Write tue or False for the below statements by providing appropriate reasons.
Chapter: Fundamentals of Financial Accounting
1. Supplies is a current asset.
2. When a company starts in business, its retained earnings will always be zero.
3. The accounting equation can be expressed as A - L = SE.
4. If a company purchases $1,000 of supplies on credit, both assets and liabilities will be increased by $1,000.
5. If a company purchases $1,000 of supplies for cash, the amount of assets will increase by $1,000.
6. AAA Co. borrows $100,000 from the bank and signs a form agreeing to repay the loan in two years. As a result of this transaction, both its current assets and current liabilities will increase by $100,000.
7. The United Company orders $2,000 of supplies for inventory. As a result, its assets increase by $2,000.
8. Liabilities are increased by debits and decreased by credits.
9. Stockholders' equity is increased by credits and decreased by debits.
10. Lee Corp. purchased $20,000 of furnishings and equipment for cash. This transaction requires a debit to cash and a credit to furnishings and equipment.
Chapter: Fundamentals of Financial Accounting
1. XYZ Co. paid a dividend of $1,000. As a result, its expenses will increase by $1,000.
2. Income tax expense is reported on the income statement as an operating expense.
3. Operating expenses are listed in order of their importance.
4. Hanesworth Co. received an electrical bill on October 14, 2xx1, for electricity used in September, 2xx1. It paid the bill in November, 2xx1. Under the accrual basis, it should record the electrical bill as an expense for the month of September, 2xx1.
5. Unearned revenue is classified as a liability
6. The Global Corp. sold $500 of gift certificates during the month of September, 2xx1. The gift certificates were used in the month of October, 2xx1. The Global Corp. should record revenue in September, 2xx1.
7. Atech, Inc. sold $100 of goods to a customer who promised to pay for them in 60 days. As a result of this transaction, revenue of $100 will be recognized.
8. Acoma, Inc. received a bill for repairs and maintenance on November 1 for services performed in October. Acoma paid the bill on December 10. This will result in a reduction of stockholders' equity in December.
9. A trial balance is a list of all accounts that only appear on the balance sheet along with their respective balances.
10. Prepaid rent would appear in the debit column in the unadjusted trial balance.