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1 Copyright © 2016 Pearson Education, Inc.Horngren's Financial & Managerial Accounting, 5e (Miller) Chapter 2 Recording Business Transactions
Learning Objective 2-1
1) Which is a true statement regarding the accounting equation?
- The equation can be stated as assets minus liabilities equals equity.
B) The equation consists of three parts: assets, liabilities, and net income.
- The equation is an optional tool for accountants to use.
- The equation does not need to balance during a specific period.
Answer: A
Diff: 1
LO: 2-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What is an Account? (H1)
2) A payment of an expense in advance is called a prepaid expense.
Answer: TRUE
Diff: 1
LO: 2-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Assets
3) An accounts receivable requires the business to pay cash in the future.
Answer: FALSE
Diff: 1
LO: 2-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Assets
4) The account title used for recording the payment of rent in advance for an office building is ________.
- Prepaid Rent
- Rent Payable
- Rent Revenue
- Rent Expense
Answer: A
Diff: 1
LO: 2-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Assets
Horngrens Financial and Managerial Accounting The Financial Chapters 5th Edition Miller-Nobles Test Bank Visit TestBankDeal.com to get complete for all chapters
2 Copyright © 2016 Pearson Education, Inc.5) Which of the following is an asset account?
- Wages Payable
- Notes Payable
- Unearned Revenue
- Accounts Receivable
Answer: D
Diff: 1
LO: 2-1
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Assets
6) A customer's promise to pay in the future for services or goods sold is called a(n) ________.
- Accounts Receivable
- Accounts Payable
- Unearned Revenue
- Notes Payable
Answer: A
Diff: 1
LO: 2-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Assets
7) Which of the following is an asset account?
- Salaries Expense
- Accounts Payable
- Service Revenue
- Prepaid Expense
Answer: D
Diff: 1
LO: 2-1
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Assets
8) Which of the following is an asset account?
- Cash
- Notes Payable
- Dividends
- Unearned Revenue
Answer: A
Diff: 2
LO: 2-1
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Assets
3 Copyright © 2016 Pearson Education, Inc.9) Provide an explanation for each of the follow asset accounts.
Account Name Explanation Accounts Receivable
Prepaid Expense
Notes Receivable
Answer:
Account Name Explanation Accounts Receivable A customer's promise to pay in the future for services or goods sold. Often described as "On Account." Prepaid Expense A payment of an expense in advance. It is considered an asset because the prepayment provides a benefit in the future.Notes Receivable A written promise that a customer will pay a fixed amount of money and interest by a certain date in the future. Often more formal than an Accounts Receivable.
Diff: 1
LO: 2-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Assets
10) Liabilities are economic resources that are expected to benefit the business in the future.
Answer: FALSE
Diff: 1
LO: 2-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Liabilities
4 Copyright © 2016 Pearson Education, Inc.11) A payable involves a future receipt of cash.
Answer: FALSE
Diff: 1
LO: 2-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Liabilities
12) Unearned revenue is a liability account.
Answer: TRUE
Diff: 1
LO: 2-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Liabilities
13) ________ represents a debt owed for renting a building currently.
- Prepaid Rent
- Rent Payable
- Rent Revenue
- Rent Expense
Answer: B
Diff: 1
LO: 2-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Liabilities
14) Which of the following is a liability account?
- Accounts Receivable
- Cash
- Building
- Notes Payable
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