Chapter 3—The Accounting Cycle: The Mechanics of Accounting
Key
1. Which of the following is NOT a reason that business documents are used in a business?
2. Business documents are used as records of transactions and as the basis for accounting entries. Which of the
following is NOT a business document?
3. Which of the following is NOT a step in the accounting cycle?
4. Which of the following steps is normally first in the accounting cycle?
5. Which of the following is NOT an advantage of a computerized accounting system over a manual accounting
system?
6. The basic accounting equation is
7. Borrowing money from a bank
8. The basic accounting equation
9. Which of the following would usually NOT happen in a single transaction?
10. The purchase of supplies on account
11. If a company purchased equipment for cash, the accounting equation would show a(n)
12. If a company paid off a loan, the accounting equation would show a(n)
13. If a company purchased equipment by borrowing money, the accounting equation would show a(n)
14. The purchase of supplies with cash would show a(n)
15. If a company purchased a building with a cash down payment and the balance with a loan, the accounting
equation will show a(n)
16. If a company issues stock for cash, the accounting equation will show a(n)
17. An entry to the left side of an account is always called a(n)
18. Liability accounts are increased
19. Owners’ equity accounts are decreased with
20. Which of the following types of entries would NOT usually be made?
21. An entry to the right side of an account is called a(n)
22. Owners’ equity accounts are increased by
23. The debit and credit analysis of a transaction normally takes place
24. Which of the following is true?
25. The inventory account is increased by
26. The capital stock account is
27. Usually, when accounts receivable are collected, an asset is debited and
28. When accounts receivable are collected,
29. When equipment is purchased with a cash down payment and a signed note for the balance, the net effect
will be
30. When a note payable is given to settle an existing account payable,
31. Which of the following is true of the cash account?
32. Revenue accounts are
33. Revenues
34. Expense and revenue accounts can be considered to be subcategories of
35. Which of the following accounts would normally NOT have a credit balance?
36. The supplies expense account
37. Which of the following accounts is decreased with a debit?
38. The dividends account
39. Expense accounts
40. Which of the following groups of accounts have a normal debit balance?
41. Which of the following types of accounts are affected when a company pays cash dividends to its
shareholders?
42. Which of the following types of accounts have a normal debit balance?
43. A credit sale of merchandise for a price that exceeds the cost of the merchandise
44. A company’s retained earnings balance would decrease by
45. The entry to record the payment of a note with interest usually includes a
46. When cash dividends are paid,
47. During March, Randolph Corporation completed the following transactions:
·
Purchased inventory for $36,000 on credit.
·
Issued additional capital stock for $20,000.
·
Purchased equipment for $15,900 cash.
As a result of these transactions, Randolph’s total assets would
48. On May 1, James Corporation had total assets of $877,000. During May, the company completed the
following transactions:
·
Barry Saunder, an owner in the firm, donated equipment to James Corporation. The equipment had a value of $6,700 at the time it was
acquired by the firm.
·
Purchased a building for $78,000 and signed a note for the purchase.
·
Purchased $1,500 of supplies for cash.
After these transactions were recorded, total assets would have a balance of
49. As of June 1, Mega Corporation had total assets of $79,500. During June, the company had the following
transactions:
·
Collected receivables of $13,050 from previous periods.
·
Generated revenues of $37,500, of which 40 percent were cash.
·
Incurred total expenses of $27,000, 60 percent of which were paid.
After these transactions have been recorded, Mega would have total assets of
50. Miles Motor Supplies had the following transactions during December:
·
Paid a note of $17,000 owed since March plus $425 for interest.
·
Sold $36,525 of merchandise to customers on account. Cost of goods sold was $21,250.
·
Paid accounts payable of $2,050.
As a result of these transactions, at year-end, liabilities and owners’ equity would show a total
51. During the period, Williams Company completed the following transactions:
·
Purchased $3,000 of supplies for cash.
·
Signed a note with Firstland Bank for a $30,000 loan (ignore interest).
·
Paid $13,200 of accounts payable.
As a result of these transactions, Williams Company’s total assets would
52. Assuming no other changes except a decrease in assets of $20,000, increase in liabilities of $10,000, and
expenses of $60,000, by how much did owners’ equity increase or decrease and what were revenues for the
period?
53. Assuming that capital stock increased $5,000, net income was $100,000, and dividends were $120,000, if
total assets increased by $25,000, what was the change in liabilities?
54. On June 30, the balances in the General Ledger accounts of Pancho Company resulted in the following
totals:
Assets
$517,600
Liabilities
323,400
Owners’ equity
200,500
Total assets do not equal total liabilities plus owners’ equity because the following errors were made:
·
Supplies of $500 were on hand but were not included in assets because all purchases were debited to Supplies Expense.
·
Credit sales of $15,700 were posted to the Sales Revenue account as $17,500. The Accounts Receivable account was posted correctly.
·
Equipment purchased on credit for $51,600 was incorrectly posted to Notes Payable as $56,100. No error was made in the Equipment
account.
The correct balances in the asset, liability, and owners’ equity accounts, respectively, should be
Assets Liabilities Owners’ Equity
55. Transactions are typically entered into the General Journal in which order?
56. Which of the following is NOT usually part of an entry in the General Journal?
57. A book of original entry is called a
58. A chronological listing of all economic transactions is maintained in a company’s
59. The following are all essential parts of the journal entry except
60. Which of the following is the correct format for journalizing transactions?
61. A journal entry that includes more than two accounts is called a(n)
62. Cost of Goods Sold is what type of account?
63. Which of the following is the correct order for preparing a journal entry?
64. Northwest Company received and immediately paid a $4,000 utility bill from Green River Gas and Electric
Company. The entry by Green River Gas and Electric Company to record receipt of the payment would include
65. Deano Inc. purchased $27,000 of merchandise from Jeri Co. by making a 25 percent cash down payment
and signing a 90-day note for the balance. The cost of the merchandise to Jeri Co. was $22,000. The entry by
Deano Inc. to record the transaction would
66. Deano Inc. purchased $27,000 of merchandise from Jeri Co. by making a 25 percent cash down payment
and signing a 90-day note for the balance. The cost of the merchandise to Jeri Co. was $22,000. The entry by
Jeri Co. to record the transaction would include
67. Christopher Company purchased $20,000 of equipment for cash. The correct entry to record the purchase of
equipment is
68. On January 25, Blayne Corporation bought merchandise from a supplier for $3,600 on account. On
February 20, Blayne paid the $3,600 owed to the supplier. The correct entry to record the purchase on January
25 is
69. On January 25, Blayne Corporation bought merchandise from a supplier for $3,600 on account. On
February 20, Blayne paid the $3,600 owed to the supplier. The correct entry to record the payment to the
supplier on February 20 is
70. Solo Company borrowed $4,000 from National City Bank on June 1. On August 31, Solo Company paid off
the loan plus $100 interest. The correct entry to record the borrowing transaction on June 1 is
71. Solo Company borrowed $4,000 from National City Bank on June 1. On August 31, Solo Company paid off
the loan plus $100 interest. The correct entry to record the August 31 payment of the loan plus interest is
72. On November 15, Roach Company issued 300 new shares of stock. Shareholders paid $25 for each share of
stock. The correct entry to record the issue of stock on November 15 is
73. On December 31, Scott Corporation paid shareholders a $13,000 cash dividend. The entry by Scott
Corporation to record the transaction would include
74. On July 24, Barkdull Inc. purchased $4,000 of inventory on account. On August 3, Barkdull, sold $2,000 of
inventory for $1,000 cash and $2,000 on credit. The correct entry by Barkdull Inc. to record the purchase of
inventory on July 24 is
75. On July 24, Barkdull Inc. purchased $4,000 of inventory on account. On August 3, Barkdull, sold $2,000 of
inventory for $1,000 cash and $2,000 on credit. The correct entry by Barkdull Inc. to record the sale of
inventory or August 3 is
76. On May 16, Bennion Company, sold $50,000 of inventory to Bonaccorsi, Inc. for $10,000 cash and $60,000
on credit. On June 10, Bonaccorsi, Inc. paid Bennion Company cash for the $60,000 credit sale. The correct
entry by Bennion Company to record the payment on June 10 is
77. On May 16, Bennion Company, sold $50,000 of inventory to Bonaccorsi, Inc. for $10,000 cash and $60,000
on credit. On June 10, Bonaccorsi, Inc. paid Bennion Company cash for the $60,000 credit sale. The entry by
Bennion Company to record the transaction on May 16 would include
78. The accounting record where all accounts are posted and summarized is the
79. Each account is assigned a number. This systematic listing of all accounts is called a
80. A trial balance shows that
81. After all transactions have been journalized and posted to the accounts, a trial balance will be prepared. The
purpose of this is to
82. Which of the following is NOT true about a trial balance?
83. Which of the following would cause a trial balance to be out of balance?