Public accountants do NOT offer which of the following services?
a. auditing
b. tax preparation
c. management consulting
d. marketing analysis
Meghan started her business by investing $30,000 in cash. 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.
(Appendix) Seascape Marina, Inc. had the following transactions during May of the
current year.
a. Invested $25,000 cash in the business.
b. Paid office rent, $1,200.
c. Purchased office equipment. Paid $4,500 in cash and agreed to pay the balance in six
monthly installments.
d. Paid cash for advertising in Seaview magazine, $900.
e. Received cash for six research assignments, $3,600.
f. Paid telephone bill, $240.
g. Made payment on loan from transaction (c), $800.
h. Withdrew cash for personal use, $1,800.
i. Paid wages to office assistant, $600.
Required:
Classify each transaction as an operating, investing, or financing activity and prepare a
statement of cash flows.
To reconcile the bank statement, which of the following amounts would be added to the
checkbook balance?
a. service charge
b. outstanding checks
c. deposits in transit
d. amounts collected by the bank for the depositor’s account
Show the effect of each transaction on the three basic accounting elements by indicating
the dollar amount of the increase or decrease under the proper element heading.
Compute the resulting accounting equation.
a. Owner invested $16,500 cash in the business.
b. Paid premium for two-year insurance policy, $1,500.
c. Purchased a van valued at $35,000 with $5,000 down payment; the balance to be paid
over three years.
d. Paid the rent for the month, $900.
e. Purchased $470 of supplies for cash.
f. Cash sales for the month, $8,750.
g. Billed credit customers $14,200 for monthly services.
h. Paid monthly utility bill, $210.
i. Owner withdrew $2,200 for personal use.
j. Received payments of $3,300 from credit customers.
The fact that each transaction has a dual effect on the accounting elements provides the
basis for what is called
a. single-entry accounting.
b. compound-entry accounting.
c. multiple-entry accounting.
d. double-entry accounting.
Which of the following amounts should NOT be posted to any ledger account?
a. the total of the Cash Credit column
b. the total of the Professional Fees column
c. the total of the Supplies Expense column
d. the total of the General Debit and Credit column
To record the purchase of assets on account under the modified cash basis of accounting
method,
a. debit the asset and credit Accounts Payable.
b. debit the asset and credit Cash.
c. debit Accounts Receivable and credit Accounts Payable.
d. debit Accounts Payable and credit the asset.
The month in the journal is recorded
a. with every transaction.
b. as the first entry on a page.
c. for the first and last transaction of the month.
d. for the last transaction of the month.
The journal entry to close the income summary account (showing a net loss) includes
a. debiting the drawing account and crediting Income Summary.
b. debiting Income Summary and crediting the drawing account.
c. debiting the owner’s capital account and crediting Income Summary.
d. debiting Income Summary and crediting the owner’s capital account.
After posting the adjusting entries, the balance of the depreciation expense account
should agree with the amount shown on the income statement.
F. Fuentes operates a business known as Variety Unlimited. Listed below are the name,
number of allowances claimed, marital status, total hours worked, and hourly rate of
each employee. All hours worked in excess of 40 hours per week are paid at the rate of
time and a half.
The employer uses the weekly federal income tax withholding table. Social Security
tax is withheld at the rate of 6.2%, Medicare tax is withheld at the rate of 1.45%. All
employees have Health Insurance Premiums withheld in the amount of $55.00. Hertz,
Jordan, and Pollo each will have $25.00 withheld this payday under a savings bond
purchase plan.
Fuentes follows the practice of drawing a single check for the net amount of the payroll
and depositing the check in a special payroll account at the bank. Individual paychecks
are then drawn for the amount due each employee. The checks issued this payday were
numbered consecutively beginning with No. 786.
Required:
Closing entries are made in the journal and posted to the ledger accounts.
The total dollar amounts on the debit and credit sides of a T account are known as
____________________.
If the cash short and over account has a credit balance at the end of the fiscal year, the
balance represents an expense or loss.
The income summary account is an account used only during the closing process.
Prepaid insurance and supplies are assets because they will provide benefits for more
than one month.
The petty cash fund should be replenished only at the end of each accounting period so
that the accounts are brought up-to-date.