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Exam 2: The Accounting Cycle: During the Period

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Question 51

Multiple Choice

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

A) Debit;Statement of stockholders' equity
B) Debit;Income statement
C) Credit;Balance sheet

D) All of the above
E) A) and C)

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Question 52

Multiple Choice

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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?

A) $12,300.
B) $27,300.
C) $22,600.

D) A) and C)
E) All of the above

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Question 53

True/False

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

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.

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

Providing services and receiving cash will:

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

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

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

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?

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?

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? $\begin{array} { | l | r | } \hline \text { Land } & \$ 150,000 \\\hline \text { Equipment } & 90,000 \\\hline \text { Salaries Payable } & 12,000 \\\hline \text { Notes Payable } & 99,000 \\\hline \text { Supplies } & 10,000 \\\hline \text { Cash } & 25,000 \\\hline \text { Common Stock } & 40,000 \\\hline \text { Retained Earnings } & 100,000 \\\hline \text { Accounts Payable } & ? \\\hline \text { Prepaid Rent } & ? \\\hline\end{array}$

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

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

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

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

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

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:

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

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?