Chapter 2 Assessment
Assets will increase and equity will increase.
A business issues $1,200,000 of common stock to new shareholders. How will this transaction impact the accounting equation?
Assets will decrease and liabilities will decrease.
A business pays off $40,000 of its short term debt. How will this transaction impact the accounting equation?
Assets will increase and equity will increase.
A business provides a service to a client and bills the client $112,000. How will this transaction impact the accounting equation?
The increase and decrease of specific assets will offset each other.
A business purchases a piece of equipment, worth $7,000, with cash. How will this transaction impact the accounting equation?
Assets will increase and liabilities will increase.
A business purchases inventory of $87,000 on account. How will this transaction impact the accounting equation?
Assets will increase and liabilities will increase.
A business purchases supplies of $105,000 on account. How will this transaction impact the accounting equation?
Liabilities will increase and equity will decrease.
A business receives a water bill of $41,000 which it will pay next year. How will this transaction impact the accounting equation?
Debit Cash, credit Common Stock
Carlos invests $120,000 of cash into a franchise he owns with his brother. How should the transaction be recorded on the franchise's books?
Debit Supplies, credit Accounts Payable
Fernando Corporation purchases $500,000 worth of supplies on account. How should the transaction be recorded on the Company's books?
Debit
How do you decrease the Sales account? (When you enter your answer use either the term debit or credit.
Debit
How do you increase the Dividends Receivable account? (When you enter your answer use either the term debit or credit.)
Credit
How do you increase the Notes Payable account? (When you enter your answer use either the term debit or credit.)
Debit Long Term Debt, credit Cash
Larrivee Inc. paid off $520,000 of its long term debt. How should the transaction be recorded on the entity's books?
Debit Prepaid Rent, credit Cash
Statesboro Inc. pays the landlord $24,000 to rent a storage facility for the next 14 months. How should the transaction be recorded on the entity's books?
Debit Accounts Receivable, credit Service Revenue
Tuskegee Incorporated provided a service to a customer and billed the customer $47,000. How should the transaction be recorded on the entity's books?
Equity-Expense
What type of account is Amortization Expense?
Asset
What type of account is Commissions Receivable?
Equity-Contributed Capital
What type of account is Common Stock?
Equity-Expense
What type of account is Cost of Goods Sold?
Liability
What type of account is Dividends Payable?
Equity-Dividend
What type of account is Dividends?
Asset
What type of account is Equipment ?
Equity-Revenue
What type of account is Interest Earned?
Equity-Expense
What type of account is Interest Expense?
Asset
What type of account is Inventory?
Asset
What type of account is Prepaid Insurance?
Equity-Expense
What type of account is Salary Expense?
Equity-Revenue
What type of account is Service Revenue?
Liability
What type of account is Unearned Legal Fees?
Liability
What type of account is Wages Payable?