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Exam 2: Financial Statements and the Accounting System

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Question 31

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Major Lodging had the following accounts and balances as of December 31: Using the information in the table,calculate the total assets reported on Major's balance sheet for the period.

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

F) B) and D)
G) B) and E)

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Question 32

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The numbering system used in a company's chart of accounts:

A) Is the same for all companies.
B) Is determined by generally accepted accounting principles.
C) Depends on the source documents used in the accounting process.
D) Typically begins with balance sheet accounts.
E) Typically begins with income statement accounts.

F) C) and D)
G) A) and C)

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Question 33

Multiple Choice

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Which of the following statements is not true:

The dividends account normally has a debit balance.

A more structured format that is similar to a T-account in that it has columns for debits and credits,but that is different in that it has columns for transaction date,explanation,and the account balance is the ________.

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

A business's source documents:

Given each of the following errors,indicate on the table below the amount by which the trial balance will be out of balance and which trial balance column (debit or credit)will have the larger total as a result of the error. a.$100 debit to Cash was debited to the Cash account twice. b.$1,900 credit to Sales was posted as a $190 credit. c.$5,000 debit to Office Equipment was debited to Office Supplies. d.$625 debit to Prepaid Insurance was posted as a $62.50 debit. e.$520 credit to Accounts Payable was not posted.

Asset accounts are decreased by debits.

Increases in liability accounts are recorded as debits.

BBB Company sends a $2,500 invoice to a customer for catering services it provided during the month.Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

Rowdy Bolton began Bolton Office Services in October and during that month completed these transactions: a.Invested $10,000 cash,and $15,000 of computer equipment in exchange for common stock. b.Paid $500 cash for an insurance premium covering the next 12 months. c.Completed a word processing assignment for a customer and collected $1,000 cash. d.Paid $200 cash for office supplies. e.Paid $2,000 for October's rent. Prepare journal entries to record the above transactions.Explanations are unnecessary.

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

List the steps in processing transactions.

On October 27,Able Graphics received a $400 utility bill for the current month's electricity.It is not due until the end of the next month which is when the bill will be paid.Which of the following general journal entries will Able Graphics make on October 27 to record this transaction?

Jaxson McCormick opened McCormick's Repairs on March 1 of the current year.During March,the following transactions occurred and were recorded in the company's books: 1.McCormick invested $25,000 cash in the business in exchange for common stock. 2.McCormick contributed $100,000 of equipment to the business. 3.The company paid $2,000 cash to rent office space for the month of March. 4.The company received $16,000 cash for repair services provided during March. 5.The company paid $6,200 for salaries for the month of March. 6.The company provided $3,000 of services to customers on account. 7.The company paid cash of $500 for utilities for the month of March. 8.The company received $3,100 cash in advance from a customer for repair services to be provided in April. 9.The company paid Jackson $5,000 cash as a dividend. Based on this information,net income for March would be:

Identify the statement that is incorrect.

A general journal is:

Source documents identify and describe transactions and events entering the accounting process.

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