Question 1

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.

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Question 2

On December 3, the ABBJ Company paid $1,400 cash in salaries to office personnel. Prepare the general journal entry to record this transaction.

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Question 3

Rowdy Bolton began Bolton Office Services, Inc. in October and during that month completed these transactions:
a. Invested $10,000 cash, and $15,000 of computer equipment.
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.

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Question 4

A company had total assets of $350,000, total liabilities of $101,500 and total equity of $248,500. Calculate the company's debt ratio.

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Question 5

For each of the accounts in the following table (1) identify the type of account as an asset, liability, equity, revenue, or expense, and (2) identify the normal balance of the account.
Account Type
Normal Balance
a. Wages Expense
b. Accounts Receivable
c. Commissions Earned
d. Salaries Payable
e. Common Stock
f. Unearned Advertising Revenue
g. Salaries Expense
h. Magazine Subscription Revenue
i. Dividends
j. Prepaid Insurance

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Question 6

The business paid $100 cash dividend to Charles Nice (the sole stockholder of the corporation). Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

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Question 7

At year-end, Henry Laundry Service, Inc. noted the following errors in its trial balance:
1. It understated the total debits to the Cash account by $500 when computing the account balance.
2. A credit sale for $311 was recorded as a credit to the revenue account, but the offsetting debit was not posted.
3. A cash payment to a creditor for $2,600 was never recorded.
4. The $680 balance of the Prepaid Insurance account was listed in the credit column of the trial balance.
5. A $24,900 van purchase was recorded as a $24,090 debit to Equipment and a $24,090 credit to Notes Payable.
6. A purchase of office supplies for $150 was recorded as a debit to Office Equipment. The offsetting credit entry was correct.
7. An additional investment of $4,000 by Del Henry was recorded as a debit to Common Stock and as a credit to Cash.
8. The cash payment of the $510 utility bill for December was recorded (but not paid) twice.
9. The revenue account balance of $79,817 was listed on the trial balance as $97,817.
10. A $1,000 cash withdrawal by the stockholder was recorded as a $100 debit to Dividends and $100 credit to cash.
Using the form below, indicate whether each error would cause the trial balance to be out of balance, the amount of any imbalance, and whether a correcting journal entry is required. $\begin{array} { |l|l|l|l|l|l|}
\hline& \begin{array}{c}
\text { Would } \
\text { the }\
\text { error } \
\text { cause } \
\text { the trial } \
\text { balance } \
\text { to be out } \
\text { of } \
\text { balance? } \
\end{array}&&\begin{array}{c}
\text { Amount } \
\text { of } \
\text { Imbalance } \
\end{array}&\begin{array}{c}
\text { Correcting } \
\text { Journal } \
\text { Entry } \
\text { Required } \
\end{array}\
\hline\text { Error } & \text { Yes } & \text { No }&& \text { Yes } & \text { No }\\hline1\\hline2\\hline3\
\hline4\\hline5\\hline6\\hline7\\hline8\\hline9\\hline10\\hline
\end{array}$

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Question 8

Explain the recording and posting processes.

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Question 9

For each of the following accounts, identify whether a debit or credit yields the indicated change.
a. To increase Fees Earned
b. To decrease Cash
c. To decrease Unearned Revenue
d. To increase Accounts Receivable
e. To increase Common Stock
f. To decrease Notes Payable
g. To increase Prepaid Rent
h. To increase Salaries Expense
i. To increase Accounts Payable
j. To decrease Prepaid Insurance

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Question 10

Pippa's Paralegal Services, Inc. completed these transactions in February:
a. Purchased office supplies on account, $300.
b. Completed work for a client on credit, $500.
c. Paid cash for the office supplies purchased in (a).
d. Completed work for a client and received $800 cash.
e. Received $500 cash for the work described in (b).
f. Received $1,000 from a client for paralegal services to be performed in March.
Prepare journal entries to record the above transactions. Explanations are not necessary.

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Question 11

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.
Error
Amount Out
of Balance
Column Having Larger Total
a.
b.
c.
d.
e.

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Question 12

Indicate on which of the financial statements the following items appears. Use I for income statement, E for statement of retained earnings, and B for balance sheet. More than one statement may be appropriate for some items.
a. Fees Earned
b. Cash
c. Unearned Revenue
d. Rent expense
e. Retained Earnings
f. Notes Payable
g. Prepaid Rent
h. Salaries Expense
i. Notes Payable
j. Dividends

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Question 13

ABC Company made a $2,500 payment on account, to satisfy a previously recorded account payable. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

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Question 14

Explain debits and credits and their role in the accounting system of a business.

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Question 15

Explain the debt ratio and its use in analyzing a company's financial condition.

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Question 16

Indicate whether a debit or credit entry would be required to record the following changes in each account.
a. To decrease Cash.
b. To increase Common Stock.
c. To decrease Accounts Payable.
d. To increase Salaries Expense.
e. To decrease Supplies.
f. To increase Revenue.
g. To decrease Accounts Receivable.
h. To increase Dividends.

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Question 17

Jackson Advertising Co. had assets of $475,000; liabilities of $275,500; and equity of $199,500. Calculate its debt ratio.

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Question 18

Describe the link between a business's income statement, the statement of retained earnings, and the balance sheet.

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Question 19

What is a trial balance? What is its purpose?

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Question 20

Explain the difference between a general ledger and a chart of accounts.

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Quiz 2: Accounting for Business Transactions