81
178) Jeff Jackson opened Jackson’s Repairs on March 1 of the current year. During March, the
following transactions occurred:
1. Jackson invested $25,000 cash in the business in exchange for common stock.
2. Jackson contributed $100,000 of equipment to the business.
3. The company paid $2,000 cash to rent office space for the month of March.
4. The company received $16,000 cash for repair services provided during March.
5. The company paid $6,200 for salaries for the month of March.
6. The company provided $3,000 of services to customers on account.
7. The company paid cash of $500 for utilities for the month of March.
8. The company received $3,100 cash in advance from a customer for repair services to be
provided in April.
9. The company paid $5,000 in cash dividends.
Based on this information, net income for March would be:
A) $10,300.
B) $13,400.
C) $5,300.
D) $8,400.
E) $13,500.
179) Web Consulting received $3,000 from a customer for services provided. The general
journal entry to record this transaction will be:
A) Debit Services Revenue, credit Accounts Receivable.
B) Debit Cash, credit Accounts Payable.
C) Debit Cash, credit Accounts Receivable.
D) Debit Cash, credit Services Revenue.
E) Debit Accounts Payable, credit Services Revenue.
180) Wiley Hill opened Hill’s Repairs on March 1 of the current year. During March, the
following transactions occurred:
1. Wiley invested $25,000 cash in the business in exchange for common stock.
2. Wiley contributed $100,000 of equipment to the business in exchange for common stock.
3. The company paid $2,000 cash to rent office space for the month of March.
4. The company received $16,000 cash for repair services provided during March.
5. The company paid $6,200 for salaries for the month of March.
6. The company provided $3,000 of services to customers on account.
7. The company paid cash of $500 for utilities for the month of March.
8. The company received $3,100 cash in advance from a customer for repair services to be
provided in April.
9. The company paid $5,000 in cash dividends.
Based on this information, the total amount of stockholders’ equity reported on the balance sheet
at the end of March would be:
A) $133,400.
B) $130,300.
C) $125,300.
D) $8,400.
E) $13,500.
83
181) Match the following definitions and terms by placing the letter that identifies the best
definition in the blank space next to the term.
____ 1. Source documents
____ 2. Debit
____ 3. Posting
____ 4. Double-entry accounting
____ 5. Ledger
____ 6. Journal
____ 7. Account
____ 8. Credit
____ 9. T-account
____ 10. Trial balance
A. Decrease in an asset, dividend and expense account, and increase in a liability, common stock
and revenue account; recorded on the right side of a T-account.
B. A record containing all the accounts of a company and their balances.
C. An accounting system where each transaction affects and is recorded in at least two
accounts; the sum of the debits for each entry must equal the sum of its credits.
D. A company’s record of each transaction in one place that shows debits and credits for each
transaction.
E. An increase in an asset, dividend, and expense account, and decrease in a liability, common
stock,
and revenue account; recorded on the left side of a T-account.
F. A record of the increases and decreases in a specific asset, liability, equity, revenue, or
expense item.
G. A representation of a ledger account used to understand the effects of transactions.
H. A list of accounts and their balances at a point in time.
I. The process of transferring journal entry information to the ledger accounts.
J. Identify and describe transactions and events entering the accounting system.
84
182) Provided below is a list of definitions and terms. Match them by placing the letter that
identifies the best definition in the blank space next to each term.
____ 1. Debit ____ 6. Chart of accounts
____ 2. Note payable ____ 7. Trial balance
____ 3. Ledger ____ 8. Credit
____ 4. Journal ____ 9. Account balance
____ 5. Debt ratio ____ 10. Balance column account
A.
An increase in an asset, dividend, and expense account, and a decrease in a liability,
common stock, and revenue account; recorded on the left side of a T-account.
B.
A decrease in an asset, dividend, and expense account, and an increase in a liability,
common stock and revenue account; recorded on the right side of a T-account.
C.
A written promise to pay a definite sum of money on a specified future date.
D.
The difference between total debits and total credits for an account including the
beginning balance.
E.
A list of accounts and their balances at a point in time; the total debit balances
should equal the total credit balances.
F.
A list of all accounts used by a company and the identification number assigned to
each account.
G.
The ratio of total liabilities to total assets; used to reflect the risk associated with the
company’s debts.
H.
An account with debit and credit columns for recording entries and another column
for showing the balance of the account after each entry.
I.
A record of each transaction in one place that shows debits and credits for each
transaction.
J.
A record containing all accounts of a company and their balances.
85
183) Provided below is a list of definitions and terms. Match them by placing the letter that
identifies the best definition in the blank space next to each term.
___ 1. General journal
____ 2. Chart of accounts
____ 3. Note receivable
____ 4. T-account
____ 5. Unearned revenues
____ 6. Compound journal entry
____ 7. Posting reference column
____ 8. Posting
____ 9. Account
____ 10. Trial Balance
A. Represents a ledger account and is used to show the effects of transactions.
B. The most flexible type of journal, it can be used to record any kind of transaction.
C. A journal entry that affects at least three accounts.
D. A written promise from a customer to pay a definite sum of money on a specified future date.
E. A record of the increases and decreases in a specific asset, liability, equity, revenue, or
expense item.
F. A list of all accounts used by a company and the identification number assigned to each
account.
G. The process of transferring journal entry information to the ledger.
H. A list of accounts and their balances; the total debit balances should equal the total credit
balances.
I. A column in journals where individual account numbers are entered when entries are posted to
ledger accounts.
J. Liabilities created when customers pay in advance for services not yet performed.
86
184) Identify each of the following accounts as a revenue (R), expense (E), asset (A), liability
(L), or equity (SE) by placing initials (R, E, A, L or SE) in the blanks.
____ 1. Salary Expense
____ 2. Cash
____ 3. Equipment
____ 4. Common Stock
____ 5. Fees Revenue
____ 6. Accounts Receivable
____ 7. Accounts Payable
____ 8. Dividends
____ 9. Supplies
____ 10. Unearned Revenue
____ 11. Prepaid Insurance
____ 12. Office Furniture
87
185) Review the transactions below and identify with an “X” those that would be posted as a
credit in the ledger (The first one has been done for you):
__X_1. Salary Payable was increased.
____ 2. Cash was decreased
____ 3. Equipment was increased
____ 4. Common Stock was increased
____ 5. Salaries Expense was increased
____ 6. Accounts Receivable was decreased
____ 7. Unearned Revenue was increased
____ 8. Dividends was increased
____ 9. Supplies was increased
____ 10. Building was increased
____ 11. Utilities Expense was increased
____ 12. Service Revenue was increased
88
186) The following accounts appear on either the Income Statement (IS) or Balance Sheet (BS).
In the space to the left of each account, write IS or BS to identify the statement on which the
account appears.
____ 1. Office Equipment
____ 2. Rent Expense
____ 3. Unearned Revenue
____ 4. Rent Expense
____ 5. Accounts Payable
____ 6. Common Stock
____ 7. Fees Revenue
____ 8. Cash
____ 9. Notes Receivable
____ 10. Wages Payable
187) Miley Block is a building consultant. Shown below are (a) several accounts in her ledger
with each account preceded by an identification number, and (b) several transactions completed
by Block. Indicate the accounts debited and credited when recording each transaction by placing
the proper account identification numbers to the right of each transaction.
1.
Accounts Payable
7.
Telephone Expense
2.
Accounts Receivable
8.
Unearned Revenue
3.
Cash
9.
Common Stock
4.
Consulting Fees Earned
10.
Dividends
5.
Office Supplies
11.
Insurance Expense
6.
Office Supplies Expense
12.
Prepaid Insurance
Debit
Credit
Example:
2
4
Completed consulting work for a client
who will pay at a later date.
Received cash in advance from a
customer for designing a building
Purchased office supplies on credit.
Paid for the supplies purchased in B.
Received the telephone bill of the
business and immediately paid it.
Paid for a 3-year insurance policy
Debit
Credit
A
3
8
B
5
1
C
1
3
D
7
3
E
12
3
188) Drew Castle is an insurance appraiser. Shown below are (a) several accounts in his ledger
with each account preceded by an identification number, and (b) several transactions completed
by Castle. Indicate the accounts debited and credited when recording each transaction by placing
the proper account identification numbers to the right of each transaction.
1. Accounts Payable 8. Office Supplies Expense
2. Accounts Receivable 9. Prepaid Insurance
3. Appraisal Fees Earned 10. Salaries Expense
4. Cash 11. Telephone Expense
5. Insurance Expense 12. Unearned Appraisal Fees
6. Office Equipment 13. Common Stock
7. Office Supplies 14. Dividends
Debit
Credit
Example:
Completed an appraisal for a client who
promised to pay at a later date.
2
3
A.
Received cash in advance for appraising a
hail damage claim………………………..
B.
Purchased office supplies on credit………
C.
The company paid cash dividends
D.
Received the phone bill of the business and
immediately paid it…………
E.
Paid the salary of the office assistant….
F.
Paid for the supplies purchased in
transaction B
G.
Completed an appraisal for a client and
immediately collected cash for the work
performed
Debit
Credit
A
4
12
B
7
1
C
14
4
D
11
4
E
10
4
F
1
4
G
4
3
91
189) List the steps in processing transactions.
190) Describe what source documents are and the purpose they serve in a business.
191) What are the three groups of accounts shown on an unclassified balance sheet and define
each group?
92
192) Explain the difference between a general ledger and a chart of accounts.
193) Explain debits and credits and their role in the accounting system of a business.
194) Explain the debt ratio and its use in analyzing a company’s financial condition.
93
195) Explain the recording and posting processes.
196) What is a trial balance? What is its purpose?
197) Describe the link between a business’s income statement, the statement of \]retained
earnings, and the balance sheet.
94
198) Identify by marking an X in the appropriate column, whether each of the following items
would likely serve as a source document. The first one is done as an example
Yes
No
Ex.
Credit card
X
a.
Credit card receipt
b.
Purchase order
c.
Invoice
d.
Balance sheet
e.
Bank statement
f.
Journal entry
g.
Telephone bill
h.
Employee earnings record
Yes
No
Ex.
Credit card
X
a.
Credit card receipt
X
b.
Purchase order
X
c.
Invoice
X
d.
Balance sheet
X
e.
Bank statement
X
f.
Journal entry
X
g.
Telephone bill
X
h.
Employee earnings record
X
95
199) Indicate whether a debit or credit entry would be required to record the following changes
in each account.
a. To decrease Cash
b. To increase Common Stock
c. To decrease Accounts Payable.
d. To increase Salaries Expense.
e. To decrease Supplies.
f. To increase Revenue.
g. To decrease Accounts Receivable.
h. To increase Dividends.
96
200) Using the following list of accounts and identification letters A through J, enter the type of
account and its normal balance into the table below. The first item is filled in as an example:
Type of Account
Normal Balance
Asset
Liability
Equity
Debit
Credit
Common Stock
X
X
Interest Payable
Land
Dividends
Fees Earned
Prepaid Rent
Advertising Expense
Unearned Rent Revenue
Commissions Earned
Notes Receivable
Type of Account
Normal Balance
Asset
Liability
Equity
Debit
Credit
Common Stock
X
X
Interest Payable
X
X
Land
X
X
Dividends
X
X
Fees Earned
X
X
Prepaid Rent
X
X
Advertising Expense
X
X
Unearned Rent Revenue
X
X
Commissions Earned
X
X
Notes Receivable
X
X
97
201) Rowdy Bolton began Bolton Office Services in October and during that month completed
these transactions:
a. Invested $10,000 cash and $15,000 of computer equipment in the business in exchange for
common stock.
b. Paid $500 cash for an insurance premium covering the next 12 months.
c. Completed office services for a customer and collected $1,000 cash.
d. Paid $200 cash for office supplies.
e. Paid $2,000 for October’s rent.
Prepare journal entries to record the above transactions. Explanations are unnecessary.
98
202) JBL Company sends a $2,500 bill to a customer for services it provided during the month.
Set up the necessary T-accounts below and show how this transaction would be recorded directly
in those accounts.
203) NBC made a $2,500 payment on account, to satisfy a previously recorded account payable.
Set up the necessary T-accounts below and show how this transaction would be recorded directly
in those accounts.
99
204) A company paid $100 in cash dividends. Set up the necessary T-accounts below and show
how this transaction would be recorded directly in those accounts.
205) On December 3, the XFL Company paid $1,400 cash in salaries to employees. Prepare the
general journal entry to record this transaction.
100
206) On February 5, Kirkland Co. purchased equipment that cost $35,000. The firm paid $5,000
cash and signed a long-term note payable for $30,000. Show the general journal entry to record
this transaction.