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Exam 16: Accounting for Business Transactions

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Question 81

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Alejandro Consulting paid $2,500 cash for a 5-month insurance policy that begins on March 1. Given the choices below, determine the general journal entry that Alejandro Consulting will make to record the cash payment. Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

A) $\begin{array}{|l|r|r|}\hline \text { Insurance Expense } & 2,500 & \\\hline \text { Cash } & & 2,500 \\\hline\end{array}$
B) $\begin{array}{|l|r|l|}\hline \text { Cash } & 2,500 \\\hline \text { Insurance Expense } && 2,500 \\\hline\end{array}$
C) $\begin{array}{|l|r|}\hline \text { Cash } & 2,500 \\\hline \text { Prepaid Insurance } & 2,500\\\hline \end{array}$
D) $\begin{array}{|l|r|r|}\hline \text { Prepaid Insurance } & 2,500 & \\\hline \text { Cash } & & 2,500 \\\hline\end{array}$
E) $\begin{array}{|l|r|r|}\hline \text { Insurance Expense } & 2,500 & \\\hline \text { Prepaid Insurance } & & 2,500 \\\hline\end{array}$

F) All of the above
G) None of the above

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Question 82

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A credit entry:

A) Increases asset and expense accounts, and decreases liability, common stock, and revenue accounts.
B) Always decreases an account.
C) Decreases asset and expense accounts, and increases liability, common stock, and revenue accounts.
D) Is recorded on the left side of a T-account.
E) Always increases an account.

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

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Question 83

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You decrease the Accounts Payable account on the ________ side of its account.

The credit purchase of a new oven for $4,700 was posted to Kitchen Equipment as a $4,700 debit and to Accounts Payable as a $4,700 debit. What effect would this error have on the trial balance?

The debt ratio helps to assess the risk a company has of failing to pay its debts and is helpful to both its owners and creditors.

A ________ gives a complete chronological record of each transaction in one place, and shows debits and credits for each transaction.

Revenues always increase equity.

Indicate on which financial statement each of the following items appears. Use I for income statement, E for statement of retained earnings and B for balance sheet. a. Fees Earned b. Cash c. Unearned Revenue d. Rent expense e. Accounts Receivable f. Notes Payable g. Prepaid Rent h. Salaries Expense i. Notes Payable j. Dividends

List the four steps in recording transactions.

The following accounts appear on either the Income Statement (IS) or Balance Sheet (BS). In the space to the left of each account, write IS or BS to identify the statement on which the account appears. ____ 1. Office Equipment ____ 2. Rent Expense ____ 3. Unearned Revenue ____ 4. Rent Expense ____ 5. Accounts Payable ____ 6. Common Stock ____ 7. Fees Revenue ____ 8. Cash ____ 9. Notes Receivable ____ 10. Wages Payable

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

Given each of the following errors, indicate on the table below the amount by which the trial balance will be out of balance and which trial balance column (debit or credit) will have the larger total as a result of the error. a. $100 debit to Cash was debited to the Cash account twice. b. $1,900 credit to Sales was posted as a $190 credit. c. $5,000 debit to Office Equipment was debited to Office Supplies. d. $625 debit to Prepaid Insurance was posted as a $62.50 debit. e. $520 credit to Accounts Payable was not posted. $\begin{array}{ll}&\text { Amount Out } & \text { Column Having } \\\text { Error }&\text { of Balance }&\text { Larger Total }\\a.\\b.\\c.\\d.\\e.\end{array}$

If the Common stock account had a $10,000 credit balance at the beginning of the period, and during the period, an additional $5,000 of common stock is issued, the balance in the common stock account listed on the trial balance will be equal to a debit balance of $5,000.

Green Cleaning purchased $500 of office supplies on credit. The company's policy is to initially record prepaid and unearned items in balance sheet accounts. Which of the following general journal entries will Green Cleaning make to record this transaction?

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

The issuance of common stock always decrease equity.

Wiley Hill opened Hill's Repairs on March 1 of the current year. During March, the following transactions occurred: 1. Wiley invested $25,000 cash in the business in exchange for common stock. 2) Wiley contributed $100,000 of equipment to the business in exchange for common stock. 3) The company paid $2,000 cash to rent office space for the month of March. 4) The company received $16,000 cash for repair services provided during March. 5) The company paid $6,200 for salaries for the month of March. 6) The company provided $3,000 of services to customers on account. 7) The company paid cash of $500 for utilities for the month of March. 8) The company received $3,100 cash in advance from a customer for repair services to be provided in April. 9) The company paid $5,000 in cash dividends. Based on this information, the total amount of stockholders' equity reported on the balance sheet at the end of March would be:

Jackson Services had the following accounts and balances at December 31: Using the information in the table, calculate the company's reported net income for the period.

A $130 credit to Supplies was credited to Fees Earned by mistake. By what amounts are the accounts under- or overstated as a result of this error?

Expenses always decrease equity.