Exam 2: Analyzing for Business Transactions

At the end of the current year, Leer Company reported total liabilities of $300,000 and total equity of $100,000. The company's debt ratio on the last year-end was:

Mary Martin, the owner of Martin Consulting, Inc., started the business by investing $40,000 cash. Identify the general journal entry below that Martin Consulting, Inc. will make to record the transaction.

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.

Based on the following trial balance for Sally's Salon, Inc, prepare an income statement, statement of retained earnings, and a balance sheet. Sally Crawford made no additional investments in the company during the year. Sally's Salon, Inc. Trial Balance December 31 Cash. \7 ,500 Accounts receivable. 475 Beauty supplies 2,500 Beauty shop equipment 17,000 Accounts payable \7 45 Common stock 1,000 Retained earnings 21,155 Dividends 63,000 Revenue eatned. 72,000 Beauty supplies expense 3,425 Rent expense. 6,000 Wages expense. Totals.

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

Jackson Consulting, Inc. had the following accounts and balances at December 31: Account Cash Accounts Receivable Prepaid Insurance Supplies Accounts Payable Common Stock Dividends Service Revenue. Utilities Expense Salaries Expense Totals Debit Credit \ 20,000 6,000 1,500 5,000 \ 500 16,200 1,000 20,000 2,000 1,200 Using the information in the table, calculate Jackson Consulting Inc.'s reported net income for the period.

Based on the following trial balance for Barry's Automotive Shop, Inc., prepare an income statement, statement of retained earnings, and a balance sheet. Barry made no additional investments in the company during the year. Barry's Automotive Shop, Inc. Trial Balance December 31 Cash................................. \1 3,500 Accounts receivable......... 1,500 Supplies............................. 500 Repair shop equipment...... 27,000 Service truck.................... 33,000 Accounts payable.............. \2 ,600 Common stock.................. 1,000 Retained earnings.............. 38,525 Dividends.......................... 36,000 Service revenue................. 125,000 Supplies expense................ 3,425 Rent expense..................... 18,000 Utilities expense................ 5,000 Gas expense...................... 7,200 Wages expense.................. Totals ..............................

An account's balance is the difference between the total debits and total credits for the account, including any beginning balance.

A general journal gives a complete record of each transaction in one place, and shows the debits and credits for each transaction.

A $130 credit to Supplies was credited to Fees Earned by mistake. By what amounts are the accounts under- or overstated as a result of this error?

Jay's Limo Services, Inc. paid $300 cash to employees for work performed in the current period. Which of the following general journal entries will Jay's Limo Services, Inc. make to record this transaction?

Richard Redden contributed $70,000 in cash and land worth $130,000 to open a new business, RR Consulting, Inc. Which of the following general journal entries will RR Consulting, Inc. make to record this transaction?

Describe the link between a business's income statement, the statement of retained earnings, and the balance sheet.

Ralph Pine Consulting received its telephone bill in the amount of $300, and immediately paid it. Pine's general journal entry to record this transaction will include a

Unearned revenues are classified as liabilities.

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

After preparing an (unadjusted) trial balance at year-end, R. Chang of Chang Window Company, Inc. discovered the following errors: 1. Cash payment of the $225 telephone bill for December was recorded twice. 2. Cash payment of a note payable was recorded as a debit to Cash and a debit to Notes Payable for $1,000. 3. A $900 cash dividend paid to the owner was recorded to the correct accounts as $90. 4. An additional investment of $5,000 cash by the owner was recorded as a debit to Common Stock and a credit to Cash. 5. A credit purchase of office equipment for $1,800 was recorded as a debit to the Office Equipment account with no offsetting credit entry. Using the form below, indicate whether the error would cause the trial balance to be out of balance by placing an X in either the yes or no column. Would the error cause the trial balance to be out of balance? Error 1. 2. 3. 4. 5. Yes No Would the error cause the trial balance to be out of balance?

Larry Bar opened an frame shop and completed these transactions: 1) Larry started the shop by investing $40,000 cash and equipment valued at $18,000. 2) Purchased $70 of office supplies on credit. 3) Paid $1,200 cash for the receptionist's salary. 4) Sold a custom frame service and collected a $1,500 cash on the sale. 5) Completed framing services and billed the client $200. What was the balance of the cash account after these transactions were posted?

Jackson Advertising Co. had assets of $475,000; liabilities of $275,500; and equity of $199,500. Calculate its debt ratio.