For each of the following accounts, (1) identify the account as an asset, liability, equity, revenue, or expense, and (2) indicate the normal balance of the account. $\begin{array}{|l|l|l|} \hline\text { Account Title } & \text { Account Type } & \begin{array}{l} \text { Normal Balance } \\ \text { (Debit or Credit) } \end{array} \\\hline \text { a. Prepaid Insurance } \\ \hline \text { b. Accounts Payable } \\ \hline \text { c. Common Stock } \\ \hline \text { d. Utilities Expense } \\ \hline \text { e. Land } \\\hline \text {f. Services Revenue } \\ \hline \text {g. Notes Receivable } \\ \hline \text {h. Advertising Expense } \\ \hline \text {i. Snearned Revenue } \\ \hline \text {j. Service Revenue }\\ \hline \end{array}$

The answer of For each of the following accounts, (1)...

Exam 16: Accounting for Business Transactions

Based on the following trial balance for Barry's Automotive Shop, prepare an income statement, statement of retained earnings, and a balance sheet. There were no additional stock issuances during the year. Barry's Automotive Shop Trial Balance December 31 Cash \ 12,500 Accounts receivable 1,500 Supplies 500 Repair shop equipment 27,000 Service truck 33,000 Accounts payable \ 2,600 Common Stock 30,000 Retained Earnings 8,525 Dividends 36,000 Service revenue 125,00 Supplies expense 3,425 Rent expense 18,000 Utilities expense 5,000 Gas expense 7,200 Wages expense 22,000 Totals \ 166,125 \1 66,125

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Question 1

Correct Answer:

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Barry's Automotive Shop
Income Statement
For Year Ended December 31
$\begin{array}{lr}\text { Service revenue}&&\$125,000\\\text {Expenses: }&\\\text { Supplies expense. }&\$3,425\\\text { Rent expense }&18,000\\\text { Utilities expense }&5,000\\\text { Gas expense }&7,200\\\text { Wages expense }&22,000\\\text { Total expenses }&&55,625\\\text { Net Income. }&&\$69,375\end{array}$
Barry's Automotive Shop
Statement of Retained Earnings
For Year Ended December 31
$\begin{array}{ll}\text { Retained Earnings, January 1 } & \$ 8,525 \\\text { Plus: Net income } & 69,375 \\& 77,900 \\\text { Less: Dividends } & (36,000) \\\text { Retained Earnings, December 31 } & \$ 41,900\end{array}$ Barry's Automotive Shop
Balance Sheet
December 31
$\begin{array}{lll}\text { Assets }&&\text { Liabilities }\\\text { Cash } & \$ 12,500 & \text { Accounts payable }&\$2,600 \\\text { Accounts receivable } & 1,500 & \\\text { Supplies } & 500 & \text { Equity }\\\text { Repair shop equipment } & 27,000 \\\text { Service truck } & 33,000 &\text { Common Stock } & 30,000\\&&\text { Retained earnings } & 41,900\\& & \text { Total stockholders' equity } & 71,900 \\\text { Total assets } & \$ 74,500 & \text { Total liabilities and equity } & \$ 74,500\end{array}$

The heading on every financial statement lists the three W's-Who (the name of the business); What (the name of the statement); and Where (the organization's address).

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Question 2

Correct Answer:

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False

Stark Co. has liabilities of $105 million and total assets of $350 million. Its debt ratio is 40.0%.

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Question 3

Correct Answer:

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False

A column in journals and ledger accounts that is used to cross reference journal and ledger entries is the:

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Question 4

The higher a company's debt ratio, the lower the risk of a company not being able to pay its debts.

(True/False)

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Question 5

The ________ is found by determining the difference between total debits and total credits for an account, including any beginning balance.

(Short Answer)

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Question 6

Mary Sunny, the sole stockholder, began business as Sunny Law Firm on November 1. Record the following November transactions by making entries directly to the T-accounts provided. Next, prepare a trial balance as of November 30. a) Mary invested $15,000 cash and a law library valued at $6,000 in exchange for common stock. b) Purchased $7,500 of office equipment from John Bronx on credit. c) Completed legal work for a client and received $1,500 cash in full payment. d) Paid John Bronx $3,500 cash in partial payment of the amount owed. e) Completed $4,000 of legal work for a client on credit. f) Paid $2,000 in cash dividends. g) Received $2,500 cash as partial payment for the legal work completed for the client in (e). h) Paid $2,500 cash for the secretary's salary.

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Question 7

An income statement reports the revenues earned minus expenses incurred by a business over a period of time.

(True/False)

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Question 8

For each of the following accounts, (1) identify the account as an asset, liability, equity, revenue, or expense, and (2) indicate the normal balance of the account. Account Title Account Type Normal Balance (Debit or Credit) a. Prepaid Insurance b. Accounts Payable c. Common Stock d. Utilities Expense e. Land f. Services Revenue g. Notes Receivable h. Advertising Expense i. Snearned Revenue j. Service Revenue

(Essay)

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Question 9

For each of the accounts in the following table (1) identify the type of account as an asset, liability, equity, revenue, or expense, and (2) identify the normal balance of the account. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Account Type $\quad$ $\quad$ Normal Balance a. Wages Expense b. Accounts Receivable c. Commissions Earned d. Salaries Payable e. Common Stock f. Unearned Advertising Revenue g. Salaries Expense h. Subscription Revenue i. Dividends j. Prepaid Insurance

(Short Answer)

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Question 10

Which of the following is not a step in the accounting process?

(Multiple Choice)

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Question 11

A tool that represents a ledger account and is used to show the effects of transactions is called a:

(Multiple Choice)

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Question 12

Review the transactions below and identify with an "X" those that would be posted as a credit in the ledger (The first one has been done for you): __X_1. Salary Payable was increased. 2. Cash was decreased 3. Equipment was increased 4. Common Stock was increased 5. Salaries Expense was increased 6. Accounts Receivable was decreased 7. Unearned Revenue was increased 8. Dividends was increased 9. Supplies was increased 10. Building was increased 11. Utilities Expense was increased 12. Service Revenue was increased

(Short Answer)

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Question 13

A double-entry accounting system is an accounting system:

(Multiple Choice)

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Question 14

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

(True/False)

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Question 15

The debt ratio is used:

(Multiple Choice)

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Question 16

Posting is the transfer of journal entry information to the ledger.

(True/False)

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Question 17

Errors made in journalizing transactions, posting to the ledger, and preparing the trial balance can still exist in a balanced trial balance.

(True/False)

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Question 18

The debt ratio of Company A is 0.31 and the debt ratio of Company B is 0.21. Based on this information, an investor can conclude:

(Multiple Choice)

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Question 19

A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage.

(True/False)

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Question 20

The heading on every financial statement lists the three W's-Who (the name of the business); What (the name of the statement); and Where (the organization's address).

Stark Co. has liabilities of $105 million and total assets of $350 million. Its debt ratio is 40.0%.

A column in journals and ledger accounts that is used to cross reference journal and ledger entries is the:

The higher a company's debt ratio, the lower the risk of a company not being able to pay its debts.

The ________ is found by determining the difference between total debits and total credits for an account, including any beginning balance.

An income statement reports the revenues earned minus expenses incurred by a business over a period of time.

Which of the following is not a step in the accounting process?

A tool that represents a ledger account and is used to show the effects of transactions is called a:

A double-entry accounting system is an accounting system:

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

The debt ratio is used:

Posting is the transfer of journal entry information to the ledger.

Errors made in journalizing transactions, posting to the ledger, and preparing the trial balance can still exist in a balanced trial balance.

The debt ratio of Company A is 0.31 and the debt ratio of Company B is 0.21. Based on this information, an investor can conclude:

A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Lean Principles and Accounting

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