Unit 5 quiz

In the first month of operations for Gallowsbird Industries, the total of the debit entries to the cash account amounted to $36,000 ($16,000 investment by stockholders and revenues of $20,000). The total of the credit entries to the cash account amounted to $22,000 (purchase of equipment $8,000 and payment of expenses $14,000). At the end of the month, the cash account has a(n)

$14,000 debit balance. Solution: $36,000 (debit) - $22,000 (credit) = $14,000 debit balance

The following transactions for the month of March have been journalized and posted to the proper accounts. Mar. 1 The business received $7,000 cash and issued common stock to stockholders. Mar. 2 Paid the first month's rent of $500. Mar. 3 Purchased equipment by paying $2,000 cash and executing a note payable for $6,000. Mar. 4 Purchased office supplies for $700 cash. Mar. 5 Billed a client for $12,000 of design services completed. Mar. 6 Received $9,000 on account for the services previously recorded. What is the balance in Accounts Receivable?

$3,000 Accounts Receivable is increased (debited) by the March 5 amount of $12,000 and decreased (credited) by the March 6 amount of $9,000, which gives a balance of $3,000 in Account Receivable account.

Electrelane Company showed the following balances at the end of its first year: Cash $ 4,000 Prepaid insurance 7,000 Accounts receivable 5,000 Accounts payable 4,000 Notes payable 6,000 Common stock 2,000 Dividends 1,000 Revenues 32,000 Expenses 25,000 What did Electrelene Company show as total credits on its trial balance?

$44,000 Accounts payable $ 4,000 Notes payable 6,000 Common stock 2,000 Revenues 32,000 Total credits $44,000

Chik Chik Company showed the following balances at the end of its first year: Cash $6,000 Prepaid insurance 9,400 Accounts receivable 7,000 Accounts payable 5,600 Notes payable 8,400 Common stock 2,800 Dividends 1,400 Revenues 44,000 Expenses 35,000 What did Chik Chik Company show as total credits on its trial balance?

$5,600+ $8,400 + $2,800 + $44,000 = $60,800

Sharon Foods, Inc. reported the following transactions for September 2016. 1. The business received $22,000 cash and issued common stock. It was credited to Common Stock. 2. The business purchased office equipment for $9,000 for which $2,500 cash was paid and the balance was put on a note payable. 3. Paid insurance expense of $1,500 cash. 4. Paid the September utility bill for $900 cash. 5. Paid $1,500 cash for September rent. 6. The business had sales of $11,000 in September. Of these sales, 60% were cash sales, and the balance was credit sales. 7. The business paid $8,000 cash for office furniture. What are the total liabilities at the end of September, 2016?

$6,500 Explanation: Liability = Note Payable = 9000 - 2500 = 6500

Which of the following statements is false? 1. Revenues have normal credit balances. 2. Revenues decrease retained earnings but increase stockholder's equity 3. Revenues are a positive factor in the computation of net income. 4. Revenues increase stockholders' equity. 5. Revenues increase retained earnings and increase stockholder's equity

2. Revenues decrease retained earnings but increase stockholder's equity

On June 1, Oxford Company purchased $8,000 of office equipment from Comma Company. Oxford Co. paid $2,000 in cash, and they signed a note payable for the remaining balance. How would Comma Company record this transaction? (Ignore cost of goods sold/inventory.) (Which of the following entries is correct?) A. Equipment 8,000 Cash 2,000 Notes Payable 6,000 B. Equipment 8,000 Cash 2,000 Notes Receivable 6,000 C. Cash 8,000 Sales Revenue 8,000 D. Cash 2,000 Notes Receivable 6,000 Sales Revenue 8,000 E. Cash 2,000 Notes Payable 6,000 Sales Revenue 8,000

D Explanation: This sale is revenue for Comma Company, so they increase the revenue account with a credit for 8,000. Additionally, they have earned all the revenue on the date of sale even though they have not received all the cash yet, so all $8,000 are recorded as revenue on June 1. Comma Company also increase the assets cash and notes receivable with debits for $2,000 and $6,000, respectively.

Which of the following statements is true about expenses?

Expenses decrease stockholders' equity, so an expense account's normal balance is a debit balance

On June 1, Oxford Company purchased $8,000 of office equipment from Comma Company. Oxford Company paid $2,000 in cash, and they signed a 6-month, 10% note payable for the remaining balance. How would Oxford Company record this transaction on June 1? (which entry is correct?) A. Cash 2,000 Equipment 8,000 Notes Payable 6,000 B. Equipment 8,000 Cash 2,000 Notes Payable 6,000 C. Cash 2,000 Equipment 8,000 Notes Payable 10,000 D. Notes Payable 6,000 Cash 2,000 Equipment 8,000 E. Notes Receivable 8,000 Equipment 6,000 Cash 2,000

Solution: B Explanation: Oxford Co would increase the asset account, equipment, with a debit for the cost of the item. Their cash account would be decreased by crediting it for $2,000, and the liability, notes payable, would be increased with a credit.

Beethoven Company provided consulting services and billed the client $3,100. As a result of this event, assets did what? Stockholders' equity did what?

assets and stockholders' equity both increased by $3,100

A trial balance is a listing of

general ledger accounts and their balances

A credit to a liability account

indicates an increase in the amount owed to creditors.