Question 1

Unquiet Hands, Inc.borrowed $30,000 on October 1, 2019 at 6% interest with both principal and interest due on September 30, 2020.Which of the following journal entries should the firm use to accrue interest at the end of each month?

Accepted Answer

A)  $$\begin{array} { | l | c | } 
\hline \text { Dr. } & \text { Iriterest payable } \
\hline \text { Cr. } & \text { Cash } \
\hline
\end{array}$$ 
B)  $\begin{array}{|c|c|}
\hline \text { Dr. } & \text { Interest receivable } \
\hline \mathrm{Cr} . & \text { Interest payable } \
\hline
\end{array}$ 
C)  $\begin{array}{|l|l|}
\hline \text { Dr. } & \text { Interest expense } \
\hline \mathrm{Cr} . & \text { Interest payable } \
\hline
\end{array}$ 
D)  $\begin{array}{|l|l|}
\hline \text { Dr. } & \text { Interest payable } \
\hline \mathrm{Cr} . & \text { Interest expense } \
\hline
\end{array}$

Question 2

A ledger:

Accepted Answer

A) is where transactions are initially recorded. 
B) is where transactions are posted to after they are initially recorded. 
C) is the same as a chart of accounts, with each account numbered to facilitate frequent references that are made to it. 
D) is the same as a source document, such as an invoice from a supplier or a copy of a credit purchase made by a customer.

Question 3

Using the column headings provided below, show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the account name, amount, and indicating whether it is an addition (+)or subtraction (?).Column headings reflect the expanded balance sheet equation; items that affect net income should not be shown as affecting stockholders' equity.
1.The firm borrowed $4,000 from the bank; a short-term note was signed.
2.Merchandise inventory costing $1,500 was purchased; cash of $400 was
paid and the balance is due in 30 days.
3.Employee wages of $2,000 were accrued at the end of the month.
4.Merchandise that cost $700 was sold for $900 in cash.
5.This month's rent of $1,400 was paid.
6.Revenues from services during month totaled $13,000.Of this amount,
$4,000 was received in cash and the balance is expected to be received within 30 days.
7.During the month, supplies were purchased on account at a cost of $1,040,
and debited into the Supplies (asset)account.A total of $800 of supplies
were used during the month.
8.Interest of $480 has been earned on a note receivable, but has not yet been received.
 $$\begin{array} { | c | l | l | l | l | } 
\hline \begin{array} { c } 
\text { Transaction/ } \
\text { Adjustment }
\end{array} & \text { Assets } & \text { Liabilities } & \begin{array} { c } 
\text { Stockholders' } \
\text { Equity }
\end{array} & \text { Net Income } \
\hline 1 . & & & & \
\hline 2 . & & & & \
\hline 3 . & & & & \
\hline 4 . & & & & \
\hline 5 . & & & & \
\hline 6 . & & & & \
\hline 7.& & & & \
\hline 8 . & & & & \

\hline
\end{array}$$

Accepted Answer

The answer of Using the column headings provided below, show...

Question 4

A newspaper ad submitted and published this week, with the agreement to get paid for it next week would, in the newspaper's records:

Accepted Answer

A) increase assets and increase revenues. 
B) increase assets and decrease liabilities. 
C) increase assets and increase expenses. 
D) have no effect on total assets.

Question 5

The effect of an adjustment is:

Accepted Answer

A) to correct an entry that was not in balance. 
B) to increase the accuracy of the financial statements. 
C) to record cash receipts and payments not previously recorded. 
D) to close the books.

Question 6

In the seller's records, the sale of merchandise on account would:

Accepted Answer

A) increase assets and increase expenses. 
B) increase assets and decrease liabilities. 
C) increase assets and increase paid-in capital. 
D) increase assets and decrease revenues.

Question 7

An expanded version of the accounting equation could be:

Accepted Answer

A) Assets + Revenues = Liabilities + Stockholders' Equity − Expenses 
B) Assets − Liabilities = Paid-in Capital − Revenues − Expenses 
C) Assets = Liabilities + Paid-in Capital + Beginning Retained Earnings + Revenues − Expenses − Dividends 
D) Assets = Liabilities + Paid-in Capital − Revenues + Expenses

Question 8

Chicago Consulting, an engineering consulting firm, provided $6,000 of services to a client; the client paid $2,000 when the bill was submitted and will pay the balance within a week.Chicago Consulting will record this transaction by:

Accepted Answer

A)  $$\begin{array} { | l |l | r | r | } 
\hline \text { Dr. } & \text { Cash } & 2,000 & \
\hline \text { Dr. } & \text { Fees receivable } & 4,000 & \
\hline \text { Cr. } & \text { Fees revenue } & & 6,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | r | r | } 
\hline \text { Dr. } & \text { Fees revenule } & 6,000 & \
\hline \text { Cr. } & \text { Fees receivable } & & 4,000 \
\hline \text { Cr. } & \text { Cash } & & 2,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | r | r | } 
\hline \text { Dr. } & \text { Cash } & 2,000 & \
\hline \text { Cr. } & \text { Fees revernue } & & 2,000 \
\hline
\end{array}$$ 
D)  $\begin{array}{|l|l|r|r|}
\hline \text { Dr. } & \text { Cash } & 2,000 & \
\hline \text { Dr. } & \text { Fees revenue } & 4,000 & \
\hline \text { Cr. } & \text { Fees receivable } & & 6,000 \
\hline
\end{array}$

Question 9

The accounting concept/principle being applied when an adjustment is made is usually:

Accepted Answer

A) matching revenue and expense. 
B) consistency. 
C) original cost. 
D) materiality.

Question 10

In an advertiser's records, a newspaper ad submitted and published this week with the agreement to pay for it next week would:

Accepted Answer

A) decrease assets and decrease expenses. 
B) increase liabilities and increase expenses. 
C) decrease assets and increase revenue. 
D) increase assets and decrease liabilities.

Question 11

When a firm purchases supplies for its business:

Accepted Answer

A) the supplies account should always be debited. 
B) the supplies expense account should always be debited. 
C) either the supplies account or the supplies expense account should be credited. 
D) an adjustment will probably be required as supplies are used.

Question 12

The balance in the Accounts Receivable account decreased from $18,000 at the beginning of the month to $15,000 at the end of the month.Sales on account during the month totaled $130,000.No accounts receivable were written off as uncollectible during the month.Cash collections of accounts receivable during the month totaled:

Accepted Answer

A) $127,000. 
B) $130,000. 
C) $133,000. 
D) $145,000.

Question 13

Wisdom Co.has a note payable to its bank.An adjustment is likely to be required on Wisdom's books at the end of every month that the loan is outstanding to record the:

Accepted Answer

A) amount of interest paid during the month. 
B) amount of total interest to be paid when the note is paid off. 
C) amount of principal payable at the maturity date of the note. 
D) accrued interest expense for the month.

Question 14

Unquiet Hands, Inc.borrowed $30,000 on October 1, 2019 at 6% interest with both principal and interest due on September 30, 2020.How much should be in Unquiet Hands, Inc.'s interest payable account at December 31, 2019?

Accepted Answer

A) $450 
B) $1,800 
C) $0 
D) $1,350

Question 15

The effect of an adjustment on the financial statements is usually to:

Accepted Answer

A) make the balance sheet balance. 
B) increase net income. 
C) increase the accuracy of both the balance sheet and income statement. 
D) match revenues and assets.

Exam 4: The Bookkeeping Process and Transaction Analysis