ACCT 1 Learnsmart chapter 1

Jacob's Chocolates had beginning retained earnings of $4,000; net income of $10,000; and dividends of $300, calculate the ending balance in the retained earnings account.

$13,700

When recording transactions into the accounting equation, which of the following statements are correct? (Check all that apply.)

After recording the transaction, total assets will always equal total liabilities plus equity. The accounting equation must always remain in balance.

Given the list of accounts below, identify which of them would appear on a balance sheet. (Check all that apply.)

Cash Supplies Retained earnings, 12/31 Accounts Payable Equipment

Which list of accounts below, identifies only accounts that would appear on a balance sheet.

Common Stock, Equipment, Accounts Payable

Smith Company purchased $100 of supplies for her business and paid immediately. She would record this transaction in the accounting equation by which of the following?

Decrease Cash; increase Supplies.

Given the accounts below, choose all of the ones that affect equity. (Check all answers that apply.)

Dividends Expenses Revenues Common Stock

Which of the following statements describes the effect of expenses on equity?

Expenses cause equity to decrease.

Which of the following statements describes the effect of expenses on equity?

If expenses increase, then total equity decreases. Higher expenses result in lower total equity.

Describe the order in which a company prepares financial statements.

Income statement Statement of retained earning Balance sheet Statement of cash flows

Jack Pickle decided to start a small business as a corporation. His initial investment was $4,000 cash in exchange for common stock. Demonstrate how to record this transaction in the accounting equation.

Increase Cash by $4,000; Increase Common Stock by $4,000.

Bob's Bakery receives its utility bill of $800 for the month and pays it immediately. Record this transaction in the accounting equation.

Increase Expenses and decrease Cash.

Generally accepted accounting principles (GAAP) wants information to have: (Check all that apply).

Relevance and faithful representation

Which of the statement(s) below define(s) an asset? (Check all that apply.)

Resources controlled by the business An amount owned Resources with expected future benefits

A corporation's equity has two main parts. Identify these two parts.

Retained earnings Contributed capital

Identify which of the following lists of accounts would belong on the statement of retained earnings.

Retained earnings and Dividends

Which of the following statements is correct regarding revenues?

Revenues cause equity to increase.

Which of the following statements are true regarding the effect of revenues on the equity of a business? (Check all that apply.)

Revenues that increase equity have many forms, such as consulting services and commissions from services. Revenues cause equity to increase.

On 6/25, supplies costing $1,000 were purchased on credit, but only $400 of this amount was paid on 6/25. The remainder of the bill is owed on account. To record this transaction on 6/25:

Supplies would be increased by $1000 Cash would be decreased by $400 Accounts Payable would be increased by $600

Which of the following statements below lists the rules of entering transactions into the accounting equation?

The accounting equation must always remain in balance so that assets always equal the sum of liabilities and equity.

What are Generally Accepted Accounting Principles?

The concepts and rules that govern financial accounting practice.

Which of the following statements explain(s) how the accounting equation applies to businesses? (Check all that apply.) Multiple select question.

The relation of assets, liabilities and equity is reflected in the equation. The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners. The equation applies to all transactions and events. The equation states that Assets = Liabilities + Equity.

Which of the following statements best represents the reason for the accounting equation?

The total of everything owned by a business must always equal the total of what the business owes to creditors and owners.

Equity is composed of

contributed capital and retained earnings

Jackson's Programming paid its June rent of $500 cash. Demonstrate how to use the accounting equation to record the transaction by completing the following sentence. Jackson would decrease (expenses/cash/revenues) and increase (expenses/equity/revenues) in the accounting equation.

decrease cash increase expense

Sally Smith decided to start a sea shell business organized as a corporation. Her initial investment in the business consisted of $10,000 in cash in exchange for common stock. Record this transaction in the accounting equation of the new business by

increasing Cash; increasing Common Stock

Jackson's Catering Company provided cookies worth $3,000 to the local college. The college paid immediately. Record this transaction in Jackson's accounting equation by:

increasing Cash; increasing Revenues

Jackson Company purchased office equipment costing $3,000 for his business and paid immediately. Record this transaction in the accounting equation by:

increasing Equipment; decreasing cash

On 8/1, supplies costing $500 were purchased on credit. Record this transaction in the accounting equation by:

increasing Supplies, and increasing Accounts Payable

On February 1, Russell's Consulting Services Company provided $1,000 of services to the local college. On February 1, Russell's collected $700, and the college will pay the balance next month. Record this transaction in the accounting equation on February 1 for Russell's Consulting Service by: Multiple choice question.

increasing both Cash and Accounts Receivable; and increasing Revenues

The accounts payable account is a(n) ______ account. Multiple choice question.

liability

When supplies are purchased on credit it means that: (Check all that apply.)

the business will pay for the supplies at a later time. a liability has been incurred. the Accounts Payable account will be increased.