Question 1

Balancing errors can be detected by computing the difference between total debits and total credits on the trial balance.

Accepted Answer

Balancing errors occur when the total debits and total credits do not equal on the trial balance. Therefore, computing the difference between the two can help detect balancing errors.

Question 2

A journal entry for a $85 payment for rent expense was posted as a debit to Salaries Expense and a credit to Cash.Which of the following statements correctly states the effect of the error on the trial balance?

Accepted Answer

The error does not affect the equality of the trial balance because both the incorrect entry (debit to Salaries Expense) and the correct entry (should have been a debit to Rent Expense) are debits, and the credit to Cash is correct in both cases.

Question 3

Baytown Paper Company has a debt ratio of 25%,which means that 75% of the assets are financed by creditors.

Accepted Answer

A debt ratio of 25% means that 25% of assets are financed with debt.

Question 4

Which of the following is assessed using the debt ratio?

Accepted Answer

The debt ratio is a measure of a firm's financial leverage, calculated by dividing total debt by total assets. It assesses the risk of default, as it indicates the proportion of a company's assets that are financed through debt. A higher debt ratio means that more of the company's assets are financed through debt, making it riskier for lenders and investors.

Question 5

Provide a definition of each of the following accounting terms.

Accepted Answer

The answer of Provide a definition of each of the...

Question 6

Calculate the debt ratio using the following trial balance of Superior Instruments Company as of December 31,2019.

Accepted Answer

The answer of Calculate the debt ratio using the following...

Question 7

The ability of a company to pay its debts can be evaluated by using the ________.

Accepted Answer

The debt ratio measures a company's total debt in relation to its assets. A lower debt ratio indicates that a company has less debt relative to its assets and therefore may have a better ability to pay its debts. Earnings per share, return on assets ratio, and fully diluted earnings per share do not directly measure a company's ability to pay its debts.

Question 8

Converse Florists & Co.reported assets of $1,100 and equity of $500.What is its debt ratio? (Round your percentage answer to two decimal places. )

Accepted Answer

A)Total liabilities = $1,100 ? $500 = $600
Debt ratio = Total liabilities / Total assets
Debt ratio = $600 / $1,100 = 0.5455 or 54.55%

Question 9

The debt ratio shows the proportion of assets financed with debt.

Accepted Answer

The debt ratio is calculated by dividing a company's total liabilities by its total assets, which shows the proportion of assets that are financed with debt.

Question 10

A journal entry for a $210 payment to purchase office supplies was erroneously recorded as a debit to Office Supplies for $550 and a credit to Cash for $210.Which of the following statements correctly states the effect of the error on the trial balance?

Accepted Answer

The erroneous entry recorded a debit of $550 instead of the correct $210 for Office Supplies, which means that it is overstated by $340. The credit of $210 to Cash is correct. Therefore, the sum of debits ($550) will exceed the sum of credits ($210) by $340, leading to an out-of-balance trial balance.

Question 11

Balancing errors can be detected by computing the difference between total debits and total credits on the trial balance.List three actions that can then be used to find the errors.

Accepted Answer

The answer of Balancing errors can be detected by computing...

Question 12

Provide a definition of each of the following accounting terms.

Accepted Answer

The answer of Provide a definition of each of the...

Question 13

Durable Plastics Company had the following total assets,liabilities,and equity as of December 31.  What is the company's debt ratio as of December 31? (Round your percentage answer to two decimal places. )

Accepted Answer

A)Debt ratio = Total liabilities / Total assets
Debt ratio = $133,000 / $420,000 = 0.3167 or 31.67%

Question 14

The higher the debt ratio,the lower the risk of default.

Accepted Answer

The lower the debt ratio,the lower the risk of default.

Question 15

Which of the following is the correct formula to calculate the debt ratio?

Accepted Answer

The correct formula to calculate the debt ratio is dividing total liabilities by total assets, which is represented as Debt ratio = Total liabilities / Total assets. This formula gives the percentage of a company's assets that are financed by debt.

Question 16

The proportion of assets that are financed with debt can be calculated using the ________ ratio.

Accepted Answer

The debt ratio is calculated by dividing total debt by total assets, which provides the proportion of assets financed with debt. The remaining options, quick ratio, asset ratio, and cash ratio, do not provide this information.

Question 17

What are two ways in which a company can improve its debt ratio?

Accepted Answer

The answer of What are two ways in which a...

Question 18

If the total debits equal the total credits on the trial balance,the individual account balances will be error free.

Accepted Answer

Total debits can equal total credits on the trial balance;however,there still could be errors in individual account balances because an incorrect amount might have been recorded in an individual journal entry.

Question 19

The debt ratio is one indication of the ability of a company to fulfill its obligation to repay liabilities.

Accepted Answer

The debt ratio compares a company's total debt to its total assets and is used to assess its ability to repay its liabilities. A higher debt ratio indicates a higher level of financial leverage and more risk for creditors.

Quiz 2: Recording Business Transactions

Balancing errors can be detected by computing the difference between total debits and total credits on the trial balance.

A journal entry for a $85 payment for rent expense was posted as a debit to Salaries Expense and a credit to Cash.Which of the following statements correctly states the effect of the error on the trial balance?

Baytown Paper Company has a debt ratio of 25%,which means that 75% of the assets are financed by creditors.

Which of the following is assessed using the debt ratio?

Provide a definition of each of the following accounting terms.

Calculate the debt ratio using the following trial balance of Superior Instruments Company as of December 31,2019.

The ability of a company to pay its debts can be evaluated by using the ________.

Converse Florists & Co.reported assets of $1,100 and equity of $500.What is its debt ratio? (Round your percentage answer to two decimal places. )

The debt ratio shows the proportion of assets financed with debt.

A journal entry for a $210 payment to purchase office supplies was erroneously recorded as a debit to Office Supplies for $550 and a credit to Cash for $210.Which of the following statements correctly states the effect of the error on the trial balance?

Balancing errors can be detected by computing the difference between total debits and total credits on the trial balance.List three actions that can then be used to find the errors.

Provide a definition of each of the following accounting terms.

Durable Plastics Company had the following total assets,liabilities,and equity as of December 31. What is the company's debt ratio as of December 31? (Round your percentage answer to two decimal places. )

The higher the debt ratio,the lower the risk of default.

Which of the following is the correct formula to calculate the debt ratio?

The proportion of assets that are financed with debt can be calculated using the ________ ratio.

What are two ways in which a company can improve its debt ratio?

If the total debits equal the total credits on the trial balance,the individual account balances will be error free.

The debt ratio is one indication of the ability of a company to fulfill its obligation to repay liabilities.