Ch 2 Smartbook

Question 1

When services are provided on account, what happens to stockholders equity?

Answer 1

It increases

Question 2

Lassiter industries purchased equipment for $140,000. Lassiter expects to use the equipment over the next 10 years. Recording this transaction would include

Answer 2

Debit to equipment, $140,000

Question 3

Rory purchases supplies for cash. Which of the following occurs?

Answer 3

Total assets remain the same

Question 4

Indicate which situations would require the company to record revenue in the current period

Answer 4

Company performs services for cash

Company performs services on account

Question 5

Klicks journal shows a debit to cash and a credit to common stock. This normal entry indicates that klick

Answer 5

Issued shares to stockholders

Question 6

Roland corporation borrows $10,000 from the bank by signing a promissory note. Recording this transaction will include

Answer 6

Debit to cash

Credit to notes payable

Question 7

Which of the following is an external transaction?

Answer 7

Purchasing supplies from a vendor

Question 8

On May 1, Ace electronics ordered office equipment. The equipment was delivered to ace on may 15, and ace agreed to pay for it by the end of the month. Ace paid for the equipment on May 31. When will ace make the first entry in its accounting system for this purchase?

Answer 8

May 15 , date it was delivered

Question 9

Roslyn corp. provides services to customers on account for $5000. Recording this transaction will include a

Answer 9

Debit to accounts receivable

Credit to revenues

Question 10

Crane purchases equipment by signing a note payable with the equipment dealer for $10,000. The accounts affected for crane are

Answer 10

Equipment and notes payable

Question 11

Tabor company issues $20,000 of common stock to investors. Recording this transaction will include a credit to

Answer 11

Common stock

Question 12

DiAngelo Company’s journal shows a debit to a cash and a credit to service revenue. This journal entry indicates that the company:

Answer 12

Performed a service for a customer for cash

Question 13

Beloit company receives $40,000 from customers for services to be performed in the following year. Recording this transaction will include a credit to

Answer 13

Differed revenue

Question 14

What are the 6 steps in the measurement process of external transactions ?

Answer 14

1. Use course documents to identify accounts affected by an external transaction
2. Analyze the impact of the transaction on the accounting equation
3. Assess whether the transaction results in a debit or credit
4. Record the transaction in a journal using debits and credits
5. Post transactions to the general ledger
6. Prepare a trail balance

Question 15

The adjusted trial balance is used

Answer 15

To prepare the financial statements

Question 16

Adjusted entries for accruals are

Answer 16

Required to record revenues for services performed and expenses incurred in the current accounting period that have not been recognized though daily entries and thus are not yet reflected in the accounts

Question 17

Accumulated depreciation is a

Answer 17

Contra asset account

Question 18

Depreciation is

Answer 18

The process of allocating the cost of an asset to expense over its useful life

Question 19

In order for revenue to be recorded in the period in which the services are performed, AND for expenses to be recognized in the period in which they are incurred

Answer 19

Adjusting entries are made

Question 20

What are the effects of providing services on account to customers

Answer 20

Increase assets

Increase retained earnings

Question 21

What are asset accounts?

Answer 21

Cash, equipment, supplies

Question 22

What is NOT an asset account ?

Answer 22

Accounts payable

Question 23

What are liabilities?

Answer 23

Accounts payable
Salaries payable
Income taxes payable
Notes payable

Question 24

Which account will have a zero balance after a company has journalized and posted closing entries?

Answer 24

Service revenue

Question 25

Adjustments for prepaid expenses

Answer 25

Decrease assets and increase expenses

Question 26

The lower-of-cost-or-net realizable value rule for inventory is an example of the application of:

Answer 26

The conservatism convention

Question 27

What is the periodicity assumption ?

Answer 27

The economic life of a business can be divided into artificial time periods