Exam 2: Analyzing and Recording Transactions

A company had total assets of $350,000 and total liabilities of $101,500 and total equity of $248,500. Calculate its debt ratio.

Krenz Car Care, owned and operated by Karl Krenz, began business in September of the current year. Karl, a master mechanic, had no experience with keeping a set of books. As a result, Karl entered all of September's transactions directly to the ledger accounts. When he tried to locate a particular entry he found it confusing and time consuming. He has hired you to improve his accounting procedures. The accounts in his General Ledger follow: Prepare the general journal entries, in chronological order (a) through (e), from the T-account entries shown. Include a brief description of the probable nature of each transaction.

Describe the link between the income statement, the statement of owner's equity, and the balance sheet.

An owner's capital account normally has a debit balance.

Source documents:

Based on the following trial balance for Smyth's Repair Shop, prepare an income statement, statement of owner's equity, and a balance sheet. Smyth made no additional investments in the company during the year.

Source documents include all of the following except:

An asset created by prepayment of an expense is:

An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.

On February 5, Textron Stores purchased a van that cost $35,000. The firm made a down payment of $5,000 cash and signed a long-term note payable for the balance. Show the general journal entry to record this transaction.

Identify whether a debit or credit yields the indicated change for each of the following accounts.

At the beginning of the current year, Taunton Company's total assets were $248,000 and its total liabilities were $175,000. During the year, the company reported total revenues of $93,000, total expenses of $76,000 and owner withdrawals of $5,000. There were no other changes in owner's capital during the year and total assets at the end of the year were $260,000. Taunton Company's debt ratio at the end of the current year is:

During the month of February, Hoffer Company had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the January 31 beginning cash balance?

A column in journals and ledger accounts used to cross reference journal and ledger entries is the:

Andrea Conaway opened Wonderland Photography on January 1 of the current year. During January, the following transactions occurred and were recorded in the company's books: Conaway invested $13,500 cash in the business. 2) Conaway contributed $20,000 of photography equipment to the business. 3) The company paid $2,100 cash for an insurance policy covering the next 24 months. 4) The company received $5,700 cash for services provided during January. 5) The company purchased $6,200 of office equipment on credit. 6) The company provided $2,750 of services to customers on account. 7) The company paid cash of $1,500 for monthly rent. 8) The company paid $3,100 on the office equipment purchased in transaction #5 above. 9) Paid $275 cash for January utilities. Based on this information, the balance in the cash account at the end of January would be:

At year-end, Harris Cleaning Service noted the following errors in its trial balance: 1. It understated the total debits to the Cash account by $500 when computing the account balance. 2. A credit sale for $311 was recorded as a credit to the revenue account, but the offsetting debit was not posted. 3. A cash payment to a creditor for $2,600 was never recorded. 4. The $680 balance of the Prepaid Insurance account was listed in the credit column of the trial balance. 5. A $24,900 truck purchase was recorded as a $24,090 debit to Vehicles and a $24,090 credit to Notes Payable. 6. A purchase of office supplies for $150 was recorded as a debit to Office Equipment. The offsetting credit entry was correct. 7. An additional investment of $4,000 by Del Harris was recorded as a debit to Del Harris, Capital and as a credit to Cash. 8. The cash payment of the $510 utility bill for December was recorded (but not paid) twice. 9. The revenue account balance of $79,817 was listed on the trial balance as $97,817. 10. A $1,000 cash withdrawal was recorded as a $100 debit to Del Harris, Withdrawal and $100 credit to cash. Using the form below, indicate whether each error would cause the trial balance to be out of balance, the amount of any imbalance, and whether a correcting journal entry is required.

Which financial statement reports an organization's financial position at a point in time?

The journal is known as a book of original entry.

The right side of a T-account is a(n):

The higher a company's debt ratio is, the higher the risk of a company not being able to meet its obligations.