Deck 3: Processing Accounting Information

Question 1

All of the following events transactions) would be identified from standard source documents except for

A)freight charges for merchandise purchased from suppliers.
B)the amount to be paid to settle a lawsuit for discrimination in hiring employees.
C)wages to be paid to hourly employees.
D)commissions earned by sales employees.

Answer 1

B

Question 2

Carl and Stefanie each invest $15,000 in a business and are given shares of stock in Thibeau Industries as evidence of their ownership interests.For this transaction, identify the effect on the accounting equation.

A)Assets increase and liabilities increase.
B)Assets increase and stockholders' equity increases.
C)Liabilities increase and stockholders' equity decreases.
D)Liabilities decrease and assets decrease.

Answer 2

B

Question 3

Which of the following is an internal event transaction)?

A)Life guard salaries are paid by a swim club.
B)Dividends are distributed to shareholders.
C)Eggs used to make omelets in a restaurant are purchased.
D)Potato chips are transferred from the production line to the packaging area.

Answer 3

D

Question 4

Payment is made for land purchased earlier on credit.For this transaction, identify the effect on the accounting equation.

A)Assets increase and liabilities increase.
B)Assets increase and stockholders' equity increases.
C)Liabilities increase and stockholders' equity decrease.
D)Liabilities decrease and assets decrease.

Question 5

Land is purchased on credit.For this transaction, identify the effect on the accounting equation.

A)Assets increase and liabilities increase.
B)Assets increase and owners' equity increases.
C)Liabilities increase and owners' equity decreases.
D)Liabilities decrease and assets decrease.

Question 6

Payment is made for an electric bill which was received and recorded earlier.For this transaction, identify the effect on the accounting equation.

A)Assets increase and liabilities increase.
B)Assets increase and stockholders' equity increases.
C)Liabilities increase and stockholders' equity decreases.
D)Liabilities decrease and assets decrease.

Question 7

Payment is received from customers who were billed earlier for services provided for them.For this transaction, identify the effect on the accounting equation.

A)Assets increase and liabilities increase.
B)Assets increase and stockholders' equity increases.
C)Liabilities increase and stockholders' equity decreases.
D)There is no effect on the accounting equation as one asset account increases while another asset account decreases.

Question 8

Services are provided for customers who pay for the services immediately.For this transaction, identify the effect on the accounting equation.

A)Assets increase and liabilities increase.
B)Assets increase and stockholders' equity increases.
C)Liabilities increase and stockholders' equity decreases.
D)Liabilities decrease and assets decrease.

Question 9

During May, Aniston, Inc.purchased office supplies for cash.The supplies will be used in June.What effect does this purchase transaction have on the accounting equation?

A)Assets increase and stockholders' equity decreases.
B)Assets increase and liabilities increase.
C)Assets decrease and liabilities decrease.
D)There is no effect on the accounting equation as one asset account increases while another asset account decreases.

Question 10

A bill is received for electric service; the charge for the electricity is recorded, but payment will be made later.For this transaction, identify the effect on the accounting equation.

A)Assets increase and liabilities increase.
B)Assets increase and stockholders' equity increases.
C)Liabilities increase and stockholders' equity decreases.
D)Liabilities decrease and assets decrease.

Question 11

Which of the following events transactions) is an internal event for a business entity?

A)An accountant provides services for clients.
B)An accountant purchases computer equipment to maintain business records and prepare legal documents.
C)Periodically, part of the cost of the computer equipment used by an accountant is assigned to depreciation expenses.
D)An accountant receives cash payments from clients who were billed for services.

Question 12

Which of the following would be a case where an event as a transaction is not supported by a source document?

A)a purchase of inventory on credit
B)a cash sale
C)the financial consequences of a fire loss
D)recording payroll

Question 13

Services are provided for customers who are sent bills for the amount they owe.For this transaction, identify the effect on the accounting equation.

A)Assets increase and liabilities increase.
B)Assets increase and stockholders' equity increases.
C)Liabilities increase and stockholders' equity decreases.
D)Liabilities decrease and assets decrease.

Question 14

Which of the following statements is false?

A)Checks and deposit slips are the main source of documents backing up the bank statement.
B)Retailers use cash register tapes to recognize sales.
C)Stock certificates are evidence of being a creditor of the company.
D)Time cards are used as the source of information to record wages.

Question 15

Which of the following statements is true?

A)Only the effects of internal transactions must be recognized and recorded in the entity's accounting system.
B)An internal event is a transaction between an entity and its environment.
C)Not all recognizable events are supported by a standard source document.
D)Only the effects of external events must be recognized, measured, and recorded in an entity's accounting system.

Question 16

All of the following are external events transactions) except for

A)a department store recognizing losses from shoplifting.
B)a department store running ads in a local newspaper.
C)a department store purchasing merchandise from a clothing manufacturer.
D)a department store selling clothing to customers on credit.

Question 17

The purchase of office equipment on credit has what effect on the accounting equation?

A)Assets decrease and stockholders' equity decreases.
B)Liabilities increase and stockholders' equity decreases.
C)Assets increase and liabilities increase.
D)Assets decrease and liabilities decrease.

Question 18

Blecker Corp.made cash sales to customers.What effect does this transaction have on the accounting equation?

A)Liabilities increase and stockholders' equity increases.
B)There is no effect on the accounting equation as one asset account increases while another asset account decreases.
C)Assets increase and liabilities increase.
D)Assets increase and stockholders' equity increases.

Question 19

The payment of employee salaries has what effect on the accounting equation?

A)Assets decrease and stockholders' equity decreases.
B)Liabilities decrease and stockholders' equity decreases.
C)Assets decrease and liabilities increase.
D)Assets increase and liabilities decrease.

Question 20

Which one of the following statements is true?

A)External events transactions) involve interactions between an entity and a party outside the entity.
B)Every event or transaction which affects an entity is identified from a source document.
C)All economic events can be reliably measured.
D)The movement of raw material into production is an external event.

Question 21

Owners of Tri-States Industries, Ralph and Maureen, are sent a dividend check from the company.For this transaction, what is the effect on the accounting equation for Tri-States Industries?

A)Assets decrease and stockholders' equity decreases.
B)Assets increase and stockholders' equity increases.
C)Liabilities increase and stockholders' equity decreases.
D)Liabilities increase and stockholders' equity decreases.

Question 22

Which of the following entries causes a decrease in assets and in net income?

A)The entry to record the payment of utilities with cash.
B)The entry to record the payment of rent for three months in advance.
C)The entry to record accrued wages payable.
D)The entry to record revenue earned but not yet received.

Question 23

A list of all asset, liability, stockholders' equity, revenue, and expense accounts, along with their assigned account numbers, which are used by a company is aan)

A)Account
B)General Journal
C)General Ledger
D)Chart of Accounts

Question 24

Your bookkeeper is off for the day and you are trying to figure out what her last entry in the journal could be for.Unfortunately, she only recorded the debit side of the transaction as $4,400 to Accounts Payable.It is possible that this debit could correspond to:

A)A purchase of equipment costing $4,400 on credit.
B)A payment of $4,400 to a supplier to settle a balance due.
C)A $4,400 sale to a customer.
D)A $4,400 issuance of the company's capital stock.

Question 25

Double-entry accounting is best characterized as:

A)The number of debit entries posted to the ledger equals the number of credit entries.
B)The number of ledger accounts with debit balances is equal to the number with credit balances.
C)Every transaction affects both an asset account and either a liability account or a stockholders' equity account.
D)The total dollar amount of debit entries posted to the ledger is equal to the dollar amount of the credit entries.

Question 26

One effect on the accounting equation when a firm borrows money is

A)stockholders' equity decreases.
B)assets increase.
C)liabilities decrease.
D)assets decrease.

Question 27

The Holmes Company purchased a building for $75,000 in cash.What is the effect on current assets?

A)Increase in current assets
B)Decrease in current assets
C)No effect on current assets
D)Unable to determine

Question 28

One effect on the accounting equation when a firm lends money is

A)stockholders' equity decreases.
B)liabilities decrease.
C)liabilities increase.
D)total assets remain the same.

Question 29

If the landlord has rent , then the tenant has rent .

A)revenue; revenue
B)revenue; expense
C)expense; revenue
D)expense; expense

Question 30

Given a current ratio of 5 to 3, what is the effect of paying a supplier within 30 days of the purchase?

A)The current ratio would increase.
B)The current ratio would decrease.
C)The current ratio would remain the same.
D)Unable to determine.

Question 31

Which of the following statements best describes the effects of recognizing revenue earned by a business entity?

A)Assets increase only when cash sales are made.
B)Stockholders' equity increases only when credit sales are made.
C)Assets and stockholders' equity increase when either cash or credit sales are made.
D)Assets increase, but stockholders' equity decreases, when either cash or credit sales are made.

Question 32

Louisiana Enterprises received payment from its customers for previous sales on credit.What was the impact on its working capital?

A)Increase in working capital
B)Decrease in working capital
C)No effect on working capital
D)Unable to determine

Question 33

Which of the following transactions does not affect the total assets of Horizon Sailing Corp.?

A)A bill is received for the telephone service used by Horizon Sailing during the past month.
B)Dividends are paid by Horizon Sailing.
C)Customers are billed for sales made on credit by Horizon Sailing.
D)A new computer is purchased on credit by Horizon Sailing.

Question 34

Which of the following transactions affects the liabilities for Gravette, Inc.?

A)Supplies are purchased for cash by Gravette.
B)Gravette places an order for merchandise with a supplier; the merchandise will be shipped to Ernest White in 60 days.
C)The owners of Gravette invest $100,000 in the company.
D)Payment is made on a bank loan which Gravette had obtained 6 months ago.

Question 35

The record used to accumulate monetary information for each individual asset, liability, stockholders' equity, revenue, and expense item is aan)

A)Account
B)General Journal
C)General Ledger
D)Chart of Accounts

Question 36

If the business has an from a customer, then the customer has an to the business.

A)account receivable; account receivable
B)account payable; account payable
C)account receivable; account payable
D)account payable; account receivable

Question 37

Krenshaw Rentals
Use the five transactions for Krenshaw Rentals described below to answer the questions) that follows).
Refer to the transactions for Krenshaw Rentals.
Based on the above transactions, how much is still owed to Krenshaw on October 31 from its customers?

A)$ -0-
B)$ 250
C)$ 500
D)$ 750

Question 38

Which of the following statements regarding the activities of Forman Corp.is true?

A)Revenues decrease Forman's stockholders' equity.
B)Expenses increase Forman's stockholders' equity.
C)Expenses decrease Forman's stockholders' equity.
D)None of these answer choices is correct.

Question 39

Given that Carlson Corp.'s current ratio is 3 to 2, what is the effect of obtaining a patent from the inventor in exchange for shares of stock in Carlson Corp.?

A)The current ratio would increase.
B)The current ratio would decrease.
C)The current ratio would remain the same.
D)Unable to determine.

Question 40

Which of the following statements best describes one effect of recognizing expenses incurred by a business entity?

A)Assets will increase.
B)Liabilities will decrease.
C)Stockholders' equity will increase.
D)Stockholders' equity will decrease.

Question 41

Which of the following accounts is increased by a credit entry?

A)Sales Revenue
B)Salary Expense
C)Accounts Receivable
D)Dividends

Question 42

Which of the following accounts is increased by a debit entry?

A)Common Stock Capital Stock)
B)Equipment
C)Unearned Subscription Revenue
D)Notes Payable

Question 43

A credit means that

A)the event has an effect on the right side of an account.
B)the event is unfavorable.
C)the event is favorable.
D)the event always decreases the account.

Question 44

Parachute Country Club
Use the selected accounts for Parachute Country Club presented below to answer the following questions).
Read the information on Parachute Country Club.
On which date did the country club collect an advance deposit?

A)August 2
B)August 3
C)August 5
D)August 7

Question 45

Debit entries are used to

A)increase asset accounts.
B)decrease expense accounts.
C)increase liability accounts.
D)increase revenue accounts.

Question 46

The system of accounting in which there are at least two accounts affected in every transaction so that the accounting equation stays in balance is aan)

A)Double-entry system
B)Debit
C)Credit
D)Journalizing

Question 47

Parachute Country Club
Use the selected accounts for Parachute Country Club presented below to answer the following questions).
Read the information on Parachute Country Club.
On which date did the company make cash sales for daily golf and swimming fees?

A)August 2
B)August 3
C)August 5
D)August 7

Question 48

Parachute Country Club
Use the selected accounts for Parachute Country Club presented below to answer the following questions).
Read the information about Parachute Country Club.
Which of the following describes the transaction which occurred on August 7?

A)Sold club memberships on credit.
B)Cash sales of daily fees.
C)Collected an advance deposit in cash.
D)Received cash payments of accounts receivable.

Question 49

All of the following accounts have normal credit balances except

A)Accounts Payable
B)Common Stock Capital Stock)
C)Investments
D)Service Revenue

Question 50

All of the following accounts have normal debit balances except

A)Accounts Receivable
B)Dividends
C)Office Supplies Expense
D)Sales

Question 51

Parachute Country Club
Use the selected accounts for Parachute Country Club presented below to answer the following questions).
Read the information for Parachute Country Club.
On which date did the country club make a credit sale of club memberships?

A)August 2
B)August 3
C)August 5
D)August 7

Question 52

Which pair of accounts has the same set of rules for debit and credit entries?

A)Common Stock Capital Stock) and Accounts Payable
B)Salaries Expense and Retained Earnings
C)Cash and Notes Payable
D)Sales Revenue and Accounts Receivable

Question 53

An entry made to the right side of an account is called a

A)debit
B)credit
C)double-entry system
D)journal entry

Question 54

Which pair of accounts has the same set of rules for debit and credit entries?

A)Service Revenue and Rent Expense
B)Dividends and Retained Earnings
C)Equipment and Salaries Expense
D)Accounts Receivable and Accounts Payable

Question 55

Credit entries are used to

A)increase asset accounts.
B)increase liability accounts.
C)decrease revenue accounts.
D)decrease liability accounts.

Question 56

The correct term for an entry made to the left side of an account is

A)Double-entry system
B)Debit
C)Credit
D)Journalizing

Question 57

An abbreviated version of an account which is useful for analyzing the effects of business transactions is the

A)chart of accounts
B)double entry system
C)T account
D)trial balance

Question 58

What type of account is increased with a debit but is a decrease to retained earnings?

A)Liability
B)Asset
C)Revenue
D)Expense

Question 59

Parachute Country Club
Use the selected accounts for Parachute Country Club presented below to answer the following questions).
Read the information about Parachute Country Club.
Assuming that there are no other transactions, how much was owed to the club by the membership on August 8th?

A)$1,800
B)$1,300
C)$ 900
D)$ 500

Question 60

A file or book which contains a record for all accounts used by a company, including the account balance, is called a

A)chart of accounts
B)general journal
C)general ledger
D)trial balance

Question 61

Transactions are recorded in the general journal in:

A)Alphabetical order.
B)Account number order.
C)Chronological order.
D)Financial statement order.

Question 62

Use the following five transactions for Morton & Associates, Inc.to answer the questions).
See the transactions to Morton & Associates.
The journal entry to record the May 1 transaction will include a debit of $800 to

A)Sales Revenue
B)Accounts Receivable
C)Cash
D)Retained Earnings

Question 63

If the sum of the debits and credits in a trial balance is not equal, then

A)there is no concern because the two amounts are not meant to be equal.
B)the chart of accounts also does not balance.
C)it is safe to proceed with the preparation of financial statements.
D)most likely an error was made in posting journal entries to the general ledger or in preparing the trial balance.

Question 64

The correct term for the process of transferring amounts from a book of original entry to specific assets, liabilities, revenues, expenses, and stockholders' equity items is

A)Double-entry system
B)Posting
C)Credit
D)Journalizing

Question 65

Use the following five transactions for Morton & Associates, Inc.to answer the questions).
See the transactions to Morton & Associates.
The journal entry to record the May 31 transaction will include a credit to

A)Salaries Expense
B)Salaries Payable
C)Prepaid Salaries
D)Cash

Question 66

A trial balance is aan)

A)optional financial statement used only by accountants.
B)device used to prove the equality of debits and credits in the general ledger.
C)list of accounts and their balances taken from the chart of accounts.
D)financial statement which can be used in place of a balance sheet.

Question 67

The purchase of office equipment at a cost of $2,600 with an immediate down payment of $1,200 and agreement to pay the balance within 60 days is recorded by:

A)A debit of $2,600 to Office Equipment, a debit of $1,200 to Accounts Receivable, and a credit of $1,400 to Accounts Payable.
B)A debit of $1,400 to Accounts Receivable, a debit of $1,200 to Cash, and a credit of $2,600 to Office Equipment.
C)A debit of $2,600 to Office Equipment, a credit of $1,200 to Cash, and a credit of $1,400 to Accounts Payable.
D)A debit of $2,600 to Office Equipment, a credit of $1,200 to Cash, and a credit of $1,400 to Accounts Receivable.

Question 68

Maryland Vacations has a $2,200 account receivable from the Miami Kiwanis.On March 11, the Kiwanis makes a partial payment of $1,050 to Maryland.The journal entry made on March 11 by Maryland to record this transaction includes:

A)A debit to the Cash account of $1,150.
B)A debit to the Accounts Receivable account of $1,150.
C)A credit to the Service Revenue account of $1,050.
D)A credit to the Accounts Receivable account of $1,050.

Question 69

When the amount for a debit entry in a journal is transferred to a specific account in the general ledger, it must be recorded

A)as a debit to that account in the general ledger.
B)as a credit to that account in the general ledger.
C)in sum only, without any regard for debit or credit, since the general ledger accounts do not have spaces for debit and credit entries.
D)cannot be determined without further information.

Question 70

Wolfe Inc.
Wolfe Inc.reports these account balances at January 1, 2015:
See the account balances for Wolfe Inc.
On January 31, Wolfe collected $12,000 of its accounts receivable and paid $11,000 on its note payable.In Wolfe's trial balance prepared on January 1, 2015, the total of the credit column is:

A)$182,000
B)$286,000
C)$196,000
D)$166,000

Question 71

Use the following five transactions for Morton & Associates, Inc.to answer the questions).
See the transactions to Morton & Associates.
The journal entry to record the May 23 transaction will include a credit of $430 to

A)Salaries Expense
B)Cash
C)Prepaid Expenses
D)Accounts Payable

Question 72

The record in which transactions are initially recorded in chronological order as they occur is aan)

A)Account
B)General Journal
C)General Ledger
D)Chart of Accounts

Question 73

Use the following five transactions for Morton & Associates, Inc.to answer the questions).
See the transactions for Morton & Associates.
Based only on these transactions, what is the total amount of expenses that should appear on the income statement for the month of May?

A)$ 430
B)$ 850
C)$ 1,280
D)$ 1,440

Question 74

A list of all accounts and their balances which is used to prove the equality of debits and credits as of a specific date is aan)

A)Account
B)General Journal
C)Trial Balance
D)Chart of Accounts

Question 75

Which of the following will not cause a trial balance to be out of balance?

A)The balance for an account is incorrectly computed.
B)A debit entry is posted as a credit.
C)A credit entry is posted to the wrong account as a credit.
D)An account is accidentally omitted from the trial balance.

Question 76

Which of the following statements is true?

A)An entry in a general ledger account can be traced to the trial balance by referring to the page listed in the posting reference column of that ledger account.
B)The posting of an amount recorded in the general journal can be verified by referring to the account number listed in the posting reference column on that line in the general journal.
C)Business transactions are recorded first in the general ledger; then that information is transferred to the general journal.
D)No explanation is needed for each entry in the general journal.

Question 77

The correct term for the process of recording the economic effects of business transactions in a book of original entry is

A)Double-entry system
B)Debit
C)Credit
D)Journalizing

Question 78

Which of the following statements is true?

A)If a debit entry is made to an account in the general journal, the same account will receive a credit entry when the amount is posted to the general ledger.
B)If all transactions are correctly posted to the general ledger, the sum of the accounts with debit balances should be equal to the sum of the accounts with credit balances.
C)Posting occurs when numbers in the general ledger accounts are transferred to the general journal.
D)If the sum of the debit balances equals the sum of the credit balances then there were no mistakes made in the posting process.

Question 79

Use the following five transactions for Morton & Associates, Inc.to answer the questions).
See the transactions to Morton & Associates.
The journal entry to record the May 9 transaction will include a credit of $1,220 to

A)Furniture and Supplies
B)Cash
C)Accounts Payable
D)Administrative Expenses

Question 80

Use the following five transactions for Morton & Associates, Inc.to answer the questions).
See the transactions to Morton & Associates.
The journal entry to record the May 15 transaction will include a debit of $1,220 to

A)Salaries Expense
B)Salaries Payable
C)Prepaid Expenses
D)Accounts Payable