Chapter 2--Analyzing Transactions
Student: ___________________________________________________________________________
1. Accounts are records of increases and decreases in individual financial statement items. 
True    False
 
2. A chart of accounts is a listing of accounts that make up the journal. 
True    False
 
3. The chart of accounts should be the same for each business. 
True    False
 
4. Consuming goods and services in the process of generating revenues results in expenses. 
True    False
 
5. Prepaid expenses are an example of an expense. 
True    False
 
6. Accounts payable are accounts that you expect will be paid to you. 
True    False
 
7. The unearned revenues account is an example of a liability. 
True    False
 
8. The dividends account is an example of an expense. 
True    False
 
9. Accounts in the ledger are usually maintained in alphabetical order. 
True    False
 
10. Depending on the account title, the right side of the account is referred to as the debit side. 
True    False
 
11. To determine the balance in a prepaid expense account, subtract credits from debits. 
True    False
 
12. An account has three parts to it; a title, an increase side, and a decrease side. 
True    False
 
13. The right hand side of a T account is known as a debit and the left hand side is known as a credit. 
True    False
 
14. A debit is abbreviated as Db and a credit is abbreviated as Cr. 
True    False
 
15. Debiting the cash account will increase the account. 
True    False
 
16. The T account got its name because it resembles the letter “T.” 
True    False
 
17. The recording of cash receipts to the cash account will be done by debiting the account. 
True    False
 
18. A credit to the cash account will increase the account. 
True    False
 
19. The recording of cash payments from the cash account is done by entering the amount as a credit. 
True    False
 
20. The cash account will always be debited 
True    False
 
21. The balance of the account can be determined by adding all of the debits, adding all of the credits, and adding the amounts together. 
True    False
 
22. Liabilities are debts owed by the business entity. 
True    False
 
23. The accounts payable account is listed in the chart of accounts as an asset. 
True    False
 
24. A dividends account records amounts paid to stockholders. 
True    False
 
25. Revenues are equal to the difference between cash receipts and cash payments. 
True    False
 
26. Expenses use up assets or consume services in the process of generating revenues. 
True    False
 
27. Retained earnings will be reduced by the amount in the dividends account. 
True    False
 
28. When a company issues new shares of stock, the capital stock account increases due to revenue being earned. 
True    False
 
29. When an accounts payable account is paid in cash, company expenses increase. 
True    False
 
30. When an account receivable is collected in cash, the total assets of the business increase. 
True    False
 
31. Journalizing eliminates fraud. 
True    False
 
32. The double-entry accounting system records each transaction twice. 
True    False
 
33. The increase side of all accounts is the normal balance. 
True    False
 
34. Transactions are initially entered into a record called a journal. 
True    False
 
35. The process of recording a transaction in the journal is called journalizing. 
True    False
 
36. Journalizing is the process of entering amounts in the ledger. 
True    False
 
37. Transactions are listed in the journal chronologically. 
True    False
 
38. Journalizing transactions using the double-entry bookkeeping system will eliminate fraud. 
True    False
 
39. Liability accounts are increased by debits. 
True    False
 
40. Expense accounts are increased by credits. 
True    False
 
41. Revenue accounts are increased by credits. 
True    False
 
42. The normal balance of a capital stock account is a debit. 
True    False
 
43. The normal balance of the dividends account is a debit. 
True    False
 
44. The normal balance of an expense account is a credit. 
True    False
 
45. The normal balance of revenue accounts is a credit. 
True    False
 
46. Dividends decrease retained earnings and are listed on the income statement as a deduction from revenue. 
True    False
 
47. For a month's transactions for a typical medium-sized business, the salary expense account is likely to have only credit entries. 
True    False
 
48. For a month's transactions for a typical medium-sized business, the accounts payable account is likely to have only credit entries. 
True    False
 
49. When a business receives a bill from the utility company, no entry should be made until the invoice is paid. 
True    False
 
50. The journal includes both debit and credit accounts for each transaction. 
True    False
 
51. A transaction that is recorded in the journal is called a journal entry. 
True    False
 
52. Assets are increased with debits and decreased with credits. 
True    False
 
53. Liabilities are increased with debits and decreased with credits. 
True    False
 
54. Debits will increase Unearned Revenues and Revenues. 
True    False
 
55. Retained earnings account increases with debits. 
True    False
 
56. Journal entries can have more than two accounts as long as the debits equal the credits. 
True    False
 
57. Normal balances appear on the side that increases the account balance. 
True    False
 
58. The process of transferring the data from the journal to the ledger accounts is posting. 
True    False
 
59. The post reference notation used in the ledger is the account number. 
True    False
 
60. The post reference notation used in the journal is the page number. 
True    False
 
61. A notation in the post reference column of the general journal indicates that the amount has been posted to the ledger. 
True    False
 
62. The order of the flow of accounting data is (1) record in the ledger, (2) record in the journal, (3) prepare the financial statements. 
True    False
 
63. The process of transferring the debits and credits from the journal entries to the accounts is known as “updating the accounts”. 
True    False
 
64. Once journal entries are posted to accounts, each account will show a new balance after each entry. 
True    False
 
65. A group of related accounts that make up a complete unit is called a trial balance. 
True    False
 
66. A trial balance determines the accuracy of the numbers. 
True    False
 
67. Even when a trial balance is in balance, there may be errors in the individual accounts. 
True    False
 
68. The totals at the bottom of the trial balance and the totals at the bottom of the balance sheet both show equality and balancing, and therefore should be equal. 
True    False
 
69. A proof of the equality of debits and credits in the ledger at the end of an accounting period is called a balance sheet. 
True    False
 
70. If the trial balance is in balance, it can be assumed that all journal entries were posted correctly and no errors were made. 
True    False
 
71. Posting a part of a transaction to the wrong account will cause the trial balance totals to be unequal. 
True    False
 
72. The erroneous arrangement of digits, such as writing $45 as $54, is called a slide. 
True    False
 
73. Journalizing a transaction with both the debit and the credit for $69 instead of $96 will cause the trial balance to be out of balance. 
True    False
 
74. Posting a transaction twice will cause the trial balance totals to be equal. 
True    False
 
75. The erroneous moving of an entire number one or more spaces to the right or left, such as writing $85 as $850, is called a transposition. 
True    False
 
76. Accounts 
A. do not reflect money amounts
B. are not used by entities that manufacture products
C. are records of increases and decreases in individual financial statement items
D. are only used by large entities with many transactions
 
77. Accounts are classified in the ledger 
A. chronologically
B. alphabetically
C. in accordance with their appearance in the financial statements
D. so that accounts used most often are listed first
 
78. Revenue should be recognized when 
A. cash is received
B. the service is performed
C. the customer places an order
D. the customer charges an order
 
79. Which of the following accounts is a stockholders’ equity account? 
A. Cash
B. Accounts Payable
C. Prepaid Insurance
D. Dividends
 
80. The gross increases in retained earnings attributable to business activities are called 
A. assets
B. liabilities
C. revenues
D. expenses
 
81. A chart of accounts is 
A. the same as a balance sheet
B. usually a listing of accounts in alphabetical order
C. usually a listing of accounts in financial statement order
D. used in place of a ledger
 
82. The debit side of an account 
A. depends on whether the account is an asset, liability or stockholders’ equity item
B. can be either side of the account depending on how the accountant set up the system
C. is the right side of the account
D. is the left side of the account
 
83. An account is said to have a debit balance if 
A. the amount of the debits exceeds the amount of the credits
B. there are more entries on the debit side than on the credit side
C. there are more entries on the credit side than on the debit side
D. the first entry of the accounting period was posted on the debit side
 
84. Which statement(s) concerning cash is (are) true? 
A. cash will always have more debits than credits
B. cash will never have a credit balance
C. cash is increased by debiting
D. all of the above
 
85. Which of the following is true about a T account? 
A. The left-hand side of the T account is called the debit side.
B. The left-hand side of the T account is called the credit side.
C. The right-hand side of the T account is called the debit side.
D. None of these are true.
 
86. Which of the following abbreviations are correct? 
A. Debit “Dr”, Credit “Cd”
B. Debit “Db”, Credit “Cr”
C. Debit “Db”, Credit “Cd”
D. Debit “Dr”, Credit “Cr”
 
87. Which side of the account increases a cash account? 
A. credit
B. neither a debit or a credit
C. debit
D. both a debit and a credit
 
88. A cash payment is recorded on the cash account as a  
A. neither a debit or a credit
B. credit
C. debit
D. both a debit and a credit
 
89. The balance of the account is determined by 
A. adding all of the debits to all of the credits.
B. always subtracting the debits from the credits.
C. always subtracting the credits from the debits. 
D. adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum.
 
90. A list of the accounts is called 
A. ledger
B. chart of accounts
C. T account
D. debit
 
91. On the chart of accounts, the balance sheet accounts are normally listed in the following order 
A. liabilities, assets, stockholders’ equity
B. assets, liabilities, stockholders’ equity
C. stockholders’ equity, assets, liabilities
D. assets, stockholders’ equity, liabilities
 
92. In which order are the accounts listed in the chart of accounts? 
A. assets, expenses, liabilities, stockholders’ equity, revenues
B. stockholders’ equity, assets, liabilities, revenues, expenses
C. assets, liabilities, stockholders’ equity, revenues, expenses
D. assets, liabilities, revenues, expenses, stockholders’ equity
 
93. Which are the parts of the T account? 
A. title, date, total
B. date, debit side, credit side
C. title, debit side, credit side
D. title, debit side, total
 
94. Which group of accounts is comprised of only assets? 
A. Cash, Accounts Payable, Buildings
B. Accounts Receivable, Revenue, Cash
C. Prepaid Expenses,  Buildings, Patents
D. Unearned Revenues, Prepaid Expenses, Cash
 
95. Of the following, which istrue about assets? 
A. Assets include physical items and intangibles that have value.
B. Assets include only physical items of value.
C. Assets are owned solely by the stockholders of the company.
D. Assets are the result of selling products or services to customers.
 
96. Which of the following is not considered to be a liability? 
A. Wages Payable
B. Accounts Receivable
C. Unearned Revenues
D. Accounts Payable
 
97. Which of the following statements is not true about liabilities? 
A. Liabilities are debts owed to outsiders.
B. Account titles of liabilities often include the term “payable.”
C. Receiving cash before a service is performed creates a liability.
D. Liabilities do not include wages owed to employees of the company.
 
98. Retained earnings will be reduced by all of the following except 
A. revenues
B. expenses
C. dividends
D. all of these
 
99. Expenses can result from 
A. paying dividends
B. consuming services
C. using up liabilities
D. all of these
 
100. Proof that the dollar amount of the debits equals the dollar amount of the credits in the ledger means 
A. all of the information from the journal was correctly transferred to the ledger
B. all accounts have their correct balances in the ledger
C. only the journal is accurate; the ledger may be incorrect
D. only that the debit dollar amounts equal the credit dollar amounts
 
101. The chart of accounts is designed to 
A. alphabetize the accounts to make reading easier for its financial statement users
B. analyze the accounts and organize them in order of dollar amount to simplify the accounting information for users
C. summarize the transactions and determine their ending balances
D. meet the information needs of a company and other financial statement users
 
102. The chart of accounts classifies the accounts to make identification of the accounts easier. This is done by way of assigning a number to each account. The first number identifies the classification of the type of account.  Which of the following indicates the use of this classification? 
A. 1-Assets, 2-Liabilities, 3-Stockholders’ Equity, 4-Expenses, 5-Revenues
B. 1-Assets, 2-Liabilities, 3-Stockholders’ Equity, 4-Revenues, 5-Expenses
C. 1-Assets, 2-Stockholders’ Equity, 3-Revenues, 4-Expenses, 5-Dividends
D. 1-Stockholders’ Equity, 2-Dividends, 3-Revenues, 4-Expenses
 
103. Which of the following is not a correct rule of debits and credits?  
A. assets, expenses, and dividends are increased by debits
B. assets are decreased by credits and have a normal debit balance
C. liabilities, revenues, and retained earnings are increased by credits
D. the normal balance for revenues and expenses is a credit
 
104. The ____ is where a transaction can first be found on the accounting records. 
A. chart of accounts
B. income statement
C. balance sheet
D. journal
 
105. A debit may signify a(n) 
A. decrease in an asset account
B. decrease in a liability account
C. increase in the retained earnings account
D. decrease in the dividends account
 
106. Which of the following types of accounts have a normal credit balance? 
A. assets and liabilities
B. liabilities and expenses
C. revenues and liabilities
D. capital stock and dividends
 
107. Which of the following groups of accounts have a normal debit balance? 
A. revenues, liabilities
B. assets, liabilities
C. liabilities, expenses
D. assets, expenses
 
108. Which one of the statements below is not a purpose for the journal? 
A. to show increases and decreases in accounts
B. to show a chronological order by date
C. to show a complete transaction in one place
D. to help posting transactions to ledger 
 
109. A credit may signify a 
A. decrease in assets
B. decrease in liabilities
C. decrease in retained earnings
D. decrease in revenue
 
110. A debit signifies a decrease in 
A. assets
B. expenses
C. dividends
D. revenues
 
111. Which of the following applications of the rules of debit and credit is true? 
A. decrease Prepaid Insurance with a credit and the normal balance is a credit
B. increase Accounts Payable with a credit and the normal balance is a debit
C. increase Supplies Expense with a debit and the normal balance is a debit
D. decrease Cash with a debit and the normal balance is a credit
 
112. Which of the following describes the classification and normal balance of the fees earned account? 
A. an asset with a credit balance
B. a liability with a credit balance
C. an expense with a debit balance
D. a revenue with a credit balance
 
113. The classification and normal balance of the accounts payable account is 
A. an asset with a credit balance
B. a liability with a credit balance
C. an asset with a debit balance
D. an expense with a debit balance
 
114. The classification and normal balance of the dividends account is 
A. an expense with a credit balance
B. an expense with a debit balance
C. a liability with a credit balance
D. a stockholders’ equity item with a debit balance
 
115. The classification and normal balance of the supplies expense account is a(n) 
A. asset with a debit balance
B. asset with a credit balance
C. expense with a debit balance
D. liability with a credit balance
 
116. Which of the following accounts are debited to record increase in balances? 
A. assets and liabilities
B. dividends and liabilities
C. expenses and liabilities
D. assets and expenses
 
117. In which of the following types of accounts are increases recorded by credits? 
A. revenues, liabilities
B. dividends, assets
C. liabilities, dividends
D. expenses, liabilities
 
118. In which of the following types of accounts are decreases recorded with debits? 
A. assets
B. revenues
C. expenses
D. dividends
 
119. In which of the following types of accounts are decreases recorded by credits? 
A. liabilities
B. retained earnings
C. dividends
D. revenues
 
120. A credit balance in which of the following accounts would indicate a likely error? 
A. Fees Earned
B. Salary Expense
C. Retained Earnings
D. Accounts Payable
 
121. A debit balance in which of the following accounts would indicate a likely error? 
A. Salaries Expense
B. Notes Payable
C. Dividends
D. Supplies
 
122. Which of the following entries records the payment of an account payable? 
A. debit Cash; credit Accounts Payable
B. debit Accounts Receivable; credit Cash
C. debit Cash; credit Supplies Expense
D. debit Accounts Payable; credit Cash
 
123. Which of the following entries records the receipt of a utility bill from the water company? 
A. debit Utilities Expense; credit Accounts Payable
B. debit Utilities Payable; credit Accounts Receivable
C. debit Accounts Payable; credit Cash
D. debit Accounts Payable; credit Utilities Payable
 
124. Which of the following entries records the cash sale of capital stock to stockholders? 
A. debit Capital Stock; credit Cash
B. debit Cash; credit Capital Stock
C. debit Cash; credit Revenue
D. debit Revenue; credit Cash
 
125. Office supplies were sold by Ari’s Alarm Service at cost to another repair shop, with cash received.  Which of the following entries for Ari’s Alarm Service records this transaction? 
A. Office Supplies, debit; Cash, credit
B. Office Supplies, debit; Accounts Payable, credit
C. Cash, debit; Office Supplies, credit
D. Accounts Payable, debit; Office Supplies, credit
 
126. Office supplies purchased by Ari’s Alarm Service on account were returned.  Which of the following entries for Ari’s Alarm Service records this transaction? 
A. Cash, debit; Office Supplies, credit
B. Office Supplies, debit; Accounts Receivable, credit
C. Accounts Payable, debit; Office Supplies, credit
D. Office Supplies, debit; Accounts Payable, credit
 
127. Cash was paid by Ari’s Alarm Service to creditors on account.  Which of the following entries for Ari’s Alarm Service records this transaction? 
A. Cash, debit; Retained Earnings, credit
B. Accounts Payable, debit; Cash, credit
C. Accounts Receivable, debit; Cash, credit
D. Accounts Payable, debit; Account Receivable, credit
 
128. The process of initially recording a business transaction is called 
A. closing
B. posting
C. journalizing
D. balancing
 
129. Which of the following entries records the acquisition of office supplies on account? 
A. Office Supplies, debit; Cash, credit
B. Cash, debit; Office Supplies, credit
C. Office Supplies, debit; Accounts Payable, credit
D. Accounts Receivable, debit; Office Supplies, credit
 
130. Which of the following entries records the payment of rent for the current month? 
A. Cash, debit; Rent Expense, credit
B. Rent Expense, debit; Cash, credit
C. Rent Expense, debit; Accounts Receivable, credit
D. Accounts Payable, debit; Rent Expense, credit
 
131. Which of the following entries records the receipt of cash from patients on account? 
A. Accounts Payable, debit; Fees Earned, credit
B. Accounts Receivable, debit; Fees Earned, credit
C. Accounts Receivable, debit; Cash, credit
D. Cash, debit; Accounts Receivable, credit
 
132. Which of the following entries records the collection of cash from cash customers? 
A. Fees Earned, debit; Cash, credit
B. Fees Earned, debit; Accounts Receivable, credit
C. Cash, debit; Fees Earned, credit
D. Accounts Receivable, debit; Fees Earned, credit
 
133. Which of the following entries records the receipt of cash for two months' rent? The cash was received in advance of providing the service. 
A. Prepaid Rent, debit; Rent Revenue, credit.
B. Cash, debit; Unearned Rent, credit.
C. Cash, debit; Prepaid Rent, credit.
D. Cash, debit; Rent Expense credit.
 
134. A patient has a physical examination and asks the bookkeeper to mail the bill.  The bookkeeper should 
A. make no entry until the cash is received
B. Cash, debit; Accounts Receivable, credit
C. Cash, debit; Fees Earned, credit
D. Accounts Receivable, debit; Fees Earned, credit
 
135. Prarie Clinic purchased X-ray equipment for $7,500, paid $2,250 down, with the remainder to be paid later.  The correct entry would be
 
A. Equipment                 2,250
      Cash                                                        2,250
B. Cash                                       2,250
Accounts Payable                    5,250
      Equipment                                   7,500
C. Equipment Expense                  7,500
      Accounts Payable                         2,250
      Cash      5,250      
D. Equipment                       7,500
      Accounts Payable                         5,250
      Cash                                            2,250
 
136. The process of recording a transaction in the journal is called 
A. recording
B. journalizing
C. posting
D. summarizing
 
137. Scott, Inc. issued $40,000 of capital stock.  How would this transaction be entered in the journal? 
A. Cash                                40,000
         Capital Stock                40,000
            Sold stock for cash.
B. Cash                            40,000
      Inventory                      40,000
             Sold stock for cash.
C. Capital Stock      40,000
        Cash                                     40,000
               Sold stock for cash.
D. Capital Stock           40,000
      Accounts Payable                 40,000
         Sold stock for cash.
 
138. 
April	23	Cash	 	26,000	 	
 	 	    Capital Stock 	 	 	26,000	
 	 	         Sold common stock.	 	 	 	

This journal entry will 
A. increase Stockholders’ Equity and decrease Cash
B. increase Cash and decrease Stockholders’ Equity
C. increase Cash and increase Stockholders’ Equity
D. decrease Cash and decrease Stockholders’ Equity
 
139. 
May	24	Land	 	105,000	 	
 	 	    Cash	 	 	105,000	
 	 	         Purchased land for business.	 	 	 	

What effect does this journal entry have on the accounts? 
A. Increase to Cash and increase to Land
B. Increase to Land and decrease to Cash
C. Decrease to Cash and decrease to Land
D. Increase to Cash and decrease to Land
 
140. 
May	31	Supplies	 	1,130	 	
 	 	      Accounts Payable	 	 	1,130	
 	 	            ????????????	 	 	 	

What is the best explanation for this journal entry? 
A. Purchased supplies with cash.
B. Returned supplies previously purchased.
C. Purchased supplies on account.
D. Paid accounts payable.
 
141. 
March	10	Accounts Payable	 	800	 	
 	 	      Cash	 	 	800	
 	 	             Paid creditors on account.	 	 	 	

What effect does this journal entry have on the accounts? 
A. Decrease accounts payable, increase cash
B. Increase cash, decrease accounts payable
C. Increase accounts payable, increase cash
D. Decrease accounts payable, decrease cash
 
142. Which of the following accounts would be increased with a credit? 
A. Land, Accounts Payable, Dividends
B. Accounts Payable, Unearned Revenue, Capital Stock
C. Capital Stock, Accounts Receivable, Unearned Revenue
D. Cash, Accounts Receivable, Capital Stock
 
143. In accordance with the rules of debit and credit, which of the following is true? 
A. Debits increase assets.
B. Credits increase assets.
C. Debits increase both assets and retained earnings.
D. Credits increase both assets and liabilities.
 
144. All of the following accounts are increased with a debit except 
A. Unearned Revenues
B. Land
C. Accounts Receivable
D. Cash
 
145. Which of the following stockholder equity accounts follow the same debit and credit rules as liabilities? 
A. Capital Stock only
B. Dividends only
C. Retained Earnings and Capital Stock
D. Retained Earnings, Capital Stock, and Dividends
 
146. The payment for the monthly rent will require which of the following entries? 
A. debit Cash and debit Rent Expense
B. credit Cash and credit Rent Expense
C. debit Rent Expense and credit Cash
D. credit Rent Expense and debit Cash
 
147. Expenses follow the same debit and credit rules as 
A. revenues
B. dividends
C. capital stock
D. liabilities
 
148. Net income will result when 
A. revenues (credits) > expenses (debits)
B. revenues (credits) < expenses (debits)
C. expenses (credits) = revenues (debits)
D. expenses (debits) > revenues (credits)
 
149. Which of the following will increase retained earnings? 
A. Expenses > revenues.
B. Dividends are declared and paid.
C. Revenues > expenses.
D. Cash is received from customers on account.
 
150. Which of the following will decrease retained earnings? 
A. Supplies are purchased on account.
B. Dividends are declared and paid.
C. Cash is received from customers.
D. Payment is made on an accounts payable.
 
151. Which of the following group of accounts are increased with a debit? 
A. assets, liabilities, stockholders’ equity
B. assets, dividends, expenses
C. assets, revenues, expenses
D. assets, liabilities, revenues
 
152. Which of the following accounts increase with a credit? 
A. capital stock, revenues, expenses
B. assets, capital stock, revenues
C. liabilities, capital stock, revenues
D. retained earnings, capital stock, assets
 
153. Which of the following is true regarding normal balances of accounts? 
A. All accounts have a normal debit balance.
B. All expense accounts have a normal negative balance.
C. Accounts that have a normal debit balance will only have debit entries, never credit entries.
D. The normal balance appears on the side of the account that also receives increase entries.
 
154. All of the following occur with a double-entry accounting system except 
A. The accounting equation remains in balance.
B. The sum of all debits is always equal to the sum of all credits in each journal entry.
C. Each business transaction will have only two entries.
D. Every transaction affects at least two accounts.
 
155. 
March	6	Cash	 	2,500	 	
 	 	     Unearned Fees	 	 	2,500	
 	 	           ????????????	 	 	 	

What is the best explanation for this journal entry? 
A. Received cash for services performed.
B. Received cash for services to be performed in the future.
C. Paid cash in advance for services to be done.
D. Paid cash for services to be performed.
 
156. 
April	14	Equipment	 	15,000	 	
 	 	      Cash	 	 	  5,000	
 	 	      Note Payable	 	 	 10,000	
 	 	              ????????????	 	 	 	

Which is the best explanation for this journal entry? 
A. Purchased equipment, paid cash of $5,000, with the remainder to be paid in the future.
B. Purchased equipment, paid cash of $10,000, with the remainder to be received in the future.
C. Purchased equipment, paid cash for the entire amount.
D. Purchased equipment on credit.
 
157. The verification that the total dollar amount of the debits equals the total dollar amount of the credits in the ledger is called a 
A. ledger
B. trial balance
C. account
D. balance sheet
 
158. The process of transferring the debits and credits from the journal entries to the ledger accounts is called 
A. sliding
B. transposing
C. journalizing
D. posting
 
159. The posting process will include the transfer of the following information from the journal to the account. 
A. date, amount (debit or credit)
B. date, amount (debit or credit), journal page number
C. amount (debit or credit), account number
D. date, amount (debit or credit) account number
 
160. The Post. Ref. columns are used to trace transactions from the journal to the accounts.  What will be entered in the Post. Ref. column of (a) the journal and (b) the account? 
A. (a) the amount of the debit or credit (b) the journal page number
B. (a) the journal page number (b) the date of the transaction
C. (a) the journal page number, (b) the account number
D. (a) the account number, (b) the journal page number
 
161. The chart of accounts for the Corning Corporation includes the following:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Capital Stock	31	
Retained Earnings	32	
Dividends	33	
Fees Earned	41	
Salaries Expense	54	
Insurance Expense	55	
Rent Expense	56	

On journal page 3, the following transaction was found:

Prepaid Insurance	1,530	 	
      Cash	 	1,530	

 What is the posting reference that will be found in the Cash account? 
A. 11
B. 15
C. 3
D. none of these
 
162. The chart of accounts for the Corning Corporation includes the following:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Capital Stock	31	
Retained Earnings	32	
Dividends	33	
Fees Earned	41	
Salaries Expense	54	
Insurance Expense	55	
Rent Expense	56	

On journal page 3, the following transaction was found:

Prepaid Insurance	1,530	 	
      Cash	 	1,530	

 What is the posting reference that will be found in the Prepaid Insurance account? 
A. 11
B. 15
C. 3
D. none of these
 
163. The chart of accounts for the Corning Corporation includes the following:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Capital Stock	31	
Retained Earnings	32	
Dividends	33	
Fees Earned	41	
Salaries Expense	54	
Insurance Expense	55	
Rent Expense	56	

On journal page 3, the following transaction was found:

Prepaid Insurance	1,530	 	
      Cash	 	1,530	

 What are the posting references that will be found in the journal entry? 
A. 15 and 11, respectively
B. 11 and 15, respectively
C. 11 and 55, respectively
D. 3 only
 
164. The chart of accounts for Miguel Corporation includes the following:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Capital Stock	31	
Retained Earnings	32	
Dividends	33	
Fees Earned	41	
Salaries Expense	54	
Insurance Expense	55	
Rent Expense	56	

 On journal page 3, the following transaction was found:

Cash	640	 	
       Fees Earned	 	640	

What are the posting references that will be found in the journal entry? 
A. 41 and 11, respectively
B. 3 only
C. 11 and 41, respectively
D. 11 and 32, respectively
 
165. The chart of accounts for Miguel Corporation includes the following:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Capital Stock	31	
Retained Earnings	32	
Dividends	33	
Fees Earned	41	
Salaries Expense	54	
Insurance Expense	55	
Rent Expense	56	

 On journal page 5, the following transaction was found:

Salaries Expense	525	 	
      Cash	 	525	

What is the posting reference that will be found in the Salaries Expense account? 
A. 5
B. 11
C. 54
D. none of these
 
166. The accounts in the ledger of Monroe Entertainment Co. are listed below.  All accounts have normal balances.
Accounts Payable	1,500	 	Fees Earned	3,600	
Accounts Receivable	1,800	 	Insurance Expense	1,300	
Prepaid Insurance	2,000	 	Land	3,000	
Cash	3,200	 	Wages Expense	1,400	
Capital Stock	2,500	 	Retained Earnings  	6,300	
Dividends	1,200	 			

Prepare a trial balance.  The total of the debits is 
A. $13,900
B. $11,200
C. $12,700
D. $ 9,700
 
167. Randomly listed below are the steps for preparing a trial balance:

(1)	Verify that the total of the Debit column equals the total of the Credit column.	
(2)	List the accounts from the ledger and enter their debit or credit balance in the Debit or Credit column of the trial balance.	
(3)	List the name of the company, the title of the trial balance, and the date the trial balance is prepared.	
(4)	Total the Debit and Credit columns of the trial balance.	

What is the proper order of these steps? 
A. (3), (2), (4), (1)
B. (2), (3), (4), (1)
C. (3), (2), (1), (4)
D. (4), (3), (2), (1)
 
168. Of the following, which will determine if the accounting equation is in balance? 
A. journal entry
B. income statement
C. trial balance
D. account reconciliation
 
169. An overpayment error was discovered in computing and paying the wages of a Jamison Tree Trimming employee.  When Jamison receives cash from the employee for the amount of the overpayment, which of the following entries will Jamison make? 
A. Cash, debit; Wages Expense, credit
B. Wages Payable, debit; Wages Expense, credit
C. Wages Expense, debit, Cash, credit
D. Cash, debit; Wages Payable, credit
 
170. If the two totals of a trial balance are not equal, it could be due to  
A. failure to record a transaction
B. recording the same erroneous amount for both the debit and the credit parts of a transaction
C. an error in determining the account balances, such as a balance being incorrectly computed
D. recording the same transaction more than once
 
171. When a transposition error is made on the trial balance, the difference between the debit and credit totals on the trial balance will be 
A. zero
B. twice the amount of the transposition
C. one-half the amount of the transposition
D. divisible by 9
 
172. Which of the following errors would cause the trial balance totals to be unequal? 
A. A transaction was not posted.
B. A payment of $67 for insurance was posted as a debit of $76 to Prepaid Insurance and a credit of $76 to Cash.
C. A payment of $4,450 to a creditor was posted as a debit of $4,500 to Accounts Payable and a credit of $450 to Accounts Receivable.
D. Cash received from customers on account was posted as a debit of $720 to Cash and a credit of $720 to Accounts Payable.
 
173. Supplies purchased on account were incorrectly recorded as Office Equipment.  The correcting entry would be 
A. Supplies, debit; Office Equipment, credit.
B. Accounts Receivable, debit; Supplies, credit.
C. Office Equipment, debit; Supplies Expense, credit.
D. Supplies, debit; Accounts Payable, credit.
 
174. Which of the following errors will cause the trial balance totals to be unequal? 
A. posting the debit portion of a journal entry incorrectly when the credit portion of the entry is correctly posted
B. failure to record a transaction or to post a transaction
C. recording the same transaction more than once
D. recording the same erroneous amount for both the debit and the credit parts of a transaction
 
175. The trial balance is out of balance and the accountant suspects that a transposition or slide error has occurred.  What will the accountant do to find the error? 
A. Determine the amount of the error and look for that amount on the trial balance.
B. Determine the amount of the error and divide by two, then look for that amount on the trial balance.
C. Determine the amount of the error and refer to the journal entries for that amount.
D. Determine the amount of the error and divide by nine. If the result is evenly divided, then this type of error is likely.
 
176. Which of the following is not a short-cut in finding errors on the trial balance? 
A. Determine the difference between debits and credits and look for the amount.
B. Determine the amount and change any account to make the trial balance correct.
C. Determine the difference between debits and credits, divide the amount by 2, look for the amount.
D. Determine the difference between debits and credits, divide the amount by 9, if it divides evenly, look for a transposition or slide error.
 
177. All of the following statements regarding a horizontal analysis are true except 
A. A horizontal analysis is used to compare an item in a current statement with the same item in prior statements.  
B. A horizontal analysis can be performed on a balance sheet and income statement, but not on a statement of cash flows.
C. If Fees Earned in 2013 is $125,000 and Fees Earned in 2014 is $143,750, a horizontal analysis will indicate a 15% increase over this period.
D. When two statements are compared in horizontal analysis, the earlier statement is used as the base for computing the amount and the percent of change.
 
178. McMann Company has a condensed income statement as shown::

 	2014	2013	
Sales	$198,000	$165,500	
Total operating expenses	163,000	147,500	
Net income	35,000	18,000	

Using horizontal analysis, calculate the amount and percent change for Sales.  Round to one decimal place.
 
A. $32,500, 19.6%
B. $18,000, 10.9%
C. $35,000, 17.7%
D. $17,000, 9.4%
 
179. McMann Company has a condensed income statement as shown::

 	2014	2013	
Sales	$150,000	$165,500	
Total operating expenses	133,000	147,500	
Net income	17,000	18,000	

Using horizontal analysis, calculate the amount and percent change for Sales.  Round to one decimal place.
 
A. (17,000), (11.3%)
B. (15,500), (10.3%)
C. ($18,000), (10.9%)
D. ($15,500), (9.4%)
 
180. The purchase of supplies on account was recorded and posted as a debit to Supplies for $500 and a credit to Accounts Receivable for $500.  The correcting entry would include a:
 
A. credit to Accounts Receivable for $500
B. credit to Accounts Receivable for $1,000
C. credit to Accounts Payable for $500
D. credit to Accounts Payable for $1,000
 
181. The chart of accounts classifies the accounts to make identification of the accounts easier. Discuss how companies set up a chart of accounts for use in their business. 

 

 
 
182. On September 1st, Erika Company purchased land for $47,500 cash.  Prepare the journal entry to record this transaction. 

 

 
 
183. (a) On October 10th, Nikle Company purchased supplies worth $1,800 on account. Prepare the journal entry to record this transaction.
(b) Nikle Company paid for the supplies purchased in (a) on October 25th. Prepare the journal entry to record this transaction. 

 

 
 
184. On October 17th, Nikle Company purchased a building and a plot of land for $750,000. The building was valued at $500,000 while the land carried a value of $250,000. Nikle paid $300,000 down in cash and signed a note payable for the balance.  Prepare the journal entry to record this transaction. 

 

 
 
185. On November 1st, Nikle Company made a cash payment of $200,000 on a note payable that was generated in the purchase of a building and land.  Prepare the journal entry to record this transaction. 

 

 
 
186. On January 7th, Damien Lawson  deposited $95,000 in a bank account in the name of JumpStart in return for shares of stock in the corporation.  Prepare the journal entry to record this transaction. 

 

 
 
187. On January 8th, JumpStart purchased $20,000 worth of office equipment.  Prepare the journal entry to record this transaction. 

 

 
 
188. On August 30th JumpStart  pays numerous bills which include:
         Payment to the landlord for August rent - $2,300
         Payment to the Gas & Electric Company for August’s bill - $525
         Payment of employee wages for the last half of August - $1,750
         Payment of shopping center’s parking lot cleaning fee - $275

Journalize these payments as one compound journal entry. 

 

 
 
189. On October 30th, JumpStart paid its only stockholder, Damien Lawson, a $3,300 cash dividend. Journalize this event. 

 

 
 
190. Prepare a journal entry for the purchase of a truck on April 4 for $85,700, paying $15,000 cash and the remainder on account. 

 

 
 
191. Prepare a journal entry on October 12 for the fees earned on account, $14,600. 

 

 
 
192. State for each account whether it is likely to have from normal business operations (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. Also, indicate the normal balance of each account.

1.	Fees Earned	4.	Supplies	
2.	Utilities Expense	5.	Cash	
3.	Accounts Payable	6.	Accounts Receivable	

 

 

 
193. On June 1, the cash account balance was $96,750.  During June, cash receipts totaled $305,000 and the June 30 balance was $75,880.  Determine the cash payments made during June. 

 

 
 
194. For each of the following errors, considered individually, indicate whether the error would cause the trial balance totals to be unequal.  If the error would cause the trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much.
a.	Payment of a cash dividend of $6,800 was journalized and posted as a debit of $8,600 to Salaries Expense and a credit of $8,600 to Cash.	
b.	A fee of $9,780 earned was debited to Accounts Receivable for $7,980 and credited to Fees Earned for $9,780.	
c.	A payment of $3,000 to a creditor was posted as a credit of $3,000 to Accounts Payable and a credit of $3,000 to Cash.	

 

 

 
195. The following errors took place in journalizing and posting transactions:
a.	A payment of $5,000 in cash dividends was recorded as a debit to Office Salaries Expense and a credit to Cash.	
b.	An accounts receivable payment of $7,800 was recorded as a debit to Cash and a credit to Fees Earned.	

Journalize the entries to correct the errors.  Omit the explanations. 

 

 
 
196. Discuss and describe how errors in accounts can be found. 

 

 
 
197. On November 30th, it was discovered that a $550 of a transaction recording the purchase of office supplies was really office equipment. Prepare the journal entry to correct this situation. 

 

 
 
198. Journalize the entries to correct the following errors:

(a)	A purchase of supplies for $500 on account was recorded and posted as a debit to Supplies for $200 and as a credit to Accounts Receivable for $200.	
(b)	A receipt of $2,500 from Fees Earned was recorded and posted as a debit to Fees Earned for $2,500 and a credit to Cash for $2,500.	

 

 

 
199. For the following, enter a “D” if the account normally has a debit balance and enter a “C” if the account normally has a credit balance.

_____1. Notes Payable
_____2. Mortgage Payable
_____3. Dividends
_____4. Accounts Receivable
_____5. Capital Stock
_____6. Rent Revenue
_____7. Unearned Income
_____8. Utility Expense
_____9. Automobiles 

 

 
 
200. On January 1, 2011, Cary Parsons established Cary’s Catering Service.  Listed below are accounts to use for transactions (a) through (d), each identified by a number.  Following this list are the transactions that occurred during the first month of operations.  You are to indicate for each transaction the accounts that should be debited and credited by placing the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Supplies	
4.	Prepaid Insurance	
5.	Equipment	
6.	Truck	
7.	Notes Payable	
8.	Accounts Payable	
9.	Capital Stock	
10.	Dividends	
11.	Fees Earned	
12.	Wages Expense	
13.	Rent Expense	
14.	Utilities Expense	
15.	Truck Expense	
16.	Miscellaneous Expense	
17.	Insurance Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.  Cary transferred cash from a  personal bank account to an account for the business in exchange for stock.	 	 	
b.  Paid rent for the period of January 3 to the end of the month.	 	 	
c.  Purchased a truck for $30,000 with a cash down payment of $5,000 and the remainder on a note.	 	 	
d. Purchased equipment on account.	 	 	

 

 

 
201. On January 1, 2011, Cary Parsons established Cary’s Catering Service.  Listed below are accounts to use for transactions (a) through (e), each identified by a number.  Following this list are the transactions that occurred during the first month of operations.  You are to indicate for each transaction the accounts that should be debited and credited by placing the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Supplies	
4.	Prepaid Insurance	
5.	Equipment	
6.	Truck	
7.	Notes Payable	
8.	Accounts Payable	
9.	Capital Stock	
10.	Dividends	
11.	Fees Earned	
12.	Wages Expense	
13.	Rent Expense	
14.	Utilities Expense	
15.	Truck Expense	
16.	Miscellaneous Expense	
17.	Insurance Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.  Purchased supplies for cash.	 	 	
b.  Paid the annual premiums on property and casualty insurance.	 	 	
c.  Received cash for a job previously recorded on account.	 	 	
d. Paid a creditor a portion of the amount owed for equipment previously purchased on account.	 	 	
e.  Received cash for a completed job.	 	 	

 

 

 
202. On January 1, 2011, Cary Parsons established Cary’s Catering Service.  Listed below are accounts to use for transactions (a) through (f), each identified by a number.  Following this list are the transactions that occurred during the first month of operations.  You are to indicate for each transaction the accounts that should be debited and credited by placing the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Supplies	
4.	Prepaid Insurance	
5.	Equipment	
6.	Truck	
7.	Notes Payable	
8.	Accounts Payable	
9.	Capital Stock	
10.	Dividends	
11.	Fees Earned	
12.	Wages Expense	
13.	Rent Expense	
14.	Utilities Expense	
15.	Truck Expense	
16.	Miscellaneous Expense	
17.	Insurance Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.  Recorded jobs completed on account and sent invoices to customers.	 	 	
b.  Received an invoice for truck expenses to be paid in February.	 	 	
c.  Paid utilities expense	 	 	
d.  Received cash from customers on account.	 	 	
e.  Paid employee wages.	 	 	
f.  Paid Cary a cash dividend.	 	 	

 

 

 
203. Listed below are accounts to use for transactions (a) through (d), each identified by a number.  Following this list are the transactions.  You are to indicate for each transaction the accounts that should be debited and credited by placing the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Office Supplies	
4.	Land	
5.	Interest Receivable	
6.	Building	
7.	Accumulated Depreciation - Building	
8.	Depreciation Expense - Building	
9.	Accounts Payable	
10.	Interest Payable	
11.	Insurance Payable	
12.	Utility Expense	
13.	Notes Payable	
14.	Prepaid Insurance	
15.	Service Revenue	
16.	Capital Stock	
17.	Insurance Expense	
18.	Utility Payable	
19.	Office Supplies Expense	
20.	Unearned Service Revenue	
21.	Dividends	
22.	Interest Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.      Utility bill is received; payment will be made in 10 days.	 	 	
b.      Paid the utility bill previously recorded in transaction (a).	 	 	
c.      Bought a three-year insurance policy and paid in full.	 	 	
d.      Received $7,000 from a contract to perform accounting services over the next two years.	 	 	

 

 

 
204. Below is the unadjusted trial balance for Dawson Designs at December 31, 2011 - the end of its first year in business.

(1) Identify the errors in the following trial balance.  All accounts have normal balances.
(2) Prepare a corrected trial balance.

Dawson Designs
Unadjusted Trial Balance
For the Year Ended December 31, 2011	
 	Debit Balances	Credit Balances	
Cash	23,000	 	
Accounts Receivable	 	49,700	
Prepaid Insurance	11,300	 	
Equipment	150,500	 	
Accounts Payable	6,050	 	
Salaries Payable	 	4,250	
Capital Stock	 	110,000	
Dividends	 	18,500	
Service Revenue	 	236,600	
Salary Expense	98,930	 	
Miscellaneous Expense	 	4,970	
Totals	424,020	424,020	

 

 

 
205. The following two situations are independent of each other.

1.  On June 1, the cash account balance was $45,750.  During June, cash payments totaled $243,910 and the June 30 balance was $53,200.  Determine the cash receipts during June and show your calculation.

2.  On March 1, the supplies account balance was $1,800.  During March, supplies of $2,450 were purchased and $630 of supplies were on hand as of March 31.  Determine the supplies expense for March and show your calculation. 

 

 
 
206. On January 1, 2010, Cary Parsons established a catering service.  Listed below are accounts she would like to open in the general ledger. List the accounts in the order in which they should appear in the ledger and propose a two-digit account numbering scheme that is consistent with the rules of a proper chart of accounts.

1.	Cash	
2.	Supplies	
3.	Equipment	
4.	Accounts Payable	
5.	Capital Stock	
6.	Wages Expense	
7.	Rent Expense	
8.	Truck	
9.	Utilities Expense	
10.	Dividends	
11.	Truck Expense	
12.	Prepaid Insurance	
13.	Fees Earned	
14.	Miscellaneous Expense	
15.	Insurance Expense	
16.	Notes Payable	
17.	Retained Earnings	
18.	Accounts Receivable	

 

 

 
207. Several transactions are listed below, with the accounting equation stated to the right side of each. Use the following identification codes to indicate the effects of each transaction on the accounting equation. Write your answers in the space provided under the accounting equation. You need an identification code for each element of the accounting equation. An example is given before the first transaction.

I-Increase	D-Decrease	NE-No Effect	

 	 	 	 	 	 	Stockholders’	
 	 	 Assets  	=	Liabilities	+	 Equity  	
Example	John Smith invests in a new business by purchasing $3,500 of capital stock.	
       I     	 	
    NE    	 	
       I     	

A)	
Cash sales are made.	

                 	
B)	Equipment is purchased on credit.	

                 	
C)	Payment is made for the equipment purchased on credit in (B).	

               	 	

D)	The company sold excess supplies to another company on credit.	

               	 	

E)	Cash is collected from customers for accounts receivable balances.	

               	 	

							

 

 

 
208. Journalize the  five transactions for Mirmax Rentals described below.

 	August   1	Mirmax purchases two new saws on credit at $425 each.  The saws are added to Mirmax’s rental inventory.  Payment is due in 30 days.	
 	 	 	
 	8	Mirmax accepts advance deposits for tool rentals of $125 that will be applied to the cash rental when the tools are returned.	
 	 	 	
 	15	Mirmax receives a bill from Macon Utility Company for $180.  Payment is due in 30 days.	
 	 	 	
 	20	Customers are charged $1,250 by Mirmax for tool rentals.  Payment is due from the customers in 30 days.	
 	 	 	
 	31	Mirmax receives $600 in payments from the customers that were billed for rentals on August 20.	

 

 

 
209. Journalize the following five transactions for Nexium & Associates, Inc.  Omit explanations. 

 	Mar.   1	Bills are sent to clients for services provided in February in the amount of $800.	
 	 	 	
 	   9	Corner Office, Inc. delivers office furniture ($1,060) and office supplies ($160) to Nexium leaving an invoice for $1,220.	
 	 	 	
 	 15	Payment is made to Corner Office, Inc. for the furniture and office supplies delivered on March 9.	
 	 	 	
 	 23	A bill for $430 for electricity for the month of March is received and will be paid on its due date in April.	
 	 	 	
 	 31	Salaries of $850 are paid to employees.	

 

 

 
210. McMann Company has condensed income statements as follows:

 	2011	2010	
Sales	$178,400	$162,500	
Wage expenses	100,000	92,500	
Rent expenses	33,000	30,000	
Utilities expenses	30,000	25,000	
Total operating expenses	163,000	147,500	
Net income	15,400	15,000	

REQUIRED:

Prepare a horizontal analysis of McMann Company’s income statements. Comment on the trends, both favorable and unfavorable. 

 

 
 
211. Georgia Company has condensed income statements as follows:

 	2011	2010	
Sales	$158,400	$162,500	
Wage expenses	80,000	92,500	
Rent expenses	28,000	30,000	
Utilities expenses	30,000	25,000	
Total operating expenses	138,000	147,500	
Net income	20,400	15,000	

REQUIRED:
Prepare a horizontal analysis of Georgia Company’s income statements. Comment on the trends, both favorable and unfavorable. 

 

 
 
212. On January 31, the cash account balance was $96,750.  During January, cash receipts totaled $305,000 and cash payments totaled was $375,880.  Determine the cash balance on January 1. 

 

 
 
213. Organize the following accounts into the usual sequence of a chart of accounts.

Miscellaneous Expense
Accounts Payable
Retained Earnings
Accounts Receivable
Cash
Capital Stock
Fees Earned
Prepaid Rent
Salaries Expense
Unearned Revenue
Dividends 

 

 
 
214. Selected accounts from the ledger of Garrison Company appear below.  For each account, indicate the following:

(a)	In the first column at the right, indicate the nature of each account, using the following abbreviations:	
 	 	
 	Asset - A	Revenue - R	
 	Liability - L	Expense - E	
 	None of the above - N	 	
 	 	
(b)	In the second column, indicate the increase side of each account by inserting Dr. or Cr.	
 	 	 	 	
 	Account	Type of Account	Increase Side	
(1)	Supplies	_______	________	
(2)	Notes Receivable	_______	________	
(3)	Fees Earned	_______	________	
(4)	Dividends	_______	________	
(5)	Accounts Payable	_______	________	
(6)	Salaries Expense	_______	________	
(7)	Capital Stock	_______	________	
(8)	Accounts Receivable	_______	________	
(9)	Equipment	_______	________	
(10)	Notes Payable	_______	________	

 

 

 
215. Calculate the following:

(a)	Determine the cash receipts for April based on the following data:	
 	 	 	
 	Cash payments during April	$63,000	
 	Cash account balance, April 1	25,500	
 	Cash account balance, April 30	31,750	
 	 	
(b)	Determine the cash received from customers on account during April based on the following data:	
 	 	 	
 	Accounts receivable account balance, April 1	$22,500	
 	Accounts receivable account balance, April 30	15,250	
 	Fees received from customers during April	45,000	

 

 

 
216. Increases and decreases in various types of accounts are listed below.  In each case, indicate by "Dr." or "Cr." (a) whether the change in the account would be recorded as a debit or a credit and (b) whether the normal balance of the account is a debit or a credit.

 	 	(a)	(b)	
 	 	Recorded
As	Normal
Balance	
(1)	Increase in Capital Stock	________	_______	
(2)	Increase in Dividends	________	_______	
(3)	Decrease in Accounts Receivable	________	_______	
(4)	Increase in Note Payable	________	_______	
(5)	Increase in Accounts Payable	________	_______	
(6)	Decrease in Supplies	________	_______	
(7)	Decrease in Salaries Expense	________	_______	
(8)	Increase in Accounts Receivable	________	_______	
(9)	Increase in Cash	________	_______	
(10)	Decrease in Land	________	_______	

 

 

 
217. Record the following selected transactions for April in a two-column journal, identifying each entry by letter:

(a)	Received $18,000 from Katie Long in exchange for stock.	
(b)	Purchased equipment for $27,000, paying $10,000 in cash and giving a note payable for the remainder.	
(c)	Paid $2,300 for rent for April.	
(d)	Purchased $1,500 of supplies on account.	
(e)	Recorded $9,800 of fees earned on account.	
(f)	Received $7,500 in cash for fees earned.	
(g)	Paid $1,200 to creditors on account.	
(h)	Paid wages of $3,425.	
(i)	Received $7,900 from customers on account.	
(j)	Recorded the payment of a $1,875 dividend.	

 

 

 
218. All nine transactions for Dalton Survey Company for September, the first month of operations, are recorded in the following T accounts:

Cash	 	Capital Stock	
(1)	20,000 	 (3)	7,500	 	 	 	 (1)	20,000	
(7)	6,900 	 (5)	2,600	 	 	 	 	 	
(9)	4,700 	 (6)	5,500	 	 	 	 	 	
 	 	 (8)	2,000	 	 	 	 	 	

Accounts Receivable	 	Dividends	
(4)	4,900 	 (9)	4,700	 	 (8)	2,000  	 	 	

Supplies	 	Fees Earned	
(3)	7,500 	 	 	 	 	 	 (4)	4,900	
 	 	 	 	 	 	 	 (7)	6,900	

Equipment	 	Operating Expense	
(2)	4,500 	 	 	 	(6)	5,500 	 	 	

Accounts Payable	 	 	
(5)	2,600 	 (2)	4,500	 	 	 	 	 	

 Indicate the following for each debit and each credit:

(a)	The type of account affected (asset, liability, equity, revenue, or expense).	
(b)	The effect on the account, using + for increase and - for decrease.	

Present your answers in the following form:

 	Account Debited	Accounted Credited	
Transaction	Type	Effect	Type	Effect	

 

 

 
219. On January 12th, JumpStart Co. purchased $870 in office supplies. 

(a) Journalize this transaction as if JumpStart paid cash.

(b) (1) Journalize this transaction as if JumpStart placed it on account.

(b) (2) On January 18th, JumpStart pays the amount due. Journalize this event. 

 

 
 
220. On December 1st, JumpStart Company provides $2,800 in services to clients.

(a) Journalize this event as if the clients had paid cash at the time the services were rendered.

(b) (1) Journalize this event as if the clients had placed this on account.

(b) (2) Assume that the clients paid $1,200 of the amount on account on December 30th. Journalize this transaction. 

 

 
 
221. On November 10th, JumpStart Co. provides $2,900 in services to clients. At the time of service, the clients paid $600.00 in cash and put the balance on account.

(a)  Journalize this event.

(b)  On November 20th, JumpStart Co. clients paid an additional $900 on their accounts due. Journalize this event.

(c)  Calculate the amount of accounts receivable on November 30th. 

 

 
 
222. Journalize the following selected transactions for April 2011 in a two-column journal.  Journal entry explanations may be omitted.

April 1	Received cash for capital stock, $14,000.	
2	Received cash for providing accounting services, $9,500.	
3	Billed customers on account for providing services, $4,200.	
4	Paid advertising expense, $700.	
5	Received cash from customers on account, $2,500.	
6	Paid cash dividends, $1,000.	
7	Received telephone bill, $900.	
8	Paid telephone bill, $900.	

Date	
Description	Post. Ref.	
Debit	
Credit	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

					

 

 

 
223. Analyze the following transactions as to their effect on the accounting equation.

(a)	The company paid $725 to a vendor for supplies purchased previously on account.	
(b)	The company performed $850 of services and billed the customer.	
(c)	The company received a utility bill for $395 and will pay it next month.	
(d)	The stockholder of the company received a cash dividend of $1,000.	
(e)	The company paid $315 in salaries to its employees.	
(f)	The company collected $730 of cash from its customers on account.	

Some of the possible effects of a transaction on the accounting equation are listed below:

(1)	Asset, dr.; Asset, cr.	
(2)	Liability, dr.; Revenue, cr.	
(3)	Asset, dr.; Liability, cr.	
(4)	Asset, dr.; Revenue, cr.	
(5)	Liability, dr.; Assets, cr.	
(6)	Equity, dr.; Asset, cr.	
(7)	Expense, dr.; Assets, cr.	
(8)	Expense, dr.; Liability, cr.	

Put the appropriate letter next to each transaction. 

 

 
 
224. Set up T accounts for Cash, Accounts Receivable, Supplies, Accounts Payable, Capital Stock, Dividends, Professional Fees, and Operating Expenses.

(a)	In the T accounts, record the following transactions of Potter Pool Services for June, 2011, identifying each entry by number:	
 	(1)	Dan Potter invested $12,500 cash in the business in exchange for stock.	
 	(2)	Purchased supplies on account, $6,250.	
 	(3)	Paid operating expenses, $5,500.	
 	(4)	Billed clients for fees, $7,440.	
 	(5)	Received cash from cash clients, $4,700.	
 	(6)	Paid creditors on account, $1,400.	
 	(7)	Received $3,100 from clients on account.	
 	(8)	The company paid Dan $1,500 in cash dividends.	
 	 	
(b)	Prepare a trial balance as of June 30, 2011 for Potter Pool Services.	
 	 	
(c)	Assuming that supplies expense (which has not been recorded) amounts to $1,500 for June, determine net income for the month.	

 

 

 
225. Prepare a trial balance, listing the following accounts in proper sequence.  The accounts (all normal balances) were taken from the ledger of Sophie Designs Co. on April 30, 2014.

Accounts Payable	$ 4,100	 	Rent Expense	$ 1,500	
Accounts Receivable	3,450	 	Salary Expense	14,000	
Cash	6,700	 	Fees Earned	45,425	
Capital Stock	10,000	 	Supplies	3,125	
Dividends	7,500	 	Supplies Expense	1,700	
Equipment	24,500	 	Utilities Expense	4,000	
Miscellaneous Expense	850	 	Retained Earnings	7,800	

 

 

 
226. Exhibit 2-1
All nine transactions for Ralston Sports Co. for September 2011, the first month of operations, are recorded in the following T accounts:

Cash	 	Capital Stock	
(1)	25,000 	 (3)	12,500	 	 	 	 (1)	25,000	
(7)	11,900 	 (5)	7,600	 	 	 	 	 	
(9)	9,700 	 (6)	10,500	 	 	 	 	 	
 	 	 (8)	7,000	 	 	 	 	 	

Accounts Receivable	 	Dividends	
(4)	9,900 	 (9)	9,700	 	(8)	7,000 	 	 	

Supplies	 	Fees Earned	
(3)	12,500 	 	 	 	 	 	 (4)	9,900	
 	 	 	 	 	 	 	 (7)	11,900	

Equipment	 	Operating Expenses	
(2)	9,500 	 	 	 	(6)	10,500 	 	 	

Accounts Payable	 	 	
(5)	7,600 	 (2)	9,500	 	 	 	 	 	

 Refer to Exhibit 2-1.  Prepare a trial balance, listing the accounts in their proper order. 

 

 
 
227. 
(a)	List the errors in the following trial balance. All accounts have normal balances.	
(b)	What would be the new totals of the trial balance after errors are corrected? What would be the balance of Accounts Receivable?	

Winslow’s Auto Body
Trial Balance
For Month Ending April 30, 2011	
Cash	 	19,475	
Accounts Receivable	?	 	
Supplies	 	1,000	
Equipment	15,000	 	
Prepaid Insurance	 	500	
Accounts Payable	 	2,500	
Capital Stock	5,000	 	
Retained Earnings	12,000	 	
Dividends	 	1,000	
Fees Earned	 	49,600	
Salary Expense	14,500	 	
Rent Expense	 	9,000	
Utilities Expense	1,400	 	
Supplies Expense	3,900	 	
Miscellaneous Expense	     250	           	
 	55,000	81,575	

 

 

 
228. Answer the following questions for each of the errors listed below, considered individually:

(a)	Did the error cause the trial balance totals to be unequal?	
(b)	What is the amount of the difference between the trial balance totals (where applicable)?	
(c)	Which of the trial balance totals, debit or credit, is the larger (where applicable)?	

Present your answers in columnar form, using the following headings:

Error	Totals	Difference in Totals	Larger of Totals	
(identifying number)	(equal or unequal)	(amount)	(debit or credit)	

Errors:
(1)	A dividend of $3,000 cash paid to the company’s owner and only stockholder was recorded by a debit of $3,000 to Salary Expense and a credit of $3,000 to Cash.	
(2)	A $650 purchase of supplies on account was recorded as a debit of $1,650 to Equipment and a credit of $1,650 to Accounts Payable.	
(3)	A purchase of equipment for $3,450 on account was not recorded.	
(4)	A $870 receipt on account was recorded as a $870 debit to Cash and a $780 credit to Accounts Receivable.	
(5)	A payment of $1,530 cash on account was recorded only as a credit to Cash.	
(6)	Cash sales of $8,500 were recorded as a credit of $8,500 to Cash and a credit of $8,500 to Fees Earned.	
(7)	The debit to record a $4,000 cash receipt on account was posted twice; the credit was posted once.	
(8)	The credit to record a $300 cash payment on account was posted twice; the debit was posted once.	
(9)	The debit balance of $7,400 in Accounts Receivable was recorded in the trial balance as a debit of $7,200.	

 

 

 
229. The bookkeeper for Brockton Industries prepared the following journal entries and posted the entries to the general ledger as indicated in the T accounts presented. Assume that the dollar amounts and the descriptions of the entries are correct.

July   3	Accounts Receivable 	1,000	 	
 	     Service Revenue 	 	1,000	
 	          Customers were billed for services completed.	 	 	
 	 	 	 	
11	Cash 	500	 	
 	     Service Revenue  	 	500	
 	      Payment is received from a customer billed for services on July 3.	 	 	
 	 	 	 	
12	Office Supplies	600	 	
 	     Accounts Payable  	 	600	
 	      Purchased office supplies on credit; payment is due in 30 days.	 	 	
 	 	 	 	
25	Office Furniture 	600	 	
 	     Cash 	 	600	
 	      Payment is made for office furniture received on 
      July 12.	 	 	

Accounts Receivable	 	Service Revenue	
7/3	1,000	½	 	 	 	7/3	1,000	½	 	 	
 	 	½	 	 	 	 	 	½	7/11	500	

Cash	 	Accounts Payable	
7/11	500	½	7/25	600	 	7/12	600	½	 	 	

Office Supplies	 	Office Furniture	
7/12	600	½	 	 	 	7/25	600	½	 	 	

REQUIRED:
If you assume that all journal entries have been recorded correctly, use the above information to: 
(1) Identify the postings to the general ledger that were made incorrectly. 
(2) Describe how each incorrect posting should have been made. 

 

 

Chapter 2--Analyzing Transactions Key
 
1. Accounts are records of increases and decreases in individual financial statement items. 
TRUE
 
2. A chart of accounts is a listing of accounts that make up the journal. 
FALSE
 
3. The chart of accounts should be the same for each business. 
FALSE
 
4. Consuming goods and services in the process of generating revenues results in expenses. 
TRUE
 
5. Prepaid expenses are an example of an expense. 
FALSE
 
6. Accounts payable are accounts that you expect will be paid to you. 
FALSE
 
7. The unearned revenues account is an example of a liability. 
TRUE
 
8. The dividends account is an example of an expense. 
FALSE
 
9. Accounts in the ledger are usually maintained in alphabetical order. 
FALSE
 
10. Depending on the account title, the right side of the account is referred to as the debit side. 
FALSE
 
11. To determine the balance in a prepaid expense account, subtract credits from debits. 
FALSE
 
12. An account has three parts to it; a title, an increase side, and a decrease side. 
TRUE
 
13. The right hand side of a T account is known as a debit and the left hand side is known as a credit. 
FALSE
 
14. A debit is abbreviated as Db and a credit is abbreviated as Cr. 
FALSE
 
15. Debiting the cash account will increase the account. 
TRUE
 
16. The T account got its name because it resembles the letter “T.” 
TRUE
 
17. The recording of cash receipts to the cash account will be done by debiting the account. 
TRUE
 
18. A credit to the cash account will increase the account. 
FALSE
 
19. The recording of cash payments from the cash account is done by entering the amount as a credit. 
TRUE
 
20. The cash account will always be debited 
FALSE
 
21. The balance of the account can be determined by adding all of the debits, adding all of the credits, and adding the amounts together. 
FALSE
 
22. Liabilities are debts owed by the business entity. 
TRUE
 
23. The accounts payable account is listed in the chart of accounts as an asset. 
FALSE
 
24. A dividends account records amounts paid to stockholders. 
TRUE
 
25. Revenues are equal to the difference between cash receipts and cash payments. 
FALSE
 
26. Expenses use up assets or consume services in the process of generating revenues. 
TRUE
 
27. Retained earnings will be reduced by the amount in the dividends account. 
TRUE
 
28. When a company issues new shares of stock, the capital stock account increases due to revenue being earned. 
FALSE
 
29. When an accounts payable account is paid in cash, company expenses increase. 
FALSE
 
30. When an account receivable is collected in cash, the total assets of the business increase. 
FALSE
 
31. Journalizing eliminates fraud. 
FALSE
 
32. The double-entry accounting system records each transaction twice. 
FALSE
 
33. The increase side of all accounts is the normal balance. 
TRUE
 
34. Transactions are initially entered into a record called a journal. 
TRUE
 
35. The process of recording a transaction in the journal is called journalizing. 
TRUE
 
36. Journalizing is the process of entering amounts in the ledger. 
FALSE
 
37. Transactions are listed in the journal chronologically. 
TRUE
 
38. Journalizing transactions using the double-entry bookkeeping system will eliminate fraud. 
FALSE
 
39. Liability accounts are increased by debits. 
FALSE
 
40. Expense accounts are increased by credits. 
FALSE
 
41. Revenue accounts are increased by credits. 
TRUE
 
42. The normal balance of a capital stock account is a debit. 
FALSE
 
43. The normal balance of the dividends account is a debit. 
TRUE
 
44. The normal balance of an expense account is a credit. 
FALSE
 
45. The normal balance of revenue accounts is a credit. 
TRUE
 
46. Dividends decrease retained earnings and are listed on the income statement as a deduction from revenue. 
FALSE
 
47. For a month's transactions for a typical medium-sized business, the salary expense account is likely to have only credit entries. 
FALSE
 
48. For a month's transactions for a typical medium-sized business, the accounts payable account is likely to have only credit entries. 
FALSE
 
49. When a business receives a bill from the utility company, no entry should be made until the invoice is paid. 
FALSE
 
50. The journal includes both debit and credit accounts for each transaction. 
TRUE
 
51. A transaction that is recorded in the journal is called a journal entry. 
TRUE
 
52. Assets are increased with debits and decreased with credits. 
TRUE
 
53. Liabilities are increased with debits and decreased with credits. 
FALSE
 
54. Debits will increase Unearned Revenues and Revenues. 
FALSE
 
55. Retained earnings account increases with debits. 
FALSE
 
56. Journal entries can have more than two accounts as long as the debits equal the credits. 
TRUE
 
57. Normal balances appear on the side that increases the account balance. 
TRUE
 
58. The process of transferring the data from the journal to the ledger accounts is posting. 
TRUE
 
59. The post reference notation used in the ledger is the account number. 
FALSE
 
60. The post reference notation used in the journal is the page number. 
FALSE
 
61. A notation in the post reference column of the general journal indicates that the amount has been posted to the ledger. 
TRUE
 
62. The order of the flow of accounting data is (1) record in the ledger, (2) record in the journal, (3) prepare the financial statements. 
FALSE
 
63. The process of transferring the debits and credits from the journal entries to the accounts is known as “updating the accounts”. 
FALSE
 
64. Once journal entries are posted to accounts, each account will show a new balance after each entry. 
TRUE
 
65. A group of related accounts that make up a complete unit is called a trial balance. 
FALSE
 
66. A trial balance determines the accuracy of the numbers. 
FALSE
 
67. Even when a trial balance is in balance, there may be errors in the individual accounts. 
TRUE
 
68. The totals at the bottom of the trial balance and the totals at the bottom of the balance sheet both show equality and balancing, and therefore should be equal. 
FALSE
 
69. A proof of the equality of debits and credits in the ledger at the end of an accounting period is called a balance sheet. 
FALSE
 
70. If the trial balance is in balance, it can be assumed that all journal entries were posted correctly and no errors were made. 
FALSE
 
71. Posting a part of a transaction to the wrong account will cause the trial balance totals to be unequal. 
FALSE
 
72. The erroneous arrangement of digits, such as writing $45 as $54, is called a slide. 
FALSE
 
73. Journalizing a transaction with both the debit and the credit for $69 instead of $96 will cause the trial balance to be out of balance. 
FALSE
 
74. Posting a transaction twice will cause the trial balance totals to be equal. 
TRUE
 
75. The erroneous moving of an entire number one or more spaces to the right or left, such as writing $85 as $850, is called a transposition. 
FALSE
 
76. Accounts 
A. do not reflect money amounts
B. are not used by entities that manufacture products
C. are records of increases and decreases in individual financial statement items
D. are only used by large entities with many transactions
 
77. Accounts are classified in the ledger 
A. chronologically
B. alphabetically
C. in accordance with their appearance in the financial statements
D. so that accounts used most often are listed first
 
78. Revenue should be recognized when 
A. cash is received
B. the service is performed
C. the customer places an order
D. the customer charges an order
 
79. Which of the following accounts is a stockholders’ equity account? 
A. Cash
B. Accounts Payable
C. Prepaid Insurance
D. Dividends
 
80. The gross increases in retained earnings attributable to business activities are called 
A. assets
B. liabilities
C. revenues
D. expenses
 
81. A chart of accounts is 
A. the same as a balance sheet
B. usually a listing of accounts in alphabetical order
C. usually a listing of accounts in financial statement order
D. used in place of a ledger
 
82. The debit side of an account 
A. depends on whether the account is an asset, liability or stockholders’ equity item
B. can be either side of the account depending on how the accountant set up the system
C. is the right side of the account
D. is the left side of the account
 
83. An account is said to have a debit balance if 
A. the amount of the debits exceeds the amount of the credits
B. there are more entries on the debit side than on the credit side
C. there are more entries on the credit side than on the debit side
D. the first entry of the accounting period was posted on the debit side
 
84. Which statement(s) concerning cash is (are) true? 
A. cash will always have more debits than credits
B. cash will never have a credit balance
C. cash is increased by debiting
D. all of the above
 
85. Which of the following is true about a T account? 
A. The left-hand side of the T account is called the debit side.
B. The left-hand side of the T account is called the credit side.
C. The right-hand side of the T account is called the debit side.
D. None of these are true.
 
86. Which of the following abbreviations are correct? 
A. Debit “Dr”, Credit “Cd”
B. Debit “Db”, Credit “Cr”
C. Debit “Db”, Credit “Cd”
D. Debit “Dr”, Credit “Cr”
 
87. Which side of the account increases a cash account? 
A. credit
B. neither a debit or a credit
C. debit
D. both a debit and a credit
 
88. A cash payment is recorded on the cash account as a  
A. neither a debit or a credit
B. credit
C. debit
D. both a debit and a credit
 
89. The balance of the account is determined by 
A. adding all of the debits to all of the credits.
B. always subtracting the debits from the credits.
C. always subtracting the credits from the debits. 
D. adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum.
 
90. A list of the accounts is called 
A. ledger
B. chart of accounts
C. T account
D. debit
 
91. On the chart of accounts, the balance sheet accounts are normally listed in the following order 
A. liabilities, assets, stockholders’ equity
B. assets, liabilities, stockholders’ equity
C. stockholders’ equity, assets, liabilities
D. assets, stockholders’ equity, liabilities
 
92. In which order are the accounts listed in the chart of accounts? 
A. assets, expenses, liabilities, stockholders’ equity, revenues
B. stockholders’ equity, assets, liabilities, revenues, expenses
C. assets, liabilities, stockholders’ equity, revenues, expenses
D. assets, liabilities, revenues, expenses, stockholders’ equity
 
93. Which are the parts of the T account? 
A. title, date, total
B. date, debit side, credit side
C. title, debit side, credit side
D. title, debit side, total
 
94. Which group of accounts is comprised of only assets? 
A. Cash, Accounts Payable, Buildings
B. Accounts Receivable, Revenue, Cash
C. Prepaid Expenses,  Buildings, Patents
D. Unearned Revenues, Prepaid Expenses, Cash
 
95. Of the following, which istrue about assets? 
A. Assets include physical items and intangibles that have value.
B. Assets include only physical items of value.
C. Assets are owned solely by the stockholders of the company.
D. Assets are the result of selling products or services to customers.
 
96. Which of the following is not considered to be a liability? 
A. Wages Payable
B. Accounts Receivable
C. Unearned Revenues
D. Accounts Payable
 
97. Which of the following statements is not true about liabilities? 
A. Liabilities are debts owed to outsiders.
B. Account titles of liabilities often include the term “payable.”
C. Receiving cash before a service is performed creates a liability.
D. Liabilities do not include wages owed to employees of the company.
 
98. Retained earnings will be reduced by all of the following except 
A. revenues
B. expenses
C. dividends
D. all of these
 
99. Expenses can result from 
A. paying dividends
B. consuming services
C. using up liabilities
D. all of these
 
100. Proof that the dollar amount of the debits equals the dollar amount of the credits in the ledger means 
A. all of the information from the journal was correctly transferred to the ledger
B. all accounts have their correct balances in the ledger
C. only the journal is accurate; the ledger may be incorrect
D. only that the debit dollar amounts equal the credit dollar amounts
 
101. The chart of accounts is designed to 
A. alphabetize the accounts to make reading easier for its financial statement users
B. analyze the accounts and organize them in order of dollar amount to simplify the accounting information for users
C. summarize the transactions and determine their ending balances
D. meet the information needs of a company and other financial statement users
 
102. The chart of accounts classifies the accounts to make identification of the accounts easier. This is done by way of assigning a number to each account. The first number identifies the classification of the type of account.  Which of the following indicates the use of this classification? 
A. 1-Assets, 2-Liabilities, 3-Stockholders’ Equity, 4-Expenses, 5-Revenues
B. 1-Assets, 2-Liabilities, 3-Stockholders’ Equity, 4-Revenues, 5-Expenses
C. 1-Assets, 2-Stockholders’ Equity, 3-Revenues, 4-Expenses, 5-Dividends
D. 1-Stockholders’ Equity, 2-Dividends, 3-Revenues, 4-Expenses
 
103. Which of the following is not a correct rule of debits and credits?  
A. assets, expenses, and dividends are increased by debits
B. assets are decreased by credits and have a normal debit balance
C. liabilities, revenues, and retained earnings are increased by credits
D. the normal balance for revenues and expenses is a credit
 
104. The ____ is where a transaction can first be found on the accounting records. 
A. chart of accounts
B. income statement
C. balance sheet
D. journal
 
105. A debit may signify a(n) 
A. decrease in an asset account
B. decrease in a liability account
C. increase in the retained earnings account
D. decrease in the dividends account
 
106. Which of the following types of accounts have a normal credit balance? 
A. assets and liabilities
B. liabilities and expenses
C. revenues and liabilities
D. capital stock and dividends
 
107. Which of the following groups of accounts have a normal debit balance? 
A. revenues, liabilities
B. assets, liabilities
C. liabilities, expenses
D. assets, expenses
 
108. Which one of the statements below is not a purpose for the journal? 
A. to show increases and decreases in accounts
B. to show a chronological order by date
C. to show a complete transaction in one place
D. to help posting transactions to ledger 
 
109. A credit may signify a 
A. decrease in assets
B. decrease in liabilities
C. decrease in retained earnings
D. decrease in revenue
 
110. A debit signifies a decrease in 
A. assets
B. expenses
C. dividends
D. revenues
 
111. Which of the following applications of the rules of debit and credit is true? 
A. decrease Prepaid Insurance with a credit and the normal balance is a credit
B. increase Accounts Payable with a credit and the normal balance is a debit
C. increase Supplies Expense with a debit and the normal balance is a debit
D. decrease Cash with a debit and the normal balance is a credit
 
112. Which of the following describes the classification and normal balance of the fees earned account? 
A. an asset with a credit balance
B. a liability with a credit balance
C. an expense with a debit balance
D. a revenue with a credit balance
 
113. The classification and normal balance of the accounts payable account is 
A. an asset with a credit balance
B. a liability with a credit balance
C. an asset with a debit balance
D. an expense with a debit balance
 
114. The classification and normal balance of the dividends account is 
A. an expense with a credit balance
B. an expense with a debit balance
C. a liability with a credit balance
D. a stockholders’ equity item with a debit balance
 
115. The classification and normal balance of the supplies expense account is a(n) 
A. asset with a debit balance
B. asset with a credit balance
C. expense with a debit balance
D. liability with a credit balance
 
116. Which of the following accounts are debited to record increase in balances? 
A. assets and liabilities
B. dividends and liabilities
C. expenses and liabilities
D. assets and expenses
 
117. In which of the following types of accounts are increases recorded by credits? 
A. revenues, liabilities
B. dividends, assets
C. liabilities, dividends
D. expenses, liabilities
 
118. In which of the following types of accounts are decreases recorded with debits? 
A. assets
B. revenues
C. expenses
D. dividends
 
119. In which of the following types of accounts are decreases recorded by credits? 
A. liabilities
B. retained earnings
C. dividends
D. revenues
 
120. A credit balance in which of the following accounts would indicate a likely error? 
A. Fees Earned
B. Salary Expense
C. Retained Earnings
D. Accounts Payable
 
121. A debit balance in which of the following accounts would indicate a likely error? 
A. Salaries Expense
B. Notes Payable
C. Dividends
D. Supplies
 
122. Which of the following entries records the payment of an account payable? 
A. debit Cash; credit Accounts Payable
B. debit Accounts Receivable; credit Cash
C. debit Cash; credit Supplies Expense
D. debit Accounts Payable; credit Cash
 
123. Which of the following entries records the receipt of a utility bill from the water company? 
A. debit Utilities Expense; credit Accounts Payable
B. debit Utilities Payable; credit Accounts Receivable
C. debit Accounts Payable; credit Cash
D. debit Accounts Payable; credit Utilities Payable
 
124. Which of the following entries records the cash sale of capital stock to stockholders? 
A. debit Capital Stock; credit Cash
B. debit Cash; credit Capital Stock
C. debit Cash; credit Revenue
D. debit Revenue; credit Cash
 
125. Office supplies were sold by Ari’s Alarm Service at cost to another repair shop, with cash received.  Which of the following entries for Ari’s Alarm Service records this transaction? 
A. Office Supplies, debit; Cash, credit
B. Office Supplies, debit; Accounts Payable, credit
C. Cash, debit; Office Supplies, credit
D. Accounts Payable, debit; Office Supplies, credit
 
126. Office supplies purchased by Ari’s Alarm Service on account were returned.  Which of the following entries for Ari’s Alarm Service records this transaction? 
A. Cash, debit; Office Supplies, credit
B. Office Supplies, debit; Accounts Receivable, credit
C. Accounts Payable, debit; Office Supplies, credit
D. Office Supplies, debit; Accounts Payable, credit
 
127. Cash was paid by Ari’s Alarm Service to creditors on account.  Which of the following entries for Ari’s Alarm Service records this transaction? 
A. Cash, debit; Retained Earnings, credit
B. Accounts Payable, debit; Cash, credit
C. Accounts Receivable, debit; Cash, credit
D. Accounts Payable, debit; Account Receivable, credit
 
128. The process of initially recording a business transaction is called 
A. closing
B. posting
C. journalizing
D. balancing
 
129. Which of the following entries records the acquisition of office supplies on account? 
A. Office Supplies, debit; Cash, credit
B. Cash, debit; Office Supplies, credit
C. Office Supplies, debit; Accounts Payable, credit
D. Accounts Receivable, debit; Office Supplies, credit
 
130. Which of the following entries records the payment of rent for the current month? 
A. Cash, debit; Rent Expense, credit
B. Rent Expense, debit; Cash, credit
C. Rent Expense, debit; Accounts Receivable, credit
D. Accounts Payable, debit; Rent Expense, credit
 
131. Which of the following entries records the receipt of cash from patients on account? 
A. Accounts Payable, debit; Fees Earned, credit
B. Accounts Receivable, debit; Fees Earned, credit
C. Accounts Receivable, debit; Cash, credit
D. Cash, debit; Accounts Receivable, credit
 
132. Which of the following entries records the collection of cash from cash customers? 
A. Fees Earned, debit; Cash, credit
B. Fees Earned, debit; Accounts Receivable, credit
C. Cash, debit; Fees Earned, credit
D. Accounts Receivable, debit; Fees Earned, credit
 
133. Which of the following entries records the receipt of cash for two months' rent? The cash was received in advance of providing the service. 
A. Prepaid Rent, debit; Rent Revenue, credit.
B. Cash, debit; Unearned Rent, credit.
C. Cash, debit; Prepaid Rent, credit.
D. Cash, debit; Rent Expense credit.
 
134. A patient has a physical examination and asks the bookkeeper to mail the bill.  The bookkeeper should 
A. make no entry until the cash is received
B. Cash, debit; Accounts Receivable, credit
C. Cash, debit; Fees Earned, credit
D. Accounts Receivable, debit; Fees Earned, credit
 
135. Prarie Clinic purchased X-ray equipment for $7,500, paid $2,250 down, with the remainder to be paid later.  The correct entry would be
 
A. Equipment                 2,250
      Cash                                                        2,250
B. Cash                                       2,250
Accounts Payable                    5,250
      Equipment                                   7,500
C. Equipment Expense                  7,500
      Accounts Payable                         2,250
      Cash      5,250      
D. Equipment                       7,500
      Accounts Payable                         5,250
      Cash                                            2,250
 
136. The process of recording a transaction in the journal is called 
A. recording
B. journalizing
C. posting
D. summarizing
 
137. Scott, Inc. issued $40,000 of capital stock.  How would this transaction be entered in the journal? 
A. Cash                                40,000
         Capital Stock                40,000
            Sold stock for cash.
B. Cash                            40,000
      Inventory                      40,000
             Sold stock for cash.
C. Capital Stock      40,000
        Cash                                     40,000
               Sold stock for cash.
D. Capital Stock           40,000
      Accounts Payable                 40,000
         Sold stock for cash.
 
138. 
April	23	Cash	 	26,000	 	
 	 	    Capital Stock 	 	 	26,000	
 	 	         Sold common stock.	 	 	 	

This journal entry will 
A. increase Stockholders’ Equity and decrease Cash
B. increase Cash and decrease Stockholders’ Equity
C. increase Cash and increase Stockholders’ Equity
D. decrease Cash and decrease Stockholders’ Equity
 
139. 
May	24	Land	 	105,000	 	
 	 	    Cash	 	 	105,000	
 	 	         Purchased land for business.	 	 	 	

What effect does this journal entry have on the accounts? 
A. Increase to Cash and increase to Land
B. Increase to Land and decrease to Cash
C. Decrease to Cash and decrease to Land
D. Increase to Cash and decrease to Land
 
140. 
May	31	Supplies	 	1,130	 	
 	 	      Accounts Payable	 	 	1,130	
 	 	            ????????????	 	 	 	

What is the best explanation for this journal entry? 
A. Purchased supplies with cash.
B. Returned supplies previously purchased.
C. Purchased supplies on account.
D. Paid accounts payable.
 
141. 
March	10	Accounts Payable	 	800	 	
 	 	      Cash	 	 	800	
 	 	             Paid creditors on account.	 	 	 	

What effect does this journal entry have on the accounts? 
A. Decrease accounts payable, increase cash
B. Increase cash, decrease accounts payable
C. Increase accounts payable, increase cash
D. Decrease accounts payable, decrease cash
 
142. Which of the following accounts would be increased with a credit? 
A. Land, Accounts Payable, Dividends
B. Accounts Payable, Unearned Revenue, Capital Stock
C. Capital Stock, Accounts Receivable, Unearned Revenue
D. Cash, Accounts Receivable, Capital Stock
 
143. In accordance with the rules of debit and credit, which of the following is true? 
A. Debits increase assets.
B. Credits increase assets.
C. Debits increase both assets and retained earnings.
D. Credits increase both assets and liabilities.
 
144. All of the following accounts are increased with a debit except 
A. Unearned Revenues
B. Land
C. Accounts Receivable
D. Cash
 
145. Which of the following stockholder equity accounts follow the same debit and credit rules as liabilities? 
A. Capital Stock only
B. Dividends only
C. Retained Earnings and Capital Stock
D. Retained Earnings, Capital Stock, and Dividends
 
146. The payment for the monthly rent will require which of the following entries? 
A. debit Cash and debit Rent Expense
B. credit Cash and credit Rent Expense
C. debit Rent Expense and credit Cash
D. credit Rent Expense and debit Cash
 
147. Expenses follow the same debit and credit rules as 
A. revenues
B. dividends
C. capital stock
D. liabilities
 
148. Net income will result when 
A. revenues (credits) > expenses (debits)
B. revenues (credits) < expenses (debits)
C. expenses (credits) = revenues (debits)
D. expenses (debits) > revenues (credits)
 
149. Which of the following will increase retained earnings? 
A. Expenses > revenues.
B. Dividends are declared and paid.
C. Revenues > expenses.
D. Cash is received from customers on account.
 
150. Which of the following will decrease retained earnings? 
A. Supplies are purchased on account.
B. Dividends are declared and paid.
C. Cash is received from customers.
D. Payment is made on an accounts payable.
 
151. Which of the following group of accounts are increased with a debit? 
A. assets, liabilities, stockholders’ equity
B. assets, dividends, expenses
C. assets, revenues, expenses
D. assets, liabilities, revenues
 
152. Which of the following accounts increase with a credit? 
A. capital stock, revenues, expenses
B. assets, capital stock, revenues
C. liabilities, capital stock, revenues
D. retained earnings, capital stock, assets
 
153. Which of the following is true regarding normal balances of accounts? 
A. All accounts have a normal debit balance.
B. All expense accounts have a normal negative balance.
C. Accounts that have a normal debit balance will only have debit entries, never credit entries.
D. The normal balance appears on the side of the account that also receives increase entries.
 
154. All of the following occur with a double-entry accounting system except 
A. The accounting equation remains in balance.
B. The sum of all debits is always equal to the sum of all credits in each journal entry.
C. Each business transaction will have only two entries.
D. Every transaction affects at least two accounts.
 
155. 
March	6	Cash	 	2,500	 	
 	 	     Unearned Fees	 	 	2,500	
 	 	           ????????????	 	 	 	

What is the best explanation for this journal entry? 
A. Received cash for services performed.
B. Received cash for services to be performed in the future.
C. Paid cash in advance for services to be done.
D. Paid cash for services to be performed.
 
156. 
April	14	Equipment	 	15,000	 	
 	 	      Cash	 	 	  5,000	
 	 	      Note Payable	 	 	 10,000	
 	 	              ????????????	 	 	 	

Which is the best explanation for this journal entry? 
A. Purchased equipment, paid cash of $5,000, with the remainder to be paid in the future.
B. Purchased equipment, paid cash of $10,000, with the remainder to be received in the future.
C. Purchased equipment, paid cash for the entire amount.
D. Purchased equipment on credit.
 
157. The verification that the total dollar amount of the debits equals the total dollar amount of the credits in the ledger is called a 
A. ledger
B. trial balance
C. account
D. balance sheet
 
158. The process of transferring the debits and credits from the journal entries to the ledger accounts is called 
A. sliding
B. transposing
C. journalizing
D. posting
 
159. The posting process will include the transfer of the following information from the journal to the account. 
A. date, amount (debit or credit)
B. date, amount (debit or credit), journal page number
C. amount (debit or credit), account number
D. date, amount (debit or credit) account number
 
160. The Post. Ref. columns are used to trace transactions from the journal to the accounts.  What will be entered in the Post. Ref. column of (a) the journal and (b) the account? 
A. (a) the amount of the debit or credit (b) the journal page number
B. (a) the journal page number (b) the date of the transaction
C. (a) the journal page number, (b) the account number
D. (a) the account number, (b) the journal page number
 
161. The chart of accounts for the Corning Corporation includes the following:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Capital Stock	31	
Retained Earnings	32	
Dividends	33	
Fees Earned	41	
Salaries Expense	54	
Insurance Expense	55	
Rent Expense	56	

On journal page 3, the following transaction was found:

Prepaid Insurance	1,530	 	
      Cash	 	1,530	

 What is the posting reference that will be found in the Cash account? 
A. 11
B. 15
C. 3
D. none of these
 
162. The chart of accounts for the Corning Corporation includes the following:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Capital Stock	31	
Retained Earnings	32	
Dividends	33	
Fees Earned	41	
Salaries Expense	54	
Insurance Expense	55	
Rent Expense	56	

On journal page 3, the following transaction was found:

Prepaid Insurance	1,530	 	
      Cash	 	1,530	

 What is the posting reference that will be found in the Prepaid Insurance account? 
A. 11
B. 15
C. 3
D. none of these
 
163. The chart of accounts for the Corning Corporation includes the following:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Capital Stock	31	
Retained Earnings	32	
Dividends	33	
Fees Earned	41	
Salaries Expense	54	
Insurance Expense	55	
Rent Expense	56	

On journal page 3, the following transaction was found:

Prepaid Insurance	1,530	 	
      Cash	 	1,530	

 What are the posting references that will be found in the journal entry? 
A. 15 and 11, respectively
B. 11 and 15, respectively
C. 11 and 55, respectively
D. 3 only
 
164. The chart of accounts for Miguel Corporation includes the following:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Capital Stock	31	
Retained Earnings	32	
Dividends	33	
Fees Earned	41	
Salaries Expense	54	
Insurance Expense	55	
Rent Expense	56	

 On journal page 3, the following transaction was found:

Cash	640	 	
       Fees Earned	 	640	

What are the posting references that will be found in the journal entry? 
A. 41 and 11, respectively
B. 3 only
C. 11 and 41, respectively
D. 11 and 32, respectively
 
165. The chart of accounts for Miguel Corporation includes the following:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Capital Stock	31	
Retained Earnings	32	
Dividends	33	
Fees Earned	41	
Salaries Expense	54	
Insurance Expense	55	
Rent Expense	56	

 On journal page 5, the following transaction was found:

Salaries Expense	525	 	
      Cash	 	525	

What is the posting reference that will be found in the Salaries Expense account? 
A. 5
B. 11
C. 54
D. none of these
 
166. The accounts in the ledger of Monroe Entertainment Co. are listed below.  All accounts have normal balances.
Accounts Payable	1,500	 	Fees Earned	3,600	
Accounts Receivable	1,800	 	Insurance Expense	1,300	
Prepaid Insurance	2,000	 	Land	3,000	
Cash	3,200	 	Wages Expense	1,400	
Capital Stock	2,500	 	Retained Earnings  	6,300	
Dividends	1,200	 			

Prepare a trial balance.  The total of the debits is 
A. $13,900
B. $11,200
C. $12,700
D. $ 9,700
 
167. Randomly listed below are the steps for preparing a trial balance:

(1)	Verify that the total of the Debit column equals the total of the Credit column.	
(2)	List the accounts from the ledger and enter their debit or credit balance in the Debit or Credit column of the trial balance.	
(3)	List the name of the company, the title of the trial balance, and the date the trial balance is prepared.	
(4)	Total the Debit and Credit columns of the trial balance.	

What is the proper order of these steps? 
A. (3), (2), (4), (1)
B. (2), (3), (4), (1)
C. (3), (2), (1), (4)
D. (4), (3), (2), (1)
 
168. Of the following, which will determine if the accounting equation is in balance? 
A. journal entry
B. income statement
C. trial balance
D. account reconciliation
 
169. An overpayment error was discovered in computing and paying the wages of a Jamison Tree Trimming employee.  When Jamison receives cash from the employee for the amount of the overpayment, which of the following entries will Jamison make? 
A. Cash, debit; Wages Expense, credit
B. Wages Payable, debit; Wages Expense, credit
C. Wages Expense, debit, Cash, credit
D. Cash, debit; Wages Payable, credit
 
170. If the two totals of a trial balance are not equal, it could be due to  
A. failure to record a transaction
B. recording the same erroneous amount for both the debit and the credit parts of a transaction
C. an error in determining the account balances, such as a balance being incorrectly computed
D. recording the same transaction more than once
 
171. When a transposition error is made on the trial balance, the difference between the debit and credit totals on the trial balance will be 
A. zero
B. twice the amount of the transposition
C. one-half the amount of the transposition
D. divisible by 9
 
172. Which of the following errors would cause the trial balance totals to be unequal? 
A. A transaction was not posted.
B. A payment of $67 for insurance was posted as a debit of $76 to Prepaid Insurance and a credit of $76 to Cash.
C. A payment of $4,450 to a creditor was posted as a debit of $4,500 to Accounts Payable and a credit of $450 to Accounts Receivable.
D. Cash received from customers on account was posted as a debit of $720 to Cash and a credit of $720 to Accounts Payable.
 
173. Supplies purchased on account were incorrectly recorded as Office Equipment.  The correcting entry would be 
A. Supplies, debit; Office Equipment, credit.
B. Accounts Receivable, debit; Supplies, credit.
C. Office Equipment, debit; Supplies Expense, credit.
D. Supplies, debit; Accounts Payable, credit.
 
174. Which of the following errors will cause the trial balance totals to be unequal? 
A. posting the debit portion of a journal entry incorrectly when the credit portion of the entry is correctly posted
B. failure to record a transaction or to post a transaction
C. recording the same transaction more than once
D. recording the same erroneous amount for both the debit and the credit parts of a transaction
 
175. The trial balance is out of balance and the accountant suspects that a transposition or slide error has occurred.  What will the accountant do to find the error? 
A. Determine the amount of the error and look for that amount on the trial balance.
B. Determine the amount of the error and divide by two, then look for that amount on the trial balance.
C. Determine the amount of the error and refer to the journal entries for that amount.
D. Determine the amount of the error and divide by nine. If the result is evenly divided, then this type of error is likely.
 
176. Which of the following is not a short-cut in finding errors on the trial balance? 
A. Determine the difference between debits and credits and look for the amount.
B. Determine the amount and change any account to make the trial balance correct.
C. Determine the difference between debits and credits, divide the amount by 2, look for the amount.
D. Determine the difference between debits and credits, divide the amount by 9, if it divides evenly, look for a transposition or slide error.
 
177. All of the following statements regarding a horizontal analysis are true except 
A. A horizontal analysis is used to compare an item in a current statement with the same item in prior statements.  
B. A horizontal analysis can be performed on a balance sheet and income statement, but not on a statement of cash flows.
C. If Fees Earned in 2013 is $125,000 and Fees Earned in 2014 is $143,750, a horizontal analysis will indicate a 15% increase over this period.
D. When two statements are compared in horizontal analysis, the earlier statement is used as the base for computing the amount and the percent of change.
 
178. McMann Company has a condensed income statement as shown::

 	2014	2013	
Sales	$198,000	$165,500	
Total operating expenses	163,000	147,500	
Net income	35,000	18,000	

Using horizontal analysis, calculate the amount and percent change for Sales.  Round to one decimal place.
 
A. $32,500, 19.6%
B. $18,000, 10.9%
C. $35,000, 17.7%
D. $17,000, 9.4%
 
179. McMann Company has a condensed income statement as shown::

 	2014	2013	
Sales	$150,000	$165,500	
Total operating expenses	133,000	147,500	
Net income	17,000	18,000	

Using horizontal analysis, calculate the amount and percent change for Sales.  Round to one decimal place.
 
A. (17,000), (11.3%)
B. (15,500), (10.3%)
C. ($18,000), (10.9%)
D. ($15,500), (9.4%)
 
180. The purchase of supplies on account was recorded and posted as a debit to Supplies for $500 and a credit to Accounts Receivable for $500.  The correcting entry would include a:
 
A. credit to Accounts Receivable for $500
B. credit to Accounts Receivable for $1,000
C. credit to Accounts Payable for $500
D. credit to Accounts Payable for $1,000
 
181. The chart of accounts classifies the accounts to make identification of the accounts easier. Discuss how companies set up a chart of accounts for use in their business. 
A chart of accounts is setup by assigning numbers to each of the accounts.  The account number for assets will begin with 1, liabilities with 2, stockholders’ equity with 3, revenues with 4, and expenses with 5.
 
182. On September 1st, Erika Company purchased land for $47,500 cash.  Prepare the journal entry to record this transaction. 

Sep. 1	Land	 	47,500	
 	Cash	47,500	
 	 	Purchased land for the company.	

183. (a) On October 10th, Nikle Company purchased supplies worth $1,800 on account. Prepare the journal entry to record this transaction.
(b) Nikle Company paid for the supplies purchased in (a) on October 25th. Prepare the journal entry to record this transaction. 

(a)	Oct. 10	Supplies	1,800	
 	Accounts Payable	1,800	
 	     Purchased supplies on account.	 	
 	 	 	
(b)	Oct. 25	Accounts Payable	1,800	
 	Cash	1,800	
 	     Paid for supplies on account.	 	

184. On October 17th, Nikle Company purchased a building and a plot of land for $750,000. The building was valued at $500,000 while the land carried a value of $250,000. Nikle paid $300,000 down in cash and signed a note payable for the balance.  Prepare the journal entry to record this transaction. 

Oct. 17	Building	500,000	 	
 	Land	250,000	 	
 	 	Cash	300,000	
 	 	Notes Payable	450,000	
 	 	     Purchased building and land.	 	

185. On November 1st, Nikle Company made a cash payment of $200,000 on a note payable that was generated in the purchase of a building and land.  Prepare the journal entry to record this transaction. 

 	Nov. 1	Notes Payable	200,000	 	
 	 	Cash	200,000	
 	 	Made payment on note payable.	 	

186. On January 7th, Damien Lawson  deposited $95,000 in a bank account in the name of JumpStart in return for shares of stock in the corporation.  Prepare the journal entry to record this transaction. 

Jan. 7	Cash	95,000	
 	Capital Stock	95,000	
 	    Issued capital stock for cash.	 	

187. On January 8th, JumpStart purchased $20,000 worth of office equipment.  Prepare the journal entry to record this transaction. 

Jan. 8	Office Equipment	20,000	
 	Cash	20,000	

188. On August 30th JumpStart  pays numerous bills which include:
         Payment to the landlord for August rent - $2,300
         Payment to the Gas & Electric Company for August’s bill - $525
         Payment of employee wages for the last half of August - $1,750
         Payment of shopping center’s parking lot cleaning fee - $275

Journalize these payments as one compound journal entry. 

Aug 30	Rent Expense	2,300	 	
 	Utilities Expense	525	 	
 	Wages Expense	1,750	 	
 	Maintenance Expense	275	 	
 	Cash	 	4,850	

189. On October 30th, JumpStart paid its only stockholder, Damien Lawson, a $3,300 cash dividend. Journalize this event. 

Oct. 30	Dividends	3,300	
 	Cash	3,300	

190. Prepare a journal entry for the purchase of a truck on April 4 for $85,700, paying $15,000 cash and the remainder on account. 

April  4	Truck	85,700	
 	Cash	15,000	
 	Accounts Payable	70,700	

191. Prepare a journal entry on October 12 for the fees earned on account, $14,600. 

Oct. 12	Accounts Receivable	14,600	 	
 	Fees Earned	14,600	

192. State for each account whether it is likely to have from normal business operations (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. Also, indicate the normal balance of each account.

1.	Fees Earned	4.	Supplies	
2.	Utilities Expense	5.	Cash	
3.	Accounts Payable	6.	Accounts Receivable	

1.  Credit entries only, normal credit balance
2.  Debit entries only, normal debit balance
3.  Both debit and credit entries, normal credit balance
4.  Both debit and credit entries, normal debit balance
5.  Both debit and credit entries, normal debit balance
6.  Both debit and credit entries, normal debit balance
 
193. On June 1, the cash account balance was $96,750.  During June, cash receipts totaled $305,000 and the June 30 balance was $75,880.  Determine the cash payments made during June. 
75,880 = 96,750 + 305,000 - ?
Cash payments = $325,870
 
194. For each of the following errors, considered individually, indicate whether the error would cause the trial balance totals to be unequal.  If the error would cause the trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much.
a.	Payment of a cash dividend of $6,800 was journalized and posted as a debit of $8,600 to Salaries Expense and a credit of $8,600 to Cash.	
b.	A fee of $9,780 earned was debited to Accounts Receivable for $7,980 and credited to Fees Earned for $9,780.	
c.	A payment of $3,000 to a creditor was posted as a credit of $3,000 to Accounts Payable and a credit of $3,000 to Cash.	

a.	The totals are equal.	
b.	The totals are unequal.  The credit total is higher by $1,800.	
c.	The totals are unequal. The credit total is higher by $6,000.	

195. The following errors took place in journalizing and posting transactions:
a.	A payment of $5,000 in cash dividends was recorded as a debit to Office Salaries Expense and a credit to Cash.	
b.	An accounts receivable payment of $7,800 was recorded as a debit to Cash and a credit to Fees Earned.	

Journalize the entries to correct the errors.  Omit the explanations. 

a.	Dividends	5,000	
 	 	Office Salaries Expense	 	5,000	

b.	Fees Earned	7,800	
 	 	Accounts Receivable	 	7,800	

196. Discuss and describe how errors in accounts can be found. 
1) through audit procedures
2) by looking at the trial balance
3) by chance
 
197. On November 30th, it was discovered that a $550 of a transaction recording the purchase of office supplies was really office equipment. Prepare the journal entry to correct this situation. 

Nov. 30	Office Equipment	550	
 	Office Supplies	550	

198. Journalize the entries to correct the following errors:

(a)	A purchase of supplies for $500 on account was recorded and posted as a debit to Supplies for $200 and as a credit to Accounts Receivable for $200.	
(b)	A receipt of $2,500 from Fees Earned was recorded and posted as a debit to Fees Earned for $2,500 and a credit to Cash for $2,500.	

(a)	Accounts Receivable	200	 	
 	   Supplies	 	200	
 	 	 	 	
 	Supplies	500	 	
 	   Accounts Payable	 	500	
 	 	 	 	
(b)	Cash	5,000	 	
 	   Fees Earned	 	5,000	

 
199. For the following, enter a “D” if the account normally has a debit balance and enter a “C” if the account normally has a credit balance.

_____1. Notes Payable
_____2. Mortgage Payable
_____3. Dividends
_____4. Accounts Receivable
_____5. Capital Stock
_____6. Rent Revenue
_____7. Unearned Income
_____8. Utility Expense
_____9. Automobiles 
1. C  
2. C  
3. D  
4. D  
5. C  
6. C  
7. C  
8. D  
9. D
 
200. On January 1, 2011, Cary Parsons established Cary’s Catering Service.  Listed below are accounts to use for transactions (a) through (d), each identified by a number.  Following this list are the transactions that occurred during the first month of operations.  You are to indicate for each transaction the accounts that should be debited and credited by placing the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Supplies	
4.	Prepaid Insurance	
5.	Equipment	
6.	Truck	
7.	Notes Payable	
8.	Accounts Payable	
9.	Capital Stock	
10.	Dividends	
11.	Fees Earned	
12.	Wages Expense	
13.	Rent Expense	
14.	Utilities Expense	
15.	Truck Expense	
16.	Miscellaneous Expense	
17.	Insurance Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.  Cary transferred cash from a  personal bank account to an account for the business in exchange for stock.	 	 	
b.  Paid rent for the period of January 3 to the end of the month.	 	 	
c.  Purchased a truck for $30,000 with a cash down payment of $5,000 and the remainder on a note.	 	 	
d. Purchased equipment on account.	 	 	

Transactions	Account(s) Debited	Account(s) Credited	
a.	1	9	
b.	13	1	
c.	6	1,7	
d.	5	8	

201. On January 1, 2011, Cary Parsons established Cary’s Catering Service.  Listed below are accounts to use for transactions (a) through (e), each identified by a number.  Following this list are the transactions that occurred during the first month of operations.  You are to indicate for each transaction the accounts that should be debited and credited by placing the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Supplies	
4.	Prepaid Insurance	
5.	Equipment	
6.	Truck	
7.	Notes Payable	
8.	Accounts Payable	
9.	Capital Stock	
10.	Dividends	
11.	Fees Earned	
12.	Wages Expense	
13.	Rent Expense	
14.	Utilities Expense	
15.	Truck Expense	
16.	Miscellaneous Expense	
17.	Insurance Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.  Purchased supplies for cash.	 	 	
b.  Paid the annual premiums on property and casualty insurance.	 	 	
c.  Received cash for a job previously recorded on account.	 	 	
d. Paid a creditor a portion of the amount owed for equipment previously purchased on account.	 	 	
e.  Received cash for a completed job.	 	 	

Transactions	Account(s) Debited	Account(s) Credited	
a.	3	1	
b.	4	1	
c.	1	2	
d.	8	1	
e.	1	11	

202. On January 1, 2011, Cary Parsons established Cary’s Catering Service.  Listed below are accounts to use for transactions (a) through (f), each identified by a number.  Following this list are the transactions that occurred during the first month of operations.  You are to indicate for each transaction the accounts that should be debited and credited by placing the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Supplies	
4.	Prepaid Insurance	
5.	Equipment	
6.	Truck	
7.	Notes Payable	
8.	Accounts Payable	
9.	Capital Stock	
10.	Dividends	
11.	Fees Earned	
12.	Wages Expense	
13.	Rent Expense	
14.	Utilities Expense	
15.	Truck Expense	
16.	Miscellaneous Expense	
17.	Insurance Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.  Recorded jobs completed on account and sent invoices to customers.	 	 	
b.  Received an invoice for truck expenses to be paid in February.	 	 	
c.  Paid utilities expense	 	 	
d.  Received cash from customers on account.	 	 	
e.  Paid employee wages.	 	 	
f.  Paid Cary a cash dividend.	 	 	

Transactions	Account(s) Debited	Account(s) Credited	
a.	2	11	
b.	15	8	
c.	14	1	
d.	1	2	
e.	12	1	
f.	10	1	

203. Listed below are accounts to use for transactions (a) through (d), each identified by a number.  Following this list are the transactions.  You are to indicate for each transaction the accounts that should be debited and credited by placing the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Office Supplies	
4.	Land	
5.	Interest Receivable	
6.	Building	
7.	Accumulated Depreciation - Building	
8.	Depreciation Expense - Building	
9.	Accounts Payable	
10.	Interest Payable	
11.	Insurance Payable	
12.	Utility Expense	
13.	Notes Payable	
14.	Prepaid Insurance	
15.	Service Revenue	
16.	Capital Stock	
17.	Insurance Expense	
18.	Utility Payable	
19.	Office Supplies Expense	
20.	Unearned Service Revenue	
21.	Dividends	
22.	Interest Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.      Utility bill is received; payment will be made in 10 days.	 	 	
b.      Paid the utility bill previously recorded in transaction (a).	 	 	
c.      Bought a three-year insurance policy and paid in full.	 	 	
d.      Received $7,000 from a contract to perform accounting services over the next two years.	 	 	

 	Debit	Credit	
a.	12	18	
b.	18	1	
c.	14	1	
d.	1	20	

204. Below is the unadjusted trial balance for Dawson Designs at December 31, 2011 - the end of its first year in business.

(1) Identify the errors in the following trial balance.  All accounts have normal balances.
(2) Prepare a corrected trial balance.

Dawson Designs
Unadjusted Trial Balance
For the Year Ended December 31, 2011	
 	Debit Balances	Credit Balances	
Cash	23,000	 	
Accounts Receivable	 	49,700	
Prepaid Insurance	11,300	 	
Equipment	150,500	 	
Accounts Payable	6,050	 	
Salaries Payable	 	4,250	
Capital Stock	 	110,000	
Dividends	 	18,500	
Service Revenue	 	236,600	
Salary Expense	98,930	 	
Miscellaneous Expense	 	4,970	
Totals	424,020	424,020	

(1)
a.  The debit column is added incorrectly; the sum is actually $289,780.
b.  The trial balance should be dated “December 31, 2011,” rather than “For the Year Ended December 31, 2011.”
c.  The accounts receivable balance should be in the debit column.
d.  The accounts payable should be in the credit column.
e.  Dividends should be in the debit column.
f.  Miscellaneous Expense should be in the debit column. 

(2)  
Dawson Designs
Unadjusted Trial Balance
December 31, 2011	
 	Debit Balances	Credit Balances	
Cash	23,000	 	
Accounts Receivable	49,700	 	
Prepaid Insurance	11,300	 	
Equipment	150,500	 	
Accounts Payable	 	6,050	
Salaries Payable	 	4,250	
Capital Stock	 	110,000	
Dividends	18,500	 	
Service Revenue	 	236,600	
Salary Expense	98,930	 	
Miscellaneous Expense	4,970	 	
 	356,900	356,900	

205. The following two situations are independent of each other.

1.  On June 1, the cash account balance was $45,750.  During June, cash payments totaled $243,910 and the June 30 balance was $53,200.  Determine the cash receipts during June and show your calculation.

2.  On March 1, the supplies account balance was $1,800.  During March, supplies of $2,450 were purchased and $630 of supplies were on hand as of March 31.  Determine the supplies expense for March and show your calculation. 
1.  $53,200 = $45,750 + Cash receipts - $243,910 
Cash receipts  = $251,360

2.  $630 = $1,800 + $2,450 - Supplies Expense
Supplies expense = $3,620
 
206. On January 1, 2010, Cary Parsons established a catering service.  Listed below are accounts she would like to open in the general ledger. List the accounts in the order in which they should appear in the ledger and propose a two-digit account numbering scheme that is consistent with the rules of a proper chart of accounts.

1.	Cash	
2.	Supplies	
3.	Equipment	
4.	Accounts Payable	
5.	Capital Stock	
6.	Wages Expense	
7.	Rent Expense	
8.	Truck	
9.	Utilities Expense	
10.	Dividends	
11.	Truck Expense	
12.	Prepaid Insurance	
13.	Fees Earned	
14.	Miscellaneous Expense	
15.	Insurance Expense	
16.	Notes Payable	
17.	Retained Earnings	
18.	Accounts Receivable	

11 Cash
12 Accounts Receivable
13 Supplies
14 Prepaid Insurance
15 Equipment
16 Truck
21 Accounts Payable
22 Notes Payable
31 Capital Stock
32 Retained Earnings
33 Dividends
41 Fees Earned
51 Wages Expense
52 Rent Expense
53 Utilities Expense
54 Truck Expense
55 Insurance Expense
56 Miscellaneous Expense
 
207. Several transactions are listed below, with the accounting equation stated to the right side of each. Use the following identification codes to indicate the effects of each transaction on the accounting equation. Write your answers in the space provided under the accounting equation. You need an identification code for each element of the accounting equation. An example is given before the first transaction.

I-Increase	D-Decrease	NE-No Effect	

 	 	 	 	 	 	Stockholders’	
 	 	 Assets  	=	Liabilities	+	 Equity  	
Example	John Smith invests in a new business by purchasing $3,500 of capital stock.	
       I     	 	
    NE    	 	
       I     	

A)	
Cash sales are made.	

                 	
B)	Equipment is purchased on credit.	

                 	
C)	Payment is made for the equipment purchased on credit in (B).	

               	 	

D)	The company sold excess supplies to another company on credit.	

               	 	

E)	Cash is collected from customers for accounts receivable balances.	

               	 	

							

 	 	 	 	 	 	Stockholders’	
 	 	  Assets  	=	Liabilities	+	 Equity  	

A)	
Cash sales are made.	
       I        	 	
      NE           	 	
        I                   	
B)	Equipment is purchased on credit.	
       I         	 	
       I          	 	
       NE                   	
C)	Payment is made for the equipment purchased on credit in (B).	

       D         	 	

       D           	 	

      NE                   	
D)	The company sold excess supplies to another company on credit.	
      NE        	 	
      NE           	 	
      NE                   	
E)	Cash is collected from customers for accounts receivable balances.	

      NE        	 	

      NE           	 	

      NE                   	

208. Journalize the  five transactions for Mirmax Rentals described below.

 	August   1	Mirmax purchases two new saws on credit at $425 each.  The saws are added to Mirmax’s rental inventory.  Payment is due in 30 days.	
 	 	 	
 	8	Mirmax accepts advance deposits for tool rentals of $125 that will be applied to the cash rental when the tools are returned.	
 	 	 	
 	15	Mirmax receives a bill from Macon Utility Company for $180.  Payment is due in 30 days.	
 	 	 	
 	20	Customers are charged $1,250 by Mirmax for tool rentals.  Payment is due from the customers in 30 days.	
 	 	 	
 	31	Mirmax receives $600 in payments from the customers that were billed for rentals on August 20.	

Aug. 1	Equipment	850	 	
 	         Accounts Payable	 	850	
 	 	 	 	
        8	Cash	125	 	
 	         Unearned Revenue	 	125	
 	 	 	 	
        15	Utilities Expense	180	 	
 	         Accounts Payable 	 	180	
 	 	 	 	
        20	Accounts Receivable	1,250	 	
 	        Rental Revenue	 	1,250	
 	 	 	 	
        31	Cash	600	 	
 	        Accounts Receivable	 	600	

 
209. Journalize the following five transactions for Nexium & Associates, Inc.  Omit explanations. 

 	Mar.   1	Bills are sent to clients for services provided in February in the amount of $800.	
 	 	 	
 	   9	Corner Office, Inc. delivers office furniture ($1,060) and office supplies ($160) to Nexium leaving an invoice for $1,220.	
 	 	 	
 	 15	Payment is made to Corner Office, Inc. for the furniture and office supplies delivered on March 9.	
 	 	 	
 	 23	A bill for $430 for electricity for the month of March is received and will be paid on its due date in April.	
 	 	 	
 	 31	Salaries of $850 are paid to employees.	

Mar.    1	Accounts Receivable	800	 	
 	      Service Revenue  	 	800	
 	 	 	 	
            9	Office Furniture	1,060	 	
 	Office Supplies   	160	 	
 	      Accounts Payable	 	1,220	
 	 	 	 	
          15	Accounts Payable	1,220	 	
 	      Cash	 	1,220	
 	 	 	 	
          23	Electricity Expense	430	 	
 	      Accounts Payable	 	430	
 	 	 	 	
          31	Salaries Expense	850	 	
 	      Cash	 	850	

 
210. McMann Company has condensed income statements as follows:

 	2011	2010	
Sales	$178,400	$162,500	
Wage expenses	100,000	92,500	
Rent expenses	33,000	30,000	
Utilities expenses	30,000	25,000	
Total operating expenses	163,000	147,500	
Net income	15,400	15,000	

REQUIRED:

Prepare a horizontal analysis of McMann Company’s income statements. Comment on the trends, both favorable and unfavorable. 

2011	

2010	Increase/
Decrease
Amount	
Percent Change	
Sales	$178,400	$162,500	15,900	9.8%	
Wage expenses	100,000	92,500	7,500	8.1%	
Rent expenses	33,000	30,000	3,000	10.0%	
Utilities expenses	30,000	25,000	5,000	20.0%	
Total operating expenses	163,000	147,500	15,500	10.5%	
Net income	15,400	15,000	400	2.7%	

While the trend in sales revenue is favorable, it is not sufficient enough to offset the rising expenses, resulting in a positive but small and slowing increase in net income.
 
211. Georgia Company has condensed income statements as follows:

 	2011	2010	
Sales	$158,400	$162,500	
Wage expenses	80,000	92,500	
Rent expenses	28,000	30,000	
Utilities expenses	30,000	25,000	
Total operating expenses	138,000	147,500	
Net income	20,400	15,000	

REQUIRED:
Prepare a horizontal analysis of Georgia Company’s income statements. Comment on the trends, both favorable and unfavorable. 

2011	

2010	Increase/
Decrease
Amount	
Percent Change	
Sales	$158,400	$162,500	(4,100)	-2.5%	
Wage expenses	80,000	92,500	(12,500)	-13.5%	
Rent expenses	28,000	30,000	(2,000)	-6.7%	
Utilities expenses	30,000	25,000	5,000	20.0%	
Total operating expenses	138,000	147,500	(9,500)	-6.4%	
Net income	20,400	15,000	5,400	36.0%	

The trend in sales revenue is unfavorable, but that is more than offset by the declines in operating expenses, with the exception of utilities, which increased over the period.  Despite the 2.5% drop in sales, the net effect was a favorable increase in net income of 36%, which was in large part spurred by the drop in wages expense.
 
212. On January 31, the cash account balance was $96,750.  During January, cash receipts totaled $305,000 and cash payments totaled was $375,880.  Determine the cash balance on January 1. 
??? + $305,000 - $375,880 = $96,750
Cash balance at January 1 is $167,630.
 
213. Organize the following accounts into the usual sequence of a chart of accounts.

Miscellaneous Expense
Accounts Payable
Retained Earnings
Accounts Receivable
Cash
Capital Stock
Fees Earned
Prepaid Rent
Salaries Expense
Unearned Revenue
Dividends 
Cash
Accounts Receivable
Prepaid Rent
Accounts Payable
Unearned Revenue
Capital Stock
Retained Earnings
Dividends
Fees Earned
Salaries Expense
Miscellaneous Expense
 
214. Selected accounts from the ledger of Garrison Company appear below.  For each account, indicate the following:

(a)	In the first column at the right, indicate the nature of each account, using the following abbreviations:	
 	 	
 	Asset - A	Revenue - R	
 	Liability - L	Expense - E	
 	None of the above - N	 	
 	 	
(b)	In the second column, indicate the increase side of each account by inserting Dr. or Cr.	
 	 	 	 	
 	Account	Type of Account	Increase Side	
(1)	Supplies	_______	________	
(2)	Notes Receivable	_______	________	
(3)	Fees Earned	_______	________	
(4)	Dividends	_______	________	
(5)	Accounts Payable	_______	________	
(6)	Salaries Expense	_______	________	
(7)	Capital Stock	_______	________	
(8)	Accounts Receivable	_______	________	
(9)	Equipment	_______	________	
(10)	Notes Payable	_______	________	

 	Type of Account	Increase Side	
(1)	A	Dr.	
(2)	A	Dr.	
(3)	R	Cr.	
(4)	N	Dr.	
(5)	L	Cr.	
(6)	E	Dr.	
(7)	N	Cr.	
(8)	A	Dr.	
(9)	A	Dr.	
(10)	L	Cr.	

215. Calculate the following:

(a)	Determine the cash receipts for April based on the following data:	
 	 	 	
 	Cash payments during April	$63,000	
 	Cash account balance, April 1	25,500	
 	Cash account balance, April 30	31,750	
 	 	
(b)	Determine the cash received from customers on account during April based on the following data:	
 	 	 	
 	Accounts receivable account balance, April 1	$22,500	
 	Accounts receivable account balance, April 30	15,250	
 	Fees received from customers during April	45,000	

(a)	$69,250 ($31,750 + $63,000 - $25,500)	
(b)	$52,250 ($22,500 + $45,000 - $15,250)	

216. Increases and decreases in various types of accounts are listed below.  In each case, indicate by "Dr." or "Cr." (a) whether the change in the account would be recorded as a debit or a credit and (b) whether the normal balance of the account is a debit or a credit.

 	 	(a)	(b)	
 	 	Recorded
As	Normal
Balance	
(1)	Increase in Capital Stock	________	_______	
(2)	Increase in Dividends	________	_______	
(3)	Decrease in Accounts Receivable	________	_______	
(4)	Increase in Note Payable	________	_______	
(5)	Increase in Accounts Payable	________	_______	
(6)	Decrease in Supplies	________	_______	
(7)	Decrease in Salaries Expense	________	_______	
(8)	Increase in Accounts Receivable	________	_______	
(9)	Increase in Cash	________	_______	
(10)	Decrease in Land	________	_______	

 	(a)	(b)	
(1)	Cr.	Cr.	
(2)	Dr.	Dr.	
(3)	Cr.	Dr.	
(4)	Cr.	Cr.	
(5)	Cr.	Cr.	
(6)	Cr.	Dr.	
(7)	Cr.	Dr.	
(8)	Dr.	Dr.	
(9)	Dr.	Dr.	
(10)	Cr.	Dr.	

217. Record the following selected transactions for April in a two-column journal, identifying each entry by letter:

(a)	Received $18,000 from Katie Long in exchange for stock.	
(b)	Purchased equipment for $27,000, paying $10,000 in cash and giving a note payable for the remainder.	
(c)	Paid $2,300 for rent for April.	
(d)	Purchased $1,500 of supplies on account.	
(e)	Recorded $9,800 of fees earned on account.	
(f)	Received $7,500 in cash for fees earned.	
(g)	Paid $1,200 to creditors on account.	
(h)	Paid wages of $3,425.	
(i)	Received $7,900 from customers on account.	
(j)	Recorded the payment of a $1,875 dividend.	

(a)	Cash	18,000	 	
 	  Capital Stock	 	18,000	
 	 	 	 	
(b)	Equipment	27,000	 	
 	  Cash	 	10,000	
 	  Notes Payable	 	17,000	
 	 	 	 	
(c)	Rent Expense	2,300	 	
 	  Cash	 	2,300	
 	 	 	 	
(d)	Supplies	1,500	 	
 	  Accounts Payable	 	1,500	
 	 	 	 	
(e)	Accounts Receivable	9,800	 	
 	  Fees Earned	 	9,800	
 	 	 	 	
(f)	Cash	7,500	 	
 	  Fees Earned	 	7,500	
 	 	 	 	
(g)	Accounts Payable	1,200	 	
 	  Cash	 	1,200	
 	 	 	 	
(h)	Wages Expense	3,425	 	
 	  Cash	 	3,425	
 	 	 	 	
(i)	Cash	7,900	 	
 	  Accounts Receivable	 	7,900	
 	 	 	 	
(j)	Dividends	1,875	 	
 	  Cash	 	1,875	

218. All nine transactions for Dalton Survey Company for September, the first month of operations, are recorded in the following T accounts:

Cash	 	Capital Stock	
(1)	20,000 	 (3)	7,500	 	 	 	 (1)	20,000	
(7)	6,900 	 (5)	2,600	 	 	 	 	 	
(9)	4,700 	 (6)	5,500	 	 	 	 	 	
 	 	 (8)	2,000	 	 	 	 	 	

Accounts Receivable	 	Dividends	
(4)	4,900 	 (9)	4,700	 	 (8)	2,000  	 	 	

Supplies	 	Fees Earned	
(3)	7,500 	 	 	 	 	 	 (4)	4,900	
 	 	 	 	 	 	 	 (7)	6,900	

Equipment	 	Operating Expense	
(2)	4,500 	 	 	 	(6)	5,500 	 	 	

Accounts Payable	 	 	
(5)	2,600 	 (2)	4,500	 	 	 	 	 	

 Indicate the following for each debit and each credit:

(a)	The type of account affected (asset, liability, equity, revenue, or expense).	
(b)	The effect on the account, using + for increase and - for decrease.	

Present your answers in the following form:

 	Account Debited	Accounted Credited	
Transaction	Type	Effect	Type	Effect	

 	Account Debited	Accounted Credited	
Transaction	Type	Effect	Type	Effect	
(1)	asset	+	equity	+	
(2)	asset	+	liability	+	
(3)	asset	+	asset	-	
(4)	asset	+	revenue	+	
(5)	liability	-	asset	-	
(6)	expense	+	asset	-	
(7)	asset	+	revenue	+	
(8)	equity	-	asset	-	
(9)	asset	+	asset	-	

219. On January 12th, JumpStart Co. purchased $870 in office supplies. 

(a) Journalize this transaction as if JumpStart paid cash.

(b) (1) Journalize this transaction as if JumpStart placed it on account.

(b) (2) On January 18th, JumpStart pays the amount due. Journalize this event. 

Jan. 12	Office Supplies	870	
 	Cash	870	

       12	Office Supplies	870	
 	Accounts Payable	870	

       18	Accounts Payable	870	
 	Cash	870	

220. On December 1st, JumpStart Company provides $2,800 in services to clients.

(a) Journalize this event as if the clients had paid cash at the time the services were rendered.

(b) (1) Journalize this event as if the clients had placed this on account.

(b) (2) Assume that the clients paid $1,200 of the amount on account on December 30th. Journalize this transaction. 

(a)      Dec. 1   Cash	2,800	
 	Fees Earned	2,800	
 	 	
(b) (1)         1   Accounts Receivable	2,800	
 	Fees Earned	2,800	
(b) (2)       30   Cash	1,200	
 	Accounts Receivable	1,200	

221. On November 10th, JumpStart Co. provides $2,900 in services to clients. At the time of service, the clients paid $600.00 in cash and put the balance on account.

(a)  Journalize this event.

(b)  On November 20th, JumpStart Co. clients paid an additional $900 on their accounts due. Journalize this event.

(c)  Calculate the amount of accounts receivable on November 30th. 

(a) Nov. 10	Cash	600	 	
 	Accounts Receivable	2,300	 	
 	Fees Earned	2,900	
 	 	 	
(b)         20	Cash	900	 	
 	Accounts Receivable	900	

(c)	 	
 	Original invoice	$2,900	
 	Less cash paid upon completion	     600	
 	Original amount on accounts receivable	$2,300	
 	Less Nov 20th payment	     900	
 	Accounts Receivable balance	$1,400	

222. Journalize the following selected transactions for April 2011 in a two-column journal.  Journal entry explanations may be omitted.

April 1	Received cash for capital stock, $14,000.	
2	Received cash for providing accounting services, $9,500.	
3	Billed customers on account for providing services, $4,200.	
4	Paid advertising expense, $700.	
5	Received cash from customers on account, $2,500.	
6	Paid cash dividends, $1,000.	
7	Received telephone bill, $900.	
8	Paid telephone bill, $900.	

Date	
Description	Post. Ref.	
Debit	
Credit	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

					

Date	
Description	Post. Ref.	
Debit 	
Credit	
April         1	Cash	 	14,000	 	
 	      Capital Stock	 	 	14,000	
 	 	 	 	 	
                2	Cash	 	9,500	 	
 	      Revenues	 	 	9,500	
 	 	 	 	 	
                3	Accounts Receivable	 	4,200	 	
 	     Revenues	 	 	4,200	
 	 	 	 	 	
               4	Advertising Expense	 	700	 	
 	     Cash	 	 	700	
 	 	 	 	 	
               5	Cash	 	2,500	 	
 	     Accounts Receivable	 	 	2,500	
 	 	 	 	 	
               6	Dividends	 	1,000	 	
 	      Cash	 	 	1,000	
 	 	 	 	 	
      7	Telephone Expense	 	900	 	
 	      Accounts Payable	 	 	900	
 	 	 	 	 	
      8	Accounts Payable	 	900	 	
 	      Cash	 	 	900	

223. Analyze the following transactions as to their effect on the accounting equation.

(a)	The company paid $725 to a vendor for supplies purchased previously on account.	
(b)	The company performed $850 of services and billed the customer.	
(c)	The company received a utility bill for $395 and will pay it next month.	
(d)	The stockholder of the company received a cash dividend of $1,000.	
(e)	The company paid $315 in salaries to its employees.	
(f)	The company collected $730 of cash from its customers on account.	

Some of the possible effects of a transaction on the accounting equation are listed below:

(1)	Asset, dr.; Asset, cr.	
(2)	Liability, dr.; Revenue, cr.	
(3)	Asset, dr.; Liability, cr.	
(4)	Asset, dr.; Revenue, cr.	
(5)	Liability, dr.; Assets, cr.	
(6)	Equity, dr.; Asset, cr.	
(7)	Expense, dr.; Assets, cr.	
(8)	Expense, dr.; Liability, cr.	

Put the appropriate letter next to each transaction. 

Transaction	Effect on the accounting equation	
(a)	5	
(b)	4	
(c)	8	
(d)	6	
(e)	7	
(f)	1	

224. Set up T accounts for Cash, Accounts Receivable, Supplies, Accounts Payable, Capital Stock, Dividends, Professional Fees, and Operating Expenses.

(a)	In the T accounts, record the following transactions of Potter Pool Services for June, 2011, identifying each entry by number:	
 	(1)	Dan Potter invested $12,500 cash in the business in exchange for stock.	
 	(2)	Purchased supplies on account, $6,250.	
 	(3)	Paid operating expenses, $5,500.	
 	(4)	Billed clients for fees, $7,440.	
 	(5)	Received cash from cash clients, $4,700.	
 	(6)	Paid creditors on account, $1,400.	
 	(7)	Received $3,100 from clients on account.	
 	(8)	The company paid Dan $1,500 in cash dividends.	
 	 	
(b)	Prepare a trial balance as of June 30, 2011 for Potter Pool Services.	
 	 	
(c)	Assuming that supplies expense (which has not been recorded) amounts to $1,500 for June, determine net income for the month.	

(a)	
Cash	 	Capital Stock	
(1)	12,500 	 (3)	5,500	 	 	 	 (1)	12,500	
(5)	4,700 	 (6)	1,400	 	 	 	 	 	
(7)	3,100 	 (8)	1,500	 	 	 	 	 	

Accounts Receivable	 	Dividends	
(4)	7,440 	 (7)	3,100	 	(8)	1,500 	 	 	

Supplies	 	Professional Fees	
(2)	6,250 	 	 	 	 	 	 (4)	7,440	
 	 	 	 	 	 	 	 (5)	4,700	

Accounts Payable	 	Operating Expenses	
(6)	1,400 	 (2)	6,250	 	 (3)	5,500 	 	 	

(b)	
Potter Pool Services
Trial Balance
June 30, 2011	
Cash	11,900	 	
Accounts Receivable	4,340	 	
Supplies	6,250	 	
Accounts Payable	 	4,850	
Capital Stock	 	12,500	
Dividends	1,500	 	
Professional Fees	 	12,140	
Operating Expenses	  5,500	           	
 	29,490	29,490	

(c)	 $5,140 ($12,140 - $5,500 - $1,500)	

225. Prepare a trial balance, listing the following accounts in proper sequence.  The accounts (all normal balances) were taken from the ledger of Sophie Designs Co. on April 30, 2014.

Accounts Payable	$ 4,100	 	Rent Expense	$ 1,500	
Accounts Receivable	3,450	 	Salary Expense	14,000	
Cash	6,700	 	Fees Earned	45,425	
Capital Stock	10,000	 	Supplies	3,125	
Dividends	7,500	 	Supplies Expense	1,700	
Equipment	24,500	 	Utilities Expense	4,000	
Miscellaneous Expense	850	 	Retained Earnings	7,800	

Sophie Designs Co.
Trial Balance
April 30, 2014	
Cash	6,700	 	
Accounts Receivable	3,450	 	
Supplies	3,125	 	
Equipment	24,500	 	
Accounts Payable	 	4,100	
Capital Stock	 	10,000	
Retained Earnings	 	7,800	
Dividends	7,500	 	
Fees Earned	 	45,425	
Salary Expense	14,000	 	
Rent Expense	1,500	 	
Utilities Expense	4,000	 	
Supplies Expense	1,700	 	
Miscellaneous Expense	     850	           	
 	67,325	67,325 	

226. Exhibit 2-1
All nine transactions for Ralston Sports Co. for September 2011, the first month of operations, are recorded in the following T accounts:

Cash	 	Capital Stock	
(1)	25,000 	 (3)	12,500	 	 	 	 (1)	25,000	
(7)	11,900 	 (5)	7,600	 	 	 	 	 	
(9)	9,700 	 (6)	10,500	 	 	 	 	 	
 	 	 (8)	7,000	 	 	 	 	 	

Accounts Receivable	 	Dividends	
(4)	9,900 	 (9)	9,700	 	(8)	7,000 	 	 	

Supplies	 	Fees Earned	
(3)	12,500 	 	 	 	 	 	 (4)	9,900	
 	 	 	 	 	 	 	 (7)	11,900	

Equipment	 	Operating Expenses	
(2)	9,500 	 	 	 	(6)	10,500 	 	 	

Accounts Payable	 	 	
(5)	7,600 	 (2)	9,500	 	 	 	 	 	

 Refer to Exhibit 2-1.  Prepare a trial balance, listing the accounts in their proper order. 

Ralston Sports Company
Trial Balance
September 30, 2011	
Cash	9,000	 	
Accounts Receivable	200	 	
Supplies	12,500	 	
Equipment	9,500	 	
Accounts Payable	 	1,900	
Capital Stock	 	25,000	
Dividends	7,000	 	
Fees Earned	 	21,800	
Operating Expenses	10,500	           	
 	48,700	48,700	

227. 
(a)	List the errors in the following trial balance. All accounts have normal balances.	
(b)	What would be the new totals of the trial balance after errors are corrected? What would be the balance of Accounts Receivable?	

Winslow’s Auto Body
Trial Balance
For Month Ending April 30, 2011	
Cash	 	19,475	
Accounts Receivable	?	 	
Supplies	 	1,000	
Equipment	15,000	 	
Prepaid Insurance	 	500	
Accounts Payable	 	2,500	
Capital Stock	5,000	 	
Retained Earnings	12,000	 	
Dividends	 	1,000	
Fees Earned	 	49,600	
Salary Expense	14,500	 	
Rent Expense	 	9,000	
Utilities Expense	1,400	 	
Supplies Expense	3,900	 	
Miscellaneous Expense	     250	           	
 	55,000	81,575	

(a)	(1)	In the heading, the date should be April 30, 2011; not for a period of time.	
 	(2)	The cash balance should be a debit.	
 	(3)	Capital Stock and Retained Earnings should be credits.	
 	(4)	The supplies account should be a debit.	
 	(5)	Prepaid Insurance should be a debit and follow Accounts Receivable.	
 	(6)	Dividends should be a debit.	
 	(7)	Rent Expense should be a debit.	
 	(8)	The trial balance does not balance.	

(b)	The new total for credits would be accounts payable $2,500 + fees earned $49,600 + capital stock $5,000 + retained earnings $12,000 = total $69,100. Accounts receivable would be $69,100 (total credits) - $66,025 (corrected debits) = $3,075.	

228. Answer the following questions for each of the errors listed below, considered individually:

(a)	Did the error cause the trial balance totals to be unequal?	
(b)	What is the amount of the difference between the trial balance totals (where applicable)?	
(c)	Which of the trial balance totals, debit or credit, is the larger (where applicable)?	

Present your answers in columnar form, using the following headings:

Error	Totals	Difference in Totals	Larger of Totals	
(identifying number)	(equal or unequal)	(amount)	(debit or credit)	

Errors:
(1)	A dividend of $3,000 cash paid to the company’s owner and only stockholder was recorded by a debit of $3,000 to Salary Expense and a credit of $3,000 to Cash.	
(2)	A $650 purchase of supplies on account was recorded as a debit of $1,650 to Equipment and a credit of $1,650 to Accounts Payable.	
(3)	A purchase of equipment for $3,450 on account was not recorded.	
(4)	A $870 receipt on account was recorded as a $870 debit to Cash and a $780 credit to Accounts Receivable.	
(5)	A payment of $1,530 cash on account was recorded only as a credit to Cash.	
(6)	Cash sales of $8,500 were recorded as a credit of $8,500 to Cash and a credit of $8,500 to Fees Earned.	
(7)	The debit to record a $4,000 cash receipt on account was posted twice; the credit was posted once.	
(8)	The credit to record a $300 cash payment on account was posted twice; the debit was posted once.	
(9)	The debit balance of $7,400 in Accounts Receivable was recorded in the trial balance as a debit of $7,200.	

Error	Totals	Difference in Totals	Larger of Totals	
(1)	equal	----	 	----	 	
(2)	equal	----	 	----	 	
(3)	equal	----	 	----	 	
(4)	unequal	$     90	 	debit 	 	
(5)	unequal	1,530	 	credit	 	
(6)	unequal	17,000	 	credit	 	
(7)	unequal	4,000	 	debit 	 	
(8)	unequal	300	 	credit	 	
(9)	unequal	200	 	credit	 	

229. The bookkeeper for Brockton Industries prepared the following journal entries and posted the entries to the general ledger as indicated in the T accounts presented. Assume that the dollar amounts and the descriptions of the entries are correct.

July   3	Accounts Receivable 	1,000	 	
 	     Service Revenue 	 	1,000	
 	          Customers were billed for services completed.	 	 	
 	 	 	 	
11	Cash 	500	 	
 	     Service Revenue  	 	500	
 	      Payment is received from a customer billed for services on July 3.	 	 	
 	 	 	 	
12	Office Supplies	600	 	
 	     Accounts Payable  	 	600	
 	      Purchased office supplies on credit; payment is due in 30 days.	 	 	
 	 	 	 	
25	Office Furniture 	600	 	
 	     Cash 	 	600	
 	      Payment is made for office furniture received on 
      July 12.	 	 	

Accounts Receivable	 	Service Revenue	
7/3	1,000	½	 	 	 	7/3	1,000	½	 	 	
 	 	½	 	 	 	 	 	½	7/11	500	

Cash	 	Accounts Payable	
7/11	500	½	7/25	600	 	7/12	600	½	 	 	

Office Supplies	 	Office Furniture	
7/12	600	½	 	 	 	7/25	600	½	 	 	

REQUIRED:
If you assume that all journal entries have been recorded correctly, use the above information to: 
(1) Identify the postings to the general ledger that were made incorrectly. 
(2) Describe how each incorrect posting should have been made. 
(1) The bookkeeper incorrectly posted the July 3, July 11, and July 12 journal entries. 
(2) For the July 3 journal entry, the $1,000 credit to Service Revenue should have been posted to the Service Revenue account as a credit, not as a debit. For the July 11 journal entry, the $500 credit should be posted to Accounts Receivable, not to Service Revenue. For the July 12 journal entry, the $600 credit to Accounts Payable should have been posted to the Accounts Payable account as a credit, not as a debit.  The debit side of the entry should have been made to Office Furniture, not Office Supplies.