Deck 4: The Bookkeeping Process and Transaction Analysis

Question 1

In the seller's records, the sale of merchandise on account would:

A)increase assets and increase expenses.
B)increase assets and decrease liabilities.
C)increase assets and increase paid-in capital.
D)increase assets and decrease revenues.

Answer 1

A

Question 2

Chicago Consulting, an engineering consulting firm, provided $6,000 of services to a client; the client paid $2,000 when the bill was submitted and will pay the balance within a week.Chicago Consulting will record this transaction by:

A) $$\begin{array} { | l |l | r | r | } \hline \text { Dr. } & \text { Cash } & 2,000 & \\\hline \text { Dr. } & \text { Fees receivable } & 4,000 & \\\hline \text { Cr. } & \text { Fees revenue } & & 6,000 \\\hline\end{array}$$
B) $$\begin{array} { | l | l | r | r | } \hline \text { Dr. } & \text { Fees revenule } & 6,000 & \\\hline \text { Cr. } & \text { Fees receivable } & & 4,000 \\\hline \text { Cr. } & \text { Cash } & & 2,000 \\\hline\end{array}$$
C) $$\begin{array} { | c | c | r | r | } \hline \text { Dr. } & \text { Cash } & 2,000 & \\\hline \text { Cr. } & \text { Fees revernue } & & 2,000 \\\hline\end{array}$$
D) $\begin{array}{|l|l|r|r|}\hline \text { Dr. } & \text { Cash } & 2,000 & \\\hline \text { Dr. } & \text { Fees revenue } & 4,000 & \\\hline \text { Cr. } & \text { Fees receivable } & & 6,000 \\\hline\end{array}$

Answer 2

$$\begin{array} { | l |l | r | r | } \hline \text { Dr. } & \text { Cash } & 2,000 & \\\hline \text { Dr. } & \text { Fees receivable } & 4,000 & \\\hline \text { Cr. } & \text { Fees revenue } & & 6,000 \\\hline\end{array}$$

Question 3

In an advertiser's records, a newspaper ad submitted and published this week with the agreement to pay for it next week would:

A)decrease assets and decrease expenses.
B)increase liabilities and increase expenses.
C)decrease assets and increase revenue.
D)increase assets and decrease liabilities.

Answer 3

B

Question 4

A debit entry will:

A)decrease an asset account.
B)increase a liability account.
C)increase paid-in capital.
D)increase an expense account.

Question 5

An expanded version of the accounting equation could be:

A)Assets + Revenues = Liabilities + Stockholders' Equity − Expenses
B)Assets − Liabilities = Paid-in Capital − Revenues − Expenses
C)Assets = Liabilities + Paid-in Capital + Beginning Retained Earnings + Revenues − Expenses − Dividends
D)Assets = Liabilities + Paid-in Capital − Revenues + Expenses

Question 6

Unquiet Hands, Inc.borrowed $30,000 on October 1, 2019 at 6% interest with both principal and interest due on September 30, 2020.Which of the following journal entries should the firm use to accrue interest at the end of each month?

A) $$\begin{array} { | l | c | } \hline \text { Dr. } & \text { Iriterest payable } \\\hline \text { Cr. } & \text { Cash } \\\hline\end{array}$$
B) $\begin{array}{|c|c|}\hline \text { Dr. } & \text { Interest receivable } \\\hline \mathrm{Cr} . & \text { Interest payable } \\\hline\end{array}$

C) $\begin{array}{|l|l|}\hline \text { Dr. } & \text { Interest expense } \\\hline \mathrm{Cr} . & \text { Interest payable } \\\hline\end{array}$

D) $\begin{array}{|l|l|}\hline \text { Dr. } & \text { Interest payable } \\\hline \mathrm{Cr} . & \text { Interest expense } \\\hline\end{array}$

Question 7

A credit entry will:

A)always decrease the account balance.
B)always increase the account balance.
C)increase the balance of a revenue account.
D)increase the balance of an expense account.

Question 8

In the buyer's records, the purchase of merchandise on account would:

A)increase assets and increase expenses.
B)increase assets and increase liabilities.
C)increase liabilities and increase paid-in capital.
D)have no effect on total assets.

Question 9

Unquiet Hands, Inc.borrowed $30,000 on October 1, 2019 at 6% interest with both principal and interest due on September 30, 2020.How much should be in Unquiet Hands, Inc.'s interest payable account at December 31, 2019?

A)$450
B)$1,800
C)$0
D)$1,350

Question 10

A newspaper ad submitted and published this week, with the agreement to get paid for it next week would, in the newspaper's records:

A)increase assets and increase revenues.
B)increase assets and decrease liabilities.
C)increase assets and increase expenses.
D)have no effect on total assets.

Question 11

The accountant at WooSah! USA made an adjusting entry at the end of February to accrue interest on a note receivable from a customer.The effect of this entry is to:

A)decrease ROI for February.
B)increase ROI for February.
C)decrease working capital at February 28.
D)decrease the acid-test ratio at February 28.

Question 12

An adjusting journal entry recording an accrual:

A)results in a better matching of revenues and expenses.
B)will involve a debit or credit to cash.
C)will affect balance sheet accounts only.
D)will most likely include a debit to a liability account.

Question 13

The effect of an adjustment is:

A)to correct an entry that was not in balance.
B)to increase the accuracy of the financial statements.
C)to record cash receipts and payments not previously recorded.
D)to close the books.

Question 14

A credit entry will:

A)increase an asset account.
B)increase a liability account.
C)decrease paid-in capital.
D)increase an expense account.

Question 15

Unquiet Hands, Inc.borrowed $30,000 on October 1, 2019 at 6% interest with both principal and interest due on September 30, 2020.Which of the following journal entries should Unquiet Hands, Inc.use to record the payment of interest on September 30, 2020?

A) $\begin{array}{|l|l|}\hline \text { Dr. } & \text { Interest payable } \\\hline \mathrm{Cr} . & \text { Cash } \\\hline\end{array}$

B) $\begin{array}{|c|c|}\hline \text { Dr. } & \text { Interest receivable } \\\hline \mathrm{Cr} . & \text { Interest payable } \\\hline\end{array}$

C) $\begin{array}{|l|l|}\hline \text { Dr. } & \text { Interest expense } \\\hline \mathrm{Cr} . & \text { Interest payable } \\\hline\end{array}$

D) $\begin{array}{|l|l|}\hline \text { Dr. } & \text { Interest payable } \\\hline \mathrm{Cr} . & \text { Interest expense } \\\hline\end{array}$

Question 16

Wisdom Co.has a note payable to its bank.An adjustment is likely to be required on Wisdom's books at the end of every month that the loan is outstanding to record the:

A)amount of interest paid during the month.
B)amount of total interest to be paid when the note is paid off.
C)amount of principal payable at the maturity date of the note.
D)accrued interest expense for the month.

Question 17

Alpha Bot Industries has 30 employees who work Monday through Friday each week; each employee earns $150 per day and is paid every Friday.The end of the accounting period is on a Tuesday.How much wages expense should the firm accrue at the end of the period?

A)$4,500
B)$6,000
C)$0
D)$9,000

Question 18

To accrue $7,100 of employee salaries for the last week of February, the employer's journal entry is:

A) $$\begin{array} { | c | l | r | r | } \hline \text { Dr. } & \text { Salaries expense } & 7,100 & \\\hline \text { Cr. } & \text { Cash } & & 7,100 \\\hline\end{array}$$
B) $$\begin{array} { | c | c | r | r | } \hline \text { Dr. } & \text { Salaries expense } & 7,100 & \\\hline \text { Cr. } & \text { Salaries payable } & & 7,100 \\\hline\end{array}$$
C) $$\begin{array} { | l | c | r | r | } \hline \text { Dr. } & \text { Salaries payable } & 7,100 & \\\hline \text { Cr. } & \text { Cash } & & 7,100 \\\hline\end{array}$$
D) $$\begin{array} { | l | c | r | r | } \hline \text { Dr. } & \text { Salaries expense } & 7,100 & \\\hline \text { Cr. } & \text { Fee reveruse } & & 7,100 \\\hline\end{array}$$

Question 19

Which of the following is not one of the 5 questions of transaction analysis?

A)What's going on?
B)Which accounts are affected?
C)Is this an accrual?
D)Does the balance sheet balance?
E)Does my analysis make sense?

Question 20

A debit entry will:

A)always decrease the account balance.
B)always increase the account balance.
C)increase the balance of a revenue account.
D)increase the balance of an expense account.

Question 21

At the beginning of the current fiscal year, Mindspin Lab's balance sheet showed assets of $1,350,000 and liabilities of $1,050,000.During the year, liabilities decreased by $70,000.Net Income for the year was $350,000, and net assets at the end of the year were $386,000.There were no changes in paid-in capital during the year.
Calculate the dividends, if any, declared during the year.
Calculate the total assets at the end of the year.

Question 22

The effect of an adjustment on the financial statements is usually to:

A)make the balance sheet balance.
B)increase net income.
C)increase the accuracy of both the balance sheet and income statement.
D)match revenues and assets.

Question 23

A chart of accounts:

A)is where transactions are initially recorded.
B)is where transactions are posted to after they are initially recorded.
C)serves as an index to the ledger, with each account numbered to facilitate frequent references that are made to it.
D)is the same as a T-account, with debits on the left and credits on the right.

Question 24

When a firm purchases supplies for its business:

A)the supplies account should always be debited.
B)the supplies expense account should always be debited.
C)either the supplies account or the supplies expense account should be credited.
D)an adjustment will probably be required as supplies are used.

Question 25

Sales on account during the month totaled $78,000.Cash collections of accounts receivable during the month totaled $72,000.The balance in the Accounts Receivable account at the end of the month was $31,000.No accounts receivable were written off as uncollectible during the month.The balance in the Accounts Receivable account at the beginning of the month was:

A)$25,000.
B)$31,000.
C)$37,000.
D)$43,000.

Question 26

When a firm purchases supplies for use in its business, and the cost of the supplies purchased is recorded as an asset, the following adjustment to recognize the cost of supplies used will probably be required:

A) $$\begin{array} { | l | l | } \hline \text { Dr. } & \text { Supplies } \\\hline \text { Cr. } & \text { Accounts payable } \\\hline\end{array}$$
B) $$\begin{array} { | l | l | } \hline \text { Dr. } & \text { Supplies } \\\hline \text { Cr. } & \text { Supplies expense } \\\hline\end{array}$$
C) $$\begin{array} { | l | l | } \hline \text { Dr. } & \text { Supplies expense } \\\hline \text { Cr. } & \text { Supplies } \\\hline\end{array}$$
D)No adjustment will probably be required.

Question 27

At the beginning of the current fiscal year, the balance sheet of Mondrop Co.showed liabilities of $760,000.During the year liabilities increased by $20,000, assets increased by $110,000, and paid-in capital increased by $40,000 to $330,000.Dividends declared and paid during the year were $120,000.At the end of the year, stockholders' equity totaled $804,000.Calculate net income or loss for the year.

Question 28

A journal:

A)is where transactions are initially recorded.
B)is where transactions are posted to after they are initially recorded.
C)serves as an index to the ledger.
D)is the same as a source document, such as an invoice from a supplier or a copy of a credit purchase made by a customer.

Question 29

The balance in the Accounts Receivable account decreased from $18,000 at the beginning of the month to $15,000 at the end of the month.Sales on account during the month totaled $130,000.No accounts receivable were written off as uncollectible during the month.Cash collections of accounts receivable during the month totaled:

A)$127,000.
B)$130,000.
C)$133,000.
D)$145,000.

Question 30

The balance in the Wages Payable account was $25,000 at the beginning of the month.Wages accrued during the month totaled $54,000.Wages paid during the month were $63,000.

A)The balance of the Wages Payable account at the end of the month was $16,000.
B)The balance of the Wages Payable account at the end of the month was $34,000.
C)Wages expense for the month totaled $63,000.
D)Wages expense for the month totaled $79,000.

Question 31

The accounting concept/principle being applied when an adjustment is made is usually:

A)matching revenue and expense.
B)consistency.
C)original cost.
D)materiality.

Question 32

Using the column headings provided below, show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the account name, amount, and indicating whether it is an addition (+)or subtraction (?).Column headings reflect the expanded balance sheet equation; items that affect net income should not be shown as affecting stockholders' equity.
1.During the month, the board of directors declared a cash dividend of $2,400,
payable next month.
2.Employees were paid $3,800 in wages for their work during the first three
weeks of the month.
3.Employee wages of $1,200 for the last week of the month have not been recorded.
4.Merchandise that cost $1,800 was sold for $2,700.Of this amount, $2,000 was
received in cash and the balance is expected to be received within 30 days.
5.A contract was signed with a local radio station for a $200 advertisement;
the ad was aired during this month but will not be paid for until next month.
6.Store equipment was purchased at a cash price of $600.The original
list price of the equipment was $800, but a discount was received.
7.Received $360 of interest revenue for the current month.
8.Accrued $620 of interest expense at the end of the month.
$$\begin{array} { | c | l | l | l | l | } \hline \begin{array} { c } \text { Transaction } \\\text { Adjustment }\end{array} & \text { Assets } & \text { Liabilities } & \begin{array} { c } \text { Stackholders' } \\\text { Equity }\end{array} & \text { Net Income } \\\hline 1 . & & & & \\\hline 2 . & & & & \\\hline 3 . & & & & \\\hline 4 . & & & & \\\hline 5 . & & & & \\\hline 6 . & & & & \\\hline 7 . & & & & \\\hline 8 . & & & & \\\hline\end{array}$$

Question 33

Using the column headings provided below, show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the account name, amount, and indicating whether it is an addition (+)or subtraction (?).Column headings reflect the expanded balance sheet equation; items that affect net income should not be shown as affecting stockholders' equity.
1.The firm borrowed $4,000 from the bank; a short-term note was signed.
2.Merchandise inventory costing $1,500 was purchased; cash of $400 was
paid and the balance is due in 30 days.
3.Employee wages of $2,000 were accrued at the end of the month.
4.Merchandise that cost $700 was sold for $900 in cash.
5.This month's rent of $1,400 was paid.
6.Revenues from services during month totaled $13,000.Of this amount,
$4,000 was received in cash and the balance is expected to be received within 30 days.
7.During the month, supplies were purchased on account at a cost of $1,040,
and debited into the Supplies (asset)account.A total of $800 of supplies
were used during the month.
8.Interest of $480 has been earned on a note receivable, but has not yet been received.
$$\begin{array} { | c | l | l | l | l | } \hline \begin{array} { c } \text { Transaction/ } \\\text { Adjustment }\end{array} & \text { Assets } & \text { Liabilities } & \begin{array} { c } \text { Stockholders' } \\\text { Equity }\end{array} & \text { Net Income } \\\hline 1 . & & & & \\\hline 2 . & & & & \\\hline 3 . & & & & \\\hline 4 . & & & & \\\hline 5 . & & & & \\\hline 6 . & & & & \\\hline 7.& & & & \\\hline 8 . & & & & \\\hline\end{array}$$

Question 34

The balance in the Wages Payable account increased from $13,000 at the beginning of the month to $20,000 at the end of the month.Wages accrued during the month totaled $82,000.

A)Wages paid during the month totaled $75,000.
B)Wages paid during the month totaled $89,000.
C)Wages expense for the month totaled $75,000.
D)Wages expense for the month totaled $89,000.

Question 35

A ledger:

A)is where transactions are initially recorded.
B)is where transactions are posted to after they are initially recorded.
C)is the same as a chart of accounts, with each account numbered to facilitate frequent references that are made to it.
D)is the same as a source document, such as an invoice from a supplier or a copy of a credit purchase made by a customer.