Accounting Volume 1 Canadian 9th Edition By Charles T. Horngren - Test Bank

Accounting, Vol. 1, 9e Cdn. Ed. (Horngren et al.) Chapter 2 Recording Business Transactions Objective 2-1 1) The basic summary device of accounting is the account. Answer: TRUE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 2) Notes receivable is a liability account. Answer: FALSE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 3) A chart of accounts is a list of all of a company's accounts with their account numbers. Answer: TRUE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 4) A chart of accounts is organized in order of the accounting equation, with assets first, followed by liabilities and owner's equity. Answer: TRUE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 5) The ledger is the first book of entry for a business transaction. Answer: FALSE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 6) An account receivable for the selling company is an account payable for the purchasing company. Answer: TRUE Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-1 Define and use key accounting terms 7) The basic summary device of accounting is the: A) ledger. B) account. C) debit. D) credit. Answer: B Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 8) Accounts are grouped in a book called the: A) trial balance. B) chart of accounts. C) journal. D) ledger. Answer: D Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 9) All of the following are assets except: A) cash. B) accounts receivable. C) land. D) accounts payable. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 10) An organization's list of all its accounts and the related account numbers is called a: A) balance sheet. B) chart of accounts. C) ledger. D) trial balance. Answer: B Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 11) A chart of accounts is: A) a source document. B) another name for a trial balance. C) a list of all of the accounts of an organization and their related account numbers. D) prepared as the last step in analyzing transactions. Answer: C Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 12) Which of the following is a revenue account? A) accounts receivable B) accumulated amortization C) unearned revenue D) sales Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-1 Define and use key accounting terms 13) Which of the following most completely describes businesses that use a chart of accounts? A) service but not merchandising or manufacturing businesses B) merchandising but not service or manufacturing businesses C) manufacturing but not service or merchandising businesses D) Service, merchandising, and manufacturing businesses all use a chart of accounts. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 14) The year end balance in the capital account is determined by: A) the change in cash from the beginning to the end of the year. B) the beginning capital balance, investments, net income or loss, and withdrawals. C) only investments and withdrawals. D) the change in total assets from the beginning to the end of the year. Answer: B Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-1 Define and use key accounting terms Match the following. A) account B) ledger C) journal D) chart of accounts 15) The basic summary device of accounting Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 16) The book of accounts Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 17) The chronological record of an entity's transactions Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 18) A list of all an entity's accounts and their account numbers Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms Answers: 15) A 16) B 17) C 18) D For the items listed below, choose the appropriate code letter to indicate whether the item is an asset, liability, owner's equity, revenue, expense or withdrawal item: Asset A Liability L Owner's Equity OE Revenue R Expense E Withdrawal W 19) Accounts receivable Diff: 1 Learning Outcome: Skill: Knowledge A-03 Analyze and record transactions and their effects on the financial statements Objective: 2-1 Define and use key accounting terms 20) Service revenue Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 21) Salary expense Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 22) Accounts payable Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 23) Office supplies Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 24) Cash Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 25) Note payable Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 26) Tim Brown, Capital Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 27) Building Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 28) Tim Brown, withdrawals Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 29) Land Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 30) Truck Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 31) Rent expense Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 32) Furniture Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 33) Equipment Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms 34) Supplies expense Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-1 Define and use key accounting terms Answers: 19) A 20) R 21) E 22) L 23) A 24) A 25) L 26) OE 27) A 28) W 29) A 30) A 31) E 32) A 33) A 34) E Objective 2-2 1) A transaction always involves exactly two accounts. Answer: FALSE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 2) The right-hand side of an account is called the increase side. Answer: FALSE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 3) Assets, revenues, and withdrawals are all increased by debits. Answer: FALSE Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 4) Total debits must always equal total credits. Answer: TRUE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 5) The right side of the account is the correct side. Answer: FALSE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 6) The normal balance of account Accounts Payable is a debit. Answer: FALSE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 7) The purchase of equipment by issuing a note payable would involve a debit to note payable. Answer: FALSE Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 8) The purchase of a building with a down payment of cash and the signing of a note payable for the remainder would include a debit to building and a credit to note payable and to cash. Answer: TRUE Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 9) The normal balance of a revenue account is a credit. Answer: TRUE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 10) Double-entry accounting means entering business transactions twice to avoid possible errors. Answer: FALSE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 11) Credit is a term representing: A) the right side of an account. B) an increase. C) a decrease. D) the left side of an account. Answer: A Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 12) Which of the following groups of accounts have normal debit balances? A) assets, revenues, and owner withdrawals B) assets, expenses, and owner withdrawals C) assets, liabilities, and capital D) assets, revenues, and expenses Answer: B Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 13) The normal balance of an expense is a ________ while the normal balance of an asset is a ________. A) debit, credit B) debit, debit C) credit, credit D) credit, debit Answer: B Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 14) The normal balance of a liability is a ________ while the normal balance of revenue is a ________. A) credit, debit B) debit, debit C) debit, credit D) credit, credit Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 15) Incurring an expense in the current accounting period, which is paid in the current accounting period, will require: A) a debit to an expense and a credit to a liability. B) a debit to a liability and a credit to an expense. C) a debit to an expense and a credit to cash. D) a debit to an expense and a credit to capital. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 16) Incurring an expense in the current accounting period, which will be paid in the following accounting period, will require: A) a debit to an expense and a credit to a liability. B) a debit to a liability and a credit to an expense. C) a debit to an expense and a credit to cash. D) a debit to an expense and a credit to capital. Answer: A Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 17) The withdrawal of cash by the owner for personal use would include a: A) debit to the owner's capital account. B) credit to the owner's withdrawals account. C) credit to the owner's capital account. D) debit to the owner's withdrawals account. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 18) An owner investment of cash into the business would include a: A) debit to capital. B) credit to withdrawals. C) debit to withdrawals. D) credit to capital. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 19) Purchasing a truck by signing a note payable would include a: A) credit to truck. B) debit to note payable. C) credit to note payable. D) debit to truck expense. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 20) Performing a service on account would include a: A) debit to accounts payable. B) credit to accounts payable. C) credit to the cash. D) credit to service revenue. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 21) The normal balance of cash is a ________ because it is a(n) ________ account. A) debit, expense B) credit, asset C) debit, asset D) credit, revenue Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 22) The normal balance of notes payable is a ________ because it is a(n) ________ account. A) debit, expense B) credit, revenue C) debit, asset D) credit, liability Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 23) The normal balance of wages payable is a ________ because it is a(n) ________ account. A) credit, liability B) credit, revenue C) credit, owner's equity D) credit, asset Answer: A Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 24) The normal balance of land is a ________ because it is a(n) ________ account. A) debit, expense B) credit, asset C) debit, asset D) credit, revenue Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 25) The purchase of equipment for cash would: A) increase total assets. B) increase total assets and decrease liabilities. C) decrease both liabilities and owner's equity. D) have no effect on total assets. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 26) An owner investment of a building, valued at $200,000, along with a $55,000 outstanding mortgage, into an entity would: A) increase owner's equity $145,000. B) increase total assets $55,000. C) decrease liabilities $145,000. D) increase owner's equity $200,000. Answer: A Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Analysis Objective: 2-2 Apply the rules of debit and credit 27) Performing services on account would: A) increase net income, decrease total assets, and decrease owner's equity. B) increase net income, increase owner's equity, and increase total assets. C) increase total assets and liabilities. D) decrease total assets, increase net income, and increase owner's equity. Answer: B Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 28) The payment of the owner's personal expenses from the business's chequebook should be recorded with a debit to: A) withdrawals. B) accounts payable. C) cash. D) capital. Answer: A Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 29) The account debited when supplies are purchased on account is: A) accounts payable. B) cash. C) capital. D) supplies. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 30) The account credited when cash is received from a customer on account is: A) cash. B) accounts payable. C) accounts receivable. D) service revenue. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 31) The owner withdrawing cash for personal use would: A) have no effect on assets. B) decrease owner's equity. C) decrease net income. D) increase assets. Answer: B Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 32) An advertising bill received in the current period that will be paid the following period would: A) decrease liabilities. B) have no effect on liabilities. C) increase net income. D) decrease owner's equity. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 33) The account debited when payment is made for equipment purchased previously on account is: A) accounts payable. B) cash. C) accounts receivable. D) equipment. Answer: A Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 34) The purchase of a building by signing a note payable would: A) increase owner's equity. B) decrease total liabilities. C) have no effect on owner's equity. D) decrease total assets. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 35) The purchase of a building by signing a note payable would: A) increase owner's equity. B) increase total liabilities. C) decrease owner's equity. D) decrease total assets. Answer: B Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 36) The investment of cash into the business by the owner would: A) increase net income. B) decrease owner's equity. C) have no effect on liabilities. D) decrease assets. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 37) The payment of an amount owed to a supplier would: A) have no effect on total assets or liabilities. B) increase owner's equity and liabilities. C) decrease net income and increase assets. D) decrease assets and liabilities. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 38) The payment of salaries to employees for wages of the current period would: A) increase owner's equity and decrease liabilities. B) increase net income and decrease assets. C) decrease assets and owner's equity. D) increase assets and decrease owner's equity. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 39) Performing a service for cash would: A) affect the accounting equation the same as if the service was performed on account. B) increase assets more than if the service had been performed on account. C) increase net income less than if the service had been performed on account. D) decrease expenses more than if the service had been performed on account. Answer: A Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 40) Performing a service on account would: A) affect the accounting equation the same as if the service was performed for cash. B) increase assets more than if the service had been performed for cash. C) increase net income less than if the service had been performed for cash. D) decrease expenses more than if the service had been performed for cash. Answer: A Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 41) Performing a service and immediately collecting the cash would: A) increase net income less than if the service had been performed on account. B) increase assets more than if the service had been performed on account. C) increase owner's equity less than if the service had been performed on account. D) have no effect on liabilities. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 42) The journal entry to record the payment of a telephone bill immediately upon receipt of the bill would: A) have no effect on owner's equity. B) decrease liabilities. C) decrease owner's equity. D) increase owner's equity. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 43) Making a payment on account of a liability would: A) decrease assets and increase liabilities. B) increase liabilities and decrease owner's equity. C) decrease assets and decrease liabilities. D) decrease assets and increase net income. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 44) Receiving a payment from a customer on account would: A) increase both assets and owner's equity. B) increase net income and decrease liabilities. C) have no effect on total assets or owner's equity. D) decrease liabilities and increase owner's equity. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 45) An owner investment of equipment into the business would: A) increase net income. B) have no effect on total assets. C) have no effect on owner's equity. D) have no effect on liabilities. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 46) An owner withdrawal of $20,000 cash would: A) decrease owner's equity and increase assets by $20,000. B) increase owner's equity and decrease liabilities by $20,000. C) increase liabilities and assets by $20,000. D) decrease assets and owner's equity by $20,000. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-2 Apply the rules of debit and credit 47) In the double-entry accounting system each transaction: A) involves exactly two accounts. B) involves at least two accounts. C) involves an asset account and a liability account. D) involves a liability account and an equity account. Answer: B Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 48) Owner equity accounts include: A) assets, liabilities and capital. B) assets, revenues and expenses. C) only the capital and withdrawal accounts. D) the revenue, expense, capital and withdrawal accounts. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 49) Which of the following is correct? A) liabilities = assets - owner's equity B) owner's equity = assets + liabilities C) assets = liabilities - owner's equity D) assets = owner's equity - liabilities Answer: A Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit   Match the following. A) debit B) normal balance C) credit 50) The left-hand side of an account Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 51) The right-hand side of an account Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit 52) The side of the account where increases are recorded Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-2 Apply the rules of debit and credit Answers: 50) A 51) C 52) B 53) State whether the account should be debited or credited and the normal balance of the account for the items listed below: Account Recorded as a debit or credit Normal balance of the account a) Increase in Accounts payable b) Increase in Salary expense c) Increase in Withdrawals d) Decrease in Capital e) Decrease in Supplies f) Increase in Accounts receivable g) Decrease in Note payable h) Decrease in Note receivable i) Increase in Utilities expense j) Decrease in Land Answer: Account Recorded as a debit or credit Normal balance of the account a) Increase in Accounts payable Credit Credit b) Increase in Salary expense Debit Debit c) Increase in Withdrawals Debit Debit d) Decrease in Capital Debit Credit e) Decrease in Supplies Credit Debit f) Increase in Accounts receivable Debit Debit g) Decrease in Note payable Debit Credit h) Decrease in Note receivable Credit Debit i) Increase in Utilities expense Debit Debit j) Decrease in Land Credit Debit Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 54) State whether the account should be debited or credited and the normal balance of the account for the items listed below: Account Recorded as a debit or credit Normal balance of the account a) Decrease in Accounts payable b) crease in Salary expense c) Decrease in Withdrawals d) Increase in Capital e) Increase in Supplies f) Decrease in Accounts receivable g) Increase in Note payable h) Increase in Note receivable i) Decrease in Rent expense j) Increase in Land Answer: Account Recorded as a debit or credit Normal balance of the account a) Decrease in Accounts payable Debit Credit b) Decrease in Salary expense Credit Debit c) Increase in Withdrawals Debit Debit d) Increase in Capital Credit Credit e) Increase in Supplies Debit Debit f) Decrease in Accounts receivable Credit Debit g) Increase in Note payable Credit Credit h) Increase in Note receivable Debit Debit i) Decrease in Rent expense Credit Debit j) Increase in Land Debit Debit Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 55) Explain the rules for debits and credits. Use the accounting equation as a basis for your explanation and indicate the specific rules for debits and credits as they apply to the various accounts. Your answer should include the rules for all types of accounts affecting owner's equity. Answer: Assets = Liabilities + Owner's Equity Dr | Cr Dr | Cr Dr | Cr + - - + - + Capital Dr | Cr - + Revenues Dr | Cr - + Expenses Dr | Cr + - Withdrawals Dr | Cr + - Debits are on the left-hand side and credits are on the right-hand side. Depending upon which side of the equation you are on, debits will either increase or decrease an accounting equation item. Owner's equity has four specific accounts that have an effect on the owner's investment in the firm. Revenues and capital (investments by the owner) increase with credits while expenses and withdrawals increase with debits. Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit 56) Describe owner's equity in relation to the assets of the business. Answer: Owner's equity represents a residual interest in the assets of the business available to the owners. The accounting equation can be presented showing owner's equity as being the net assets: Owner's equity = Assets - Liabilities Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-2 Apply the rules of debit and credit Objective 2-3 1) The purchase of office equipment for cash would increase assets and decrease liabilities. Answer: FALSE Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-3 Analyze and record transactions in the journal 2) A payment to a creditor would increase assets and decrease liabilities. Answer: FALSE Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-3 Analyze and record transactions in the journal 3) A journal is a chronological record of transactions. Answer: TRUE Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-3 Analyze and record transactions in the journal 4) The first step in the journalizing process is to identify the transaction and its data. Answer: TRUE Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-3 Analyze and record transactions in the journal 5) A journal is like a diary; it shows a chronological listing of a business's activities. Answer: TRUE Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-3 Analyze and record transactions in the journal 6) Recording the transaction in the journal is the first step in the journalizing process. Answer: FALSE Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-3 Analyze and record transactions in the journal 7) Transactions are first recorded in a(n): A) trial balance. B) journal. C) account. D) ledger. Answer: B Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-3 Analyze and record transactions in the journal 8) A chronological record of an entity's transactions is called a(n): A) journal. B) ledger. C) trial balance. D) account. Answer: A Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-3 Analyze and record transactions in the journal 9) The last step in the journalizing process is to: A) enter the transaction to the journal. B) post the transaction to the ledger. C) determine the accounts involved in the transaction. D) identify the transaction and its data. Answer: A Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-3 Analyze and record transactions in the journal 10) All of the following are included in the journal entry for a transaction except: A) the name of the person making the entry. B) the titles of the accounts to be debited and credited. C) the date of the transaction. D) the dollar amounts of the debit and credit. Answer: A Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-3 Analyze and record transactions in the journal 11) A business purchases equipment for cash of $100,000. This transaction will cause: A) cash to be credited for $100,000. B) equipment to be credited for $100,000. C) capital to be credited for $100,000. D) capital to be debited for $100,000. Answer: A Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 12) A business acquires equipment costing $10,000 by making a $2,000 down payment and issuing a note for the balance. This transaction will cause: A) equipment to be debited for $10,000. B) notes payable to be debited for $8,000. C) cash to be credited for $8,000. D) equipment to be credited for $8,000. Answer: A Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 13) A payment of $400 to a creditor, on account, will cause: A) cash to be debited for $400. B) accounts receivable to be credited for $400. C) accounts payable to be debited for $400. D) accounts payable to be credited for $400. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 14) Providing services for $2,000 where cash is immediately received, will cause: A) service revenue to be debited for $2,000. B) service revenue to be credited for $2,000. C) cash to be credited for $2,000. D) accounts receivable to be credited for $2,000. Answer: B Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 15) An owner investment of land valued at $20,000 and a building valued at $55,000 into the business would include a: A) debit to the land and building account for $75,000. B) debit to the land account for $75,000. C) debit to the capital account for $75,000. D) debit to the building account for $55,000. Answer: D Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 16) An owner investment of land valued at $20,000 and a building valued at $55,000 into the business would include a: A) debit to the land account for $55,000 and building account for $20,000. B) debit to the land account for $75,000. C) debit to the land account for $20,000 and building account for $55,000. D) debit to the building account for $75,000. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 17) Purchasing supplies on account would include a: A) debit to supplies and a credit to note payable. B) debit to supplies and a credit to cash. C) debit to supplies and a debit to accounts payable. D) debit to supplies and a credit to accounts payable. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 18) Purchasing supplies and office equipment for cash would include a: A) debit to supplies; credit to office equipment and cash. B) debit to supplies and office equipment; credit to cash. C) debit to office equipment; credit to supplies and cash. D) debit to cash; credit to office equipment and supplies. Answer: B Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 19) Which of the following records the payment of the current month's rent bill for a business? A) debit to cash and a credit to rent expense B) debit to rent expense and a credit to cash C) debit to rent expense and a credit to accounts payable D) debit to accounts payable and a credit to cash Answer: B Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 20) Receiving cash on account of $1,200 from a customer would include a: A) debit to accounts receivable and a credit to service revenue for $1,200. B) debit to cash and a credit to accounts receivable for $800. C) debit to accounts payable and a credit to cash for $1,200. D) debit to cash and a credit to accounts receivable for $1,200. Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 21) Making a $350 payment on an account with a current balance of $800 would include a: A) debit to accounts receivable and a credit to cash for $350. B) debit to accounts payable and a credit to cash for $450. C) debit to accounts payable and a credit to cash for $350. D) debit to accounts receivable and a credit to capital for $350. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 22) Receiving a $350 payment on an account with a current balance of $800 would include a: A) debit to cash and a credit to accounts payable for $350. B) debit to cash and a credit to accounts receivable for $350. C) credit to cash and a credit to accounts receivable for $350. D) debit to accounts receivable and a credit to cash for $350. Answer: B Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 23) Which of the following entries records the billing of service revenue performed on account for $5,400? A) debit to service revenue and a credit to accounts receivable for $5,400 B) debit to accounts payable and a credit to service revenue for $5,400 C) debit to accounts receivable and a credit to the owner's capital for $5,400 D) debit to accounts receivable and a credit to service revenue for $5,400 Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 24) Which of the following entries records the billing of service revenue performed for cash for $5,400? A) debit to service revenue and a credit to cash for $5,400 B) debit to accounts payable and a credit to cash for $5,400 C) debit to cash and a credit to the owner's capital for $5,400 D) debit to cash and a credit to service revenue for $5,400 Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 25) Performing a service for $500 cash and $700 on account would include a: A) debit to cash for $1,200. B) debit to service revenue for $1,200. C) credit to service revenue for $500. D) debit to accounts receivable for $700. Answer: D Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 26) Performing a service for $500 cash and $700 on account would include a: A) debit to cash for $700. B) debit to service revenue for $700. C) credit to service revenue for $1,200. D) credit to accounts receivable for $700. Answer: C Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 27) A $500 rent bill received for the current period that will be paid in the following period would include a: A) debit to accounts payable for $500. B) credit to rent expense for $500. C) debit to rent expense for $500. D) credit to cash for $500. Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 28) The entry to record the purchase of supplies for $200 cash would be: A) Supplies 200 Accounts Payable 200 B) Cash 200 Supplies 200 C) Cash 200 Supplies Expense 200 D) Supplies 200 Cash 200 Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 29) The entry to record an owner investment of $400 cash into the business would be: A) Withdrawals 400 Capital 400 B) Cash 400 Accounts Receivable 400 C) Cash 400 Capital 400 D) Capital 400 Cash 400 Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 30) The entry to record the return of $300 of supplies purchased on account would be: A) Cash 300 Supplies 300 B) Supplies 300 Accounts Payable 300 C) Accounts Payable 300 Supplies 300 D) Accounts Payable 300 Capital 300 Answer: C Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Analysis Objective: 2-3 Analyze and record transactions in the journal 31) The entry to record the receipt of $650 on account for services previously rendered and billed would be: A) Accounts Receivable 650 Service Revenue 650 B) Service Revenue 650 Accounts Receivable 650 C) Cash 650 Accounts Receivable 650 D) Cash 650 Accounts Payable 650 Answer: C Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 32) Which of the following journal entries most accurately records an owner investing building and land into a business valued at $250,000 and $400,000 respectively? A) Building and land 650,000 Capital 650,000 B) Building and land 650,000 Cash 650,000 C) Building 250,000 Land 400,000 Cash 650,000 D) Building 250,000 Land 400,000 Capital 650,000 Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 33) The proper journal entry to record a proprietor taking $500 cash from the business for personal use is: A) Cash 500 Withdrawals 500 B) Withdrawals 500 Cash 500 C) Salary expense 500 Cash 500 D) Loans payable 500 Cash 500 Answer: B Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 34) A business making a monthly mortgage payment that included $1,200 principal and $300 interest should be recorded as: A) Mortgage payable 1,200 Interest payable 300 Cash 1,500 B) Mortgage payable 1,500 Cash 1,500 C) Cash 1,500 Mortgage payable 1,500 D) Mortgage payable 1,200 Interest expense 300 Cash 1,500 Answer: D Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 35) A customer with an overdue account of $450 pays $150 and provides a promissory note for the balance. Which of the following is the most appropriate journal entry to record this transaction? A) Cash 150 Bad debts expense 300 Accounts receivable 450 B) Cash 150 Notes receivable 300 Accounts receivable 450 C) Accounts receivable 450 Cash 450 D) Cash 150 Accounts receivable 150 Answer: B Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 36) Which of the following journal entries correctly records paying for a $900 one year insurance policy in advance? A) Insurance expense 900 Prepaid insurance 900 B) Prepaid insurance 900 Insurance payable 900 C) Insurance expense 900 Cash 900 D) Prepaid insurance 900 Cash 900 Answer: D Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 37) Sam Snead the owner of Snead's Fine Golf Wear used $1,800 of his personal funds to go on vacation. Which of the following is the most appropriate treatment regarding this transaction? A) Withdrawals 1,800 Cash 1,800 B) Travel expense 1,800 Cash 1,800 C) record a memorandum in the general journal D) do not record the transaction in the general journal Answer: D Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-3 Analyze and record transactions in the journal 38) Which of the following journal entries would be recorded if a business makes a cash payment to a supplier of $600 "on account" (the business had purchased supplies on account in the previous month)? A) Cash 600 Accounts payable 600 B) Accounts payable 600 Cash 600 C) Cash 600 Supplies 600 D) Accounts payable 600 Supplies 600 Answer: B Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal Match the following. A) journalizing 39) The process of entering transactions into the journal Diff: 1 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Knowledge Objective: 2-3 Analyze and record transactions in the journal Answers: 39) A Matching Source Documents A) bank reconciliation B) purchase order C) bank cheque D) packing slip E) deposit slip F) cash receipt G) sales invoice 40) a company places an order with a vendor to purchase inventory Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-3 Analyze and record transactions in the journal 41) an order of materials is received from a vendor via a delivery truck Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-3 Analyze and record transactions in the journal 42) the company accountant deposits the cash and cheques received at the bank Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-3 Analyze and record transactions in the journal 43) paid a vendor on account Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-3 Analyze and record transactions in the journal 44) sold merchandise to a customer on account Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-3 Analyze and record transactions in the journal 45) paid employee for one week's wages Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-3 Analyze and record transactions in the journal 46) customer pays the company immediately for services performed Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Comprehension Objective: 2-3 Analyze and record transactions in the journal Answers: 40) B 41) D 42) E 43) C 44) G 45) C 46) F 47) State the account to be debited and the account to be credited for the following transactions. Choose from the following list of accounts: cash, accounts receivable, supplies, equipment, land, accounts payable, note payable, capital, withdrawals, service revenue, utilities expense, and salary expense. a) Purchased equipment for cash. b) Performed services for cash. c) Owner invests cash into the business. d) Purchased supplies for cash. e) Purchased equipment by issuing a note payable. f) Purchased supplies on account. g) Performed services on account. h) Received cash on account. i) Paid a creditor on account. j) Paid salary of employees for the current period. k)Owner invested land in the business Debit Credit a) ________________ ________________ b) ________________ ________________ c) ________________ ________________ d) ________________ ________________ e) ________________ ________________ f) ________________ ________________ g) ________________ ________________ h) ________________ ________________ i) ________________ ________________ j) ________________ ________________ k) ________________ ________________ Answer: Debit Credit a) Equipment Cash b) Cash Service revenue c) Cash Capital d) Supplies Cash e) Equipment Note payable f) Supplies Accounts payable g) Accounts receivable Service revenue h) Cash Accounts receivable i) Accounts payable Cash j) Salary expense Cash k) Land Capital Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 48) Prepare journal entries in good form for the following transactions. a) Francine Forestell opened a consulting firm by investing $20,700 cash and office furniture valued at $8,300. b) Paid monthly rent of $1,000 c) Purchased office supplies for cash, $700. d) Paid $1,200 employee salary. e) Billed a client $4,000 for services rendered. f) Owner, Francine Forestell withdrew $1,500 for personal living expenses. Answer: General Journal Date Accounts Debit Credit a) Office Furniture 8,300 Cash 20,700 Francine Forestell, Capital 29,000 b) Rent Expense 1,000 Cash 1,000 c) Office Supplies 700 Cash 700 d) Wages Expense 1,200 Cash 1,200 e) Accounts Receivable 4,000 Service Revenue 4,000 f) Francine Forestell, Withdrawals 1,500 Cash 1,500 Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 49) Prepare journal entries in good form for the following transactions. a) Owner, Mira Addington invested equipment valued at $4,500 and cash of $7,000 into the business. b) Purchased office supplies for cash, $550. c) Paid $700 for current month's rent of office space. d) Billed a client $2,000 for services rendered. e) Owner, Mira Addington withdrew $1,600 for personal living expenses. Answer: General Journal Date Accounts Debit Credit a) Equipment 4,500 Cash 7,000 Mira Addington, Capital 11,500 b) Office Supplies 550 Cash 550 c) Rent Expense 700 Cash 700 d) Accounts Receivable 2,000 Service Revenue 2,000 e) Mira Addington, Withdrawals 1,600 Cash 1,600 Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 50) Given the journal entries below, write an explanation of the event that created the transaction. General Journal Date Accounts Debit Credit a) Cash 25,500 Mira Addington, Capital 25,500 b) Office Equipment 2,000 Cash 1,000 Note payable 1,000 c) Supplies 2,400 Cash 2,400 d) Accounts Receivable 4,500 Cash 1,500 Service Revenue 6,000 e) Note Payable 2,500 Cash 2,500 Answer: a) Owner, Mira Addington invested $25,500 cash into the business. b) Purchased office equipment costing $2,000 by making a down payment of $1,000 and issuing a note payable for $1,000. c) Purchased supplies for $2,400 cash. d) Recorded service revenue of $6,000, receiving $1,500 cash and $4,500 on account. e) Made a $2,500 payment on a note payable. Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Analysis Objective: 2-3 Analyze and record transactions in the journal 51) Prepare journal entries in good form for the following transactions: a) Owner, Janet Simpson, invested equipment valued at $5,800 and cash of $5,000 into the business. b) Purchased office supplies for cash, $250. c) Paid $800 for current month's rent of office space. d) Billed a client $2,000 for services rendered. e) Owner, Janet Simpson, withdrew $1,000 for personal living expenses. Answer: General Journal Date Accounts Debit Credit a) Equipment 5,800 Cash 5,000 Janet Simpson, Capital 10,800 Owner invested cash and equipment in the business. b) Office Supplies 250 Cash 250 Purchased office supplies for cash. c) Rent Expense 800 Cash 800 Paid one month's rent for office space. d) Accounts Receivable 2,000 Service Revenue 2,000 Performed services on account. e) Janet Simpson, Withdrawals 1,000 Cash 1,000 Owner withdrew cash for personal use. Diff: 2 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 52) Based on the following transactions that occurred during 2014, prepare a trial balance dated December 31, 2014, for Wellman Water Services a) Randy Wellman invested $13,000 cash in the business. b) Purchased $500 of supplies on account. c) Bought equipment on account, $5,000. d) Performed $6,000 of services on account. e) Performed $3,000 of services for cash. f) Paid $3,000 on equipment purchased in transaction c. g) Paid salaries to employees for the current period, $2,500. Answer: Wellman Water Services Trial Balance December 31, 2014 Debit Credit Cash $10,500 Accounts receivable 6,000 Supplies 500 Equipment 5,000 Accounts payable $ 2,500 Randy Wellman, Capital 13,000 Service revenue 9,000 Salary expense 2,500 _______ Total $24,500 $24,500 Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 53) Journalize the following transactions for Redmond Storage and prepare a trial balance dated June 30, 2014. a) Owner, Roger Redmond invested $10,000 cash into the business. b) Rented an office and paid one month's rent, $1,100. c) Purchased $450 of supplies on account. d) Performed a service on account, $1,550. e) Paid $2,500 cash for office furniture. f) Owner, Roger Redmond withdrew $1,700 cash for personal use. g) Collected $1,200 on account. Answer: Journal Date Description Debit Credit a) Cash 10,000 Roger Redmond, Capital 10,000 Owner investment of cash in business. b) Rent Expense 1,100 Cash 1,100 Paid cash for one month's rent. c) Supplies 450 Accounts Payable 450 Purchased supplies on account. d) Accounts Receivable 1,550 Service Revenue 1,550 Performed a service on account. e) Office Furniture 2,500 Cash 2,500 Paid cash for office furniture. f) Roger Redmond, Withdrawals 1,700 Cash 1,700 Owner withdrew cash for personal use. g) Cash 1,200 Accounts Receivable 1,200 Collect cash on account. Redmond Storage Trial Balance June 30, 2014 Debit Credit Cash $5,900 Accounts receivable 350 Supplies 450 Office furniture 2,500 Accounts payable $ 450 Roger Redmond, Capital 10,000 Roger Redmond, Withdrawals 1,700 Service revenue 1,550 Rent expense 1,100 _______ Total $12,000 $12,000 Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 54) Journalize the following transactions for Stanley's Repair Shop and prepare a trial balance dated May 31, 2014. a) Owner, Stanley Knowles invested $5,000 cash into the business. b) Rented a garage and paid one month's rent, $1,400. c) Purchased $50 of supplies for cash. d) Performed repair services on account, $1,590. e) Paid $1,500 cash for equipment. f) Owner, Stanley Knowles withdrew $700 cash for personal use. Answer: Journal Date Description Debit Credit a) Cash 5,000 Stanley Knowles, Capital 5,000 Owner invested cash in business. b) Rent Expense 1,400 Cash 1,400 Paid cash for one month's rent for garage. c) Supplies 50 Cash 50 Purchased supplies for cash. d) Accounts Receivable 1,590 Service Revenue 1,590 Performed repair services on account. e) Equipment 1,500 Cash 1,500 Purchased equipment for cash. f) Stanley Knowles, Withdrawals 700 Cash 700 Owner withdrew cash for personal use. Stanley's Repair Shop Trial Balance May 31, 2014 Debit Credit Cash $1,350 Accounts receivable 1,590 Supplies 50 Equipment 1,500 Stanley Knowles, Capital 5,000 Stanley Knowles, Withdrawals 700 Service revenue 1,590 Rent expense 1,400 _______ Total $6,590 $6,590 Diff: 3 Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements Skill: Application Objective: 2-3 Analyze and record transactions in the journal 55) Given the following transactions for the The Warren Candle Company, prepare a trial balance as of August 31, 2013. a) Owner, Wendy Warren invested $16,000 cash and equipment with a value of $7,500 into the business. b) Purchased supplies on account, $350. c) Rented office space paying one month's rent, $950. d) Performed a service on account, $1,500. e) Purchased a truck by paying $2,000 down and signing a note for the balance of $19,900. f) Performed a service and immediately collected $900 cash. g) Owner, Wendy Warren withdrew $900 for personal use. Answer: The Warren Candle Company Trial Balan