ACCT 151 - Ch 2 review

Pasta Disasta, Inc. issued 1,000 shares of the company's $1 par value stock to its owner for $2,000. The effect of this transaction on the accounting equation is to cause Common Stock to ______.

increase by $1,000

Off-balance sheet financing

obligations not reported as liabilities on the balance sheet

Rental agreements are sometimes written so that the company can avoid reporting liabilities. This is considered ______.

off-balance-sheet financing

In May, Pasta Disasta, Inc. pays its suppliers $1,000 for supplies received in April. The effect on the accounting equation is a ______

$1,000 decrease in assets $1,000 decrease in liabilities

In May, Pasta Disasta, Inc. paid its suppliers $500 that it owed for the pizza pans purchased and received in April. Which accounts are affected? (Check all that apply.)

Cash is decreased. Accounts Payable is decreased.

The entry to record the issuance of $1 par value common stock to investors for $10 per share in cash results in an increase in ______.

Common Stock Stockholders' Equity Assets Cash

Smith Company purchased $8,000 of supplies on account. Show how to record this transaction in the T-accounts by selecting the correct answer below.

Enter $8,000 on left side of the Supplies account; enter $8,000 on the right side of the Accounts payable account.

An amount posted on the right side of a T-account causes which accounts to increase?

Liabilities Common Stock Notes Payable

On May 1, Ace Electronics ordered office equipment. The equipment was delivered to Ace on May 15, and Ace agreed to pay for it by the end of the month. Ace paid for the equipment on May 31. When will Ace make the first entry in its accounting system for this purchase?

May 15

What is the effect on the accounting equation when the company declares a dividend to be paid later?

Retained earnings decrease, Liabilities increase

What is the effect on total assets when a company buys a building in exchange for a 20-year note payable?

Total assets will increase.

Par value of common stock is the ______

amount established by the board of directors legal amount per share

Lox, Stock and Bagel, Inc., issued $100,000 of stock. It recorded the transaction by increasing Cash and decreasing Common Stock. As a result of this entry, the accounting equation will Blank______.

be out of balance

Company X receives $10,000 from issuing 10,000 shares of $1 par value common stock to its owners. The effect on the accounting equation is ______.

stockholders' equity increases assets increase