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Exam 2: Analyzing Business Transactions

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Question 21

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The entire process of analyzing, recording, and reporting business transactions is based on the fundamental accounting equation.

A) True
B) False

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Question 22

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Which financial statement is a representation of the accounting equation?

A) Income Statement
B) Statement of Owner's Equity
C) Balance Sheet
D) Profit and Loss Statement

E) All of the above
F) None of the above

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Question 23

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When revenue is greater than expenses, the result is a net ___________________.

When the owner invests cash in a business,

Total assets of Douglas Fuhr Furniture Co. are $36,000 and the total liabilities are $12,000. What is the amount of the owner's equity?

The income statement shows

Guy McKinley started the McKinley Charter Service at the beginning of August 2013. On August 31, 2013, the accounting records of the business showed the following information. Prepare an income statement and a statement of owner's equity for the month and a balance sheet as of August 31, 2013. $\begin{array} { l r l r } \text { Equipment } & \$ 17,000 & \text { Rent Expense } & \$ 4,500 \\\text { Accounts Receivable } & 2,600 & \text { Cash } & 5,000 \\\text { Fees Income } & 28,000 & \text { Salaries Expense } & 9,600 \\\text { Boats } & 103,000 & \text { Utilities Expense } & 1,900 \\\text { Gasoline Expense } & 6,500 & \text { Supplies } & 2,300 \\\text { Loans Payable } & 77,500 & \text { Initial Investment } & 51,000 \\\text { Owner's Withdrawal } & 4,100 & &\end{array}$

The transactions listed below took place at the Mitchell Advertising Agency. These transactions affected the following accounts. Indicate the accounts affected and use plus and minus to show the changes caused by each transaction. $\begin{array}{ll}\text { Cash } & \text { K. Mitchell, Capital } \\\text { Accounts Receivable } & \text { Revenue } \\\text { Equipment } & \text { Expenses } \\\text { Accounts Payable } &\end{array}$ -Sent a check to a creditor

If the owner takes cash out of the business for personal use, the withdrawal should be recorded as an expense of the business.

The ____________________ is the financial report that shows the assets, liabilities, and owner's equity of a business on a specific date.

The figure below shows the transactions for Sawyer Architecture Services during June. Greg Sawyer opened this business on June 1 with a capital investment of $72,000 (Transaction 1). $\begin{array}{|c|c|c|c|c|c|c|c|c|c|}\hline \text { Trans } & & \text { Assets } & & = & \text { Liab. } & &&{\text { Owner's Equity }} \\\hline & \text { Cash } & \text { Accts } & \text { Supp } & \text { Equip } & \text { Accts } & & \text { G. Sawyer, } & \text { Rev. } & \text { Expense } \\\hline & & \text { Rec } & & & \text { Pay } & & \text { Capital } & & \\\hline\\\hline 1 & +72,000 & & &&&&+72,000 \\\hline 2 & -8,200 & & & +8,200 \\\hline 3 & & 5,200 & & &&&&+5,200 \\\hline 4 & & & & +3,680 & +3,680 \\\hline 5 & -3,500 & &&&&& & &-3,500 \\\hline 6 & +670 & -670 & & & \\\hline 7 & -2,400 & & & &&&-,400 \\\hline 8 & -450 & & +450 & & \\\hline \text { Bal } & 58,120+ & 4,530+ & 450+ & 11,880= & 3,680 & + & 69,600+ & 5,200+ & -3,500 \\\hline\end{array}$ -Prepare the statement of owner's equity for Sawyer Architecture Services for the month ended June 30, 2013.

The total assets for the SloMo Delivery Service are

For statements prepared on plain paper, dollar signs are placed with the first amount in each column and with each total.

The statement of owner's equity is prepared before the balance sheet so that the ending capital balance is available.

On September 1, Shawn Dahl established Whitewater Rentals, a canoe and kayak rental business. The following transactions occurred in the month of September and affected the following accounts: $\begin{array}{ll}\text { Cash } & \text { Accounts Payable } \\\text { Accounts Receivable } & \text { Shawn Dahl, Capital } \\\text { Office Equipment } & \text { Revenue } \\\text { Canoe and Kayak Equipment } & \text { Expenses }\end{array}$ Transactions 1. Shawn Dahl invested $45,000 in cash to open the business 2. Paid $12,700 in cash for the purchase of kayak and canoe equipment 3. Paid $1,050 in cash for rent expense 4. Purchased additional kayak and canoe equipment for $3,800 on credit 5. Received $3,900 in cash for kayak rentals 6. Rented canoes and kayaks for $1,200 on account 7. Purchased office equipment for $125 in cash 8. Received $800 in cash from credit clients 9. Shawn Dahl withdrew $1,500 in cash for personal expenses -Based on the information shown in transaction #4 above, indicate the accounts affected and use plus and minus to show the changes caused by the transaction.

If during the year total assets increase by $75,000 and total liabilities decrease by $16,000, by how much did owner's equity increase/decrease?

If assets are $8,000 and liabilities are $2,000, owner's equity is $10,000.

The Balance Sheet heading includes each of the following except

The debts or obligations of a business are known as its ___________________.

During October, a firm had the following transactions involving revenue and expenses. Did the firm earn a net income or incur a net loss for the period? What was the amount?