Exam 2: Analyzing and Recording Transactions

The record in which transactions are first recorded is the:

The balance sheet reports the financial position of a company at a point in time.

Source documents provide evidence of business transactions and are the basis for accounting entries.

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

If the Debit and Credit column totals of a trial balance are equal, then:

For each of the following errors, indicate on the table below the amount by which the trial balance will be out of balance and which trial balance column (debit or credit) will have the larger total as a result of the error. a. $100 debit to Cash was debited to the Cash account twice. b. $1,900 credit to Sales was posted as a $190 credit. c. $5,000 debit to Office Equipment was debited to Office Supplies. d. $625 debit to Prepaid Insurance was posted as a $62.50 debit. e. $520 credit to Accounts Payable was not posted.

The following trial balance is prepared from the general ledger of Hal's Auto Repair. Because the trial balance did not balance, you decided to examine the accounting records. You found that the following errors had been made: 1. A purchase of supplies on account for $245 was posted as a debit to Supplies and as a debit to Accounts Payable. 2. An investment of $500 cash by the owner was debited to Hal Frederick, Capital and credited to Cash. 3. In computing the balance of the Accounts Receivable account, a debit of $600 was omitted from the computation. 4. One debit of $300 to the Hal Frederick, Withdrawals account was posted as a credit. 5. Office equipment purchased for $800 was posted to the Repair Equipment account. 6. One entire entry was not posted to the general ledger. The transaction involved the receipt of $125 cash for repair services performed for cash. Prepare a corrected trial balance for the Hal's Auto Repair as of October 31.

An account balance is:

_______________ is the process of transferring journal entry information to the ledger.

For each of the following (1) identify the type of account as an asset, liability, equity, revenue, or expense, and (2) identify the normal balance of the account.

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

Cash withdrawn by the owner of a proprietorship should be treated as an expense of the business.

Preparation of a trial balance is the first step in the analyzing and recording process.

Hamilton Industries has liabilities of $105 million and total assets of $350 million. Its debt ratio is 40.0%. $105 million/$350 million = 30.0%

Stride Along had total liabilities of $130 million and total assets of $375 million. Its debt ratio was ______________.

Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year: If Josephine made no investments in the business and withdrew no assets during the year, what was the amount of net income earned by Josephine's Bakery?

Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year: If Josephine invested an additional $12,000 in the business during the year, but withdrew no assets during the year, what was the amount of net income earned by Josephine's Bakery?

Land and buildings are generally recorded in the same ledger account.

Zed Bennett opened an art gallery and as a dealer completed these transactions: Started the gallery, Artery, 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 painting for an artist and collected a $4,500 cash commission on the sale. 5) Completed an art appraisal and billed the client $200. What was the balance of the cash account after these transactions were posted?

The debt ratio helps to assess the risk a company has of failing to pay its debts and is helpful to both its owners and creditors.