Assignment: Chapter 3 homework

1.

Types of Events

For each of the following events, identify whether it is an external event that would be recorded as a transaction, an internal event that would be recorded as a transaction, or not recorded.

1. A vendor for a company's supplies is paid an amount owed on account. _________________

2. A customer pays its open account. _________________

3. A new chief executive officer is hired. _________________

4. The biweekly payroll is paid. _________________

5. Depreciation on equipment is recognized. _________________

6. A new advertising agency is hired to develop a series of newspaper ads for the company. _________________

7. The advertising bill for the first month is paid. _________________

8. The accountant determines the federal income taxes owed based on the income earned during the period. (Assume the accountant accrues the taxes owed but has not paid them yet.) _________________

2.

The Effect of Transactions on the Accounting Equation

For each of the following transactions, indicate whether it increases, decreases, or has no effect on the total dollar amount of each of the elements of the accounting equation.

Transactions Assets = Liabilities + Stockholders' Equity

Example: Common stock is issued in exchange for cash. Increases No effect Increases

1. Equipment is purchased for cash. _________________ _________________ _________________

2. Services are provided to customers on account. _________________ _________________ _________________

3. Services are provided to customers in exchange for cash. _________________ _________________ _________________

4. An account payable is paid off. _________________ _________________ _________________

5. Cash is collected on an account receivable. _________________ _________________ _________________

6. Buildings are purchased in exchange for a three-year note payable. _________________ _________________ _________________

7. Advertising bill for the month is paid. _________________ _________________ _________________

8. Dividends are paid to stockholders. _________________ _________________ _________________

9. Land is acquired by issuing shares of stock to the owner of the land. _________________ _________________ _________________

3.

Balance Sheet Accounts and Their Use

Choose from the following list of account titles the one that most accurately fits the description of that account or is an example of that account. An account title may be used more than once or not at all.

1. A written obligation to repay a fixed amount, with interest, at some time in the future

_________________

2. Twenty acres of land held for speculation

_________________

3. An amount owed by a customer

_________________

4. Corporate income taxes owed to the federal government

_________________

5. Ownership in a company that allows the owner to receive dividends before common shareholders receive any distributions

_________________

6. Five acres of land used as the site for a factory

_________________

7. Amounts owed on an open account to a vendor, due in 90 days

_________________

8. A checking account at a bank

_________________

9. A warehouse used to store equipment

_________________

10. Claims by the owners on the undistributed net income of a business

_________________

11. Rent paid on an office building in advance of use of the facility

_________________