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Exam 2: Analyzing and Recording Transactions

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Question 71

Multiple Choice

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A debit:

A) Always decreases an account.
B) Is the left-hand side of a T-account.
C) Is not needed to record a transaction.
D) Is the right-hand side of a T-account.
E) Always increases an account.

F) B) and C)
G) B) and D)

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Question 72

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The right side of an account is called the debit side.

A) True
B) False

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Question 73

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"Unearned" accounts are liabilities that must be fulfilled.

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

Jackson Consulting had the following accounts and balances at December 31: $\begin{array}{|l|c|c|}\hline \text { Account } & \text { Debit } & \text { Credit } \\\hline \text { Cash } & \$ 20,000 & \\\hline \text { Accounts Receivable } & 6,000 & \\\hline \text { Prepaid Insurance } & 1,500 & \\\hline \text { Supplies } & 5,000 & \\\hline \text { Accounts Payable } & & \$ 500 \\\hline \text { R. Jackson, Capital } & & 16,200 \\\hline \text { R. Jackson, Withdrawals } & 1,000 & \\\hline \text { Service Revenue } & & 20,000 \\\hline \text { Utilities Expense } & 2,000 & \\\hline \text { Salaries Expense } & 1,200 & \\\hline \text { Totals } & \$ 36,700 & \$ 36,700 \\\hline\end{array}$ Using the information in the table, calculate Jackson Consulting's reported net income for the period.

A revenue account normally has a debit balance.

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

Identify the account used by businesses to record the transfer of assets from a business to its owner for personal use:

Larry Matt completed these transactions during December of the current year: $\begin{array} { | l | l | } \hline \text { Dec. 1 } & \begin{array} { l } \text { Began a financial services practice by investing } \$ 15,000 \text { cash and office } \\\text { equipment having a } \$ 5,000 \text { value. }\end{array} \\\hline 2 & \text { Purchased } \$ 1,200 \text { of office equipment on credit. } \\\hline 3 & \text { Purchased } \$ 300 \text { of office supplies on credit. } \\\hline\end{array}$ $\begin{array}{|l|l|}\hline 4 & \begin{array}{l}\text { Completed work for a client and immediately received a payment of } \$ 900 \\\text { cash. }\end{array} \\\hline 8 & \text { Completed work for Precept Paper Co. on credit, } \$ 1,700 . \\\hline 10 & \text { Paid for the supplies purchased on credit on December } 3 . \\\hline 14 & \text { Paid for the annual } \$ 960 \text { premium on an insurance policy. } \\\hline 18 & \begin{array}{l}\text { Received payment in full from Precept Paper Co. for the work completed on } \\\text { December } 8 .\end{array} \\\hline 27 & \text { Larry withdrew } \$ 650 \text { cash from the practice to pay personal expenses. } \\\hline 30 & \text { Paid } \$ 175 \text { cash for the December utility bills. } \\\hline 30 & \text { Received } \$ 2,000 \text { from a client for financial services to be rendered next year. } \\\hline\end{array}$ Prepare general journal entries to record these transactions.

Revenues always increase equity.

Jackson Brown Footwear had total liabilities of $130 million and total assets of $375 million. Its debt ratio was ________. (round to one decimal place)

Preparation of a trial balance is the first step in processing a financial transaction.

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

Identify each of the following accounts as:

The debt ratio helps to assess the risk a company has of failing to pay its debts and is helpful to both its owners and creditors.

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

The balance column in a ledger account is:

Given the following errors, identify the one by itself that will cause the trial balance to be out of balance.

________ documents identify and describe transactions and events and provide objective evidence and amounts for recording.

An account balance is: