Question 1

Recording the borrowing of money for which a note is signed involves:

Accepted Answer

When a company borrows money and signs a note for it, it increases its cash because it receives the borrowed funds. At the same time, it increases its notes payable because this account represents the company's obligation to repay the borrowed amount.

Question 2

Paying a previously recorded invoice from a supplier (of supplies) involves:

Accepted Answer

When you pay a previously recorded invoice from a supplier, it means you are settling a liability that was previously recorded as Accounts Payable. This decreases the Accounts Payable (as you no longer owe the supplier) and also decreases Cash (as you are paying out cash to settle the debt).

Question 3

Recording the payment of dividends to shareholders involves:

Accepted Answer

Recording the payment of dividends involves decreasing the cash account because cash is paid out to shareholders, and increasing the dividends account to reflect the distribution of earnings to shareholders.

Question 4

If a company paid off $100,000 of its accounts payable, the effect of this transaction as reflected in the accounting equation are:

Accepted Answer

Paying off $100,000 of accounts payable decreases both total assets (as cash or another asset is used to pay the liability) and total liabilities (as the accounts payable is reduced by the payment).

Question 5

Chaffin Consulting performed consulting services during June on account, and collections for these services were not received until August.
What effect did performing these services have on the accounting equation during June?

Accepted Answer

Performing services on account increases assets (accounts receivable) and increases stockholders' equity (revenue) in June, reflecting the economic benefit earned from providing the service.

Question 6

A company incurred $30,000 (to be paid next year) for the current year's advertising activities. What would the effect of this transaction on the current year's accounting equation?

Accepted Answer

The transaction increases liabilities (since the payment is deferred to next year, creating a payable) and decreases stockholders' equity (as expenses reduce equity) without immediately affecting assets.

Question 7

Howard Company had a transaction that caused a $15,000 increase in both assets and liabilities. This transaction could have been a(n):

Accepted Answer

The correct answer is A because it involves acquiring an asset (office equipment) worth $22,000 and increasing liabilities through a note payable for $15,000, while paying $7,000 in cash. This results in a net increase in assets and liabilities by $15,000, matching the scenario described.

Question 8

A transaction caused a $100,000 increase in both assets and total liabilities. This transaction could have been:

Accepted Answer

The correct transaction is D) Purchase of office equipment for $120,000, paying $20,000 cash and issuing a note payable for the balance. This transaction increases assets (office equipment) by $120,000, decreases assets (cash) by $20,000, resulting in a net increase in assets of $100,000, and increases liabilities (note payable) by $100,000.

Question 9

An individual person starting a business made an investment of a building, which is valued at $200,000 with an $180,000 outstanding mortgage payable.
The effect of this transaction on the accounting equation of the business would be to:

Accepted Answer

The answer of An individual person starting a business made...

Question 10

The accounting equation for Ellie Enterprises is as follows:

If the company now purchases office equipment on account for $10,000, the accounting equation will change to:

Accepted Answer

The answer of The accounting equation for Ellie Enterprises is...

Question 11

During its first month of operations, Donald Company borrowed $100,000 from a bank, and then purchased equipment costing $40,000 by paying cash of $20,000 and signing a long term note for the remaining amount. During the month, the company also purchased Inventory for $30,000 on credit, performed services for clients for $10,000 on account, paid $15,000 cash for accounts payable, and paid $30,000 cash for utilities.
What is the amount of total assets at the end of the month?

Accepted Answer

The answer of During its first month of operations, Donald...

Question 12

Mr. Cool Dude started a company (Cool Dude Company) by contributing $50,000 cash, and a building valued at $400,000. The company then purchased a machine by making a $50,000 down payment (which accounted for half its purchase price), and signed a note payable to the bank.
After recording the above transactions, the company's balance sheet will show:

Accepted Answer

The answer of Mr. Cool Dude started a company (Cool...

Question 13

On December 31, 2018, the balance sheet of Roberts Realty reported total assets of $200,000. The following transactions occurred during the month of January 2019:
(1) The business purchased land for $250,000, paying $100,000 cash and issuing a note payable for the balance.
(2) The business collected accounts receivable totaling $45,000.
(3) The business sold land (which had cost $50,000) for $60,000 cash.
(4) The business paid off $50,000 of Notes Payable.
What is the amount of the company's total assets on January 31, 2019?

Accepted Answer

The answer of On December 31, 2018, the balance sheet...

Question 14

On February 1st, Flora Accounting Services had a cash balance of $5,000, and completed the following transactions during February:
A. Purchased office supplies on account, $300.
B. Completed work for a client on credit, $500.
C. Paid cash for the office supplies purchased in (a ).
D. Completed work for a client and received $800 cash.
E. Received $500 cash for the work described in (b ).
F. Received $1,000 from a client for accounting services to be performed in March.
What was the balance of the company's cash account after these transactions?

Accepted Answer

The cash balance starts at $5,000. Transactions affecting cash are: C (-$300), D (+$800), E (+$500), and F (+$1,000). The net change is +$2,000, making the ending balance $7,000.

Question 15

When Honest Abe received his paycheck, he realized that his employer made an error in computing his wages, and overpaid him by $1,300. So he promptly returned the excess amount.
When the employer receives a check from Abe for the amount of the overpayment, what is the effect of transaction to the employer?

Accepted Answer

When Abe returns the overpaid amount, the employer's cash increases because they are receiving money back. The wages expense decreases because the initial overpayment error inflated the expense, and returning the money corrects this overstatement.

Question 16

Terry Company purchased supplies for $7,000 on credit on January 1. On January 15, they made a cash payment of $2,000 to the supplier, and signed a one-year note for the remaining amount to settle the account.
Terry Company's entry on January 15 will include:

Accepted Answer

The entry on January 15 will include an increase to Notes Payable for $5,000 because Terry Company is converting the remaining balance of their purchase ($7,000 - $2,000 = $5,000) into a note payable. This means they are acknowledging a formal obligation to pay the remaining $5,000 through a promissory note.

Question 17

St. Clair Motor Supplies had the following transactions during December:
$\bullet$Paid a note of $17,000 owed since March plus $425 for interest.
$\bullet$Sold $36,525 of merchandise to customers on account. Cost of goods sold was $21,250.
$\bullet$Paid accounts payable of $2,050.
As a result of these transactions, at year-end, liabilities and stockholders' equity would show a total:

Accepted Answer

The answer of St. Clair Motor Supplies had the following...

Question 18

During January, Wells Corporation purchased $100,000 of inventory; they paid one-fourth in cash, and signed a note for the remaining balance.
This transaction will have the following effect on the accounting equation:

Accepted Answer

The transaction increases Inventory by $100,000, decreases Cash by $25,000 (one-fourth of $100,000), and increases Notes Payable by $75,000 (the remaining balance).

Question 19

Horizon Company, an internet service provider, has 1,000,000 customers. The customers make electronic payments of $70 each for that month's service on the last day of each month. Horizon Company does not send any bills to their customers.
The company's transaction on the day they receive the payment will include:

Accepted Answer

BA) The total revenue from 1,000,000 customers paying $70 each is $70,000,000, which increases Internet Service Revenue.B) Since customers make electronic payments and the company does not bill them, the payment directly increases Accounts Receivable by $70,000,000 before it is settled, assuming the company recognizes the revenue when the service is provided but before cash is received.

Question 20

A customer received and then paid a $9,000 utility bill from Maryland Power Company. The entry by Maryland Power Company to record receipt of the payment would include:

Accepted Answer

When Maryland Power Company receives payment for a utility bill, it would record a decrease in Accounts Receivable, reflecting that the customer's outstanding balance has been settled.

Quiz 2: Processing Accounting Information

Recording the borrowing of money for which a note is signed involves:

Paying a previously recorded invoice from a supplier (of supplies) involves:

Recording the payment of dividends to shareholders involves:

If a company paid off $100,000 of its accounts payable, the effect of this transaction as reflected in the accounting equation are:

Chaffin Consulting performed consulting services during June on account, and collections for these services were not received until August. What effect did performing these services have on the accounting equation during June?

A company incurred $30,000 (to be paid next year) for the current year's advertising activities. What would the effect of this transaction on the current year's accounting equation?

Howard Company had a transaction that caused a $15,000 increase in both assets and liabilities. This transaction could have been a(n) :

A transaction caused a $100,000 increase in both assets and total liabilities. This transaction could have been:

An individual person starting a business made an investment of a building, which is valued at $200,000 with an $180,000 outstanding mortgage payable. The effect of this transaction on the accounting equation of the business would be to:

The accounting equation for Ellie Enterprises is as follows: If the company now purchases office equipment on account for $10,000, the accounting equation will change to:

Terry Company purchased supplies for $7,000 on credit on January 1. On January 15, they made a cash payment of $2,000 to the supplier, and signed a one-year note for the remaining amount to settle the account. Terry Company's entry on January 15 will include:

During January, Wells Corporation purchased $100,000 of inventory; they paid one-fourth in cash, and signed a note for the remaining balance. This transaction will have the following effect on the accounting equation:

A customer received and then paid a $9,000 utility bill from Maryland Power Company. The entry by Maryland Power Company to record receipt of the payment would include: