Chapter 3

Retained earnings is decreased by A. expenses. B. revenues. C. cash payments. D. contributions from owners. E. cash payments for assets.

A. expenses.

A company began the year with $60,000 in its common stock account and a credit balance in retained earnings of $40,000. During the year, the company earned net income of $75,000 and declared and paid $25,000 of dividends. In addition, the company sold additional common stock amounting to $100,000. Based on this information, what is the ending total of stockholders' equity? A. $250,000 B. $190,000 C. $175,000 D. $150,000 E. $275,000

A. $250,000

A trial balance will balance even if A. a $1,000 journal entry was posted twice. B. both accounts affected by a $1,000 transaction were debited. C. None of these D. a $1,000 cash payment for supplies was debited to the Supplies account for $1,000 and credited to the Cash account for $100. D. the account that should be debited was credited and the account that should be credited was credited..

A. a $1,000 journal entry was posted twice.

An accountant has debited an asset account for $1,000 and credited a stockholders' equity account for $500. There is one missing part of the transaction. Which of the following can be the missing part of the transaction that needs to be recorded? A. Debit a different stockholders' equity account for $500. B. Credit a different asset account for $500. C. Nothing further must be done. D. Credit another asset account for $1,000. E. Debit another liability account for $1,000.

B. Credit a different asset account for $500.

Powell Corporation paid dividends of $500. As a result of this event, the corporation's A. liabilities increased and equity decreased by $500. B. assets and equity decreased by $500. C. assets and equity increased by $500. D. liabilities decreased and equity increased by $500. E. assets and liabilities decreased by $500.

B. assets and equity decreased by $500.

A company purchases office equipment in exchange for cash. This transaction will immediately affect the A. income statement only. B. balance sheet and cash flows statement only. C. income statement, retained earnings statement, cash flows statement, and balance sheet. D. income statement, balance sheet, and retained earnings statement only. E. income statement and cash flows statement only.

B. balance sheet and cash flows statement only.

Buying supplies in exchange for cash A. decreases liabilities and increases assets. B. increases assets and decreases assets. C. increases liabilities and decreases liabilities. D. increases liabilities and increases assets. E. increases stockholders' equity and decreases stockholders' equity.

B. increases assets and decreases assets.

Posting A. transfers ledger transaction data to the journal. B. transfers journal entries to ledger accounts. C. provides a chronological record of transactions. D. involves transferring all debits and credits on a journal page to the trial balance. E. transfers trial balance amounts to the financial statements.

B. transfers journal entries to ledger accounts.

In its first month of operations, a company's cash account has total debit entries amounting to $27,500 and total credit entries amounting to $24,900. At the end of the month, the cash account has a A. $27,500 debit balance. B. $2,600 credit balance. C. $2,600 debit balance. D. $0 balance. E. $52,400 debit balance.

C. $2,600 debit balance.

At the start of the current year, a corporation's retained earnings account had a credit balance of $282,000. During the year, the corporation earned revenues of $40,000, incurred expenses of $24,000. At the end of the year, it purchased equipment for $10,000 in exchange for a $10,000 note and it paid dividends of $4,000. What is the balance in retained earnings at the end of May? A. $282,000 debit B. $284,000 credit C. $294,000 credit D. $16,000 credit E. $298,000 credit

C. $294,000 credit

Which of the following statements is true? A. Credits decrease assets and decrease liabilities. B. Debits increase liabilities and equities. C. Credits decrease assets and increase liabilities. D. Debits increase liabilities and decrease assets. E. Debits increase assets and increase liabilities.

C. Credits decrease assets and increase liabilities.

Which of these steps occurs earliest in the accounting cycle? A. Prepare financial statements B. Prepare the closing entries C. Journalize the transaction D. Prepare a trial balance E. Post to the ledger

C. Journalize the transaction

What type of account is unearned revenue? A. Revenue B. Expense C. Liability D. Asset E. Equity

C. Liability

On April1, a company hires a new employee who will start to work a week later. 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. No, the financial position of the company has been changed, but cash has not yet been paid. B. Yes, failure to record the event would cause the financial statements to be misleading. C. No, hiring an employee is an important event; however it is not an economic event that should be recorded. D. None of these E. Yes, the company is now obligated to pay the employee, thus that event must be recorded.

C. No, hiring an employee is an important event; however it is not an economic event that should be recorded.

A trial balance A. will not balance if a correct journal entry is posted twice. B. will tell you if all transactions have been posted. C. is a list of accounts with their balances at a given point in time. D. never includes revenue, expense, and dividend accounts. E. proves the accuracy of journalized transactions.

C. is a list of accounts with their balances at a given point in time.

At the start of the month, a corporation reported retained earnings of $136,000. During the month, it earned $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and paid dividends of $2,000. What is the balance in retained earnings at the end of the month? A. $137,000 credit B. $136,000 debit C. $184,000 credit D. $142,000 credit E. $8,000 credit

D. $142,000 credit

A company's financial records report the following accounts and balances at the end of the year: Accounts payable$ 4,300Accounts receivable 5,000Cash 14,400Common stock 5,900Dividends 2,500Interest expense 18,800Notes payable 5,500Prepaid insurance 3,000Retained earnings 2,700Service revenue 25,300 What would the company show as its total credits on its trial balance? A. $45,900 B. $37,800 C. $41,000 D. $42,200 E. $43,700

E. $43,700

A company has the following accounts and account balances at the end of its first year:Accounts payable, $4,000Cash, $20,000Common stock, Not givenDividends, $1,000Expenses, $17,000Notes payable, $6,000Prepaid insurance, $2,000Revenues, $22,000What is the balance of its common stock account at the end of the first year? A. $7,000 B. $13,000 C. $3,000 D. $9,000 E. $8,000

E. $8,000

Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not? A. No, the amount of revenue cannot be adequately determined until the company completes the work. B. Yes, the intent of the company is to perform the work and the customer is confident that the services will be completed. C. None of these D. Yes, they are treated as revenue at the time of receipt because the company has the cash. E. No, revenue cannot be recognized until the work is performed.

E. No, revenue cannot be recognized until the work is performed.

The effects of receiving cash in advance from a customer on the basic accounting equation are to A. increase assets and increase stockholders' equity. B. decrease assets and decrease stockholders' equity. C. decrease assets and decrease liabilities. D. increase liabilities and increase stockholders' equity. E. increase assets and increase liabilities.

E. increase assets and increase liabilities.