Question 1

Cost of Goods Sold is what type of account?

Accepted Answer

Cost of Goods Sold is an expense account that reflects the cost of the products sold during a given period. It is usually found on the income statement and is subtracted from revenue to calculate gross profit.

Question 2

On July 24, Barkdull Inc. purchased $4,000 of inventory on account. On August 3, Barkdull, sold $2,000 of inventory for $1,000 cash and $2,000 on credit. The correct entry by Barkdull Inc. to record the purchase of inventory on July 24 is

Accepted Answer

The purchase of inventory on account is recorded by debiting Inventory and crediting Accounts Payable.

Question 3

Northwest Company received and immediately paid a $4,000 utility bill from Green River Gas and Electric Company. The entry by Green River Gas and Electric Company to record receipt of the payment would include

Accepted Answer

When Northwest Company pays Green River Gas and Electric Company $4,000, Green River will record a debit to Cash (increasing their cash account) and a credit to Northwest Company's Accounts Receivable account. However, none of the given answer choices match this scenario, so the best choice is B: a debit to Cash, since that is a necessary part of the double-entry accounting system.

Question 4

Which of the following is the correct order for preparing a journal entry?

Accepted Answer

The correct order for preparing a journal entry is to first identify which accounts are involved, then determine if each account is increased or decreased, and finally determine by how much each account has changed.

Question 5

Each account is assigned a number. This systematic listing of all accounts is called a

Accepted Answer

The systematic listing of all accounts is called a Chart of Accounts. The other options, Trial Balance, General Journal, and General Ledger, all refer to specific accounting documents or records.

Question 6

Deano Inc. purchased $27,000 of merchandise from Jeri Co. by making a 25 percent cash down payment and signing a 90-day note for the balance. The cost of the merchandise to Jeri Co. was $22,000. The entry by Jeri Co. to record the transaction would include

Accepted Answer

The answer of Deano Inc. purchased $27,000 of merchandise from...

Question 7

On January 25, Blayne Corporation bought merchandise from a supplier for $3,600 on account. On February 20, Blayne paid the $3,600 owed to the supplier. The correct entry to record the payment to the supplier on February 20is

Accepted Answer

The correct entry to record the payment is to debit Accounts Payable to decrease the liability and credit Cash to reflect the outflow of cash.

Question 8

Solo Company borrowed $4,000 from National City Bank on June 1. On August 31, Solo Company paid off the loan plus $100 interest. The correct entry to record the August 31 payment of the loan plus interest is

Accepted Answer

The correct entry involves debiting Notes Payable for $4,000 and Interest Expense for $100, and crediting Cash for the total payment of $4,100.

Question 9

On July 24, Barkdull Inc. purchased $4,000 of inventory on account. On August 3, Barkdull, sold $2,000 of inventory for $1,000 cash and $2,000 on credit. The correct entry by Barkdull Inc. to record the sale of inventory or August 3 is

Accepted Answer

The correct entry records the cash received, the accounts receivable, the sales revenue, and the cost of goods sold, which reduces inventory.

Question 10

The accounting record where all accounts are posted and summarized is the

Accepted Answer

The General Ledger is the accounting record where all accounts are posted and summarized. It contains all the transactions of the company and provides a complete record of financial activity. The General Journal is used to record specific transactions, while the Balance Sheet is a financial statement that shows the financial position of the company at a specific point in time. Posting reference is a reference number used to track the posting of transactions between the General Journal and the General Ledger.

Question 11

On December 31, Scott Corporation paid shareholders a $13,000 cash dividend. The entry by Scott Corporation to record the transaction would include

Accepted Answer

When a company pays out a cash dividend, it reduces its retained earnings account (which is part of equity) and increases its dividend account. Therefore, the entry would include a debit to the Dividends account and a credit to Cash. Option A is incorrect because there is no credit to Cash. Option B is incorrect because there is no debit to Dividends. Option D is incorrect because there is no direct impact on the Capital Stock account from a cash dividend payment.

Question 12

A journal entry that includes more than two accounts is called a(n)

Accepted Answer

A compound journal entry includes more than two accounts being affected by the transaction.

Question 13

Christopher Company purchased $20,000 of equipment for cash. The correct entry to record the purchase of equipment is

Accepted Answer

The purchase of equipment for cash is recorded by debiting Equipment and crediting Cash, reflecting the increase in assets and the decrease in cash.

Question 14

On May 16, Bennion Company, sold $50,000 of inventory to Bonaccorsi, Inc. for $10,000 cash and $60,000 on credit. On June 10, Bonaccorsi, Inc. paid Bennion Company cash for the $60,000 credit sale. The entry by Bennion Company to record the transaction on May 16 would include

Accepted Answer

The entry by Bennion Company to record the sale of inventory to Bonaccorsi, Inc. would include a debit to Accounts Receivable for $60,000 and a credit to Sales Revenue for $60,000. This is because the inventory was sold on credit for $60,000. The cash received for $10,000 would require a credit to cash, but it is not part of the original transaction involving the sale of inventory. The cost of goods sold is not relevant at this point in the transaction.

Question 15

Solo Company borrowed $4,000 from National City Bank on June 1. On August 31, Solo Company paid off the loan plus $100 interest. The correct entry to record the borrowing transaction on June 1 is

Accepted Answer

The correct entry records the cash received and the liability incurred. Cash is debited for $4,000, and Notes Payable is credited for $4,000.

Question 16

Deano Inc. purchased $27,000 of merchandise from Jeri Co. by making a 25 percent cash down payment and signing a 90-day note for the balance. The cost of the merchandise to Jeri Co. was $22,000. The entry by Deano Inc. to record the transaction would

Accepted Answer

The purchase of merchandise would increase the total assets of Deano Inc. Since they made a cash down payment, both cash and inventory (merchandise) would be recorded as assets. The liabilities would stay the same until the 90-day note is due, and owners' equity is not affected by this transaction.

Question 17

On January 25, Blayne Corporation bought merchandise from a supplier for $3,600 on account. On February 20, Blayne paid the $3,600 owed to the supplier. The correct entry to record the purchase on January 25 is

Accepted Answer

The correct entry to record the purchase on account is to debit Inventory and credit Accounts Payable.

Question 18

On May 16, Bennion Company, sold $50,000 of inventory to Bonaccorsi, Inc. for $10,000 cash and $60,000 on credit. On June 10, Bonaccorsi, Inc. paid Bennion Company cash for the $60,000 credit sale. The correct entry by Bennion Company to record the payment on June 10 is

Accepted Answer

The correct entry is to debit Cash and credit Accounts Receivable, reflecting the receipt of cash for the outstanding credit sale.

Question 19

On November 15, Roach Company issued 300 new shares of stock. Shareholders paid $25 for each share of stock. The correct entry to record the issue of stock on November 15 is

Accepted Answer

The correct entry is to debit Cash for $7,500 (300 shares x $25) and credit Capital Stock for $7,500, reflecting the cash received and the issuance of stock.

Question 20

A trial balance shows that

Accepted Answer

A trial balance is used to check that the total debits and total credits recorded in the journal and posted to the general ledger are equal. Therefore, if there are no errors in recording or posting, the trial balance should balance and show that total debits equal total credits.

Quiz 3: The Accounting Cycle: The Mechanics of Accounting