Acct- 2301 Chapt 2 Quiz

Which of the following transactions for Bill's Fish 'n Chips restaurant would be treated as an accounting transaction?

Bill purchased a fryer and a dishwasher, which will be paid for next month.

Which events are recorded in the accounting system?

Both external exchanges and internal events

Who has first claim to a business's assets should the company go out of business?

Creditors

Transactions include which two types of events?

External exchanges, internal events

If a company borrows money from a bank and signs an agreement to repay the loan several years from now, in which account would the company report the amount borrowed?

Notes Payable (long-term)

Which of the following is an asset?

Notes Receivable

Which of the following would not be recorded as an accounting transaction?

Ordering supplies to be delivered next month

A transaction is an exchange or event that directly affects the assets, liabilities, or stockholders' equity of a company.

TRUE

If total assets decrease, then either total liabilities or total stockholders' equity must also decrease.

TRUE

The list of account names and reference numbers that the company will use when accounting for transactions is called the chart of accounts.

TRUE : The chart of accounts is a summary of all account names (and corresponding account numbers) used to record financial results in the accounting system.

_________________ are of special importance because they are the only activities that enter the financial accounting system.

Transactions

Which of the following is not true regarding the double-entry system?

Transactions must be recorded twice to ensure accuracy.

The requirement that transactions be recorded at their exchange price at the transaction date is called the:

cost principle.

Owners of a company:

have a claim that is secondary to creditor's claims.

The characteristic shared by all liabilities is that they:

obligate the company to do something in the future.

Equity financing is financing obtained from:

stockholders.

The cost principle is used:

to measure the amount used to record assets on the date of the transaction.

On January 1, Kirk Corporation had total assets of $425,000. During the month, the following activities occurred:

$428,000 Explanation/Formula Beginning total assets of $425,000 + Equipment purchased of $3,000 + Supplies purchased of $1,750 − Cash paid for supplies $1,750 + Cash received from sale of land of $7,500 − Land sold of $7,500 = $428,000Signing a rental agreement is not an accounting transaction since there was no exchange involving assets, liabilities, and/or stockholders' equity between the company and someone else.

A company was formed with $300,000 cash contributed by its owners in exchange for common stock. The company borrowed $150,000 from a bank. The company purchased $50,000 of inventory and paid cash for it. The company also purchased $350,000 of equipment by paying $50,000 in cash and issuing a note for the remainder.What is the amount of the total liabilities to be reported on the balance sheet?

$450,000 Explanation/Formula: Note issued from borrowing of $150,000 + Note issued to purchase equipment of $300,000 = $450,000

The Sweet Smell of Success Fragrance Company borrowed $60,000 from the bank to be paid back in five years and used all of the money to purchase land for a new store. Sweet Smell's balance sheet would show this as:

$60,000 under Land and $60,000 under Notes Payable (long-term).

Spin Company has $52,000 in its Cash account, $20,000 in its Inventory account, and $12,000 in its Notes Payable (short-term) account. If Spin's only other account is Common Stock, what is the balance of that account?

$60,000. Explanation/Formula: Assets = Liabilities + Stockholders' EquityStockholders' Equity = Assets − Liabilities= ($52,000 + $20,000) − $12,000 = $60,000