ch 2- act 210

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.

When supplies are purchased on account, which of the following occurs?

A liability increases.

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

Which of the following accounts would normally have a debit balance on the trial balance?

Accounts receivable Equipment Dividends

The sum of accounts with Blank 1 of 2 balances must equal the sum of the accounts with Blank 2 of 2 balances.

Blank 1: debit Blank 2: credit

Accounts on the left side of the accounting equation (assets) are increased with a(n) Blank 1 of 2 to the account, whereas accounts on the right side of the accounting equation are increased with a(n) Blank 2 of 2.

Blank 1: debit, DR, or debits Blank 2: credit, CR, or credits

For every journal entry, total Blank 1 of 1 must be equal to total credits. (Enter one word per blank)

Blank 1: debits or debit

Match each item with its definition.

Expense: cost of conducting business during the period Dividend: Distribution of cash to stockholders

Which of the following accounts are located in the income statement?

Expenses Revenues

True or false: A balance sheet is a list of all accounts and their balances showing that debits equals credits.

False Reason: A trial balance is a list of all accounts and their balances showing debits equals credits. A balance sheet presents assets, liabilities, and stockholders' equity.

True or false: A ledger provides a chronological record of all transactions affecting the firm.

False A journal provides a chronological record of the transactions of a firm.

Which of the following contains a list of transactions affecting each account and the account's balance?

General ledger

Which of the following includes the list of transactions affecting each individual account and the account's balance?

Ledger

Which of the following are stockholder equity accounts?

Retained earnings Common stock

Match the account used for each type of transaction.

Revenue: Services performed for customers for cash or an account Deferred revenue: cash received from customers for services to be performed in the future

Identify the three components of retained earnings.

Revenues Dividends Expenses

Rory purchases supplies for cash. Which of the following occurs?

Total assets remain the same

True or false: An external transaction is a transaction the firm conducts with a separate economic entity.

True An external transaction occurs with a separate economic entity.

True or false: For each journal entry, debits must be equal to credits.

True Debits and credits must be equal for each journal entry.

Indicate which situations would require Zenda Company to record revenue in the current period. (Select all that apply.)

Zenda performs services on account. Zenda performs services for cash

If debits do not equal credits on a trial balance, a possible error could be

a debit was posted to the credit column for a journal entry.

Smith Company's journal shows a debit to cash and a credit to notes payable, both for $15,000. This indicates that Smith Company:

borrowed $15,000 cash and signed a note

Analyze the following t-accounts. The transaction that required the posting for item (2) is

borrowing cash from the bank.

ch 2

smartbook

The two roles of financial accounting are to:

communicate information to external parties for decision making purposes. measure business activities of the company.

Shannon Corporation issues common stock for $25,000. Recording this transaction will include a

credit to common stock.

On January 1, Kim pays for two years of rent in advance. The effect of this transaction

has no effect on total assets. Cash will decrease and prepaid rent will increase; therefore, the total effect is no change in total assets.

Revenue and expense accounts are shown in the

income statement.

A transaction is initially recorded in the journal, and then subsequently posted to the general Blank 1 of 1.

ledger

A debit is on the ______ side of the account.

left

A trial balance may not be free of errors because the trial balance

only determines that debits equals credits.

Crimson Company's journal shows a debit to the dividend account and a credit to cash. Crimson Company must have:

paid a dividend to its stockholders

Gondel Company's journal shows a debit to prepaid rent and a credit to cash. This means that Gondel Company

paid rent in advance.

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?

Common stock Notes payable Deferred revenue

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

Match the type of the accounting system with the method for posting journal entries.

Computerized system -Journal entries are instantly posted to the general ledger Manual system- Journal entries are posted periodically to the general ledger

The last step for analyzing the effect of transactions is:

Confirm that assets are equal to liabilities plus stockholders' equity

What effect will the payment of salaries to employees for the current period have on stockholders' equity?

Decrease

What are the effects of providing services on account to customers?

Increase retained earnings Increase assets

What effect does revenue have on retained earnings?

Increases

What is the effect of net income on retained earnings?

Increases retained earnings

Analyze the following postings. Which of the following is the transaction that required this posting?

Issue common stock to investors

Which of the following represents a common advantage of a computerized accounting system?

Journal entries are instantly posted to the ledger

Accounts receivable are

assets

Yeung Corp. purchases supplies on account. Recording this transaction will include a

debit to supplies.

Budget Company pays a dividend to its shareholders for $5,000. Recording this transaction will include a debit to

dividends.

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.

Fuller Company provides services to customers for $25,000 cash. Which of the following is used to record this transaction?

Debit cash; credit revenue.

A(n)Blank 1 of 1 entry describes the format for recording a transaction. (Enter only one word.)

Blank 1: journal

The term debit means to place the entry on the Blank 1 of 2 hand side of the account, and the term credit means to place the entry on the Blank 2 of 2hand side of the account.

Blank 1: left Blank 2: right

The term debit means to place the entry on the Blank 1 of 2 hand side of the account, and the term credit means to place the entry on the Blank 2 of 2hand side of the account. Listen to the complete question

Blank 1: left Blank 2: right

On August 2, Garner Company provides services to a long-time customer for $50,000. Payment for this service is due on September 1. Which of the following journal entries is made to record this transaction on August 2?

Debit accounts receivable; credit service revenue.

Rawlings Corp. borrows $3,000 on a note payable from Third National Bank. Which of the following is used to record this transaction?

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

The first step for analyzing the effect of transactions is:

Determine one account in the accounting equation that will increase or decrease

True or false: The term debit means increase, and the term credit means decrease.

False Debit means left; credit means right. Some accounts you debit to increase; other accounts you credit to increase.

What type(s) of transactions are typically measured only at the end of the accounting period?

Internal transactions External transactions are recorded throughout the year, as they occur. Internal transactions are recorded at the end of the period.

Analyze the following journal entry. What is the transaction that required this journal entry?

Payment of dividends to investors

Analyze the following t-accounts and postings. What is the transaction that would require the posting of item (10)?

Payment of dividends to investors

Jonathan Company's journal shows a debit to supplies and a credit to accounts payable. This means that Jonathan:

Purchased supplies on account

Recording the repayment of a promissory note will include a credit to

cash.

DiAngelo Company's journal shows a debit to cash and a credit to service revenue. This journal entry indicates that DiAngelo:

performed a service for a customer for cash

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

posting

Pilot Company pays for two years of rent in advance. Recording this transaction would include a debit to

prepaid rent

Rent paid in advance and classified as an asset is referred to as

prepaid rent.

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

$29,000 Issuing common stock increases assets by $25,000 (cash) and increases equity (common stock). Purchasing equipment for cash decreases one asset and increases another asset, so there is no change in assets. Purchasing supplies on account increases assets and increases accounts payable. $25,000 + $0 + $4,000 = $29,000 total assets.

Clem Corporation issues 1,000 shares of common stock for $25,000. Clem purchased equipment for $10,000 by borrowing from the bank. Clem's total assets are

$35,000 Cash $25,000 + Equipment $10,000 = $35,000 total assets.

Which of the following is used to record the summary of effects on one particular item?

An account

If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs? (Select all that apply)

Another asset is increased A liability is decreased

Where is the Deferred Revenue account reported in the financial statements?

As a liability

The accounting equation is:

Assets = Liabilities + Stockholders' Equity

For every journal entry, total Blank 1 of 2 must be equal to total Blank 2 of 2. (Enter one word per blank)

Blank 1: debits or debit Blank 2: credits or credit

Expenses Blank 1 of 2 stockholders' equity because they Blank 2 of 2 retained earnings.

Blank 1: decrease, lower, or reduce Blank 2: decrease, lower, or reduce

A(n) Blank 1 of 2 is a cost of doing business during the period, whereas a(n) Blank 2 of 2 is a distribution of cash to stockholders. (Enter only one word per blank.)

Blank 1: expense Blank 2: dividend

The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as Blank 1 of 1. (Enter only one word.)

Blank 1: posting or post

The accumulated net amount of revenue less expenses and dividends is reflected in the balance of Blank 1 of 2 Blank 2 of 2.

Blank 1: retained Blank 2: earnings or earning

A list of all accounts and their balances at a particular date showing that debits equal credits is referred to as a(n)Blank 1 of 2 Blank 2 of 2.

Blank 1: trial Blank 2: balance

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 and signing a promissory note

Because dividends reduce retained earnings, a ______ to dividends is essentially a ______ to retained earnings.

Debit; debit Reason: dividends are recorded as debits and debits reduce retained earnings

What is the effect of dividends on retained earnings?

Decrease

A journal entry should contain which of the following information?

Description of the transaction Accounts and amounts credited Accounts and amounts debited The date

Which of the following are components of calculating net income?

Expenses Revenues Dividends are a distribution of net income to shareholders and are not included in net income. A dividend is never considered an expense of doing business; it is a distribution to shareholders and reduces retained earnings.

True or false: The two functions of financial accounting are to measure business activities and prepare tax returns.

False The two functions of financial accounting are to measure business activities and communicate those measurements to external parties for decision-making purposes.

True or false: The accounting equation must always remain in balance.

True In a double entry system, debits must equal credits, and the balance sheet must always balance.

Turkey Corp. provides services to customers on account for $3,000. Recording this transaction will include a

credit to revenues.

The accounting equation is Assets = Liabilities + Stockholders' Equity. Accounts on the right side of the equal sign in this equation are increased with

credits.

A proper journal entry includes the ______, the account and amount debited, the account and amount credited, and a brief explanation of the transaction.

date

In a double-entry accounting system, a(n) Blank 1 of 1 represents the left side of the account.

debit

In a double-entry accounting system, the Blank 1 of 1 represents the left side of the account. (Enter one word per blank)

debit or debits

Roslin Corp. provides services to customers on account for $5,000. Recording this transaction will include a

debit to accounts receivable. credit to revenues.

Sinclair purchased equipment for $100,000 cash. Recording this transaction would include a

debit to equipment $100,000. Reason: cash is credited Reason: accounts payable is credited Reason: the total cost of the equipment is $100,000

Lassiter Industries purchased equipment for $140,000. Lassiter expects to use the equipment over the next 10 years. Recording this transaction would include a

debit to equipment $140,000. Because the equipment is to be used over 10 years and has future value, it is an asset.

Because expenses reduce retained earnings, a ______ to expense is essentially a(n) ______ to retained earnings.

debit; debit Reason: expenses reduce retained earnings. Expenses and reductions in retained earnings are recorded as debits

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

debits and credits.

The accounting equation is Assets = Liabilities + Stockholders' Equity. Accounts on the left side of the equal sign in this equation are increased with

debits.

A t-account has space at the top for the account title and two sides for recording ______ and ______ to the account.

debits; credits

Dividends paid to stockholders will cause retained earnings to

decrease

On January 1, Lorna pays $36,000 of rent in advance. The effects of this transaction are to

decrease cash. increase prepaid rent.

Carlson Corporation pays a dividend to its investors. The effect of the dividend is to

decrease retained earnings.

The effect of expenses on the expanded accounting equation is to

decrease retained earnings.

What is the effect of dividends paid on the expanded accounting equation?

decrease retained earnings. decrease assets

When a company pays salary expense, the effects are to

decrease stockholders' equity. decrease assets.

Dividends ______ retained earnings; therefore, to increase dividends, one would ______ the dividends account.

decrease; debit

Expenses ______ retained earnings; therefore, to increase any expense, one would ______ the expense account.

decrease; debit

Beloit Company receives $40,000 from customers for services to be performed in the following year. Recording this transaction will include a credit to

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 and credit.

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):

dividends. assets. expenses.

The purpose of a trial balance is to

ensure debits equals credits. assist in preparing adjusting entries.

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 types of accounts which affect retained earnings are

expenses. dividends. revenues.

A(n) ??? transaction involves an exchange between the company and a separate economic entity. (Enter one word per blank)

external

Zelda purchases $10,000 of supplies on account. The effects of this transaction are to

increase liabilities. increase assets. Supplies (an asset) increases, and accounts payable (a liability) increases.

Revenues cause retained earnings to

increase.

Revenues ______ retained earnings; therefore, to increase any revenue, one would ______ the revenue account.

increase; credit Reason: revenues increase retained earnings and are recorded by crediting a revenue account

Net income ______ retained earnings.

increases

A(n) Blank 1 of 1 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 Blank 1 of 1 transactions.

internal

The commonly used format for recording a transaction is referred to as a(n)

journal entry.

A chart of accounts is a

list of all account names and numbers used by a company.

Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company

provided goods or services to a customer.

Indigo Company's journal reveals that equipment was debited and notes payable was credited, both for $10,000. Indigo Company must have

purchased equipment and signed a note for the purchase price

The purpose of a journal is to

record a chronological listing of every transaction for a company.

Prepaid rent is

rent paid in advance.

An increase in revenues increases net income, which results in an increase to:

retained earnings

Consistent with the Blank 1 of 1 recognition principle, companies record revenue at the time goods are provided to customers. (Enter only one word.)

revenue

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

revenues. owners' equity. liabilities.

The accounts included on the balance sheet are

stockholders' equity. liabilities. assets.

The purpose of an account is to

summarize all transactions for that item.

An simplified version that is used informally for analysis instead of drawing a formal general ledger account is referred to as a:

t-account

The type of information included in an account includes

the account title. columns for debits and credits.

The balance in retained earnings represents

the accumulated net amount of revenue minus expenses and dividends over the company's lifetime.

Accounts receivable are assets which represent

the amounts owed by customers. Accounts receivable only represent services or sales on account. Since the company could also have cash sales, accounts receivable do not represent total revenues for the period.

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.

A transaction will always affect at least ______ accounts.

two

Jeremy issues 5,000 shares of common stock for $10 per share. Which of the following accounts are affected? (Select all that apply.)

Cash Common stock

What is the effect of expenses on retained earnings?

Decrease

On February 1, Domino Corporation ordered inventory. The inventory was received on February 15. Domino paid for the inventory on February 27. On which of the following dates will Domino record a transaction? (Select all that apply)

February 15 February 27 No entry is recorded at the time the inventory is ordered because no value has been exchanged, and a transaction has not occurred.

Lexington Company borrows $10,000 from a bank by signing a promissory note. What are the effects of this transaction on the accounting equation?

Increase liabilities Increase assets

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

Ryan Corporation declares and pays a dividend. Which of the following is correct?

Stockholders' equity decreases.

London Corp. issues 1,000 shares of stock for $20 per share. What is the effect of this transaction on the accounting equation?

Stockholders' equity increases Assets increase

Expenses will cause retained earnings to

decrease.

An event that affects the financial position of a company but does not include an exchange with a separate economic entity is a(n)

internal transaction.

London Corp. issues 1,000 shares of stock for $20 per share. What are the effects of this transaction?

Common stock is increased. Cash is increased.

Farmer, Inc. purchases a tractor for $80,000 cash. Recording this transaction will require which of the following?

Credit cash Debit equipment

Pluto Inc. borrows $3,000 from Second National Bank by signing a promissory note. Recording this transaction will include which of the following?

Credit note payable Debit cash

National Company provides services to customers on account for $20,000. Which of the following journal entries is used to record this transaction?

Debit accounts receivable; credit service revenue.

Carnival Company issues common stock to investors for $50,000. Which of the following is used to record this transaction?

Debit cash; credit common stock.

Inwood Corporation receives $36,000 in advance from customers for services to be performed over the next three years. Which of the following is used to record this transaction?

Debit cash; credit deferred revenue.

Oasis Company provides services to customers for $10,000 cash. Which of the following is used to record this transaction?

Debit cash; credit revenue.

Zinc Corp. pays a dividend of $10,000 to its stockholders. Which of the following entries are required to record this transaction?

Debit dividends Credit cash

Gilman Company pays a dividend of $4,000 to stockholders. Which of the following is used to record this transaction?

Debit dividends; credit cash.

On June 1, Kale Inc. repays a promissory note for $10,000. Which of the following is used to record this transaction?

Debit notes payable; credit cash.

Perkins Company pays employees $5,000 for work performed in the current period. Which of the following is used to record this transaction?

Debit salary expense; credit cash.

Resnick purchases supplies on account. Which of the following is used to record this transaction?

Debit supplies; credit accounts payable.v

Torrence purchases supplies for cash. Which of the following is used to record this transaction?

Debit supplies; credit cash.

Alvord Company pays employees $10,000 for work performed in the current period. Which of the following is used to record this transaction?

Debit to salary expense.

When services are provided on account, what is the effect on stockholders' equity?

Increase

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

Rice borrows $20,000 from the bank. Which of the following is an effect of this transaction?

Increase liabilities

Price Company provides cleaning services to customers for $10,000 cash. What are the effects of this transaction on the accounting equation? (Select all that apply.)

Increase retained earnings Increase assets

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

An increase in revenues increases Blank 1 of 2 Blank 2 of 2, which increases retained earnings, which increases stockholders' equity. (Enter one word per blank)

Net income

Analyze the following t-accounts. What is the transaction that required the posting of item (4)?

Pay rent in advance

Analyze the following journal entry. What is the transaction that required this journal entry?

Payment of salaries to employees

Analyze the following t-accounts and postings. What is the transaction that required the posting of item (9)?

Payment of salaries to employees

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

Analyze the following journal entry. What is the transaction that required this journal entry?

Perform services for customer for cash

Analyze the following t-accounts. What is the transaction that required the posting of item (7)?

Perform services for customers on account

Analyze the following journal entry. What is the transaction that required this journal entry?

Purchase equipment for cash

Analyze the following t-accounts and the posting marked item (3). What is the transaction that required this posting?

Purchase equipment for cash

Analyze the following journal entry. What is the transaction that required this entry?

Purchase supplies on account

Analyze the following t-accounts and postings for item (5). What is the transaction that required this posting?

Purchase supplies on account

What are the three components of retained earnings?

Revenues, expenses, and dividends

The accounting equation is: Assets = Liabilities +

Stockholders' Equity

A payment of cash dividends will decrease which of the following?

Stockholders' equity Retained earnings Assets

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 Reason: If debits are not equal to credits, the assets will not be equal to liabilities plus stockholders' equity and the balance sheet will not balance.

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 Revenue is recorded when the services are performed..

True or false: A trial balance is used for internal purpose to check that debits equal credits.

True Reason: A trial balance is used internally to help prepare financial statements. It lists all accounts of the company and checks to determine if debits equals credits.

Which of the following accounts would normally have a debit balance on the trial balance?

Utility Expense Cash Supplies

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 company records the effects of transactions for a particular item in a(n)

account.

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 Blank 1 of 1 cycle refers to the full set of procedures utilized to measure and communicate business transactions to external decision makers. (Enter only one word.)

accounting

The full set of accounting procedures used to measure and communicate business transactions is referred to as the

accounting cycle.

A cost is recognized as _____ if the company expects to derive benefits during future periods.

an asset

The cost of equipment that will benefit future periods is typically recorded as a(n) Blank 1 of 1.

asset

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.

Slim purchases equipment with cash. The accounts affected are

cash and equipment.

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.

Tabor Company issues $20,000 of common stock to investors. Recording this transaction will include a credit to

common stock.

Roland Corporation borrows $10,000 from the bank by signing a promissory note. Recording this transaction will include:

credit to notes payable debit to cash