Exam 16: Accounting for Business Transactions

Identify each of the following accounts as a revenue (R), expense (E), asset (A), liability (L), or equity (SE) by placing initials (R, E, A, L or SE) in the blanks. ____ 1. Salary Expense ____ 2. Cash ____ 3. Equipment ____ 4. Common Stock ____ 5. Fees Revenue ____ 6. Accounts Receivable ____ 7. Accounts Payable ____ 8. Dividends ____ 9. Supplies ____ 10. Unearned Revenue ____ 11. Prepaid Insurance ____ 12. Office Furniture

Ted Catering received $800 cash in advance from a customer for catering services to be provided in three months. Determine the general journal entry that Ted Catering will make to record the cash receipt. Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

A debit is used to record which of the following:

An expense account normally has a credit balance.

A complete record of each transaction in one place is called a(n):

The process of transferring general journal entry information to the ledger is called:

The right side of a T-account is a(n):

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

A business uses a credit to record:

A journal entry that affects only two accounts is called a compound entry.

Marco Nelson opened a frame shop and completed these transactions: 1. Marco started the shop by investing $40,000 cash and equipment valued at $18,000 in exchange for common stock. 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 $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?

A transaction that decreases a liability and increases an asset must also affect one or more other accounts.

________ requires that each transaction affect, and be recorded in, at least two accounts. It also means that total amounts debited must equal total amounts credited for each transaction.

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

If a company is highly leveraged, this means that it has relatively high risk of not being able to repay its debt.

At the end of its first month of operations, JMP Consulting reported net income of $25,000. They also had account balances of: Cash, $18,000; Office Supplies, $2,000; and Accounts Receivable, $10,000. Stockholders' total investments for this first month was $5,000. There were no dividends in the first month. Calculate the amount of total stockholders' equity reported on the balance sheet at month-end.

Rowdy Bolton began Bolton Office Services in October and during that month completed these transactions: a. Invested $10,000 cash and $15,000 of computer equipment in the business in exchange for common stock. b. Paid $500 cash for an insurance premium covering the next 12 months. c. Completed office services for a customer and collected $1,000 cash. d. Paid $200 cash for office supplies. e. Paid $2,000 for October's rent. Prepare journal entries to record the above transactions. Explanations are unnecessary.

Identify the account below that is classified as an asset account:

A law firm collected $1,800 on account for work performed in the previous month. Which of the following general journal entries will the firm make to record this collection of cash?

The Dividends account normally has a debit balance.