Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 3: Processing Accounting Information
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
169. Retained Earnings
ANSWER:
a
170. Furniture and Fixtures
ANSWER:
a
171. Common Stock
ANSWER:
a
172. Utilities Expense
ANSWER:
b
173. Interest Revenue
ANSWER:
b
Choose from the following list of account titles the one that most accurately fits the description of that account or is an
example of that account. An account title may be used more than once or not at all.
a.
Cash
b.
Prepaid Asset
c.
Investments
d.
Taxes Payable
e.
Preferred Stock
f.
Accounts Receivable
g.
Land
h.
Accounts Payable
i.
Retained Earnings
j.
Notes Receivable
k.
Buildings
l.
Notes Payable
m.
Common Stock
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.03-04 - LO: 03-04
KEYWORDS:
Bloom's: Remembering
174. A written obligation to repay a fixed amount, with interest, at some time in the future
ANSWER:
l
175. A plot of land held for speculation
ANSWER:
c
176. An amount owed by a customer
ANSWER:
f
177. Corporate income taxes owed to the state government
ANSWER:
d
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
178. Ownership in a company that allows the owner to receive dividends before common shareholders receive any
distributions
ANSWER:
e
179. Ten acres of land used as the site for a factory
ANSWER:
g
180. Amounts owed on an open account to a vendor, due in 70 days
ANSWER:
h
181. A checking account at a bank
ANSWER:
a
182. A warehouse used to store equipment
ANSWER:
k
183. Claims by the owners on the undistributed net income of a business
ANSWER:
i
184. Rent paid on an office building in advance of use of the facility
ANSWER:
b
Each account has a normal balance. For the following list of accounts, indicate whether the normal balance of each is a
debit or a credit.
a.
Debit
b.
Credit
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.03-05 - LO: 03-05
KEYWORDS:
Bloom's: Remembering
185. Cash
ANSWER:
a
186. Prepaid Insurance
ANSWER:
a
187. Retained Earnings
ANSWER:
b
188. Bonds Payable
ANSWER:
b
189. Investments
ANSWER:
a
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
190. Capital Stock
ANSWER:
b
191. Advertising Fees Earned
ANSWER:
b
192. Wages and Salaries Expense
ANSWER:
a
193. Wages and Salaries Payable
ANSWER:
b
194. Office Supplies
ANSWER:
a
195. Dividends
ANSWER:
a
196. Unearned Advertising Fees
ANSWER:
b
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
198. Presented below are a list of source documents and a list of transactions. Using the identification letters before each
source document, indicate next to each transaction which source document serves as evidence for the recording of the
transaction.
Source Documents
A)
Purchase invoice
B)
Sales invoice
C)
Cash register tape
D)
Check
E)
Time card
F)
Monthly statement
G)
Promissory note
H)
Stock certificate
Transactions
_____
(1)
Supplies are purchased on credit.
_____
(2)
Cash sales are made to customers.
_____
(3)
Land is acquired by signing an agreement to pay a stated amount plus interest in
one year.
_____
(4)
Utilities expense is recorded for the current month.
_____
(5)
The weekly payroll is paid.
_____
(6)
Merchandise is sold to a customer on account.
_____
(7)
Payment is made for utility bills which were recorded earlier.
_____
(8)
Investors purchase additional shares of the company's stock directly from the
company.
ANSWER:
Transactions
A
(1)
Supplies are purchased on credit.
C
(2)
Cash sales are made to customers.
G
(3)
Land is acquired by signing an agreement to pay a stated amount plus interest
in one year.
F
(4)
Utilities expense is recorded for the current month.
E
(5)
The weekly payroll is paid.
B
(6)
Merchandise is sold to a customer on account.
D
(7)
Payment is made for utility bills which were recorded earlier.
H
(8)
Investors purchase additional shares of the company's stock directly from the
company.
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.03-02 - LO: 03-02
KEYWORDS:
Bloom's: Understanding
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
199. Several transactions are listed below, with the accounting equation stated to the right side of each. Use the following
identification codes to indicate the effects of each transaction on the accounting equation. Write your answers in the space
provided under the accounting equation. You need an identification code for each element of the accounting equation. An
example is given before the first transaction.
I-Increase
D-Decrease
NE-No Effect
Assets
=
Liabilities
+
Owners’ Equity
Example
Common stock is issued to
investors in the company
__I___
__NE___
__I___
A)
Cash sales are made.
_______
_______
______
B)
Equipment is purchased on
credit.
_______
_______
______
C)
Payment is made for the
equipment purchased on
credit.
_______
_______
______
D)
Sales are made on
account.
_______
_______
______
E)
Cash is collected from
customers for accounts
receivable balances.
_______
_______
______
F)
Dividends are declared and
paid to stockholders.
_______
_______
______
G)
Land and a building are
acquired in exchange for shares
of the company’s common
stock.
_______
_______
______
H)
Utility bills are received and
recorded; payment will be made
later.
_______
_______
______
ANSWER:
Assets
=
Liabilities
+
Owners’ Equity
on credit
I
I
NE
C)
Payment is made for the
equipment purchased on
credit
D
D
NE
D)
Sales are made on
account.
I
NE
I
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
200. Union Inc. was organized on June 1, 2016, by two students majoring in education. The two entrepreneurs provided
entertainment for children’s birthday parties to supplement their college career. The following transactions occurred
during the first month of operations:
June 1: Received contribution of $6,000 from each of the two principal owners of the new business in exchange for shares
of stock.
June 1: Purchased lighting equipment for $300 on an open account. The company has 30 days to pay for the equipment.
June 5: Registered as a vendor with the city and paid the $25 monthly fee.
June 9: Purchased an event tent to set up at parties for $2,400 cash.
June 10: Purchased $100 in miscellaneous supplies on account. The company has 30 days to pay for the supplies.
June 15: Paid a $75 bill from local printer for advertisement signs.
June 17: Customers paid for services with cash of $1,500.
June 24: Billed the local park district $800 entertainment provided to a summer camp.
The park district is to pay one-half of the bill within five working days and the rest within 30 days.
June 29: Received 50% of the amount billed to the park district.
June 30: Customers paid cash for parties of $2,000.
June 30: Paid wages of $300 to a friend who helped over the weekend.
June 30: Paid the balance due on the supplies.
Required
1. Prepare a table to summarize the preceding transactions as they affect the accounting
equation. Use the following format. Identify each transaction with the date.
Assets =
Liabilities +
Stock. Equity
Date
Cash
Accts. Rec.
Equipment
Supplies
Accts. Pay.
Cap. Stock
Ret.
Earn.
2. Prepare an income statement for the month ended June 30, 2016.
3. Prepare a classified balance sheet at June 30, 2016.
4. Why do you think the two students decided to incorporate their business rather than operate it as a partnership?
Chapter 3: Processing Accounting Information
ANSWER:
1.
Union, Inc.
TRANSACTIONS FOR THE MONTH OF June 2016
Assets =
Liabilities
+
Stock. Equity
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3.
Union, Inc.
BALANCE SHEET
June 30, 2016
Assets
Current assets:
Cash
$13,000
Accounts receivable
400
Supplies
100
Total current assets
$13,500
Property, plant, and equipment:
Equipment
2,700
Total assets
$16,200
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$300
Capital stock
12,000
Retained earnings
3,900
Total stockholders' equity
15,900
Total liabilities and stockholders' equity
$16,200
4.
Given the line of business that they are in, the two students may be concerned about their
liability. One of the advantages of incorporating is the limited liability of the stockholders.
Generally, a stockholder is liable only for the amount contributed to the business.
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.03-03 - LO: 03-03
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
201. Prepare the journal entry to record each of the following independent transactions. (Use the number of the transaction
in place of a date for identification purposes.)
1. Services provided for cash of $7,050.
2. Purchase of equipment for cash of $2,240.
3. Services provided on account of $530.
4. Purchases of supplies on account for $365.
ANSWER:
1
Cash
7,050
Sales Revenue
7,050
Made cash sales.
2
Equipment
2,240
Cash
2,240
Purchased equipment for cash.
3
Accounts Receivable
530
Sales Revenue
530
Made sales on open account.
4
Supplies
365
Accounts Payable
365
Purchased supplies on open account.
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.03-03 - LO: 03-03
FACC.PONO.13.03-05 - LO: 03-05
FACC.PONO.13.03-06 - LO: 03-06
KEYWORDS:
Bloom's: Analyzing
Chapter 3: Processing Accounting Information
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
202. Prepare the journal entry to record each of the following independent transactions. (Use the number of the transaction
in place of a date for identification purposes.)
1. Sale of capital stock in exchange for a parcel of land; the land is appraised at $75,000
2. Payment of $3,400 in salaries and wages
3. Payment of open account in the amount of $850
4. Issuance of a promissory note for $2,750
5. Collections on account for $689
ANSWER:
1.
Land
75,000
Capital Stock
75,000
Issued capital stock in exchange for land.
2.
Salary and Wage Expense
3,400
Cash
3,400
Paid salaries and wages.
3.
Accounts Payable
850
Cash
850
Paid open account.
4.
Cash
2,750
Notes Payable
2,750
Issued promissory note for cash.
5.
Cash
689
Accounts Receivable
689
Collected open accounts.
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.03-03 - LO: 03-03
FACC.PONO.13.03-05 - LO: 03-05
FACC.PONO.13.03-06 - LO: 03-06
KEYWORDS:
Bloom's: Analyzing
203. During the month, services performed for customers on account amounted to $4,500 and collections from customers
in payment of their accounts totaled $3,000. At the end of the month, the Accounts Receivable account had a balance of
$3,500. What was the Accounts Receivable balance at the beginning of the month? (Show your work using a T account.)
ANSWER:
Beginning Balance + Services on Account – Collections = Ending Balance
Beginning Balance + $4,500 – $3,000 = $1,500
Beginning Balance = $2,000
Accounts Receivable
Beg. Bal. X*
4,500
3,000
End. Bal. 3,500
*X = $2,000: (X + $4,500 – $3,000 = $3,500)
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.03-04 - LO: 03-04
KEYWORDS:
Bloom's: Analyzing
204. Falcon Services was organized on October 1, 2016. The company received a contribution of $2,000 from each of the
two principal owners. During the month, Falcon Services provided services for cash of $1,400 and services on account for
$600, received $350 from customers in payment of their accounts, purchased supplies on account for $800 and equipment
on account for $1,050, received a utility bill for $150 that will not be paid until November, and paid the full amount due
on the equipment.
REQUIRED: Show your work to determine the company’s Cash balance on October 31, 2016.
ANSWER:
$4,000 + $1,400 + $350 - $1,050 = $4,700
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.03-04 - LO: 03-04
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
205. Several accounts from the financial statements of Robot Technologies are listed below. In the two columns provided
for answers, indicate the type of account and the normal account balance. Use the following identification codes for your
answers:
Type of Account
Normal Balance
A = Asset
DR = Debit
L = Liability
CR = Credit
SE = Stockholders’ Equity
R = Revenue
E = Expense
Type of Account
Normal Balance
A)
Prepaid Expenses
_______
_______
B)
Cable Television Equipment
_______
_______
C)
Subscriptions Received in Advance
_______
_______
D)
Common Stock
_______
_______
E)
Accounts Payable
_______
_______
F)
Income Taxes Expense
_______
_______
G)
Interest Income
_______
_______
H)
Cable Television Franchises
_______
_______
I)
Long-Term Debt
_______
_______
ANSWER:
Type of
Account
Normal Balance
A)
Prepaid Expenses
A
DR
B)
Cable Television Equipment
A
DR
C)
Subscriptions Received in Advance
L
CR
D)
Common Stock
SE
CR
E)
Accounts Payable
L
CR
F)
Income Taxes Expense
E
DR
G)
Interest Income
R
CR
H)
Cable Television Franchises
A
DR
I)
Long-Term Debt
L
CR
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.03-05 - LO: 03-05
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
206. Listed below are selected accounts from the financial statements of Bargain Mart for the year ended December 31,
2016. In the blank space provided for each account, indicate what type of account it is, its normal balance, and the
debit/credit rules for increasing and decreasing it. Use the following abbreviations for your answers:
Type of Account
Normal Account
Balance
Rules to Increase or
Decrease the Account
A = Asset
Dr = Debit
Dr = Debit
L = Liability
Cr = Credit
Cr = Credit
SE = Stockholders’ Equity
R = Revenue
E = Expense
Type of
Account
Normal
Balance
Rule to
Increase
Rule to
Decrease
Example:
Cash
A
Dr
Dr
Cr
(a)
Income Taxes
_______
_______
_______
_______
(b)
Accounts Payable
_______
_______
_______
_______
(c)
Retained Earnings
_______
_______
_______
_______
(d)
Prepaid Expenses
_______
_______
_______
_______
(e)
Sales Revenues
_______
_______
_______
_______
(f)
Long-term Debt
_______
_______
_______
_______
(g)
Intangibles
_______
_______
_______
_______
(h)
Common Stock
_______
_______
_______
_______
Chapter 3: Processing Accounting Information
ANSWER:
Type of
Account
Normal
Balance
Rule to
Increase
Rule to
Decrease
(a)
Income Taxes
E
Dr
Dr
Cr
________
________
________
________
(b)
Accounts Payable
L
Cr
Cr
Dr
________
________
________
________
(c)
Retained Earnings
SE
Cr
Cr
Dr
________
________
________
________
(d)
Prepaid Expenses
A
Dr
Dr
Cr
________
________
________
________
(e)
Sales Revenues
R
Cr
Cr
Dr
________
________
________
________
(f)
Long-term Debt
L
Cr
Cr
Dr
________
________
________
________
(g)
Intangibles
A
Dr
Dr
Cr
________
________
________
________
(h)
Common Stock
SE
Cr
Cr
Dr
________
________
________
________
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.03-05 - LO: 03-05
