College Accounting, 14e (Slater)
Chapter 3 Beginning the Accounting Cycle
3.1 Learning Objective 3-1
1) The process that begins with recording business transactions and includes the completion of the
financial statements is the:
A) operating cycle.
B) natural business year.
C) fiscal year.
D) accounting cycle.
2) The twelve-month period a business chooses for its accounting period is a(n):
A) calendar year.
B) accounting period.
C) fiscal year.
D) accounting cycle.
3) The time period for which a statement of owner’s equity is prepared is a(n):
A) calendar year.
B) accounting period.
C) fiscal period.
D) accounting cycle.
4) Financial statements that are prepared for a period shorter than a year are called:
A) accounting period statements.
B) fiscal year statements.
C) interim statements.
D) periodic statements.
5) The first step of the accounting cycle is:
A) recording journal entries.
B) posting to the ledger.
C) preparing closing entries.
D) analyzing business transactions.
6) A journal entry affecting three or more accounts is called a:
A) multi-level entry.
B) multi-step entry.
C) compound entry.
D) triple-step entry.
7) Business transactions are first recorded in the:
A) ledger.
B) journal.
C) trial balance.
D) interim statement.
8) Revenue is traditionally recognized in the accounting records when:
A) cash is received.
B) services are rendered.
C) it is incurred.
D) None of the answers are correct.
9) The general journal:
A) is the book of original entry.
B) is the book of final entry.
C) contains account balances.
D) is completed after the closing entries.
10) The process of initially recording business transactions in a journal is:
A) sliding.
B) posting.
C) journalizing.
D) kiting.
11) When recording a transaction in a journal, the account listed first is always the:
A) debit.
B) credit.
C) increase.
D) highest dollar.
12) How are credits distinguished from debits in the journal?
A) A line separation
B) A different color
C) Indenting
D) There is no distinction.
13) How are explanations distinguished in the journal?
A) They are underlined.
B) They are marked with an X before and after the explanation.
C) They are indented below the credit entries.
D) They are written all capital letters, in line with the debit entries.
14) The journal entry debiting Cash and crediting Capital would be a result of a(n):
A) customer payment.
B) owner withdrawal.
C) investment.
D) revenue.
15) If you debit Prepaid Insurance, you most likely will:
A) credit Fees Earned.
B) credit Capital.
C) credit Insurance Expense.
D) credit Cash.
16) The entry to record the payment of office salaries would be:
A) Debit Cash; Credit Salaries Payable
B) Debit Cash; Credit Salaries Expense
C) Debit Salaries Expense; Credit Accounts Payable
D) Debit Salaries Expense; Credit Cash
17) Which of the following entries would record the payment of a utility bill?
A) Utilities Expense, debit; Cash, credit
B) Cash, debit; Utilities Expense, credit
C) Utilities Expense, debit; Accounts Payable, credit
D) Accounts Receivable, debit; Utilities Expense, credit
18) Which of the following entries records the owner taking cash for personal use?
A) Wage Expense, debit; Cash, credit
B) Capital, debit; Cash, credit
C) Withdrawals, debit; Cash, credit
D) No entry is necessary since this is a personal transaction.
19) During the month of June, Jane invested $19,000 in starting her legal practice. The proper journal
entry would be:
A) Cash, debit $19,000; Jane, Capital, credit $19,000
B) Accounts Payable, debit $19,000; Cash, credit $19,000
C) Cash, debit $19,000; Revenue, credit $19,000
D) Jane’s Capital, debit $19,000; Cash, credit $19,000
20) Which of the following entries records the acquisition of office supplies for cash?
A)
Office Supplies 4,000
Cash 4,000
B)
Office Supplies 4,000
Accounts Payable 4,000
C)
Equipment 4,000
Accounts Payable 4,000
D)
Equipment 4,000
Accounts Receivable 4,000
21) During the month of October, Ford advertised on the Internet. Ford received the bill for $500 in
October, but waited until November to pay the advertising expense. The journal entry to record the
payment in November is:
A) Accounts Payable, debit; Cash, credit
B) Advertising Expense, debit; Accounts Payable, credit
C) Advertising Expense, debit; Cash, credit
D) The journal entry is not made in November.
22) On July 1, Bill’s Construction paid six months’ insurance in advance. The journal entry to record this
transaction is:
A) debit Prepaid Insurance; credit Cash
B) debit Insurance Expense; credit Accounts Payable
C) debit Cash; credit Prepaid Insurance
D) debit Cash; credit Insurance Expense
23) Sue’s Book Review billed customers $550. The journal entry to record this transaction is:
A) Accounts Receivable, debit $550; Editing Fees, credit $550
B) Editing Fees, debit $550; Sue, Capital, credit $550
C) Accounts Payable, debit $550; Editing Fees, credit $550
D) Cash, debit $550; Sue, Accounts Receivable, credit $550
24) Bob’s catered a reception. The total price was $600. The customer paid half of the fee in cash and
placed the remainder on account. The journal entry to record this transaction is:
A)
Cash 300
Accounts Receivable 300
Catering Service Fees 600
B)
Cash 600
Accounts Receivable 600
C)
Cash 600
Catering Service Fees 600
D)
Cash 600
Accounts Receivable 300
Catering Service Fees 300
25) Renzi’s Volleyball Gym purchased equipment for $1,300. It made a down payment of $500 with the
remainder on account. The journal entry to record this transaction is:
A)
Cash 800
Accounts Receivable 800
B)
Accounts Receivable 500
Cash 800
Equipment 1,300
C)
Supplies 1,300
Cash 800
Accounts Payable 500
D)
Equipment 1,300
Accounts Payable 800
Cash 500
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26) The entry to record completing a financial lecture and immediately collecting payment from
customers would be:
A)
Cash 1,400
Lecture Fees 1,400
B)
Cash 1,400
Accounts Payable 1,400
C)
Lecture Fees 1,400
Cash 1,400
D)
Lecture Fees 1,400
Accounts Payable 1,400
27) CSI completed a performance and collected revenue of $12,000 not previously billed or recorded. The
journal entry to record the collection would be:
A)
Accounts Receivable 12,000
Performance Fees 12,000
B)
Cash 12,000
Performance Fees 12,000
C)
Accounts Receivable 12,000
Cash 12,000
D)
Performance Fees 12,000
Cash 12,000
28) The general journal does NOT have a column titled:
A) Date.
B) Account Titles & Descriptions.
C) Dr. and Cr.
D) Balance.
29) A calendar year is:
A) any 12-month period that a business chooses for its accounting year.
B) the 12-month period beginning with January.
C) the period for when an interim financial statement would be completed.
D) All of these answers are correct.
30) Interim statements are prepared to:
A) notify management of the company’s current financial position.
B) notify investors of the company’s current financial position.
C) allow management to make changes to the business before processing year-end financial statements.
D) All of the above are correct.
31) A transaction completed by Norton Company caused a $10,000 increase in both the total assets and
the total liabilities. This transaction could have been:
A) purchase of office equipment for $16,000, paying $6,000 cash, with the rest on account.
B) investment by the owner of an additional $10,000.
C) purchase of office equipment, paying $10,000 cash, and $6,000 on account.
D) a loan of $2,000, on a $12,000 purchase of equipment with $10,000 down payment.
32) Conner Sales’ total assets and total liabilities increased $3,400. The transaction could have been:
A) purchase of supplies for cash, $3,400.
B) purchase of supplies for $3,700 with a down payment of $300 and the remainder on account.
C) paid the rent for the month, $3,400.
D) None of these answers is correct.
33) Which of the following accounts would be debited in a proper journal entry?
A) Notes Payable when it is increased
B) Accounts Receivable when it is increased
C) Cash when it is decreased
D) Capital when it is increased
34) As Withdrawals increase:
A) Cash decreases.
B) Owner’s Equity increases.
C) Cash increases.
D) Expense increases.
35) If Accounts Receivable has been credited, it is most likely that:
A) the company collected a payment from a customer.
B) the company made a payment on account.
C) the company made a purchase on account.
D) None of these is possible.
36) If Accounts Payable has been credited, it is most likely that:
A) a collection from a customer was made.
B) a service was provided on account.
C) the company made a purchase and will pay for the purchase next month.
D) None of these is possible.
37) The journal entry to record an investment by the owner would most commonly include:
A) a debit to Cash and a credit to Fees Earned.
B) a debit to Capital and a credit to Cash.
C) a debit to Fees Earned and a credit to Capital.
D) a debit to Cash and a credit to Capital.
38) The journal entry to record a withdrawal by the owner would most commonly include:
A) a debit to Wage Expense and a credit to Cash.
B) a debit to Capital and a credit to Cash.
C) a debit to Withdrawals and a credit to Cash.
D) a debit to Cash and a credit to Wage Expense.
39) The journal entry to record a shift of assets would include:
A) a debit to Cash and a credit to Fees Earned.
B) a debit to Supplies and a credit to Accounts Payable.
C) a debit to Cash and a credit to Accounts Receivable.
D) a debit to Fees Earned and a credit to Accounts Receivable.
40) The general journal entry to record the purchase of an asset for cash would include:
A) a debit to Accounts Receivable and a credit to Fees Earned.
B) a debit to Equipment and a credit to Accounts Payable.
C) a debit to Accounts Payable and a credit to Cash.
D) a debit to Supplies and a credit to Cash.
41) The general journal entry to record a payment to a creditor would most commonly include:
A) a debit to Accounts Payable and a credit to Cash.
B) a debit to Capital and a credit to Cash.
C) a debit to Supplies and a credit to Cash.
D) a debit to Cash and a credit to Accounts Payable.
42) The general journal entry to record the earning of revenue would most commonly include:
A) a debit to Accounts Receivable and a credit to Capital.
B) a debit to Cash and a credit to Capital.
C) a debit to Fees Earned and a credit to Cash.
D) a debit to Accounts Receivable and a credit to Fees Earned.
43) Which of the following statements is false regarding a proper journal entry?
A) Debits are always listed first in the entry.
B) Credits are always indented.
C) Skip a line between transactions.
D) Always list the expenses first.
44) To find an explanation for a transaction, look in the:
A) income statement.
B) balance sheet.
C) journal.
D) trial balance.
45) If Cash has been debited, it is likely that:
A) the owner made an investment.
B) a customer made a payment.
C) a customer paid cash for services.
D) All of these are possible.
46) If Prepaid Rent has been debited, it is likely that:
A) the rent was paid for three months in advance.
B) a bill for the past month’s rent was received.
C) this month’s rent was paid.
D) All of these are possible.
47) If Rent Expense has been debited, it is likely that:
A) the rent was paid for three months in advance.
B) a copy of the lease was received.
C) this month’s rent was paid.
D) All of these are possible.
48) If Capital has been credited, it is likely that:
A) services were provided to a cash customer.
B) services were provided to a charge customer.
C) the owner made an investment.
D) the owner withdrew cash.
49) The proper format for a journal entry includes all of the following, except:
A) the total amounts of debits must equal the total amount of credits.
B) skip a line between transactions.
C) the credit portion of the transaction is always indented.
D) listed in the order of highest dollar value.
50) An overpayment was discovered in computing and paying the wages of a Plum Hollow Country
Club employee. When the employee returns the amount of the overpayment, Plum Hollow should make
which of the following entries?
A) Cash, debit; Wages Expense, credit
B) Wages Payable, debit; Wages Expense, credit
C) Wages Expense, debit; Cash, credit
D) Cash, debit; Wages Payable, credit
51) Which of the following accounts would be credited in a proper journal entry?
A) Cash when it is increased
B) Accounts Receivable when it is increased
C) Expenses when it is increased
D) Accounts Payable when it is increased
52) If Fees Earned has been credited, it is most likely that:
A) services were provided.
B) the owner made an investment.
C) a correcting entry for the overstatement of revenue was recorded.
D) a customer paid in advance.
53) If Accounts Payable has been debited, it is most likely that:
A) a payment was made on account.
B) a purchase was made on account.
C) a charge customer made a payment.
D) an expense was paid with cash.
54) If Accounts Payable has been credited, it is most likely that:
A) a sale was made on account.
B) a purchase was made on account.
C) a correcting entry was made for the overstatement of the purchase of equipment on account.
D) a customer paid a bill on account.
55) The time period for which an income statement is prepared is called the calendar year.
56) A fiscal year is always January 1 through December 31.
57) Transactions are listed in chronological order in the journal.
58) Insurance paid in advance is an expense.
59) Interim statements are statements that are prepared for a minimum of 6 months of the fiscal year.
60) A journal is called the book of final entry.
61) A business’s fiscal year that ends at the same time as the slow seasonal period begins is the natural
business year.
62) The debit part of the transaction is recorded second in a journal entry.
63) The debit is indented in a journal entry.
64) A compound journal entry affects more than two accounts in the transaction.
65) A company would review the journal if an account balance was needed.
66) Prepare in proper form journal entries for the following transactions. Omit explanations.
December
2 Owner made a cash investment into the company $2,500
6 Bought supplies on account $100.
10 Paid salaries, $700
16 Paid for supplies purchased on December 6
21 Received company telephone bill, to be paid later, $50
67) Journalize, in proper form, the following transactions that occurred during September. Omit
explanations.
June
5 Mike invested $13,000 cash and $20,000 of equipment into his new business.
10 Paid three months’ rent in advance, $2,400
23 Withdrew $400 from the business
24 Billed client for services rendered, $18,000
68) James Company began business in July. Prepare the following transactions for June. Omit
explanations.
July
2 James invested $3,000 cash and $1,000 equipment into the new business.
12 Billed customer for services performed, $600
16 Purchased equipment on account, $200
20 Received one-half amount due from June 12
25 James withdrew cash for personal use, $150