Chapter 1 Concepts
Financial Statements
Debit/ Credit Rules
Journal Entries
Chapter 3
100

How are assets organized on the balance sheet?

By liquidity

100

What formula appears on the income statement?

Revenue- Expenses= Net Income

100

What is the normal balance of Accounts Receivable?

Debit

100

Make the journal entry:

Pepsi declares and pays dividend of $100

D: Dividend $100

C: Cash $100

100

A dentist performs dental services for a patient on April 20; the total bill for the dental services was $200. The patient makes a co-pay of $20 on April 20, and the insurance company pays the remaining balance of $180 on May 19. On what date(s) will the dentist record the revenue for those dental services provided on April 20? (Assume the accrual basis of accounting is used.)

$200 of revenue on April 20

200

What is the historical cost principle?

A principle that states that assets should be recorded at their actual cost

200

What formula appears on the statement of retained earnings?

Begin RE + NI - Dividends= End RE

200

What is the normal balance of service revenue?

Credit

200

Make the journal entry:

Pepsi collects $300 on account

D: Cash $100

C: Accounts Rec $100

200

According to U.S. GAAP, when should revenue be recognized?

When the service is performed or the goods have been delivered to the customer

300

What is the continuity assumption?

The assumption that an entity will remain in operation for the foreseeable future

300

What is the accounting equation?

Assets= Liabilities+Equity

300

What is the normal balance of Notes Payable?

Credit

300

Make the journal entry:

Pepsi sold $800 worth of product and received $200 in cash with the remainder on account

D: Cash $200

D: Acc Rec $600

C: Rev $800

300

When are expenses recognized?

When the expense occurred 
400

What are the two components that make up stockholder's equity?


Paid in Capital and Retained Earnings

400

What item flows from the Income Statement to the Statement of Retained Earnings?

Net Income

400

What is the normal balance of dividends?

Debits

400

Make the journal entry:

Pepsi performs service of $500 on account

D: Acc Rec $500

C: Service Rev $500

400

An adjusting entry recorded June salary expense that will be paid in July. Which statement best describes the effect of this adjusting entry on the company's accounting equation?

A. Assets are not affected, liabilities are increased, and stockholders' equity is decreased.

B. Assets are decreased, liabilities are increased, and stockholders' equity is decreased.

C. Assets are not affected, liabilities are increased, and stockholders' equity is increased

D. Assets are decreased, liabilities are not affected, and stockholders' equity is decreased.


A.


Salary Ex.

Salary Payable

500

When is the balance sheet created?

At the end of the year

500

Who uses financial statements?

Investors, Creditors, Gov agencies (regulatory bodies), the public

-People outside the company



500

What is the normal balance of Prepaid Expenses?

Debit

500

Make the journal entry:

Pepsi bought inventory of $50 on account

D: Inventory $50

C: Accounts Payable $50

500

On January 1 of the current year, Bambi Company paid $900 in rent to cover six months (January—June). Bambirecorded this transaction as follows:

D: Prepaid Rent: $900

C: Cash $900

Bambi adjusts the accounts at the end of each month. Based on these facts, the adjusting entry at the end of January should include.


A. a credit to Prepaid Rent for $150.

B. a debit to Prepaid Rent for $750.

C. a credit to Prepaid Rent for $750.

D. a debit to Prepaid Rent for $150.

A

D. Rent Ex $150

C. Prepaid Rent $150

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