978-1337276337 Test Bank Chapter 3 Part 4

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KEYWORDS: Bloom’s: Remembering

184. Cash

185. Prepaid Insurance

186. Retained Earnings

187. Bonds Payable

188. Investments

189. Capital Stock

190. Advertising Fees Earned

191. Wages and Salaries Expense

192. Wages and Salaries Payable

193. Office Supplies

194. Dividends

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Subjective Short Answer

196. Several events are listed below. Indicate whether each event is an external event that should be recorded as a

transaction, an internal event that should be recorded as a transaction, or an event that should not be recorded. Use the

following identification codes for your answers:

E-External event to be recorded as a transaction

I-Internal event to be recorded as a transaction

NR–An event that should NOT be recorded

_____ A) An order is placed with a supplier for merchandise.

_____ B) Common stock is issued to investors.

_____ C) Cash sales are made.

_____ D) Raw materials are entered into production.

_____ E) Federal income tax returns are prepared by the company’s accountant.

_____ F) Bills are received for utility expenses.

_____ G) Payment is received from customers to whom merchandise had been sold on credit.

_____ H) Money collected from cash and credit customers is deposited in the company’s checking account at a local

bank.

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197. Presented below are a list of source documents and a list of transactions. Using the identification letters before each

source document, indicate next to each transaction which source document serves as evidence for the recording of the

transaction.

Source Documents

A) Purchase invoice

B) Sales invoice

C) Cash register tape

D) Check

E) Time card

F) Monthly statement

G) Promissory note

H) Stock certificate

Transactions

_____ (1) Supplies are purchased on credit.

_____ (2) Cash sales are made to customers.

_____ (3) Land is acquired by signing an agreement to pay a stated amount plus interest in one year.

_____ (4) Utilities expense is recorded for the current month.

_____ (5) The weekly payroll is paid.

_____ (6) Merchandise is sold to a customer on account.

_____ (7) Payment is made for utility bills that were recorded earlier.

_____ (8) Investors purchase additional shares of the company’s stock directly from the company.

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198. Several transactions are listed below, with the accounting equation stated to the right side of each. Use the following

identification codes to indicate the effects of each transaction on the accounting equation. Write your answers in the space

provided under the accounting equation. You need an identification code for each element of the accounting equation. An

example is given before the first transaction.

I-Increase D-Decrease NE–No Effect

Assets = Liabilities + Owners’ Equity

Example Common stock is issued to investors in the company.

I

NE

I

A)

Cash sales are made.

_______

______

B)

Equipment is purchased on

credit.

_______

______

C) Payment is made for the

equipment purchased on

credit.

_______

______

D) Sales are made on

account.

_______

______

E)

Cash is collected from customers for accounts receivable balances.

_______

______

F)

Dividends are declared and

paid to stockholders.

_______

______

G)

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Land and a building are

acquired in exchange for shares of the company’s common stock.

_______

______

H)

Utility bills are received and recorded; payment will be made later.

_______

______

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199. Union Inc. was organized on June 1, 2017, by two students majoring in education. The two entrepreneurs provided

entertainment for children’s birthday parties to supplement their college career. The following transactions occurred

during the first month of operations:

June 1: Received contribution of $6,000 from each of the two principal owners of the new business in exchange for shares

of stock.

June 1: Purchased lighting equipment for $300 on an open account. The company has 30 days to pay for the equipment.

June 5: Registered as a vendor with the city and paid the $25 monthly fee.

June 9: Purchased an event tent to set up at parties for $2,400 cash.

June 10: Purchased $100 in miscellaneous supplies on account. The company has 30 days to pay for the supplies.

June 15: Paid a $75 bill from a local printer for advertisement signs.

June 17: Customers paid for services with cash of $1,500.

June 24: Billed the local park district $800 entertainment provided to a summer camp.

The park district is to pay one-half of the bill within five working days and the rest within 30 days.

June 29: Received 50% of the amount billed to the park district.

June 30: Customers paid cash for parties of $2,000.

June 30: Paid cash wages of $300 to a friend who helped over the weekend.

June 30: Paid the balance due on the supplies.

Required

1. Prepare a table to summarize the preceding transactions as they affect the accounting

equation. Use the following format. Identify each transaction with the date.

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200. Prepare the journal entry to record each of the following independent transactions. (Use the number of the transaction

in place of a date for identification purposes.)

1. Services provided for cash of $7,050.

2. Purchase of equipment for cash of $2,240.

3. Services provided on account of $530.

4. Purchases of supplies on account for $365.

ANSWER:

201. Prepare the journal entry to record each of the following independent transactions. (Use the number of the transaction

in place of a date for identification purposes.)

1. Sale of capital stock in exchange for a parcel of land; the land is appraised at $75,000.

2. Cash payment of $3,400 in salaries and wages.

3. Payment of open account in the amount of $850.

4. Issuance of a promissory note for $2,750 cash.

5. Collections on account for $689.

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ANSWER:

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202. During the month, services performed for customers on account amounted to $4,500 and collections from customers

in payment of their accounts totaled $3,000. At the end of the month, the Accounts Receivable account had a balance of

$3,500. What was the Accounts Receivable balance at the beginning of the month? (Show your work using a T account.)

ACCOUNTS RECEIVABLE

203. Falcon Services was organized on October 1, 2017. The company received a contribution of $2,000 from each of the

two principal owners. During the month, Falcon Services provided services for cash of $1,400 and services on account for

$600, received $350 from customers in payment of their accounts, purchased supplies on account for $800 and equipment

on account for $1,050, received a utility bill for $150 that will not be paid until November, and paid the full amount due

on the equipment.

Required

Show your work to determine the company’s Cash balance on October 31, 2017.

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204. Several accounts from the financial statements of Robot Technologies are listed below. In the two columns provided

for answers, indicate the type of account and the normal account balance. Use the following identification codes for your

Type of Account Normal Balance

A) Prepaid Expenses _______ _______

B) Cable Television Equipment _______ _______

C) Subscriptions Received in Advance _______ _______

D) Common Stock _______ _______

E) Accounts Payable _______ _______

F) Income Taxes Expense _______ _______

G) Interest Income _______ _______

H) Cable Television Franchises _______ _______

I) Long-Term Debt _______ _______

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205. Listed below are selected accounts from the financial statements of Bargain Mart for the year ended December 31,

2017. In the blank space provided for each account, indicate what type of account it is, its normal balance, and the

debit/credit rules for increasing and decreasing it. Use the following abbreviations for your answers:

Type of Account Normal Account

Balance Rules to Increase or

Decrease the Account

A = Asset Dr = Debit Dr = Debit

L = Liability Cr = Credit Cr = Credit

SE = Stockholders’ Equity

R = Revenue

E = Expense

Type of

Account Normal

Balance Rule to

Increase Rule to

Decrease

Example: Cash A Dr Dr Cr

(a) Income Taxes _______ _______ _______ _______

(b) Accounts Payable _______ _______ _______ _______

(c) Retained Earnings _______ _______ _______ _______

(d) Prepaid Expenses _______ _______ _______ _______

(e) Sales Revenues _______ _______ _______ _______

(f) Long-Term Debt _______ _______ _______ _______

(g) Intangibles _______ _______ _______ _______

(h) Common Stock _______ _______ _______ _______

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206. Presented below are several accounts from the financial statements of Eagle, Inc. for the year ended December 31,

2017:

1. Cash

2. Accounts Receivable

3. Prepaid Expenses

4. Accounts Payable

5. Common Stock

6. Sales

7. Selling Expenses

8. Administrative Expenses

9. Interest Expense

10. Income Taxes Expense

Each of these accounts has been assigned an identification number that you will use as answers for the transactions

described below. Enter the account number(s) in the blank spaces under the headings DEBIT and CREDIT to indicate the

accounts debited and credited when each transaction is recorded in a general journal.

DEBIT CREDIT

A) The company issues common stock at par value.

________ ________

B) A bill is received for advertising placed by the company’s ad agency; payment is due in 30 days. ________

________

C) Interest due on long-term debt is paid.

________ ________

D) Received an invoice from the insurance company for next year’s coverage and payment was made. ________

________