Question 1

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.

Accepted Answer

A)  25.9%. 
B)  14.9%. 
C)  38.6%. 
D)  34.9%. 
E)  13.4%. 
A)  25.9%. 
B)  14.9%. 
C)  38.6%. 
D)  34.9%. 
E)  13.4%.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

None

Question 4

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

Accepted Answer

A)  Cash 
B)  Accounts Receivable 
C)  Supplies 
D)  Salaries Expense 
E)  Unearned Revenue 
A)  Cash 
B)  Accounts Receivable 
C)  Supplies 
D)  Salaries Expense 
E)  Unearned Revenue

Question 5

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

Accepted Answer

A)  Accounts Payable 
B)  Cash 
C)  Supplies 
D)  Prepaid Insurance 
E)  Owner's Withdrawals 
A)  Accounts Payable 
B)  Cash 
C)  Supplies 
D)  Prepaid Insurance 
E)  Owner's Withdrawals

Question 6

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.

Accepted Answer

A)  $$\begin{array} { | l | r | l | } 
\hline \text { Accounts payable } & 12,000 & \
\hline \text { Consulting services revenue } & & 12,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 12,000 & \
\hline \text { Consulting services revenus } & & 12,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 12,000 & \
\hline \text { Cash } & & 12,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | l | } 
\hline \text { Accounts Receivable } & 12,000 & \
\hline \text { Consulting services revenue } & & 12,000 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | r | l | } 
\hline \text { Consulting services revenue } & 12,000 & \
\hline \text { Cash } & & 12,000 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | r | l | } 
\hline \text { Accounts payable } & 12,000 & \
\hline \text { Consulting services revenue } & & 12,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 12,000 & \
\hline \text { Consulting services revenus } & & 12,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 12,000 & \
\hline \text { Cash } & & 12,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | l | } 
\hline \text { Accounts Receivable } & 12,000 & \
\hline \text { Consulting services revenue } & & 12,000 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | r | l | } 
\hline \text { Consulting services revenue } & 12,000 & \
\hline \text { Cash } & & 12,000 \
\hline
\end{array}$$

Question 7

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

Accepted Answer

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

Question 8

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.

Accepted Answer

The answer of ABC Company made a $2,500 payment on...

Question 9

List the steps in processing transactions.

Accepted Answer

Business transactions and events are the

Question 10

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

Accepted Answer

A)  An error in the general journal where a $4,950 increase in Accounts Receivable was recorded as an increase in Cash. 
B)  A net income of $4,950. 
C)  The balance of $49,500 in Accounts Payable being entered in the trial balance as $4,950. 
D)  An error in the general journal where a $4,950 increase in Accounts Payable was recorded as a decrease in Accounts Payable. 
E)  The balance of $5,500 in the Office Equipment account being entered on the trial balance as a debit of $550. 
A)  An error in the general journal where a $4,950 increase in Accounts Receivable was recorded as an increase in Cash. 
B)  A net income of $4,950. 
C)  The balance of $49,500 in Accounts Payable being entered in the trial balance as $4,950. 
D)  An error in the general journal where a $4,950 increase in Accounts Payable was recorded as a decrease in Accounts Payable. 
E)  The balance of $5,500 in the Office Equipment account being entered on the trial balance as a debit of $550.

Question 11

Owner investments always decrease equity.

Accepted Answer

A) True 
 B)False

Question 12

Identify the statement below that is incorrect.

Accepted Answer

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. 
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.

Question 13

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

Accepted Answer

Accounts are classified into three gener

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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}$

Accepted Answer

\[\begin{array} { | l | l | l | } 
\hlin

Question 16

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

Accepted Answer

A)  Trial balance. 
B)  Balance column account. 
C)  Journal. 
D)  T-account. 
E)  Account. 
A)  Trial balance. 
B)  Balance column account. 
C)  Journal. 
D)  T-account. 
E)  Account.

Question 17

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.

Accepted Answer

A)  Able's Bakery has a smaller percentage of its assets financed with liabilities as compared to Lu Lu's. 
B)  Higher financial leverage involves lower risk. 
C)  Able's Bakery's financial leverage is greater than Lu Lu's. 
D)  Able's Bakery's financial leverage is less than Lu Lu's. 
E)  Lu Lu's has a higher risk from its financial leverage. 
A)  Able's Bakery has a smaller percentage of its assets financed with liabilities as compared to Lu Lu's. 
B)  Higher financial leverage involves lower risk. 
C)  Able's Bakery's financial leverage is greater than Lu Lu's. 
D)  Able's Bakery's financial leverage is less than Lu Lu's. 
E)  Lu Lu's has a higher risk from its financial leverage.

Question 18

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?

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 900 & \
\hline \text { Consulting Revenue } & & 800 \
\hline \text { Design Revenue } & & 100 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Consulting Revenue } & 800 & \
\hline \text { Design Revenue } & 100 & \
\hline \text { Cash } & & 900 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts Payable } & 800 & \
\hline \text { Design Revenue } & & 100 \
\hline \text { Consulting Revenue } & & 800 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts Receivable } & 900 & \
\hline \text { Consulting Revenue } & & 800 \
\hline \text { Design Revenue } & & 100 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | r | r | } 
\hline \text { Design Revenue } & 100 & \
\hline \text { Consulting Revenue } & 800 & \
\hline \text { Accounts Receivable } & & 900 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 900 & \
\hline \text { Consulting Revenue } & & 800 \
\hline \text { Design Revenue } & & 100 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Consulting Revenue } & 800 & \
\hline \text { Design Revenue } & 100 & \
\hline \text { Cash } & & 900 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts Payable } & 800 & \
\hline \text { Design Revenue } & & 100 \
\hline \text { Consulting Revenue } & & 800 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts Receivable } & 900 & \
\hline \text { Consulting Revenue } & & 800 \
\hline \text { Design Revenue } & & 100 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | r | r | } 
\hline \text { Design Revenue } & 100 & \
\hline \text { Consulting Revenue } & 800 & \
\hline \text { Accounts Receivable } & & 900 \
\hline
\end{array}$$

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  All entries from the journal have been posted to the ledger correctly. 
B)  The balance sheet would be correct. 
C)  All ledger account balances are correct. 
D)  Equal debits and credits have been recorded for transactions. 
E)  All transactions have been recorded correctly. 
A)  All entries from the journal have been posted to the ledger correctly. 
B)  The balance sheet would be correct. 
C)  All ledger account balances are correct. 
D)  Equal debits and credits have been recorded for transactions. 
E)  All transactions have been recorded correctly.

Exam 2: Analyzing and Recording Transactions

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.

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

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

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

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.

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

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.

List the steps in processing transactions.

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

Owner investments always decrease equity.

Identify the statement below that is incorrect.

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

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

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

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.

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

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

Accounting in Business

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

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