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Exam 2: The Balance Sheet

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Question 21

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The asset that results when a customer buys goods or services on credit is

A) notes receivable.
B) accounts payable.
C) Cash.
D) accounts receivable.

E) All of the above
F) A) and B)

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Question 22

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A T-account shows total debits of $25,000 and total credits of $22,000; therefore, it has a $3,000 credit balance.

A) True
B) False

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Question 23

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The amount shown on the statement of financial position as shareholders' equity represents the current market value of the owners' residual claim against the company.

Debit and credit can be interpreted to mean "bad" and "good," respectively.

The purchase of an asset on credit

An individual accounting record for a specific asset, liability or shareholders' equity item is called an account.

The assumption that a business enterprise will not be liquidated or sold in the near future is known as the

If the correct accounts have been identified and the appropriate direction of the effect on each account has been determined, then the equation should remain in balance.

The basic system of recording transactions has withstood the test of time, and has been in use for more than 500 years.

For each of the transactions listed below, indicate whether it is an investing (I) or financing (F) activity on the cash flow statement. Also, indicate if the transaction increases (+) or decreases (-) cash.

Accounting systems should record

Contributed capital results when a company buys a new delivery truck.

The unit-of-measure assumption states that financial information is reported in the national monetary unit.

When a new business is just starting up, which of the following must be done first?

Usually when a short-term, interest-bearing note payable is paid on its maturity date, an asset is credited and a liability is debited.

The following amounts are reported in the ledger of Bowers Company: $\begin{array} { | l | r | } \hline \text { Assets } & \$ 25,000 \text { (debit) } \\\hline \text { Liabilities } & 15,000 \text { (credit) } \\\hline \text { Retained earnings } & 3,000 \text { (credit) } \\\hline\end{array}$ What is the balance in the contributed capital account?

Which of the following transactions will cause both the left and right side of the equation to increase?

Classify the following statement of financial position accounts for White Goose Linen Co. $\begin{array} { | l | l | } \hline \underline{\quad\quad}& \text { a. Investments in associates } \\ \hline\underline{\quad\quad} & \text { b. Retained Earnings } \\\hline \underline{\quad\quad} & \text { c. } \text { Notes Payable due in } 3 \text { months } \\\hline \underline{\quad\quad} & \text { d. Land } \\\hline\underline{\quad\quad} & \text { e. Short-term investments } \\\hline\underline{\quad\quad} & \text { f. Bonds Payable } \\\hline \underline{\quad\quad} & \text { g. Supplies } \\\hline \underline{\quad\quad}& \text { h. Share Capital } \\\hline\underline{\quad\quad} & \text { i. Notes Payable due in 5 years } \\\hline \underline{\quad\quad}& \text { j. Income Taxes Payable } \\\hline \end{array}$

The adoption of International Financial Reporting Standards can be viewed as an application of which of the following quality enhancing characteristics?

Scott, Kim and Koko organized the SKK Corporation on January 1 20X1. Each of these owners invested $30,000 cash and received shares. Below are selected transactions that were completed during January. (A) Give the entry on SKK's books for each transaction: (1) Sold shares to the owners. (2) Borrowed $100,000 on one-year note payable . (3) Purchased land by signing a $20,000 note payable . (4) Paid $5,000 of trade payables. (5) Purchased two service vehicles, $21, 000 each; paid cash. (6) Accepted a promissory note of $1,000 from a customer. (B) Complete the following based only on the 6 transactions above: Assets $ Liabilities $ Shareholders ' equity $