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ACT 205 Lecture Notes - Lecture 4: Accounts Receivable, Deferred Income, Promissory Note

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skykangaroo617
1 Feb 2018
School
CSU
Department
Accounting
Course
ACT 205
Professor
Sally Plasterer Whitney

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Document Summary

Instead of increase and decrease, we use debits and credits. *whether a debit or credit increases or decreases an account is based on a set of debit/credit rules. Liabilities and stockholders" equity are on the right. Whichever increases the account"s balance (a debit or a credit) is that account"s normal balance. After analyzing, enter transactions into the accounting system. The format used to record the dollar amount of change in each account that is affected by a transaction. The accounts that are affected by the transaction are either debited or credited for the amount of increase or decrease. A journal entry must have at least two lines, one debit and one credit. There may be multiple debits and/or credits in a journal entry. But the total debits must equal the total credits. The debit and credit rules tell us how to increase and decrease the accounts in a journal entry.

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Related Questions

1.
The realizationprinciple indicates that revenue usually should be recorded inthe accounting records:
Question 1 options:
A) when cash is collected from customers
B) when goods are sold or services are rendered to customers
C) at the end of the accounting period
D) only when the revenue can be matched by an equal dollar amountof expenses
E) both (b) and (d) are correct

2.
Which of the following account(s) would be part ofworking capital?
Question 2 options:
A) accounts payable
B) land
C) supplies
D) retained earnings
E) cost of goods sold
F) two of the above accounts are part of working capital
G) three of the above accounts are part of working capital
H) four of the above accounts are part of working capital
I) all of the above accounts are part of working capital

3.
On May 17, Buckeye Corporation performed $800 ofservices for ABC Company, a customer. ABC paid for one-half ofthe
bill on May 17 and agreed to pay the remainder within 30 days. OnJune 9, ABC paid the remaining amount owed. Which
of the following journal entries would ABC Company make onJune 9?
Question 3 options:
A) debit accounts receivable $400 and credit cash $400
B) debit cash $400 and credit service revenue $400
C) debit accounts payable $400 and credit service revenue$400
D) debit cash $400 and credit accounts payable $400
E) debit cash $400 and credit accounts receivable $400
F) debit accounts payable $400 and credit cash $400

4.
The following information is available for XYZ Company: January 1, 2003 December 31, 2003Assets $500,000 $700,000Liabilities $300,000 $400,000 Equity $200,000 $300,000
XYZ Company reported a net income of $50,000 during 2003.
XYZ Company's return on equity (ROE) for 2003 was equal to:
Question 4 options:
A) 8.3%
B) 50.0%
C) 25.0%
D) 20.0%
E) 16.7%

5.
Fletcher, Inc. reported an ending notes payablebalance of $57,000. An examination of the notes payablet-account
revealed debits of $25,000 and credits of $39,000 during the year.The beginning notes payable balance for Fletcher,
Inc. was equal to:
Question 5 options:
A) $71,000 credit
B) $71,000 debit
C) $43,000 debit
D) $43,000 credit
E) none of the above are correct

6.

Indicate the effect each of the following transactions has onthe accounting equation (i.e., assets, liabilities, and equity).Enter the number corresponding to your answer in the box provided.Answer choices may be used once, more than once, or not atall.

Question 6 options:
ABC Company performed $2,000 of delivery servicesfor a customer who agreed to pay next month

ABC Company paid $2,000 cash to the bank; $1,800of this amount was the repayment of a bank loan and the other $200paid was interest

ABC Company made the adjusting entry to accrueincome taxes owed but not yet paid

ABC Company purchased equipment for $3,000cash

1.
assets increase; liabilities increase; equitydecrease
2.
assets decrease; liabilities decrease; equity noeffect
3.
assets increase; liabilities no effect; equityincrease
4.
assets no effect; liabilities no effect; equity noeffect
5.
assets no effect; liabilities increase; equitydecrease
6.
assets increase; liabilities increase; equityincrease
7.
assets increase; liabilities increase; equity noeffect
8.
assets no effect; liabilities decrease; equityincrease
9.
assets decrease; liabilities no effect; equitydecrease
10.
assets decrease; liabilities decrease; equitydecrease
1.
The realizationprinciple indicates that revenue usually should be recorded inthe accounting records:
Question 1 options:
A) when cash is collected from customers
B) when goods are sold or services are rendered to customers
C) at the end of the accounting period
D) only when the revenue can be matched by an equal dollar amountof expenses
E) both (b) and (d) are correct

2.
Which of the following account(s) would be part ofworking capital?
Question 2 options:
A) accounts payable
B) land
C) supplies
D) retained earnings
E) cost of goods sold
F) two of the above accounts are part of working capital
G) three of the above accounts are part of working capital
H) four of the above accounts are part of working capital
I) all of the above accounts are part of working capital

3.
On May 17, Buckeye Corporation performed $800 ofservices for ABC Company, a customer. ABC paid for one-half ofthe
bill on May 17 and agreed to pay the remainder within 30 days. OnJune 9, ABC paid the remaining amount owed. Which
of the following journal entries would ABC Company make onJune 9?
Question 3 options:
A) debit accounts receivable $400 and credit cash $400
B) debit cash $400 and credit service revenue $400
C) debit accounts payable $400 and credit service revenue$400
D) debit cash $400 and credit accounts payable $400
E) debit cash $400 and credit accounts receivable $400
F) debit accounts payable $400 and credit cash $400

4.
The following information is available for XYZ Company: January 1, 2003 December 31, 2003Assets $500,000 $700,000Liabilities $300,000 $400,000 Equity $200,000 $300,000
XYZ Company reported a net income of $50,000 during 2003.
XYZ Company's return on equity (ROE) for 2003 was equal to:
Question 4 options:
A) 8.3%
B) 50.0%
C) 25.0%
D) 20.0%
E) 16.7%

5.
Fletcher, Inc. reported an ending notes payablebalance of $57,000. An examination of the notes payablet-account
revealed debits of $25,000 and credits of $39,000 during the year.The beginning notes payable balance for Fletcher,
Inc. was equal to:
Question 5 options:
A) $71,000 credit
B) $71,000 debit
C) $43,000 debit
D) $43,000 credit
E) none of the above are correct

6.

Indicate the effect each of the following transactions has onthe accounting equation (i.e., assets, liabilities, and equity).Enter the number corresponding to your answer in the box provided.Answer choices may be used once, more than once, or not atall.

Question 6 options:
ABC Company performed $2,000 of delivery servicesfor a customer who agreed to pay next month

ABC Company paid $2,000 cash to the bank; $1,800of this amount was the repayment of a bank loan and the other $200paid was interest

ABC Company made the adjusting entry to accrueincome taxes owed but not yet paid

ABC Company purchased equipment for $3,000cash

1.
assets increase; liabilities increase; equitydecrease
2.
assets decrease; liabilities decrease; equity noeffect
3.
assets increase; liabilities no effect; equityincrease
4.
assets no effect; liabilities no effect; equity noeffect
5.
assets no effect; liabilities increase; equitydecrease
6.
assets increase; liabilities increase; equityincrease
7.
assets increase; liabilities increase; equity noeffect
8.
assets no effect; liabilities decrease; equityincrease
9.
assets decrease; liabilities no effect; equitydecrease
10.
assets decrease; liabilities decrease; equitydecrease

Identify a business or personal financial transaction. (You canchoose any one you like, it doesn't have to be one in thetextbook). Then answer the following questions which should resultin correctly identifying the accounts to be debited and credited:REQUIRED: 1) What are the specific accounts that are affected?(i.e. Cash, Accounts Receivable, Land, etc.) REMEMBER THAT THEREMUST BE AT LEAST 2 SPECIFIC ACCOUNTS AFFECTED. 2) What BROAD typeof Account do they belong to? (i.e. Asset, Liability or Equity) 3)Does this transaction result in an INCREASE or DECREASE to theaccount(s) in #2 above? 4) Using the rules for Debits and Creditsidentify which SPECIFIC ACCOUNT (#1) is to be debited and which isto be credited. REMEMBER: 1. ASSETS are on the LEFT side of theaccounting equation and therefore they INCREASE on the LEFT, DEBITSIDE; LIABILITIES AND EQUITY are on the RIGHT SIDE of the equationand therefore they INCREASE on the RIGHT, CREDIT side. 2. TOTALDEBITS MUST EQUAL TOTAL CREDITS!