Accounting Ch3
.An investment by the stockholders in a business increases a. assets and stockholders' equity. b. assets and liabilities. c. liabilities and stockholders' equity. d. assets only.
: A,
117. Which of the following accounts follows the rules of debit and credit in relation to increases and decreases in the opposite manner? a. Prepaid Insurance and Dividends b. Dividends and Interest Revenue c. Interest Payable and Common Stock d. Advertising Expense and Land
: B
118. Which of the following is not true of the terms debit and credit? a. They can be abbreviated as Dr. and Cr. b. They can be interpreted to mean increase and decrease. c. They can be used to describe the balance of an account. d. They can be interpreted to mean left and right.
: B
: FSA 182. Equipment costing $20,000 is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a a. debit to Notes Payable. b. credit to Cash. c. credit to Notes Receivable. d. credit to Equipment.
: B, LO: 5, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 172. A journal is not useful for a. disclosing in one place the complete effect of a transaction. b. preparing financial statements. c. providing a record of transactions. d. locating and preventing errors.
: B, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 121. Which of the following statements is true? a. Debits increase assets and increase liabilities. b. Credits decrease assets and decrease liabilities. c. Credits decrease assets and increase liabilities. d. Debits increase liabilities and decrease assets.
: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 132. A revenue account a. is increased with a debit. b. is decreased with a credit. c. is increased with a credit. d. has a normal balance of a debit.
: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
94. In its simplest form, an account consists of all of the following except a. right (credit) side. b. account title. c. left side. d. explanation column.
: D
95. A debit to an asset account indicates a(n) a. error. b. credit was made to a liability account. c. decrease in the asset. d. increase in the asset.
: D
99. A credit is not the normal balance for which account listed below? a. Common Stock account b. Revenue account c. Liability account d. Dividends account
: D
: FSA 78. If a company pays dividends of $10,000, a. stockholders' equity will be reduced by $10,000. b. net income will be reduced by $10,000. c. retained earnings will be reduced by $10,000. d. Both retained earnings and stockholders' equity will be reduced by $10,000.
: D
: Reporting 72. If a company buys a $700 machine on credit, this transaction will affect the a. income statement and retained earnings statement only. b. income statement only. c. income statement, retained earnings statement, and balance sheet. d. balance sheet only.
: D
: Reporting 76. Comstock Company provided consulting services and billed the client $2,500. As a result of this event a. assets remained unchanged. b. assets increased by $2,500. c. equity increased by $2,500 d. Both assets and equity increased by $2,500.
: D
114. Which of the following accounts is increased with a debit? a. Dividends b. Service Revenue c. Interest Payable d. Common Stock
: A
56. Collection of a $600 Accounts Receivable a. increases an asset $600; decreases an asset $600. b. increases an asset $600; decreases a liability $600. c. decreases a liability $600; increases stockholders' equity $600. d. decreases an asset $600; decreases a liability $600.
: A
59. If services are rendered for cash, then a. assets will increase. b. liabilities will increase. c. stockholders' equity will decrease. d. liabilities will decrease.
: A
92. A T-account is a. a way of depicting the basic form of an account. b. a special account used instead of a journal. c. a special account used instead of a trial balance. d. used for accounts that have both a debit and credit balance.
: A
: FSA 83. Howard Company had a transaction that caused a $5,000 increase in both assets and total liabilities. This transaction could have been a(n) a. purchase of office equipment for $12,000, paying $7,000 cash and issuing a note payable for the balance. b. investment of $5,000 cash in the business by the stockholders. c. purchase of office equipment for $5,000 cash. d. repayment of a $5,000 bank loan.
: A
57. If an individual asset is increased, then a. there could be an equal decrease in a specific liability. b. there could be an equal decrease in stockholders' equity. c. there could be an equal decrease in another asset. d. None of these answer choices are correct.
: C
: Reporting 77. Budke Corporation paid dividends of $5,000. As a result of this event, the a. Dividends account was increased by $5,000. b. Dividends account was decreased by $5,000. c. Cash account was increased by $5,000. d. Cash was increased and the Dividends account was decreased by $5,000.
: A
: Reporting 66. When collection is made on Accounts Receivable, a. total assets will remain the same. b. stockholders equity will increase. c. total assets will increase. d. total assets will decrease.
: A
: Reporting 68. A paid dividend a. decreases assets and stockholders' equity. b. increases assets and stockholders' equity. c. increases assets and decreases stockholders' equity. d. decreases assets and increases stockholders' equity.
: A
: Reporting 69. Receiving payment of a portion of an accounts receivable will a. not affect total assets. b. increase liabilities. c. increase stockholders' equity. d. decrease net income.
: A
: Reporting 74. Powers Corporation received a cash advance of $500 from a customer. As a result of this event, a. assets increased by $500. b. equity increased by $500. c. liabilities decreased by $500. d. Both assets and equity increased by $500.
: A
The double-entry system requires that each transaction must be recorded a. in at least two different accounts. b. in two sets of books. c. in a journal and in a ledger. d. first as a revenue and then as an expense.
: A
: FSA 123. Which pair of the listed accounts follows the rules of debits and credits in relation to increases and decreases in the opposite manner? a. Salaries and Wages Expense and Notes Payable b. Common Stock and Unearned Rent Revenue c. Prepaid Rent and Advertising Expense d. Service Revenue and Notes Payable
: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 124. A company that receives money in advance of performing a service a. debits Cash and credits Unearned Service Revenue. b. debits Unearned Service Revenue and credits Accounts Payable c. debits Cash and credits Prepaid Insurance. d. debits Cash and credits Accounts Receivable.
: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 130. When a corporation distributes a dividend the a. most common form of distribution is a cash dividend. b. Dividends account will be increased with a credit. c. Retained Earnings account will be directly increased with a debit. d. Dividends account will be decreased with a debit.
: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting Solution: $280,000 − $60,000 − $40,000 = $180,000 146. During January 2014, Carey Services Inc. paid a cash dividends of $2,000. This transaction a. reduces stockholders' equity by $2,000. b. increases stockholders' equity by $2,000. c. reduces net income by $2,000. d. increases expenses by $2,000.
: A, LO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: FSA 133. Which of the following statements is not true? a. Expenses increase stockholders' equity. b. Expenses have normal debit balances. c. Expenses decrease stockholders' equity. d. Expenses are a negative factor in the computation of net income.
: A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 134. A credit to a liability account a. indicates an increase in the amount owed to creditors. b. indicates a decrease in the amount owed to creditors. c. is an error. d. must be accompanied by a debit to an asset account.
: A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Business Applications 158. In recording accounting transactions, evidence that a transaction has taken place is obtained from a. source documents. b. the Internal Revenue Service. c. the public relations department. d. the Securities and Exchange Commission.
: A, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Business Applications 164. The usual sequence of steps in the recording process is to a. analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts. b. analyze each transaction, enter the transaction in the ledger, and transfer the information to the journal. c. analyze each transaction, enter the transaction in the book of accounts, and transfer the information to the journal. d. analyze each transaction, enter the transaction in the book of original entry, and transfer the information to the journal.
: A, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 177. When a company has performed a service but has not yet received payment, it a. debits accounts receivable and credits service revenue. b. debits revenue from services and credits accounts receivable. c. debits revenue from services and credits accounts payable. d. makes no entry until the cash is received.
: A, LO: 5, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 181. Equipment costing $20,000 machine is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a a. credit to Notes Payable. b. debit to Cash. c. credit to Notes Receivable. d. credit to Equipment.
: A, LO: 5, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 184. Typically the chart of accounts begins with a. asset accounts. b. liability accounts. c. revenue accounts. d. expense accounts.
: A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 186. Which of the following accounts probably would be listed before the others in a chart of accounts? a. Accumulated Depreciation—Buildings b. Insurance Expense c. Dividends d. Notes Payable
: A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 191. A person who wants to determine the balance of a particular account should refer to the a. ledger. b. source document. c. chart of accounts. d. journal.
: A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 193. The usual ordering of accounts in the general ledger is a. assets, liabilities, stockholders' equity, revenues, and expenses. b. assets, liabilities, stockholders' equity, expenses, and revenues. c. liabilities, assets, stockholders' equity, revenues, and expenses. d. stockholders' equity, assets, liabilities, expenses, and revenues.
: A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 205. On January 14, Decker industries purchased supplies of $500 on account. The entry to record the purchase will include a. a debit to Supplies and a credit to Accounts Payable. b. a debit to Supplies Expense and a credit to Accounts Receivable. c. a debit to Supplies and a credit to Cash. d. a debit to Accounts Receivable and a credit to Supplies.
: A, LO: 7, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 202. Posting a. transfers journal entries to ledger accounts. b. transfers ledger transaction data to the journal. c. involves transferring all debits and credits on a journal page to the trial balance. d. provides a chronological record of transactions.
: A, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 216. Which of the following errors, each considered individually, would cause the trial balance to be out of balance? a. A payment of $148 to a creditor was posted as a debit to Accounts Payable and a debit of $148 to Cash. b. Cash of $530 received from a customer on account was posted as a debit of $350 to Cash and as a credit of $350 to Accounts Payable. c. A payment of $59 for supplies was posted as a debit of $95 to Supplies and a credit of $95 to Cash. d. A transaction was not posted.
: A, LO: 8, Bloom: AN, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving,
: FSA 183. An accounting record that includes a list of accounts and their balances at a given time is called a a. trial balance. b. general journal. c. general ledger. d. chart of accounts.
: A, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 213. A trial balance proves a. the mathematical equality of debits and credits after the posting process. b. the ledger is posted correctly. c. that all transactions have been recorded correctly. d. that all transactions have been posted.
: A, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 214. A trial balance a. is a list of accounts with their balances at a given point in time. b. will not balance if a correct journal entry is posted twice. c. will tell you if a transaction is not posted at all. d. proves the factual accuracy of journalized transactions.
: A, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: FSA 119. An account will have a credit balance if the a. credits exceed the debits. b. first transaction entered was a credit. c. debits exceed the credits. d. last transaction entered was a credit.
: A: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, , LO
101. Which of the following describes the classification and normal balance of the Retained Earnings account? a. Asset, debit b. Stockholders' equity, credit c. Revenues, credit d. Expense, debit
: B
102. Which of the following describes the classification and normal balance of the Unearned Rent Revenue account? a. Asset, debit b. Liability, credit c. Revenues, credit d. Expense, debit
: B
63. The purchase of an asset on credit a. increases assets and stockholders' equity. b. increases assets and liabilities. c. decreases assets and increases liabilities. d. leaves total assets unchanged.
: B
88. Which one of the following is not a part of an account? a. Credit side b. Trial balance c. Debit side d. Title
: B
89. An account is a part of the financial information system and is described by each one of the following except a. an account has a debit and credit side. b. an account is a source document. c. an account consists of three parts. d. an account has a title.
: B
93. Which statement about an account is true? a. In its simplest form, an account consists of two parts. b. An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity items. c. There are separate account for specific assets and liabilities but only one account for stockholders' equity items. d. The left side of an account is the credit or decrease side.
: B
: Reporting 82. On March 1, 2014, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not? a. Yes, the company is now obligated to pay the employee, thus that event must be recorded. b. No, hiring an employee is an important event; however it is not an economic event that should be recorded. c. Yes, failure to record the event would cause the financial statements to be misleading. d. No, the financial position of the company has been changed, however, the dollar amount of the transaction is not yet known.
: B
: Reporting 67. A revenue generally a. increases assets and liabilities. b. increases assets and stockholders' equity. c. increases assets and decreases stockholders' equity. d. leaves total assets unchanged.
: B
: Reporting 70. An expense a. decreases assets and liabilities. b. decreases stockholders' equity. c. leaves stockholders' equity unchanged. d. is basically the same as a liability.
: B
87. The left side of an account is a. blank. b. a description of the account. c. the debit side. d. the balance of the account.
: C
:104. Which one of the following represents the expanded basic accounting equation? a. Assets = Liabilities + Common Stock + Dividends - Revenue - Expenses b. Assets + Dividends + Expenses = Liabilities + Common Stock + Revenues c. Assets - Liabilities - Dividends = Common Stock + Revenues - Expenses d. Assets = Revenues + Expenses - Liabilities
: B
MULTIPLE CHOICE QUESTIONS 55. If total liabilities decreased by $4,000, then a. stockholders' equity must have decreased by $4,000. b. assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000. c. assets and stockholders' equity each increased by $2,000. d. assets must have increased by $4,000.
: B
85. Crawford Company started the year with $30,000 in its Common Stock account and a credit balance in Retained Earnings of $22,000. During the year, the company earned net income of $24,000 and declared and paid $10,000 of dividends. In addition, the company sold additional common stock amounting to $14,000. As a result, the amount of its retained earnings at the end of the year would be a. $80,000. b. $36,000. c. $66,000. d. $50,000.
: B Solution: $22,000 + $24,000 − $10,000 = $36,000
: FSA 142. Winrow Company showed the following balances at the end of its first year: Cash $11,000 Prepaid insurance 500 Accounts receivable 2,500 Accounts payable 2,000 Notes payable 3,000 Common stock 5,000 Dividends 500 Revenues 17,000 Expenses 12,500 What did Winrow Company show as total credits on its trial balance? a. $27,500 b. $27,000 c. $26,500 d. $28,000
: B, LO: 3, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, Solution: $2,000 + $3,000 + $5,000 + $17,000 = $27,000
: Business Economics 141. Barnes Company showed the following balances at the end of its first year: Cash $14,000 Prepaid insurance 700 Accounts receivable 3,500 Accounts payable 2,800 Notes payable 4,200 Common stock 5,400 Dividends 700 Revenues 24,000 Expenses 17,500 Mc. 141 (count) What did Barnes Company show as total credits on its trial balance? a. $37,100 b. $36,400 c. $35,700 d. $37,800
: B, LO: 3, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, Solution: $2,800 + $4,200 + $5,400 + $24,000 = $36,400
: FSA 125. When a company performs a service but has not yet received payment, it a. debits Service Revenue and credits Accounts Receivable. b. debits Accounts Receivable and credits Service Revenue. c. debits Service Revenue and credits Accounts Payable. d. makes no entry until cash is received.
: B, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 127. An awareness of the normal balances of accounts would help you spot which of the following as an error in recording? a. A debit balance in the Dividends account b. A credit balance in an expense account c. A credit balance in a liabilities account d. A credit balance in a revenue account
: B, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 128. If a company has overdrawn its bank balance, then a. its Cash account will show a debit balance. b. its Cash account will show a credit balance. c. the Cash account debits will exceed the cash account credits. d. it cannot be detected by observing the balance of the Cash account.
: B, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 140. Why are expenses increased with a debit? a. They are always paid by cash, which is credited. Thus expenses are debited. b. They decrease stockholders' equity thus they increase with a debit. c. They have the same rules of debits and credits as the retained earnings account. d. None of the statements are correct.
: B, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
136. In the first month of operations, the total of the debit entries to the Cash account amounted to $1,200 and the total of the credit entries to the Cash account amounted to $900. The Cash account has a a. $900 credit balance. b. $300 debit balance. c. $1,200 debit balance. d. $300 credit balance.
: B, LO: 3, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, Solution: $1,200 dr. − $900 cr. = $300 dr.
: Reporting Solution: $700 + $600 − $800 = $500 154. At December 1, 2014, Orear Company's Accounts Receivable balance was $5,600. During December, Orear had credit sales of $15,000 and collected accounts receivable of $12,000. At December 31, 2014, the Accounts Receivable balance is a. $5,600 debit b. $8,600 debit c. $20,600 debit d. $8,600 credit
: B, LO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting 147. During February 2014, its first month of operations, the owner of Schwenn Enterprises invested cash of $40,000. Schwenn had cash sales of $8,000 and paid expenses of $14,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28? a. $6,000 credit b. $34,000 debit c. $48,000 debit d. $26,000 credit
: B, LO: 3, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: FSA 120. For the basic accounting equation to stay in balance, each transaction recorded must a. affect two or less accounts. b. affect two or more accounts. c. always affect exactly two accounts. d. affect the same number of asset and liability accounts.
: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Business Applications 150. Which of the following accounts has a normal debit balance? a. Accounts Payable b. Prepaid Rent c. Retained Earnings d. Common Stock
: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: FSA 126. Assets normally show a. credit balances. b. debit balances. c. debit and credit balances. d. debit or credit balances.
: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 139. Which statement is incorrect? a. Dividends represent a distribution by a corporation to its stockholders. b. Dividends are shown on the income statement. c. Dividends reduce stockholders' equity, thus the Dividends account increases on the left side. d. The Dividends account has a normal debit balance.
: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Applications 160. The first step in the recording process is to a. prepare financial statements. b. analyze the transaction in terms of its effect on the accounts. c. post to a journal. d. prepare a trial balance.
: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Business Applications 161. Which of the following is not part of the recording process? a. Analyzing transactions b. Preparing a trial balance c. Entering transactions in a journal d. Posting journal entries
: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting Solution: $282,000 + ($40,000 − $24,000) − $4,000 = $294,000 157. The usual sequence of steps in the transaction recording process is a. journalize, analyze, post to the ledger. b. analyze, journalize, post to the ledger. c. journalize, post to the ledger, analyze. d. post to the ledger, journalize, analyze.
: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: FSA 179. When a company receives a utility bill but will not pay it right away, it should a. debit Utilities Expense and credit Accounts Receivable. b. debit Utilities Expense and credit Accounts Payable. c. debit Accounts Payable and credit Utilities Expense. d. make no entry until the bill is paid.
: B, LO: 5, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 173. A complete journal entry does not show a. the date of the transaction. b. the new balance in the accounts affected by the transaction. c. a brief explanation of the transaction. d. the accounts and amounts to be debited and credited.
: B, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 189. A ledger a. contains only asset and liability accounts. b. is a collection of the entire group of accounts maintained by a company. c. provides a chronological record of transactions. d. should show accounts in alphabetical order.
: B, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 187. Which of the following accounts probably would be listed after the others in a chart of accounts? a. Accumulated Depreciation—Buildings b. Insurance Expense c. Dividends d. Notes Payable
: B, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: FSA 200. The principal purpose of posting is to a. help identify errors made in the journal. b. accumulate the effects of journalized transactions in the individual accounts. c. enter transactions directly into the ledger. d. help determine if the financial statements are ready to be prepared.
: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 199. Posting a. should be performed in account number order. b. accumulates the effects of journalized transactions in the individual accounts. c. involves transferring all debits and credits on a journal page to the trial balance. d. is accomplished by examining ledger accounts and seeing which ones need updating.
: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 215. A trial balance will not balance if a. a correcting journal entry is posted twice. b. a $50 cash dividend is debited to dividends for $500 and credit to cash for $50. c. a $300 payment on accounts payable is debited to accounts payable for $30 and credited to cash for $30. d. a transaction is not posted at all.
: B, LO: 8, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 218. The purchase or sale of long-lived assets used in operating the business is a. an operating activity. b. an investing activity. c. a financing activity. d. None of these answer choices are correct.
: B, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
107. Which accounts normally have credit balances? a. Revenues, liabilities, and dividends b. Revenues, liabilities, and assets c. Revenues, liabilities, and retained earnings d. Revenues, liabilities, and expenses
: C
108. The best interpretation of the word "credit" is the a. offset side of an account. b. increase side of an account. c. right side of an account. d. decrease side of an account.
: C
109. In recording an accounting transaction in a double-entry system a. the number of debit accounts must equal the number of credit accounts. b. there must always be entries made on both sides of the accounting equation. c. the amount of the debits must equal the amount of the credits. d. there must only be two accounts affected by any transaction.
: C
113. An accountant has debited an asset account for $900 and credited a liability account for $600. What can be done to complete the recording of the transaction? a Debit a stockholders' equity account for $300. b. Debit another asset account for $300. c. Credit a different asset account for $300. d. Nothing further must be done.
: C
115. Which of the following accounts is increased with a credit? a. Supplies Expense b. Supplies c. Sales Revenue d. Dividends
: C
116. Which pair of accounts follows the rules of debit and credit in relation to increases and decreases in the same manner? a. Dividends Payable and Rent Expense b. Utilities Expense and Notes Payable c. Prepaid Insurance and Advertising Expense d. Service Revenue and Equipment
: C
96. Debits a. increase both assets and liabilities. b. decrease both assets and liabilities. c. increase assets and decrease liabilities. d. decrease assets and increase liabilities.
: C
97. The normal balance of any account is the a. left side. b. right side. c. side which increases that account. d. side which decreases that account.
: C
: Reporting 65. The sale of an asset on credit for what it cost a. increases assets and liabilities. b. decreases assets and liabilities. c. leaves total assets unchanged. d. decreases assets and increases liabilities.
: C
: Reporting 73. A payment of a portion of an accounts payable will a. not affect total assets. b. increase liabilities. c. not affect stockholders' equity. d. decrease net income.
: C
: Reporting 75. Courtney Company purchased equipment for $1,800 cash. As a result of this event, a. equity decreased by $1,800. b. assets increased by $1,800. c. total assets remained unchanged. d. Both assets and equity decreased by $1,800.
: C
: Reporting 79. If a company issues common stock for $40,000 and uses $30,000 of the cash to purchase a truck, a. assets will be increased by $10,000. b. equity will be reduced by $40,000. c. assets will be increased by $40,000. d. assets will be unchanged.
: C
: Reporting 81. The receipt of cash in advance from a customer a. increases assets and stockholders' equity. b. increases assets and decreases stockholders' equity. c. increases assets and liabilities. d. none of these answer choices are correct.
: C
: Reporting 71. Which of the following items has no effect on retained earnings? a. Expense b. Dividends c. Land purchase d. Revenue
: C
If services are rendered on account, then a. assets will decrease. b. liabilities will increase. c. stockholders' equity will increase. d. liabilities will decrease.
: C
: FSA 84. Jamal Company began the year with $84,000 in its Common Stock account and a debit balance in Retained Earnings of $36,000. During the year, the company earned net income of $18,000 and declared and paid $6,000 of dividends. In addition, the company sold additional common stock amounting to $22,000. Based on this information, what should the transaction analysis show for the ending total of all stockholders' equity accounts? a. $154,000 b. $166,000 c. $82,000 d. $110,000
: C Solution: $84,000 + ($36,000) + $18,000 − $6,000 + $22,000 = $82,000
An account consists of a. a title, a debit balance, and a credit balance. b. a title, a left side, and a debit balance. c. a title, a debit side, and a credit side. d. a title, a right side, and a debit balance.
: C,
: FSA 143. During January 2014, its first month of operation, Osborn Enterprises earned net income of $1,700 and paid dividends to the owners of $500. At January 31, the balance in Retained Earnings will be a. $0. b. $1,700 credit. c. $1,200 credit. d. $500 debit.
: C, LO: 3, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, Solution: $1,700 − $500 = $1,200
: Reporting 144. On June 1, 2014, England Inc. reported a cash balance of $21,000. During June, England made deposits of $8,000 and made disbursements totaling $24,000. What is the cash balance at the end of June? a. $5,000 credit balance b. $29,000 debit balance c. $5,000 debit balance d. $3,000 credit balance
: C, LO: 3, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, Solution: $21,000 + $8,000 − $24,000 = $5,000 debit
: FSA 122. Which pair of the listed accounts follows the rules of debits and credits in relation to increases and decreases in the same manner? a. Salaries and Wages Expense and Notes Payable b. Common Stock and Rent Expense c. Prepaid Rent and Advertising Expense d. Service Revenue and Equipment
: C, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting Solution: $70,000 + $30,000 − $50,000 = $50,000 debit 149. All of the following statements regarding the double-entry system are true except a. a two-sided effect of each transaction is recorded in appropriate accounts when using the double-entry system. b. the double-entry system provides a logical method for recording transactions. c. both sides of the accounting equation must be affected when recording a transaction using the double-entry system. d. when using the double-entry system, the sum of all debits to the accounts must equal the sum of all credits.
: C, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 137. In the first month of operations, the total of the debit entries to the Cash account amounted to $1,000 and the total of the credit entries to the Cash account amounted to $600. The Cash account has a a. $600 credit balance. b. $1,000 debit balance. c. $400 debit balance. d. $600 credit balance.
: C, LO: 3, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, Solution: $1,000 dr. − $600 cr. = $400 dr.
: FSA 135. In the first month of operations, the total of the debit entries to the Cash account amounted to $1,400 and the total of the credit entries to the Cash account amounted to $800. The Cash account has a a. $800 credit balance. b. $1,400 debit balance. c. $600 debit balance. d. $600 credit balance.
: C, LO: 3, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, Solution: $1,400 dr. − $800 cr. = $600 dr.
: Reporting 152. During 2014, its first year of operations, Jane's Bakery had revenues of $65,000 and expenses of $33,000. The business paid cash dividends of $18,000. What is the balance in Retained Earnings at December 31, 2014? a. $0 b. $18,000 debit c. $14,000 credit d. $32,000 credit
: C, LO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $5,600 + $15,000 − $12,000 = $8,600 debit 155. At October 1, 2014, Metz Industries had an Accounts Payable balance of $70,000. During the month, the company made purchases on account of $50,000 and made payments on account of $80,000. At October 31, 2014, the Accounts Payable balance is a. $70,000 debit b. $10,000 credit c. $40,000 credit d. $80,000 credit
: C, LO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
138. The Cash account has a credit balance. Which statement is true? a. This is the normal balance for cash. b. An error has occurred and must be corrected before financial statements can be prepared. c. The account needs to be analyzed to determine the reason for the credit balance. d. Debit postings exceed the credit postings for the accounting period.
: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 131. The Dividends account a. appears on the income statement along with the expenses of the business. b. must show transactions every accounting period. c. is increased with debits and decreased with credits. d. is not a proper subdivision of stockholders' equity.
: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 151. Which of the following accounts has a normal credit balance? a. Prepaid Rent b. Notes Receivable c. Rent Revenue d. Rent Expense
: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: FSA 167. Which of the following is not an example of a source document that provides evidence of a transaction? a. A cancelled check b. A sales slip c. A trial balance d. A cash register tape
: C, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Business Applications 162. Evidence that would not help with determining the effects of a transaction on the accounts would be a(n) a. cash register sales tape. b. bill. c. advertising brochure. d. check.
: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Business Economics 159. After a business transaction has been analyzed and entered in the book of original entry, the next step in the recording process is to transfer the information to a. the company's bank. b. stockholders' equity. c. ledger accounts. d. financial statements.
: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 166. The recording process occurs a. once a year. b. once a month. c. repeatedly during the accounting period. d. infrequently in a manual accounting system.
: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 165. The final step in the recording process is to transfer the journal information to the a. trial balance. b. financial statements. c. ledger. d. file cabinets.
: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 178. A company that receives money in advance of performing a service a. debits cash and credits prepaid services. b. debits unearned fees and credits accounts payable. c. debits cash and credits unearned service revenue. d. debits cash and credits accounts receivable.
: C, LO: 5, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 168. All of the following are significant contributions that the journal makes to the recording process except the journal a. discloses the complete effect of a transaction in one place. b. helps prevent or locate errors because debits and credits can be readily compared. c. keeps complete information about changes in a specific account balance in one place. d. provides a chronological record of transactions.
: C, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 170. The basic format of a journal would not include a(n) a. brief explanation. b. account title column. c. T-account. d. date column.
: C, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 175. The basic form of a journal entry has the a. debit account entered first and indented. b. credit account entered first and indented. c. debit account entered first at the extreme left margin. d. credit account entered first at the extreme left margin.
: C, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 192. A journal a. contains only asset and liability accounts. b. is a collection of the entire group of accounts maintained by a company. c. provides a chronological record of transactions. d. should show accounts in alphabetical order.
: C, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 196. Which statement is incorrect? a. A chart of accounts is a listing of accounts used by a business. b. New accounts can be added to the chart of accounts. c. Stockholders' Equity is an account that is included in the chart of accounts. d. Account titles for the chart of accounts are used in general journal entries.
: C, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: FSA 198. A chart of accounts for a business firm a. is a graph. b. indicates the amount of profit or loss for the period. c. lists the accounts in the ledger. d. shows the balance of each account in the general ledger.
: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 195. The ledger accounts are typically arranged in a. chronological order. b. alphabetical order. c. financial statement order. d. order of appearance in the journal.
: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 185. The purpose of the ledger is to a. record chronologically the day's transactions. b. keep a record of documentation to support each transaction. c. keep in one place all information about changes in specific account balances. d. make sure that all assets, liabilities, etc., have normal balances at all times.
: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 194. Management could determine the amounts due from customers by examining which ledger account? a. Service Revenue b. Accounts Payable c. Accounts Receivable d. Supplies
: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: FSA 206. On July 7, 2014, Shireman Enterprises received cash $1,400 for services rendered. The entry to record this transaction will include a. a debit to Service Revenue of $1,400. b. a credit to Accounts Receivable of $1,400. c. a debit to Cash of $1,400. d. a credit to Accounts Payable of $1,400.
: C, LO: 7, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 203. Posting a. transfers ledger transaction data to the journal. b. normally occurs before journalizing. c. accumulates the effects of journalized transactions in the individual accounts. d. enters transaction data in the journal.
: C, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 204. A list of accounts and their balances at a given time is called a(n) a. journal. b. posting. c. trial balance. d. income statement.
: C, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: FSA 210. A trial balance is a listing of a. transactions in a journal. b. the chart of accounts. c. general ledger accounts and balances. d. the totals from the journal pages.
: C, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: FSA 217. Borrowing money and issuing shares of stock are a. operating activities. b. investing activities. c. financing activities. d. None of these answer choices are correct.
: C, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 211. Customarily, a trial balance is prepared a. at the end of each day. b. after each journal entry is posted. c. at the end of an accounting period. d. only at the inception of the business.
: C, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
100. The classification and normal balance of the Dividends account is a. revenue with a credit balance. b. an expense with a debit balance. c. a liability with a credit balance. d. stockholders' equity with a debit balance.
: D
103. A revenue account a. is increased by debits. b. is decreased by credits. c. has a normal balance of a debit. d. is increased by credits.
: D
105. Which of the following correctly identifies normal balances of accounts? a. Assets Debit Liabilities Credit Common Stock Credit Revenues Debit Expenses Credit b. Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Credit c. Assets Credit Liabilities Debit Common Stock Debit Revenues Credit Expenses Debit d. Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Debit
: D
106. Which accounts normally have debit balances? a. Assets, expenses, and revenues b. Assets, expense, and retained earnings c. Assets, liabilities, and dividends d. Assets, expenses, and dividends
: D
111. An accountant has debited an asset account for $1,000 and credited a liability account for $500. What can be done to complete the recording of the transaction? a. Nothing further must be done. b. Debit a stockholders' equity account for $500. c. Debit another asset account for $500. d. Credit a different asset account for $500.
: D
112. An accountant has debited an asset account for $800 and credited a liability account for $700. Which of the following would be an incorrect way to complete the recording of the transaction? a. Credit an asset account for $100. b. Credit another liability account for $100. c. Credit a stockholders' equity account for $100. d. Debit a stockholders' equity account for $100.
: D
62. The purchase of an asset for cash a. increases assets and stockholders' equity. b. increases assets and liabilities. c. decreases assets and increases liabilities. d. leaves total assets unchanged.
: D
86. All of the following are characteristics of every accounting information system except it is a system a. that collects transaction data. b. that processes transaction data. c. that communicates financial information to decision makers. d. of data storage hardware for the chart of accounts.
: D
90. The right side of an account a. is the correct side. b. reflects all transactions for the accounting period. c. shows all the balances of the accounts in the system. d. is the credit side.
: D
: Reporting 80. Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not? a. Yes, they are treated as revenue at the time of receipt because the company has access to the cash. b. No, the amount of revenue cannot be adequately determined until the company completes the work. c. Yes, The intent of the company is to perform the work and the customer is confident that the services will be completed. d. No, revenue cannot be recognized until the work is performed.
: D
: Reporting 64. The payment of a liability a. decreases assets and stockholders' equity. b. increases assets and decreases liabilities. c. decreases assets and increases liabilities. d. decreases assets and liabilities.
: D
:110. A debit is not the normal balance for which account listed below? a. Dividends b. Cash c. Accounts Receivable d. Service Revenue
: D
: Reporting 145. At January 1, 2014, Troyer Industries reported Retained Earnings of $280,000. During 2014, Troyer had a net loss of $60,000 and paid dividends to the stockholders of $40,000. At December 31, 2014, the balance in Retained Earnings is a. $280,000 debit. b. $240,000 credit. c. $220,000 debit. d. $180,000 credit.
: D, LO: 3, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $70,000 + $50,000 − $80,000 = $40,000 156. At September 1, 2014, Baxter Inc. reported Retained Earnings of $282,000. During the month, Baxter generated revenues of $40,000, incurred expenses of $24,000, purchased equipment for $10,000 and paid dividends of $4,000. What is the balance in Retained Earnings at September 30, 2014? a. $282,000 debit b. $16,000 credit c. $284,000 credit d. $294,000 credit
: D, LO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: ($65,000 + $33,000) − $18,000 = $14,000 153. At January 31, 2014, the balance in Goebel Inc.'s supplies account was $700. During February. Goebel purchased supplies of $600 and used supplies of $800. At the end of February, the balance in the Supplies account should be a. $700 debit. b. $900 credit. c. $2,100 debit. d. $500 debit.
: D, LO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $40,000 + $8,000 − $14,000 = $34,000 148. At September 1, 2014, Kern Enterprises reported a cash balance of $70,000. During the month, Kern collected cash of $30,000 and made disbursements of $50,000. At September 30, 2014, the cash balance is a. $20,000 credit. b. $50,000 credit. c. $100,000 debit. d. $50,000 debit.
: D, LO: 3, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting 129. Which account below is not a subdivision of stockholders' equity? a. Dividends b. Revenues c. Expenses d. Liabilities
: D, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Applications 163. After transaction information has been recorded in the journal, it is transferred to the a. trial balance. b. income statement. c. general journal. d. ledger.
: D, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 176. Which of the following journal entries is recorded correctly and in the basic format? a. Salaries and Wages Expense 550 Cash 1,500 Advertising Expense 950 b. Salaries and Wages Expense 550 Advertising Expense 950 Cash 1,600 c. Cash 1,500 Salaries and Wages Expense 550 Advertising Expense 950 d. Salaries and Wages Expense 550 Advertising Expense 950 Cash 1,500
: D, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 180. When a service has been performed, but no cash has been received, which of the following statements is true? a. No journal entry is made. b. The entry includes a debit to accounts payable. c. The entry includes a credit to unearned revenue. d. The entry includes a debit to accounts receivable.
: D, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 169. A journal provides a. the balances for each account. b. information about a transaction in several different places. c. a list of all accounts used in the business. d. a chronological record of transactions.
: D, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 174. The name given to entering transaction data in the journal is a. chronicling. b. listing. c. posting. d. journalizing.
: D, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 171. Transactions in a journal are initially recorded in a. account number order. b. dollar amount order. c. alphabetical order. d. chronological order.
: D, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 190. Which of the following is an asset? a. Service Revenue b. Notes Payable c. Supplies Expense d. Prepaid Rent
: D, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 188. The Unearned Service Revenue account is classified as a(n) a. asset. b. revenue. c. expense. d. liability.
: D, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: FSA 201. Posting is performed by transferring information from the a. source documents to the journal. b. ledger to the journal. c. source documents to the ledger. d. journal to the ledger.
: D, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 197. The procedure of transferring journal entries to the ledger accounts is called a. journalizing. b. analyzing. c. reporting. d. posting.
: D, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: FSA 209. If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates a. no errors have been made. b. no errors can be discovered. c. that all accounts reflect correct balances. d. the mathematical equality of the accounting equation.
: D, LO: 8, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 212. A trial balance would only help in detecting which one of the following errors? a. A transaction that is not journalized b. A journal entry that is posted twice c. Offsetting errors made in recording the transaction d. A transposition error when transferring the debit side of journal entry to the ledger
: D, LO: 8, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 208. The accountant for Mega Stores, Inc. should have recorded the following correct entry: Jan. 15 Notes Receivable 243 Equipment 243 Instead, he misunderstood the transaction and recorded an incorrect entry. Which of the following wrong entries pertaining to this transaction could have been detected as erroneous when using a trial balance? a. Jan 15 Notes Payable 243 Cash 243 b. Jan 15 Notes Receivable 234 Equipment 234 c. Jan 15 Equipment 243 Notes Receivable 243 d. Jan 15 Notes Receivable 243 Equipment 234
: D, LO: 8, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving,
: FSA 207. The primary purpose of the trial balance is to a. disclose the complete effect of a transaction in one place. b. make sure a journal entry is not posted twice. c. transfer journal entries to the ledger accounts. d. prove the equality of the debit and credit amounts after posting.
: D, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
