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Exam 16: Accounting for Business Transactions

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Question 111

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Cash dividends paid to stockholders are not reported on the income statement.

A) True
B) False

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Question 112

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Provided below is a list of definitions and terms. Match them by placing the letter that identifies the best definition

Premises

Responses

Ledger

A list of accounts and their balances at a point in time; the total debit balances should equal the total credit balances.

Balance column account

A list of all accounts used by a company and the identification number assigned to each account.

Trial balance

A decrease in an asset, dividend, and expense account, and an increase in a liability, common stock and revenue account; recorded on the right side of a T-account.

Debit

The ratio of total liabilities to total assets; used to reflect the risk associated with the company's debts.

Account balance

An account with debit and credit columns for recording entries and another column for showing the balance of the account after each entry.

Journal

A record containing all accounts of a company and their balances.

Chart of accounts

A record of each transaction in one place that shows debits and credits for each transaction.

Debt ratio

The difference between total debits and total credits for an account including the beginning balance.

Credit

An increase in an asset, dividend, and expense account, and a decrease in a liability, common stock, and revenue account; recorded on the left side of a T-account.

Note payable

A written promise to pay a definite sum of money on a specified future date.

Premises

Ledger

Balance column account

Trial balance

Debit

Account balance

Journal

Chart of accounts

Debt ratio

Credit

Note payable

Responses

A list of accounts and their balances at a point in time; the total debit balances should equal the total credit balances.

A list of all accounts used by a company and the identification number assigned to each account.

A decrease in an asset, dividend, and expense account, and an increase in a liability, common stock and revenue account; recorded on the right side of a T-account.

The ratio of total liabilities to total assets; used to reflect the risk associated with the company's debts.

An account with debit and credit columns for recording entries and another column for showing the balance of the account after each entry.

A record containing all accounts of a company and their balances.

A record of each transaction in one place that shows debits and credits for each transaction.

The difference between total debits and total credits for an account including the beginning balance.

An increase in an asset, dividend, and expense account, and a decrease in a liability, common stock, and revenue account; recorded on the left side of a T-account.

A written promise to pay a definite sum of money on a specified future date.

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Correct Answer

Premises

Responses

Ledger

Balance column account

Trial balance

Debit

Account balance

Journal

Chart of accounts

Debt ratio

Credit

Note payable

Premises

Ledger

Balance column account

Trial balance

Debit

Account balance

Journal

Chart of accounts

Debt ratio

Credit

Note payable

Responses

Question 113

Essay

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Explain debits and credits and their role in the accounting system of a business.

The balance column in a ledger account is:

Specter Consulting purchased $7,000 of supplies and paid cash immediately. Which of the following general journal entries will Specter Consulting make to record this transaction? Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

Identify the account below that is classified as a liability account:

Assets would be increased with a ________ entry and liabilities would be increased with a________ entry.

After preparing an (unadjusted) trial balance at year-end, R. Chang of Chang Window Company discovered the following errors: 1. Cash payment of the $225 telephone bill for December was recorded twice. 2. Cash payment of a note payable was recorded as a debit to Cash and a debit to Notes Payable for $1,000. 3. A $900 cash dividend was recorded to the correct accounts as $90. 4. An additional investment of $5,000 cash by a stockholder was recorded as a debit to Common Stock and a credit to Cash. 5. A credit purchase of office equipment for $1,800 was recorded as a debit to the Office Equipment account with no offsetting credit entry. Using the form below, indicate whether the error would cause the trial balance to be out of balance by placing an X in either the yes or no column. $\begin{array} { l l l } \text { Error } & \text { Yes } & \text { No } \\1 & & \\2 & & \\3 & & \\4 & &\\5 &\end{array}$

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.

A balanced trial balance is proof that no errors were made in journalizing transactions, posting to the ledger, and preparing the trial balance.

All of the following are asset accounts except:

During the month of March, Harley's Computer Services made purchases on account totaling $43,500. Also during the month of March, Harley was paid $8,000 by a customer for services to be provided in the future and paid $36,900 of cash on its accounts payable balance. If the balance in the accounts payable account at the beginning of March was $77,300, what is the balance in accounts payable at the end of March?

The trial balance can serve as a replacement for the balance sheet, since total debits must equal total credits.

Identify the statement that is incorrect.

The balances for the accounts of Milo's Management Co. for the year ended December 31 are shown below. Each account shown had a normal balance. Calculate the correct balance for Cash and prepare a trial balance.

Smart Consulting, paid cash dividends of $2,000 to its common stockholders. Identify the general journal entry below that Smart Consulting will make to record the transaction.

Source documents identify and describe transactions and events entering the accounting process.

The debt ratio is calculated by dividing total assets by total liabilities.

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?

Jerry's Shop had the following assets and liabilities at the beginning and end of the current year: $\begin{array}{lcl}&\text { Assets } & \text { Liabilities } \\\text { Beginning of the year } & \$ 114,000 & \$ 68,000 \\\text { End of the year } & 135,000 & 73,000\end{array}$ If there were no stockholder investments or dividends paid during the year, what was the amount of net income earned by Jerry's Shop?