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Exam 16: Accounting for Business Transactions

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Question 91

Multiple Choice

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A credit:

A) Always decreases an account.
B) Is the right-hand side of a T-account.
C) Always increases an account.
D) Is the left-hand side of a T-account.
E) Always increases asset accounts.

F) A) and E)
G) B) and C)

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Question 92

Multiple Choice

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Identify the item below that would cause the trial balance to not balance?

A) A $1,000 collection of an account receivable was erroneously posted as a debit to Accounts Receivable and a credit to Cash.
B) The purchase of office supplies on account for $3,250 was erroneously recorded in the journal as $2,350 debit to Office Supplies and $2,350 credit to Accounts Payable.
C) A $50 cash receipt for the performance of a service was not recorded at all.
D) The purchase of office equipment for $1,200 was posted as a debit to Office Supplies and a credit to Cash for $1,200.
E) The cash payment of a $750 account payable was posted as a debit to Accounts Payable and a debit to Cash for $750.

F) C) and D)
G) A) and D)

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Question 93

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Drew Castle is an insurance appraiser. Shown below are (a) several accounts in his ledger with each account preceded by an identification number, and (b) several transactions completed by Castle. Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction. 1. Accounts Payable 8. Office Supplies Expense 2. Accounts Receivable 9. Prepaid Insurance 3. Appraisal Fees Earned 10. Salaries Expense 4. Cash 11. Telephone Expense 5. Insurance Expense 12. Unearned Appraisal Fees 6. Office Equipment 13. Common Stock 7. Office Supplies 14. Dividends

The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to Accounts Payable.

Debit means increase and credit means decrease for all accounts.

At the end of the current year, James Co. reported total liabilities of $300,000 and total equity of $100,000. The company's debt ratio was:

Sanders Co. has total assets of $385 million. Its total liabilities are $100.1 million and its equity is $284.9 million. Calculate its debt ratio.

At the beginning of the current year, Snell Co. total assets were $248,000 and its total liabilities were $174,200. During the year, the company reported total revenues of $93,000, total expenses of $76,000 and dividends of $5,000. There were no other changes in equity during the year and total assets at the end of the year were $260,000. The company's debt ratio at the end of the current year is:

Edison Consulting received a $300 utilities bill and immediately paid it. Edison's general journal entry to record this transaction will include a:

Identify by marking an X in the appropriate column, whether each of the following items would likely serve as a source document. The first one is done as an example

Dividends always decrease equity.

A business's source documents may include all of the following except:

If a company provides services to a customer on credit, the company providing the service should credit Accounts Receivable.

A customer's promise to pay on credit is classified as an account payable by the seller.

Archer Co. had the following assets and liabilities at the beginning and end of the current year: $\begin{array} { l l l } & \text { Assets } & \text { Liabilities } \\\text { Beginning of the year } & \$ 114,000 & \$ 68,000 \\\text { End of the year } & 135,000 & 73,000\end{array}$ If $12,000 of common stock was issued during the year, and the business paid $5,000 in dividends during the year, what was the amount of net income earned by Archer Co.?

Unearned revenue is classified as a(an) ________ on a business's balance sheet.

Match the following definitions and terms by placing the letter that identifies the best definition

If Tyrol Willow, the sole stockholder of Willow Hardware, withdraws cash of the business to purchase a family car, the business should record this use of cash with an entry to:

Indicate whether a debit or credit entry would be required to record the following changes in each account. a. To decrease Cash b. To increase Common Stock c. To decrease Accounts Payable. d. To increase Salaries Expense. e. To decrease Supplies. f. To increase Revenue. g. To decrease Accounts Receivable. h. To increase Dividends.

The accounting process begins with: