Question 1

J. Brown Consulting paid $2,500 cash for a 5-month insurance policy which begins on December 1. Given the choices below, determine the general journal entry that J. Brown Consulting will make to record this transaction.

Accepted Answer

The payment is for a future insurance policy, so it should be recorded as a prepaid expense, which is an asset. The correct entry is to debit Prepaid Insurance and credit Cash.

Question 2

Richard Redden contributed $70,000 in cash and land worth $130,000 to open a new business, RR Consulting, Inc. Which of the following general journal entries will RR Consulting, Inc. make to record this transaction?

Accepted Answer

The transaction involves contributions of both cash and land, so they should be recorded separately. The cash should be debited for $70,000, the land should be debited for $130,000, and the common stock account should be credited for the total amount of $200,000. This entry properly records the contributions made by Richard Redden and establishes the basic accounting equation of Assets = Liabilities + Equity.

Question 3

An asset created by prepayment of an insurance expense is:

Accepted Answer

When insurance is prepaid, it is recorded as an asset, specifically a Prepaid Insurance account. This account is a debit account as it represents an asset.

Question 4

Trimble Graphic Design receives $1,500 from a client billed in a previous month for services provided. Which of the following general journal entries will Trimble Graphic Design make to record this transaction?

Accepted Answer

The correct entry is to debit Cash and credit Accounts Receivable, as the payment is for a previously billed service, reducing the Accounts Receivable balance.

Question 5

J. Brown Consulting paid $500 cash for utilities for the current month. Given the choices below, determine the general journal entry that J. Brown Consulting will make to record this transaction.

Accepted Answer

The correct journal entry involves debiting Utilities Expense to record the cost incurred and crediting Cash to reflect the payment made.

Question 6

A simple tool that is widely used in accounting to represent a ledger account and to understand how debits and credits affect an account balance is called a:

Accepted Answer

A T-account is a common tool used in accounting to represent ledger accounts. It is named after its shape, which resembles the letter "T". It provides a visual representation of how transactions affect an account's balance, with debits on the left and credits on the right.

Question 7

Select the account below that normally has a credit balance.

Accepted Answer

Wages Payable is a liability account, which normally has a credit balance.

Question 8

Able Graphics received a $400 utility bill for the current month's electricity. It is not due until the end of the next month which is when they intend to pay it. Which of the following general journal entries will Able Graphics make to record this transaction?

Accepted Answer

The correct entry is to debit Utilities Expense and credit Accounts Payable, as the expense is incurred but not yet paid.

Question 9

Grills R Us Catering provided $1,000 of catering services and billed its client for the amount owed. Given the choices below, determine the general journal entry that Grills R Us Catering will make to record this transaction.

Accepted Answer

The correct entry is to debit Accounts Receivable for $1,000 (to record the amount owed by the client) and credit Catering Revenue for $1,000 (to record the revenue earned).

Question 10

The company paid $100 cash in dividends to J. Smith, the owner. Which of the following general journal entries will Jay's Limo Services, Inc. make to record this transaction?

Accepted Answer

The correct journal entry for paying dividends involves debiting the Dividends account and crediting the Cash account, reflecting the decrease in cash and the distribution of earnings.

Question 11

Ralph Pine Consulting received its telephone bill in the amount of $300, and immediately paid it. Pine's general journal entry to record this transaction will include a

Accepted Answer

The answer of Ralph Pine Consulting received its telephone bill...

Question 12

Jay's Limo Services, Inc. paid $300 cash to employees for work performed in the current period. Which of the following general journal entries will Jay's Limo Services, Inc. make to record this transaction?

Accepted Answer

The correct entry is to debit Salaries Expense to recognize the expense incurred and credit Cash to reflect the cash payment made.

Question 13

Golddigger Services, Inc. provides services to clients. On May 1, a client prepaid Golddigger Services $60,000 for 6-months services in advance. Golddigger Services' general journal entry to record this transaction will include a:

Accepted Answer

When a client pre-pays for services, the company receiving the payment must record it as a liability until the services are actually rendered. In this case, Golddigger Services would record the transaction by crediting the liability account Unearned Management Fees for $60,000 and debiting Cash for $60,000. Option D is the only choice that reflects this accounting treatment. Option A is incorrect because it debits Unearned Management Fees instead of crediting it. Option B is incorrect because Management Fees Earned should only be credited once the services have actually been performed. Option C is incorrect because it only reflects the cash received, but not the liability created. Option E is incorrect because Management Fees Earned is an income account, not a liability account.

Question 14

An account balance is:

Accepted Answer

An account balance is the difference between total debits and total credits for an account including the beginning balance. This is known as the account's net balance or simply the balance. Option A, B, and E are incorrect because the account balance takes into account both credits and debits, and can be either a credit or a debit balance. Option D is incorrect because it is the basic accounting equation that represents the relationship between assets, liabilities, and equity, and not directly related to account balances.

Question 15

Identify the statement below that is correct?

Accepted Answer

The left side of a T-account is always the debit side. Option A is incorrect because the left side is debit, not credit. Option B is incorrect because debits increase asset accounts and expenses and decrease liability, equity, and revenue accounts. Option D is incorrect because credits increase liability, equity, and revenue accounts and decrease asset and expense accounts. Option E is incorrect because the total debited amount must always equal the total credited amount according to the double-entry accounting principle.

Question 16

A double-entry accounting system is an accounting system:

Accepted Answer

A double-entry accounting system records the effects of transactions in at least two accounts with equal debits and credits. This system ensures accuracy and helps to prevent errors. It is not necessary to use T-accounts in a double-entry system, and it is possible to have multiple debits or credits in a transaction.

Question 17

ABC Catering received $800 cash from a customer for catering services to be provided next month. Given the choices below, determine the general journal entry that ABC Catering will make to record this transaction.

Accepted Answer

The correct entry is to debit Cash for $800 and credit Unearned Catering Revenue for $800, as the cash received is for services to be provided in the future, creating a liability.

Question 18

Wiley Consulting purchased $7,000 worth of supplies and paid cash immediately. Which of the following general journal entries will Wiley Consulting make to record this transaction?

Accepted Answer

Wiley Consulting purchased supplies, which increases the Supplies account (debit) and decreases the Cash account (credit) since they paid cash immediately.

Question 19

A debit is used to record which of the following:

Accepted Answer

The answer of A debit is used to record which...

Question 20

Willow Rentals purchased office supplies on credit. The general journal entry made by Willow Rentals will include a:

Accepted Answer

Willow Rentals purchased office supplies on credit, meaning they owe money to the supplier. To record this transaction in the general journal, a credit to Accounts Payable should be made to show the increase in the amount owed. Therefore, the correct answer is D, a credit to Accounts Payable.

Quiz 2: Analyzing for Business Transactions