Principles of Accounting Exam 1 (quiz 1 &2)

In a statement of​ owner's equity, decreases in​ Owner, Capital result from​ ________. A:net losses B:revenues earned C:gains on sale of land D:net income

A:net losses

The account title used for recording a written promise that a customer will pay the business a fixed amount of money and interest by a certain date in the future is​ ________. A: Prepaid Note B: Notes Receivable C: Accounts Receivable D:Notes Payable

B: Notes Receivable

Which of the following is a liability​ account? A: Cash B: Unearned Rent C: Prepaid Advertising D: Building

B: Unearned Rent

Which of the following is true of​ assets? A: Assets include​ Cash, Merchandise​ Inventory, and Accounts Payable B: Assets are something of value the business owns or controls C: Assets can be recorded at the market value if acquired at a bargain. D: Assets do not need to provide future benefit to the business.

B:Assets are something of value the business owns or controls

Which of the following accounts increases with a​ debit? A:Accounts Payable B:Intrest Payable C:Prepaid Rent D:Owner,Capital

C:Prepaid Rent

When is a trial balance usually​ prepared? A: at the beginning of an accounting period B: after each entry is journalized C: after the financial statements are prepared D: before the financial statements are prepared

D: before the financial statements are prepared

Journalizing a transaction involves​ ________. A: calculating the balance in an account using journal entries B: preparing a summary of account balances C: posting the account balances in the chart of accounts D: recording the data only in the journal

D: recording the data only in the journal

Fred​ Jones, the sole owner of a​ business, withdraws cash for his personal use. How does this transaction affect the accounting​ equation? A: The assets increase and liabilities decrease. B: The assets decrease and equity increases C: The​ assets, liabilities, and equity remain the same. D: The assets decrease and equity decreases.

D:The assets decrease and equity decreases.

The T−account is a summary device that is shaped like a capital T with debits posted on the left side of the vertical line and credits posted on the right side of the vertical line True False

True

The heading of a balance sheet will show the date as a specific​ date, not a period of time. True False

True

balance sheet data at May​ 31, 2018​, and June​ 30, 2018​,follow: May 31, 2018:Total Assets:$144,000,Total Liabilities:$133,000. June 30, 2018:Total Assets:$231,000 Total Liabilities:$166,000 Begin by identifying the accounting equation and the formula expressed by the statement of​ owner's equity​ (the "equity​ equation"): Accounting equation: Equity equation: For each of the following situations with regard to​ owner's contributions and withdrawals of the​ business, compute the amount of net income or net loss during June 2018. ​(Use a minus sign or parentheses for a net​ loss.) a. The owner contributed $30,000 to the business and made no withdrawals. Net income (loss) is:______ b. The owner made no contributions. The owner withdrew cash of $6,000. Net income (loss) is______ c. The owner made contributions of $12,000 and withdrew cash of $18,000. Net income (loss) is______

Accounting equation: Assets=Liability+ Equity Equity equation: Capital beginning + owner contribution+ Net income or - Net loss - Owner Withdrawal= Capital a. Net income(loss)is $24,000 b. NET income (loss)is$60,000 c. Net income(loss) is$60,000

A business can be organized as a sole​ proprietorship, partnership,​ corporation, or limited−liability company​ (LLC). True False

True

A trial balance is a list of all of the ledger accounts of a company with their balances at a point in time. True False

True

An asset account is increased by a debit. True False

True

An accounts receivable requires the business to pay cash in the future. True False

False

An​ owner's withdrawals affect the​ business's net income or net loss and are recorded as an expense. True False

False

Investors primarily use managerial accounting information for decision−making purposes. True False

False

The SEC is a governmental agency that oversees world−wide financial markets and organizations that set accounting standards. True False

False

When a business makes a cash​ payment, the Cash account is debited. True False

False

AndersonHandyman Services has total assets for the year of $20,700 and total liabilities of $8,160. Requirements 1. Use the accounting equation to solve for equity. 2. If next year's assets increased by $3,700 and equity decreased by $2,700​, what would be the amount of total liabilities for Anderson Handyman​ Services?

Requirement 1. Assets= Liabilities+ Equity Then the company has equity of $12,540 Requirement 2 Then the company has liabilities of 14,560

Accounting starts with economic activities that accountants review and evaluate using critical thinking and judgment to create useful information that helps individuals make good decisions. True False

True

Assets are something of value that the business owns or has control of. True False

True

Elaine​'s Inflatables earns service revenue by providing party planning services and inflatable playscapes. Elaine​'s Inflatables is organized as a sole proprietorship and owned by Elaine Gibson. During the past​ month, Elaine​'s Inflatables has the following​ transactions: a.Gibson contributed $10,000 to the business in exchange for capital. b.Purchased equipment for $5,000 on account. c.Paid $400 for office supplies. d.Earned and received $2,500 cash for service revenue. e.Paid $400 for wages to employees. f.Gibsonwithdrew $1,000 cash. g.Earned $1,000 for services provided. The customer has not yet paid. h.Paid $1,000 for rent. i.Received a bill for $250 for the monthly utilities. The bill has not yet been paid. Indicate the effects of the business transactions on the accounting equation for Elaine​'s Inflatables. Transaction​ (a) is answered as a guide.

a Increase asset (cash); Increased equity (Gibsbson, capital) b. Increase asset(equipment);Increase liability(accounts payable) c. Decrease asset(cash); Increase asset(office supplies) d. Increase asset(cash);Increase equity(service revenue) e. Decrease asset(cash);Decrease equity(wages expense) f. Decrease asset(cash);Decrease equity(Gibson, withdrawals) g. Increase asset(accounts receivable);Increase equity(service revenue) h. Decrease asset(cash);Decrease equity(rent expense) i. Increase liability(accounts payable);Decrease equity(utilities expense)

Click a Pix Photography works weddings and​ prom-type parties. The balance of Welch​, Capital was $10,000 at December 31​, 2017. At December 31​, 2018​, the​ business's accounting records show these​ balances: InsuranceExpense: $12,000 Accounts Receivable: $5,000 Cash: 41,000 Notes Payable: 11,000 Accounts Payable: 9,000 Welch, Capital, Dec. 31, 2018? Advertising Expense: 3,500 Salaries Expense: 26,000 Service Revenue:90,000 Equipment: 49,500term-25 Welch, Withdrawals:14,000 Owner contribution:31,000 Prepare the following financial statements for Click a Pix Photography for the year ended December 31​, 2018​: a.Income statement.

a. Prepare Click a Pix's income statement