Chapter 1 Concepts
How are assets organized on the balance sheet?
By liquidity
What formula appears on the income statement?
Revenue- Expenses= Net Income
What is the normal balance of Accounts Receivable?
Debit
Make the journal entry:
Pepsi declares and pays dividend of $100
D: Dividend $100
C: Cash $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
What is the historical cost principle?
A principle that states that assets should be recorded at their actual cost
What formula appears on the statement of retained earnings?
Begin RE + NI - Dividends= End RE
What is the normal balance of service revenue?
Credit
Make the journal entry:
Pepsi collects $300 on account
D: Cash $100
C: Accounts Rec $100
According to U.S. GAAP, when should revenue be recognized?
When the service is performed or the goods have been delivered to the customer
What is the continuity assumption?
The assumption that an entity will remain in operation for the foreseeable future
What is the accounting equation?
Assets= Liabilities+Equity
What is the normal balance of Notes Payable?
Credit
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
When are expenses recognized?
What are the two components that make up stockholder's equity?
Paid in Capital and Retained Earnings
What item flows from the Income Statement to the Statement of Retained Earnings?
Net Income
What is the normal balance of dividends?
Debits
Make the journal entry:
Pepsi performs service of $500 on account
D: Acc Rec $500
C: Service Rev $500
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
When is the balance sheet created?
At the end of the year
Who uses financial statements?
Investors, Creditors, Gov agencies (regulatory bodies), the public
-People outside the company
What is the normal balance of Prepaid Expenses?
Debit
Make the journal entry:
Pepsi bought inventory of $50 on account
D: Inventory $50
C: Accounts Payable $50
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