Principles Of Accounting 12th Edition By Needles Powers Test Bank

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Principles Of Accounting 12th Edition By Needles Powers Test Bank

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WITH ANSWERS
Principles Of Accounting 12th Edition By Needles Powers Test Bank

Chapter 2: Analyzing and Recording Business Transactions

Student: ___________________________________________________________________________

  1. The valuation issue deals with how the components of a transaction should be categorized.
    True    False

 

  1. Business transactions are economic events that should be recorded in the accounting records.
    True    False

 

  1. In accounting, to recognize means to record a transaction or event.
    True    False

 

  1. Generally accepted accounting principles state that all business transactions should be valued at fair value both when they occur and at all subsequent reporting dates.
    True    False

 

  1. Fair value is the exchange price of an actual or potential business transaction between market participants.
    True    False

 

  1. Normally, the value of an asset remains at its initial fair value or cost until the asset is sold, expires, or is consumed.
    True    False

 

  1. A credit to an asset account means that asset account has been increased.
    True    False

 

  1. A debit has an unfavorable effect on an account.
    True    False

 

  1. For a T account, an account balance is the difference in total dollars between total debit footings and total credit footings.
    True    False

 

  1. A decrease in a liability is recorded by a credit.
    True    False

 

  1. The double-entry system is possible because all business transactions have at least two equal and opposite aspects.
    True    False

 

  1. A decrease in the Owners Capital account is recorded with a debit.
    True    False

 

  1. Owners withdrawals should appear on the statement of owners equity.
    True    False

 

  1. The Owners Withdrawals account has a normal debit balance.
    True    False

 

  1. The first step in the accounting cycle is to post the journal entries to the ledger and prepare a trial balance.
    True    False

 

  1. The normal balance of an account is the side (debit or credit) used to decrease the account.
    True    False

 

  1. The general ledger is the basic storage unit for accounting data and is used to accumulate
    amounts from similar transactions.
    True    False

 

  1. One of the general rules of the double-entry system is that total debits must always be equal to total credits.
    True    False

 

  1. Withdrawls and revenues are deductions from owners equity.
    True    False

 

  1. When a withdrawal is made, the Cash account is debited and the Withdrawals account is credited.
    True    False

 

  1. Liabilities are established with credits and eliminated with debits.
    True    False

 

  1. Generally, before Accounts Receivable is debited, it is credited.
    True    False

 

  1. A journal entry is a notation that consists of either a single debit or a single credit that is recorded in the general ledger.
    True    False

 

  1. Proper journal form is a way of recording a transaction with the date, debit account, and debit amount shown on one line, and the credit account (indented) and credit amount shown on the next line.
    True    False

 

  1. When a company records the purchase of 1 month of prepaid expense the transaction does not affect the totals of assets or liabilities and owners equity.
    True    False

 

  1. In a trial balance, all debits are listed before all credits.
    True    False

 

  1. A trial balance is normally prepared at the end of each business day.
    True    False

 

  1. When the columns of the trial balance equal each other, it is still possible that errors may have occurred in recording and posting the transactions.
    True    False

 

  1. A transposition error will cause the trial balance to be out of balance by an amount that is evenly divisible by two.
    True    False

 

  1. Recording an account with a debit balance as a credit, or vice versa, will cause the trial balance to be out of balance by an amount that is evenly divisible by two.
    True    False

 

  1. Once in a while, a transaction leaves an account with a balance that isnt normal.  When this occurs, the abnormal balance should be corrected to the normal balance before copying the balance into the trial balance.
    True    False

 

  1. A trial balance may be prepared at any point in time.
    True    False

 

  1. The journal is a chronological record of all transactions.
    True    False

 

  1. Entering transactions into the journal is called posting.
    True    False

 

  1. In a journal entry, debits are always recorded before credits.
    True    False

 

  1. In a journal entry, debits are always indented.
    True    False

 

  1. In a journal entry, the Post. Ref. column is left blank until the entry has been posted.
    True    False

 

  1. It is never correct for a compound entrys debit totals and credit totals to be unequal.
    True    False

 

  1. One might see J5 correctly placed in the Post. Ref. column of the journal.
    True    False

 

  1. Journal entries are typically posted to the ledger only at the end of the year.
    True    False

 

  1. Another name for the ledger is the book of original entry.
    True    False

 

  1. In the general journal, the year appears on the first line of the first column, the month on the next line of the first column, and the day in the second column opposite the month.
    True    False

 

  1. The general ledger is used to record the details of each transaction. The general journal is used to update each account.
    True    False

 

  1. When a company receives a product previously ordered, a recordable transaction has occurred.
    True    False

 

  1. When a business hires a new employee, a recordable transaction has occurred.
    True    False

 

  1. A transaction should be recorded when title to merchandise passes from the supplier to the purchaser and creates an obligation to pay.
    True    False

 

  1. Purchase requests and purchase orders are economic events, and as such they affect a companys financial position, and are recognized in the accounting records.
    True    False

 

  1. When a company pays an employee for work performed, it is considered an economic event that is not recorded as a transaction.
    True    False

 

  1. A purchase should usually not be recognized (recorded) before the title is transferred because, until that point, the vendor has not fulfilled its contractual obligation and the buyer has no liability.
    True    False

 

  1. The timing of cash flows is critical to a companys ability to maintain adequate liquidity so that it can pay its bills on time.
    True    False

 

  1. All sales transactions generate immediate cash.
    True    False

 

  1. In order to manage a companys liquidity, managers and other users of financial information must understand the difference between transactions that generate immediate cash and those that do not.
    True    False

 

  1. One way a company can manage its expenditures is to rely on its creditors to give it time to pay for purchases.
    True    False

 

  1. All expenses incurred by a business are paid immediately in cash.
    True    False

 

  1. Purchasing office supplies on account is an example of one way a company can take advantage of deferring a cash payment.
    True    False

 

  1. When a business reports an asset at an inflated dollar amount, is has violated the measurement issue of
    A. recognition.
    B. valuation.
    C. classification.
    D. realization.

 

  1. Which of the following is not a measurement issue in accounting?
    A. When to record a business transaction.
    B. How to classify the items of a business transaction.
    C. How to classify the items of a business transaction.
    D. Where to record a business transaction.

 

  1. The issue of deciding when to record a transaction is solved by

    A. properly classifying the transaction.
    B. deciding on a point of recognition.
    C. assigning historical cost to the transaction.
    D. analyzing the intent of management.

 

  1. The cost principle relates most closely to the
    A. recognition point.
    B. recognition issue.
    C. valuation issue.
    D. classification issue.

 

  1. Which of the following is not a measurement issue in accounting?
    A. Valuation.
    B. Recognition.
    C. Evaluation.
    D. Classification.

 

  1. Which of the following is an illustration of the classification issue?
    A. At what amount should land be shown on the balance sheet?
    B. At what point should the payment of salaries to employees be recorded?
    C. Should supplies be recorded as an asset or as an expense?
    D. At what point should a bill be paid for the purchase of an item?

 

  1. When a business erroneously records expenses as assets, it has violated the measurement issue of
    A. communication.
    B. classification.
    C. valuation.
    D. realization.

 

  1. After initially recording an asset at cost, fair value is
    A. the price at which an asset could be sold in a current transaction between independent parties.
    B. the actual, or historical, price at which the asset was acquired.
    C. the easiest value used to measure and record assets.
    D. verifiable at all future dates by referring to the invoice price paid for the asset.

 

  1. Proper __________ depends on correctly analyzing the effect of each transaction and on maintaining a system of accounts that reflects that effect.
    A. classification
    B. valuation
    C. recognition
    D. realization

 

  1. Which of the following accounts is increased with a debit?
    A. Jim Webb, Capital
    B. Rent Payable
    C. Service Revenue
    D. Prepaid Insurance

 

  1. Which of the following accounts is increased with a credit?
    A. Office Supplies
    B. Unearned Revenue
    C. Land
    D. Prepaid Insurance

 

  1. Which pair of accounts follows the rules of debit and credit in the same manner?
    A. Service Revenue and Equipment
    B. Land and Withdrawals
    C. Notes Payable and Buildings
    D. Wages Expense and Service Revenue

 

  1. Which pair of accounts follows the rules of debit and credit in the opposite manner?
    A. Prepaid Insurance and Withdrawals
    B. Advertising Expense and Land
    C. Withdrawals and Service Revenue
    D. Interest Payable and Owners Capital

 

  1. The double-entry system
    A. requires that each transaction be recorded with at least one debit and one credit.
    B. requires that the total amount of the debits must always equal the total amount of the credits.
    C. is based on the principle of duality.
    D. All of these choices.

 

  1. Which of the following accounts is not shown on the Statement of Owners Equity?
    A. Owners Capital
    B. Revenues
    C. Expenses
    D. Withdrawals

 

  1. Which of the following is the final step in the accounting cycle?
    A. Prepare financial statements.
    B. Close the accounts.
    C. Prepare and adjusted trial balance.
    D. Post the journal entries to the ledger.

 

  1. Which of the following is the first step in the accounting cycle?
    A. Prepare financial statements.
    B. Analyze business transactions from source documents.
    C. Prepare and adjusted trial balance.
    D. Post the journal entries to the ledger.

 

  1. The withdrawal of cash by the owner will
    A. decrease net income.
    B. increase liabilities.
    C. not affect total assets.
    D. decrease owners equity.

 

  1. A company records a transaction in which six months rent is paid in advance. Which of the following journal entries records the transaction?
    A. Prepaid Rent Debit; Cash Credit
    B. Rent Receivable Debit; Cash Credit
    C. Rent Revenue Debit; Cash Credit
    D. Rent Expense Debit; Cash Credit.

 

  1. Receiving cash from a customer for settlement of an Accounts Receivable will
    A. decrease Owners Equity.
    B. increase net income.
    C. increase total assets.
    D. not affect total assets.

 

  1. Which of the following events does not require a journal entry?
    A. Purchase of a one-year insurance policy.
    B. Agreement to perform a service at a future date.
    C. Payment for a service performed previously.
    D. All of these choices.

 

  1. When a company has performed a service but has not yet received payment, what is the required journal entry to be recorded?
    A. Accounts Receivable Debit; Service Revenue Credit
    B. Service Revenue Debit;  Accounts Payable Credit.
    C. Service Revenue Debit; Accounts Receivable Credit
    D. No entry is required until the cash is received.

 

  1. When a service has been performed, but no cash has been received, which of the following statements is true?
    A. The entry would include a debit to Accounts Receivable.
    B. The entry would include a debit to Accounts Payable.
    C. The entry would include a credit to Unearned Revenue.
    D. No entry is required until the cash is received.

 

  1. The controller for Tires and More, Inc. has recorded the following transactions during the month: the purchase of equipment for $8,500 cash; payment of $6,300 for 3 months rent; and, collection of $2,400 from a customer for services performed.  At the beginning of the month the owner established the business by making an investment of $15,000 cash.  What is the balance in the Cash account at the end of the month, and is the balance a debit or a credit?
    A. $2,600 debit.
    B. $2,600 credit.
    C. $6,800 debit.
    D. $15,200 debit.

 

  1. The controller for Tires and More, Inc. has recorded the following transactions during the month: the purchase of supplies on credit, $4,200; receipt of a bill for utilities for the month which is due on the 15th of the next month, $1,200; and, partial payment on the balance due for supplies, $800.  What is the balance in the Accounts Payable account at the end of the month assuming a beginning balance of $0, and is the balance a debit or a credit?
    A. $4,600 debit.
    B. $4,600 credit.
    C. $3,400 credit.
    D. $5,400 credit.

 

  1. The controller for Tires and More, Inc. has recorded the following transactions during the month: the owner established the business with a $20,000 investment on the 1st of the month; the company recorded $36,000 of revenue for tires and services provided during the month; and expenses of $22,000 were recorded for the month.  What is the balance ofOwners Equity at the end of the month, and is the balance a debit or a credit?
    A. $34,000 debit.
    B. $34,000 credit.
    C. $20,000 credit.
    D. $6,000 debit.

 

  1. The controller for Tires and More, Inc. has recorded the following transactions during the month: the owner established the business with a $20,000 investment on the 1st of the month; the company recorded $36,000 of revenue for tires and services provided during the month; and expenses of $22,000 were recorded for the month.  Additionally, on the last day of the month the owner withdrew $2,000 for personal expenses.  What is the balance of Owners Equity at the end of the month, and is the balance a debit or a credit?
    A. $32,000 debit.
    B. $32,000 credit.
    C. $18,000 credit.
    D. $36,000 debit.

 

  1. An $800 debit item is accidentally posted as a credit. The trial balance column totals will therefore differ by
    A. $0
    B. $400
    C. $800
    D. $1,600

 

  1. The trial balance for Parker Company is as follows:
Parker Company  
Trial Balance  
January 31, 2014  
Cash $  6,000  
Accounts Receivable 4,000  
Art Supplies 6,000  
Office Supplies 10,000  
Prepaid Rent 14,000  
Prepaid Insurance 10,000  
Art Equipment 10,000  
Office Equipment 6,000  
Accounts Payable   $  10,000
Mike Parker, Capital   30,000
Mike Parker, Withdrawals ?  
Advertising Fees Earned   ?
Wages Expense ?  
Utilities Expense 10,000  
Telephone Expense      6,000 ________
  $         A $            B
     

If the balance of the Mike Parker, Withdrawals account were $100,000 and the balance of the Wages Expense account were $10,000, what would be the amount of B?
A. $124,000
B. $150,000
C. $192,000
D. $152,000

 

  1. The trial balance for Parker Company is as follows:
Parker Company  
Trial Balance  
January 31, 2014  
Cash $  6,000  
Accounts Receivable 4,000  
Art Supplies 6,000  
Office Supplies 10,000  
Prepaid Rent 14,000  
Prepaid Insurance 10,000  
Art Equipment 10,000  
Office Equipment 6,000  
Accounts Payable   $  10,000
Mike Parker, Capital   30,000
Mike Parker, Withdrawals ?  
Advertising Fees Earned   ?
Wages Expense ?  
Utilities Expense 10,000  
Telephone Expense      6,000 ________
  $         A $            B
     

If the trial balance showed a balance of $14,000 in the Mike Parker, Withdrawals account and a balance of $30,000 in the Wages Expense account, what would be the amount of Advertising Fees Earned for the period?
A. $106,000
B. $86,000
C. $116,000
D. $56,000

 

  1. The trial balance for Parker Company is as follows:
Parker Company  
Trial Balance  
January 31, 2014  
Cash $28,000  
Accounts Receivable 4,000  
Art Supplies 6,000  
Office Supplies 10,000  
Prepaid Rent 14,000  
Prepaid Insurance 10,000  
Art Equipment 10,000  
Office Equipment 6,000  
Accounts Payable   $  10,000
Mike Parker, Capital   30,000
Mike Parker, Withdrawals 14,000  
Advertising Fees Earned   108,000
Wages Expense 30,000  
Utilities Expense 10,000  
Telephone Expense    6,000 _______
  $148,000 $148,000
     

On the trial balance, total assets equal
A. $108,000
B. $104,000
C. $88,000
D. $68,000

 

  1. The trial balance for Parker Company is as follows:
Parker Company  
Trial Balance  
January 31, 2014  
Cash $  6,000  
Accounts Receivable 4,000  
Art Supplies 6,000  
Office Supplies 10,000  
Prepaid Rent 14,000  
Prepaid Insurance 10,000  
Art Equipment 10,000  
Office Equipment 6,000  
Accounts Payable   $10,000
Mike Parker, Capital   30,000
Mike Parker, Withdrawals ?  
Advertising Fees Earned   ?
Wages Expense ?  
Utilities Expense 10,000  
Telephone Expense    6,000 ________
  $       A $           B
     

If the trial balance showed a balance of $16,000 in the Wages Expense account and a balance of $86,000 in the Advertising Fees Earned account, what would be the amount of A?
A. $126,000
B. $106,000
C. $136,000
D. $116,000

 

  1. The trial balance for Parker Company is as follows:
Parker Company  
Trial Balance  
January 31, 2014  
Cash $  6,000  
Accounts Receivable 4,000  
Art Supplies 6,000  
Office Supplies 10,000  
Prepaid Rent 14,000  
Prepaid Insurance 10,000  
Art Equipment 10,000  
Office Equipment 6,000  
Accounts Payable   $10,000
Mike Parker, Capital   30,000
Mike Parker, Withdrawals ?  
Advertising Fees Earned   ?
Wages Expense ?  
Utilities Expense 10,000  
Telephone Expense    6,000 ________
  $       A $           B
     

If the trial balance showed a balance of $8,000 in the Wages Expense account and a balance of $85,000 in the Advertising Fees Earned account, what would be the amount of the Mike Parker, Withdrawals account?
A. $75,000
B. $53,000
C. $35,000
D. $63,000

 

  1. Which of the following errors will not cause the debit and credit columns of the trial balance to be unequal?
    A. A debit entry was recorded in the wrong account.
    B. A debit was entered in an account as a credit.
    C. The account balance was carried to the wrong column of the trial balance.
    D. The balance of an account was incorrectly computed.

 

  1. The primary purpose of the trial balance is to test the
    A. recording of transactions.
    B. analysis of transactions.
    C. equality of debit and credit balances in the ledger.
    D. equality of debit and credit balances in the journal.

 

  1. A $155 credit item is posted as a debit. The trial balance column totals therefore will differ by
    A. $310
    B. $620
    C. $155
    D. $0

 

  1. Which of the following errors will cause the trial balance to be out of balance?
    A. An entire transaction was entered in the general journal as $27 instead of $72.
    B. An entire transaction was omitted from the general journal.
    C. The balance of an account was incorrectly computed.
    D. A debit entry was entered in the wrong debit account.

 

  1. Which of the following errors will cause the trial balance to be out of balance?
    A. Posting a debit to Land as a debit to Machinery.
    B. Placing a debit balance amount into the credit balance column of the ledger.
    C. Omitting an entire transaction.
    D. Incorrectly recording the purchase of land for cash as a debit to Cash and a credit to Land.

 

  1. The general journal does not have a column titled
    A. Description.
    B. Account Balance.
    C. Date.
    D. Post. Ref.

 

  1. To find a description of a transaction, one should look at the
    A. ledger.
    B. trial balance.
    C. journal.
    D. chart of accounts.

 

  1. Which of the following accounts might be placed first in a journal entry?
    A. Interest Payable, when it has been decreased.
    B. Accounts Receivable, when it has been decreased.
    C. Unearned Revenue, when it has been increased.
    D. Service Revenue, when it has been increased.

 

  1. Which of the following accounts would be placed after the debit(s) in a journal entry?
    A. Interest Payable, when it has been decreased.
    B. Accounts Receivable, when it has been decreased.
    C. Unearned Revenue, when it has been decreased.
    D. Withdrawals, when it has been increased.

 

  1. Which of the following statements is false about a journal entry?
    A. All debits are always listed before any credits.
    B. It may have more than one debit or credit entry.
    C. Credits are always indented.
    D. Accounts that are increased are always listed first.

 

  1. Which of the following accounts should be debited in a journal entry?
    A. Accounts Receivable, when it has been decreased.
    B. Withdrawals, when it has been increased.
    C. Wages Payable, when it has been increased.
    D. All of these choices.

 

  1. The process of transferring journal entry information from the journal to the ledger is called
    A. journalizing.
    B. posting.
    C. footing.
    D. analzying.

 

  1. The account most recently posted is determined most efficiently by referring to the
    A. Post. Ref. column of the ledger.
    B. balance column of the ledger.
    C. date column of the general journal.
    D. Post. Ref. column of the general journal.

 

  1. Posting is performed by transferring information from the
    A. source documents to the journal.
    B. source documents to the ledger.
    C. journal to the ledger.
    D. ledger to the journal.

 

  1. Which of the following guidelines is correct?
    A. Dollar signs ($) are required in all financial statements and other schedules.
    B. Account names are capitalized when referenced in text or listed in work documents like the journal or ledger.
    C. In financial statements only the first word of an account name is capitalized.
    D. All of these choices.

 

  1. Which of the following is a business event that is not considered a recordable transaction?
    A. A company receives a product previously ordered.
    B. A company pays an employee for work performed.
    C. A customer inquires about the availability of a service.
    D. A customer purchases a service.

 

  1. Which of the following is a business event that is considered a recordable transaction?
    A. A company hires a new employee.
    B. A customer purchases merchandise.
    C. A company orders a product from a supplier.
    D. An employee sends a purchase requisition to the purchasing department.

 

  1. A purchase is recognized in the accounting records when
    A. payment is made for the item purchased.
    B. the purchase requisition is sent to the purchasing department.
    C. title transfers from the seller to the buyer.
    D. the buyer receives the sellers bill.

 

  1. Which of the following business events is not a transaction
    A. Signing a contract.
    B. Paying wages.
    C. Receiving goods.
    D. Purchasing a service.

 

  1. Which of the following is not an example of egregious financial reporting frauds as discussed in the text?
    A. Keeping the books open for a few days after the end of the reporting period.
    B. Transferring assets to an affiliate at more than their actual value.
    C. Recording as assets expenditures that should have been classfied as expenses.
    D. Recording a liability when title to merchandise passes to the purchaser.

 

  1. Which of the following is an example of egregious financial reporting fraud as discussed in the text?
    A. Closing the books at the end of the reporting period.
    B. Transferring assets to an affiliate at more than their actual value.
    C. Recording as expenses expenditures that should have been classfied as expenses.
    D. Recording a liability when title to merchandise passes to the purchaser.

 

  1. Slim Co. is ordering a new computer for its corporate office.  Which of the following events would trigger the recognition of the computer and related liability on Slims books?
    A. The company generates a purchase order.
    B. The purchasing department sends a purchase order to the supplier.
    C. The company receives the computer.
    D. The company receives the bill from the supplier.

 

  1. Mesquite, Inc. is ordering a new machine to be used in its manufacturing facility.  Which of the following events would trigger the recognition of the machine and related liability on Mesquites books?
    A. The company generates a purchase order.
    B. A technician installs the machine on the floor of the manufacturing facility.
    C. The company receives the machine.
    D. The company pays the bill from the supplier.

 

  1. Mesquite, Inc. engaged in the following transactions during October:
Performed services for cash $1,840
Performed services on credit 2,100
Purchased office supplies on account 800
Paid salaries in cash 900
Collected on account 600
Paid on account 400
   

What is the balance in cash after these transactions?
A. $940
B. $1,140
C. $740
D. $2,440

 

  1. Mesquite, Inc. engaged in the following transactions during October:
Performed services for cash $1,840
Performed services on credit 2,100
Purchased office supplies on account 800
Paid salaries in cash 900
Collected on account 600
Paid on account 400
   

What is the amount of cash still to be received?
A. $2,300
B. $1,500
C. $1,900
D. $400

 

  1. Mesquite, Inc. engaged in the following transactions during October:
Performed services for cash $1,840
Performed services on credit 2,100
Purchased office supplies on account 800
Paid salaries in cash 900
Collected on account 600
Paid on account 400
   

What is the amount of cash still to be paid?
A. $2,300
B. $2,100
C. $1,300
D. $400

 

  1. Copper Company engaged in the following transactions during April
Performed services for cash $215,000
Performed services on credit 168,000
Purchased office supplies on account 56,000
Paid salaries in cash 29,000
Collected on account 42,000
Paid on account 38,000
   

What is the amount of cash still to be paid?
A. $18,000
B. $47,000
C. $94,000
D. $52,000

 

  1. Copper Company engaged in the following transactions during April
Performed services for cash $215,000
Performed services on credit 168,000
Purchased office supplies on account 56,000
Paid salaries in cash 29,000
Collected on account 42,000
Paid on account 38,000
   

What is the amount of cash still to be collected?
A. $126,000
B. $341,000
C. $144,000
D. $18,000

 

  1. Copper Company began operations in April and then engaged in the following transactions during April
Performed services for cash $215,000
Performed services on credit 168,000
Purchased office supplies on account 56,000
Paid salaries in cash 29,000
Collected on account 42,000
Paid on account 38,000
   

What is the balance in cash after these transactions?
A. $302,000
B. $190,000
C. $144,000
D. $87,000

 

  1. Copper Company engaged in the following transactions during April
Performed services for cash $215,000
Performed services on credit 108,000
Purchased office supplies on account 56,000
Paid salaries in cash 129,000
Collected on account ??
Paid on account 38,000
   

If the balance in cash after these transactions is $115,000, how much cash was collected on account?
A. $67,000
B. $62,000
C. $15,000
D. $29,000

 

  1. Copper Company began operations in April and then engaged in the following transactions during April
Performed services for cash $215,000
Performed services on credit 168,000
Purchased office supplies on account 56,000
Paid salaries in cash 29,000
Collected on account 22,000
Paid on account ??
   

If the balance in cash after these transactions is $165,000, how much cash was paid on account?
A. $43,000
B. $57,000
C. $1,000
D. $21,000

 

  1. Match each item with the correct statement below.
1. Recording transactions at the exchange price at the point of recognition.      Recognition   ____
2. A series of steps that measure and communicate useful information to decision makers.      Valuation   ____
3. Basic storage unit for accounting data and used to accumulate amounts from similar transactions.      Classificiation   ____
4. Process of assigning a monetary amount to business transactions.      Accounting cycle   ____
5. A device used to ensure that the total of debits and credits in the accounts are equal.      Journal   ____
6. Process of assigning all the transactions in which a business engages to appropriate categories, or accounts.      Trial balance   ____
7. Refers to the decision as to when to record a business transaction.      Posting   ____
8. The book of original entry.      Cost principle   ____
9. Left side.      Account   ____
10. Process of transferring transactions from the journal to the ledger.      Debit   ____

 

  1. Use this journal entry to answer the following question.
Nov. 16 Accounts Payable 685    
      Cash   685  
        Recorded payment of a liability    
             

Explain how the above journal entry relates to the measurement issues of (a) recognition, (b) valuation, and (c) classification.

 

 

 

 

 

  1. Why is the Owners Withdrawals account increased by a debit? Explain in terms of its relationship to owners equity.

 

 

 

 

 

  1. For each of the following economic events determine whether the event is a business transaction on the date it occurs and whether its recognized in the accounts on that date.  Support your answer.

    a On July 15, the controller of Kona Corporation orders a custom display case for the companys store.

    b. On July 31, a new administrative assistant is hired at a monthly salary of $3,500.

    c. On July 31, the controller of Kona Corporation receives a bill for electricity for the month of July.  The bill is due on August 18 and will be paid on that date.

 

 

 

 

 

  1. A trial balance proves that the accounts are in balance.  Does a balanced trial balance also prove that all the transactions are correctly analyzed and recorded?  Why or why not?

 

 

 

 

 

  1. If a debit to Supplies were posted as a credit, and a credit of the same amount to Cash were posted as a debit, what would be the effect, if any, on the two accounts and on the trial balance column totals?

 

 

 

 

 

  1. What type of information does the general journal include for each transaction?

 

 

 

 

 

  1. What are the steps in the posting process for the debit side of an entry?

 

 

 

 

 

  1. Discuss the difference between business events that are transactions and those that are not. Why is the distinction important?

 

 

 

 

 

  1. Ironwood Company has just started operations.  The owner, Robert Ironwood, invested $10,000 to get the business started.  The company has made several sales on account, but has not yet collected any cash from these sales.  At this point, Ironwoods cash flows for expenses are exceeding its cash flows from revenues.  How might Ironwood make up the difference so it can maintain its liquidity?

 

 

 

 

 

  1. Using the following transactions, calculate (A) the ending balance of Cash, (B) the ending balance of Accounts Receivable, (C) total liabilities, and (D) Owners Equity at the end of the period. For parts a, b, and d, indicate whether each balance is debit or credit.

    a. Opened business by investing $50,000 in cash.
    b. Billed customers for services rendered, $10,000.
    c. Paid for six months subscription in advance, $2,500.
    d. Received advertising bill, to be paid next week, $500.
    e. Withdrawals of $4,000 were made by the owner.
    f. Received $7,500 from customers billed in b.
    g. Paid half of advertising bill.
    h. Received $1,000 in advance of performing a service.

 

 

 

 

 

  1. Using the following transactions, calculate the ending balance of (A) total assets, (B) total liabilities, (C) Cash, and (D) Owners Equity. Indicate whether each balance is debit or credit.

    a. Opened business by investing $72,000 in cash.
    b. Paid one years insurance in advance, $4,800.
    c. Billed customers for services rendered, $12,000.
    d. Received utility bill, to be paid next month, $800.
    e. Received $1,600 in advance of performing a service.
    f. Received $8,800 from customers billed in c.
    g. Paid $600 on the utility bill of d.
    h. Withdrawals of $4,000 were made by the owner.

 

 

 

 

 

  1. From the following alphabetical list of account balances, all of which are normal, for Ivy Maxx Company on July 31, 2014, prepare a trial balance in proper form (the amount of Ivy Maxx, Withdrawals must be computed) .
Accounts Payable $250
Accounts Receivable 100
Cash 40
Equipment 350
Ivy Maxx, Capital 75
Ivy Maxx, Withdrawals ?
Prepaid Advertising 10
Revenue Earned 200
Wages Expense 35
Wages Payable 25
   

 

 

 

 

 

 

  1. Using the alphabetical list of account balances presented below, all of which are normal, prepare a trial balance for Cookies and Cream Company at June 30, 2014, in proper order. Compute the balance of the Cash account.
Accounts Payable $280
Accounts Receivable 560
Cash ?
Equipment 800
Office Expense 360
Joan Cream, Capital 880
Service Revenue 600
   

 

 

 

 

 

 

  1. From the following alphabetical list of account balances, all of which are normal, for Cannon Company on September 30, 2014, prepare a trial balance in proper form (the amount of Tina Cannon, Withdrawals must be computed) .
Accounts Payable  $  780
Accounts Receivable 460
Cash 400
Equipment 1,380
Prepaid Advertising 20
Revenue Earned 1,000
Tina Cannon, Capital 1,200
Tina Cannon, Withdrawals ?
Wages Expense 60
Wages Payable 20
   

 

 

 

 

 

 

  1. Record the following transactions, using proper form, in the journal provided.
June 9 Provided services in the amount of $4,000, receiving $300 in partial payment.
  19 Received $1,600 of the amount owed from June 9.
     

 

General Journal Page 1  
Date Description Post.
Ref.
Debit Credit  
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           

 

 

 

 

 

 

  1. In the journal provided, prepare journal entries without explanations for the following transactions. Write no entry if none is needed.

    a. Received a $1,000 invoice for this months electricity. Payment will be made in 2 weeks.
    b. Paid $1,200 for insurance premiums to cover the next six months.
    c. The owner, Heidi Shop, withdrew $700.
    d. The utility bill from part a is paid.
    e. Purchased land for $50,000. The company paid half in cash and issued a promissory note for the other half.

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General Journal Page 1  
Date Description Post.
Ref.
Debit Credit