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Exam 15: Analyzing for Business Transactions

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Question 121

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Neither U.S. GAAP nor IFRS require the use of accrual basis accounting.

A) True
B) False

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Question 122

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Identify the correct formula below used to calculate the debt ratio.

A) Total Equity/Total Liabilities.
B) Total Liabilities/Total Equity.
C) Total Liabilities/Total Assets.
D) Total Assets/Total Liabilities.
E) Total Equity/Total Assets.

F) All of the above
G) C) and D)

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Question 123

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A business paid $100 cash to Charles Nice (the sole stockholder) for his personal use. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

Identify the accounts that would normally have balances in the debit column of a business's trial balance.

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

The general journal is known as the book of final entry because financial statements are prepared from it.

________ documents identify and describe transactions and events and provide objective evidence and amounts for recording.

A company provided $12,000 of consulting services, and was immediately paid in cash by the customer. Identify the journal entry below that properly records this transaction.

Geraldine Parker, the sole stockholder of Gi Gi's Dance Studio, started the business by investing $10,000 cash and donating a building worth $20,000 in exchange for common stock. Identify the general journal entry below that Gi Gi's will make to record the transaction.

Unearned revenues are classified as liabilities.

The steps in the accounting process focus on analyzing and recording financial transactions and events within a company. Those steps are shown below. Using the number system of 1 as the first step and 4 as the last step in the process, number the steps in the correct order in which they would occur (1 thru 4). _____Record relevant transactions and events in a journal, _____Post journal information to the ledger accounts _____Prepare and analyze the trial balance _____Analyzing each transaction

Posting is the transfer of journal entry information to the ledger.

Identify the statement below that is true.

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 $\begin{array}{|l|l|l|l|}\hline && \text { Debit } & \text { Credit } \\\hline & \text { Example } & & \\\hline & \text {Completed an appraisal for a client who } & & \\ & \text {promised to pay at a later date } & 2 & 3 \\ \hline & \text {Received cash in advance for appraising a } & & \\A & \text { hail damage claim. } & & \\\hline B. & \text { Purchased office supplies on credit. } & & \\\hline & \text {Drew Castleused cash from the business to } & & \\ & \text {pay his home telephone bill. There were no } & & \\C. & \text { business calls on the bill } & & \\\hline & \text {Received the telephone bill of the business } & & \\D. & \text {and immediately paid it. } & & \\\hline E. & \text { Paid the salary of the office assistant } & & \\\hline & \text {Paid for the supplies purchased } & & \\F. & \text {in transaction B } & & \\\hline& \text {Completed an appraisal for a client and } & & \\& \text {immediately collected cash for the work } & & \\\hline G. & \text { done } & & \\\hline\end{array}$

The third step in the analyzing and recording process is to post the information to the ________.

A journal entry that affects no more than two accounts is called a compound entry.

Using the following list of accounts and identification letters A through J for Homer's Management Co., enter the type of account and its normal balance into the table below. The first item is filled in as an example: A. Common Stock B. Interest Payable C. Land D. Dividends E. Fees Earned F. Prepaid Rent G. Advertising Expense H. Unearned Rent Revenue I. Commissions Earned J. Notes Receivable $\quad$$\quad$$\quad$$\quad$$\quad$$\text { Type of Account }$ $\quad$$\quad$$\quad$$\quad$$\text { Normal Balance }$ $\begin{array} { | c | c | c | c | c | c | c | } \hline & \text { Asset } & \text { Liability } & \text { Equity } & & \text { Debit } & \text { Credit } \\\hline \mathrm { A } & & & \mathrm { X } & & & \mathrm { X } \\\hline \mathrm { B } & & & & & & \\\hline \mathrm { C } & & & & & & \\\hline \mathrm { D } & & & & & & \\\hline \mathrm { E } & & & & & & \\\hline \mathrm { F } & & & & & & \\\hline \mathrm { G } & & & & & & \\\hline \mathrm { H } & & & & & & \\\hline \mathrm { I } & & & & & & \\\hline \mathrm { J } & & & & & & \\\hline\end{array}$

Joe Jackson opened Jackson's Repairs on March 1 of the current year. During March, the following transactions occurred and were recorded in the company's books: • Jackson invested $25,000 cash in the business in exchange for common stock. • Jackson contributed $100,000 of equipment to the business. • The company paid $2,000 cash to rent office space for the month of March. • The company received $16,000 cash for repair services provided during March. • The company paid $6,200 for salaries for the month of March. • The company provided $3,000 of services to customers on account. • The company paid cash of $500 for utilities for the month of March. • The company received $3,100 cash in advance from a customer for repair services To be provided in April. • The company paid Jackson $5,000 cash as a dividend. Based on this information, net income for March would be:

Explain the debt ratio and its use in analyzing a company's financial condition.

A law firm collected $1,800 for work to be performed in the following month. Which of the following general journal entries will the firm make to record this transaction?