Question 1

At the end of the current year, Leer Company reported total liabilities of $300,000 and total equity of $100,000. The company's debt ratio on the last year-end was:

Accepted Answer

A)  300%. 
B)  33.3% 
C)  75.0%. 
D)  66.67%. 
E)  $400,000.

Question 2

Mary Martin, the owner of Martin Consulting, Inc., started the business by investing $40,000 cash. Identify the general journal entry below that Martin Consulting, Inc. will make to record the transaction.

Accepted Answer

A)  $\begin{array} { | c | r | r | } 
\hline \text { Cash } & 40,000 & \
\hline \text { Common Stock } & & 40,000 \
\hline
\end{array}$ 
B)  $\begin{array} { | c | r | r | } 
\hline \text { Commen Stock } & 40,000 & \
\hline \text { Cash } & & 40,000 \
\hline
\end{array}$ 
C)  $\begin{array} { | c | r | r | } 
\hline \text { Investments } & 40,000 & \
\hline \text { Cash } & & 40,000 \
\hline
\end{array}$ 
D)  $\begin{array} { | c | r | r | } 
\hline \text { Investments } & 40,000 & \
\hline \text { Commrnon Stock } & & 40,000 \
\hline
\end{array}$ 
E)  $\begin{array} { | c | r | r | } 
\hline \text { Cash } & 40,000 & \
\hline \text { Increased Equity } & & 40,000 \
\hline
\end{array}$

Question 3

Lu Lu's Catering has a debt ratio equal to .3 and its competitor, Able's Bakery, has a debt ratio equal to .7. Determine the statement below that is correct.

Accepted Answer

A)  Able's Bakery has a smaller percentage of its assets financed with liabilities as compared to Lu Lu's. 
B)  Able's Bakery's financial leverage is less than Lu Lu's 
C)  Able's Bakery's financial leverage is greater than Lu Lu's. 
D)  Lu Lu's has a higher risk from its financial leverage 
E)  Higher financial leverage involves lower risk.

Question 4

Match between columns
                        Premises: Account
Unearned revenues
Chart of accounts
Note receivable
T-account
Compound journal entry
Trial Balance
Posting reference column
Posting
General journal

Accepted Answer

The Answer of A written promise from a customer to is...

Question 5

Based on the following trial balance for Sally's Salon, Inc, prepare an income statement, statement of retained earnings, and a balance sheet. Sally Crawford made no additional investments in the company during the year.
Sally's Salon, Inc.
Trial Balance
December 31 $\begin{array}{llcc}
  \text {Cash.  } &\$7,500\
 \text {  Accounts receivable.} &475\
 \text { Beauty supplies } &2,500\
\text { Beauty shop equipment } &17,000\
 \text { Accounts payable } &&\$745\
 \text { Common stock } &&1,000\
 \text {Retained earnings  } &&21,155\
 \text {Dividends  } &&63,000\
 \text {Revenue eatned.  } &&72,000\
 \text { Beauty supplies expense } &3,425\
 \text {  Rent expense.} &6,000\
 \text {Wages expense.  } &\underline{22,000}&\underline{\quad\quad}\
 \text {  Totals.} &\underline{\$94,900}&\underline{\$94,900}\

\end{array}$

Accepted Answer

The answer of Based on the following trial balance for...

Question 6

A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is a(n):

Accepted Answer

A)  Account. 
B)  Trial balance. 
C)  Journal. 
D)  T-account. 
E)  Balance column account.

Question 7

Jackson Consulting, Inc. had the following accounts and balances at December 31: $\begin{array}{c}
\begin{array}{|l}
 \hline \text { Account}\
 \hline \text { Cash}\
 \hline \text { Accounts Receivable}\
 \hline \text { Prepaid Insurance}\
 \hline \text { Supplies}\
 \hline \text { Accounts Payable}\
 \hline \text { Common Stock}\
 \hline \text { Dividends}\
 \hline \text { Service Revenue.}\
 \hline \text { Utilities Expense}\
 \hline \text { Salaries Expense}\
 \hline \text { Totals}\
 \hline
\end{array}
\begin{array}{|r|r|}
\hline \text { Debit } & \text { Credit } \
\hline \$ 20,000 & \
\hline 6,000 & \
\hline 1,500 & \
\hline 5,000 & \
\hline & \$ 500 \
\hline & 16,200 \
\hline 1,000 & \
\hline & 20,000 \
\hline 2,000 & \
\hline 1,200 & \
\hline\underline{ \$ 36,700 }& \underline{\$ 36,700 }\
\hline
\end{array}
\end{array}$

Using the information in the table, calculate Jackson Consulting Inc.'s reported net income for the period.

Accepted Answer

A)  $16,800 
B)  $15,800. 
C)  $15,300 
D)  $10,300. 
E)  $32,000

Question 8

Based on the following trial balance for Barry's Automotive Shop, Inc., prepare an income statement, statement of retained earnings, and a balance sheet. Barry made no additional investments in the company during the year.
Barry's Automotive Shop, Inc.
Trial Balance
December 31 $\begin{array}{llcc}
  \text {Cash.................................  } &\$13,500\
 \text { Accounts receivable......... } &1,500\
 \text {Supplies.............................  } &500\
 \text {Repair shop equipment......  } &27,000\
 \text { Service truck.................... } &33,000\
 \text {Accounts payable..............  } &&\$2,600\
  \text { Common stock.................. } &&1,000\
 \text {Retained earnings..............  } &&38,525\
 \text { Dividends.......................... } &36,000\
 \text { Service revenue................. } &&125,000\
 \text {Supplies expense................  } &3,425\
 \text {Rent expense.....................  } &18,000\  
\text {Utilities expense................  } &5,000\
 \text {Gas expense......................  } &7,200\
 \text {Wages expense..................  } &\underline{22,000}&\underline{\quad\quad}\
 \text {Totals .............................. } &\underline{\$167,125}&\underline{167,125}\
\end{array}$

Accepted Answer

The answer of Based on the following trial balance for...

Question 9

An account's balance is the difference between the total debits and total credits for the account, including any beginning balance.

Accepted Answer

A) True 
 B)False

Question 10

A general journal gives a complete record of each transaction in one place, and shows the debits and credits for each transaction.

Accepted Answer

A) True 
 B)False

Question 11

A $130 credit to Supplies was credited to Fees Earned by mistake. By what amounts are the accounts under- or overstated as a result of this error?

Accepted Answer

A)  Supplies, understated $130; Fees Earned, overstated $130. 
B)  Supplies, understated $260; Fees Earned, overstated $130. 
C)  Supplies, overstated $130; Fees Earned, overstated $130. 
D)  Supplies, overstated $130; Fees Earned, understated $130. 
E)  Supplies, overstated $260; Fees Earned, understated $130.

Question 12

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

Accepted Answer

A)  $\begin{array}{|c|c|c|}
\hline \text { Salaries Expense } & 300 & \
\hline \text { Accounts Payable } & & 300\
\hline
\end{array}$ 
B)  $\begin{array}{|c|r|r|}
\hline \text { Cash } & 300 & \
\hline \text { Salaries Expense } & & 300 \
\hline
\end{array}$ 
C)  $\begin{array} { | c | r | r | } 
\hline \text { Salaries Expense } & 300 & \
\hline \text { Dividends } & & 300 \
\hline
\end{array}$ 
D)  $\begin{array} { | c | r | r | } 
\hline \text { Salaries Payable } & 300 & \
\hline \text { Salaries Expense } & & 300 \
\hline
\end{array}$ 
E)  $\begin{array}{|c|r|r|}
\hline \text { Salaries Expense } & 300 & \
\hline \text { Cash } & & 300 \
\hline
\end{array}$

Question 13

Richard Redden contributed $70,000 in cash and land worth $130,000 to open a new business, RR Consulting, Inc. Which of the following general journal entries will RR Consulting, Inc. make to record this transaction?

Accepted Answer

A)  Debit Assets $200,000; credit Common Stock, $200,000. 
B)  Debit Cash and Land, $200,000; credit Common Stock, $200,000. 
C)  Debit Cash $70,000; debit Land $130,000; credit Common Stock, $200,000. 
D)  Debi Common Stock, $200,000; credit Cash $70,000, credit Land, $130,000. 
E)  Debit Common Stock, $200,000; credit Assets, $200,000.

Question 14

Describe the link between a business's income statement, the statement of retained earnings, and the balance sheet.

Accepted Answer

The answer of Describe the link between a business's income...

Question 15

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

Accepted Answer

A)  Debit to Telephone Expense for $300. 
B)  Credit to Accounts Payable for $300. 
C)  Debit to Cash for $300. 
D)  Credit to Telephone Expense for $300. 
E)  Debit to Accounts Payable for $300.

Question 16

Unearned revenues are classified as liabilities.

Accepted Answer

A) True 
 B)False

Question 17

Identify the account below that is classified as an asset in a company's chart of accounts:

Accepted Answer

A)  Accounts Receivable 
B)  Accounts Payable 
C)  Common Stock 
D)  Unearned Revenue 
E)  Service Revenue

Question 18

After preparing an (unadjusted) trial balance at year-end, R. Chang of Chang Window Company, Inc. discovered the following errors:
1. Cash payment of the $225 telephone bill for December was recorded twice.
2. Cash payment of a note payable was recorded as a debit to Cash and a debit to Notes Payable for $1,000.
3. A $900 cash dividend paid to the owner was recorded to the correct accounts as $90.
4. An additional investment of $5,000 cash by the owner was recorded as a debit to Common Stock and a credit to Cash.
5. A credit purchase of office equipment for $1,800 was recorded as a debit to the Office Equipment account with no offsetting credit entry.
Using the form below, indicate whether the error would cause the trial balance to be out of balance by placing an X in either the yes or no column. Would the error cause the trial balance to be out of balance? $\begin{array}{c}
\begin{array}{lll}
 \text {Error }\
1.\
2.\
3.\
4.\
5.
\end{array}
\begin{array}{lll}
\text { Yes }\
\underline{\quad\quad\quad\quad}\
\underline{\quad\quad\quad\quad}\
\underline{\quad\quad\quad\quad}\
\underline{\quad\quad\quad\quad}\
\underline{\quad\quad\quad\quad}\

\end{array}
\begin{array}{lll}
\text { No }\
\underline{\quad\quad\quad\quad}\
\underline{\quad\quad\quad\quad}\
\underline{\quad\quad\quad\quad}\
\underline{\quad\quad\quad\quad}\
\underline{\quad\quad\quad\quad}\
\end{array}
\end{array}$

Would the error cause the trial balance to be out of balance?

Accepted Answer

The answer of After preparing an (unadjusted) trial balance at...

Question 19

Larry Bar opened an frame shop and completed these transactions:
1) Larry started the shop 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 custom frame service and collected a $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?

Accepted Answer

A)  $300. 
B)  $41,500. 
C)  $40,300. 
D)  $38,500. 
E)  $38,700.

Question 20

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

Accepted Answer

The answer of Jackson Advertising Co. had assets of $475,000;...

Exam 2: Analyzing for Business Transactions

At the end of the current year, Leer Company reported total liabilities of $300,000 and total equity of $100,000. The company's debt ratio on the last year-end was:

Mary Martin, the owner of Martin Consulting, Inc., started the business by investing $40,000 cash. Identify the general journal entry below that Martin Consulting, Inc. will make to record the transaction.

Lu Lu's Catering has a debt ratio equal to .3 and its competitor, Able's Bakery, has a debt ratio equal to .7. Determine the statement below that is correct.

Provided below is a list of definitions and terms. Match the term with defenition.

A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is a(n) :

An account's balance is the difference between the total debits and total credits for the account, including any beginning balance.

A general journal gives a complete record of each transaction in one place, and shows the debits and credits for each transaction.

A $130 credit to Supplies was credited to Fees Earned by mistake. By what amounts are the accounts under- or overstated as a result of this error?

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

Richard Redden contributed $70,000 in cash and land worth $130,000 to open a new business, RR Consulting, Inc. Which of the following general journal entries will RR Consulting, Inc. make to record this transaction?

Describe the link between a business's income statement, the statement of retained earnings, and the balance sheet.

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

Unearned revenues are classified as liabilities.

Identify the account below that is classified as an asset in a company's chart of accounts:

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