Question 1

Golddigger Services, Inc. provides services to clients. On May 1, a client prepaid Golddigger Services $60,000 for 6-months services in advance. Golddigger Services' general journal entry to record this transaction will include a:

Accepted Answer

The prepayment of $60,000 represents services that have not yet been performed. Therefore, Golddigger Services should record the receipt of cash with a credit to Cash and the obligation to provide services with a debit to Unearned Management Fees. Choice D is the only option that correctly reflects this transaction.

Question 2

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 they intend to pay it. Which of the following general journal entries will Able Graphics make to record this transaction?

Accepted Answer

The answer of Able Graphics received a $400 utility bill...

Question 3

The company paid $100 cash in dividends to J. Smith, the owner. Which of the following general journal entries will Jay's Limo Services, Inc. make to record this transaction?

Accepted Answer

The correct journal entry for paying dividends involves debiting the Dividends account and crediting the Cash account, reflecting the decrease in cash due to the payment.

Question 4

Richard Redden contributed $70,000 in cash and land worth $130,000 to open a new business, RR Consulting, Inc. Which of the following general journal entries will RR Consulting, Inc. make to record this transaction?

Accepted Answer

The transaction involves contribution of both cash and land, which means they would be recorded separately. The common stock account will be credited with the total contributed amount. Therefore, the transaction will be recorded by debiting cash for $70,000, debiting land for $130,000, and crediting common stock for $200,000.

Question 5

Jay's Limo Services, Inc. paid $300 cash to employees for work performed in the current period. Which of the following general journal entries will Jay's Limo Services, Inc. make to record this transaction?

Accepted Answer

The correct journal entry to record the payment of salaries in cash is to debit Salaries Expense and credit Cash. This reflects the expense incurred and the reduction in cash.

Question 6

A double-entry accounting system is an accounting system:

Accepted Answer

A double-entry accounting system records the effects of transactions and other events in at least two accounts with equal debits and credits. This ensures that the accounting equation (assets = liabilities + equity) is always in balance and provides a system of checks and balances to prevent errors. Option A is not entirely accurate because transactions are not recorded twice, but rather in two different accounts with equal debits and credits. Options C, D, and E are incorrect statements.

Question 7

J. Brown Consulting paid $500 cash for utilities for the current month. Given the choices below, determine the general journal entry that J. Brown Consulting will make to record this transaction.

Accepted Answer

The correct journal entry for paying cash for utilities is to debit Utilities Expense and credit Cash. This reflects the increase in expenses and the decrease in cash.

Question 8

Trimble Graphic Design receives $1,500 from a client billed in a previous month for services provided. Which of the following general journal entries will Trimble Graphic Design make to record this transaction?

Accepted Answer

The answer of Trimble Graphic Design receives $1,500 from a...

Question 9

An asset created by prepayment of an insurance expense is:

Accepted Answer

The asset created by prepayment of an insurance expense is recorded as a debit to Prepaid Insurance. This is because prepaid insurance represents an asset, since the company has paid for a service or coverage that will be used in the future.

Question 10

Gi Gi's Dance Studio provided $150 of dance instruction and rented out its dance studio to the same client for another $100. The client paid immediately. Identify the general journal entry below that Gi Gi's will make to record the transaction.

Accepted Answer

The client paid immediately, so the cash account is debited for $250. The rental revenue and instruction revenue accounts are credited for $100 and $150, respectively, reflecting the earned income.

Question 11

A credit entry:

Accepted Answer

The answer of A credit entry:
...

Question 12

Wiley Consulting purchased $7,000 worth of supplies and paid cash immediately. Which of the following general journal entries will Wiley Consulting make to record this transaction?

Accepted Answer

The correct journal entry is to debit Supplies for $7,000 and credit Cash for $7,000, reflecting the purchase of supplies paid in cash.

Question 13

A debit is used to record which of the following?

Accepted Answer

The answer of A debit is used to record which...

Question 14

HH Consulting & Design provided $800 of consulting work and $100 of design work to the same client. It billed the client for the total amount and is expecting to collect from the customer next month. Which of the following general journal entries will HH Consulting & Design make to record this transaction?

Accepted Answer

The correct entry is to debit Accounts Receivable for $900 (the total amount billed) and credit Consulting Revenue for $800 and Design Revenue for $100, reflecting the services provided.

Question 15

J. Brown Consulting paid $2,500 cash for a 5-month insurance policy which begins on December 1. Given the choices below, determine the general journal entry that J. Brown Consulting will make to record this transaction.

Accepted Answer

The payment for a future insurance policy is recorded as a prepaid expense, which is an asset. Therefore, the correct entry is to debit Prepaid Insurance and credit Cash.

Question 16

Grills R Us Catering provided $1,000 of catering services and billed its client for the amount owed. Given the choices below, determine the general journal entry that Grills R Us Catering will make to record this transaction.

Accepted Answer

The correct journal entry is to debit Accounts Receivable for $1,000 (to record the amount owed by the client) and credit Catering Revenue for $1,000 (to record the revenue earned from the catering services provided).

Question 17

An account balance is:

Accepted Answer

An account balance is the difference between the total debits and total credits for an account including the beginning balance. It can be either a debit or credit balance depending on whether the total debits or credits exceed the other. Choices A, B, D, and E do not accurately describe what an account balance is.

Question 18

Willow Rentals purchased office supplies on credit. The general journal entry made by Willow Rentals will include a:

Accepted Answer

When purchasing office supplies on credit, the accounts payable account is credited because the company now owes the supplier money. Therefore, the correct choice is a credit to accounts payable.

Question 19

ABC Catering received $800 cash from a customer for catering services to be provided next month. Given the choices below, determine the general journal entry that ABC Catering will make to record this transaction.

Accepted Answer

The correct entry is to debit Cash for $800 and credit Unearned Catering Revenue for $800, as the revenue has not yet been earned.

Question 20

Select the account below that normally has a credit balance.

Accepted Answer

Wages Payable is a liability account and normally has a credit balance, as the company owes money to its employees for wages that have been earned but not yet paid.

Quiz 2: Accounting for Business Transactions