Exam 3: The Accounting Cycle: Capturing Economic Events

The term revenue can best be described as:

Listed below are accounts of Global Company, each identified by a number. Following this list of accounts is a series of transactions. You are to indicate for each transaction the accounts that should be debited and credited by inserting the proper account numbers in the space provided. 1 Cash 5 Delivery Equipment 2 Accounts Receivable 6 Notes Payable 3 Land 7 Accounts Payable 4 Building 8 Capital Stock 9 Retained Earnings Transaction Account(s) Debited Account(s) Credited Example: Purchased delivery equipment, paying part cash and charging the balance on account 5 1,7 A. Paid an account payable B. Collected an account receivable C. Issued capital stock in exchange for cash D. Sold some delivery equipment at cost; received part of the proceeds in cash, with the balance due in 60 days E. Purchased land and building paying part cash and signing a note payable for the balance F. Borrowed money from a bank and signed a note payable due in six months

Posting is the process of:

The account balances for Creative Band, Inc. as of May 31, 2009, are listed below in alphabetical order: Accounts Payable $12,000 Equipment $18,000 Accounts Receivable $14,000 Land $52,000 Building $42,000 Notes Payable $30,000 Cash $8,000 Capital Stock $92,000 On June 3, Creative Band, Inc collected $4,000 of its accounts receivable and paid $7,000 of its accounts payable. In addition, 2,000 of additional shares of capital stock are issued for $5,600. -On June 4, the balance in the Cash account is:

Sally Smith had expenses of $800 in June which she paid in July. She declared these expenses on her June income statement. By doing this, she is following the accounting principle of:

A credit to a ledger account refers to the entry of an amount on the right side of an account.

Wilson Trucking, Inc. reports these account balances at January 1, 2012 (shown in alphabetical order): On January 5, Wilson Trucking collected $175,000 of its accounts receivable, paid $150,000 on its accounts payable, and paid $11,000 on its note payable. Accounts Payable \ 220,000 Accounts Receivable \ 200,000 Buildings \ 480,000 Capital Stock \ 680,000 Cash \ 160,000 Equipment \ 320,000 Land \ 400,000 Notes Payable \ 520,000 Retained Earnings \1 40,000 -On January 5, 2012, total assets are:

Effects of a series of transactions on balance sheet items Fieldstone, Inc. had the following transactions during the month of March, the first month of operations for the business: * The corporation issued 12,000 shares of capital stock to Sandy Fieldstone in exchange for $120,000 cash. * Purchased $73,000 of equipment; made a $18,000 down payment and signed a note payable for the balance. * Made payment of $9,000 on the amount owed for equipment. (A.) Compute the balance in the Cash account at the end of March. (B.) What are the total assets of Fieldstone, Inc. at the end of March? (C.) Compute the balance in the Notes Payable account at the end of March. (D.) What is the total amount of owners' equity at the end of March?

The essential point of a double-entry system of accounting is that every transaction:

What is the total owners' equity at the end of June?

A trial balance cannot be distributed to stockholders in lieu of a balance sheet.

A transaction is first recorded in which of the following accounting records?

Recording transactions in T accounts; trial balance On May 15, George Manny began a new business, called Sounds, Inc., a recording studio to be rented out to artists on an hourly or daily basis. The following six transactions were completed by the business during May: (A.) Issued to Manny 5,000 shares of capital stock in exchange for his investment of $200,000 cash. (B.) Purchased land and a building for $410,000, paying $100,000 cash and signing a note payable for the balance. The land was considered to be worth $310,000 and the building $100,000. (C.) Installed special insulation and soundproofing throughout most of the building at a cost of $120,000. Paid $32,000 cash and agreed to pay the balance in 60 days. Manny considers these items to be additional costs of the building. (D.) Purchased office furnishings costing $18,000 and recording equipment costing $88,400 from Music Supplies. Sounds paid $28,000 cash with the balance due in 30 days. (E.) Borrowed $180,000 from a bank by signing a note payable. (F.) Paid the full amount of the liability to Music Supplies arising from the purchases in D above. Instructions (A.) Record the above transactions directly in the T accounts below. Identify each entry in a T account with the letter shown for the transaction. This exercise does not call for the use of a journal. (B.) Prepare a trial balance at May 31 by completing the form provided. SOUNDS, INC. Trial Balance May 31, 20__ Debit Credit

If the trial balance has a higher debit balance than credit balance, it signifies:

The matching principle is best demonstrated by:

Effects of a series of transactions on balance sheet items Clark Plumbing had the following transactions during the month of June, the first month of operations for the business: * The corporation issued 12,000 shares of capital stock to Bill Clark in exchange for his investment of $72,000 cash. * Purchased $36,000 of equipment; made an $8,000 down payment and signed a note payable for the balance. * Made payment of $4,000 on the amount owed for equipment. (A.) Compute the balance in the Cash account at the end of June. (B.) What are the total assets of Clark Plumbing at the end of June? (C.) Compute the balance in the Notes Payable account at the end of June. (D.) What is the total amount of owners' equity at the end of June?

At the end of October, Flagship Marina received a bill for fuel used in October. Payment is not due until November 30. This transaction:

A trial balance that balances provides proof that all transactions were correctly journalized and posted to the ledger.

The following entry appears in Galloway Paints general journal on April 23, 2011: Inventory 26,000 Accounts Payable 20,000 Cash 6,000 -This transaction involves:

The following transactions occurred during May, the first month of operations for Hunter Products, Inc: * Issued 50,000 shares of capital stock to the owners of the corporation in exchange for $600,000 cash. * Purchased a piece of land for $400,000, making a $150,000 cash down payment and signing a note payable for the balance. * Made a $60,000 cash payment on the note payable from the purchase of land. * Purchased equipment on credit from BBW, Inc. for $63,000. -Bruno's Pizza Restaurant makes full payment of $8,300 on an account payable to Stella's Cheese Co. Stella's would record this transaction with a: