Question 1

Performing services on account:

Accepted Answer

A) decreases both assets and liabilities. 
B) increases assets and decreases stockholders' equity. 
C) decreases revenues and decreases stockholders' equity. 
D) increases both net income and stockholders' equity.

Question 2

A company did not record the receipt and payment of an utility bill for $2,500.Is the trial balance out of balance?

Accepted Answer

A) No. 
B) Yes,by $2,500. 
C) Yes,by $5,000. 
D) Yes,by an indeterminate amount.

Question 3

A trial balance is a required financial statement.

Accepted Answer

A) True 
 B)False

Question 4

In a journal entry,the sum of the debits must always equal the sum of the credits.

Accepted Answer

A) True 
 B)False

Question 5

Transaction analysis and the accounting equation have been used to record several transactions for a company.The transactions are now recorded on a multi-column spreadsheet.When preparing a statement of retained earnings with this spreadsheet,which column would be used?

Accepted Answer

A) Cash 
B) Accounts Receivable 
C) Retained Earnings 
D) Revenue

Question 6

A company borrowed $15,000 from the bank by signing a long-term note.How does this transaction affect the accounting equation?

Accepted Answer

A) Add $15,000 to Cash and add $15,000 to Accounts Payable. 
B) Add $15,000 to Cash and add $15,000 to Notes Payable. 
C) Add $15,000 to Cash and add $15,000 to Retained Earnings. 
D) Add $15,000 to Accounts Receivable and add $15,000 to Accounts Payable.

Question 7

Which of the following statements regarding a trial balance is TRUE?

Accepted Answer

A) A trial balance may be prepared at any time during the accounting period. 
B) A trial balance is a list of all accounts used in a business with their balances. 
C) A trial balance shows whether total debits equal total credits. 
D) All of the above are true.

Question 8

Purchasing supplies on account would:

Accepted Answer

A) increase total assets and decrease total liabilities. 
B) increase total liabilities and decrease total assets. 
C) increase total assets and increase total liabilities. 
D) increase total liabilities and increase stockholders' equity.

Question 9

Interest payable,income tax payable and salary payable are all examples of:

Accepted Answer

A) accrued liabilities. 
B) prepaid expenses. 
C) expenses of future periods. 
D) retained earnings.

Question 10

Wrobell Company has the following incorrect trial balance available on December 31,2019:
  The following errors in the trial balance were made:
1.Recorded $200 cash revenue received by debiting Accounts Receivable for $200 and crediting Sales Revenue for $200.
2.Posted a $1,000 credit to Accounts Payable as $100.
3.Understated Common Stock by $200.
4.Omitted a journal entry that debits Insurance Expense for $3,700 and credits Cash for $3,700.
Prepare a corrected trial balance at December 31,2019.A proper heading is not required.

Accepted Answer

The answer of Wrobell Company has the following incorrect trial...

Question 11

Company Z sells land for cash for the same amount it paid for it three years ago.When the company records this transaction:

Accepted Answer

A) assets and stockholders' equity are increased. 
B) one asset is increased and another asset is decreased. 
C) one liability is increased and another liability is decreased. 
D) assets are increased and liabilities are decreased.

Question 12

Latinovich Legal Services had the following transactions during its first month of operations:
May 1 Latinovich Legal Services received $20,000 cash and issued common stock to the stockholders.
May 1 Paid the May rent,$5,000.
May 3 Purchased equipment on account for $3,000.
May 5 Purchased supplies for $2,000 on account.
May 8 Performed services for a client and received cash of $11,800.
May 12 Performed services for a client and billed the client $12,200.The client promised to pay within 10 days.
May 15 Paid for the equipment purchased May 3 on account.
May 22 Received payment from a client on account,$12,200.
May 28 Borrowed $10,000,by signing a promissory note,from First National Bank for use in the business.
May 31 Employees were paid $3,000 for working during the current month.
May 31 Received and paid the utility bill of $1,800.
Required: Record the transactions of the business in a journal.Include an explanation for each entry.

Accepted Answer

The answer of Latinovich Legal Services had the following transactions...

Question 13

If a company buys inventory on account:

Accepted Answer

A) cash decreases. 
B) accounts payable increases. 
C) net income increases. 
D) total assets remain the same.

Question 14

To compute the ending balance of retained earnings:

Accepted Answer

A) the beginning balance in retained earnings will be negative for a new business. 
B) net loss for the period is subtracted from the beginning balance of retained earnings. 
C) dividends are added to the beginning balance of retained earnings. 
D) common stock sold during the period is added to the beginning balance of retained earnings.

Question 15

A prepaid expense is an asset.

Accepted Answer

A) True 
 B)False

Question 16

A company received $35,000 cash and issued common stock in exchange.How does this transaction affect the accounting equation?

Accepted Answer

A) Add $35,000 to Cash and add $35,000 to Retained Earnings. 
B) Add $35,000 to Cash and add $35,000 to Revenue. 
C) Add $35,000 to Dividends and subtract $35,000 from Retained Earnings. 
D) Add $35,000 to Cash and add $35,000 to Common Stock.

Question 17

When preparing the financial statements from a spreadsheet that shows the results of a transaction analysis:

Accepted Answer

A) a statement of retained earnings is not required. 
B) the balance sheet reports the beginning balance of retained earnings. 
C) assets,liabilities,and stockholders' equity are reported on the balance sheet. 
D) revenues,expenses,and dividends are reported on the income statement.

Question 18

Every journal entry:

Accepted Answer

A) must increase at least one account and decrease at least one account. 
B) must debit at least one account and credit at least one account. 
C) is recorded in either the journal or the ledger. 
D) affects both an income statement account and a balance sheet account.

Question 19

Which of the following transactions will increase stockholders' equity?

Accepted Answer

A) The company pays a dividend to its shareholders. 
B) The company issues common stock to new shareholders. 
C) The company purchases equipment. 
D) The company makes a payment on account.

Question 20

Information for the trial balance is obtained from the:

Accepted Answer

A) journal. 
B) ledger. 
C) balance sheet. 
D) income statement.

Exam 2: Transaction Analysis

Performing services on account:

A company did not record the receipt and payment of an utility bill for $2,500.Is the trial balance out of balance?

A trial balance is a required financial statement.

In a journal entry,the sum of the debits must always equal the sum of the credits.

Transaction analysis and the accounting equation have been used to record several transactions for a company.The transactions are now recorded on a multi-column spreadsheet.When preparing a statement of retained earnings with this spreadsheet,which column would be used?

A company borrowed $15,000 from the bank by signing a long-term note.How does this transaction affect the accounting equation?

Which of the following statements regarding a trial balance is TRUE?

Purchasing supplies on account would:

Interest payable,income tax payable and salary payable are all examples of:

Company Z sells land for cash for the same amount it paid for it three years ago.When the company records this transaction:

If a company buys inventory on account:

To compute the ending balance of retained earnings:

A prepaid expense is an asset.

A company received $35,000 cash and issued common stock in exchange.How does this transaction affect the accounting equation?

When preparing the financial statements from a spreadsheet that shows the results of a transaction analysis:

Every journal entry:

Which of the following transactions will increase stockholders' equity?

Information for the trial balance is obtained from the: