Copyright 2016 Pearson Education, Inc.

1 Copyright © 2016 Pearson Education, Inc.Horngren's Accounting,11e (Miller-Nobles) 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 Accounting The Financial Chapters 11th 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 following 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

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

4 Copyright © 2016 Pearson Education, Inc.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

Answer: D

Diff: 1

LO: 2-1

AACSB: Application of knowledge

AICPA Functional: Measurement

PE Question Type: Application

H2 : Liabilities

15) Which of the following is a liability account?

• Accounts Payable
• Prepaid Expense
• Salaries Expense
• Service Revenue

Answer: A

Diff: 1

LO: 2-1

AACSB: Application of knowledge

AICPA Functional: Measurement

PE Question Type: Application

H2 : Liabilities