Intermediate Accounting Ch.2 A

An account is maintained for each financial statement element, whereas a(n) ____ ____ contains all of the accounts of the entity.

general ledger

In a perpetual system, each time goods are sold, cost of goods sold is debited and _______ is credited.

inventory

The double entry system of accounting means each transaction

has a dual effect on the accounting equation

Bigelow Company purchases supplies on account. What are the effects on the balance sheet equation? (Select all that apply.)

increase assets increase liabilities

Pluto Corporation borrows $20,000 from the bank. What are the balance sheet effects of this transaction?

increase assets increase liabilities

Ace Cleaning Services performs cleaning services for $2,000 cash. What are the effects on the balance sheet equation for Ace Cleaning Services?

increase owners' equity increase cash

Revenues will ______ retained earnings, and expenses will ______ retained earnings.

increase; decrease

An account should have an account title, account number, a place for the date of the transaction, and two columns for

increases and decreases.

Purchasing supplies on account _________ the supplies account and ________ accounts payable.

increases; increases

A chronological record of all economic events affecting a firm are recorded in a(n

journal

Beginning inventory was $50,000. Inventory purchased during the year cost $75,000. Inventory on hand at year-end was $40,000. Cost of goods sold was

$85,000

Which of the following steps occurs only at the end of the year?

Close the temporary accounts to retained earnings

Lassiter Corp. uses the periodic inventory method. During the year, Lassiter purchases $10,000 of inventory. Ending inventory is $6,000. Cost of goods sold is $12,000. Beginning inventory was:

8,000 Reason: Let beginning inventory = x. x + $10,000 - 12,000 = $6,000. Solve for x, and x = $8,000

Place the steps in the accounting process in the correct order.-

Analyze the transaction Record the transaction Post from the journal to the general ledger Prepare the unadjusted trial balance

Which transaction would result in the following journal entry: debit Cash for $40,000 and credit Notes payable for $40,000?

Borrow from a bank.

Which of the following are economic events? (Select all that apply.)

Borrowing $10,000 from the bank. The payment of employee salaries for the week.

What account is debited when cash is collected from customers for a previous sale on account?

Cash

On July 1, Davis Corporation pays $10,000 for August rent. Which of the following are correct? (Select all that apply.)

Davis debits prepaid rent $10,000 Davis credits cash $10,000

The journal entry to record the issuance of 100 shares of $5 par value common stock for $500 would include which of the following?

Debit cash $500.

Which of following is true regarding a trial balance?

Debits must equal credits.

Royce Corporation pays for supplies purchased in the previous month. What is the effect on the accounting equation for the payment of the supplies?

Decrease assets Decrease liabilities

Which of the following is an internal economic event?

Depreciating equipment

A(n) _______ event is any event that directly affects the financial position of the company. (Enter one word per blank)

Economic

The type of system that integrates the information of departments and functions of a company into a single computer system is called a(n)

Enterprise Resource Planning (ERP) system

True or false: An internal event involves an exchange between the company and a separate economic entity.

False

True or false: Permanent accounts are closed at the end of the accounting period.

False

True or false: Retained earnings equals net income plus distributions to shareholders.

False

Transaction analysis involves which of the following?

Identifying the elements involved in the transaction. Identifying the accounts to be debited and credited.

Hargrave Professional Group performs legal services on account. What is the effect of this transaction on the balance sheet equation for Hargrave

Increase assets

An individual invests $10,000 to open a new business. What is the effect on assets?

Increase in total assets

Galaxy Corporation issues 500 shares of $1 par value common stock for $5,000. What is the total effect on owners' equity?

Increases $5,000

Identify which transaction would result in the following journal entry: debit to Cash for $60,000 and credit to Common stock for $60,000.

Issue stock to investors

Which transaction would require the following journal entry: debit Inventory for $60,000 and credit Accounts payable for $60,000?

Purchase inventory on account.

A general journal entry should contain which of the following?

Supporting explanations. The accounts and amounts debited and credited. The date.

Which accounts are closed to retained earnings at the end of an accounting period?

Temporary

True or false: In banking, a customer account is credited when cash is deposited because the customer account represents a liability to the bank.

True

Brunson Company pays employees $4,000 for work performed in the current month. The journal entry to record the transaction will include a

a credit to cash a debit to salary expense

elements of the accounting equation are represented by _______, which are contained in the general ledger

accounts

Flounder Corp. sold $12,000 of goods on account. The entry to record this transaction would include a debit to

accounts receivable.

Which of the following items is prepared at the end of the accounting period immediately before the financial statements are prepared?

adjusted trial balance

An internal event (Select all that apply)

affects the company's financial position. does not involve an exchange transaction with another entity.

When rent is paid in advance, it is properly recorded on the balance sheet as

an asset.

At the end of the accounting period, before the adjusting entries are recorded:

an unadjusted trial balance is prepared

Transaction analysis includes _________ the source documents to determine the dual effect on the accounting equation.

analyzing

The primary purpose of a source document is to assist in

analyzing a transaction.

The effect on the accounting equation from using supplies which had been previously recorded as an asset is:

assets decrease and owners' equity decrease

In a periodic inventory system, cost of goods sold is debited for the cost of inventory sold

at the end of the accounting period

Which of the following serves to relay important information about a transaction to the accountant? (Select all that apply.)

bills from suppliers sales invoices cash register tapes

Which of the following is an external event?

borrowing from the bank

Samuel Corporation purchased a building for $500,000. To record this transaction (Select all that apply.)

building is debited $500,000 cash is credited $500,000

Jarvis Company signs a note payable for $10,000 and receives the funds. This transaction will increase the _____ account and increase the note payable account.

cash

The general ledger accounts serve as ________ accounts.

control

Zircon Corporation has 100 clients and maintains a separate account receivable account for each client. The account receivable account in the general ledger that contains the total accounts receivable amount owed to Zircon by all customers is referred to as a

control account.

In a double entry accounting system, the right side of the account is represented by a(n)

credit

To record the issuance of common stock at par value, (Select all that apply.)

credit common stock debit cash

Drake Corp. received $5,000 from customers for goods sold on account in the previous month. The journal entry for this transaction will include a

credit to accounts receivable.

Crater Corp. uses a separate dividend account to record dividends declared. When a dividend is declared and paid, the journal entry will include (Select all that apply.)

credit to cash debit to dividends

Beck Company borrowed $50,000 from the bank and signed a note. The journal entry Beck makes to record this transaction includes (Select all that apply.)

credit to notes payable $50,000 debit to cash for $50,000

Klondike Inc. sold goods to customers for $5,000 cash. The cost of the goods was $3,000. The journal entry to record this transaction would include a

credit to sales $5,000.

To increase a liability, one should _______ the liability account and to increase an asset, one should _____ the asset account.

credit; debit

A company debits cash to increase its cash account. A _______ the customer's checking account because the customer account represents a liability on the bank's balance sheet.

credits

Glasser Corp. sold goods on account. The journal entry to record this transaction includes (Select all that apply.)

debit accounts receivable credit inventory debit cost of goods sold credit revenue

Carly Enterprises borrows $3,000 on a 9-month 8% note from Second National Bank. The journal entry to record the note is

debit cash $3,000; credit note payable $3,000.

Tindall Corp. purchased inventory for $50,000 cash. The entry to record this transaction is

debit inventory $50,000 credit cash $50,000.

Klondike Inc. sold goods to customers for $5,000 cash. The cost of the goods was $3,000. The journal entries to record this transaction include (Select all that apply.)

debit to cost of goods sold $3,000. credit to sales $5,000. credit to inventory $3,000. debit to cash $5,000.

Kendall Corp. purchased equipment for $100,000 by paying $20,000 in cash and signing a note payable for $80,000. The journal entry to record this transaction would include a

debit to equipment $100,000.

When a company pays rent in advance, prepaid rent is ________ and cash is ________.

debited, credited

In a journal entry, the amount to be _____ is entered in the first column, and the amount to be _____ is entered in the second column.

debited; credited

A trial balance proves:

debits balances equal credit balances

The payment of an account for supplies purchased in the previous month will ______ the cash account.

decrease

Londa Corporation pays employees $3,000 for the month. What is the effect on the balance sheet equation? (Select all that apply.)

decrease assets decrease owners' equity

The use of office supplies purchased on account in the previous month will have what effects on the balance sheet equation?

decrease assets decrease retained earnings

Salaries paid to employees _______,owners equity for the expense incurred.

decrease, debit, reduce, decreases, or lower

Indirectly, expenses will _____ retained earnings and revenues will _____ retained earnings.

decrease; increase

Paying employees for services rendered during the current month _____ assets and _____ shareholders' equity.

decreases; decreases

When a company declares a dividend, the temporary ______ account is often debited.

dividend Reason: This is a liability account and should be credited when the company declares a dividend.

Each economic event, or transaction, affecting the accounting equation has a(n)______ , Incorrect Unavailable effect because resources must always equal claims

dual

Economic events cause changes in the:

financial position of a company

The accounts receivable control account is found in the ______ ledger, whereas individual customer accounts are located in the ______ ledger.

general; subsidiary

A transaction is an event that

has a dual effect on the accounting equation

The purchases account is debited to record purchases of inventory in a:

periodic inventory system

A ______ account represents the basic financial position elements of the accounting equation and a _____ account keeps track of the changes in the retained earnings component of shareholders' equity.

permanent; temporary

The process of transferring debit and credit information from the journal to the ledger is called:

posting

The process of transferring information from the journal to the ledger is referred to as

posting

Which of the following make up shareholders' equity of a corporation? (Select all that apply.)

retained earnings paid-in capital

Which of the following are temporary accounts? (Select all that apply.)

salary expense revenue

Sales invoices, bills from suppliers, and cash register tapes that relay information to the accountant are referred to as

source

The left side of the accounting equation represents _____, while the right side represents _____.

the total economic resources of the company; the total claims against the company

In step 3 of the accounting processing cycle:

the transaction is recorded in a journal

The process of reviewing the source documents to determine the dual effect on the accounting equation and the specific elements involved is called _____ _____.

transaction, analyze, or analyzing analysis or transactions

At the end of the period, an unadjusted ______ balance, a listing of all accounts with their respective balances, is used to assist in the preparation of adjusting entries, financial statements, and closing entries.

trial or trail