ACC 250 Test #2 Study

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Otto's Auto Repair Shop repairs a car for a customer on August 29th. The customer picks up the car on September 1st. The customer mails a check in payment of the repair to Otto on September 5th. Otto receives the check on September 6. According to GAAP, Otto must record the revenue on _____?

August 29th

On January 1, 2018, M. Johanson Company purchased equipment for $36,000. The company is depreciating the equipment at the rate of $500 per month. The book value of the equipment at December 31, 2018 is:

$30,000

Revenues and Expenses appear on which financial statement?

Income Statement

Alas Corporation's customer, Mr. Jones, cannot afford to pay his account receivable on the due date; so he gives Alas Corporation a note promising to pay the amount at a later date. When Mr. Jones gives the note to Alas Corporation, Alas Corporation will:

Make a journal entry debiting the Note Receivable account and crediting the Accounts Receivable account

The Hodi Company's balance sheets on December 31, 2018 and 2019 show accounts receivable of $80,000 and $70,000 respectively. And the company's net credit sales for 2018 and 2019 respectively were: $410,000 and $500,000. Hodi Company's average collection period for accounts receivable for 2019 is:

54.7 days

Notes payable is where?

Balance Sheet

Which of the following is not a stockholders' equity account?

Cash

If you were going to start a business, which type of business would best protect your personal assets?

Corporation

The Vintage Laundry Company began business on June 1st. On June 10th it purchased $6,500 worth of supplies and recorded the purchase as an asset (i.e., it debited the Supplies account). On June 30, only $1,000 of supplies were left in the supply cabinet. The adjusting entry that should be made by the company on June 30 is:

Debit Supplies Expense, $5,500; Credit Supplies, $5,500

A debit always increases an account's balance

False

A debit decreases an expense account while a credit increases an expense account

False

Debit and credit can be interpreted to mean "bad" and "good", respectively.

False

Debits do not always have to equal Credits

False

Expense Accounts normally have a credit balance

False

Land improvement costs (e.g., fencing around the perimeter of the land) are debited to the Land account. T/F

False

Liability, Equity, and Revenue Accounts normally have a debit balance

False

On the balance sheet on textbook page 49, the $11,000 balance of notes payable is indented because it has a debit balance.

False

The Left Side of an account represents the Credit Side

False

The normal balance of an asset is a credit.

False

On April 6th, a law firm received $2,000 cash from a client for legal services to be rendered in the future. The law firm debited cash for $2,000 and credited the liability account Unearned Service Revenue for $2,000. If the legal services have been completed by April 30th and no adjusting entry is made, this would cause:

Revenues to be understated

"A balance sheet must always be in balance." What does this mean? Answer by giving the accounting equation

Total Assets = Total Liabilities + Stockholders' Equity

A T account has a left side, called the debit side, and a right side, called the credit side.

True

A credit can represent an increase or decrease to an account's balance

True

A debit can represent an increase or a decrease to an account's balance

True

A debit decreases a revenue account, while a credit increase a revenue account

True

Liability and Equity Accounts normally have credit balance

True

Revenue Accounts normally have a credit balance

True

A credit always increases an account's balance

False

A debit increases a liability account while a credit decreases a liability account

False

Allowance for Doubtful Accounts is an expense account and, therefore, it is deducted from revenue in arriving at net income on the income statement. T/F

False

All accounts have a normal balance that is either a debit balance or a credit balance

True

An increase in an asset is recorded by a debit.

True

Asset, Expense, and Draw Accounts normally have a debit balance

True

A debit to an account always indicates an increase in that account.

False

Asset Accounts normally have credit balances

False

When a business purchases a truck, sales taxes and the annual license tab cost should be debited to the Truck account. T/F

False

You are the accountant for Smith Plumbing Corporation. Jim Lime, a customer of Smith Plumbing Corporation, just paid for services that were rendered and billed last month. As a result of Mr. Lime's payment to Smith Plumbing Corporation, which of the following statements is correct? [Hint: make and analyze the journal entry for the receipt of the customer's money]

The amount of Smith Corporation's total assets will not change.

A debit increases an asset account's balance while a credit decreases an asset's balance.

True

A debit increases an expense account's balance while a credit reduces an expense account's balance

True

A decrease in a liability is recorded by a debit.

True

Allowance for Doubtful Accounts is a contra asset account that is deducted from Accounts Receivable on the balance sheet. T/F

True

An account's structure has an increase side and also a decrease side

True

Debits and Credits are crucial concepts needed in order to understand bookkeeping

True

Debits and Credits are the accounting terms used to identify increases and decreases to an account's balance

True

If a debit increases a specific type of account's balance then it logically follows that a credit reduces that type of account's balance

True

If a revenue account is credited, the revenue account is increased.

True

In a journal entry, the total dollar amount of debits must always equal the total dollar amount of credits (see page 127 for sample journal entries).

True

The "Right Side" of an account's structure is the Credit Side

True

The major types of accounts are Assets, Liabilities, Equity, Revenue, Expenses, and Draws

True

Whether a debit or credit increases or decreases an account's balance depends on the type of account

True


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