Acctg 101 chapter 2 - Smart learning
Long issued 5,000 shares of stock for $10,000. Long used $2,000 of the proceeds to purchase supplies, and borrowed $8,000 cash from the bank. Long's total assets are
$18,000
Sampson Corporation issues common stock for $25,000 cash and uses some of the proceeds to purchase equipment for $10,000 cash. Sampson also purchases $4,000 of supplies on account. After recording these transactions total assets are
$25,000 + $0 + $4,000 = $29,000 total assets.
If a transaction decreases cash by $100, the balance sheet will balance if what occurs?
- Another asset is increased- A liability is decreased
London Corp. issues 1,000 shares of stock for $20 per share. what are the effects of this transaction on the balance sheet?
- Assets increase- Stockholders equity increases
If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs?
- another asset is increased - a liability is decreased
A journal entry should contain which of the following information?
-Description of the transaction -The date -Accounts and amounts debited -Accounts and amounts credited
On Feb 1, Domino Corporation ordered inventory. The inventory was purchased on account and was received on February 15. Domino paid for the inventory on February 27. On which of the following dates will Domino record a transaction?
-February 15& -February 27
Company borrows $25,000 from a bank & signs a two-year promissory note. What accounts will be affected by this transaction & what is the effect?
-cash & -stock holders equity increase
Ramirez purchases $50,000 of equipment by signing a note payable. The effects are
-increase in assets -increase in liabilities
London Corp. uses 1,000 shares of stock for $20 per share. What are the effects of this transaction?
1.) Cash is increased 2.) Common stock is increased
Jeremy issues 5,000 shares of common stock for $10 per share. Which of the following accounts are affected?
1.) Common stock 2.) Cash
Which of the following are stockholder equity accounts?
1.) Common stock 2.) Retained earnings
Place the three steps for analyzing the effect of transactions in the correct order.
1.) Determine one account in the accounting equation that will increase or decrease. 2.) Determine a second account in the accounting equation that will increase or decrease. 3.) Confirm that assets are equal to liabilities plus stockholders' equity.
Which of the following are external transactions?
1.) Paying salaries to employees 2.) Borrowing money from the bank 3.) Purchasing inventory from suppliers
Arrange the steps for measuring transactions in the correct order:
1.) Use a source document to identify accounts affected. 2.) Analyze the impact of the transaction on the accounting equation. 3.) Asses whether the transaction results in a debit or credit to account balances. 4.) Record the transaction in the journal. 5.) Post the transaction to the general ledger.
When supplies are purchased on account, which of the following occurs?
A liability increases.
The full set of accounting procedures used to measure and communicate business transactions is referred to as the _____.
Accounting Cycle
When a company performs services for a customer, and the customer agrees to pay for the services at a later date, the transaction is recorded in which account?
Accounts receivable
The accounting equation is ______.
Assets = Liabilities + Stockholders Equity
Analysis of Mueller Company's accounts show that as a result of a single transaction, both cash and notes payable increased by $10,000. Which of the following transactions would have caused this increase?
Borrowing cash; signing a promissory note.
Which of the following accounts would normally have a debit balance on the trial balance?
Cash Supplies Utility Expense Equipment Accounts receivable Dividends
Slim purchases equipment with cash. The accounts affected are:
Cash and equipment.
Wolfgang Company's assets and stockholders' equity both increased by $50,000 as a result of a single transaction. Which of the following transactions would explain this increase?
Common stock was sold for cash
The last step for analyzing the effect of a transaction
Confirm that the assets are equal to liabilities to stockholders' equity
Oasis Company provides services to customers for $10,000 cash. Which of the following is used to record this transaction?
Debit cash; credit revenue.
What is the effect of dividends on retained earnings?
Decrease
What is the effect of expenses on stockholders' equity?
Decrease
True or false: A balance sheet is a list of all accounts and their balances showing that debits equals credits.
False
True or false: A ledger provides a chronological record of all transactions affecting the firm.
False
True or false: The term debit means increase, and the term credit means decrease.
False
Rice borrows $20,000 from the bank. Which of the following is a balance sheet effect of this transaction?
Increase Liabilities
What are the effects of providing services on account to customers?
Increase assets Increase retained earnings
LMN Enterprises performs accounting services for a client for $3,000 cash. What is the effect on the accounting equation?
Increase assets and increase retained earnings
What effect does revenue have on retained earnings?
Increases
What is the effect of net income on retained earnings?
Increases retained earnings
An event that affects the financial position of a company but does not include an exchange with a separate economic entity is an _____.
Internal transactions
Which of the following includes the list of transactions affecting each individual account and the account's balance?
Ledger
How is deferred revenue classified?
Liability
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
Shriver Corp. borrows $25,000 from a bank and signs a two-year promissory note. What accounts will be affected by this transaction and what is the effect?
Notes payable increases; Cash increases
Neumann Company's journal shows a debit to salaries expense and a credit to cash. What is the transaction that required this journal entry?
Payment of salaries to employees
Rent paid in advance and classified as an asset is referred to as:
Prepaid rent
Analyze the following t-accounts and postings for item (5). What is the transaction that required this posting?
Purchase supplies on account
Cray purchases equipment for cash. Total assets will
Remain the same
Which of the following accounts would normally have a credit balance on the trial balance?
Retained earnings Deferred revenue
What are the three components of retained earnings?
Revenues, expenses, and dividends
Three components of retained earnings
Revenues, expenses, dividends
The purpose of an account is to _____.
Summarize all transactions for that item.
Lim Corporation purchases $10,000 of equipment for cash. The balance sheet effects of this transaction are _____.
Total assets will remain the same.
True or false: A trial balance is used for internal purpose to check that debits equal credits.
True
True or false: After posting all journal entries to accounts. the sum of accounts with debit balances should equal the sum of accounts with credit balances.
True
True or false: For each journal entry, debits must be equal to credits.
True
True or false: Revenue is recorded when services are performed, whereas deferred revenue is recorded when cash is received from customers in advance before services are performed.
True
True or false: The accounting equation must always remain in balance.
True
When should revenue be recorded?
When the services are performed
When cash is received in advance for services to be performed at a later date, an asset is increased and
a liability is increased.
A(n) ______ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.
account; general ledger
The term ___ cycle refers to the full set of procedures utilized to measure and communicate business transactions to external decision makers.
accounting
Which of the following is used to record the summary of effects on one particular item?
an account
Accounts receivable are:
assets
Marcy receives $10,000 cash in advance from customers for services to be performed in the following year. This transaction would cause
assets to increase and liabilities to increase.
A list of all account names used to record transactions of a company is referred to as the
chart of accounts
A journal provides a
chronological record of all transactions affecting a firm.
The two components of stockholders' equity are
common stock and retained earnings
Jeremy issues 5,000 shares of common stock for $10 per share. Which of the following accounts are affected?
common stock; cash
Because dividends reduce retained earnings, a ______ to dividends is essentially a ______ to retained earnings.
debit; debit
Because expenses reduce retained earnings, a ______ to expense is essentially a(n) ______ to retained earnings.
debit; debit
Dividends paid to stockholders will cause retained earnings to
decrease
Expenses will cause retained earnings to
decrease
What is the effect of expenses on retained earnings?
decrease
When a company pays salary expense, the effects are to
decrease assets. decrease stockholders' equity.
When a company receives cash in advance from customers for services to be performed in the future, the transaction affects the ______ account.
deferred revenue
After the accountant analyzes the impact of a transaction on the accounting equation, the next step in the measurement process is to
determine the accounts to debit or credit
Crane purchases equipment by signing a note payable with the equipment dealer for $10,000. The accounts affected for Crane are
equipment and notes payable
The acronym DEALOR can be used to remember how debits and credits affect different accounts. The three types of accounts that are increased with debits (represented by the DEA in the acronym) are (Select all the apply):
expenses.dividends.assets.
A(n) ___ transaction involves an exchange between the company and a separate economic entity.
external
True or false: The two functions of financial accounting are to measure business activities and prepare tax returns.
false
On January 1, Kim pays for two years of rent in advance. The effect of this transaction
has no effect on total assets
Revenues cause retained earnings to
increase
When services are provided on account, what is the effect on stockholders' equity?
increase
Zelda purchases $10,000 of supplies on account. The effects of this transaction are to
increase assets; increase liabilities
A(n) ___ transaction is an event that affects the financial position of the company but does not include an exchange with a separate economic entity.
internal
Transactions that are typically recognized at the end of the period and do not include an exchange with a separate company are referred to as ___ transactions.
internal
What type(s) of transactions are typically measured only at the end of the accounting period?
internal
A(n) _______ entry describes the format for recording a transaction.
journal
The commonly used format for recording a transaction is referred to as a(n)
journal entry.
If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs? (Select all that apply)
liability is decreased; another asset is increased
The two roles of financial accounting are to:
measure business activities of the company; communicate information to external parties for decision making purposes
An increase in revenues increases ________________ , which increases retained earnings, which increases stockholders' equity. (Enter one word per blank)
net income
The acronym DEALOR can be used to remember how debits and credits affect different accounts. The three types of accounts that are increased with credits (represented by the LOR in the acronym) are
owners' equity. revenues. liabilities.
The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as ________
posting
The purpose of a general ledger is to
provide in a single location the list of transactions affecting each account and the account's balance.
Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company
provided goods or services to a customer
Prepaid rent is:
rent paid in advance
Consistent with the _______ recognition principle, companies record revenue at the time goods are provided to customers. (Enter only one word.)
revenue
The two basic components for calculating net income _____ are _____ and . (Enter one word per blank.)
revenues, expenses
The types of accounts which affect retained earnings are
revenues. expenses. dividends.
Claire purchases equipment for $10,000 by paying $3,000 in cash and borrowing $7,000 from the bank. The number of accounts affected by this transaction is
three
Rory purchases supplies for cash. Which of the following occurs?
total asset to remain the same
A transaction will always affect at least ____ accounts
two