Question 1

Materials Handling Company sold merchandise inventory costing $7,000 for $12,000 in cash.How should Materials Handling Company record this transaction?

Accepted Answer

The correct recording of the transaction involves debiting Cash for the amount received ($12,000), debiting Cost of Goods Sold for the cost of the merchandise sold ($7,000), crediting Sales for the sales amount ($12,000), and crediting Merchandise Inventory for the cost of the merchandise sold ($7,000). This accurately reflects the increase in cash, the expense of goods sold, the revenue from sales, and the decrease in inventory.

Question 2

Publishing for Personnel,Inc.,received and paid its utility bill of $800.As the accountant,you would tell the bookkeeper to

Accepted Answer

When a company pays a utility bill, it increases (debits) its Utility Expense account to reflect the incurred expense and decreases (credits) its Cash account to show the outflow of cash.

Question 3

Sharpington,Inc.manufactures and sells phone cases.The company sold a shipment of cases costing $5,000 to a customer for $8,000.The customer paid cash.Which of the following is the journal entry that Sharpington would make to record the sale of the shipment of cases?

Accepted Answer

The correct journal entry to record the sale involves debiting Cash for the sale amount ($8,000), debiting Cost of Goods Sold for the cost of the inventory sold ($5,000), crediting Sales for the sale amount ($8,000), and crediting Merchandise Inventory for the cost of the inventory sold ($5,000). This accurately reflects the increase in cash, the expense related to the cost of goods sold, the revenue from the sale, and the decrease in inventory.

Question 4

A compound journal entry

Accepted Answer

A compound journal entry is a journal entry that affects more than two accounts. It is used when there are multiple accounts involved in a single transaction. This type of entry is allowed under both U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).

Question 5

Application Technologies has acquired equipment costing $15,000.The company paid $5,000 and gave a 10-month note for the balance.The bookkeeper should

Accepted Answer

The correct journal entry to record the acquisition of equipment involves debiting Equipment for the total cost of $15,000, crediting Cash for the down payment of $5,000, and crediting Notes Payable for the balance of $10,000. This reflects the company's increase in assets (equipment) and the decrease in cash, while also recognizing the liability (note payable) for the remaining amount owed.

Question 6

On October 1,2012,Water Works paid $3,600 for 6 months' rent in advance.The appropriate journal entry was made at the time using Prepaid Rent.No other journal entry has been made.As of December 31,2012,Water Works should

Accepted Answer

As of December 31, 2012, Water Works has used 3 months of the prepaid rent (October, November, December), which is half of the 6-month period. Therefore, $1,800 (3/6 of $3,600) should be recognized as Rent Expense, reducing the Prepaid Rent account by the same amount.

Question 7

Kasper Shack,Inc.acquired merchandise inventory for $1,300 cash on January 12^th.On January 21^st,it noticed that the wrong merchandise had been shipped and returned it to the supplier for a cash refund.Which of the following is the journal entry that would be required for the return of the merchandise on January 21^st?

Accepted Answer

The correct journal entry for returning merchandise and receiving a cash refund is to debit Cash and credit Merchandise Inventory, reversing the original purchase entry.

Question 8

Darla Documentation,paid $1,900 to the local newspaper for advertising that will begin in 30 days and continue for the following 6 weeks.How would Darla Documentation record this transaction?

Accepted Answer

Since the advertising will begin in 30 days and continue for 6 weeks, the payment is for a future service. Therefore, it should be recorded as a prepaid expense. The correct entry is to debit Prepaid Advertising and credit Cash for $1,900, reflecting the payment made now for future advertising services.

Question 9

On July 1,2012,Norton Company paid $2,400 for rent on the building it occupies.This rent payment is for the 3-month period of July 1 to September 30,2012.Which of the following is the journal entry to be made on July 1,2012?

Accepted Answer

The company paid $2,400 for rent expense covering July 1 to September 30. This means that the rent expense has not yet been incurred but has been paid in advance. Therefore, it should be recorded as prepaid rent, which is an asset account. The journal entry to be made on July 1, 2012, is to debit Prepaid Rent for $2,400 and credit Cash for $2,400. This option is only available in choice C.

Question 10

Chordley Manufacturing borrowed $12,000 from the Second National Bank of Tahoma on October 1,2012.The note carries an annual interest rate of 10%,which will be paid once a year on September 30.The company has not recognized any interest expense during 2012.What is the journal entry necessary to recognize interest expense as of December 31,2012?

Accepted Answer

The interest expense for 2012 will be $1,200 ($12,000 x 10%). Since the interest is paid on September 30 of each year, at December 31, 2012, there will be an interest expense of $300 ($1,200/4). The journal entry to recognize this would be to debit interest expense for $300 and credit interest payable for $300. This is because the interest has been earned by the bank (expense for Chordley) but not yet paid. Choice A is the correct answer.

Question 11

The entry to record the cost of merchandise inventory sold involves a

Accepted Answer

When merchandise inventory is sold, it is removed from the inventory account and transferred to the cost of goods sold account. Therefore, the entry to record the cost of merchandise inventory sold involves a debit to Cost of Goods Sold and a credit to Merchandise Inventory.

Question 12

Palladia Publishing paid $450 for an advertisement that will appear in today's newspaper.Which of the following is the journal entry to record this transaction?

Accepted Answer

The answer of Palladia Publishing paid $450 for an advertisement...

Question 13

The journal entry to acquire equipment costing $30,000 with a $12,000 down payment and a note issued for the difference would include a

Accepted Answer

The journal entry should reflect the full cost of the equipment being acquired (debit to Equipment for $30,000) as well as the source of funds used to acquire it. Since there is a down payment of $12,000, this should be credited to Cash. The remaining amount ($18,000) is being financed through a note, so this should be credited to Notes Payable. Thus, the journal entry should be: debit to Equipment for $30,000, credit to Notes Payable for $18,000, and credit to Cash for $12,000.

Question 14

If a company would like to repay a bank loan of $7,000,the bookkeeper would

Accepted Answer

When repaying a bank loan, the company reduces its liability by debiting Notes Payable and decreases its cash by crediting Cash.

Question 15

Bethany Industries purchased $3,000 of merchandise inventory,paying cash for 20% of the purchase,with the remainder on account.The entry would include a

Accepted Answer

The entry would include a debit to Merchandise Inventory for the full amount of $3,000, credit to Cash for the amount paid in cash ($600), and credit to Accounts Payable for the remaining balance ($2,400). This reflects that Bethany Industries paid for a portion of the inventory in cash and still owes the remainder to the supplier. Choice A is incorrect because it includes a debit to Cash for the full amount, which did not happen. Choice B includes a debit to Notes Payable, which is not mentioned in the scenario. Choice C includes a credit to Notes Payable, which is also not mentioned in the scenario. Choice E only reflects the cash payment and does not account for the remainder owed on account.

Question 16

Posting is the process of transferring information from the

Accepted Answer

Posting involves transferring information from the journal to the corresponding account in the ledger. The balance sheet and income statement are prepared using the information from the ledger.

Question 17

The entry to collect cash on account involves a

Accepted Answer

When a business collects cash on account from a customer, it is essentially receiving payment for an amount that the customer owes. This transaction involves a debit to Cash (increasing it) and a credit to Accounts Receivable (decreasing it), since the customer's account balance is decreasing as they pay off their debt. Therefore, option C is the correct choice, which shows a debit to Cash and a credit to Accounts Receivable.

Question 18

Indirect Personnel,Inc.obtained a $20,000 note payable on August 1,2012,that is due in 5 years.Interest,at an annual rate of 12%,will be paid once a year on July 31.The accountant made the appropriate journal entry on August 1,2012.No other journal entry has been made.What journal entry is necessary as of December 31,2012?

Accepted Answer

From August 1st to December 31st, there are 5 months of accrued interest (from August to December), which is calculated as follows: 
$20,000 x 12% x 5/12 = $1,000

Since the interest payment date is on July 31st, the interest for the year ended December 31st, 2012 is not yet due or paid. Therefore, the entry is to debit Interest Expense (income statement) and credit Interest Payable (current liability) for the amount of accrued interest, which is $1,000.

Question 19

Wilham Roofing acquired merchandise inventory for $12,000,paying one-fourth in cash and the remainder on open account.Which of the following is the journal entry necessary to record this transaction?

Accepted Answer

Option D correctly records the purchase of merchandise inventory totaling $12,000, with $3,000 paid in cash and the remaining $9,000 on account, which increases Accounts Payable.

Question 20

Contributor Enterprise borrowed $2,400 on February 1,2012.All interest has been paid and properly recorded for separately.On March 31,2012,the company repaid the loan.Which of the following is the journal entry to be made at the time of the loan repayment?

Accepted Answer

The journal entry for loan repayment is a debit to Notes Payable and a credit to Cash. Option B correctly shows this entry. Option A includes an incorrect account "Notes Payable Expense." Option C includes an incorrect account "Notes Payable Expense" and incorrectly shows a debit to Cash. Option D is correct but includes unnecessary wording "Cash in repayment of the loan." Option E includes an incorrect account "Notes Receivable" instead of "Notes Payable."

Quiz 3: Recording Transactions