183.
Explain the debt ratio and its use in analyzing a company’s financial condition.
184.
Explain the recording and posting processes.
2-102
185.
What is a trial balance? What is its purpose?
186.
Describe the link between a business’s income statement, the statement of retained earnings,
and the balance sheet.
Essay Questions
187.
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
Ex.
Credit card
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
2-104
188.
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.
189.
Using the following list of accounts and identification letters A through J for Homer’s
Management Co., Inc., indicate the type of account and its normal balance by entering an X in
the appropriate boxes of the table below. The first item is filled in as an example:
A.
F.
Prepaid Rent
B.
G.
Advertising Expense
C.
H.
Unearned Rent Revenue
D.
I.
Commissions Earned
E.
J.
Notes Receivable
Type of Account
Normal Balance
Asset
Liability
Equity
Debit
Credit
A
X
X
B
C
D
E
F
G
H
I
J
Asset
Equity
A
B
C
D
E
190.
Rowdy Bolton began Bolton Office Services, Inc. in October and during that month completed
these transactions:
2-107
AICPA: FN Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-P1 Record transactions in a journal and post entries to a ledger.
Topic: Journalizing and Posting Transactions
191.
BBB Company sends a $2,500 invoice to a customer for catering services it provided during
the month. Set up the necessary T-accounts below by entering appropriate account names,
and show how this transaction would be recorded directly in those accounts.
192.
ABC Company made a $2,500 payment on account, to satisfy a previously recorded account
payable. Set up the necessary T-accounts below by entering appropriate account names, and
show how this transaction would be recorded directly in those accounts.
193.
The business paid $100 cash dividend to Charles Nice (the sole stockholder of the
corporation). Set up the necessary T-accounts below by entering appropriate account names,
and show how this transaction would be recorded directly in those accounts.
194.
On December 3, the ABBJ Company paid $1,400 cash in salaries to office personnel. Prepare
the general journal entry to record this transaction.
195.
On February 5, Teddy’s Catering purchased an oven that cost $35,000. The firm made a down
payment of $5,000 cash and signed a long-term note payable for the balance. Show the
general journal entry to record this transaction.
196.
Jarrod Automotive, Inc. owned and operated by Jarrod Johnson, began business in September
of the current year. Jarrod, a mechanic, had no experience with recording business
transactions. As a result, Jarrod entered all of September’s transactions directly into the
ledger accounts. When he tried to locate a particular entry he found it confusing and time
consuming. He has hired you to improve his accounting procedures. The accounts in his
General Ledger follow:
Cash
Equipment
9/01
(a)
4,200
9/4
(b)
550
9/1
(a) 800
9/11
(d) 150
9/4
(b) 2,550
9/15
(e) 190
Common Stock
Notes Payable
9/1
(a) 5,000
9/4
(b) 2,000
Accounts
Receivable
Revenue
9/9
(c)
275
9/15
(e)
190
9/9
(c)
275
9/11
(d)
150
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.
Equipment
Common Stock
197.
Pippa’s Paralegal Services, Inc. completed these transactions in February:
a. Purchased office supplies on account, $300.
b. Completed work for a client on credit, $500.
c. Paid cash for the office supplies purchased in (
a
).
d. Completed work for a client and received $800 cash.
e. Received $500 cash for the work described in (
b
).
f. Received $1,000 from a client for paralegal services to be performed in March.
Prepare journal entries to record the above transactions. Explanations are not necessary.
198.
Larry Matt, Inc. completed these transactions during December of the current year:
Dec. 1
Began a financial services practice by
investing $15,000 cash and office
equipment having a $5,000 value.
2
Purchased $1,200 of office equipment on
credit.
3
Purchased $300 of office supplies on
credit.
4
Completed work for a client and
immediately received a payment of $900
cash.
8
Completed work for Precept Paper Co. on
credit, $1,700.
10
Paid for the supplies purchased on credit
on December 3.
14
Paid for the annual $960 premium on an
insurance policy.
18
Received payment in full from Precept
Paper Co. for the work completed
on December 8.
27
The company paid $650 cash in dividends
to the owner. (sole shareholder)
30
Paid $175 cash for the December utility
bills.
30
Received $2,000 from a client for financial
services to be rendered next year.
Prepare general journal entries to record these transactions.
Office Equipment
Accounts Payable
199.
Mary Sunny began business as Sunny Law Firm, Inc. on November 1. Record the following
November transactions by making entries directly to the T-accounts provided. Then prepare a
trial balance, as of November 30.
a) Mary invested $15,000 cash and a law library valued at $6,000.
b) Purchased $7,500 of office equipment from John Bronx on credit.
c) Completed legal work for a client and received $1,500 cash in full payment.
d) Paid John Bronx. $3,500 cash in partial settlement of the amount owed.
e) Completed $4,000 of legal work for a client on credit.
f) The company paid $2,000 cash in dividends to the owner. (sole shareholder)
g) Received $2,500 cash as partial payment for the legal work completed for the client in (
e
).
h) Paid $2,500 cash for the legal secretary’s salary.
Cash
Office
Equipment
Dividends
Accounts
Receivable
Accounts
Payable
Legal Fees
Earned
Law Library
Common Stock
Salaries
Expense
Office
Equipment
200.
Conner Piper began business as Conner’s Bookkeeping, Inc. on May 1. Prepare a trial balance,
as of May 31 using the account information provided below:
Cash
Office
Equipment
Dividends
10,000
3,500
7,500
1,000
1,500
2,000
Accounts
Receivable
Accounts
Payable
Acctg. Fees
Earned
4,000
1,500
2,500
7,500
2,500
3,000
Acctg. Library
Common
Stock
Salaries
Expense
4,000
12,500
2,500
201.
Jerry’s Butcher Shop, Inc. had the following assets and liabilities at the beginning and end of
the current year:
Assets
Liabilities
Beginning of the
year
$114,000
$68,000
End of the year
135,000
73,000
If Jerry made no investments in the business and withdrew no assets during the year, what
was the amount of net income earned by Jerry’s Butcher Shop, Inc.?
202.
Jerry’s Butcher Shop, Inc. had the following assets and liabilities at the beginning and end of
the current year:
Assets
Liabilities
Beginning of the
year
$114,000
$68,000
End of the year
135,000
73,000
If Jerry invested an additional $12,000 in the business during the year, but withdrew no assets
during the year, what was the amount of net income earned by Jerry’s Butcher Shop, Inc.?
203.
Jerry’s Butcher Shop, Inc. had the following assets and liabilities at the beginning and end of
the current year:
Assets
Liabilities
Beginning of the
year
$114,000
$68,000
End of the year
135,000
73,000
If Jerry made no investments in the business but withdrew $5,000 during the year, what was
the amount of net income earned by Jerry’s Butcher Shop, Inc.?