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Exam 2: Analyzing and Recording Transactions

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Question 91

True/False

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When a company provides services for which cash will not be received until some future date,the company should record unearned revenue for the amount charged to the customer.

A) True
B) False

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Question 92

Multiple Choice

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Match the following definitions and terms by placing the number that identifies the best definition in the blank space next to the term. -     A record of the increases and decreases in a specific asset, liability, equity, revenue or expense item 

A)  Credit 
B)  Journal 
C)  Account 
D)  Ledger 
E)  Source documents 
F)  Accounting records 
G)  Debit 
H)  T-account 
I)  Posting 
J)  Double-entry accounting 

K) A) and C)
L) E) and G)

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Question 93

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Krenz Car Care,which is owned and operated by Karl Krenz,began business as a corporation 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 to be confusing and time consuming.He has hired you to improve his accounting procedures.The accounts in his General Ledger are as follows: 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.

Of the following errors,which one on its own will cause the trial balance to be out of balance?

For each of the following errors,indicate on the table below the amount by which the trial balance will be out of balance and which trial balance column (debit or credit)will have the larger total as a result of the error. a. $100 debit to Cash was debited to the Cash account twice b. $1,900 credit to Sales was posted as a $190 credit c. $5,000 debit to Office Equipment was debited to Office Supplies d. $625 debit to Prepaid Insurance was posted as a $62.50 debit e. $520 credit to Accounts Payable was not posted $\begin{array}{|c|c|c|}\hline \text { Error } & \begin{array}{c}\text { Amount Out of } \\\text { Balance }\end{array} & \begin{array}{c}\text { Column Having } \\\text { Larger Total }\end{array} \\\hline \text { a. } & & \\\hline \text { b. } & & \\\hline \text { c. } & & \\\hline \text { d. } & & \\\hline \text { e. } & & \\\hline\end{array}$

The following is a list of accounts and identification letters A through J for Shannon Management Co.: $\begin{array}{|l|l|l|l|}\hline \text { A. } & \text { Common Stock } & \text { F. } & \text { Prepaid Rent } \\\hline \text { B. } & \text { Interest Payable } & \text { G. } & \text { Advertising Expense } \\\hline \text { C. } & \text { Land } & \text { H. } & \text { Unearned Rent Revenue } \\\hline \text { D. } & \text { Dividends } & \text { I. } & \text { Commissions Earned } \\\hline \text { E. } & \text { Fees Earned } & \text { J. } & \text { Notes Receivable } \\\hline\end{array}$ Use the form below to identify the type of account and its normal balance.The first item is filled in as an example.

Identify each of the following accounts

Match term to its definition

Explain the difference between a ledger and a chart of accounts.

Robert Haddon contributed $70,000 in cash and some land worth $130,000 to open a new business,RH Consulting.Which of the following general journal entries will RH Consulting make to record this transaction?

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

On April 30,Holden Company had an Accounts Receivable balance of $18,000.During the month of May,total credits to Accounts Receivable were $52,000 from customer payments.The May 31 Accounts Receivable balance was $13,000.What was the amount of credit sales during May?

The credit purchase of a delivery truck for $4,700 was posted to Delivery Trucks as a $4,700 debit and to Accounts Payable as a $4,700 debit.What effect would this error have on the trial balance?

What is net income for Shiver Ice House? $\begin{array} { l l } \text { Common Stock...\$ } 120,000 & \text { Accounts Payable.....\$25,000 } \\\text { Cash..............\$116,640 } & \text { Accounts Receivable..\$22,450 } \\\text { Supplies..........\$ } 1,500 & \text { Office Equipment.....\$23,300 } \\\text { Prepaid Rent......\$ } 3,200 & \text { Unearned Revenue...\$ } 4,152 \\\text { Revenue..........\$ } 20,000 & \text { Utilities Expense......\$ } 422 \\\text { Retained Earnings.\$ } 30,000 & \text { Shaving Equipment...\$31,640 }\end{array}$

A trial balance that balances is not proof of complete accuracy in recording transactions.

_____________________________ requires that the impact of each transaction be recorded in at least two accounts.It also means that total amounts debited must equal total amounts credited for each transaction.

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

A ledger is:

A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is:

FastForward purchased $25,000 of equipment for cash.The Equipment asset account is _______________ for $25,000 and the cash account is _______________ for $25,000.