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Exam 2: Analyzing for Business Transactions

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Question 61

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A company's ledger is:

A) A record containing increases and decreases in a specific asset, liability, equity, revenue, or expense item.
B) A journal in which transactions are first recorded.
C) A collection of documents that describe transactions and events entering the accounting process.
D) A list of all accounts a company uses with an assigned identification number.
E) A record containing all accounts and their balances used by the company.

F) A) and E)
G) B) and C)

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Question 62

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Wiley Consulting purchased $7,000 worth of supplies and paid cash immediately.Which of the following general journal entries will Wiley Consulting make to record this transaction? Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

A) $\begin{array} { | l | r | r | } \hline \text { Accounts Payable } & 7,000 & \\\hline \text { Supplies } & & 7,000 \\\hline\end{array}$
B) $\begin{array} { | l | r | r | } \hline \text { Cash } & 7,000 & \\\hline \text { Supplies } & & 7,000 \\\hline\end{array}$
C) $\begin{array} { | l | r | l | } \hline \text { Supplies } & 7,000 & \\\hline \text { Cash } & & 7,000 \\\hline\end{array}$
D) $\begin{array} { | l | r | l | } \hline \text { Supplies } & 7,000 & \\\hline \text { Accounts Payable } & & 7,000 \\\hline\end{array}$
E) $\begin{array} { | l | r | l | } \hline \text { Supplies Expense } & 7,000 & \\\hline \text { Accounts Payable } & & 7,000 \\\hline\end{array}$

F) All of the above
G) B) and C)

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Question 63

Multiple Choice

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Unearned revenues refer to a(n) :

Explain debits and credits and their role in the accounting system of a business.

Identify the following accounts as appearing on either the Income Statement (IS) or Balance Sheet (BS) . -Cash

Stockholder investments always decrease equity.

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 in exchange for common stock. Andrea contributed $20,000 of photography equipment to the business in exchange for common stock. 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 amount of total stockholders' equity reported on the Balance Sheet at the end of the month would be:

A debit is used to record an increase in all of the following accounts except:

If insurance coverage for the next two years is paid for in advance,the amount of the payment is debited to an asset account called Prepaid Insurance.

The ordering of accounts in a trial balance typically follows their identification number from the chart of accounts,that is,assets first,then liabilities,then common stock and dividends,followed by revenues and expenses.

Jerry's Butcher Shop had the following assets and liabilities at the beginning and end of the current year: $\begin{array} { l l l } & \text { Assets } & \text { Liabilities } \\\text { Beginning of the year } & \$ 114,000 & \$ 68,000 \\\text { End of the year } & 135,000 & 73,000\end{array}$ If stockholders invested an additional $12,000 in the business in exchange for common stock and $5,000 of dividends were paid during the year,what was the amount of net income earned by Jerry's Butcher Shop?

Indicate on which of the financial statements the following items appears.Use I for income statement,RE for statement of retained earnings,and B for balance sheet.More than one statement may be appropriate for some items. $\begin{array} { | l | l | } \hline \text { a.Fees Earned } &\quad\quad\quad\quad\quad\quad \\\hline \text { b. Cash } & \\\hline \text { c. Unearned Revenue } & \\\hline \text { d. Rent expense } & \\\hline \text { e. Owner, Capital } & \\\hline \text { f. Notes Payable } & \\\hline \text {g. Prepaid Rent } & \\\hline \text { h.Salaries Expense } & \\\hline \text { i. Notes Payable }\\\hline \text {j.Owner, Withdrawal } & \\\hline\end{array}$

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?

At the end of its first month of operations,Michael's Consulting Services reported net income of $25,000.They also had account balances of: Cash,$18,000; Office Supplies,$2,000 and Accounts Receivable $10,000.The sole stockholder's total investment in exchange for common stock for this first month was $5,000.There were no dividends in the first month. Calculate the amount of total equity to be reported on the balance sheet at the end of the month.

The detail of individual revenue and expense accounts is reported on the statement of retained earnings.

Identify each of the following accounts as a revenue (R) , expense (E) , asset (A) , liability (L) , or equity (SE) . -Unearned Revenue

Unearned revenues are classified as liabilities.

Identify the following accounts as appearing on either the Income Statement (IS) or Balance Sheet (BS) . -Rent Expense

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.

Identify the account below that is classified as a liability account: