ACG2021 Ch 2 Practice Quiz

$6,600 Accounts Payable, a liability account, has a normal credit balance. The beginning credit balance of $9,100 − Debits of ($2,350 + $5,650 + $7,400) + Credits of ($1,800 + $4,750 + $6,350) = Ending credit balance of $6,600.

Accounts Payable had a balance of $9,100 at the beginning of the month. During the month, three debits in the amounts of $2,350, $5,650, and $7,400 were posted to Accounts Payable, and three credits in the amounts of $1,800, $4,750, and $6,350 were posted to Accounts Payable. What is the ending balance of the Accounts Payable account?

$120,600 Total credits = Accounts Payable $30,600 + Common Stock $30,000 + Notes Payable $60,000 = $120,600

Broadway, Inc.'s trial balance was in balance at the end of the period and showed the following accounts: What is the balance of the credit column on Broadway's trial balance?

No effect on total assets; no effect on total liabilities; no effect on total stockholders' equity

Danny Company purchased supplies using cash. What is the effect on Danny's balance sheet?

$62,400 Total assets = Cash from borrowing of $20,000 + Cash from issuing stock of $40,000 + Supplies purchased $4,000 − Cash paid to suppliers of $1,600 = $62,400

During its first year of operations, a company entered into the following transactions: Borrowed $20,000 from the bank by signing a promissory note. Issued stock to owners for $40,000. Purchased $4,000 of supplies on account. Paid $1,600 to suppliers as payment on account for the supplies purchased. What is the amount of total assets at the end of the year?

$40,000 decrease Change in assets = Change in liabilities + Change in stockholders' equity= ($50,000) + $10,000 = ($40,000)

During the current year, Sue Shells, Inc.'s total liabilities decreased by $50,000 and stockholders' equity increased by $10,000. By what amount and in what direction did Sue's total assets change during the same time period?

has at least two effects on the basic accounting equation. Every transaction has at least two effects on the basic accounting equation (at least one debit and one credit). A transaction can result in two accounts increasing, two accounts decreasing, or one account increasing and one account decreasing. A transaction may affect two balance sheet accounts, two income statement accounts, or one of each. Every transaction is analyzed from the standpoint of the business, not the owners.

Every transaction:

debits first and then credits, indented to the right underneath.

For both accounts and amounts, the standard formatting for a journal entry lists:

the total dollar amount of debits must equal the total dollar amount of credits.

In addition to requiring that the accounting equation remain in balance, the double-entry system also requires that:

$10,000 debit to Accounts Payable and a $10,000 credit to Cash. Both accounts decrease. Cash is an asset account and Accounts Payable is a liability account. The journal entry would include a debit to Accounts Payable and a credit to Cash and for $10,000.

Purrfect Pets, Inc., makes a $10,000 payment on account. This would result in a:

Debit cash and credit notes payable for $62,000 Since cash (asset) is increased, it must be debited. Since notes payable (liability) is being increased, it must be credited.

Shaylee, Inc. borrowed $62,000 from a bank, depositing those funds in its bank account and signing a formal agreement to repay the loan in two years. What is the correct journal entry for this transaction?

$1,200,000 will be debited and $180,000 will be credited to asset accounts; $1,020,000 will be credited to liability accounts. Equipment, an asset, will increase with a debit for $1,200,000. Cash, an asset, will decrease with a credit for $180,000. Notes Payable, a liability, will increase with a credit for $1,020,000.

Slug, Inc. purchases equipment for $1,200,000 million paying $180,000 in cash and issuing $1,020,000 in promissory notes. When the journal entry is posted to the related accounts:

Assets decrease by $200,000, liabilities decrease by $200,000, and stockholders' equity is unchanged. This transaction will cause assets (Cash) to decrease and liabilities (Notes Payable) to decrease.

Sue Shells, Inc. pays back $200,000 on a loan it had obtained earlier from a bank.

Accounts Payable. In this transaction, Supplies, an asset account, which increases, would be debited and Accounts Payable, a liability account, which also increases, would be credited.

The journal entry to record the purchase of supplies on account includes a credit to:

side which increases that account. The side that increases an account is the normal balance of the account.

The normal balance of any account is the:

403,500 Beginning debit balance of $371,700 + $44,100 + $114,900 − $18,000 − $17,400 − $22,200 − $36,000 − $33,600 = Ending balance of $403,500

What is the ending balance of the Cash account?

A manager signs a promissory note and receives cash. An accounting transaction occurs when there is an exchange involving assets, liabilities and/or stockholders' equity. An exchange of a promissory note for cash qualifies as an exchange. An exchange of only promises is not an accounting transaction.

Which of the following is an accounting transaction?

Increases to liabilities Assets are increased by debits and decreased by credits. Liabilities and Stockholders' equity are increased by credits and decreased by debits.

Which of the following requires a credit?

Prepare journal entries, post to ledger, prepare trial balance, and prepare financial statements. After transactions are analyzed, journal entries are prepared to record those transactions in the journal. Then, they are posted to the ledger. After a trial balance is prepared using the ledger balances, the financial statements are prepared.

Which of the following sequences indicates the correct order of steps in the accounting cycle?

Equipment Cash, Supplies, and Prepaid Insurance are current assets because they will be used up or converted to cash within 12 months of the date of the balance sheet. Equipment is classified as a noncurrent asset because it will be used over a number of years.

Which one of the following is not a current asset?