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Exam 2: Analyzing and Recording Transactions

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Question 111

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Asset accounts normally have credit balances and expense accounts normally have debit balances.

A) True
B) False

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Question 112

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The accounting process begins with:

A) Analysis of business transactions and events.
B) Preparation of financial statements and other reports.
C) Summarizing the recorded effects of business transactions.
D) Presentation of financial information to decision-makers.
E) Preparation of the trial balance.

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

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Question 113

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The following are all of the accounts of Flaherty Company that have a balance at the end of August.All accounts have normal balances: $\begin{array}{|l|r|l|r|}\hline \text { Accounts receivable } & \$ 36,000 & \text { Cash } & \$ 27,000 \\\hline \text { Equipment } & 59,000 & \text { Advertising expense } & 5,000 \\\hline \text { Service revenues earmed } & 75,000 & \text { Accounts payable } & 31,000 \\\hline \text { Rent expense } & 3,600 & \text { Dividends } & 24,000 \\\hline \text { Office supplies } & 1,500 & \text { Salaries expense } & 30,000 \\\hline \text { Notes payable } & 22,000 & \text { Common stock } & 20,000 \\\hline & & \text { Retained earnings } & 58,100 \\\hline\end{array}$ a.Calculate net income b.Determine the amount of retained earnings to be shown on the August 31 balance sheet.

Montgomery Marketing Co.had assets of $475,000; liabilities of $275,500; and equity of $199,500.Calculate its debt ratio.

A trial balance taken at year-end showed total credits exceeding total debits by $4,950.This discrepancy could have been caused by:

Other names for the income statement are earnings statement,statement of operations,or profit and loss statement.

A general journal is:

A sales invoice:

A company paid $2,500 cash to satisfy a previously recorded account payable,the only liability on the books.Assume the company had a $4,000 balance in Cash immediately prior to this transaction.Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.Show ending account balances.

A trial balance that is in balance is proof that no errors were made in journalizing the transactions,posting to the ledger,and preparing the trial balance.

A $72,000 receipt of cash from a customer paying on their account was recorded as a $72,000 debit to Accounts Receivable.Assuming this journal entry was posted,what correcting entry (if any) is needed?

Vicki Lake is a computer consultant.Shown below are (a)several accounts in her ledger with each account preceded by an identification number and (b)several transactions completed by Lake.Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction. $\begin{array}{|l|l|l|l|}\hline \text { 1. } & \text { Accounts Payable } & 7 . & \text { Telephone Expense } \\\hline \text { 2. } & \text { Accounts Receivable } & 8 . & \text { Unearned Consulting Fees } \\\hline \text { 3. } & \text { Cash } & 9 . & \text { Common Stock } \\\hline \text { 4. } & \text { Consulting Fees Earned } & 10 . & \text { Dividends } \\\hline \text { 5. } & \text { Office Supplies } & 11 . & \text { Insurance Expense } \\\hline \text { 6. } & \text { Office Supplies Expense } & 12 . & \text { Prepaid Insurance }\\\hline\end{array}$

Which of the following is the appropriate journal entry if a company performs a service and is paid immediately?

Which financial statements are prepared for a period of time?

Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year: $\begin{array}{|l|r|r|}\hline & \text { Assets } & \text { Liabilities } \\\hline \text { Beginning of the year } & \$ 114,000 & \$ 68,000 \\\hline \text { End of the year } & 135,000 & 73,000\\\hline \end{array}$ If the owners invested an additional $12,000 in the business during the year,but no dividends were paid,what was the amount of net income earned by Josephine's Bakery during the current year?

The dividends account normally has a credit balance since it is an equity account.