Accounting Chapter 2 Study Guide

What would be the account balance in the Service Revenue account after the following transactions, assuming a zero beginning balance? Performed services and left a bill $4,200. Performed services and collected immediately. $3,500. Performed services and billed customer $2,200. Performed services on an account $6,000. Received partial payment on account $1,500.

$15,900 ($4,200 + $3,500 + $2,200 + $6,000 = $15,900)

During the month of February, Hoffer Company had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the January 31 beginning cash balance?

$2,900 (Beginning balance + $7,500 - $8,600 = $1,800 Beginning balance = $2,900)

The record in which business transactions are first recorded is the:

General journal

Which of the following items would appear on the income statement?

Service revenue and utilities expense.

A simple account form widely used in accounting to illustrate how debits and credits work is called a:

T-account

An account balance is:

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

The account used to record the transfers of assets from a business to its stockholders is:

The dividends account

Which of the following formulas can be used to calculate the debt ratio?

Total liabilities/Total assets

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

Trial balance

A company failed to post a $50 debit to the Office Supplies account. The effect of this error will be that the:

Trial balance will not balance.

A ledger is:

A record containing all accounts (with amounts) for a business.

Which of the following statements is false with regard to the debt ratio?

A relatively high ratio is always desirable.

Which of the following list of events properly reflects the early steps taken in the accounting process?

Analyze each transaction, record relevant transactions, post journal information to ledger accounts, and prepare and analyze the trial balance.

Prepaid expenses are

Assets that represent prepayments of future expenses

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

Credit

A credit entry:

Decreases asset and expense accounts and increases liability, common stock, and revenue accounts

Source documents include all of the following except: Bank statements Checks Sales tickets Purchase orders Ledgers

Ledgers

A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is:

Recorded as a credit to an unearned revenue account.

An asset created by prepayment of an expense is:

Recorded as a debit to a prepaid expense account.

The following transactions occurred during July: a. Received $900 cash for services provided to a customer during July. b. Received $2,200 cash investment from Barbara Hanson, the owner of the business. c. Received $750 from a customer in partial payment of his account receivable, which arose from sales in June. d. Provided services to a customer on credit, $375. e. Signed a promissory note for a $6,000 bank loan. f. Received $1,250 cash from a customer for services to be rendered next year. What was the amount of revenue for July?

$1,275 ($900 + $375 = $1,275)

On October 31, a company's Cash account had a normal balance of $7,000. During October, the account was debited for a total of $4,250 and credited for a total of $5,340. What was the balance in the Cash account at the beginning of October?

$8,090 debit balance

Given the trial balance amounts below, compute ending retained earnings.

(add revenue with beginning retained earning then subtract "expenses")

A company has total liabilities of $550 million and total equity of $300 million. Calculate this company's debt ratio.

64.7% ($550/($550 + $300) = 64.7%)

Laurie Dexter starts a business called Camden Cleaning. Dexter invests $10,000 cash in Camden in exchange for its common stock. How would Camden record this transaction?

Debit Cash for $10,000 and credit Common Stock for $10,000.

On April 15, Landscape by Design Inc. receives cash of $2,000 in advance from a customer who will be out of the country for landscaping services to be performed during the four-month period beginning on June 1. How would Landscape by Design record this transaction?

Debit Cash for $2,000 and Credit Unearned Revenue for $2,000.

Jones Hardware, Inc. paid a cash dividend of $6,000. What is the necessary entry to record this transaction?

Debit Dividends, credit Cash.

Teasdale Printing Services purchases equipment on credit for $8,000. How would Teasdale record this transaction?

Debit Equipment for $8,000 and Credit Accounts Payable for $8,000.

On September 30, Forester Inc. receives its electric bill for the month of September in the amount of $300. The accountant sets the bill aside since it is not due until October 25. How would Forester record this transaction?

Debit Utilities Expense for $300 and credit Accounts Payable for $300

Which of the following is the appropriate journal entry if a company performs a service and then bills the customer?

Debit to Accounts Receivable, credit to Service Revenue.

Which of the following is the appropriate journal entry if a company purchases equipment costing $100,000 by paying cash of $10,000?

Debit to Equipment, credit to Notes Payable, credit to Cash.