Accounting Chapter 2 Questions and Graded Answers.
A company paid $500 for supplies that it purchased last month. The decrease in liabilities would
be recorded with a __________ to Accounts Payable. - Debit
In May, Pasta Disasta, Inc. pays its suppliers $1,000 for supplies received in April. The effect on
the accounting equation is a __________. (Check all that apply.) - $1,000 decrease in
liabilities
$1,000 decrease in assets
Identify the account title that may be used to record borrowing cash in exchange for a promissory
note. - Note Payable
The Cash T-Account is increased with an entry on the __________ side of the T-Account. (Enter
one word per blank.) - Left
List the components of a classified balance sheet in the proper order in accordance with GAAP.
List from top to bottom. - 1. Current assets
2. Non-current assets
3. Current liabilities
4. Non-current liabilities
5. Stockholders' equity
The Common Stock account is increased with an entry on the __________ side of the T-
Account. - Right
Two sources of financing for a new business are __________. (Check all that apply.) -
Creditors
Stockholders
, When a company buys an asset on account __________. - Assets increase
Liabilities increase
Which of the following is an appropriate application of the cost principle regarding land that was
purchased 20 years ago and has increased in value? - The land is reported on the balance
sheet at the original price paid for it.
Liabilities have a normal __________ balance - Credit
True or False: An exchange of a promise to deliver an asset in the future for a promise to pay in
the future is a transaction. - False
MMM Pizza bought $1,500 of supplies on account (i.e., on credit). What is the effect of
recording this transaction on the company's total liabilities? - Total liabilities will increase
In May, Pasta Disasta, Inc. paid its suppliers $500 that it owed for the pizza pans purchased and
received in April. Which accounts are affected? (Check all that apply.) - Cash is decreased
Accounts Payable is decreased
A company paid $200 cash for supplies that were purchased last month. However, the company
recorded a debit to Accounts Payable of $200 and a credit to Cash of $20. This companies
accounting records are __________. - Incorrect, because debits do not equal credits
Company X issued $10,000 of common stock to its owners for cash. It recorded the transaction
by increasing assets and increasing liabilities. Which of the following statements are correct?
(Check all that apply.) - Stockholders' equity will be too low
Liabilities will be too high
When a company pays its supplier for amounts owed, its Cash and Accounts __________
accounts are decreased. (Enter only one word per blank.) - Payable
A company paid $500 for supplies that it purchased last month. The decrease in liabilities would
be recorded with a __________ to Accounts Payable. - Debit
In May, Pasta Disasta, Inc. pays its suppliers $1,000 for supplies received in April. The effect on
the accounting equation is a __________. (Check all that apply.) - $1,000 decrease in
liabilities
$1,000 decrease in assets
Identify the account title that may be used to record borrowing cash in exchange for a promissory
note. - Note Payable
The Cash T-Account is increased with an entry on the __________ side of the T-Account. (Enter
one word per blank.) - Left
List the components of a classified balance sheet in the proper order in accordance with GAAP.
List from top to bottom. - 1. Current assets
2. Non-current assets
3. Current liabilities
4. Non-current liabilities
5. Stockholders' equity
The Common Stock account is increased with an entry on the __________ side of the T-
Account. - Right
Two sources of financing for a new business are __________. (Check all that apply.) -
Creditors
Stockholders
, When a company buys an asset on account __________. - Assets increase
Liabilities increase
Which of the following is an appropriate application of the cost principle regarding land that was
purchased 20 years ago and has increased in value? - The land is reported on the balance
sheet at the original price paid for it.
Liabilities have a normal __________ balance - Credit
True or False: An exchange of a promise to deliver an asset in the future for a promise to pay in
the future is a transaction. - False
MMM Pizza bought $1,500 of supplies on account (i.e., on credit). What is the effect of
recording this transaction on the company's total liabilities? - Total liabilities will increase
In May, Pasta Disasta, Inc. paid its suppliers $500 that it owed for the pizza pans purchased and
received in April. Which accounts are affected? (Check all that apply.) - Cash is decreased
Accounts Payable is decreased
A company paid $200 cash for supplies that were purchased last month. However, the company
recorded a debit to Accounts Payable of $200 and a credit to Cash of $20. This companies
accounting records are __________. - Incorrect, because debits do not equal credits
Company X issued $10,000 of common stock to its owners for cash. It recorded the transaction
by increasing assets and increasing liabilities. Which of the following statements are correct?
(Check all that apply.) - Stockholders' equity will be too low
Liabilities will be too high
When a company pays its supplier for amounts owed, its Cash and Accounts __________
accounts are decreased. (Enter only one word per blank.) - Payable
