Exam 3: The Accounting Cycle: Capturing Economic Events

All of the following statements are true of an income statement except:

The journal entry to record a particular business transaction includes a credit to the Cash account.This transaction is most likely also to include:

The statement "This business produced net income of $520,000" is unclear because it failed to specify:

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.

Since most companies update their Retained Earnings balances only once per year,the Retained Earnings balance will always have a $0 balance in the trial balance.

Which of the following errors would be disclosed by preparation of a trial balance?

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 an $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 purchase of equipment on credit is recorded by a:

Every transaction affects equal numbers of ledger accounts and is recorded by equal dollar amounts of debits and credits.

The purchase of office equipment at a cost of $7,600 with an immediate payment of $4,200 and agreement to pay the balance within 60 days is recorded by:

Recording transactions directly in T accounts; trial balance On July 20,Mollie Rose began a new business called MR Printing,which provides typing,duplicating,and printing services.The following six transactions were completed by the business during July. (A.)Issued to Rose 1,000 shares of capital stock in exchange for her investment of $200,000 cash. (B.)Purchased land and a small building for $450,000,paying $165,000 cash and signing a note payable for the balance.The land was considered to be worth $240,000 and the building $210,000. (C.)Purchased office equipment for $30,000 from Quality Interiors,Inc.Paid $17,000 cash and agreed to pay the balance within 60 days. (D.)Purchased a motorcycle on credit for $3,400 to be used for making deliveries to customers.Mollie agreed to make payment to Spokes,Inc.within 10 days. (E.)Paid in full the account payable to Spokes,Inc. (F.)Borrowed $30,000 from a bank and signed a note payable due in six months. 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 July 31 by completing the form provided.

This transaction involves:

A journal entry which records revenue must include:

The sequence of accounting procedures used to record,classify,and summarize accounting information is called the:

A journal entry to recognize an expense could include each of the following,except:

The matching principle is best demonstrated by:

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

The concept of applying the accounting treatment that results in the lowest,most conservative,estimate of net income for the period is called the matching principle.

The accounting cycle begins with the

"I was just following orders" is an acceptable defense if you committed an unethical action during an audit.