978-1337276337 Test Bank Chapter 3 Part 3

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110. The correct term for the process of transferring amounts from a book of original entry to specific assets, liabilities,

revenues, expenses, and stockholders’ equity items is

a. double-entry system.

b. recording.

c. credit.

d. posting.

111. The correct term for the process of recording the economic effects of business transactions in a book of original entry

is

a. double-entry system.

b. debit.

c. dredit.

d. None of these are correct.

112. When the amount for a debit entry in a journal is transferred to a specific account in the general ledger,

a. it must be recorded as a debit to that account in the general ledger.

b. it must be recorded as a credit to that account in the general ledger.

c. it must be recorded in sum only, without any regard for debit or credit, since the general ledger accounts do not

have spaces for debit and credit entries.

d. it cannot be determined without further information.

113. Transactions are recorded in the general journal in

a. alphabetical order.

b. account number order.

c. chronological order.

d. financial statement order.

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Monaco & Associates

Use the following five transactions for Monaco & Associates to answer the following question.

Oct. 1 Bills are sent to clients for services provided in September in the amount of $800.

9 Dravo Co. delivers office furniture ($1,060) and office supplies ($160) to Monaco leaving an

invoice for $1,220.

15 Payment is made to Dravo Co. for the furniture and office supplies delivered on October 9.

23 A bill for $430 for electricity for the month of September is received and will be paid on its due

date in November.

31 Salaries of $850 are paid to employees.

114. See the transactions for Monaco & Associates.

The journal entry to record the October 1 transaction will include a debit of $800 to

a. Sales Revenue.

b. Accounts Receivable.

c. Cash.

d. Retained Earnings.

115. See the transactions for Monaco & Associates.

The journal entry to record the October 9 transaction will include a credit of $1,220 to

a. Furniture and Supplies.

b. Cash.

c. Accounts Payable.

d. Administrative Expenses.

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117. See the transactions for Monaco & Associates.

The journal entry to record the October 23 transaction will include a credit of $430 to

a. Salaries Expense.

b. Cash.

c. Prepaid Expenses.

d. Accounts Payable.

118. See the transactions for Monaco & Associates.

The journal entry to record the October 31 transaction will include a credit to

a. Salaries Expense.

b. Accounts Payable.

c. Prepaid Salaries.

d. Cash.

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119. See the transactions for Monaco & Associates.

Based only on these transactions, what is the total amount of expenses that should appear on the income statement for the

month of October?

a. $430

b. $850

c. $1,280

d. $1,440

120. A list of all accounts and their balances that is used to prove the equality of debits and credits as of a specific date is

a(n)

a. account.

b. general journal.

c. trial balance.

d. chart of accounts.

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121. A trial balance is a(n)

a. optional financial statement used only by accountants.

b. financial statement that can be used in place of a balance sheet.

c. list of accounts.

d. document used to prove the equality of debits and credits in the general ledger.

122. If the sum of the debits and credits in a trial balance is not equal, then

a. there is no concern because the two amounts are not meant to be equal.

b. the chart of accounts also does not balance.

c. it is safe to proceed with the preparation of financial statements.

d. most likely an error was made in posting journal entries to the general ledger or in preparing the trial balance.

123. Which of the following will not cause a trial balance to be out of balance?

a. The balance for an account is incorrectly computed.

b. A debit entry is posted as a credit.

c. A credit entry is posted to the wrong account as a credit.

d. An account is accidentally omitted from the trial balance.

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Wolfe Inc.

Wolfe Inc. reports these account balances at January 1, 2017:

Retained Earnings $ 49,000

Accounts Receivable 20,000

Accounts Payable 24,000

Capital Stock 185,000

Land 153,000

Cash 13,000

Equipment 20,000

Notes Payable 28,000

Buildings 80,000

124. See the account balances for Wolfe Inc.

In Wolfe’s trial balance prepared on January 1, 2017, the total of the credit column is

a. $182,000.

b. $286,000.

c. $196,000.

d. $166,000.

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125. See the account balances for Wolfe Inc.

On January 31, Wolfe collected $12,000 of its accounts receivable and paid $11,000 on its note payable. In Wolfe’s trial

balance prepared on January 31, 2017, the total of the credit column is

a. $297,000.

b. $287,000.

c. $286,000.

d. $275,000.

126. See the account balances for Wolfe Inc.

On January 31, Wolfe collected $12,000 of its accounts receivable and paid $11,000 on its note payable. On January 31,

2017, the total liabilities are

a. $0.

b. $56,000.

c. $41,000.

d. $30,000.

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127. Unfortunately, the bookkeeper notices that two transactions for Patio Publications were not reflected in the balances

of the trial balance: one to record $800 of accrued wages and salaries to be paid on the next pay period, and the other was

the use of $560 of office supplies from the supplies on hand. If the Trial Balance column totals are $15,380 prior to

discovering these mistakes, what are the totals of the Trial Balance columns after the corrections are made?

a. $15,860

b. $15,140

c. $16,740

d. $16,180

128. A cash register tape would be a source document for which of the following?

a. Recording a purchase of inventory on credit

b. Recognizing a cash sale

c. Recording an invoice

d. Recording payroll

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129. A cancelled check would be a source document for which of the following?

a. Recording a purchase of inventory on credit

b. Recording cash received on a customer account

c. Recording accrued payroll

d. Recording a cash payment to a creditor

130. Which one of the following best defines an external event in terms of accounting?

a. A measured event that must be recognized

b. An event recognized in a set of financial statements

c. A happening of consequence to an entity

d. An interaction between an entity and its environment

131. Debit and credit would best be described as __________ terms.

a. abnormal

b. increasing/decreasing

c. quantitative

d. locational

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132. The term “chronological order” is best associated with

a. a journal.

b. a trial balance.

c. credit entries.

d. capital stock.

Completion

133. A purchase of raw materials from a supplier is a(n) ____________________ event.

134. An internal or external event must be ____________________ to be recognized.

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135.

_________________________ provide the proof needed in an accounting system to record a transaction.

136. The issuance of common stock increases both ____________________ and stockholders’ equity.

137. The acquisition of a computer for $1,200, with a down payment of $200 cash and the signing of a $1,000 note

payable for the balance, increases both assets and ____________________.

138. If an accounting firm provides services on account, ____________________ increase and stockholders’ equity

decreases.

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139. The payment of salaries and wages decreases cash and increases a(n) ____________________.

140. Dividends are not a(n) __________________ but a direct reduction of retained earnings.

141. The ____________________ principle says that, with a few exceptions, assets are not carried at market values, but

at their original cost.

142. Various transactions may change the amount and composition of the assets and liabilities, but the

____________________________ must balance after each transaction.

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143. _______________________ are a distribution of net income for the period, not a reduction of net income as are

expenses.

144. A(n) ________________________________ is a numerical list of all of the accounts used by an entity.

145. The _________________________ is the file or book that contains all of a company’s accounts.

146. The totaling of each side of a T account is known as ____________________.

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147. The left or debit side of a liability account is used to record ____________________.

148. Assets and expenses are ____________________ by credits.

149. Liabilities and stockholders’ equity are ____________________ by debits.

150. Credits are always on the _____________________ side of the T account.

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151. The normal balance of revenue is a(n) ____________________.

152. A(n) ____________________ is a chronological record of all transactions entered into by a business.

153. A(n) ________________________ is a list of each account and its balance at a specific point in time.

Matching

Identify which of the following would be recorded as external events, recorded as internal events, or not recorded.

a. Internal event

b. External event

c. Not recorded

DIFFICULTY: Easy

REFERENCES: p. 102

LEARNING OBJECTIVES: FACC.PONO.18.03-01 – LO: 03–01

NATIONAL STANDARDS: United States – BUSPROG: Communications

ACCREDITING STANDARDS: ACBSP: APC-06 – Recording Transactions

AICPA: FN-Reporting

KEYWORDS: Bloom’s: Understanding

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154. The company hires a new secretary.

155. A customer pays its open account.

156. A vendor for a company’s supplies is paid an amount owed on account.

157. The company transfers work in process to finished goods inventory.

158. The company hires a new marketing firm for its new product.

159. The company takes a count of the raw materials inventory and adjusts the books to the actual count of inventory on

hand.

160. The company signs a contract with the marketing firm and pays a retainer.

For each of the following accounts, indicate whether it is a balance sheet account or an income statement account.

a. Balance sheet account

b. Income statement account

DIFFICULTY: Easy

REFERENCES: pp. 107-112

LEARNING OBJECTIVES: FACC.PONO.18.03-04 – LO: 03–04

NATIONAL STANDARDS: United States – BUSPROG: Communications

ACCREDITING STANDARDS: ACBSP: APC-06 – Recording Transactions

AICPA: FN-Reporting

KEYWORDS: Bloom’s: Remembering

161. Prepaid Insurance

162. Cash

163. Sales Revenue

164. Income Taxes Payable

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165. Income Taxes Expense

166. Accounts Receivable

167. Accounts Payable

168. Retained Earnings

169. Furniture and Fixtures

170. Common Stock

171. Utilities Expense

Choose from the following list of account titles the one that most accurately fits the description of that account or is an

example of that account. An account title may be used more than once or not at all.

a. Cash

b. Prepaid Asset

c. Investments

d. Taxes Payable

e. Preferred Stock

f. Accounts Receivable

g. Land

h. Accounts Payable

i. Retained Earnings

j. Notes Receivable

k. Buildings

l. Notes Payable

m. Common Stock

DIFFICULTY: Easy

REFERENCES: pp. 107-112

LEARNING OBJECTIVES: FACC.PONO.18.03-04 – LO: 03–04

NATIONAL STANDARDS: United States – BUSPROG: Communications

ACCREDITING STANDARDS: ACBSP: APC-06 – Recording Transactions

AICPA: FN-Reporting

Chapter 3

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KEYWORDS: Bloom’s: Remembering

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173. A written obligation to repay a fixed amount, with interest, at some time in the future

174. A plot of land held for speculation

175. An amount owed by a customer

176. Corporate income taxes owed to the state government

177. Ownership in a company that allows the owner to receive dividends before common shareholders receive any

distributions

178. Ten acres of land used as the site for a factory

179. Amounts owed on an open account to a vendor, due in 70 days

180. A checking account at a bank

181. A warehouse used to store equipment

182. Claims by the owners on the undistributed net income of a business

183. Rent paid on an office building in advance of use of the facility

Each account has a normal balance. For the following list of accounts, indicate whether the normal balance of each is a

debit or a credit.

a. Debit

b. Credit

DIFFICULTY: Easy

REFERENCES: pp. 112-117

LEARNING OBJECTIVES: FACC.PONO.18.03-05 – LO: 03–05

NATIONAL STANDARDS: United States – BUSPROG: Communications

ACCREDITING STANDARDS: ACBSP: APC-06 – Recording Transactions

AICPA: FN-Reporting