Question 1

The trade payables account has a beginning balance of $1,000 and we purchased $3,000 of inventory on credit during the month. The ending balance was $800. How much did we pay our creditors during the month?

Accepted Answer

The amount paid to creditors is calculated as: Beginning balance ($1,000) + Purchases on credit ($3,000) - Ending balance ($800) = $3,200.

Question 2

The purchase of an asset on credit

Accepted Answer

When an asset is purchased on credit, it increases assets because the asset is now owned by the company. However, it also increases liabilities because the company now owes money to the creditor who provided the credit to purchase the asset. Therefore, both assets and liabilities increase.

Question 3

Which of the following will not result in recording a transaction?

Accepted Answer

Signing a contract does not result in a transaction being recorded because no exchange of goods, services, or cash has occurred yet.

Question 4

Financing activities involve

Accepted Answer

Financing activities are typically related to raising capital for the company. Issuing shares is a common way that companies raise funds, making option A the most relevant financing activity listed. B and D are related to investing activities, while lending money falls under operating activities.

Question 5

Which one of the following represents the expanded basic accounting equation?

Accepted Answer

The expanded accounting equation includes all the elements that affect a company's financial position: assets, liabilities, owner's equity (contributed capital and retained earnings), revenues, expenses, and dividends. Option A reflects all these elements in the equation.

Question 6

Borrowing $100,000 of cash from First National Bank, signing a note to be paid, would do which of the following?

Accepted Answer

Borrowing cash increases liabilities, so notes payable is credited. Cash received increases assets, so cash is debited.

Question 7

Which of the following would cause an inflow of cash?

Accepted Answer

Sale of an asset for cash at less than its book value would cause an inflow of cash.

Question 8

If total liabilities decreased by $14,000 during a period of time and shareholders' equity increased by $6,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n)

Accepted Answer

The answer of If total liabilities decreased by $14,000 during...

Question 9

Which of the following is not considered an asset?

Accepted Answer

Dividends are not considered an asset, as they are a form of payment to shareholders after profits have been earned. Assets are resources that a company owns and can use to generate revenues, such as accounts receivable, equipment, and inventory.

Question 10

Which of the following defines assets?

Accepted Answer

Assets are defined as probable future economic benefits that are owned or controlled by an entity as a result of past transactions or events.

Question 11

When a company buys equipment for $60,000 and pays for one third in cash and the other two thirds is financed by a note payable, which of the following are the effects on the accounting equation?

Accepted Answer

The company pays $20,000 in cash (1/3 of $60,000), decreasing cash (an asset) by $20,000, and finances $40,000 with a note payable, increasing liabilities by $40,000. Equipment (an asset) increases by $60,000, so the net effect on total assets is an increase of $40,000, not $60,000.

Question 12

The following amounts are reported in the ledger of Bowers Company:  What is the balance in the contributed capital account?

Accepted Answer

The answer of The following amounts are reported in the...

Question 13

Which of the following would be an example of a financing transaction?

Accepted Answer

Selling shares to investors for cash is an example of a financing transaction because it involves raising funds from external sources such as investors. Option A is a capital expenditure, option B is a purchase on credit, and option C is a cash purchase of inventory, all of which are not financing transactions.

Question 14

If Golden Company owed Eye Company $500, where would Golden Company reflect this?

Accepted Answer

The statement of financial position, also known as the balance sheet, reflects the assets, liabilities and equity of a company at a specific point in time. The $500 owed by Golden Company to Eye Company would be reflected as a liability on the statement of financial position. The income statement shows revenue and expenses over a period of time, the statement of cash flows shows changes in cash and cash equivalents, and the statement of changes in equity shows the movement in the equity accounts of a company.

Question 15

An accountant has debited an asset account for $500 and credited a revenue account for $1,000. What can be done to complete the recording of the transaction?

Accepted Answer

Since the asset account was debited for $500 and the revenue account was credited for $1,000, there is an imbalance in the accounting equation. To balance it, another asset account must be debited for $500. Therefore, choice B is the correct answer.

Question 16

Liabilities are generally classified on a statement of financial position as

Accepted Answer

Liabilities are classified into two main categories on a statement of financial position: current liabilities and non-current liabilities. Current liabilities are expected to be settled within a year, while non-current liabilities are expected to be settled after a year.

Question 17

The purchase of an asset on credit

Accepted Answer

When an asset is purchased on credit, it increases the asset account (as you now own the asset) and also increases the liability account (as you now owe the creditor for the purchase). Therefore, both assets and liabilities increase.

Question 18

Jet Corporation was organized on March 1, 20B. Jet Corporation issued shares to each of the six owners who paid in a total of $3,000 cash. On the basis of transaction analysis, the following entry should be recorded in the accounts (dr = debit and cr = credit)

Accepted Answer

When shares are issued to owners in exchange for cash, the company's cash account increases, and the owners' equity account (Contributed capital) also increases. Therefore, the correct entry would be to debit Cash and credit Contributed capital. Option B is the correct entry. Option A and C both debit a shareholders' equity account, which is incorrect. Option D does not make sense since revenue is earned through the sale of goods or services, and not through the issuance of shares.

Question 19

The best interpretation of the word credit is the

Accepted Answer

Credit is the right side of an account, where increases are recorded.

Question 20

Winsome Inc. reports total assets and total liabilities of $225,000 and $100,000, respectively, at the conclusion of its first year of business. The company earned $75,000 during the first year and distributed $30,000 in dividends. What was the corporation's contributed capital?

Accepted Answer

The answer of Winsome Inc. reports total assets and total...

Quiz 2: Investing and Financing Decisions and the Accounting System

The trade payables account has a beginning balance of $1,000 and we purchased $3,000 of inventory on credit during the month. The ending balance was $800. How much did we pay our creditors during the month?

The purchase of an asset on credit

Which of the following will not result in recording a transaction?

Financing activities involve

Which one of the following represents the expanded basic accounting equation?

Borrowing $100,000 of cash from First National Bank, signing a note to be paid, would do which of the following?

Which of the following would cause an inflow of cash?

If total liabilities decreased by $14,000 during a period of time and shareholders' equity increased by $6,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n)

Which of the following is not considered an asset?

Which of the following defines assets?

When a company buys equipment for $60,000 and pays for one third in cash and the other two thirds is financed by a note payable, which of the following are the effects on the accounting equation?

The following amounts are reported in the ledger of Bowers Company: What is the balance in the contributed capital account?

Which of the following would be an example of a financing transaction?

If Golden Company owed Eye Company $500, where would Golden Company reflect this?

An accountant has debited an asset account for $500 and credited a revenue account for $1,000. What can be done to complete the recording of the transaction?

Liabilities are generally classified on a statement of financial position as

The purchase of an asset on credit

Jet Corporation was organized on March 1, 20B. Jet Corporation issued shares to each of the six owners who paid in a total of $3,000 cash. On the basis of transaction analysis, the following entry should be recorded in the accounts (dr = debit and cr = credit)

The best interpretation of the word credit is the

Winsome Inc. reports total assets and total liabilities of $225,000 and $100,000, respectively, at the conclusion of its first year of business. The company earned $75,000 during the first year and distributed $30,000 in dividends. What was the corporation's contributed capital?