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Exam 2: Analyzing and Recording Transactions

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Question 21

Multiple Choice

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Identify the statement below that is incorrect.

A) The normal balance of owner's withdrawals is a debit.
B) The normal balance of the owner's capital account is a credit.
C) The normal balance of an expense account is a credit.
D) The normal balance of accounts receivable is a debit.
E) The normal balance of unearned revenues is a credit.

F) C) and D)
G) A) and E)

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Question 22

Multiple Choice

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Which financial statement reports an organization's financial position at a single point in time?

A) Balance sheet.
B) Cash flow statement.
C) Trial balance.
D) Income statement.
E) Statement of owner's equity.

F) B) and E)
G) D) and E)

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Question 23

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A company's chart of accounts is a list of all the accounts used and includes an identification number assigned to each account.

A company provided $12,000 of consulting services on account. The customer promises payment in 30 days. Identify the journal entry below that properly records this transaction.

At year-end, a trial balance showed total credits exceeding total debits by $4,950. This difference could have been caused by:

Lu Lu's Catering has a debt ratio equal to .3 and its competitor, Able's Bakery, has a debt ratio equal to .7. Determine the statement below that is correct.

ABC Company made a $2,500 payment on account, to satisfy a previously recorded account payable. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

Owner investments always decrease equity.

On December 3, the ABBJ Company paid $1,400 cash in salaries to office personnel. Prepare the general journal entry to record this transaction.

Explain how accounts are used in recording information about a business's transactions.

List the steps in processing transactions.

The amount of net income is added on the statement of owner's equity.

HH Consulting & Design provided $800 of consulting work and $100 of design work to the same client. It billed the client for the total amount and is expecting to collect from the customer next month. Which of the following general journal entries will HH Consulting & Design make to record this transaction?

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.

On a trial balance, if the Debit and Credit column totals are equal, then:

Items such as sales tickets, bank statements, checks, and purchase orders are examples of a business's source documents.

Identify the account below that is classified as a liability in a company's chart of accounts:

A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is a(n) :

Drew Castle is an insurance appraiser. Shown below are (a) several accounts in his ledger with each account preceded by an identification number, and (b) several transactions completed by Castle. Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction. 1. ^{Accounts Payable 8. Office Supplies Expense} 2. ^{Accounts Receivable 9. Prepaid Insurance} 3. ^{Appraisal Fees Earned 10. Salaries Expense} 4. ^{Cash 11. Telephone Expense} 5. ^{Insurance Expense 12. Unearned Appraisal Fees} 6. ^{Office Equipment 13. Drew Castle, Capital} 7. ^{Office Supplies 14. Drew Castle, Withdrawals} $\begin{array}{l|l|l}&\text { Debit } &\text { Credit }\\\hline \text { Example: } & & \\\hline \text { Completed an appraisal for a client who } & 2 & 3 \\\text { promised to pay at a later date. }\\\hline \\\end{array}$ $\begin{array}{l|l|l}\hline \text { A. } &\begin{array}{l}\text { Received cash in advance for appraising a } \\\text { hail damage claim................................... }\end{array} & & \\\hline B . & \text { Purchased office supplies on credit......... } \\\hline \text { C. } & \begin{array}{l}\text { Drew Castle used cash from the business to } \\\text { pay his home telephone bill. There were no } \\\text { business calls on the bill...................... }\end{array} \\\hline & \begin{array}{l}\text { Received the telephone bill of the business } \\\text { and immediately paid it......................... }\end{array} \\\hline\end{array}$ $\begin{array}{r|l|l}\hline \text { E. } & \text { Paid the salary of the office assistant.... } & \\\hline \text { F. } & \text { Paid for the supplies purchased } \\&\text { in transaction B.............................. }\\\hline \text {G. }& \text {Completed an appraisal for a client and }\\\hline& \text {immediately collected cash for the work}\\ \hline&\text { done...}\\\hline\end{array}$

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