Question 1

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

Accepted Answer

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Question 2

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.

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Question 3

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

Accepted Answer

The answer of Describe the link between the income statement,...

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Source documents:

Accepted Answer

A)  Include the ledger. 
B)  Are the sources of accounting information. 
C)  Must be in electronic form. 
D)  Are based on accounting entries. 
E)  Include the chart of accounts.

Question 6

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.

Accepted Answer

The answer of Based on the following trial balance for...

Question 7

Source documents include all of the following except:

Accepted Answer

A)  Sales tickets. 
B)  Ledgers. 
C)  Checks. 
D)  Purchase orders. 
E)  Bank statements.

Question 8

An asset created by prepayment of an expense is:

Accepted Answer

A)  Recorded as a debit to an unearned revenue account. 
B)  Recorded as a debit to a prepaid expense account. 
C)  Recorded as a credit to an unearned revenue account. 
D)  Recorded as a credit to a prepaid expense account. 
E)  Not recorded in the accounting records until the earnings process is complete.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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.

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Question 11

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

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Question 12

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:

Accepted Answer

A)  70.6%. 
B)  67.3%. 
C)  32.7%. 
D)  48.6%. 
E)  Cannot be determined from the information provideD.If total assets were $248,000 and total liabilities were $175,000, total equity was $73,000 at the beginning of the period. Add to that figure $93,000 of revenues during the year and subtract $76,000 of expenses and $5,000 of withdrawals during the year and equity obviously ended the year at $85,000. If total assets at the end of the year were $260,000 and total equity was $85,000, total liabilities were $175,000. Thus, the debt ratio was $175,000/$260,000 = 67.3%.

Question 13

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?

Accepted Answer

A)  $700. 
B)  $1,100. 
C)  $2,900. 
D)  $0. 
E)  $4,300.

Question 14

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

Accepted Answer

A)  Account balance column. 
B)  Debit column. 
C)  Posting reference column. 
D)  Credit column. 
E)  Description column.

Question 15

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:

Accepted Answer

A)  $41,450. 
B)  $12,225. 
C)  $18,700. 
D)  $15,250. 
E)  $13,500.

Question 16

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.

Accepted Answer

The answer of At year-end, Harris Cleaning Service noted the...

Question 17

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

Accepted Answer

A)  Income statement. 
B)  Balance sheet. 
C)  Statement of owner's equity. 
D)  Cash flow statement. 
E)  Trail balance.

Question 18

The journal is known as a book of original entry.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  Debit. 
B)  Increase. 
C)  Credit. 
D)  Decrease. 
E)  Account balance.

Question 20

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

Accepted Answer

A) True 
 B)False

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.

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.

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:

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.