash
The Dividends account
is a stockholders' equity account, but is debited to increase it.
If the trial balance has total debits equal to total credits, then
it is possible the wrong accounts were used in the journal entry.
The characteristic that most distinguishes a partnership from a corporation is
limited liability
Activities that create revenues and expenses fall under the category of ____activities.
operating
