ACC 556 WEEK 2 CHAPTER 3 EXERCISE

28 Jul ACC 556 WEEK 2 CHAPTER 3 EXERCISE

Question 1

The purpose of the ledger is to

[removed]		record chronologically the day’s transactions.
[removed]		keep a record of documentation to support each transaction.
[removed]		keep in one place all information about changes in specific account balances.
[removed]		make sure that all assets, liabilities, etc., have normal balances at all times.

Question 2

An expense

[removed]		decreases assets and liabilities.
[removed]		decreases stockholders’ equity.
[removed]		leaves stockholders’ equity unchanged.
[removed]		is basically the same as a liability.

Question 3

Operating activities are the types of activities the company performs to generate profits.

[removed]True

[removed]False

Question 4

The primary purpose of the trial balance is to

[removed]		disclose the complete effect of a transaction in one place.
[removed]		make sure a journal entry is not posted twice.
[removed]		transfer journal entries to the ledger accounts.
[removed]		prove the equality of the debit and credit amounts after posting.

Question 5

Which one of the following represents the expanded basic accounting equation?

[removed]		Assets = Liabilities + Common Stock + Dividends – Revenue – Expenses
[removed]		Assets + Dividends + Expenses = Liabilities + Common Stock + Revenues
[removed]		Assets=  Liabilities  + Common Stock + Revenues – Expenses – Dividends
[removed]		Assets = Revenues + Expenses – Liabilities

Question 6

Borrowing money and issuing shares of stock are

[removed]		operating activities.
[removed]		investing activities.
[removed]		financing activities.
[removed]		None of these answer choices are correct.

Question 7

Economic events that require recording in the financial statements are called accounting transactions.

[removed]True

[removed]False

Question 8

Which of the following statements is not true?

[removed]		Expenses increase stockholders’ equity.
[removed]		Expenses have normal debit balances.
[removed]		Expenses decrease stockholders’ equity.
[removed]		Expenses are a negative factor in the computation of net income.

Question 9

Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not?

[removed]		Yes, they are treated as revenue at the time of receipt because the company has access to the cash.
[removed]		No, the amount of revenue cannot be adequately determined until the company completes the work.
[removed]		Yes, The intent of the company is to perform the work and the customer is confident that the services will be completed.
[removed]		No, revenue cannot be recognized until the work is performed.

Question 10

Match the items below by entering the appropriate code letter in the space provided.

Account

 

Normal account balance

 

Debit

 

Revenue account

 

Ledger

 

Journal

 

Posting

 

Chart of accounts

 

Trial balance

 

Source document

A. An accounting record of increases and decreases in specific assets, liabilities, and stockholders’ equity items. B. Transferring journal entries to ledger accounts. C. Evidence that a transaction has taken place. D. Shows the debit and credit effects of specific transactions. E. A list of accounts and their balances at a given time. F. Has a credit normal balance G. Left side of an account. H. A list of all the accounts used by a company. I. The side which increases an account. J. The entire group of accounts maintained by a company.

Question 11

On June 1, 2014, England Inc. reported a cash balance of $21,000. During June, England made deposits of $8,000 and made disbursements totaling $24,000. What is the cash balance at the end of June?

[removed]		$5,000 credit balance
[removed]		$29,000 debit balance
[removed]		$5,000 debit balance
[removed]		$3,000 credit balance

Question 12

Salaries and wages payable is a type of expense.

[removed]True

[removed]False

Question 13

If total liabilities decreased by $4,000, then

[removed]		stockholders’ equity must have decreased by $4,000.
[removed]		assets must have decreased by $4,000, or stockholders’ equity must have increased by $4,000.
[removed]		assets and stockholders’ equity each increased by $2,000.
[removed]		assets must have increased by $4,000.

Question 14

An account is often referred to as a T-account because of the way it is constructed.

[removed]True

[removed]False

Question 15

All of the following statements regarding the double-entry system are true except

[removed]		a two-sided effect of each transaction is recorded in appropriate accounts when using the double-entry system.
[removed]		the double-entry system provides a logical method for recording transactions.
[removed]		both sides of the accounting equation must be affected when recording a transaction using the double-entry system.
[removed]		when using the double-entry system, the sum of all debits to the accounts must equal the sum of all credits.

Question 16

Revenues are a subdivision of stockholders’ equity.

[removed]True

[removed]False

Question 17

Which of the following is not an example of a source document that provides evidence of a transaction?

[removed]		A cancelled check
[removed]		A sales slip
[removed]		A trial balance
[removed]		A cash register tape

Question 18

All of the following are characteristics of every accounting information system except it is a system

[removed]		that collects transaction data.
[removed]		that processes transaction data.
[removed]		that communicates financial information to decision makers.
[removed]		of data storage hardware for the chart of accounts.