Financial Statements And The | Test Bank + Answers Chapter 2

Financial Accounting, 9e (Wild)

Chapter 2 Financial Statements and the Accounting System

1) The first step in the processing of a transaction is to analyze the transaction and source documents.

2) Preparation of a trial balance is the first step in processing a financial transaction.

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

4) Items such as sales tickets, bank statements, checks, and purchase orders are examples of a business's source documents.

5) An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.

6) A customer's promise to pay on credit is classified as an account payable by the seller.

7) Dividends paid to stockholders are a business expense.

8) An unclassified balance sheet broadly groups accounts into assets, liabilities, and equity

9) Unearned revenues are classified as liabilities.

10) Dividends distributed to stockholders should be treated as an expense of the business.

11) When a company provides services for which cash will not be received until some future date, the company should record the amount billed as accounts receivable.

12) Dividends always decrease equity.

13) Expenses always decrease equity.

14) Revenues always increase equity.

15) Stockholder investments always decrease equity.

16) Unearned revenue is a liability that is settled in the future when a company delivers its products or services.

17) A company's chart of accounts is a list of all the accounts used and includes an identification number assigned to each account.

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

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

20) In a double-entry accounting system, the total dollar amount debited must always equal the total dollar amount credited.

21) Increases in liability accounts are recorded as debits.

22) Debits increase asset and expense accounts.

23) Credits always increase account balances.

24) Crediting an expense account decreases it.

25) A revenue account normally has a debit balance.

26) Asset accounts are decreased by debits.

27) Debit means increase and credit means decrease for all accounts.

28) Asset accounts normally have debit balances and revenue accounts normally have credit balances.

29) The dividends account normally has a debit balance.

30) A debit entry is always an increase in the account.

31) A transaction that credits an asset account and credits a liability account must also affect one or more other accounts.

32) A transaction that decreases a liability and increases an asset must also affect one or more other accounts.

33) If insurance coverage for the next two years is paid for in advance, the amount of the payment is debited to an asset account called Prepaid Insurance.

34) The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to Accounts Payable.

35) If a company purchases equipment paying cash, the journal entry to record this transaction will include a debit to Cash.

36) If a company provides services to a customer on credit, the company providing the service should credit Accounts Receivable.

37) When a company bills a customer for $700 for services rendered, the journal entry to record this transaction will include a $700 debit to Services Revenue.

38) 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.

39) The higher a company's debt ratio, the lower the risk of a company not being able to meet its obligations.

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

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

42) If a company is highly leveraged, this means that it has relatively high risk of not being able to repay its debt.

43) Booth Industries has liabilities of $105 million and total assets of $350 million. Its debt ratio is 40.0%.

44) A journal entry that affects no more than two accounts is called a compound entry.

45) Posting is the transfer of journal entry information to the ledger.

46) Transactions are recorded first in the ledger and then transferred to the journal.

47) The journal is known as a book of original entry.

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

49) While companies can use various journals, every company uses a general journal.

50) At a given point in time, a business's trial balance is a list of all of its general ledger accounts and their balances.

51) The ordering of accounts in a trial balance typically follows their identification number from the chart of accounts, that is, assets first, then liabilities, then common stock and dividends, followed by revenues and expenses.

52) A trial balance is not a financial statement; it is a mechanism for checking equality of debits and credits in the ledger.

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

54) The income statement, statement of retained earnings, and statement of cash flows report financial performance over a period of time.

55) The financial statement that summarizes the changes in the retained earnings account is called the balance sheet.

56)  An income statement is also called an earnings statement, a statement of operations or a profit and loss statement. 

57) The detail of individual revenue and expense accounts is reported on the statement of retained earnings.

58) The heading on every financial statement lists the three W's−Who (the name of the business); What (the name of the statement); and Where (the organization's address).

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

60) Dividends are not reported on a business's income statement.

61) An income statement reports the revenues earned less the expenses incurred by a business over a period of time.

62) The balance sheet reports the financial position of a company at a point in time.

63) The same four basic financial statements are prepared by both U.S. GAAP and IFRS.

64) Neither U.S. GAAP nor IFRS require the use of accrual basis accounting.

65) The amount of net income is added on the statement of retained earnings.

66) The accounting process begins with:

A) Analysis of business transactions and source documents.

B) Preparing financial statements and other reports.

C) Summarizing the recorded effect of business transactions.

D) Presentation of financial information to decision-makers.

E) Preparation of the trial balance.

67) Which of the following statements is not true:

A) Accounts receivable are held by a seller.

B) Accounts receivable arise from credit sales.

C) Accounts receivable are increased by customer payments.

D) Accounts receivable are classified as assets.

E) Accounts receivable are increased by billings to customers.

68) A business's source documents may include all of the following except:

A) Sales tickets.

B) Ledgers.

C) Checks.

D) Purchase orders.

E) Bank statements.

69) A business's source documents:

A) Include the ledger.

B) Provide objective evidence that a transaction has taken place.

C) Must be in electronic form.

D) Are prepared internally to ensure accuracy.

E) Include the chart of accounts.

70) A business's record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is known as a(n):

A) Journal.

B) Posting.

C) Trial balance.

D) Account.

E) Chart of accounts.

71) An account used to record stockholders' investments in a business is called a(n):

A) Dividends account.

B) Common stock account.

C) Revenue account.

D) Expense account.

E) Liability account.

72) Identify the account used by businesses to record the transfer of assets from a business to its stockholders:

A) A revenue account.

B) The dividends account.

C) The common stock account.

D) An expense account.

E) A liability account.

73) Identify the statement below that is correct.

A) When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense.

B) Promises of future payment by the customer are called accounts receivable.

C) Increases and decreases in cash are always recorded in the common stock account.

D) An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business.

E) Accrued liabilities include accounts receivable.

74) Unearned revenues are generally:

A) Revenues that have been earned and received in cash.

B) Revenues that have been earned but not yet collected in cash.

C) Liabilities created when a customer pays in advance for products or services before the goods or services are delivered.

D) Recorded as an asset in the accounting records.

E) Increases to common stock.

75) Unearned revenues refer to a(n):

A) Asset that will be used over time.

B) Expense incurred because a customer has paid in advance.

C) Liability that is settled in the future when a company delivers its products or services.

D) Increase in revenues as a result of delivering products or services to a customer.

E) Decrease in an asset.

76) Prepaid accounts (also called prepaid expenses) are generally:

A) Payments made for products and services that never expire.

B) Classified as liabilities on the balance sheet.

C) Decreases in equity.

D) Assets from prepayments of future expenses.

E) Promises of payments by customers.

77) A company's formal promise to pay (in the form of a promissory note) a future amount is a(n):

A) Unearned revenue.

B) Prepaid expense.

C) Credit account.

D) Note payable.

E) Account receivable.

78) The record of all accounts and their balances used by a business is called a:

A) Journal.

B) Book of original entry.

C) General Journal.

D) Balance column journal.

E) Ledger (or General Ledger).

79) A company's ledger is:

A) A record containing increases and decreases in a specific asset, liability, equity, revenue, or expense item.

B) A journal in which transactions are first recorded.

C) A collection of documents that describe transactions and events entering the accounting process.

D) A list of all accounts a company uses with an assigned identification number.

E) A record containing all accounts and their balances used by the company.

80) A company's list of accounts and the identification numbers assigned to each account is called a:

A) Source document.

B) Journal.

C) Trial balance.

D) Chart of accounts.

E) General Journal.

81) The numbering system used in a company's chart of accounts:

A) Is the same for all companies.

B) Is determined by generally accepted accounting principles.

C) Depends on the source documents used in the accounting process.

D) Typically begins with balance sheet accounts.

E) Typically begins with income statement accounts.

82) A debit:

A) Always increases an account.

B) Is the right-hand side of a T-account.

C) Always decreases an account.

D) Is the left-hand side of a T-account.

E) Is not needed to record a transaction.

83) The right side of a T-account is a(n):

A) Debit.

B) Increase.

C) Credit.

D) Decrease.

E) Account balance.

84) Identify the statement below that is incorrect.

A) The normal balance of accounts receivable is a debit.

B) The normal balance of dividends is a debit.

C) The normal balance of unearned revenues is a credit.

D) The normal balance of an expense account is a credit.

E) The normal balance of the common stock account is a credit.

85) A credit is used to record an increase in all of the following accounts except:

A) Accounts Payable

B) Service Revenue

C) Unearned Revenue

D) Wages Expense

E) Common Stock

86) A debit is used to record an increase in all of the following accounts except:

A) Supplies

B) Cash

C) Accounts Payable

D) Dividends

E) Prepaid Insurance

87) Identify the account below that is classified as a liability in a company's chart of accounts:

A) Cash

B) Unearned Revenue

C) Salaries Expense

D) Accounts Receivable

E) Supplies

88) Identify the account below that is classified as an asset in a company's chart of accounts:

A) Accounts Receivable

B) Accounts Payable

C) Common Stock

D) Unearned Revenue

E) Service Revenue

89) Identify the account below that is classified as an asset account:

A) Unearned Revenue

B) Accounts Payable

C) Supplies

D) Common Stock

E) Service Revenue

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

A) Cash

B) Accounts Payable

C) Salaries Expense

D) Common Stock

E) Equipment

91) Identify the account below that impacts the Equity of a business:

A) Utilities Expense

B) Accounts Payable

C) Accounts Receivable

D) Cash

E) Unearned Revenue

92) Which of the following does not affect the equity of a business?

A) Unearned Revenue

B) Common Stock

C) Services Revenue

D) Wages Expense

E) Dividends

93) Which of the following is NOT an asset account: 

A) Cash

B) Land

C) Services Revenue

D) Buildings

E)  Equipment

94) 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.

95) A simple tool that is widely used in accounting to represent a ledger account and to understand how debits and credits affect an account balance is called a:

A) Dividends account.

B) Common Stock account.

C) Asset account.

D) T-account.

E) Balance column sheet.

96) Identify the statement below that is correct.

A) The left side of a T-account is the credit side.

B) Debits decrease asset and expense accounts, and increase liability, equity, and revenue accounts.

C) The left side of a T-account is the debit side.

D) Credits increase asset and expense accounts, and decrease liability, equity, and revenue accounts.

E) In certain circumstances the total amount debited need not equal the total amount credited for a particular transaction.

97) An account balance is:

A) The total of the credit side of the account.

B) The total of the debit side of the account.

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

D) Assets = liabilities + equity.

E) Always a credit.

98) Select the account below that normally has a credit balance.

A) Cash.

B) Office Equipment.

C) Wages Payable.

D) Dividends.

E) Sales Salaries Expense.

99) A debit is used to record which of the following:

A) A decrease in an asset account.

B) A decrease in an expense account.

C) An increase in a revenue account.

D) An increase in the common stock account.

E) An increase in the dividends account.

100) A credit entry:

A) Increases asset and expense accounts, and decreases liability, common stock, and revenue accounts.

B) Is always a decrease in 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) Is always an increase in an account.

101) A double-entry accounting system is an accounting system:

A) That records each transaction twice.

B) That records the effects of transactions and other events in at least two accounts with equal debits and credits.

C) In which each transaction affects and is recorded in two or more accounts but that could include two debits and no credits.

D) That may only be used if T-accounts are used.

E) That insures that errors never occur.

102) Ralph Pine Consulting received its telephone bill in the amount of $300, and immediately paid it. Which of the following general journal entries will Pine Consulting make to record this transaction?

A) Debit Telephone Expense, $300; Credit Cash, $300.

B) Debit Telephone Expense, $300; Credit Accounts Payable, $300.

C) Debit Cash, $300; Credit Telephone Expense, $300.

D) Debit Accounts Payable, $300; Credit Telephone Expense, $300.

E) Debit Prepaid Expense, $300; Credit Cash, $300.

103) Spafford Services, Inc. provides services to clients. On May 1, a client prepaid Spafford Services $30,000 for 6-months services in advance. Spafford Services' general journal entry to record this transaction will include a: 

A) Debit to Unearned Management Fees for $30,000.

B) Credit to Management Fees Earned for $30,000.

C) Credit to Cash for $30,000.

D) Credit to Unearned Management Fees for $30,000.

E) Debit to Management Fees Earned for $30,000.

104) Willow Rentals purchased $800 of office supplies on credit. Which of the following general journal entries will Willow Rentals make to record this transaction?

A) Debit Accounts Payable, $800; credit Office Supplies, $800.

B) Debit Accounts Receivable, $800; credit Office Supplies, $800.

C) Debit Office Supplies, $800; credit Accounts Receivable, $800.

D) Debit Office Supplies, $800; credit Accounts Payable, $800.

E) Debit Cash, $800; credit Office Supplies, $800.

105) An asset created by prepayment of an insurance premium is:

A) Recorded as a debit to Unearned Revenue.

B) Recorded as a debit to Prepaid Insurance.

C) Recorded as a credit to Unearned Revenue.

D) Recorded as a credit to Prepaid Insurance.

E) Not recorded in the accounting records until the insurance period expires.

106) Samuel Sorenson, the sole stockholder, contributed $70,000 in cash and land worth $130,000 in exchange for common stock to open a new business, SS Consulting. Which of the following general journal entries will SS Consulting make to record this transaction?

A) Debit Assets $200,000; credit Common Stock, $200,000.

B) Debit Cash and Land, $200,000; credit Common Stock, $200,000.

C) Debit Cash $70,000; debit Land $130,000; credit Common Stock, $200,000.

D) Debit Common Stock, $200,000; credit Cash $70,000, credit Land, $130,000.

E) Debit Common Stock, $200,000; credit Assets, $200,000.

107) Paul's Landscaping 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 Paul's Landscaping make to record this transaction?

A) Debit Office supplies expense, $500; credit Cash, $500.

B) Debit Cash, $500; credit Office supplies, $500.

C) Debit Office supplies, $500; credit Cash, $500.

D) Debit Office supplies, $500; credit Accounts payable, $500.

E) Debit Accounts payable, $500; credit Office supplies, $500.

108) Paul's Landscaping paid $500 on account for supplies purchased in the prior month. Which of the following general journal entries will Paul's Landscaping make to record this transaction?

A) Debit Office supplies expense, $500; credit Cash, $500.

B) Debit Cash, $500; credit Office supplies, $500.

C) Debit Office supplies, $500; credit Cash, $500.

D) Debit Office supplies, $500; credit Accounts payable, $500.

E) Debit Accounts payable, $500; credit Cash, $500.

109) A law firm billed a client $1,800 for work performed in the current month. Which of the following general journal entries will the firm make to record this transaction?

A) Debit Accounts Receivable, $1,800; credit Unearned Legal Fees Revenue, $1,800.

B) Debit Cash, $1,800; credit Unearned Legal Fees Revenue, $1,800.

C) Debit Legal Fees Revenue, $1,800; credit Accounts Receivable, $1,800.

D) Debit Accounts Receivable, $1,800; credit Legal Fees Revenue, $1,800.

E) Debit Cash, $1,800; credit Accounts Receivable, $1,800.

110) A law firm collected $1,800 on account for work performed in the previous month. Which of the following general journal entries will the firm make to record this transaction?

A) Debit Accounts Receivable, $1,800; credit Unearned Legal Fees Revenue, $1,800.

B) Debit Cash, $1,800; credit Unearned Legal Fees Revenue, $1,800.

C) Debit Legal Fees Revenue, $1,800; credit Accounts Receivable, $1,800.

D) Debit Accounts Receivable, $1,800; credit Legal Fees Revenue, $1,800.

E) Debit Cash, $1,800; credit Accounts Receivable, $1,800.

111) A law firm collected $1,800 for work to be performed in the following month. Which of the following general journal entries will the firm make to record this transaction?

A) Debit Accounts Receivable, $1,800; credit Unearned Legal Fees Revenue, $1,800.

B) Debit Cash, $1,800; credit Unearned Legal Fees Revenue, $1,800.

C) Debit Legal Fees Revenue, $1,800; credit Accounts Receivable, $1,800.

D) Debit Accounts Receivable, $1,800; credit Legal Fees Revenue, $1,800.

E) Debit Cash, $1,800; credit Accounts Receivable, $1,800.

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

A)

B)

C)

D)

E)

113) A. Egert Consulting immediately paid $500 cash for utilities for the current month. Given the choices below, determine the general journal entry that A. Egert Consulting will make to record this transaction.

A)

B)

C)

D)

E)

114) S. Green Consulting paid $2,500 cash for a 5-month insurance policy which begins on December 1. Given the choices below, determine the general journal entry that S. Green 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)

B)

C)

D)

E)

115) Annie's Catering received $800 cash from a customer for catering services to be provided next month. Given the choices below, determine the general journal entry that Annie's Catering will make to record the cash receipt. Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

A)

B)

C)

D)

E)

116) Annie's Catering provided $1,000 of catering services and billed its client for the amount owed. Given the choices below, determine the general journal entry that Annie's Catering will make to record this transaction.

A)

B)

C)

D)

E)

117) Trimble Graphic Design receives $1,500 from a client billed in a previous month for services provided. Which of the following general journal entries will Trimble Graphic Design make to record this transaction?

A)

B)

C)

D)

E)

118) J. Smith, the sole stockholder, received a $100 dividend from Jay's Limo Services. Which of the following general journal entries will Jay's Limo Services make to record this transaction?

A)

B)

C)

D)

E)

119) Kim's Auto Services paid $300 cash to employees for work performed in the current period. Which of the following general journal entries will Kim's Auto Services make to record this transaction?

A)

B)

C)

D)

E)

120) On October 27, Able Graphics 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 the bill will be paid. Which of the following general journal entries will Able Graphics make on October 27 to record this transaction?

A)

B)

C)

D)

E)

121) HH Consulting & Design provided $800 of consulting work and $100 of design work to the same client. It billed the client for the total amount and is expecting to collect from the client next month. Which of the following general journal entries will HH Consulting & Design make to record this transaction?

A)

B)

C)

D)

E)

122) Eduardo's Dance Studio provided $150 of dance instruction and rented out its dance studio to the same client for another $100. The client paid immediately. Identify the general journal entry below that Eduardo's will make to record the transaction.

A)

B)

C)

D)

E)

123) Eduardo Martinez, the sole stockholder of Eduardo's Dance Studio, started the business by investing $10,000 cash and donating a building worth $20,000 in exchange for common stock. Identify the general journal entry below that Eduardo's will make to record the transaction.

A)

B)

C)

D)

E)

124) A company provided $12,000 of consulting services to a customer on account.  The customer promises payment in 30 days. Identify the journal entry below that properly records this transaction.

A)

B)

C)

D)

E)

125)  A company provided $12,000 of consulting services, and was immediately paid in cash by the customer. Identify the journal entry below that properly records this transaction.

A)

B)

C)

D)

E)

126) Elaine Matuszek, the sole stockholder of Matuszek Consulting, received a $2,000 dividend from the company. Identify the general journal entry below that Matuszek Consulting will make to record the transaction.

A)

B)

C)

D)

E)

127) Elaine Matuszek, the sole stockholder of Matuszek Consulting, started the business by investing $40,000 cash. Identify the general journal entry below that Matuszek Consulting will make to record the transaction.

A)

B)

C)

D)

E)

128) If cash is received from customers in payment for products or services that have not yet been delivered to the customers, the business would record the cash receipt as:

A) A debit to an unearned revenue account and a credit to cash.

B) A debit to a prepaid expense account and a credit to cash.

C) A debit to cash and a credit to an unearned revenue account.

D) A debit to cash and a credit to a prepaid expense account.

E) No entry is required at the time of collection.

129) On May 31, the Cash account of Bottle's R US had a normal balance of $5,000. During May, the Cash account was debited for a total of $12,200 and credited for a total of $11,500. What was the balance in the Cash account at the beginning of May? 

A) A $0 balance.

B) A $4,300 debit balance.

C) A $4,300 credit balance.

D) A $5,700 debit balance.

E) A $5,700 credit balance.

130) On April 30, Victor 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?

A) $5,000.

B) $47,000.

C) $52,000.

D) $57,000.

E) $32,000.

131) During the month of February, Victor Services had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the February 1 beginning cash balance?

A) $700.

B) $1,100.

C) $2,900.

D) $0.

E) $4,300.

132) The following transactions occurred during July:

1. Received $900 cash for services provided to a customer during July.

2. Received $2,200 cash investment from Bob Johnson, the owner of the business.

3. Received $750 from a customer in partial payment of his account receivable which arose from sales in June.

4. Provided services to a customer on credit, $375.

5. Borrowed $6,000 from the bank by signing a promissory note.

6. Received $1,250 cash from a customer for services to be rendered next year.

What was the amount of revenue for July?

A) $ 900.

B) $ 1,275.

C) $ 2,525.

D) $ 3,275.

E) $ 11,100.

133) If Taylor Willow, the sole stockholder of Willow Hardware, uses cash of the business to purchase a family automobile, the business should record this use of cash with an entry to:

A) Debit Salary Expense and credit Cash.

B) Debit Cash and credit Salary Expense.

C) Debit Cash and credit Dividends.

D) Debit Dividends and credit Cash.

E) Debit Automobiles and credit Cash.

134) Larry Bar opened a frame shop and completed these transactions:

1. Larry started the shop by investing $40,000 cash and equipment valued at $18,000 in exchange for common stock.

2. Purchased $70 of office supplies on credit.

3. Paid $1,200 cash for the receptionist's salary.

4. Sold a custom frame service and collected $1,500 cash on the sale.

5. Completed framing services and billed the client $200.

What was the balance of the cash account after these transactions were posted?

A) $300.

B) $41,500.

C) $40,300.

D) $38,500.

E) $38,700.

135) At the beginning of January of the current year, Little Mikey's Catering ledger reflected a normal balance of $52,000 for accounts receivable. During January, the company collected $14,800 from customers on account and provided additional services to customers on account totaling $12,500. Additionally, during January one customer paid Mikey $5,000 for services to be provided in the future. At the end of January, the balance in the accounts receivable account should be:

A) $54,700.

B) $49,700.

C) $2,300.

D) $54,300.

E) $49,300.

136) 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?

A) $83,900.

B) $91,900.

C) $6,600.

D) $75,900.

E) $4,900.

137) On January 1 of the current year, Jimmy's Sandwich Company reported stockholders' equity totaling $122,500. During the current year, total revenues were $96,000 while total expenses were $85,500. Also, during the current year paid $20,000 in cash dividends. No other changes in equity occurred during the year. If, on December 31 of the current year, total assets are $196,000, the change in total stockholders' equity during the year was:

A) A decrease of $9,500.

B) An increase of $9,500.

C) An increase of $30,500.

D) A decrease of $30,500.

E) An increase of $73,500.

138) Andrea Apple opened Apple Photography on January 1 of the current year. During January, the following transactions occurred and were recorded in the company's books:

1. Andrea invested $13,500 cash in the business in exchange for common stock.

2. Andrea contributed $20,000 of photography equipment to the business.

3. The company paid $2,100 cash for an insurance policy covering the next 24 months.

4. The company received $5,700 cash for services provided during January.

5. The company purchased $6,200 of office equipment on credit.

6. The company provided $2,750 of services to customers on account.

7. The company paid cash of $1,500 for monthly rent.

8. The company paid $3,100 on the office equipment purchased in transaction #5 above.

9. Paid $275 cash for January utilities.

Based on this information, the balance in the cash account at the end of January would be:

A) $41,450.

B) $12,225.

C) $18,700.

D) $15,250.

E) $13,500.

139) Aaliyah Turner opened Turner Photography on January 1 of the current year. During January, the following transactions occurred and were recorded in the company's books:

1. Aaliyah invested $13,500 cash in the business in exchange for common stock.

2. Aaliyah contributed $20,000 of photography equipment to the business in exchange for common stock.

3. The company paid $2,100 cash for an insurance policy covering the next 24 months.

4. The company received $5,700 cash for services provided during January.

5. The company purchased $6,200 of office equipment on credit.

6. The company provided $2,750 of services to customers on account.

7. The company paid cash of $1,500 for monthly rent.

8. The company paid $3,100 on the office equipment purchased in transaction #5 above.

9. Paid $275 cash for January utilities.

Based on this information, the amount of total stockholders' equity reported on the Balance Sheet at the end of the month would be:

A) $31,400.

B) $39,200.

C) $31,150.

D) $40,175.

E) $30,875.

140) The debt ratio is used:

A) To measure the ratio of equity to expenses.

B) To assess the risk associated with a company's use of liabilities.

C) Only by banks when a business applies for a loan.

D) To determine how much debt a firm should pay off.

E) To determine how much debt a company should borrow.

141) Identify the correct formula below used to calculate the debt ratio.

A) Total Equity/Total Liabilities.

B) Total Liabilities/Total Equity.

C) Total Liabilities/Total Assets.

D) Total Assets/Total Liabilities.

E) Total Equity/Total Assets.

142) Lu Lu's Catering has a debt ratio equal to .3 and its competitor, Able's Bakery, has a debt ratio equal to .7. Determine the statement below that is correct.

A) Able's Bakery has a smaller percentage of its assets financed with liabilities as compared to Lu Lu's.

B) Able's Bakery's financial leverage is less than Lu Lu's.

C) Able's Bakery's financial leverage is greater than Lu Lu's.

D) Lu Lu's has a higher risk from its financial leverage.

E) Higher financial leverage involves lower risk.

143) Identify the statement that is incorrect.

A) Higher financial leverage involves higher risk.

B) Risk is higher if a company has more liabilities.

C) Risk is higher if a company has higher assets.

D) The debt ratio is one measure of financial risk.

E) Lower financial leverage involves lower risk.

144) The debt ratio of Company A is .31 and the debt ratio of Company B is .21. Based on this information, an investor can conclude:

A) Company B has more debt than Company A.

B) Company B has a lower risk from its financial leverage.

C) Company A has a lower risk from its financial leverage.

D) Company A has 10% more assets than Company B.

E) Both companies have too much debt.

145) The debt ratio of Jackson's Shoes is .9 and the debt ratio of Billy's Catering is 1.0. Based on this information, an investor can conclude:

A) Billy's Catering finances a relatively lower portion of its assets with liabilities than Jackson's Shoes.

B) Billy's Catering has a lower risk from its financial leverage.

C) Jackson's Shoes has a higher risk from its financial leverage.

D) Billy's Catering has the exact same dollar amount of total liabilities and total assets.

E) Jackson's Shoes has less equity per dollar of assets than Billy's Catering.

146) Gi Gi's Bakery has total assets of $425 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio.

A) 38.6%.

B) 13.4%.

C) 34.9%.

D) 25.9%.

E) 14.9%.

147) Happiness Catering has total assets of $385 million. Its total liabilities are $100 million and its equity is $285 million. Calculate its debt ratio.

A) 35.1%.

B) 26.0%.

C) 38.5%.

D) 28.5%.

E) 58.8%.

148) All of the following statements accurately describe the debt ratio except.

A) It is of use to both internal and external users of accounting information.

B) A relatively high ratio is always desirable.

C) The dividing line for a high and low ratio varies from industry to industry.

D) Many factors such as a company's age, stability, profitability and cash flow influence the determination of what would be interpreted as a high versus a low ratio.

E) The ratio might be used to help determine if a company is capable of increasing its income by obtaining further debt.

149) At the end of the current year, Leer Company reported total liabilities of $300,000 and total equity of $100,000. The company's debt ratio on the last year-end was:

A) 300%.

B) 33.3%.

C) 75.0%.

D) 66.67%.

E) $400,000.

150) At the beginning of the current year, Trenton Company's total assets were $248,000 and its total liabilities were $175,000. During the year, the company reported total revenues of $93,000, total expenses of $76,000 and dividends of $5,000. There were no other changes in equity during the year and total assets at the end of the year were $260,000. Trenton Company's debt ratio at the end of the current year is:

A) 70.6%.

B) 67.3%.

C) 32.7%.

D) 48.6%.

E) 1.42%.

151) The process of transferring general journal entry information to the ledger is called:

A) Double-entry accounting.

B) Posting.

C) Balancing an account.

D) Journalizing.

E) Not required unless debits do not equal credits.

152) A column in journals and ledger accounts that is used to cross reference journal and ledger entries is the:

A) Account balance column.

B) Debit column.

C) Posting reference column.

D) Credit column.

E) Description column.

153) The chronological record of each complete transaction that has occurred in a business is called the:

A) Account balance.

B) Ledger.

C) Journal.

D) Trial balance.

E) Cash account.

154) A business's general journal provides a place for recording all of the following except:

A) The transaction date.

B) The names of the accounts involved.

C) The amount of each debit and credit.

D) An explanation of the transaction.

E) The balance in each account.

155) The balance column in a ledger account is:

A) An account entered on the balance sheet.

B) A column for showing the balance of the account after each entry is posted.

C) Another name for the dividends account.

D) An account used to record the transfers of assets from a business to its owner(s).

E) A simple form of account that is widely used in accounting to illustrate the debits and credits required in recording a transaction.

156) A general journal is:

A) A ledger in which amounts are posted from a balance column account.

B) Not required if T-accounts are used.

C) A complete record of all transactions in chronological order from which transaction amounts are posted to the ledger accounts.

D) Not necessary in electronic accounting systems.

E) A book of final entry because financial statements are prepared from it.

157) A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is a(n):

A) Account.

B) Trial balance.

C) Journal.

D) T-account.

E) Balance column account.

158) Smiles Entertainment 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) $1,100.

B) $4,000.

C) $8,500

D) $10,400.

E) $5,500.

159) Jackson Consulting had the following accounts and balances at December 31:

Using the information in the table, calculate Jackson Consulting's reported net income for the period.

A) $16,800.

B) $15,800.

C) $15,300.

D) $10,300.

E) $23,200.

160) Major Lodging had the following accounts and balances as of December 31:

Using the information in the table, calculate the total assets reported on Major's balance sheet for the period.

A) $ 24,900.

B) $ 25,400.

C) $ 22,500.

D) $ 25,900.

E) $ 23,400.

161) At the end of its first month of operations, Michael's Consulting Services reported net income of $25,000. They also had account balances of: Cash, $18,000; Office Supplies, $2,000 and Accounts Receivable $10,000. The sole stockholder's total investment in exchange for common stock for this first month was $5,000. There were no dividends in the first month.

Calculate the amount of total equity to be reported on the balance sheet at the end of the month.

A) $30,000

B) $25,000

C) $20,000

D) $5,000

E) $7,000

162) Identify the accounts that would normally have balances in the debit column of a business's trial balance.

A) Assets and expenses.

B) Assets and revenues.

C) Revenues and expenses.

D) Liabilities and expenses.

E) Liabilities and dividends.

163) Identify the accounts that would normally have balances in the credit column of a business's trial balance.

A) Liabilities and expenses.

B) Assets and revenues.

C) Revenues and expenses.

D) Revenues and liabilities.

E) Dividends and liabilities.

164) Which of the following is not a step in the accounting process?

A) Record relevant transactions and events in a journal.

B) Post journal information to the ledger accounts.

C) Prepare and analyze the trial balance.

D) Analyze each transaction.

E) Verify that revenues and expenses are equal.

165) A bookkeeper has debited an asset account for $3,500 and credited a liability account for $2,000. Which of the following would be an incorrect way to complete the recording of this transaction:

A) Credit another asset account for $1,500.

B) Credit another liability account for $1,500.

C) Credit a revenue account for $1,500.

D) Credit the common stock account for $1,500.

E) Debit another asset account for $1,500.

166) A report that lists a business's accounts and their balances, in which the total debit balances should equal the total credit balances, is called a(n):

A) Account balance.

B) Trial balance.

C) Ledger.

D) Chart of accounts.

E) General Journal.

167) Identify the statement below that is true.

A) If the trial balance is in balance, it proves that no errors have been made in recording and posting transactions.

B) The trial balance is a book of original entry.

C) Another name for the trial balance is the chart of accounts.

D) The trial balance is a list of all accounts from the ledger with their balances at a point in time.

E) The trial balance is another name for the balance sheet as long as debits balance with credits.

168) While in the process of posting from the journal to the ledger, a company failed to post a $500 debit to the Equipment account. The effect of this error will be that:

A) The Equipment account balance will be overstated.

B) The trial balance will not balance.

C) The error will overstate the debits listed in the journal.

D) The total debits in the trial balance will be larger than the total credits.

E) The error will overstate the credits listed in the journal.

169) A $15 credit to Sales was posted as a $150 credit. By what amount is the Sales account in error?

A) $150 understated.

B) $135 overstated.

C) $150 overstated.

D) $15 understated.

E) $135 understated.

170) At year-end, a trial balance showed total credits exceeding total debits by $4,950. This difference could have been caused by:

A) An error in the general journal where a $4,950 increase in Accounts Receivable was recorded as an increase in Cash.

B) A net income of $4,950.

C) The balance of $49,500 in Accounts Payable being entered in the trial balance as $4,950.

D) The balance of $5,500 in the Office Equipment account being entered on the trial balance as a debit of $550.

E) An error in the general journal where a $4,950 increase in Accounts Payable was recorded as a decrease in Accounts Payable.

171) Identify the item below that would cause the trial balance to not balance.

A) A $1,000 collection of an account receivable was erroneously posted as a debit to Accounts Receivable and a credit to Cash.

B) The purchase of office supplies on account for $3,250 was erroneously recorded in the journal as $2,350 debit to Office Supplies and $2,350 credit to Accounts Payable.

C) A $50 cash receipt for the performance of a service was not recorded at all.

D) The purchase of office equipment for $1,200 was posted as a debit to Office Supplies and a credit to Cash for $1,200.

E) The cash payment of a $750 account payable was posted as a debit to Accounts Payable and a debit to Cash for $750.

172) 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?

A) The total of the Debit column of the trial balance will exceed the total of the Credit column by $4,700.

B) The total of the Credit column of the trial balance will exceed the total of the Debit column by $4,700.

C) The total of the Debit column of the trial balance will exceed the total of the Credit column by $9,400.

D) The total of the Credit column of the trial balance will exceed the total of the Debit column by $9,400.

E) The total of the Debit column of the trial balance will equal the total of the Credit column.

173) On a trial balance, if the Debit and Credit column totals are equal, then:

A) All transactions have been recorded correctly.

B) All entries from the journal have been posted to the ledger correctly.

C) All ledger account balances are correct.

D) Equal debits and credits have been recorded for transactions.

E) The balance sheet would be correct.

174) Given the following errors, identify the one by itself that will cause the trial balance to be out of balance.

A) A $200 cash salary payment posted as a $200 debit to Cash and a $200 credit to Salaries Expense.

B) A $100 cash receipt from a customer in payment of her account posted as a $100 debit to Cash and a $10 credit to Accounts Receivable.

C) A $75 cash receipt from a customer in payment of her account posted as a $75 debit to Cash and a $75 credit to Cash.

D) A $50 cash purchase of office supplies posted as a $50 debit to Office Equipment and a $50 credit to Cash.

E) An $800 prepayment from a customer for services to be rendered in the future was posted as an $800 debit to Unearned Revenue and an $800 credit to Cash.

175) 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?

A) Supplies, understated $130; Fees Earned, overstated $130.

B) Supplies, understated $260; Fees Earned, overstated $130.

C) Supplies, overstated $130; Fees Earned, overstated $130.

D) Supplies, overstated $130; Fees Earned, understated $130.

E) Supplies, overstated $260; Fees Earned, understated $130.

176) All of the following are asset accounts except:

A) Accounts Receivable.

B) Buildings.

C) Supplies expense.

D) Equipment.

E) Prepaid insurance.

177) Compare the list of accounts below and choose the list that contains only accounts that would be classified as asset accounts on the Chart of Accounts.

A) Accounts Payable; Cash; Supplies.

B) Unearned Revenue; Accounts Payable; Dividends.

C) Building; Prepaid Insurance; Supplies Expense.

D) Cash; Prepaid Insurance; Equipment.

E) Notes Payable; Cash; Dividends.

178) Which financial statement reports an organization's financial position at a single point in time?

A) Income statement.

B) Balance sheet.

C) Statement of retained earnings.

D) Cash flow statement.

E) Trial balance.

179) Jaxson McCormick opened McCormick's Repairs on March 1 of the current year. During March, the following transactions occurred and were recorded in the company's books:

1. McCormick invested $25,000 cash in the business in exchange for common stock.

2. McCormick contributed $100,000 of equipment to the business.

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 Jackson $5,000 cash as a dividend.

Based on this information, net income for March would be:

A) $10,300.

B) $13,400.

C) $5,300.

D) $8,400.

E) $13,500.

180) Jeremy Consulting received $3,000 from a customer for services provided. Jeremy's general journal entry to record this transaction will be:

A) Debit Services Revenue, credit Accounts Receivable.

B) Debit Cash, credit Accounts Payable.

C) Debit Cash, credit Accounts Receivable.

D) Debit Cash, credit Services Revenue.

E) Debit Accounts Payable, credit Services Revenue.

181) Benjamin Stone opened Stone's Repairs on March 1 of the current year. During March, the following transactions occurred and were recorded in the company's books:

1. Benjamin, the sole stockholder, invested $25,000 cash in the business in exchange for common stock.

2. Benjamin 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 Benjamin $5,000 cash as a dividend.

Based on this information, total stockholder's equity reported on the balance sheet at the end of March would be:

A) $133,400.

B) $130,300.

C) $125,300.

D) $8,400.

E) $13,500.

Match the following definitions and terms.

A) A record of the increases and decreases in a specific asset, liability, equity, revenue, or

expense item.

B) The process of transferring journal entry information to the ledger accounts.

C) A representation of a ledger account used to understand the effects of transactions.

D) A list of accounts and their balances at a point in time.

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

F) Verifiable evidence that transactions have occurred used to record accounting information.

G) An increase in an asset and expense account, and decrease in a liability, common stock,

and revenue account; recorded on the left side of a T-account.

H) A company's chronological record of each transaction in one place that shows debits and credits for each transaction.

I) An accounting system where each transaction affects and is recorded in at least two

accounts; the sum of the debits for each entry must equal the sum of its credits.

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

182) Source documents

183) Debit

184) Posting

185) Double-entry accounting

186) Ledger

187) Journal

188) Account

189) Credit

190) T-account

191) Trial balance

Match the following definitions and terms.

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

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

C) 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.

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

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

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

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

H) 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.

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

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

192) Debit

193) Note payable

194) Ledger

195) Journal

196) Debt ratio

197) Chart of accounts

198) Trial balance

199) Credit

200) Account balance

201) Balance column account

Match the following definitions and terms.

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

B) A journal entry that affects at least three accounts.

C) The process of transferring journal entry information to the ledger.

D) A written promise from a customer to pay a definite sum of money on a specified future date.

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

F) A column in journals where individual account numbers are entered when entries are posted to ledger accounts.

G) Liabilities created when customers pay in advance for products or services; satisfied by delivering the products or services in the future.

H) The most flexible type of journal, it can be used to record any kind of transaction.

I) A simple form used as a helpful tool in understanding the effect of transactions and events on specific accounts.

J) A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense item.

202) General journal

203) Chart of accounts

204) Note receivable

205) T-account

206) Unearned revenues

207) Compound journal entry

208) Posting reference column

209) Posting

210) Account

211) Trial Balance

Identify each of the following accounts as a revenue (R), expense (E), asset (A), liability (L), or equity.

A) OE

B) asset (A)

C) revenue (R)

D) liability (L)

E) expense (E)

212) Salary Expense

213) Cash

214) Equipment

215) Common Stock

216) Fees Revenue

217) Accounts Receivable

218) Accounts Payable

219) Dividends

220) Supplies

221) Unearned Revenue

222) Prepaid Insurance

223) Office Furniture

224) 1. Review the transactions below and identify with an "X" those that would be posted as a credit in the ledger (The first one has been done for you):

__X_1. Salary Payable was increased.

____ 2. Cash was decreased

____ 3. Equipment was increased

____ 4. Common Stock was increased

____ 5. Salaries Expense was increased

____ 6. Accounts Receivable was decreased

____ 7. Unearned Revenue was increased

____ 8. Dividends was increased

____ 9. Supplies was increased

____ 10. Building was increased

____ 11. Utilities Expense was increased

____ 12. Service Revenue was increased

Match the following accounts with whether they appear on the Income Statement (IS) or Balance Sheet (BS).

A) Income Statement (IS)

B) Balance Sheet (BS)

225) Office Equipment

226) Rent Expense

227) Unearned Fees Revenues

228) Rent Expense

229) Accounts Payable

230) Common Stock

231) Fees Revenue

232) Cash

233) Notes Receivable

234) Wages Payable

235) Miley Block is a building consultant. Shown below are (a) several accounts in her ledger with each account preceded by an identification number, and (b) several transactions completed by Block. Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction.

236) 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.

1. Accounts Payable 8. Office Supplies Expense

2. Accounts Receivable 9. Prepaid Insurance

3. Appraisal Fees Earned 10. Salaries Expense

4. Cash 11. Telephone Expense

5. Insurance Expense 12. Unearned Appraisal Fees

6. Office Equipment 13. Common Stock

7. Office Supplies 14. Dividends

237) List the steps in processing transactions.

238) Describe what source documents are and the purpose they serve in a business.

239) Explain how accounts are used in recording information about a business's transactions.

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

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

242) Explain the debt ratio and its use in analyzing a company's financial condition.

243) Explain the recording and posting processes.

244) What is a trial balance? What is its purpose?

245) Describe the link between a business's income statement, the statement of retained earnings, and the balance sheet.

246) Identify by marking an X in the appropriate column, whether each of the following items would likely serve as a source document. The first one is done as an example

247) Indicate whether a debit or credit entry would be required to record the following changes in each account.

a. To decrease Cash

b. To increase Common Stock

c. To decrease Accounts Payable.

d. To increase Salaries Expense.

e. To decrease Supplies.

f. To increase Revenue.

g. To decrease Accounts Receivable.

h. To increase Dividends.

248) Using the following list of accounts and identification letters A through J for Homer's Management Co., enter the type of account and its normal balance into the table below. The first item is filled in as an example:

249) Rowdy Bolton began Bolton Office Services in October and during that month completed these transactions:

a. Invested $10,000 cash, and $15,000 of computer equipment in exchange for common stock.

b. Paid $500 cash for an insurance premium covering the next 12 months.

c. Completed a word processing assignment for a customer and collected $1,000 cash.

d. Paid $200 cash for office supplies.

e. Paid $2,000 for October's rent.

Prepare journal entries to record the above transactions. Explanations are unnecessary.

250) BBB Company sends a $2,500 invoice to a customer for catering services it provided during the month. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

251) ABC Company made a $2,500 payment on account, to satisfy a previously recorded account payable. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

252) A business paid $100 cash to Charles Nice (the sole stockholder) for his personal use. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

253) On December 3, the ABBJ Company paid $1,400 cash in salaries to office personnel. Prepare the general journal entry to record this transaction.

254) On February 5, Teddy's Catering purchased an oven that cost $35,000. The firm made a down payment of $5,000 cash and signed a long-term note payable for the balance. Show the general journal entry to record this transaction.

255) Jarrod Automotive, owned and operated by Jarrod Johnson, began business in September of the current year. Jarrod, a mechanic, had no experience with recording business transactions. As a result, Jarrod entered all of September's transactions directly into the ledger accounts. When he tried to locate a particular entry he found it confusing and time consuming. He has hired you to improve his accounting procedures. The accounts in his General Ledger follow:

Prepare the general journal entries, in chronological order (a) through (e), from the T-account entries shown. Include a brief description of the probable nature of each transaction.

256) Pippa's Paralegal Services completed these transactions in February:

a. Purchased office supplies on account, $300.

b. Completed work for a client on credit, $500.

c. Paid cash for the office supplies purchased in (a).

d. Completed work for a client and received $800 cash.

e. Received $500 cash for the work described in (b).

f. Received $1,000 from a client for paralegal services to be performed in March.

Prepare journal entries to record the above transactions. Explanations are not necessary.

257) Larry Matt completed these transactions during December of the current year:

Prepare general journal entries to record these transactions.

258) Mary Sunny began business as Sunny Law Firm on November 1. Record the following November transactions by making entries directly to the T-accounts provided. Then, prepare a trial balance, as of November 30.

a) Mary invested $15,000 cash and a law library valued at $6,000 in exchange for common stock.

b) Purchased $7,500 of office equipment from John Bronx on credit.

c) Completed legal work for a client and received $1,500 cash in full payment.

d) Paid John Bronx. $3,500 cash in partial settlement of the amount owed.

e) Completed $4,000 of legal work for a client on credit.

f) The firm paid $2,000 cash in dividends.

g) Received $2,500 cash as partial payment for the legal work completed for the client in (e).

h) Paid $2,500 cash for the legal secretary's salary.

259) Jerry's Butcher Shop had the following assets and liabilities at the beginning and end of the current year:

Assets Liabilities

Beginning of the year $114,000 $68,000

End of the year 135,000 73,000

If there were no stockholder investments in the business and no dividends paid during the year, what was the amount of net income earned by Jerry's Butcher Shop?

260) Jerry's Butcher Shop had the following assets and liabilities at the beginning and end of the current year:

Assets Liabilities

Beginning of the year $114,000 $68,000

End of the year 135,000 73,000

If stockholders invested an additional $12,000 in the business during the year in exchange for common stock, but no dividends were paid during the year, what was the amount of net income earned by Jerry's Butcher Shop?

261) Jerry's Butcher Shop had the following assets and liabilities at the beginning and end of the current year:

Assets Liabilities

Beginning of the year $114,000 $68,000

End of the year 135,000 73,000

If there were no stockholder investments in the business but the company paid $5,000 in dividends during the year, what was the amount of net income earned by Jerry's Butcher Shop?

262) Jerry's Butcher Shop had the following assets and liabilities at the beginning and end of the current year:

Assets Liabilities

Beginning of the year $114,000 $68,000

End of the year 135,000 73,000

If stockholders invested an additional $12,000 in the business in exchange for common stock and $5,000 of dividends were paid during the year, what was the amount of net income earned by Jerry's Butcher Shop?

263) A company had total assets of $350,000, total liabilities of $101,500 and total equity of $248,500. Calculate the company's debt ratio.

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

265) List the four steps in recording transactions.

266) 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.

267) 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 withdrawal by the owner was recorded to the correct accounts as $90.

4. An additional investment of $5,000 cash by the 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. Would the errors cause the trial balance to be out of balance?

Would the errors cause the trial balance to be out of balance?

268) 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.

269) 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 the stockholder 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.

270) The following trial balance is prepared from the general ledger of HG's Auto Maintenance.

Because the trial balance did not balance, you decided to examine the accounting records. You found that the following errors had been made:

1. A purchase of supplies on account for $245 was posted as a debit to Supplies and as a debit to Accounts Payable.

2. An investment of $500 cash by the sole stockholder was debited to Common Stock and credited to Cash.

3. In computing the balance of the Accounts Receivable account, a debit of $600 was omitted from the computation.

4. One debit of $300 to the Dividends account was posted as a credit.

5. Office equipment purchased for $800 was posted to the Shop Equipment account.

6. One entire entry was not posted to the general ledger. The transaction involved the receipt of $125 cash for repair services performed for cash.

Prepare a corrected trial balance for the HG's Auto Maintenance as of October 31.

271) Figgaro Company's accounts and their balances, as of the end of August, are included below. All accounts have normal balances:

a. Calculate net income.

b. Determine the amount of total equity to be shown on the August 31 balance sheet.

272) Based on the following trial balance for Sally's Salon, prepare an income statement, statement of retained earnings, and a balance sheet. Sally Crawford, the sole stockholder, made no additional investments in the company during the year.

273) George Butler owned a tugboat and was tired of his current job. He decided to open a business that provides day tugboat tours to tourists along the Mississippi River near his hometown. Prepare journal entries to record the following transactions.

May 1 Butler invested $20,000 cash and his tugboat valued at $90,000 in the business in exchange for common stock.

May 2 Butler paid $3,000 cash for office equipment to help him keep track of business activities.

May 3 Butler bought boating supplies costing $2,500 on credit.

May 4 Butler paid the river master $500 cash for the first month's dock rental.

May 5 Butler paid $1,800 cash for a six-month insurance policy.

May 10 Butler received $2,000 cash from clients for his first tour.

May 12 Butler provided a $3,500 tour on credit, the customer has agreed to pay within

10 days

May 19 Butler paid for the boating supplies originally purchased on May 3.

May 22 Butler receives payment on the account from the client entry on May 12.

May 25 Butler received $2,750 cash for additional tours that he completed that day.

May 31 Butler paid his crew member a salary of $1,000.

May 31 The company paid Butler, its sole stockholder, $2,000 for personal use.

274) Based on the following trial balance for Barry's Automotive Shop, prepare an income statement, statement of retained earnings, and a balance sheet. Barry, the company's sole stockholder, made no additional investments in the company during the year.

275) For each of the accounts in the following table (1) identify the type of account as an asset, liability, equity, revenue, or expense, and (2) identify the normal balance of the account.

276) For each of the following accounts, identify whether a debit or credit yields the indicated change

277) Indicate on which of the financial statements the following items appears. Use I for income statement, RE for statement of retained earnings, and B for balance sheet. More than one statement may be appropriate for some items.

278) Jason Hope decided to open a hotel in his hometown. Prepare journal entries to record the following transactions. Hope uses the accounts Room Rental Revenue and Event Revenue. All expenses for special events are recorded as Event Expense. (Omit explanations.)

279) For each of the following (1) identify the type of account as an asset, liability, equity, revenue, or expense, and (2) identify the normal balance of the account.

280) 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).

_____ Record relevant transactions and events in a journal,

_____ Post journal information to the ledger accounts

_____ Prepare and analyze the trial balance

_____ Analyzing each transaction

281) ________ and ________ are the starting points for the analyzing and recording process.

282) The second step in the analyzing and recording process is to record the transactions and events in the book of original entry, called the ________.

283) The third step in the analyzing and recording process is to post the information to the ________.

284) ________documents identify and describe transactions and events and provide objective evidence and amounts for recording.

285) Revenues and expenses are two categories of ________ accounts.

286) The ________ is a record containing all accounts used by a company as well as the transactions and ending balances of each of the accounts.

287) In a seller's accounting records, ________ are promises of payment waiting to be received from customers.

288) Unearned revenue is classified as a(an) ________ on a business's balance sheet.

289) The four categories of equity accounts are ________, ________, ________, and ________.

290) A ________ is a list of all the accounts used by a company and their identification codes but does not contain the balances.

291) A record containing all the separate accounts for a company as well as all of their balances is called the ________.

292) ________ requires that each transaction affect, and be recorded in, at least two accounts. It also means that total amounts debited must equal total amounts credited for each transaction.

293) The ________ is found by determining the difference between total debits and total credits for an account, including any beginning balance.

294) To increase an asset account, we would ________ it and to increase a liability account, we would ________ it.

295) Funky Music purchased $25,000 of equipment for cash. The Equipment asset account is ________ for $25,000 and the Cash account is ________ for $25,000.

296) Jackson Brown Footwear had total liabilities of $130 million and total assets of $375 million. Its debt ratio was ________. (round to one decimal place)

297) ________ is the process of transferring journal entry information from the journal to the ledger.

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

299) A more structured format that is similar to a T-account in that it has columns for debits and credits, but that is different in that it has columns for transaction date, explanation, and the account balance is the ________.

300) The posting process is the link between the ________ and the ________.

301) You increase the Service Revenue account on the ________ side of its account.

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