The process of bringing the book and the bank balance into agreement is called
a. reconciling the bank statement.
b. proving the cash.
c. preparing a statement of payment.
d. preparing a statement of disbursements.
Show the effects of each transaction on the accounting equation by indicating under the
proper heading the dollar amount of increase or decrease for each transaction listed
below. Compute the resulting accounting equation.
a. Owner deposited $20,000 in his new business checking account.
b. Supplies were purchased for $300 on account.
c. Paid a $1,200 premium for six months of liability insurance.
d. Purchased supplies for $200 cash.
e. Purchased equipment for $4,000 by paying $1,000; the rest to be paid in six months.
f. Paid the $300 bill outstanding (from transaction b).
g. Owner withdrew $700 from the business for personal use.
The employer pays which of the following to the Internal Revenue Service?
a. the employer’s Social Security and Medicare taxes
b. sales taxes
c. property taxes
d. no taxes
To sign the back of a check with the name of the company and “Pay to any bank” is an
example of a
a. restrictive endorsement.
b. signature card.
c. blank endorsement.
d. canceled check.
Forms and papers that provide information about a business transaction are called
a. ledgers.
b. accounts.
c. source documents.
d. journals.
Examples of employees include all of the following EXCEPT
a. secretaries.
b. public accountants.
c. accounting clerks.
d. plant supervisors.
Jason purchased office equipment for $4,800 on account. This transaction would
a. increase assets and increase owner’s equity.
b. increase assets and increase liabilities.
c. increase one asset and decrease another asset.
d. decrease assets and decrease liabilities.
According to the assumption used in this text, employers are required to withhold
Social Security taxes on the first ____ of each employee’s earnings.
a. $120,000
b. $105,900
c. $120,000
d. $110,100
The trial balance and information for year-end adjustments for Litton Company are as
follows:
a. Ending inventory of supplies is $800 at December 31, 20–.
b. Unexpired insurance as of year-end is $600.
c. Depreciation of equipment is $5,000.
d. Wages earned but not paid as of year-end are $1,700.
Prepare the necessary year-end adjustments on a 10-column work sheet (identify each
adjustment by letter), and complete the work sheet.
Jerri’s Mason Supply Company has four employees who are paid on a weekly basis
receiving time and a half for working more than 40 hours in any one week. The payroll
data for the week ended December 10 is as follows:
Social Security tax is withheld at 6.2% and Medicare tax at 1.45%. Each employee that
is single has $40 withheld for health insurance and each that is married has $70
withheld. Higgins has $25 withheld for United Way. Number the checks beginning with
803.Required:
Stockholders own which type of business?
a. proprietorship
b. corporation
c. partnership with more than ten partners
d. partnership with only two partners
The financial statement that shows the state of the firm’s assets, liabilities, and owner’s
equity on a specific date is called a(n)
a. balance sheet.
b. statement of operations.
c. statement of owner’s equity.
d. income statement.
Prepare a corrected trial balance by changing incorrect amounts and placing each
amount in the proper column.
a. Be sure all accounts have been listed with the appropriate debit or credit balance and
check column totals.
b. The debits to the Cash account are $37,421, and the credits are $34,381.
c. A $500 payment to a creditor was entered in the journal, but was not posted to the
Accounts Payable account. Cash was properly posted.
d. The Advertising Expense total has a transposition error of $90.
e. Accounts Receivable contains a slide error.
The Income Summary account is used to
a. close the revenue accounts only.
b. close the revenue accounts and expense accounts only.
c. close the drawing account.
d. close revenue accounts and expense accounts and update the owner’s capital account.
Employees Income Tax Payable is a liability account that is credited for the FICA tax
withheld from an employee’s earnings.
____________________ represent the decrease in assets (or increase in liabilities) as a
result of efforts made to produce revenues.
Since supplies last for several months, they are recorded as assets.
Record the following transactions in the T accounts below. Indicate next to each entry
the number for that transaction. After all transactions have been recorded, foot the
accounts where necessary and enter the balances in the proper places. Prepare a trial
balance for Douglas Distinctive Services as of December 31, 20–.
The period of time that an asset is expected to help produce revenues is called its
____________________.
____________________ represent something owed to another business entity.
A(n) ____________________ is owned by two or more people who assume the risks
for the business and whose assets may be taken to pay creditors.