Question 1

Electrelane Company showed the following balances at the end of its first year: $$\begin{array} { l r } 
\text { Cash } & \$ 4,000 \
\text { Prepaid insurance } & 7,000 \
\text { Accounts receivable } & 5,000 \
\text { Accounts payable } & 4,000 \
\text { Notes payable } & 6,000 \
\text { Common stock } & 2,000 \
\text { Dividends } & 1,000 \
\text { Revenues } & 32,000 \
\text { Expenses } & 25,000
\end{array}$$ What did Electrelene Company show as total credits on its trial balance?
A) $9,000
B) $44,000
C) $45,000
D) $49,000

Accepted Answer

The answer of Electrelane Company showed the following balances at...

Question 2

At December 1, 2018, Cursive Company's accounts receivable balance was $1,800. During December, Cursive had revenues on account of $7,200 and collected accounts receivable of $6,000. At December 31, 2018, the accounts receivable balance is
A) $600 debit.
B) $3,000 debit.
C) $600 credit.
D) $3,000 credit.

Accepted Answer

Starting Balance: $1,800
Add: Revenues on account: $7,200
Total: $9,000
Less: Collections: $6,000
Ending Balance: $3,000 debit.

Question 3

On January 14, Edamame Industries purchased supplies of $700 on account. The entry to record the purchase will include
A) a debit to Supplies and a credit to Accounts Payable.
B) a debit to Supplies Expense and a credit to Accounts Receivable.
C) a debit to Supplies and a credit to Cash.
D) a debit to Accounts Receivable and a credit to Supplies.

Accepted Answer

When supplies are purchased on account, it means that the company has received the supplies but has not yet paid for them. Therefore, the entry to record the purchase will include a debit to Supplies (an increase in assets) and a credit to Accounts Payable (an increase in liabilities).

Question 4

If a company has overdrawn its bank balance, then
A) its cash account will show a debit balance.
B) its cash account will show a credit balance.
C) the cash account debits will exceed the cash account credits.
D) it cannot be detected by observing the balance of the cash account.

Accepted Answer

When a company overdraws its bank balance, it means the bank account has a negative balance, which is represented in the company's books as a credit balance in the cash account.

Question 5

TransAm Mail Service purchased equipment for $2,500. TransAm paid $400 in cash and signed a note for the balance. TransAm debited the Equipment account, credited Cash and
A) nothing further must be done.
B) debited the retained earnings account for $2,100.
C) credited another asset account for $400.
D) credited a liability account for $2,100.

Accepted Answer

TransAm paid $400 in cash and signed a note for the balance, therefore creating a liability. The Equipment account is debited to record the purchase of the equipment, and Cash is credited for the amount paid in cash. However, the balance of $2,100 must be credited to a liability account to record the note payable. Therefore, the correct choice is to credit a liability account for $2,100, as stated in option D.

Question 6

At January 31, 2018, the balance in Aislers Inc.'s supplies account was $750. During February, Aislers purchased supplies of $900 and used supplies of $1,125. At the end of February, the balance in the supplies account should be
A) $525 debit.
B) $975 debit.
C) $525 credit.
D) $775 debit.

Accepted Answer

The balance at the end of February is calculated as: Beginning balance ($750) + Purchases ($900) - Used supplies ($1,125) = $525 debit.

Question 7

The Dividends account
A) appears on the income statement along with the expenses of the business.
B) must show transactions every accounting period.
C) is increased with debits and decreased with credits.
D) is not a proper subdivision of retained earnings.

Accepted Answer

The Dividends account is a temporary equity account that is increased with debits and decreased with credits. It reflects the amount of money paid out to shareholders as dividends. It does not appear on the income statement, but is instead closed out to Retained Earnings at the end of each accounting period.

Question 8

In the first month of operations, the total of the debit entries to the cash account amounted to $1,200 and the total of the credit entries to the cash account amounted to $800. The cash account has a(n)
A) $800 credit balance.
B) $1,200 debit balance.
C) $400 debit balance.
D) $400 credit balance.

Accepted Answer

The cash account has a debit balance of $1,200 - $800 = $400. This means that the company has spent more than it has received in cash transactions during the first month of operations. Therefore, the correct answer is C) $400 debit balance.

Question 9

On June 1, 2018, Portugal Inc. reported a cash balance of $12,000. During June, Portugal made deposits of $5,000 and made disbursements totalling $14,000. What is the cash balance at the end of June?
A) $3,000 debit balance
B) $17,000 debit balance
C) $3,000 credit balance
D) $2,000 credit balance

Accepted Answer

The cash balance at the end of June is calculated by taking the initial balance, adding deposits, and subtracting disbursements: $12,000 + $5,000 - $14,000 = $3,000. Since the balance is positive, it is a debit balance.

Question 10

An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?
A) A debit balance in the dividends account
B) A credit balance in an expense account
C) A credit balance in a liabilities account
D) A credit balance in a revenue account

Accepted Answer

Normally, expenses have debit balances and should be recorded as such. A credit balance in an expense account would indicate an error in recording the transaction. A debit balance in the dividends account is normal because it represents a reduction in retained earnings. A credit balance in a liabilities account is normal because it represents a source of funds for the company. A credit balance in a revenue account is normal because it represents an increase in the company's income.

Question 11

Which account below is not a subdivision of retained earnings?
A) Dividends
B) Revenues
C) Expenses
D) Common stock

Accepted Answer

Common stock represents the capital that has been invested in the company by its owners/shareholders and is not a subdivision of retained earnings, which reflects the cumulative profits and losses of the company that have been retained for reinvestment or distribution to shareholders.

Question 12

Mt. Zion Inc. pays its employees twice a month, on the 7^th and the 21^st. On June 21, Mt. Zion Inc. paid employee salaries of $5,000. This transaction would A) increase stockholders' equity by $5,000. B) decrease the balance in Salaries and Wages Expense by $5,000. C) decrease net income for the month by $5,000. D) be recorded by a $5,000 debit to Salaries and Wages Payable and a $4,000 credit to Salaries and Wages Expense.

Accepted Answer

The answer of Mt. Zion Inc. pays its employees twice...

Question 13

When a company distributes dividends
A) it doesn't have to be cash, it could be another asset.
B) the dividends account will be increased with a credit.
C) the retained earnings account will be directly increased with a debit.
D) the dividends account will be decreased with a debit.

Accepted Answer

Dividends can be distributed in forms other than cash, such as stock or other assets.

Question 14

At January 1, 2018, Alligator Industries reported retained earnings of $150,000. During 2018, Alligator had a net loss of $30,000 and paid dividends of $15,000. At December 31, 2018, the amount of retained earnings is
A) $105,000.
B) $120,000.
C) $135,000.
D) $165,000.

Accepted Answer

Retained earnings at the end of the year is calculated as the beginning retained earnings plus net income (or minus net loss) minus dividends. So, $150,000 - $30,000 - $15,000 = $105,000.

Question 15

In the first month of operations for Gallowsbird Industries, the total of the debit entries to the cash account amounted to $36,000 ($16,000 investment by stockholders and revenues of $20,000). The total of the credit entries to the cash account amounted to $22,000 (purchase of equipment $8,000 and payment of expenses $14,000). At the end of the month, the cash account has a(n)
A) $6,000 credit balance.
B) $6,000 debit balance.
C) $14,000 debit balance.
D) $14,000 credit balance.

Accepted Answer

The answer of In the first month of operations for...

Question 16

Assets normally show
A) credit balances.
B) debit balances.
C) debit and credit balances.
D) debit or credit balances.

Accepted Answer

Assets have debit balances.

Question 17

A credit to a liability account
A) indicates an increase in the amount owed to creditors.
B) indicates a decrease in the amount owed to creditors.
C) is an error.
D) must be accompanied by a debit to an asset account.

Accepted Answer

A credit to a liability account indicates an increase in the amount owed to creditors. In double-entry accounting, credits increase liability accounts.

Question 18

Radio Moscow Industries purchased supplies for $1,000. They paid $400 in cash and agreed to pay the balance in 30 days. The journal entry to record this transaction would include a debit to an asset account for $1,000, a credit to a liability account for $600. Which of the following would be the correct way to complete the recording of the transaction?
A) Credit an asset account for $400.
B) Credit another liability account for $400.
C) Credit the retained earnings account for $400.
D) Debit the retained earnings account for $400.

Accepted Answer

The correct way to complete the recording of the transaction is to credit an asset account (Cash) for $400, as this reflects the cash payment made.

Question 19

Which of the following statements is incorrect?
A) Expenses increase stockholders' equity.
B) Expenses have normal debit balances.
C) Expenses decrease stockholders' equity.
D) Expenses are a negative factor in the computation of net income.

Accepted Answer

Expenses decrease stockholders' equity, not increase it. When expenses are incurred, they are recorded as debits to expense accounts, which in turn decreases the overall equity of the company.

Question 20

During February 2018 its first month of operations, the stockholders of Ariel Pink Enterprises invested cash of $50,000. Ariel had cash revenues of $10,000 and paid expenses of $14,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28?
A) $4,000 credit
B) $4,000 debit
C) $46,000 debit
D) $54,000 debit

Accepted Answer

The initial cash investment was $50,000. Ariel had cash revenues of $10,000, increasing cash to $60,000. Expenses paid were $14,000, reducing cash to $46,000. Thus, the balance in Cash at February 28 is $46,000 debit.

Quiz 2: The Recording Process

At December 1, 2018, Cursive Company's accounts receivable balance was $1,800. During December, Cursive had revenues on account of $7,200 and collected accounts receivable of $6,000. At December 31, 2018, the accounts receivable balance is

On January 14, Edamame Industries purchased supplies of $700 on account. The entry to record the purchase will include

If a company has overdrawn its bank balance, then

TransAm Mail Service purchased equipment for $2,500. TransAm paid $400 in cash and signed a note for the balance. TransAm debited the Equipment account, credited Cash and

At January 31, 2018, the balance in Aislers Inc.'s supplies account was $750. During February, Aislers purchased supplies of $900 and used supplies of $1,125. At the end of February, the balance in the supplies account should be

The Dividends account

In the first month of operations, the total of the debit entries to the cash account amounted to $1,200 and the total of the credit entries to the cash account amounted to $800. The cash account has a(n)

On June 1, 2018, Portugal Inc. reported a cash balance of $12,000. During June, Portugal made deposits of $5,000 and made disbursements totalling $14,000. What is the cash balance at the end of June?

An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?

Which account below is not a subdivision of retained earnings?

Mt. Zion Inc. pays its employees twice a month, on the 7th and the 21st. On June 21, Mt. Zion Inc. paid employee salaries of $5,000. This transaction would

When a company distributes dividends

At January 1, 2018, Alligator Industries reported retained earnings of $150,000. During 2018, Alligator had a net loss of $30,000 and paid dividends of $15,000. At December 31, 2018, the amount of retained earnings is

Assets normally show

A credit to a liability account

Which of the following statements is incorrect?

During February 2018 its first month of operations, the stockholders of Ariel Pink Enterprises invested cash of $50,000. Ariel had cash revenues of $10,000 and paid expenses of $14,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28?

Mt. Zion Inc. pays its employees twice a month, on the 7^th and the 21^st. On June 21, Mt. Zion Inc. paid employee salaries of $5,000. This transaction would