Question 1

Current assets are expected to be converted to cash within

Accepted Answer

Current assets are expected to be converted to cash within one year, according to standard accounting definitions.

Question 2

Which of the following is/are true regarding the T-account?

Accepted Answer

Option A is not entirely true as some businesses may still use the T-account for recording transactions. 
Option B is correct as the T-account is named after its shape which resembles the letter T. 
Option C is also correct as it is a simple and effective way to keep track of transactions. Therefore, option D is the correct answer as all the options are true.

Question 3

A T-account is a device or convention for organizing and accumulating the accounting entries of transactions that affect an individual account. Which of the following is/are true?

Accepted Answer

All the statements are true regarding the rules of recording in T-accounts: increases in assets are recorded on the left side (debit), while decreases are on the right side (credit). For liabilities and shareholders' equity, increases are recorded on the right side (credit), and decreases on the left side (debit).

Question 4

Conrad Company reports the following: $\begin{array}{ll}
\text { Total Assets } & \$ 800 \
\text { Contributed Capital } & \$ 300 \
\text { Total Revenues } & \$ 600 \
\text { Beginning Retained Earnings } & \$ 200 \
\text { Total Expenses } & \$ 700 \
\text { Dividends } & \$ 100
\end{array}$ What are Total liabilities?

Accepted Answer

Total liabilities can be calculated using the accounting equation: Assets = Liabilities + Equity. Equity is calculated as Contributed Capital + Ending Retained Earnings. Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends. Net Income = Total Revenues - Total Expenses. So, Ending Retained Earnings = $200 + ($600 - $700) - $100 = $0. Therefore, Equity = $300 + $0 = $300. Thus, Liabilities = $800 - $300 = $500.

Question 5

T-accounts

Accepted Answer

T-accounts are used to summarize the effects of transactions on specific accounts, showing debits and credits for each account.

Question 6

A detailed system of accounts allows the preparer of financial statements to decompose, or __________, each transaction to convey information about the effects of the transaction.

Accepted Answer

To decompose means to break down into smaller parts or components. In the context of accounting, a detailed system of accounts allows the preparer of financial statements to break down each transaction into its component parts or accounts, which can then be analyzed and aggregated to convey information about the effects of the transaction on the company's financial position and performance. Therefore, the best choice is B, which means to break down or disassemble.

Question 7

Temporary accounts are for recording

Accepted Answer

Temporary accounts are used to record revenues and expenses, which are related to a specific accounting period and are closed at the end of that period. Examples of temporary accounts include revenue accounts, expense accounts, and dividend accounts.

Question 8

Marianne Company reports the following: $\begin{array}{lr}
\text { Total Assets } & \$ 1,200 \
\text { Total Revenues } & \$ 800 \
\text { Total Liabilities } & \$ 500 \
\text { Beginning Retained Earnings } & \$ 200 \
\text { Total Expenses } & \$ 400 \
\text { Dividends } & \$ \quad 0
\end{array}$ What is Contributed Capital?

Accepted Answer

The answer of Marianne Company reports the following: \(\begin{array}{lr}
\text {...

Question 9

The equation that describes the relationship between the balance sheet and the income statement through the Retained Earnings account is as follows:

Accepted Answer

The correct equation is Retained Earnings (beginning) + Net Income - Dividends = Retained Earnings (ending). This equation shows how the net income after paying dividends is added to the beginning retained earnings to arrive at the ending retained earnings.

Question 10

Composite, Inc., a firm specializing in building materials, engaged in the following transaction during 2013: issued 2,000 shares of common stock for $7,500 million in cash.Indicate the effects of the transaction on the balance sheet equation.(Composite Inc.applies U.S.GAAP financial reporting standards, and reports its results in millions of dollars.)

Accepted Answer

The issuance of 2,000 shares of common stock for $7,500 million in cash has the following effects on the balance sheet equation:
Assets +$7,500 million (cash increases)
Shareholders' Equity +$7,500 million (common stock increases)
Therefore, the correct answer is D.

Question 11

Brice Foods Group, a European food retailer that operates supermarkets in seven countries, engaged in the following transaction during 2013: purchased and received inventory costing €500 million on account from various suppliers. Indicate the effects of the transaction on the balance sheet equation.Brice Foods Group applies IFRS, and reports its results in millions of euros.

Accepted Answer

Inventory is an asset, and the company obtained it on credit, which creates a liability. Therefore, the transaction increases both assets and liabilities by €500 million. The equation remains balanced, as both sides increase by the same amount. Thus, the correct answer is A, Assets + €500 million; Liabilities + €500 million.

Question 12

Journal entries

Accepted Answer

Journal entries show all the accounts affected by a single event or transaction and provide a record of transactions. Therefore, they have the characteristics presented in choices A and B. Additionally, they summarize the effects of transactions on specific accounts, so they also have the characteristic presented in choice D. Therefore, the best choice is C.

Question 13

Retained Earnings measures the cumulative excess of _____ for the life of a firm

Accepted Answer

Retained earnings represent the portion of earnings that have been retained or reinvested in the company rather than paid out as dividends. Therefore, it measures the cumulative excess of net income over dividends for the life of the firm.

Question 14

Which of the following is/are true regarding T-accounts?

Accepted Answer

All of the options are true regarding T-accounts. T-accounts are used in accounting to visualize account balances and transactions. The left side is used to record debits (increases in assets or decreases in liabilities) and the right side for credits (decreases in assets or increases in liabilities). For each transaction, the total debits must equal the total credits to ensure that the balance sheet equation (assets = liabilities + equity) remains balanced.

Question 15

Any single event or transaction will have which of the following effect(s) on the balance sheet?

Accepted Answer

Any single event or transaction can have any of the above effects on the balance sheet depending on the nature of the event or transaction. It can result in an increase in an asset and an increase in either a liability or shareholders' equity, a decrease in an asset and a decrease in either a liability or shareholders' equity, an increase in one asset and a decrease in another asset, or an increase in one liability or shareholders' equity and a decrease in another liability or shareholders' equity. Therefore, option E, "all of the above," is the best choice.

Question 16

Horton Company reports the following: $\begin{array}{ll}
\text { Contributed Capital } & \$ 200 \
\text { Total Revenues } & \$ 800 \
\text { Total Liabilities } & \$ 1,200 \
\text { Beginning Retained Earnings } & (\$ 100) \
\text { Total Expenses } & \$ 500 \
\text { Dividends } & \$ \quad 0
\end{array}$ What are Total Assets?

Accepted Answer

Total Assets = Total Liabilities + Equity. Equity = Contributed Capital + Ending Retained Earnings. Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends. Net Income = Total Revenues - Total Expenses = $800 - $500 = $300. Ending Retained Earnings = -$100 + $300 - $0 = $200. Equity = $200 + $200 = $400. Total Assets = $1,200 + $400 = $1,600.

Question 17

Noncurrent assets are expected to be converted to cash over

Accepted Answer

Noncurrent assets are assets that are expected to be held for a period greater than one year and are not easily converted to cash. Examples of noncurrent assets include property, plant, and equipment, intangible assets, and long-term investments. Therefore, the best choice is option E, as noncurrent assets are expected to be converted to cash over a period of time greater than one year.

Question 18

Which of the following is/are true regarding the T-account?

Accepted Answer

All of the given statements are true regarding the T-account. The name or title of the account appears on the horizontal line, dates and other information can be included in the T-account, and one side of the space formed by the vertical line records increases in the item while the other side records decreases.

Question 19

To maintain balance sheet equality, it is necessary to report every event and transaction in a dual manner. If a transaction results in an increase in a Liability account, then which of the following must occur, to maintain the balance sheet equation?

Accepted Answer

The balance sheet equation must always balance, so if a liability increases, it can be balanced by decreasing another liability, decreasing shareholders' equity, or increasing an asset. All these actions maintain the balance sheet equation.

Question 20

The accounting system uses a device called an account.An account

Accepted Answer

An account accumulates the increases and decreases that occur during the period for a single item. It helps keep track of the financial transactions related to that item, whether it is an asset, liability, equity, revenue or expense item. Accounts are used in both the income statement and the balance sheet as they help in measuring profitability and financial position of the organization. Accounts are not created for every transaction, but rather for the items that the organization wants to keep track of.

Quiz 2: The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

Current assets are expected to be converted to cash within

Which of the following is/are true regarding the T-account?

A T-account is a device or convention for organizing and accumulating the accounting entries of transactions that affect an individual account. Which of the following is/are true?

T-accounts

A detailed system of accounts allows the preparer of financial statements to decompose, or __________, each transaction to convey information about the effects of the transaction.

Temporary accounts are for recording

The equation that describes the relationship between the balance sheet and the income statement through the Retained Earnings account is as follows:

Journal entries

Retained Earnings measures the cumulative excess of _____ for the life of a firm

Which of the following is/are true regarding T-accounts?

Any single event or transaction will have which of the following effect(s) on the balance sheet?

Noncurrent assets are expected to be converted to cash over

Which of the following is/are true regarding the T-account?

To maintain balance sheet equality, it is necessary to report every event and transaction in a dual manner. If a transaction results in an increase in a Liability account, then which of the following must occur, to maintain the balance sheet equation?

The accounting system uses a device called an account.An account