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Exam 2: The Accounting Information System

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Question 71

Multiple Choice

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Consider the following transactions: Issued common stock for cash. Purchased equipment by signing a note payable. Paid rent for the current month. Collected cash from customers on account. How many of these four transactions increased the given company's total assets?

A) One.
B) Two.
C) Three.
D) Four.

E) A) and D)
F) None of the above

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Question 72

Multiple Choice

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Which of the following is not a possible journal entry?

A) Credit assets; Debit expenses.
B) Debit assets; Debit stockholders' equity.
C) Credit revenues; Debit assets.
D) Debit expenses; Credit liabilities.

E) None of the above
F) All of the above

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Question 73

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A company receives $6,500 cash in advance from customers for services to be provided next year. Record the transaction.

Suppose a company has the following balance sheet accounts: $\begin{array} { l r } { \text { Accounts } } & \text { Balances } \\\hline \text { Land } & \$ 9,000 \\\text { Building } & ? \\\text { Salaries payable } & 3,700 \\\text { Common stock } & ? \\\text { Accounts payable } & 2,600 \\\text { Cash } & 5,300 \\\text { Retained earnings } & 11,600 \\\text { Supplies } & 3,200 \\\text { Equipment } & 4,500\end{array}$ Calculate the missing amounts assuming the company has total assets of $40,000.

Consider the following accounts: Dividends Insurance Expense Cash Service Revenue How many of these accounts are increased with credits?

On September 30, MFP Co. paid employee salaries $7,000, including $1,000 it owed to its employees last month. What are the effects of this transaction on the accounting equation?

A company pays $2,000 dividends to its stockholders. Record the transaction.

A credit to an account balance always results in the balance decreasing.

If the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month, did assets increase or decrease and by how much?

When a company issues common stock for cash, what is the effect on the accounting equation for the company?

On March 3, Cobra Inc. purchased a desk for $450 on account. On March 22, Cobra purchased another desk for $500 also on account, and then on March 24, Cobra paid $400 on account. At the end of March, what amount should Cobra report for desks (assuming these two desks were the only desks they had) ?

Following are transactions of Gotebo Tanners, Inc., a new company, during the month of January 2012: 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?

Xenon Corporation borrows $75,000 from First Bank. Xenon Corporation records this transaction with a:

For each of the following accounts, indicate whether we use a debit or a credit to decrease the balance of the account. (a) Accounts Receivable (b) Accounts Payable (c) Salaries Expense (d) Service Revenue (e) Supplies (f) Common Stock (g) Advertising Expense (h) Dividends

A company receives a $50,000 cash deposit from a customer on October 15 but will not provide services until November 20. Which of the following statements is true?

A company purchases a building for $100,000, paying $20,000 cash and signing a note payable for the remainder. Record the transaction.

Styleson Inc. performed cleaning services for its customers for cash. These transactions would be recorded as:

The Unearned Revenue account is shown in which statement?

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

Internal transactions are events that affect the financial position of the company but do not include an exchange with a separate economic entity. Examples are using supplies on hand and earning revenues after having received cash in advance from a customer.