ACCT 2301 Chapter 2 SB - Homework assignment PDF

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ACCT 2301 Chapter 2. Financial Statements and the Accounting System A business pays $500 for rent. How would this payment affect the equity of a business? Expenses are increased, so equity is decreased A trial balance is a(n) (list) of accounts and their balances at a point in time and is used to confirm that the sum of debit account balances equals the sum of (credit) account balances. Accounts payable refer to obligations owed (by) the business and are classified as a (liability) account. After entering a transaction into the accounting equation, an increase in total assets can be accompanied by an (increase) in total liabilities and (equity). An account is a record or increases and (decreases) in a specific asset, liability, equity, revenue or expense. An income statement reports: the revenues less the expenses incurred by a business Analyzing the accounting equation at the end of the month will reveal the following. Select all that apply. Revenues and expenses will change the equity account; assets = liabilities + equity Brown Company paid $40 in cash dividends. Show how to record the transaction by completing the following sentence. Dividends would be (debited) on the (left) side of the T-account, and Cash would be (credited) on the (right) side of the T-account. Brown Company paid its employee his weekly wages of $400. Show how to record the transaction by completing the following sentence. The Wages Expense account would be (debited) on the (left) side of the T-account, and the Cash account would be (credited) on the (right) side of the T-account. Brown Company purchased $900 of supplies on credit. Illustrate how to record the transaction by completing the following sentence. Accounts payable would be (credited) on the (right) side of the Taccount, and Supplies would be (debited) on the (left) side of the T-account. Cash can take many forms. From the lists of items below, choose the one which includes only items that would be defined as cash. Coins, Checks, Money Orders Choose the account(s) below, that would have a normal credit balance. Revenues, common stock, notes payable, accounts payable Choose the statement below that correctly explains a general journal. A journal is a complete record of each transaction in one place and includes the debit and credit of each transaction. Equipment is an (asset) account. It is reported on the (left) side of the accounting equation and is (increased) when equipment is purchased. From the following lists of accounts, choose the list(s) which contains only expense accounts. Rent expense, Wages expense, Insurance expense From the lists of accounts below, which one contains only revenue accounts? Interest revenue, Professional fees earned, sales

Gunner Company made a $50 payment on account for a previous equipment purchase. Show how this transaction should be entered into the accounts of Gunner Company, by selecting the correct answer below. Place $50 on left side of the Accounts Payable account; place $50 on the right side of the Cash account Gunner Company purchased a piece of equipment costing $6,000. She paid $1,000 immediately and put the rest on account. Show how to record this transaction by selecting the correct answer below. $6,000 on left side of the Equipment account; $5,000 on the right side of the Accounts Payable account; $1,000 on the right side of the cash account Holt Computer Services purchased $2,000 of new equipment and paid immediately. Illustrate how to record the transaction of Holt Services by completing the following sentence. The Equipment account would be (debited) on the (left) side of the T-account and the cash account would be (credited) on the (right) side of the T-account. Identify which of the following lists include only examples of assets. Building, cash, accounts receivable Illustrate how the financial statements are linked by placing them in the correct order of preparation. Income statement –> Statement of retained earnings –> Balance sheet In defining a reporting period, which of the following statements is (are) correct? (Check all that apply.) A reporting period can be one month, one quarter or one year; A one-year reporting period is known as the fiscal year; A reporting period is determined by the business J. Jackson invested $1,000 in his business in exchange for common stock. Show how to record this transaction by selecting the correct answer below. Debit Cash; Credit Common Stock L. Lyons started a business and invested $4,000 in exchange for common stock. Illustrate how to record the transaction in the T-accounts by completing the following sentence. The Cash account would be (debited) on the (left) side of the T-account and the Common Stock account would be (credited) on the (right) side of the T-account. Match each item on the left with the correct definition on the right. Creditors—individuals or organizations that have rights to receive payments from a business; Liabilities—claims against the assets of a business; Assets—things of value owned by a business; Expenses—the cost of doing business Match the items on the left with their definition on the right. Assets—things of value owned by the business; Equity—the residual interest in the assets of a business after deducting the business’s debts; Revenues—the dollars earned because of services performed or products sold; Liabilities—the obligations owed by the business to creditors On Jan. 2, Callie Company performed $800 worth of services for a client. The client paid $800 immediately, The journal entry to record this transaction in Callie Company’s books would include a (debit) to the Cash account; and a (credit) to the Service Revenue account. On Jan. 2, Callie Company performed $800 worth of services for a client. The client paid $100 immediately, but promised to pay the balance next month. The journal entry to record this transaction in Callie Company’s books would include a (debit) to the Cash account; a (debit) to the Accounts Receivable account and a (credit) to the Service Revenue account.

On Jan. 2, Callie Company received a $700 payment from a customer previously billed for services performed. The journal entry to record this transaction would include a (debit) to the (cash) account and a (credit) to the Accounts Receivable account. On Mar 3, Lyons Company paid dividends of $1,000. Use your knowledge of what a correct journal entry should look like to identify what would be included. (Check all that apply.) Dividends would be debited and listed first; Cash would be credited and listed second On Mar 3, Lyons Company received $100 cash in advance of providing catering services to a customer. Use your knowledge of what a correct journal entry should look like to identify what would be included in the correct journal entry. Cash would be debited and listed first; Unearned Revenue would be credited and listed second Paul’s Programming Services paid $100 in cash dividends. Show how to record this transaction by selecting the correct answer below. Debit Dividends; Credit Cash R&R Programming pays a $900 supply bill that it had received earlier in the month. Illustrate how to record the transaction by completing the following sentence. Accounts Payable would be (debited) on the (left) side of the T-account, and Cash would be (credited) on the (right) side of the T-account. Recall that the Balance Sheet reports the equality of the accounting equation and would include which of the following accounts? Total Liabilities; Total Assets; Retained earnings balance at end of period Recall the required information in a financial statement heading. Rearrange the following line items as they would appear in a headings. 1. Name of business. 2. Name of financial statement. 3. Period of time the financial statement covers. Revenues cause equity to (increase) and they are increased on the (right) side of the T-account. Select the statements below that are correct in regards to entering transactions in a journal. (Check all that apply.) Total dollar amount of debits must equal the total dollar amount of credits; Credited accounts should be indented Select the statements that are true regarding debiting and crediting. (Check all that apply.) A credit will always decrease and asset account; For an account where a debit is an increase, the credit is a decrease; A debit can increase an expense account; A debit or a credit can increase an account depending on the account Since expenses are the costs of doing business and cause equity to (decrease), expenses are increased on the (left) side of their T-account. Smith Company purchased $8,000 of supplies on credit. Show how to record this transaction by selecting the correct answer below. Enter $8,000 on the left side of the Supplies account; enter $8,000 on the right side of the Accounts Payable account Sunshine Company received and paid for a utility bill of $50. Show how to record this transaction by selecting the correct answer below. $50 on left side of the Utility Expense account; $50 on the right side of the Cash account Supplies are (assets) until they are used. When they are used up, their costs are reported as (expenses).

The ability to meet long-term obligations and generate revenues is called: solvency The ability to provide financial rewards to attract and retain financing is called: profitability The account title is shown at the top of a T-account. The left side of a T-account is called the (debit) side, and the right side is called the (credit) side. The balance sheet reports: assets, liabilities and the ending retained earnings balance The business earns $2,800 cash for services performed. How would this receipt affect the total equity of a business? Revenues would be increased, so equity is increased The business earns $700 of consulting revenue. How would these earnings affect the total equity of a business? Revenues increase, so total equity is increased The business receives and immediately pays a $300 advertising bill. How would this payment affect the total equity of a business? Expenses would be increased, so equity is decreased The correct definition of and “account” includes which of the following? A record of increases and decreases in a specific asset, liability, equity, revenue, or expense item The general ledger can be used to determine which of the following (select all answers which apply): common and unique accounts used by a business, increases and decreases in all accounts in a business, which accounts are being used by a company and their balances at any given time The rules of double-entry accounting say that for each transaction at least (two) accounts are involved, with at least one debit and one (credit) The stockholders of a business received a $1000 dividend. How would this affect the total equity of the business? Assets would be decreased and total equity would decrease as well. The T-account for Accounts payable had 4 transactions entered into it. It was increased by $300 and by $100 and decreased by $50 and by $150, respectively. Its balance at the end of the period would be a (credit) balance of ($200). The T-account for Cash had 3 transactions entered into it. It was increased by $400 and decreased by $100 and by $30, respectively. Its balance at the end of the period would be a (debit) balance of ($270) There are several types of accounts that impact equity. Which of the accounts below cause equity to increase? Common Stock and Revenues There are several types of accounts that impact equity. Which of the accounts below cause equity to increase? Common stock and revenues To enter transactions on the left side of a T-account means you will (debit) the account and will cause a (increase) in an asset account. To enter transactions on the left side of a T-account means you will (debit) the account and will cause a (increase) in an asset account To enter transactions on the right side of a T-account means you will (credit) the account and will cause an (increase) in a liability account

Transferring entries form the journal to the ledger is called (posting) True or false: Assets are claims (by creditors) against the company. False True or false: At the end of the period, the assets will still equal the liabilities plus the equity. True When entering a transaction into a general journal, the entry would be dated; then the accounts (debited) would be listed first; then the accounts (credited) would be listed next; and finally, a(n) (explanation) would be included to show the details of the transaction. When preparing a trial balance, there are certain steps that need to be followed. Place the following steps in the correct order. 1. List each account title and its amount from the general ledger. 2. Compute the total of debit balances and the total of credit balances. 3. Verify that total debit balances equal total credit balances. When the product or service related to an unearned revenue is delivered, the earned portion of the unearned revenue is transferred to a __________ account. Revenue When the stockholders receive a dividend, how would this affect the equity of a business? Assets are decreased and equity is decreased Which of the following accounts are examples of expenses? (Check all that apply.) Supplies Expense, Rent Expense Which of the following accounts are examples of revenues? (Check all that apply.) Fees revenue, Sales, Service Revenue Which of the following accounts has a normal credit balance? (Check all that apply.) Unearned consulting revenue, common stock, accounts payable Which of the following accounts has a normal debit balance? (Check all that apply.) Accounts receivable, buildings, supplies, cash Which of the following accounts impact equity? (Check all that apply.) Dividends, Expenses, Common Stock, Revenue Which of the following accounts would be considered an asset? (Check all that apply.) Building, Cash, Accounts Receivable, Supplies Which of the following describes a general ledger? The general ledger is a record containing all accounts used by a company Which of the following financial statements report(s) the financial position of a business over a period of time? (Check all that apply.) Statement of retained earnings, statement of cash flows, income statement Which of the following formulas is correct in depicting the expanded accounting equation? Assets = Liabilities + Common Stock – Dividends + Revenues – Expenses Which of the following is a correct statement regarding the posting process? Entries must be posted to the ledger before financial statements are prepared

Which of the following is correct regarding posting a transaction? Posting means to transfer journal information to a ledger Which of the following is required information when entering a transaction into a journal? (Check all that apply.) Date of the transaction; Explanation of transaction; Debited accounts; Credited accounts Which of the following items is (are) required in the heading of every financial statement? (Check all that apply.) Date or period of time covered; Name of the business; Name of the financial statement Which of the following items would be considered “cash” and reflected in a company’s Cash account? (Check all that apply.) Checks, coin, money orders Which of the following statements about revenues is correct? Revenues cause equity to increase, and they are increased on the right side of the T-account. Which of the following statements are accurate regarding supplies? (Check all that apply.) Unused supplies can be recorded as store supplies, office supplies or supplies; when supplies are purchased, they are added to the supplies account; supplies are assets until they are used; unused supplies are treated as assets Which of the following statements are correct regarding how the financial statements are linked? (Check all that apply.) The ending balance in the retained earnings account is carried to the balance sheet; Net Income from the income statement is carried to the statement of retained earnings Which of the following statements correctly explains how to prepare a trial balance? (Check all that apply.) Compute the total of debit balances and the total of credit balances; List each account title and its amount from the ledger; Verify that the total debit balances equals the total credit balances; If an account has a zero balance, it may be omitted entirely Which of the following statements explains what a trial balance is? A trial balance confirms that the sum of debit account balanced equals the sum of credit account balances. Which of the following statements is (are) accurate regarding equipment purchased within a business? (Check all that apply.) Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed; Equipment is an asset; Equipment is reported on the left side of the accounting equation; Equipment purchases are reported on the balance sheet Which of the following statements is (are) correct regarding a journal? (Check all that apply.) Transactions are generally entered in chronological order; A journal is used to record business transactions; In a journal, both the debit and credit side of the transaction can be seen Which of the following statements is (are) correct regarding a T-account? (Check all that apply.) A Taccount may be used as a tool to visualize the effects of a transaction; A T-account will show the debit and credit effects of transactions; A T-account represents a ledger account Which of the following statements is (are) correct regarding the definition of a liability? (Check all that apply.) A liability is a debt owed by the business; A liability can be settled by transferring assets or providing products or services to others; A liability is a claim by creditors against the assets of a business

Which of the following statements is (are) correct regarding the sides of a T-account? (Check all that apply.) Liability accounts will be increased on the right side; The right side is called the credit side; The left side is called the debit side; Asset accounts will be increased on the left side Which of the following statements is (are) correct regarding the sides of a T-account? (Check all that apply.) Asset accounts will be increased on the left side; The left side is called the debit side; The right side is called the credit side; Liability accounts will be increased on the right side Which of the following statements is (are) correct regarding the effect of debiting or crediting accounts? (Check all that apply.) To increase the Dividends account, you would debit it; To reduce Accounts Payable, you would debit it; To decrease an asset, you would credit it; To reduce Cash, you would credit it; To increase an expense account, you would debit it Which of the following statements is (are) correct regarding the posting process? (Check all that apply.) Entries must be posted to the ledger before financial statements are prepared; The posting process does not require detailed explanations in the ledger; The posting process creates a link between the ledger and the journal; Entries are posted as soon as possible Which of the following statements is (are) correct regarding unearned revenues? (Check all that apply.) Unearned revenues refer to a liability that is settled when a company delivers a product or performs a service; Unearned revenue is a liability account which is set up when a customer pays in advance for a product or service Which of the following statements is (are) correct? (Check all that apply.) Crediting a liability account will increase it; Crediting the Common Stock account means to increase it; Crediting means to enter transactions on the right side of a T-account. Which of the following statements is accurate regarding accounts payable? Accounts payable refer to promises to pay later, which may arise from the purchase of supplies or services Which of the following statements is correct in regards to debiting and crediting an account? A debit or a credit can increase an account, depending on what kind of account it is Which of the following statements is correct regarding expenses. Expenses are increased on the left side of their T-account because they decrease equity. Which of the following statements is correct regarding the effect of debits and credits in accounts? Expenses red...