a. Analyzeb. Adjustc. Eliminated. Report16. The purchase of $500 of supplies on account will:a. Increase both assets and stockholders’ equity by $500b. Increase assets and decrease liabilities by $500c. Increase assets and decrease stockholders’ equity by $500d. Increase both assets and liabilities by $500QUESTIONS1. List the five major steps in the accounting cycle in their proper order.2. Define the term fiscal year.3. Provide three examples of source documents that underlie business transactions.4. Provide an example of a transaction that would: 5. Explain the financial effect (increase, decrease, or no effect) of each of the following transactions on stock-holders’ equity: 6. The retained earnings on a balance sheet are $80,000. Without seeing the rest of the balance sheet, can you conclude that stockholders should be able to receive a dividend in the amount of $80,000 cash from the business? Justify your answer. 7. On December 31, 2013, the Miller Company had $700,000 in total assets and owed $220,000 to creditors. If the corporation’s common stock amounted to $300,000, what amount of retained earnings should appear on the company’s December 31, 2013, balance sheet? 8. Some accounting students believe that debits are good and credits are bad. Explain why this is not an ac-curate way to think about debits and credits.9. What is an account?10. What information is recorded in an account?11. What does the term debitmean? What does the term creditmean?12. What type of account—asset, liability, stockholders’ equity, dividend, revenue, or expense—is each of the following accounts? Indicate whether a debit entry or a credit entry increases the balance of the account.Professional Fees EarnedCommon StockAccounts ReceivableAdvertising ExpenseAccounts PayableSuppliesCashDividends13. How is the normal side of an account determined?14. What is the normal balance (debit or credit) of each of the accounts in Discussion Question 12?15. Describe the nature and purpose of a general journal.16. What is the justification for the use of posting references?17. Describe a compound journal entry.18. What is a chart of accounts? LO1LO282CHAPTER 2Processing Accounting InformationASSIGNMENTS
19. Explain the terms general ledgerand trial balance. What are the primary reasons for preparing a trial balance?20. Explain how it is possible for a trial balance to be in balance but still be in error.21. What is a T-account and how is it used?22. Is it possible for an accounting transaction to only affect the left side of the accounting equation and still leave the equation in balance? If so, provide an example.23. Would a company record a transaction in its general ledger when an order is placed for the purchase of a machine that will be paid for at the time of its delivery in three months? Explain your answer.SHORT EXERCISESSE2-1. Normal Balances Indicate for each of the following accounts whether the normal balance is a debit or a credit:
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