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Exam 2: Accounting for Business Transactions

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Question 21

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Russell Co.received a $400 utility bill for the current month's electricity.It is not due until the end of the next month which is when they intend to pay it.Which of the following general journal entries will Russell Co.make to record the receipt of the bill?

A)
B)
C)
D)
E) No journal entry is required.

F) A) and B)
G) B) and D)

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Question 22

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A business uses a credit to record:

A) An increase in an expense account.
B) A decrease in an asset account.
C) A decrease in an unearned revenue account.
D) A decrease in a revenue account.
E) A decrease in a common stock account.

F) A) and B)
G) B) and E)

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Question 23

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A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage.

On April 30,Gomez Services had an Accounts Receivable balance of $18,000.During the month of May,total credits to Accounts Receivable were $52,000 from customer payments.The May 31 Accounts Receivable balance was $13,000.What was the amount of credit sales during May?

The steps in the accounting process focus on analyzing and recording financial transactions and events within a company.Those steps are shown below.Using the number system of 1 as the first step and 4 as the last step in the process,number the steps in the correct order in which they would occur (1 thru 4). _____ Analyze transactions using the accounting equation. _____ Record journal entry. _____ Post entry to ledger. _____ Identify transactions and source documents.

Victor Services had the following assets and liabilities at the beginning and end of the current year: If $12,000 of common stock was issued during the year,but no dividends were paid during the year,what was the amount of net income earned by Victor Services?

A list of all ledger accounts and their balances at a point in time is called a(n) :

A business's source documents may include all of the following $\bold{except:}$

The financial statement that summarizes how equity changes over the reporting period is called the balance sheet.

Explain the difference between a general ledger and a chart of accounts.

Jackson Advertising Co.had assets of $475,000; liabilities of $275,500; and equity of $199,500.Calculate its debt ratio.

The right side of an account is called the debit side.

At year-end,Henry Laundry Service noted the following errors in its trial balance: 1.It understated the total debits to the Cash account by $500 when computing the account balance. 2.A credit sale for $311 was recorded as a credit to the revenue account,but the offsetting debit was not posted. 3.A cash payment to a creditor for $2,600 was never recorded. 4.The $680 balance of the Prepaid Insurance account was listed in the credit column of the trial balance. 5.A $24,900 van purchase was recorded as a $24,090 debit to Equipment and a $24,090 credit to Notes Payable. 6.A purchase of office supplies for $150 was recorded as a debit to Office Equipment.The offsetting credit entry was correct. 7.An additional investment of $4,000 by stockholders was recorded as a debit to Common Stock and as a credit to Cash. 8.The cash payment of the $510 utility bill for December was recorded (but not paid)twice. 9.The revenue account balance of $79,817 was listed on the trial balance as $97,817. 10.A $1,000 cash dividend was recorded as a $100 debit to Dividends and $100 credit to cash. Using the form below,indicate whether each error would cause the trial balance to be out of balance,the amount of any imbalance,and whether a correcting journal entry is required.

The debt ratio of Company A is 0.31 and the debt ratio of Company B is 0.21.Based on this information,an investor can conclude:

A general journal gives a complete record of each transaction in one place,and shows the debits and credits for each transaction.

Business transactions and events are the starting points of financial statements.

Jerry's Shop had the following assets and liabilities at the beginning and end of the current year: If there were no stockholder investments or dividends paid during the year,what was the amount of net income earned by Jerry's Shop?

An account's balance is the difference between the total debits and total credits for the account,including any beginning balance.

Drew Castle is an insurance appraiser.Shown below are (a)several accounts in his ledger with each account preceded by an identification number,and (b)several transactions completed by Castle.Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction.

At the end of its first month of operations,JMP Consulting reported net income of $25,000.They also had account balances of: Cash,$18,000; Office Supplies,$2,000; and Accounts Receivable,$10,000.Stockholders' total investments for this first month was $5,000.There were no dividends in the first month. Calculate the amount of total stockholders' equity reported on the balance sheet at month-end.