Financial And Managerial Accounting 15th Edition By jan Williams -Test Bank
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Sample Test
Chapter 03
The Accounting Cycle: Capturing Economic Events
True / False Questions
1. The
credit side of an account is the right side, while the debit side is the left
side.
True False
2. In a
computerized accounting system, posting may be done automatically but
journalizing must be done by someone with an understanding of recording
transactions.
True False
3. The
running balance form or the T account form is typically used in the trial
balance to display the accounts and their amounts.
True False
4. Dividends
are an expense of a corporation and reduce both total assets and liabilities.
True False
5. Dividends
increase owners’ equity and therefore should be added to retained earnings.
True False
6. Every
business transaction is recorded by a debit to a balance sheet account and a
credit to an income statement account.
True False
7. Earning
revenue increases owners’ equity and expenses reduce owners’ equity, therefore,
revenues are recorded with debit entries and expenses are recorded with credit
entries.
True False
8. A
trial balance cannot be distributed to stockholders in lieu of a balance sheet.
True False
9. Accounts
are usually arranged in the ledger in financial statement order, that is,
assets first, followed by liabilities, owners’ equity, expenses, and revenues.
True False
10. A
credit to a ledger account refers to the entry of an amount on the right side
of an account.
True False
11. The
left-hand side of an account is used for recording debits and the right-hand
side for recording credits.
True False
12. If
the number of debit entries in an account is greater than the number of credit
entries, the account will have a debit balance.
True False
13. Liability
accounts should only be debited and never credited.
True False
14. Increases
in owners’ equity are recorded by credits; increases in assets and in
liabilities are recorded by debits.
True False
15. When
making a general journal entry, there can only be one debit and one credit.
True False
16. A
business that is profitable and liquid will have more accounts with credit
balances than with debit balances.
True False
17. Every
transaction affects equal numbers of ledger accounts and is recorded by equal
dollar amounts of debits and credits.
True False
18. When
a company uses the double-entry method, the total dollar amount of debits
recorded must equal the total dollar amount of credits recorded, but the number
of debit and credit entries may differ.
True False
19. If
ledger accounts are maintained in three-column, running balance form, the
journal should be maintained in the same format.
True False
20. The
general ledger is sometimes called the book of original entry because it is the
accounting record where transactions are first recorded.
True False
21. Each
business transaction is initially recorded in a journal and later transferred
to the appropriate accounts in the general ledger.
True False
22. The
matching principle refers to the relationship between revenues and expenses.
True False
23. An
increase in a liability is recorded by a credit; an increase in owners’ equity
by a debit.
True False
24. Revenues
increase owners’ equity and are, therefore, recorded by crediting the revenues
account.
True False
25. The
accrual basis of accounting recognizes expenses only when they are paid.
True False
26. Every
transaction which affects an income statement account also affects a balance
sheet account.
True False
27. A
trial balance that balances provides proof that all transactions were correctly
journalized and posted to the ledger.
True False
28. A
trial balance proves that equal amounts of debits and credits were posted to
the ledger.
True False
29. Dividends
are an expense to a corporation and appear on the income statement.
True False
30. A CEO
or CFO associated with fraudulent financial reporting could be fined but not
imprisoned under the Sarbanes Oxley Act.
True False
31. “I
was just following orders” is an acceptable defense if you committed an
unethical action during an audit.
True False
Multiple Choice Questions
32. Sally
Smith had expenses of $800 in June which she paid in July. She declared these
expenses on her June income statement. By doing this, she is following the
accounting principle of:
33. Revenue
realization.
34. Adequate
disclosure.
35. Matching.
36. Conservatism.
33. The
price of the goods sold or services rendered during a given accounting period
is called:
34. Net
income.
35. Profit.
36. Revenue.
37. Equity.
34. The
principle that states revenue should be recognized at the time goods are sold
or services rendered is called:
35. Adequate
disclosure.
36. Conservatism.
37. Matching.
38. Revenue
realization.
35. Recognizing
revenue when it is earned and not when cash is received and recognizing
expenses when the related goods or services are used rather than when they are
paid for is called:
36. Revenue
recognition.
37. Accrual
accounting.
38. Conservatism.
39. Matching.
36. The agreement
of the debit and credit totals of the trial balance gives assurance that:
37. All
transactions were posted correctly.
38. No
transactions were omitted.
39. The
number of accounts with debit balances equals the number of accounts with
credit balances.
40. The
total debits equal the total credits.
37. The
sequence of accounting procedures used to record, classify, and summarize
accounting information is called the:
38. Accounting
cycle.
39. Accounting
period.
40. Accrual
accounting.
41. Double-entry
bookkeeping.
38. The
purchase of equipment on credit is recorded by a:
39. Debit
to Equipment and a credit to Accounts Payable.
40. Debit
to Accounts Payable and a credit to Equipment.
41. Debit
to Equipment and a debit to Accounts Payable.
42. Credit
to Equipment and a credit to Accounts Payable.
39. The collection
of accounts receivable is recorded by a:
40. Debit
to Cash and a debit to Accounts Receivable.
41. Credit
to Cash and a credit to Accounts Receivable.
42. Debit
to Cash and a credit to Accounts Receivable.
43. Credit
to Cash and a debit to Accounts Receivable.
40. Which
of the following accounts normally has a debit balance?
41. Accounts
payable.
42. Retained
earnings.
43. Accounts
receivable.
44. Service
revenue.
41. In
the general ledger, a separate “account” is maintained for each:
42. Type
of asset and liability and for each element of owners’ equity.
43. Business
transaction.
44. Business
day.
45. Journal
entry.
42. In
accounting, the terms debit and credit indicate, respectively:
43. Increase
and decrease.
44. Left
and right.
45. Decrease
and increase.
46. Right
and left.
43. In a
ledger, debit entries cause:
44. Increases
in owners’ equity, decreases in liabilities, and increases in assets.
45. Decreases
in liabilities, increases in assets, and decreases in owners’ equity.
46. Decreases
in assets, decreases in liabilities, and increases in owners’ equity.
47. Decreases
in assets, increases in liabilities, and increases in owners’ equity.
44. Which
of the following accounts normally has a credit balance?
45. Cash.
46. Service
revenue.
47. Accounts
receivable.
48. Utilities
expense.
45. Which
of the following is not true regarding the general ledger account for Cash?
46. The
balance of the account indicates the amount of cash owned by the business on a
particular date.
47. Each
debit entry in the Cash account represents a cash receipt.
48. Debit
entries are made before credit entries.
49. Credit
entries in the Cash account represent cash payments.
46. The
rules of debit and credit may be summarized as follows:
47. Accounts
on the left side of the balance sheet are increased by debits, whereas,
accounts on the right side of the balance sheet are increased by credits.
48. The
balance of a ledger account is increased by debit entries and is decreased by
credit entries.
49. Accounts
on the left side of the balance sheet are increased by credits, whereas
accounts on the right side of the balance sheet are increased by debits.
50. The
balance of a ledger account is increased by credit entries and is decreased by
debit entries.
47. The
essential point of a double-entry system of accounting is that every
transaction:
48. Affects
accounts on both sides of the balance sheet.
49. Is recorded
in both the journal and the ledger.
50. Increases
one ledger account and decreases another.
51. Affects
two or more ledger accounts and is recorded by an equal dollar amount of debits
and credits.
48. Double-entry
accounting is characterized by which of the following?
49. Every
transaction affects both an asset account and either a liability account or an
owners’ equity account.
50. The
number of general ledger accounts with debit balances is equal to the number
with credit balances.
51. The
total dollar amount of debit entries posted to the general ledger is equal to
the dollar amount of the credit entries.
52. The
number of debit entries posted to the general ledger equals the number of
credit entries.
49. The
process of originally recording a business transaction in the accounting
records is termed:
50. Journalizing.
51. Footing.
52. Posting.
53. Balancing.
50. If
the trial balance has a higher debit balance than credit balance, it signifies:
51. Assets
are more than liabilities.
52. A
profit.
53. A
loss.
54. An
error has been made.
51. Brett
Tarek, a manager at D&J Landscaping, Inc. needs information regarding the
amount of accounts payable currently owed by the company. This information
would most easily be found in the:
52. General
ledger.
53. General
journal.
54. Income
statement.
55. Notes
to the financial statements.
52. Which
of the following accounting procedures requires the greatest knowledge of
generally accepted accounting principles?
53. Journalizing
business transactions.
54. Posting
journal entries to ledger accounts.
55. Preparing
a trial balance.
56. Locating
errors in a trial balance.
53. Transactions
are recorded in the general journal in:
54. Numerical
order.
55. Chronological
order.
56. Account
number order.
57. Financial
statement order.
54. A
transaction is first recorded in which of the following accounting records?
55. Trial
balance.
56. Ledger.
57. General
journal.
58. Balance
sheet.
55. What
type of account will normally contain a debit balance?
56. Asset.
57. Liability.
58. Owners’
equity.
59. Revenue.
56. If
the trial balance has a smaller debit balance than credit balance, it
signifies:
57. Assets
are more than liabilities.
58. A
profit.
59. A
loss.
60. An
error has been made.
57. The
manager of Grande Home Improvements purchased several cash registers for the
business on June 10 but does not remember whether he paid cash for the full
price or still owes a balance to the vendor. Where is the best place for the
manager to get the information about this transaction?
58. A
trial balance prepared at the end of June.
59. The
general journal.
60. A
balance sheet prepared at the end of June.
61. The
ledger account for equipment.
58. Sue
Costa, owner of A-1 Cleaning Services, invested an additional $75,000 in the
company. Which of the following would be a part of the correct journal entry to
record this transaction?
59. A
debit to the Cash account.
60. A
debit to the Equity account.
61. A
debit to the Capital Stock account.
62. A
debit to the Cash Received account.
59. If a
company purchases equipment on account:
60. Assets
will increase and owners’ equity will also increase.
61. Assets
will increase and owners’ equity will decrease.
62. Assets
will increase and owners’ equity will remain unchanged.
63. Assets
will increase and liabilities will decrease.
60. Preparing
a journal entry in proper form involves all the following except:
61. Listing
all accounts debited before any credits.
62. Computing
the balances in accounts involved in the transaction.
63. Indicating
the date of the transaction.
64. Providing
a brief written explanation of the transaction.
61. The
journal entry to record a particular business transaction includes a credit to
a liability account. This transaction is most likely also to include:
62. Issuance
of new capital stock.
63. The
purchase of an asset on account.
64. A
cash payment.
65. A
credit to Accounts Receivable.
62. The
journal entry to record a particular business transaction includes a credit to
the Cash account. This transaction is most likely also to include:
63. Issuance
of new capital stock.
64. The
purchase of an asset on account.
65. Payment
of an outstanding note payable.
66. A
credit to Accounts Receivable.
63. The
collection of an account receivable is recorded by a debit to Cash and a credit
to Accounts Payable. If this error is not corrected:
64. Total
liabilities are understated.
65. Total
assets are understated.
66. Total
liabilities are overstated.
67. Owners’
equity is overstated.
64. Posting
is the process of:
65. Transferring
debit and credit entries from the journal into the appropriate ledger accounts.
66. Determining
that the dollar amount of debit entries recorded in the ledger is equal to the
dollar amount of credit entries.
67. Entering
information into a computerized data base.
68. Preparing
journal entries to describe each business transaction.
65. If a
company purchases equipment for cash:
66. Assets
will increase and owners’ equity will also increase.
67. Assets
will increase and owners’ equity will decrease.
68. Assets
will increase and owners’ equity will remain unchanged.
69. Total
assets and owners’ equity will remain unchanged.
66. A
trial balance that is out of balance indicates that:
67. The
number of ledger accounts with debit balances is not equal to the number of
accounts with credit balances.
68. A
debit has been posted to the wrong account.
69. There
is not an equality of debit and credit amounts in the ledger.
70. A
journal entry has been completely omitted from the posting process.
67. A
trial balance consists of:
68. A
two-column schedule of all debit and credit entries posted to ledger accounts.
69. A
two-column financial statement intended for distribution to interested parties
outside the business.
70. A
two-column schedule showing the totals of all debits and of all credits made in
journal entries.
71. A
two-column schedule listing names and balances of all ledger accounts.
68. Green
Systems sold and delivered modems to Blue Computers for $660,000 to be paid by
Blue in three equal installments over the next three months. The journal entry
made by Blue Computers to record the last of the three installment payments
will include:
69. A
debit of $220,000 to Modem Expense.
70. A
debit of $220,000 to Accounts Receivable.
71. A
debit of $220,000 to Cash.
72. A
debit of $220,000 to Accounts Payable.
69. Which
of the following errors would be disclosed by preparation of a trial balance?
70. The
collection of an account receivable was recorded by a debit to the Land account
rather than to the Cash account.
71. The
collection of an account receivable for $219 was recorded by a $291 debit to
Cash and a $291 credit to Accounts Receivable.
72. The
collection of a $365 account receivable was not recorded at all.
73. The
collection of a $325 account receivable was recorded by a $325 debit to Cash
and a $325 debit to Accounts Receivable.
70. Which
of the following errors would not be disclosed by preparation of a trial
balance?
71. An
error was made in computing the balance of the Cash account.
72. A
journal entry included a debit to the Equipment account for $3,200, but this
amount was erroneously posted as $2,300.
73. During
the posting process, a $1,700 debit to Cash was accidentally entered in the
credit side of the Cash account.
74. The
journal entries recorded on the last day of the year have never been posted to
the ledger.
71. Black
Systems sold and delivered modems to White Computers for $330,000 to be paid by
White in three equal installments over the next three months. The journal entry
made by Black Systems to record this transaction will include:
72. A
debit to Sales Revenue for $330,000.
73. A
debit to Accounts Receivable for $330,000.
74. A
debit to Accounts Receivable for $110,000.
75. A
debit to Cash Paid for $330,000.
72. The
statement “This business produced net income of $520,000” is unclear because it
failed to specify:
73. The
accounting method, that is, accrual or cash basis.
74. Whether
the amount earned is before or after expenses.
75. The
time period.
76. The
amount of cash withdrawn from the business by the owner.
73. The
term revenue can best be described as:
74. The
selling price of goods and services rendered to customers during a given
accounting period.
75. The
cash received from selling goods and serving customers during a given
accounting period.
76. The
net increase in owners’ equity during a given period.
77. The
“bottom line” in the income statement.
74. The
realization principle indicates that revenue usually should be recognized and
recorded in the accounting records:
75. When
goods are sold or services are rendered to customers.
76. When
cash is collected from customers.
77. At
the end of the accounting period.
78. Only
when the revenue can be matched by an equal dollar amount of expenses.
75. In
February of each year, the Carlton Hotel holds a very popular wine tasting
event. Tickets must be ordered and paid for in advance, and are typically sold
out by November of the preceding year. The realization principle indicates that
the revenue from these ticket sales should be recognized in the period in which
the:
76. Order
is placed.
77. Wine
tasting event is held.
78. Payments
are received.
79. Expenses
associated with the wine tasting are paid in full.
76. Collection
of an accounts receivable:
77. Increases
the total assets of a company.
78. Decreases
the total assets of a company.
79. Does
not change the total assets of a company.
80. Reduces
a company’s total liabilities.
77. The
matching principle is best demonstrated by:
78. Using
debits to record decreases in owners’ equity and credits to record increases.
79. The
equation Assets = Liabilities + Owners’ Equity.
80. Allocating
the cost of an asset to expense over the periods during which benefits are
derived from the asset.
81. Offsetting
the cash receipts of the period with the cash payments made during the period.
78. Net
income is:
79. The
excess of debits over credits.
80. The
increase in owners’ equity resulting from the profitable operations of the
business.
81. The
excess of credits over debits.
82. The
increase in assets of a company during a year.
79. Clinton
prepares monthly financial statements. Which of the following violates the
matching principle?
80. A
portion of the salary payments made this month are not recognized as expense
because some of the work was done by employees last month.
81. The
premium on a six-month insurance policy is charged immediately to expense.
82. Expenses
for the period exceed revenues.
83. The
cost of advertising done during the month is charged to expense even though no
payment is due for 60 days.
80. The
matching principle:
81. Applies
only to situations in which a cash payment occurs before an expense is
recognized.
82. Applies
only to situations in which a cash receipt occurs before revenue is recognized.
83. Is
used in accrual accounting to determine the proper period in which to recognize
revenue.
84. Is
used in accrual accounting to determine the proper period for recognition of
expenses.
81. The
reason that revenue is recorded by a credit entry to a revenue account is:
82. That
revenue always involves a debit to the Cash account.
83. Explained
by the realization principle.
84. Explained
by the matching principle.
85. That
revenue increases owners’ equity.
82. Revenues
increase owners’ equity because:
83. Revenues
increase net income which increases retained earnings.
84. Revenues
are recorded by a credit.
85. Of
the matching principle.
86. The
realization principle requires revenues be recognized with an increase to
owners’ equity.
83. The
reason that both expenses and dividends are recorded by debit entries is that:
84. All
dividend and expense transactions involve offsetting credit entries to the Cash
account.
85. Both
expenses and dividends are offset against revenues in the income statement.
86. Both
expenses and dividends reduce owners’ equity.
87. The
statement is untrue-expenses are recorded by debits, but dividends are recorded
by credits to the owners’ equity account.
84. A
journal entry which records revenue must include:
85. A
debit to Cash.
86. A
credit to a revenue account.
87. A
credit to the owners’ equity account.
88. A
debit to the owners’ equity account.
85. A
journal entry to record revenue could include each of the following, except:
86. A
credit to a revenue account.
87. A
credit to the Capital Stock account.
88. A
debit to Cash.
89. A
debit to Accounts Receivable.
86. A
journal entry to recognize an expense must include:
87. A
credit to Accounts Payable.
88. A
credit to an expense account.
89. A
credit to Cash.
90. A
debit to an expense account.
87. A
journal entry to recognize an expense could include each of the following,
except:
88. A
debit to an expense account.
89. A
credit to Accounts Payable.
90. A
debit to a liability account.
91. A
credit to Cash.
88. Which
of the following accounts normally does not have a debit balance?
89. Dividends.
90. Wage
Expense.
91. Building.
92. Capital
Stock.
89. On
June 18, Baltic Arena paid $6,600 to Marvin Maintenance, Inc. for cleaning the
arena following a monster truck show held on June 9th. This transaction:
90. Is
recorded by debiting the Retained Earnings account.
91. Is
recorded by debiting Cash and crediting Cleaning Expense.
92. Causes
a decrease in owners’ equity by increasing expenses for June.
93. May
not be recorded until all revenue generated from the monster truck show has
been collected in cash.
90. Davis,
Inc., a music group, entertained at a black-tie dinner dance on April 26, and
collected the fee in full at the end of the evening. This transaction:
91. Causes
an increase in assets and revenue, as well as an increase in owners’ equity.
92. Is
recorded by debiting Cash and crediting the Retained Earnings account.
93. Causes
an increase in assets and a decrease in owners’ equity.
94. Violates
the matching principle unless any expenses associated with this cash receipt
are paid prior to recording the revenue.
91. At
the end of October, Flagship Marina received a bill for fuel used in October.
Payment is not due until November 30. This transaction:
92. Should
not be recorded in the accounting records until November.
93. Causes
a decrease in assets and in owners’ equity in November, when the bill is paid.
94. Should
be recorded as an expense of October, regardless of the payment date.
95. Is
recorded as a liability in October, but is not considered an expense until
paid.
92. On
June 27, Healthy Life Services, Inc. performed extensive tests on lab specimens
submitted by several customers and sent invoices totaling $5,200, due in 30
days.
93. No revenue
from rendering these services should be recorded until payment is received.
94. This
situation causes an increase in assets and in revenue in June, but has no
effect on owners’ equity until payment is received.
95. Revenue
is earned in June, but assets are not increased until payment is received.
96. Assets,
revenue, and owners’ equity are increased in June, regardless of when payments
are received for the services rendered.
The following transactions occurred during March, the first
month of operations for Quality Galleries, Inc.
* Capital stock was issued in exchange for $360,000 cash.
* Purchased $180,000 of equipment by making a $60,000 cash down
payment and signing a note payable for the balance.
* Made a $35,000 cash payment on the note payable from the purchase
of equipment.
* Sold a piece of equipment for cash of $18,000. The equipment
was sold at cost, so there is no gain or loss on the sale.
93. What
is the balance in the Cash account at the end of March?
94. $283,000.
95. $343,000.
96. $318,000.
97. $378,000.
94. What
are total assets of Quality Galleries at the end of March?
95. $283,000.
96. $162,000.
97. $445,000.
98. $480,000.
95. What
is the balance in the Note Payable account at the end of March?
96. $120,000.
97. $85,000.
98. $35.000.
99. $155,000
96. What
is the total owners’ equity at the end of March?
97. $283,000.
98. $445,000.
99. $480,000.
100.
$360,000.
The following transactions occurred during May, the first month
of operations for Hunter Products, Inc:
* Issued 50,000 shares of capital stock to the owners of the
corporation in exchange for $600,000 cash.
* Purchased a piece of land for $400,000, making a $150,000 cash
down payment and signing a note payable for the balance.
* Made a $60,000 cash payment on the note payable from the
purchase of land.
* Purchased equipment on credit from BBW, Inc. for $63,000.
97. What
is the balance in the Cash account at the end of May?
98. $210,000.
99. $390,000.
100.
$600,000.
101.
$810,000.
98. What
are total assets of Hunter Products at the end of May?
99. $913,000.
100.
$790,000.
101.
$853,000.
102.
$916,000.
99. What
is the total of Hunter Products’ liabilities at the end of May?
100.
$253,000.
101.
$190,000.
102.
$63,000.
103.
$313,000.
100.
What is the total owners’ equity at the end of May?
101.
$810,000.
102.
$600,000.
103.
$790,000.
104.
$660,000.
101.
Master Equipment has a $17,400 liability to Arrow Paint Co. When
Master Equipment makes a partial payment of $7,600 on this liability, which of
following is true about the journal entry made by Master to record this
transaction?
102.
The Cash Paid Out account is debited $7,600.
103.
The liability account Accounts Payable is credited $9,800.
104.
The Cash account is debited $7,600.
105.
The Accounts Payable account is debited $7,600.
102.
Eagle News has a $6,000 account receivable from one of its
advertisers, Allwood Floors. When Eagle receives $3,600 from Allwood as partial
payment:
103.
Eagle should debit Accounts Receivable for $3,600.
104.
Eagle should credit Cash for $3,600.
105.
Eagle should credit Accounts Receivable for $3,600.
106.
Eagle makes no journal entry until the total of $6,000 is
received from Allwood.
103.
Bruno’s Pizza Restaurant makes full payment of $8,300 on an
account payable to Stella’s Cheese Co. Stella’s would record this transaction
with a:
104.
Debit to Accounts Payable for $8,300.
105.
Credit to Cash for $8,300.
106.
Credit to Accounts Receivable for $8,300.
107.
Credit to Accounts Payable for $8,300.
104.
The purchase of office equipment at a cost of $7,600 with an
immediate payment of $4,200 and agreement to pay the balance within 60 days is
recorded by:
105.
A debit of $7,600 to Office Equipment, a debit of $4,200 to
Accounts Receivable, and a credit of $3,400 to Accounts Payable.
106.
A debit of $7,600 to Office Equipment, a credit of $4,200 to
Cash, and a credit of $3,400 to Accounts Receivable.
107.
A debit of $3,400 to Accounts Receivable, a debit of $4,200 to
Cash, and a credit of $7,600 to Office Equipment.
108.
A debit of $7,600 to Office Equipment, a credit of $4,200 to
Cash, and a credit of $3,400 to Accounts Payable.
105.
Land is purchased by making a cash down payment of $40,000 and
signing a note payable for the balance of $130,000. The journal entry to record
this transaction in the accounting records of the purchaser includes:
106.
A credit to Land for $40,000.
107.
A debit to Cash for $40,000.
108.
A debit to Land for $170,000.
109.
A debit to Note Payable for $130,000.
The bookkeeper for Wood Mfg. made the following journal entry on
January 30, 2009:
106.
This transaction involves:
107.
The sale of land and building for $286,000.
108.
Payment of $221,000 on a note payable.
109.
The receipt of $65,000 cash.
110.
An increase in liabilities of $221,000.
107.
Before the journal entry above, Wood had assets, liabilities,
and owners’ equity of $450,000, $100,000, and $350,000, respectively. What are
total assets immediately after the above transaction occurs?
108.
$221,000.
109.
$671,000.
110.
$735,500.
111.
$450,000.
108.
This transaction involves:
109.
Martin’s collection of $35,000 on an account receivable.
110.
Payment of $21,000 cash by Martin.
111.
A $21,000 overall increase in Martin’s assets.
112.
Sale of equipment by Martin for $51,000.
109.
Before the journal entry above, Martin had assets of $900,000;
liabilities of $460,000; and owners’ equity of $440,000. Total assets
immediately after the above transaction has been recorded amount to:
110.
$905,000.
111.
$921,000.
112.
$956,000.
113.
$794,000.
Montauk Oil Co. reports these account balances at December 31,
2010
On January 2, 2011, Montauk Oil collected $50,000 of its
accounts receivable and paid $20,000 of its accounts payable.
110.
In a trial balance prepared at December 31, 2010 the total of
the debit column is:
111.
$1,540,000.
112.
$780,000.
113.
$1,020,000.
114.
$700,000.
111.
In a trial balance prepared at January 3, 2011, the total of the
debit column is:
112.
$760,000.
113.
$1,570,000.
114.
$740,000.
115.
$370,000.
112.
On January 3, 2011, total liabilities are:
113.
$370,000.
114.
$350,000.
115.
$300,000.
116.
$70,000.
Ceramic Products, Inc. reports these account balances at January
1, 2009 (shown in alphabetical order):
On January 5, Ceramic Products collected $12,000 of its accounts
receivable and paid $11,000 on its note payable.
113.
In a trial balance prepared for Ceramic Products on January 1,
2009, the total of the credit column is:
114.
$182,000.
115.
$196000.
116.
$166,000.
117.
$286,000.
114.
In a trial balance prepared on January 5, 2009, the total of the
credit column is:
115.
$275,000.
116.
$286,000.
117.
$287,000.
118.
$297,000.
115.
On January 5, 2009, total liabilities are:
116.
$0.
117.
$30,000.
118.
$56,000.
119.
$41,000.
116.
Ben Dryden, president of Jet Glass, Inc, noticed a $8,000 debit
to Accounts Payable in the company’s general ledger. This debit could
correspond to:
117.
A $8,000 sale to a customer.
118.
A purchase of equipment costing $8,000 on credit.
119.
A payment of $8,000 to a supplier to settle a balance due.
120.
The failure to pay this month’s $8,000 utility bill on time.
The following entry appears in Galloway Paints general journal
on April 23, 2011:
117.
This transaction involves:
118.
Galloway’s collection of $20,000 on an account payable.
119.
Payment of $6,000 cash by Galloway
120.
A $26,000 overall increase in Galloway’s assets.
121.
Sale of inventory by Galloway for $26,000.
118.
Before the journal entry above, Galloway had assets of $450,000;
liabilities of $230,000; and owners’ equity of $220,000. Total assets
immediately after the above transaction has been recorded amount to:
119.
$430,000.
120.
$450,000.
121.
$470,000.
122.
$476,000.
Indirect Oil Co. reports these account balances at December 31,
2011
On January 2, 2012, Indirect Oil collected $25,000 of its
accounts receivable and paid $20,000 of its accounts payable.
119.
In a trial balance prepared at December 31, 2011 the total of
the debit column is:
120.
$805,000.
121.
$780,000.
122.
$415,000.
123.
$390,000.
120.
In a trial balance prepared at January 3, 2012, the total of the
debit column is:
121.
$760,000.
122.
$825,000.
123.
$740,000.
124.
$370,000.
121.
On January 3, 2012, total liabilities are:
122.
$185,000.
123.
$165,000.
124.
$150,000.
125.
$70,000.
Wilson Trucking, Inc. reports these account balances at January
1, 2012 (shown in alphabetical order):
On January 5, Wilson Trucking collected $175,000 of its accounts
receivable, paid $150,000 on its accounts payable, and paid $11,000 on its note
payable.
122.
In a trial balance prepared for Wilson Trucking on January 1,
2012, the total of the credit column is:
123.
$1,580,000.
124.
$1,560,000.
125.
$1,620,000.
126.
$3,120,000.
123.
In a trial balance prepared for Wilson Trucking on January 5,
2012, the total of the debit column is:
124.
$1,580,000.
125.
$1,399,000.
126.
$1,620,000.
127.
$3,120,000.
124.
In a trial balance prepared on January 5, 2012, the total of the
credit column is:
125.
$1,350,000.
126.
$1,399,000.
127.
$1,560,000.
128.
$1,721,000.
125.
On January 5, 2012, total liabilities are:
126.
$0.
127.
$579,000.
128.
$1,399,000.
129.
$1,721,000.
126.
On January 5, 2012, total assets are:
127.
$1,350,000.
128.
$1,399,000.
129.
$1,560,000.
130.
$1,574,000.
Essay Questions
127.
Accounting terminology
Listed below are nine technical accounting terms introduced in
this chapter:
(A.) The accounting record in which transactions are initially
recorded.
(B.) A concept designed to avoid overstatement of the financial
strength of a company.
(C.) A schedule prepared to determine the equality of the debit
and credit amounts in the ledger.
(D.) An amount entered in the right side of a ledger account.
(E.) The sequence of procedures involved in recording
transactions, processing the information in the accounting system, and
summarizing the information in the form of financial statements.
(F.) The accounting record that contains a separate account for
each type of asset and liability, and for each element of owners’ equity
appearing in the balance sheet.
(G.) The system of accounting in which every business
transaction is recorded by equal dollar amounts of debit and credit entries.
128.
Recording transactions directly in T accounts; trial balance
On July 20, Mollie Rose began a new business called MR Printing,
which provides typing, duplicating, and printing services. The following six
transactions were completed by the business during July.
(A.) Issued to Rose 1,000 shares of capital stock in exchange
for her investment of $200,000 cash.
(B.) Purchased land and a small building for $450,000, paying
$165,000 cash and signing a note payable for the balance. The land was
considered to be worth $240,000 and the building $210,000.
(C.) Purchased office equipment for $30,000 from Quality
Interiors, Inc. Paid $17,000 cash and agreed to pay the balance within 60 days.
(D.) Purchased a motorcycle on credit for $3,400 to be used for
making deliveries to customers. Mollie agreed to make payment to Spokes, Inc.
within 10 days.
(E.) Paid in full the account payable to Spokes, Inc.
(F.) Borrowed $30,000 from a bank and signed a note payable due
in six months.
Instructions
(A.) Record the above transactions directly in the T accounts
below. Identify each entry in a T account with the letter shown for the
transaction. This exercise does not call for the use of a journal.
(B.) Prepare a trial balance at July 31 by completing the form
provided.
129.
Recording transactions in T accounts; trial balance
On May 15, George Manny began a new business, called Sounds,
Inc., a recording studio to be rented out to artists on an hourly or daily
basis. The following six transactions were completed by the business during
May:
(A.) Issued to Manny 5,000 shares of capital stock in exchange
for his investment of $200,000 cash.
(B.) Purchased land and a building for $410,000, paying $100,000
cash and signing a note payable for the balance. The land was considered to be
worth $310,000 and the building $100,000.
(C.) Installed special insulation and soundproofing throughout
most of the building at a cost of $120,000. Paid $32,000 cash and agreed to pay
the balance in 60 days. Manny considers these items to be additional costs of
the building.
(D.) Purchased office furnishings costing $18,000 and recording
equipment costing $88,400 from Music Supplies. Sounds paid $28,000 cash with
the balance due in 30 days.
(E.) Borrowed $180,000 from a bank by signing a note payable.
(F.) Paid the full amount of the liability to Music Supplies arising
from the purchases in D above.
Instructions
(A.) Record the above transactions directly in the T accounts
below. Identify each entry in a T account with the letter shown for the
transaction. This exercise does not call for the use of a journal.
(B.) Prepare a trial balance at May 31 by completing the form
provided.
SOUNDS, INC.
Trial Balance
May 31, 20__
Debit Credit
130.
Recording transactions journal entry grid
A list of accounts for Harding Company is given below, followed
by a series of transactions. Indicate the accounts that would be debited and
credited in recording each transaction by placing the appropriate number (or
numbers) in the space provided.
131.
Listed below are accounts of Global Company, each identified by
a number. Following this list of accounts is a series of transactions. You are
to indicate for each transaction the accounts that should be debited and
credited by inserting the proper account numbers in the space provided.
132.
Recording transactions in general journal
Enter the following transactions in the two-column journal of
Baumann Bathrooms. Include a brief explanation of the transaction as part of
each journal entry.
133.
Recording transactions in general journal
Enter the following transactions in the two-column journal of
Festive Parties, Inc. Include a brief explanation of the transaction as part of
each journal entry.
134.
Journalize and post basic transactions
Precision Grading Co. was organized to grade construction sites.
* On June 1, owner Dave Precision deposited $90,000 in a new
bank account opened in the name of the business in exchange for stock.
* On June 3, the company acquired grading equipment costing
$89,000, paying $43,000 cash and signing a note payable for the balance.
* On June 10, the company paid $13,000 of the amount owed for
equipment acquired on June 3.
Instructions: Journalize these three transactions and post to
the ledger accounts.
135.
Journalize and post basic transactions
Geller Landscaping was organized on April 5 when the corporation
issued 20,000 shares of capital stock to Larry Geller in exchange for $60,000
cash.
* On April 8, the business acquired gardening equipment by
paying cash of $26,000 and signing a $20,000 note payable, due in four monthly
installments of $5,000 each, beginning on April 15.
* On April 15, Larry Geller made the first payment on the note
payable by writing a check from the business bank account.
Instructions: Journalize these three transactions and post to
the ledger accounts.
136.
Effects of a series of transactions on balance sheet items
Fieldstone, Inc. had the following transactions during the month
of March, the first month of operations for the business:
* The corporation issued 12,000 shares of capital stock to Sandy
Fieldstone in exchange for $120,000 cash.
* Purchased $73,000 of equipment; made a $18,000 down payment
and signed a note payable for the balance.
* Made payment of $9,000 on the amount owed for equipment.
(A.) Compute the balance in the Cash account at the end of
March.
(B.) What are the total assets of Fieldstone, Inc. at the end of
March?
(C.) Compute the balance in the Notes Payable account at the end
of March.
(D.) What is the total amount of owners’ equity at the end of
March?
137.
Effects of a series of transactions on balance sheet items
Clark Plumbing had the following transactions during the month
of June, the first month of operations for the business:
* The corporation issued 12,000 shares of capital stock to Bill
Clark in exchange for his investment of $72,000 cash.
* Purchased $36,000 of equipment; made an $8,000 down payment
and signed a note payable for the balance.
* Made payment of $4,000 on the amount owed for equipment.
(A.) Compute the balance in the Cash account at the end of June.
(B.) What are the total assets of Clark Plumbing at the end of
June?
(C.) Compute the balance in the Notes Payable account at the end
of June.
(D.) What is the total amount of owners’ equity at the end of
June?
138.
Double-entry accounting
The accounting system of most businesses, whether manual or
computer-based, is some form of a double-entry system of accounting.
(A.) What is meant by the term “double-entry accounting”?
(B.) Explain how the double-entry system is applied in
accounting for the following transaction:
Majestic Company purchases a piece of equipment costing $6,000,
paying $3,000 cash with the balance of the purchase price to be paid within 60
days.
139.
Rules of debit and credit as applied to balance sheet accounts
Items in the balance sheet are classified into three categories:
assets, liabilities, and owners’ equity.
(A.) Identify by name two ledger accounts in each of the first
two categories above (assets and liabilities) and one owners’ equity account.
State whether each account would normally have a debit or credit balance.
(B.) Describe briefly the rules of debits and credits as applied
to the three categories of balance sheet accounts: asset accounts, liability
accounts, and owners’ equity accounts.
140.
Matching principle
In April, Grinnel Paving, Inc. acquired a large quantity of
crushed stone on account with payment due in 90 days. The stone was used in May
when Grinnel Paving, Inc. completed a large parking lot for a local shopping
center. In early July, Grinnel Paving, Inc. paid the supplier from which the
crushed stone had been purchased. In which month should Grinnel Paving, Inc. recognize
the cost of the crushed stone as an expense? What accounting principle provides
the justification for the answer?
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