Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A double-entry accounting system is an accounting system:

Accepted Answer

A)  That records each transaction twice. 
B)  That records the effects of transactions and other events in at least two accounts with equal debits and credits. 
C)  In which each transaction affects and is recorded in two or more accounts but that could include two debits and no credits. 
D)  That may only be used if T-accounts are used. 
E)  That insures that errors never occur.

Question 3

Bologna Lodging, Inc. had the following accounts and balances as of December 31: $\begin{array}{c}
\begin{array}{|l}
\hline \text { Account}\
\hline \text { Cash}\
\hline \text { Accounts Receivable}\
\hline \text { Salaries Expense}\
\hline \text { Accounts Payable}\
\hline \text { Lodging Revenue}\
\hline \text { Utilities Expense}\
\hline \text { Prepaid Insurance}\
\hline \text { Supplies}\
\hline \text { Common Stock}\
\hline \text { Totals}\
\hline
\end{array}
\begin{array}{|r|r|}
\hline{\text { Debit }} & \text { Credit } \
\hline \$ 20,000 & \
\hline 2,000 & \
\hline 500 & \
\hline & \$ 4,000 \
\hline & 7,000 \
\hline 500 & \
\hline 1,400 & \
\hline 1,500 & \
\hline & 14,900 \
\hline\underline{ \$ 25,900 }&\underline{ \$ 25,900} \
\hline 
\end{array}
\end{array}$
 Using the information in the table, calculate the total assets reported on Bologna's balance sheet for the period.

Accepted Answer

A)  $ 24,900 
B)  $ 25,400. 
C)  $ 22,500. 
D)  $ 25,900. 
E)  $ 23,400

Question 4

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

Accepted Answer

A)  Debit. 
B)  Increase. 
C)  Credit. 
D)  Decrease. 
E)  Account balance.

Question 5

Gi Gi's Dance Studio provided $150 of dance instruction and rented out its dance studio to the same client for another $100. The client paid immediately. Identify the general journal entry below that Gi Gi's will make to record the transaction.

Accepted Answer

A)  $\begin{array} { | c | r | r | } 
\hline \text { Rental Revenue } & 100 & \
\hline \text { Instruction Revenue } & 150 & \
\hline \text { Cash } & & 250 \
\hline
\end{array}$ 
B)  $\begin{array} { | c | r | r | } 
\hline \text { Accounits Payable } & 250 & \
\hline \text { Rental Revenue } & & 100 \
\hline \text { Instruction Revenue } & & 150 \
\hline
\end{array}$ 
C)  $\begin{array} { | c | r | r | } 
\hline \text { Cash } & 250 & \
\hline \text { Rental Revenue } & & 100 \
\hline \text { Instruction Revenue } & & 150 \
\hline
\end{array}$ 
D)  $\begin{array} { | c | r | r | } 
\hline \text { Accounts Receivable } & 250 & \
\hline \text { Rental Revenue } & & 100 \
\hline \text { Instruction Revenue } & & 150 \
\hline
\end{array}$ 
E)  $\begin{array} { | c | r | r | } 
\hline \text { Unearned Revenue } & 250 & \
\hline \text { Rental Revenue } & & 100 \
\hline \text { Instruction Revenue } & & 150 \
\hline
\end{array}$

Question 6

The first step in the processing of a transaction is to analyze the transaction and source documents.

Accepted Answer

A) True 
 B)False

Question 7

Transactions are recorded first in the ledger and then transferred to the journal.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The journal is known as a book of original entry.

Accepted Answer

A) True 
 B)False

Question 10

Jarrod Automotive, Inc. owned and operated by Jarrod Johnson, began business in September of the current year. Jarrod, a mechanic, had no experience with recording business transactions. As a result, Jarrod entered all of September's transactions directly into the ledger accounts. When he tried to locate a particular entry he found it confusing and time consuming. He has hired you to improve his accounting procedures. The accounts in his General Ledger follow:    Prepare the general journal entries, in chronological order (a) through (e), from the T-account entries shown. Include a brief description of the probable nature of each transaction.

Accepted Answer

The answer of Jarrod Automotive, Inc. owned and operated by...

Question 11

List the four steps in recording transactions.

Accepted Answer

The answer of List the four steps in recording transactions....

Question 12

A balanced trial balance is proof that no errors were made in journalizing transactions, posting to the ledger, and preparing the trial balance.

Accepted Answer

A) True 
 B)False

Question 13

Asset accounts normally have debit balances and revenue accounts normally have credit balances.

Accepted Answer

A) True 
 B)False

Question 14

The steps in the accounting process focus on analyzing and recording financial transactions and events within a company. Those steps are shown below. Using the number system of 1 as the first step and 4 as the last step in the process, number the steps in the correct order in which they would occur (1 thru 4).

Accepted Answer

A) Record relevant transactions and events in a journal, 
B) Post journal information to the ledger accounts 
C) Prepare and analyze the trial balance 
D) Analyzing each transaction

Question 15

The debt ratio of Jackson's Shoes is .9 and the debt ratio of Billy's Catering is 1.0. Based on this information, an investor can conclude:

Accepted Answer

A)  Billy's Catering finances a relatively lower portion of its assets with liabilities than Jackson's Shoes. 
B)  Billy's Catering has a lower risk from its financial leverage. 
C)  Jackson's Shoes has a higher risk from its financial leverage. 
D)  Billy's Catering has the exact same dollar amount of total liabilities and total assets. 
E)  Jackson's Shoes has less equity per dollar of assets than Billy's Catering.

Question 16

The same four basic financial statements are prepared by both U.S. GAAP and IFRS.

Accepted Answer

A) True 
 B)False

Question 17

A revenue account normally has a debit balance.

Accepted Answer

A) True 
 B)False

Question 18

A business uses a credit to record:

Accepted Answer

A)  An increase in an expense account. 
B)  A decrease in an asset account. 
C)  A decrease in an unearned revenue account. 
D)  A decrease in a revenue account. 
E)  A decrease in an equity account.

Question 19

Andrea Apple opened Apple Photography, Inc. on January 1 of the current year. During January, the following transactions occurred and were recorded in the company's books:
1) Andrea, the stockholder, invested $13,500 cash in the business.
2) Andrea contributed $20,000 of photography equipment to the business.
3) The company paid $2,100 cash for an insurance policy covering the next 24 months.
4) The company received $5,700 cash for services provided during January.
5) The company purchased $6,200 of office equipment on credit.
6) The company provided $2,750 of services to customers on account.
7) The company paid cash of $1,500 for monthly rent.
8) The company paid $3,100 on the office equipment purchased in transaction #5 above.
9) Paid $275 cash for January utilities.
Based on this information, the balance in the stockholders' equity reported on the Balance Sheet at the end of the month would be:

Accepted Answer

A)  $31,400. 
B)  $39,200. 
C)  $31,150. 
D)  $40,175. 
E)  $30,875.

Question 20

Explain debits and credits and their role in the accounting system of a business.

Accepted Answer

The answer of Explain debits and credits and their role...

Exam 2: Analyzing for Business Transactions

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

A double-entry accounting system is an accounting system:

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

Gi Gi's Dance Studio provided $150 of dance instruction and rented out its dance studio to the same client for another $100. The client paid immediately. Identify the general journal entry below that Gi Gi's will make to record the transaction.

The first step in the processing of a transaction is to analyze the transaction and source documents.

Transactions are recorded first in the ledger and then transferred to the journal.

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

The journal is known as a book of original entry.

List the four steps in recording transactions.

A balanced trial balance is proof that no errors were made in journalizing transactions, posting to the ledger, and preparing the trial balance.

Asset accounts normally have debit balances and revenue accounts normally have credit balances.

The debt ratio of Jackson's Shoes is .9 and the debt ratio of Billy's Catering is 1.0. Based on this information, an investor can conclude:

The same four basic financial statements are prepared by both U.S. GAAP and IFRS.

A revenue account normally has a debit balance.

A business uses a credit to record:

Explain debits and credits and their role in the accounting system of a business.