Chapter 2

Question 1

Pay salaries to employees

Answer 1

Debit: Salaries expense (SE down) 
Credit Cash (assets down)

Question 2

Issue stock

Answer 2

Debit: Cash (Assets up)
Credit: common stock (SE up)

Question 3

Borrow money from the bank

Answer 3

Debit: Cash (assets up)
Credit: note payable (liability up)

Question 4

Purchase a car for 15,000; pay 5000 in cash and the rest on account.

Answer 4

Debit: Equipment (15000)
Credit: Cash (5000)
Credit Accounts payable (10000)

(Assets up 15000)
(Asset down 5000)
(Liability up 10000)

Question 5

Declare Dividends on October 1st

Answer 5

Debit: Dividends

Credit: dividends payable

(SE goes down)

(Liabilities go up)

Question 6

Pay Dividends on October 31st

Answer 6

Debit: Dividends payable
Credit: Cash

(Liabilities go down)
(Assets go down)

Question 7

Declare and Pay Dividends on the same day

Answer 7

Debit: Dividends
Credit: Cash

(SE goes down)
(Assets go down)

Question 8

Provide a service and will be pain next month

Answer 8

Debit: Accounts receivable
Credit: Deferred revenue

(Assets go up)
(SE goes up)

Question 9

Provide a service and receive immediate payment

Answer 9

Debit: Cash
Credit: service revenue

(Assets go up)
(SE goes up)

Question 10

Pay utilities bill

Answer 10

Debit: Utilities Expense
Credit: Cash

(SE goes down)
(Assets go down)

Question 11

Pay insurance for the entire year

Answer 11

Debit: Prepaid insurance
Credit: Cash

(Assets up)
(Assets down)

Question 12

Cash $25000

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 12

Current asset

Question 13

Land $100,000

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 13

Fixed asset

Question 14

Notes payable < 1 year $23000

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 14

Current liability

Question 15

Accounts receivable

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 15

Current asset

Question 16

Building $50000

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 16

Fixed asset

Question 17

Bonds payable $14000

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 17

Long-Term liability

Question 18

Accounts payable $10000

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 18

Current Liability

Question 19

Inventory $5000

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 19

Current Asset

Question 20

Trademarks $25000

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 20

Intangible Asset

Question 21

Wages payable

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 21

Current liability

Question 22

Prepaid expenses $2000

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 22

Current Asset

Question 23

Good will (reputation) $10000

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 23

Intangible Asset

Question 24

Notes Payable > 1year $28000

A) current asset 
B) fixed asset 
C) intangible asset 
D) current liability 
E) long-term liability

Answer 24

Long-term liability