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Exam 13: The Double-Entry Accounting System

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Question 81

Multiple Choice

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Which of the following is a true statement? (Note: A statement may be true even if it does not identify all accounts that have debit balances on that particular financial statement) .

A) Account numbers 1, 3, and 5 normally have debit balances.
B) Account numbers 2, 4, and 5 normally have debit balances.
C) Account numbers 2, 5, and 8 normally have debit balances.
D) Account numbers 4, 5, and 6 normally have debit balances.

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

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Question 82

Multiple Choice

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Vargas Company purchased a computer for $4,000 on January 1, Year 1. The computer is estimated to have a 4-year useful life and a $1,000 salvage value. What adjusting entry would Vargas record on December 31, Year 1 to recognize expense related to use of the computer?

A)
B)
C)
D)

E) A) and B)
F) A) and D)

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Question 83

Multiple Choice

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What effect will the following closing entry have on the retained earnings account?

A trial balance can only be prepared at the end of the fiscal year, as part of the adjusting and closing processes.

When a company receives cash in advance from a customer, it should debit Cash and credit Accounts Receivable.

The following adjusted trial balance was drawn from the records of the Dakota Company . Based on the information in the adjusted trial balance

Indicate whether each of the following statements is true or false. a)________ A debit may increase a liability.b)________ Closing a revenue account includes a debit to retained earnings.c)________ A debit may decrease stockholders' equity.d)________ A credit may decrease an asset.e)________ Debits to the Cash account are reported as cash outflows on the statement of cash flows.

The journal entry to close the revenue account would include which of the following?

The following adjusted trial balance is for Wayne Company as of December 31, Year 1: Required:Using this information:a)Record the closing entries in journal entry format.b)Prepare an income statementc)Prepare a balance sheet

The following transaction has been recorded in the general journal: How will this transaction affect the company's financial statements after it is posted to the ledger accounts?

The type of transaction that would be represented by a debit to one asset and a credit to another asset is an asset source transaction.

Indicate whether each of the following statements is true or false. a)________ The entry to record the purchase of supplies involves a debit to Supplies Expense and a credit to Cash.b)________ The entry to record the amount of supplies used involves a debit to Supplies Expense and a credit to Supplies.c)________ An asset use transaction may involve a debit to an asset and a credit to a liability.d)________ An asset exchange transaction may involve a debit to an asset and a credit to a liability.e)________ A claims exchange transaction may involve a debit to a liability and a credit to revenue.

A $200 credit to Interest Payable was instead recorded in error as a $200 credit to Cash in an adjusting entry, which has been posted to the ledger accounts. Which of the following is the result of this error?

Matt's Computer Service entered into the following transactions during Year 1: 1)Issued stock to investors for $45,000 cash2)Purchased land for $36,000 cash3)Performed services on account for $51,0004)Collected $33,600 from customers on account5)Paid $19,500 cash for operating expenses Required:a)Draw T-accounts and post the above transactions to the appropriate T-accounts.b)Prepare a balance sheet for Matt's Computer Service for December 31, Year 1.

Bijan Corporation earned $4,000 of revenue that had been deferred. How would the related adjusting entry be recorded in the company's T-accounts?

The employees of Able Company have worked the last two weeks of Year 1, but the employees' salaries have not been paid or recorded as of December 31, Year 1. The adjusting entry that Able should make to accrue these unpaid salaries on December 31, Year 1 is:

Indicate whether each of the following statements is true or false a)________ The general ledger is often called the book of original entry.b)________ Transactions are first recorded in the journal and then transferred to the ledger.c)________ The process of making entries into a journal is called posting.d)________ The general ledger is an example of a source document.e)________ The list of a business's ledger accounts, and their account numbers is called a chart of accounts.

The T-account format is also called the chart of accounts.

Indicate how each event affects the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts. Increase = I Decrease = DNot Affected = NA A transaction recorded as a debit to Cash and a credit to Unearned Revenue.

Consider each of the following accounting events: 1)Debited cash and credited common stock.2)Debited accounts receivable and credited service revenue.3)Debited office supplies and credited accounts payable.4)Debited prepaid rent and credited cash.5)Debited cash and credited accounts receivable.6)Debited accounts payable and credited cash.7)Debited dividends and credited cash.8)Debited rent expense and credited prepaid rent.Required:For each of the events listed above, use the table shown below to:a)Identify the transaction giving rise to that event as asset source (AS), asset use (AU), asset exchange (AX), or claims exchange (CX)transaction.b)Show the effect of each transaction on the components of the accounting equation. Use "+" to signify an increase, "−" to signify a decrease, and "NA" to signify that a given element is not affected by the transaction. If one account increases and another account decreases within the same element, record "+/−" (i.e. an asset exchange transaction). Note that "Not Affected" means that the event does not affect that element of the financial statements.