MBUS 300 CH3

The following is a trial balance of Barnhart Company as December 31, Year 1: Account Title:DebitCreditCash12,500 Accounts Receivable3,250 Accounts Payable 2,800 Common Stock 6,600 Retained Earnings 4,500 Service Revenue 7,450 Operating Expenses5,100 Dividends500 Totals21,350 21,350 What is the total amount of assets that will be reported on the balance sheet prepared as of December 31, Year 1?

$15,750 The two asset accounts listed on the trial balance are Cash and Accounts Receivable. Total assets = $12,500 + $3,250 = $15,750

The following account balances were taken from the adjusted trial balance of Kendall Company: Revenues$22,400 Operating Expenses 15,000 Dividends 4,500 Retained Earnings 17,000 What is the Retained Earnings account balance that will be included on the post-closing trial balance?

$19,900 Ending retained earnings = Beginning balance + Revenues − Expenses − Dividends Ending retained earnings = $17,000 + $22,400 − $15,000 − $4,500 = $19,900

The closing entry for the Dividends account would involve which of the following?

A credit to Dividends The closing entry to move the balance of the dividends account to the retained earnings account would include a debit to retained earnings to decrease that account. The credit to the dividends account leaves a zero balance in that account.

Which one of the following would not be included in a closing entry? A.A credit to Rent Expense B.A credit to Dividends C.A debit to Unearned Revenue D.A debit to Service Revenue

A debit to Unearned Revenue Closing entries move all current year data from the temporary accounts (revenues, expenses, and dividends) into the retained earnings account. The Unearned Revenue account is a liability account; it is not closed.

What is the term that is used to describe the difference between the total debit and credit amounts in a T-account?

Account balance For any given account, the difference between the total debit and credit amounts is the account balance.

Which of the following accounts is decreased with a debit?

Accounts Payable Debits increase asset accounts; credits decrease asset accounts. Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Accounts Payable, a liability account, is decreased with a debit.

A transaction has been recorded in the T-accounts of Vernon Company as follows: Land10,000 Cash 10,000 Which of the following reflects how this event affects the company's financial statements? Asset=Liab.+Stk.EquityRev.-Exp.=Net Inc.Stmt ofCash Flows A.+=++NANA-NA=NA+FA B.+=NA++NA-NA=NA-FA C.+=++NANA-NA=NA-IA D.NA=NA+NANA-NA=NA-IA

B.+=NA++NA-NA=NA-FA The debit to the Land T-account increases total assets and the credit to the Cash T-account decreases total assets. The increase is offset by the decrease and total assets do not change as a result of this transaction. The income statement is not affected, and the transaction is reported as a cash outflow for investing activities.

What is the term used to describe the right side of a T-account?

Credit side The right side of an account is the credit side.

Which of the following statements regarding credit entries is true?

Credits increase the common stock account. Debits increase asset accounts; credits decrease asset accounts. Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Common Stock, a stockholders' equity account, is increased with a credit.

transaction has been recorded in the general journal of Van Buren Company as follows: Cash5,000 Service revenue 5,000 Which of the following describes how this entry affects the company's financial statements when it is posted to the ledger accounts? Asset=Liab.+Stk.EquityRev.-Exp.=Net Inc.Stmt ofCash Flows A.+=++NANA-+=-NA B.+-=NA+NA+-NA=++OA C.+=NA+++-NA=++FA D.+=NA+++-NA=++OA

D.+=NA+++-NA=++OA The debit to cash increases assets and the credit to service revenue increases revenue, which increases net income and stockholders' equity (retained earnings). The transaction is reported as a cash inflow from operating activities.

What is the term used to describe the left side of a T-account?

Debit side The left side of an account is the debit side.

Which of the following statements about debits is false?

Debits increase liabilities. Debits increase asset accounts; credits decrease asset accounts.Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts.

Which of the following statement is true regarding the trial balance?

Incorrectly recording a cash sale as a sale on account would not cause the trial balance to be out of balance. Even if the debit and credit totals on the trial balance are equal, there may be errors in the accounting records. For example, equal trial balance totals would not disclose errors like the following: failure to record transactions; misclassifications (such as debiting the wrong account); or incorrectly recording the amount of a transaction. The income statement is prepared using the adjusted trial balance.

Which of the following accounts is increased with a debit?

Insurance expense Debits increase asset accounts; credits decrease asset accounts. Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Debit entries increase expense accounts. Expenses, however, decrease stockholders' equity (retained earnings). Debiting an expense account, therefore, reduces stockholders' equity.

Which of the following accounts is decreased with a credit?

Prepaid Insurance Debits increase asset accounts; credits decrease asset accounts. Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Prepaid insurance, an asset account, is decreased with a credit.

Which of the following accounts normally has a debit balance?

Prepaid insurance Assets, such as prepaid insurance, normally have a debit balance; that is, debits increase those accounts. Liabilities, such as unearned revenue and accounts payable, normally have a credit balance; that is, credits increase those accounts. Stockholders' equity accounts, such as common stock, normally have a credit balance; that is, credits increase those accounts.

What effect will the following closing entry have on the retained earnings account? Service Revenue18,800 Interest Expense 750Operating Expenses 15,500Retained Earning 2,550

Retained earnings will increase by $2,550. A credit to retained earnings of $2,550 (to close the service revenue, interest expense, and operating expenses accounts) will increase retained earnings by $2,550.

Bijan Corporation earned $4,000 of revenue that had been deferred. How would the related adjusting entry be recorded in the company's T-accounts?

Revenue4,000 Unearned Revenue 4,000 The adjusting entry decreases unearned revenue, a liability, and increases revenue. It is recorded as a debit to unearned revenue and a credit to the revenue account

Which of the following statements is true? A. Adjusting entries are recorded after the closing entries have been recorded. B. Equal totals in a trial balance guarantees that no errors were made in the recording process. Incorrect C. Debits are equal to credits only after closing entries have been recorded. D. The balance in the retained earnings account in the trial balance will equal the retained earnings balance on the balance sheet only after closing entries have been posted to the general ledger.

The balance in the retained earnings account in the trial balance will equal the retained earnings balance on the balance sheet only after closing entries have been posted to the general ledger. Every entry (not only closing entries) must include at least one debit to an account and at least one credit to an account. This system is called double-entry accounting. Adjusting entries are recorded before (rather than after) the closing entries are recorded. If the debit total does not equal the credit total on the trial balance, the accountant knows to search for an error. Even if the totals are equal, however, there may be errors in the accounting records. Prior to posting closing entries, the balance in the retained earnings account will be the balance at the beginning of the accounting period. Only after closing entries are posted will the trial balance reflect the same retained earnings account balance as the balance sheet.

Which of the following statements is true regarding a trial balance that balances?

The equality of debits and credits has been proven. The trial balance only proves the equality of debits and credits. It does not detect missing or incorrect entries that were recorded with equal debits and credits. If the debit total does not equal the credit total on the trial balance, adjusted trial balance, or post-closing trial balance, the accountant knows to search for an error.