B)
Cash
40,000
M. Martin, Capital
40,000
C)
M. Martin, Capital
40,000
Cash
40,000
D)
Investments
40,000
Cash
40,000
E)
Cash
40,000
Increased Equity
40,000
128)
If cash is received from customers in payment for products or services that have not yet been
delivered to the customers, the business would record the cash receipt as:
A)
A debit to a prepaid expense account.
B)
A debit to an unearned revenue account.
C)
No entry is required at the time of collection.
D)
A credit to a prepaid expense account.
E)
A credit to an unearned revenue account.
129)
On May 31, the Cash account of Bottle’s R US had a normal balance of $5,000. During May, the
account was debited for a total of $12,200 and credited for a total of $11,500. What was the
balance in the Cash account at the beginning of May?
A)
A $4,300 debit balance.
B)
A $4,300 credit balance.
C)
A $5,700 credit balance.
D)
A $5,700 debit balance.
E)
A $0 balance.
130)
On April 30, Victor Services had an Accounts Receivable balance of $18,000. During the month of
May, total credits to Accounts Receivable were $52,000 from customer payments. The May 31
Accounts Receivable balance was $13,000. What was the amount of credit sales during May?
A) $47,000. B) $5,000. C) $52,000. D) $32,000. E) $57,000.
131)
During the month of February, Victor Services had cash receipts of $7,500 and cash disbursements
of $8,600. The February 28 cash balance was $1,800. What was the February 1 beginning cash
balance?
A) $2,900. B) $700. C) $0. D) $4,300. E) $1,100.
132)
The following transactions occurred during July:
Received $900 cash for services provided to a customer during July.
Received $2,200 cash investment from Bob Johnson, the owner of the business.
Received $750 from a customer in partial payment of his account receivable which arose from sales
in June.
Provided services to a customer on credit, $375.
Borrowed $6,000 from the bank by signing a promissory note.
Received $1,250 cash from a customer for services to be rendered next year.
What was the amount of revenue for July?
A) $900. B) $3,275. C) $2,525. D) $1,275. E) $11,100.
133)
If Taylor Willow, the owner of Willow Hardware proprietorship, uses cash of the business to
purchase a family automobile, the business should record this use of cash with an entry to:
A)
Debit Cash and credit T. Willow, Withdrawals.
B)
Debit T. Willow, Withdrawals and credit Cash.
C)
Debit Automobiles and credit Cash.
D)
Debit Cash and credit Salary Expense.
E)
Debit Salary Expense and credit Cash.
134)
Larry Bar opened a frame shop and completed these transactions:
1. Larry started the shop by investing $40,000 cash and equipment valued at $18,000.
2. Purchased $70 of office supplies on credit.
3. Paid $1,200 cash for the receptionist’s salary.
4. Sold a custom frame service and collected $1,500 cash on the sale.
5. Completed framing services and billed the client $200.
What was the balance of the cash account after these transactions were posted?
A) $38,700. B) $40,300. C) $300. D) $41,500. E) $38,500.
135)
At the beginning of January of the current year, Little Mikey’s Catering ledger reflected a normal
balance of $52,000 for accounts receivable. During January, the company collected $14,800 from
customers on account and provided additional services to customers on account totaling $12,500.
Additionally, during January one customer paid Mikey $5,000 for services to be provided in the
future. At the end of January, the balance in the accounts receivable account should be:
A) $2,300. B) $49,300. C) $54,300. D) $49,700. E) $54,700.
136)
During the month of March, Harley’s Computer Services made purchases on account totaling
$43,500. Also during the month of March, Harley was paid $8,000 by a customer for services to be
provided in the future and paid $36,900 of cash on its accounts payable balance. If the balance in
the accounts payable account at the beginning of March was $77,300, what is the balance in
accounts payable at the end of March?
A) $83,900. B) $91,900. C) $4,900. D) $75,900. E) $6,600.
72
137)
On January 1 of the current year, Jimmy’s Sandwich Company reported owner’s capital totaling
$122,500. During the current year, total revenues were $96,000 while total expenses were $85,500.
Also, during the current year Jimmy withdrew $20,000 from the company. No other changes in
equity occurred during the year. If, on December 31 of the current year, total assets are $196,000,
the change in owner’s capital during the year was:
A)
A decrease of $9,500.
B)
An increase of $73,500.
C)
An increase of $9,500.
D)
A decrease of $30,500.
E)
An increase of $30,500.
74
138)
Andrea Apple opened Apple Photography on January 1 of the current year. During January, the
following transactions occurred and were recorded in the company’s books:
Andrea invested $13,500 cash in the business.
Andrea contributed $20,000 of photography equipment to the business.
The company paid $2,100 cash for an insurance policy covering the next 24 months.
The company received $5,700 cash for services provided during January.
The company purchased $6,200 of office equipment on credit.
The company provided $2,750 of services to customers on account.
The company paid cash of $1,500 for monthly rent.
The company paid $3,100 on the office equipment purchased in transaction #5 above.
Paid $275 cash for January utilities.
Based on this information, the balance in the cash account at the end of January would be:
A) $12,225. B) $18,700. C) $13,500. D) $15,250. E) $41,450.
139)
Andrea Apple opened Apple Photography on January 1 of the current year. During January, the
following transactions occurred and were recorded in the company’s books:
Andrea invested $13,500 cash in the business.
Andrea contributed $20,000 of photography equipment to the business.
The company paid $2,100 cash for an insurance policy covering the next 24 months.
The company received $5,700 cash for services provided during January.
The company purchased $6,200 of office equipment on credit.
The company provided $2,750 of services to customers on account.
The company paid cash of $1,500 for monthly rent.
The company paid $3,100 on the office equipment purchased in transaction #5 above.
Paid $275 cash for January utilities.
Based on this information, the balance in the A. Apple, Capital account reported on the Statement of
Owner’s Equity at the end of the month would be:
A) $39,200. B) $40,175. C) $31,150. D) $30,875. E) $31,400.
140)
The debt ratio is used:
A)
To determine how much debt a firm should pay off.
B)
To measure the ratio of equity to expenses.
C)
To determine how much debt a company should borrow.
D)
To assess the risk associated with a company’s use of liabilities.
E)
Only by banks when a business applies for a loan.
141)
Identify the correct formula below used to calculate the debt ratio.
A)
Total Liabilities/Total Assets.
B)
Total Equity/Total Assets.
C)
Total Assets/Total Liabilities.
D)
Total Equity/Total Liabilities.
E)
Total Liabilities/Total Equity.
142)
Lu Lu’s Catering has a debt ratio equal to .3 and its competitor, Able’s Bakery, has a debt ratio
equal to .7. Determine the statement below that is correct.
A)
Able’s Bakery has a smaller percentage of its assets financed with liabilities as compared to
Lu Lu’s.
B)
Higher financial leverage involves lower risk.
C)
Able’s Bakery’s financial leverage is greater than Lu Lu’s.
D)
Able’s Bakery’s financial leverage is less than Lu Lu’s.
E)
Lu Lu’s has a higher risk from its financial leverage.
143)
Identify the statement that is incorrect.
A)
Lower financial leverage involves lower risk.
B)
Higher financial leverage involves higher risk.
C)
The debt ratio is one measure of financial risk.
D)
Risk is higher if a company has more liabilities.
E)
Risk is higher if a company has higher assets.
144)
The debt ratio of Company A is .31 and the debt ratio of Company B is .21. Based on this
information, an investor can conclude:
A)
Company A has a lower risk from its financial leverage.
B)
Company B has more debt than Company A.
C)
Company A has 10% more assets than Company B.
D)
Company B has a lower risk from its financial leverage.
E)
Both companies have too much debt.
145)
The debt ratio of Jackson’s Shoes is .9 and the debt ratio of Billy’s Catering is 1.0. Based on this
information, an investor can conclude:
A)
Billy’s Catering has a lower risk from its financial leverage.
B)
Billy’s Catering has the exact same dollar amount of total liabilities and total assets.
C)
Billy’s Catering finances a relatively lower portion of its assets with liabilities than Jackson’s
Shoes.
D)
Jackson’s Shoes has a higher risk from its financial leverage.
E)
Jackson’s Shoes has less equity per dollar of assets than Billy’s Catering.
146)
Gi Gi’s Bakery has total assets of $425 million. Its total liabilities are $110 million. Its equity is
$315 million. Calculate the debt ratio.
A) 25.9%. B) 14.9%. C) 38.6%. D) 34.9%. E) 13.4%.
147)
Happiness Catering has total assets of $385 million. Its total liabilities are $100 million and its
equity is $285 million. Calculate its debt ratio.
A) 28.5%. B) 26.0%. C) 58.8%. D) 38.5%. E) 35.1%.
148)
All of the following statements accurately describe the debt ratio except.
A)
The dividing line for a high and low ratio varies from industry to industry.
B)
The ratio might be used to help determine if a company is capable of increasing its income by
obtaining further debt.
C)
A relatively high ratio is always desirable.
D)
Many factors such as a company’s age, stability, profitability and cash flow influence the
determination of what would be interpreted as a high versus a low ratio.
E)
It is of use to both internal and external users of accounting information.
149)
At the end of the current year, Leer Company reported total liabilities of $300,000 and total equity
of $100,000. The company’s debt ratio on the last year-end was:
A) $400,000. B) 66.67%. C) 33.3%. D) 75.0%. E) 300%.