Lecture 2

Chaco Company's trial was in balance at the end of the period and showed the following accounts: Accounts Payable25,200 Cash40,200 Common Stock21,200 Equipment10,200 Land42,000 Notes Payable46,000 What is the balance of the credit column on Chaco's trial balance?

92400

Obtaining a loan would be an example of a(n):

Financing Activity

On April 10, Cary's Carpet Cleaning, Inc. borrows $15,000 from a bank, depositing those funds in its bank account and signing a formal agreement to repay the loan in one year. Prepare the appropriate journal entry for this transaction.

NoTransactionGeneral JournalDebitCredit1aCashselected answer correct15,000selected answer correctnot attemptedNotes Payableselected answer correctnot attempted15,000selected answer correct

Cary's Carpet Cleaning, Inc. purchased $10,000 of carpet cleaning equipment, paying $2,000 cash and giving an informal promise to pay $8,000 at the end of the month. On April 30, Cary's Carpeting Cleaning pays $8,000 to the equipment supplier. Prepare the appropriate journal entry for the payment on April 30.

NoTransactionGeneralJournal DebitCredit1April 30Accounts Payable8,000Cash8,000

Which of the following is an example of an investing activity of a business?

Purchasing office equipment

Put the steps involved with accounting for business activities in order.

Step 1 - Analyze transaction Step 2 - Record journal entry Step 3 - Post to ledger

Indicate whether each account type is decreased by debits or credits.

Stockholders' equity - Decreased with debits Assets - Decreased with credits Liabilities - Decreased with debits

Buffy Inc., borrowed $50,000 from a bank, depositing those funds in its bank account and signing a formal agreement to repay the loan in two years. Which of the following statements is true with regards to this transaction?

Assets and liabilities increased.

Buffy Inc., issued shares of common stock to investors in exchange for cash contributions. Which of the following statements is true with regards to this transaction?

Assets and stockholders' equity increased.

Buffy Inc purchases and receives equipment totaling $8,000 in exchange for $8,000 cash. Which of the following statements is true with regards to this transaction?

Assets, liabilities, and stockholders' equity were not affected

Assume that a journal entry with a debit to Equipment for $8,000 and a credit to Cash for $8,000 is recorded in the journal. What should be done next?

- A debit of $8,000 should be posted to the Equipment account in the ledger - A credit of $8,000 should be posted to the Cash account in the ledger

-Transactions are recorded with _______ __________ -Transactions are analyzed and their financial effects are entered in a ________ each day they occur. -A ________ a collection of records that summarizes, for each account, the effects of transactions entered in the journa

- Journal Entries -Journal -Ledger

Which of the following are reported on the balance sheet?

-Assets -Liabilities -Stockholder's Equity

Which of the following statements are true with regards to asset accounts?

-Assets are on the left-side of the accounting equation. -Assets are increased with debits. -Assets are decreased with credits.

Which of the following are the types of business activities that affect the balances in asset, liability, and stockholders' equity accounts?

-Financing activities -Investing activities -Operating activities

Which of the following statements are true with regards to journal entries?

-The accounts that are debited in the transaction are followed by the accounts that are credited in the transaction. -The left column for dollar amounts is used for debits.

The Notes Payable T-account had a beginning balance of $7,000, debits during the period totaling $5,000, and credits during the period totaling $15,000. What is the ending balance of the Notes Payable account?

17000

During the year, assets increased by $20,000 and stockholders' equity increased by $15,000. What was the increase in liabilities?

5000

The Cash T-account had a beginning balance of $1,000, debits during the period totaling $10,000, and credits during the period totaling $6,000. What is the ending balance of the Cash account?

5000

Indicate whether each account is increased with debits or credits.

Cash - Increased with debits Accounts Payable - Increased with credits Software - Increased with debits

Which financial statement would a potential creditor ask to review if it wants to determine whether a company might have the ability to pay?

Classified balance sheet

Willette Company reported the following information at December 31, Year Accounts Payable - $4,500 Accounts Receivable - 9,350 Cash - 23,490 Common Stock - 90,000 Equipment - 49,500 Inventory - 31,200 Notes Payable due December 31, Year 3 - 2,500 Retained Earnings, December 31, Year 1 - 14,090 Salaries and Wages Payable - 2,450 What is the amount of current assets on the classified balance sheet?

Current assets - $64,040

The balance sheet of Ambiance Corporation reported current assets of $186,708 total assets of $300,000 current liabilities of $36,139 total liabilities of $125,000. What is the company's current ratio?

Current ratio - 5.17 (Current Assets/Current Liabilities)

Put the steps involved with accounting for business activities in order.

First: Picture the documented activity Second: Name what's exchanged Third: Analyze the financial effects

Indicate whether each account type is increased by debits or credits.

Liabilities - Increased by credits Assets - Increased by debits Stockholders' equity - Increased by credits