Financial Accounting Tools for Decision Making Chapter 3

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? A) Credit an asset account for $100. B) Credit another liability account for $100. C) Credit a stockholders' equity account for $100. D) Debit a stockholders' equity account for $100.

A) Credit an asset account for $100.

Receiving payment of a portion of an accounts receivable will A) not affect total assets. B) increase liabilities. C) increase stockholders' equity. D) decrease net income.

A) not affect total assets.

When collection is made on Accounts Receivable, A) total assets will remain the same. B) stockholders equity will increase. C) total assets will increase. D) total assets will decrease.

A) total assets will remain the same.

Barnes Company showed the following normal balances at the end of its first year: Cash $14,000 Prepaid insurance 700 Accounts receivable 3,500 Accounts payable 2,800 Notes payable 4,200 Common stock 5,400 Dividends 700 Revenues 29,000 Expenses 17,500 What amount did Barnes Company show as total credits? A) $42,100 B) $41,400 C) $40,700 D) $42,800

B) $41,400

Which one of the following represents the expanded basic accounting equation? A) Assets = Liabilities + Common Stock + Dividends - Revenue - Expenses B) Assets + Dividends + Expenses = Liabilities + Common Stock + Revenues C) Assets - Liabilities - Dividends = Common Stock + Revenues - Expenses D) Assets = Revenues + Expenses - Liabilities

B) Assets + Dividends + Expenses = Liabilities + Common Stock + Revenues

A credit is not the normal balance for which account listed below? A) Common Stock account B) Revenue account C) Liability account D) Dividends account

B) Revenue account

The left side of an account is A) blank. B) a description of the account. C) the debit side. D) the balance of the account

B) a description of the account.

A T-account is A) a way of depicting the basic form of an account. B) a special account used instead of a journal. C) a special account used instead of a trial balance. D) used for accounts that have both a debit and credit balance

B) a special account used instead of a journal.

If total liabilities decreased by $4,000, then A) stockholders' equity must have decreased by $4,000. B) assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000. C) assets and stockholders' equity each increased by $2,000. D) assets must have increased by $4,000.

B) assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000.

15. An expense A) decreases assets and liabilities. B) decreases stockholders' equity. C) leaves stockholders' equity unchanged. D) is basically the same as a liability.

B) decreases stockholders' equity.

Jamal Company began the year with $126,000 in its Common Stock account and a debit balance in Retained Earnings of $54,000. During the year, the company earned net income of $27,000 and declared and paid $9,000 of dividends. In addition, the company sold additional common stock amounting to $33,000. Based on this information, what should the transaction analysis show for the ending total of all stockholders' equity accounts? A) $231,000 B) $249,000 C) $123,000 D) $165,000

C) $123,000

During January 2017, its first month of operation, Osborn Enterprises earned net income of $6,800 and paid dividends to the owners of $2,000. At January 31, the balance in Retained Earnings will be A) $0. B) $6,800 credit. C) $4,800 credit. D) $2,000 debit.

C) $4,800 credit.

All of the following statements regarding the double-entry system are true except A) a two-sided effect of each transaction is recorded in appropriate accounts when using the double-entry system. B) the double-entry system provides a logical method for recording transactions. C) both sides of the accounting equation must be affected when recording a transaction using the double-entry system. D) when using the double-entry system, the sum of all debits to the accounts must equal the sum of all credits.

C) both sides of the accounting equation must be affected when recording a transaction using the double-entry system.

The receipt of cash in advance from a customer A) increases assets and stockholders' equity. B) increases assets and decreases stockholders' equity. C) increases assets and liabilities. D) none of these answer choices are correct.

C) increases assets and liabilities

A payment of a portion of an accounts payable will A) not affect total assets. B) increase liabilities. C) not affect stockholders' equity. D) decrease net income.

C) not affect stockholders' equity

The right side of an account A) is the correct side. B) reflects all transactions for the accounting period. C) shows all the balances of the accounts in the system. D) is the credit side.

C) shows all the balances of the accounts in the system.

If services are rendered on account, then A) assets will decrease. B) liabilities will increase. C) stockholders' equity will increase. D) liabilities will decrease.

C) stockholders' equity will increase.

Courtney Company purchased equipment for $1,800 cash. As a result of this event, A) equity decreased by $1,800. B) assets increased by $1,800. C) total assets remained unchanged. D) Both assets and equity decreased by $1,800.

C) total assets remained unchanged

Which one of the following is not a part of an account? A) Credit side B) Trial balance C) Debit side D) Title

D) Title

The payment of a liability A) decreases assets and stockholders' equity. B) increases assets and decreases liabilities. C) decreases assets and increases liabilities. D) decreases assets and liabilities.

D) decreases assets and liabilities.

The purchase of an asset for cash A) increases assets and stockholders' equity. B) increases assets and liabilities. C) decreases assets and increases liabilities. D) leaves total assets unchanged.

D) leaves total assets unchanged.

41. In recording an accounting transaction in a double-entry system A) the number of debit accounts must equal the number of credit accounts. B) there must always be entries made on both sides of the accounting equation. C) the amount of the debits must equal the amount of the credits. D) there must only be two accounts affected by any transaction.

D) there must only be two accounts affected by any transaction.