Accounting 326 SDSU Chapters 2,3,4 (Test 1) ACTUAL UPDATED QUESTIONS
AND CORRECT ANSWERS
Source Documents Used to identify and process external transactions
Transaction Analysis Determine the dual effect on the accounting equation.
Journal Record of the dual effect of a transaction in debit/credit form
Posting Transferring debits and credits from the journal to the ledger.
Unadjusted Trial Balance List of accounts and their balances before recording adjusting entries.
Adjusting Entries Updates to account balances recorded at the end of a reporting period.
Adjusted Trial Balance List of accounts and their balances after recording adjusting entries.
Financial Statements Primary means of disseminating information to external decision makers.
Closing Entries To zero out the temporary accounts.
Post-Closing Trial Balance List of accounts and their balances after recording closing entries.selected answer
correct
ADJUSTING ENTRY: A three-year fire insurance policy Debit Insurance Expense: 2400
was purchased on July 1, 2027, for $14,400. The company Credit Prepaid Insurance: 2400
debited prepaid insurance for the entire amount at the
time of payment.
, ADJUSTING ENTRY: Depreciation on equipment totaled Debit Depreciation Expense: 13750
$13,750 for the year. Credit Accumulated Depreciation: 13750
ADJUSTING ENTRY: Employee salaries of $20,000 for the Debit Salaries Expense: 20000
month of December will be paid in early January 2028. Credit Salaries Payable: 20000
ADJUSTING ENTRY: On November 1, 2027, the company Debit Interest Expense: 5200
borrowed $260,000 from a bank. The note requires Credit Interest Payable: 5200
principal and interest at 12% to be paid on April 30, 2028.
Why: 260000*0.12=31200 (divide by # of months(6)) 31200/6=5200
ADJUSTING ENTRY: On December 1, 2027, the company Debit Deferred Rent Revenue: 2600
received $7,800 in cash from another company that is Credit Rent Revenue: 2600
renting office space in Fierro's building. The payment,
representing rent for December, January, and February Why: Rent was paid for the next 3 months, we must take only December's portion.
was credited to deferred rent revenue at the time cash
was received. 7800/3=2600
Obtained a loan of $60,000 from the bank by signing a D- Cash: 60000
note. C- Notes Payable: 60000
Issued common stock in exchange for cash of $30,000 D- Cash: 30000
C- Common Stock: 30000
Purchased equipment for $65,000 cash. D- Equipment: 65000
C- Cash: 65000
Purchased supplies of $7,000 on account. D- Supplies: 7000
C- Accounts Payable: 7000
Provided services of $4,000 to customers. All customers D- Cash: 4000
paid cash. C- Service Revenue: 4000
Paid employees $800 for work performed. D- Salaries Expense: 800
C- Cash: 800
Paid for advertising in a local newspaper, costing $400. D- Advertising Expense: $400
C- Cash: 400
Provided services of $5,000 to customers on account. D- Accounts Receivable: 5000
C- Service Revenue: 5000
Paid a utility bill of $1,300 for the current month. D- Utilities Expense: 1300
C- Cash: 1300
Paid dividends of $500 to shareholders. D- Dividends: 500
C- Cash: 500
October 1, $25,000 was paid for a one-year fire insurance D- Prepaid Insurance: 25000
policy; C- Cash: 25000
AND CORRECT ANSWERS
Source Documents Used to identify and process external transactions
Transaction Analysis Determine the dual effect on the accounting equation.
Journal Record of the dual effect of a transaction in debit/credit form
Posting Transferring debits and credits from the journal to the ledger.
Unadjusted Trial Balance List of accounts and their balances before recording adjusting entries.
Adjusting Entries Updates to account balances recorded at the end of a reporting period.
Adjusted Trial Balance List of accounts and their balances after recording adjusting entries.
Financial Statements Primary means of disseminating information to external decision makers.
Closing Entries To zero out the temporary accounts.
Post-Closing Trial Balance List of accounts and their balances after recording closing entries.selected answer
correct
ADJUSTING ENTRY: A three-year fire insurance policy Debit Insurance Expense: 2400
was purchased on July 1, 2027, for $14,400. The company Credit Prepaid Insurance: 2400
debited prepaid insurance for the entire amount at the
time of payment.
, ADJUSTING ENTRY: Depreciation on equipment totaled Debit Depreciation Expense: 13750
$13,750 for the year. Credit Accumulated Depreciation: 13750
ADJUSTING ENTRY: Employee salaries of $20,000 for the Debit Salaries Expense: 20000
month of December will be paid in early January 2028. Credit Salaries Payable: 20000
ADJUSTING ENTRY: On November 1, 2027, the company Debit Interest Expense: 5200
borrowed $260,000 from a bank. The note requires Credit Interest Payable: 5200
principal and interest at 12% to be paid on April 30, 2028.
Why: 260000*0.12=31200 (divide by # of months(6)) 31200/6=5200
ADJUSTING ENTRY: On December 1, 2027, the company Debit Deferred Rent Revenue: 2600
received $7,800 in cash from another company that is Credit Rent Revenue: 2600
renting office space in Fierro's building. The payment,
representing rent for December, January, and February Why: Rent was paid for the next 3 months, we must take only December's portion.
was credited to deferred rent revenue at the time cash
was received. 7800/3=2600
Obtained a loan of $60,000 from the bank by signing a D- Cash: 60000
note. C- Notes Payable: 60000
Issued common stock in exchange for cash of $30,000 D- Cash: 30000
C- Common Stock: 30000
Purchased equipment for $65,000 cash. D- Equipment: 65000
C- Cash: 65000
Purchased supplies of $7,000 on account. D- Supplies: 7000
C- Accounts Payable: 7000
Provided services of $4,000 to customers. All customers D- Cash: 4000
paid cash. C- Service Revenue: 4000
Paid employees $800 for work performed. D- Salaries Expense: 800
C- Cash: 800
Paid for advertising in a local newspaper, costing $400. D- Advertising Expense: $400
C- Cash: 400
Provided services of $5,000 to customers on account. D- Accounts Receivable: 5000
C- Service Revenue: 5000
Paid a utility bill of $1,300 for the current month. D- Utilities Expense: 1300
C- Cash: 1300
Paid dividends of $500 to shareholders. D- Dividends: 500
C- Cash: 500
October 1, $25,000 was paid for a one-year fire insurance D- Prepaid Insurance: 25000
policy; C- Cash: 25000
