Question 1

A transaction does not require counterbalancing entries so that the total assets are equal to the total liabilities plus owner's equity.

Accepted Answer

Every transaction must have at least two entries, which means there must be a corresponding debit and credit entry. These entries must balance out so that the total assets are equal to the total liabilities plus owner's equity.

Question 2

A loan from a financial institution will increase assets and increase liabilities.

Accepted Answer

When a financial institution provides a loan, it increases the borrower's assets (the cash received) and also increases their liabilities (the obligation to repay the loan with interest). Hence, both assets and liabilities increase.

Question 3

A transaction affects the financial position of an entity and can be reliably recorded in terms of money.

Accepted Answer

Transactions involve exchange of goods, services or assets for money, and their impact on the financial position of an entity can be quantified and reliably recorded in financial statements.

Question 4

Buying on credit creates an account receivable.

Accepted Answer

Buying on credit creates an account payable for the buyer, as it represents an obligation to pay a supplier or creditor for goods or services received. An account receivable is created for the seller or creditor, representing money owed to them.

Question 5

The purchase of inventory on credit will increase liabilities and equity.

Accepted Answer

The purchase of inventory on credit increases liabilities (accounts payable) but does not directly affect equity; it increases assets (inventory) with a corresponding increase in liabilities, keeping the accounting equation balanced.

Question 6

Mailers Manufacturing,acquired equipment for $19,000.Mailers Manufacturing,paid $6,000 in cash,with the balance due on a note.The effect of this transaction on Mailers Manufacturing,would be to
A)increase the equipment account by $19,000,decrease the cash account by $6,000 and increase the notes payable account by $13,000.
B)increase the equipment account by $19,000,decrease the cash account by $6,000,and decrease the notes receivable by $13,000.
C)increase the equipment account by $6,000,and decrease the cash account by $6,000.
D)increase the equipment account by $6,000,decrease the cash account by $6,000,and increase the notes payable account by $13,000.
E)increase the equipment account by $19,000,and increase the notes payable account by $6,000.

Accepted Answer

The transaction involves the acquisition of equipment for a total cost of $19,000, with $6,000 paid in cash and the balance due on a note. This means that the equipment account will increase by $19,000, the cash account will decrease by $6,000, and the notes payable account will increase by $13,000 to reflect the amount owed on the note. Therefore, Option A is the correct answer.

Question 7

Kitty Clips acquired $2,800 worth of merchandise inventory on account.Upon inspection,the company discovered that $400 worth of the merchandise inventory was defective.Kitty Clips returned the defective merchandise inventory and received full credit.The effect of the return transaction on Kitty Clips would be to
A)decrease the merchandise inventory account by $400 and increase the accounts payable account by $400.
B)decrease the merchandise inventory account by $400 and decrease the accounts payable account by $400.
C)decrease the merchandise inventory account by $400 and increase the accounts receivable account by $400.
D)decrease the merchandise inventory account by $400 and decrease the accounts receivable account by $400.
E)Because the merchandise inventory was never used,Kitty Clips would not record the return of the merchandise inventory.

Accepted Answer

When Kitty Clips returns the defective merchandise inventory, it reduces the merchandise inventory account by $400 and also the accounts payable account (since it was purchased on account) by $400. This results in a decrease in both inventory and liabilities, which is reflected in option B, making it the correct choice. Option A is incorrect because accounts payable would decrease, not increase, with the return of merchandise. Option C is incorrect because accounts receivable would not be involved in this transaction as Kitty Clips is not receiving any money. Option D is incorrect because accounts receivable would not decrease in this transaction. Option E is incorrect because, while the merchandise inventory was not used, Kitty Clips still needs to record the return to accurately reflect its inventory levels and financial position.

Question 8

Manziel Inc.is a sole proprietorship owned by Chris Herold.Chris acquired $9,000 worth of equipment for use in his store.He will pay for the equipment in 30 days.The effect of this transaction on Manziel would be to
A)increase the equipment account by $9,000 and increase the accounts payable account by $9,000.
B)increase the equipment account by $9,000 and decrease the accounts payable account by $9,000.
C)increase the equipment account by $9,000 and increase the capital account by $9,000.
D)This would not change any account because the equipment has not been paid for.
E)This would not change any account because this transaction does not affect Manziel Inc.

Accepted Answer

Since Manziel Inc. is a sole proprietorship owned by Chris Herold, the transaction would affect the accounts payable account and the equipment account. The equipment account would be increased by $9,000, representing the cost of the equipment acquired, and the accounts payable account would also be increased by $9,000, representing the amount Chris owes for the equipment that he will pay in 30 days. Therefore, choice A is the best option.

Question 9

Smith's Medical Supplies sold unused land at cost,which was $15,000.The buyer paid $6,000 in cash,with the balance to be paid on a note due in 6 months.The effect on Smith's Medical Supplies is to
A)decrease the land account by $15,000,increase the cash account by $6,000,and increase the balance in the notes payable account by $9,000.
B)decrease the land account by $15,000,increase the cash account by $6,000,and increase the balance in the notes receivable account by $9,000.
C)decrease the land account by $15,000,increase the cash account by $6,000,and decrease the balance in the notes receivable by $9,000.
D)decrease the land account by $6,000 and increase the cash account by $6,000.
E)decrease the land account by $15,000,increase the cash account by $6,000,and decrease the balance in the notes payable account by $9,000.

Accepted Answer

Selling land at cost decreases the land account by the cost amount ($15,000), increases cash by the amount received ($6,000), and the balance due ($9,000) is recorded as a note receivable, not payable, since Smith's Medical Supplies will receive this amount in the future.

Question 10

Jakey Technologies has 1,000 folders in inventory that cost $2.00 each.The company's supplier announced that,effective immediately,all future folders will cost $2.20 each.Jakey Technologies should
A)increase the inventory account by $200 and increase the capital account by $200.
B)increase the inventory account by $200 and decrease the capital account by $200.
C)increase the inventory account by $200 and increase the accounts payable account by $200.
D)increase the inventory account by $200 and decrease the accounts payable account by $200.
E)There is no effect from the price change on the accounts of Jakey Technologies.

Accepted Answer

The price change affects future purchases, not the cost of inventory already on hand. Existing inventory cost remains unchanged, so there's no immediate effect on the accounts.

Question 11

Sounds Good Entertainment acquired office equipment valued at $4,000 and office supplies valued at $600 by paying cash of $1,300 with the balance on account.The effect of this transaction on Sounds Good Entertainment would be to
A)increase the cash account by $1,300,increase the accounts payable account by $3,300,and increase the office equipment account by $4,600.
B)increase the office equipment account by $4,600,decrease the cash account by $1,300,and decrease the accounts payable account by $3,300.
C)decrease the cash account by $1,300,increase the accounts payable account by $3,300,increase the office equipment account by $4,000,and increase the office supplies by $600.
D)increase the cash account by $1,300,increase the capital account by $3,300,decrease the equipment account by $4,000,and increase the office supplies account by $600.
E)increase the office supplies account by $600,decrease the office equipment account by $4,000,increase the accounts payable account by $4,000,and decrease the cash account by $600.

Accepted Answer

The transaction involves acquiring assets (office equipment and supplies) partly with cash and partly on account. The cash account decreases by the cash paid ($1,300), the accounts payable increases by the balance owed ($3,300), and the asset accounts (office equipment and office supplies) increase by their respective values ($4,000 and $600).

Question 12

Stockholders' equity at the beginning and end of the period amounts to $16,000 and $19,000,respectively.Assets at the beginning and end of the period amount to $26,000 and $21,000,respectively.Liabilities at the beginning of the period were $10,000.Liabilities at the end of the period amount to
A)$8,000.
B)$6,000.
C)$2,000.
D)$5,000.
E)$3,000.

Accepted Answer

The answer of Stockholders' equity at the beginning and end...

Question 13

Zeus Greek Foods purchased a $21,000 van for use in the business.The company made a $15,000 cash down payment,and signed a note for the balance.The effect of this transaction on Zeus Greek Foods would be to
A)increase the van account by $21,000,decrease the cash account by $15,000,and decrease the notes receivable account by $6,000.
B)increase the van account by $21,000,decrease the cash account by $15,000,and decrease the notes payable account by $6,000.
C)increase the van account by $15,000 and decrease the cash account by $15,000.
D)increase the van account by $21,000,decrease the cash account by $15,000,and increase the notes payable account by $6,000.
E)decrease the van account by $15,000 and increase the cash account by $15,000.

Accepted Answer

When Zeus Greek Foods purchases a $21,000 van for use in the business, it will increase the van account by $21,000. The company made a $15,000 cash down payment, which will decrease the cash account by $15,000. The remaining balance of $6,000 is signed in the note, which becomes a notes payable account and is increased by $6,000. Therefore, the effect of this transaction on Zeus Greek Foods would be to increase the van account by $21,000, decrease the cash account by $15,000, and increase the notes payable account by $6,000.

Question 14

Iacofano Pizza Place acquired equipment costing $11,000 on account.The effect of this transaction on Iacofano Pizza Place would be to
A)increase equipment by $11,000 and decrease capital by $11,000.
B)increase equipment by $11,000 and increase capital by $11,000.
C)increase equipment by $11,000 and increase accounts payable by $11,000.
D)increase equipment by $11,000 and decrease accounts payable by $11,000.
E)No transaction is recorded since no cash has been paid.

Accepted Answer

Acquiring equipment on account increases the equipment asset account by $11,000 and also increases accounts payable by $11,000, reflecting the obligation to pay for the equipment in the future.

Question 15

Payton Corporation,acquired some office equipment,including a desk costing $900.The owner of the business next door said that he had been searching for a desk just like that one,so Payton Corporation,sold the desk to its business neighbor at cost,receiving $400 in cash,with the remainder to be paid in 30 days.The effect of this transaction on Payton Corporation,would be to
A)increase the cash account by $400,increase the capital account by $500,and decrease the equipment account by $900.
B)increase the cash account by $400,increase the accounts payable account by $500,and decrease the equipment account by $900.
C)increase the cash account by $400,decrease the accounts payable account by $500,and decrease the equipment account by $900.
D)increase the cash account by $400,increase the accounts receivable account by $500,and decrease the equipment account by $900.
E)increase the cash account by $400,decrease the accounts receivable account by $500,and decrease the equipment account by $900.

Accepted Answer

The correct answer is D because Payton Corporation received $400 in cash and will receive $500 later, which increases the accounts receivable. The equipment account decreases by $900, the cost of the desk.

Question 16

An account is a summary record of the changes in a particular asset,liability,or owners' equity.

Accepted Answer

An account is a summary record of the changes in a particular asset, liability, or owners' equity. This statement is true.

Question 17

What accounts are affected by an initial investment of cash by an owner into his business?
A)Cash and Owner payable
B)Cash and Long-term debt payable
C)Owner payable and Accounts payable
D)Cash and Capital
E)Cash and Retained earnings

Accepted Answer

When an owner invests cash into their own business, it increases the business's cash account and also increases the owner's capital account. Therefore, the accounts affected are Cash and Capital.

Question 18

What effect does the purchase of store equipment on account have on the balance sheet equation?
A)Assets increase and liabilities decrease
B)Assets increase and liabilities increase
C)Assets decrease and liabilities decrease
D)Assets decrease and liabilities increase
E)There is no effect on the accounting equation.

Accepted Answer

The purchase of store equipment on account increases the assets of the business, specifically the fixed assets account, which is a part of the total assets of the business listed on the balance sheet. At the same time, the business incurs a liability to the vendor or supplier, which is reflected in the accounts payable account separately from other short-term and long-term liabilities. Therefore, both assets and liabilities increase, and the balance sheet equation remains in balance.

Question 19

An owner's investment into a business will increase assets and decrease liabilities.

Accepted Answer

An owner's investment into a business will increase assets and also increase owner's equity, not decrease liabilities.

Question 20

Home Theater Advantage sells audio equipment.Home Theater Advantage acquired 50 speakers from a manufacturer at a cost of $200 per speaker and purchased the speakers on account.The effect of this transaction on Home Theater Advantage would be to
A)increase inventory by $10,000 and increase capital by $10,000.
B)increase inventory by $10,000 and decrease capital by $10,000.
C)increase inventory by $10,000 and decrease cash by $10,000.
D)increase inventory by $10,000 and increase accounts payable by $10,000.
E)increase inventory by $10,000 and decrease accounts payable by $10,000.

Accepted Answer

When Home Theater Advantage acquires 50 speakers on account from a manufacturer for $200 per speaker, it increases its inventory by $10,000 (50 speakers x $200 per speaker). Since the speakers were purchased on account, it also increases the accounts payable by $10,000. There is no effect on capital or cash at this point in time. Therefore, the correct answer is D, which states that the transaction increases inventory by $10,000 and increases accounts payable by $10,000.

Quiz 1: Accounting: the Language of Business

A transaction does not require counterbalancing entries so that the total assets are equal to the total liabilities plus owner's equity.

A loan from a financial institution will increase assets and increase liabilities.

A transaction affects the financial position of an entity and can be reliably recorded in terms of money.

Buying on credit creates an account receivable.

The purchase of inventory on credit will increase liabilities and equity.

Mailers Manufacturing,acquired equipment for $19,000.Mailers Manufacturing,paid $6,000 in cash,with the balance due on a note.The effect of this transaction on Mailers Manufacturing,would be to

Manziel Inc.is a sole proprietorship owned by Chris Herold.Chris acquired $9,000 worth of equipment for use in his store.He will pay for the equipment in 30 days.The effect of this transaction on Manziel would be to

Smith's Medical Supplies sold unused land at cost,which was $15,000.The buyer paid $6,000 in cash,with the balance to be paid on a note due in 6 months.The effect on Smith's Medical Supplies is to

Jakey Technologies has 1,000 folders in inventory that cost $2.00 each.The company's supplier announced that,effective immediately,all future folders will cost $2.20 each.Jakey Technologies should

Sounds Good Entertainment acquired office equipment valued at $4,000 and office supplies valued at $600 by paying cash of $1,300 with the balance on account.The effect of this transaction on Sounds Good Entertainment would be to

Stockholders' equity at the beginning and end of the period amounts to $16,000 and $19,000,respectively.Assets at the beginning and end of the period amount to $26,000 and $21,000,respectively.Liabilities at the beginning of the period were $10,000.Liabilities at the end of the period amount to

Zeus Greek Foods purchased a $21,000 van for use in the business.The company made a $15,000 cash down payment,and signed a note for the balance.The effect of this transaction on Zeus Greek Foods would be to

Iacofano Pizza Place acquired equipment costing $11,000 on account.The effect of this transaction on Iacofano Pizza Place would be to

An account is a summary record of the changes in a particular asset,liability,or owners' equity.

What accounts are affected by an initial investment of cash by an owner into his business?

What effect does the purchase of store equipment on account have on the balance sheet equation?

An owner's investment into a business will increase assets and decrease liabilities.

Home Theater Advantage sells audio equipment.Home Theater Advantage acquired 50 speakers from a manufacturer at a cost of $200 per speaker and purchased the speakers on account.The effect of this transaction on Home Theater Advantage would be to