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Exam 2: The Accounting Cycle: During the Period

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Question 51

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Which of the following is not possible when recording a transaction?

A) Liabilities increase and assets decrease.
B) Stockholders' equity increases and assets increase.
C) One asset increases and another asset decreases.

D) A) and B)
E) A) and C)

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Question 52

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Providing services to customers for cash causes stockholders' equity to increase.

A) True
B) False

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Question 53

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Following are transactions of Gotebo Tanners,Inc. ,a new company,during the month of January: 1.Issued 10,000 shares of common stock for $15,000 cash.2.Purchased land for $12,000,signing a note payable for the full amount.3.Purchased office equipment for $1,200 cash.4.Received cash of $14,000 for services provided to customers during the month.5.Purchased $300 of office supplies on account.6.Paid employees $10,000 for their first month's salaries.What was the total amount of Gotebo's liabilities following these six transactions?

On July 7,Saints Inc.received $10,000 in cash from a customer for services to be provided on October 10.Which of the following describes how the transaction should be recorded on July 7?

The Dividends account increases with a credit and decreases with a debit.The Dividends account increases with a debit and decreases with a credit.

Liabilities normally carry a _______ balance and are shown in the ______________.

Purchasing supplies on account increases the balance of the Accounts Receivable account.The balance of Accounts Payable increases.

Receiving cash in advance from customers increases the Service Revenue account.Receiving cash in advance from customers increases the Deferred Revenue account.

Which step in the process of measuring external transactions involves assessing the equality of total debits and total credits for the period?

Pumpkin Inc.sold $500 in pumpkins to a customer on account on January 1.On January 11 Pumpkin collected the cash from that customer.What is the impact on Pumpkin's accounting equation from the collection of cash?

Selling common stock for cash is recorded with a debit to common stock.Selling common stock for cash is recorded with a credit to common stock.

An increase to an asset account is shown with a ______________.An increase to a liability account is shown with a ______________.

Borrowing cash from the bank causes assets to increase and liabilities to increase.

Daniel Dino Restaurant owes employees' salaries of $15,000.This would be recorded as:

Clement Company paid an account payable related to a previous utility bill of $1,000.This transaction should be recorded as follows on the payment date:

Finnish Motors has the following balance sheet accounts: If the company has total liabilities and stockholders' equity of $290,000,what is the balance of the company's Prepaid Rent account? $\begin{array} { | l | r | } \hline \text { Land } & \$ 150,000 \\\hline \text { Equipment } & 90,000 \\\hline \text { Salaries Payable } & 12,000 \\\hline \text { Notes Payable } & 99,000 \\\hline \text { Supplies } & 10,000 \\\hline \text { Cash } & 25,000 \\\hline \text { Common Stock } & 40,000 \\\hline \text { Retained Earnings } & 100,000 \\\hline \text { Accounts Payable } & ? \\\hline \text { Prepaid Rent } & ? \\\hline\end{array}$

Liability accounts increase with a credit and decrease with a debit.

Providing services and receiving cash will:

A company received a bill for newspaper advertising services,$400.The bill will be paid in 10 days.How would the transaction be recorded today?

Paying employees' salaries for the current month causes no change to stockholders' equity.Salaries expense would reduce stockholders' equity.