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Exam 2: Analyzing and Recording Transactions

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Question 71

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Gi Gi's Bakery has total assets of $425 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio.

A) 25.9%.
B) 14.9%.
C) 38.6%.
D) 34.9%.
E) 13.4%.

F) None of the above
G) A) and E)

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Question 72

Multiple Choice

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A company's formal promise to pay (in the form of a promissory note) a future amount is a(n) :

A) Account receivable.
B) Unearned revenue.
C) Note payable.
D) Prepaid expense.
E) Credit account.

F) A) and E)
G) All of the above

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Question 73

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Paul's Landscaping paid $500 on account for supplies purchased in the prior month. Which of the following general journal entries will Paul's Landscaping make to record this transaction?

The debt ratio is calculated by dividing total assets by total liabilities.

A debit:

What is a trial balance? What is its purpose?

A business's source documents:

A business's general journal provides a place for recording all of the following except:

Expenses always decrease equity.

A debit is used to record an increase in all of the following accounts except:

Owner withdrawals always decrease equity.

All of the following statements accurately describe the debt ratio except.

The purchase of land and buildings will generally be recorded in the same ledger account.

Which of the following is NOT an equity account:

Miley Block is a building consultant. Shown below are (a)several accounts in her ledger with each account preceded by an identification number, and (b)several transactions completed by Block. Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction. $\begin{array}{llll}\text { 1. } & \text { Accounts Payable } & 7 . & \text { Telephone Expense } \\\text { 2. } & \text { Accounts Receivable } & 8 . & \text { Unearned Revenue } \\\text { 3. } & \text { Cash } & 9 . & \text { Miley Block, Capital } \\\text { 4. } & \text { Consulting Fees Earned } & 10 . & \text { Miley Block, Withdrawals } \\\text { 5. } & \text { Office Supplies } & 11 . & \text { Insurance Expense } \\\text { 6. } & \text { Office Supplies Expense } & 12 . & \text { Prepaid Insurance }\end{array}$ $\begin{array}{lcc}\begin{array}{l}& \text { Debit } & \text { Credit }\\\text { Example: } \\\text { Completed consulting work for a } \\\text { client who will pay at a later date. }& 2 & 4\\\end{array} \\\end{array}$ A. Received cash in advance from a customer for designing a building B. Purchased office supplies on credit. C. Paid for the supplies purchased in B. D. Received the telephone bill of the business and immediately paid it. E. Paid for a 3-year insurance policy

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

Credits always increase account balances.

A business paid $100 cash to Charles Nice (the owner of the business)for his personal use. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

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

Select the account below that normally has a credit balance.