Exam 16: Accounting for Business Transactions

Matthew Martin, the sole stockholder of Innovation Consulting, started the business by investing $40,000 cash in exchange for common stock. Identify the general journal entry below that Innovation Consulting will make to record the transaction.

The following transactions occurred during July: 1. Received $900 cash for services provided to a customer during July. 2) Issued common stock for $2,200 cash. 3) Received $750 from a customer in partial payment of his account receivable which arose from sales in June. 4) Provided services to a customer on credit, $375. 5) Borrowed $6,000 from the bank by signing a promissory note. 6) Received $1,250 cash from a customer for services to be performed next year. What was the amount of revenue for July?

Identify the correct formula below used to calculate the debt ratio.

When a company provides services for which cash will not be received until some future date, the company should record the amount billed as accounts receivable.

A company provided $12,000 of consulting services and was immediately paid in cash by the customer. Identify the journal entry below that properly records this transaction.

List the steps in processing transactions.

Compare the list of accounts below and choose the list that contains only accounts that would be classified as asset accounts on the Chart of Accounts.

Which of the following is NOT an equity account:

Funky Music purchased $25,000 of equipment for cash. The asset account, Equipment, is ________ for $25,000 and the Cash account is ________ for $25,000.

Identify the statement below that is correct.

Credits always increase account balances.

If a company purchases equipment paying cash, the journal entry to record this transaction will include a debit to Cash.

Gloria Catering provided $1,000 of catering services and billed its client for the amount owed. Determine the general journal entry that Gloria Catering will make to record this transaction.

While in the process of posting from the journal to the ledger, a company failed to post a $500 debit to the Equipment account. The effect of this error will be that:

The amount of net income is added on the statement of retained earnings.

Business transactions and events are the starting points of financial statements.

The financial statement that summarizes how equity changes over the reporting period is called the balance sheet.

Asset accounts are decreased by debits.

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

A company's written promise to pay (in the form of a promissory note) a future amount is a(n):