Question 1

A company provided $12,000 of consulting services, and was immediately paid in cash by the customer. Identify the journal entry below that properly records this transaction.

Accepted Answer

The correct journal entry records an increase in cash (debit) and an increase in consulting services revenue (credit) since the service was paid for immediately.

Question 2

During the month of February, Victor Services had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the February 1 beginning cash balance?

Accepted Answer

Using the formula: Beginning Cash + Cash Receipts - Cash Disbursements = Ending Cash, we can solve for the beginning cash balance.

Beginning Cash + $7,500 - $8,600 = $1,800
Beginning Cash = $1,800 + $1,100 = $2,900

Therefore, the beginning cash balance was $2,900.

Question 3

The debt ratio is used:

Accepted Answer

The debt ratio is a financial ratio that measures the proportion of a company's liabilities to its total assets. It is used to assess the risk associated with a company's use of liabilities, as a higher debt ratio indicates that the company may be at risk of defaulting on its loans or encountering financial difficulties. It is not used solely by banks but is also useful for investors, lenders, and other stakeholders in evaluating a company's financial health. The debt ratio is not used to determine how much debt a firm should pay off or borrow.

Question 4

At the beginning of January of the current year, Little Mikey's Catering ledger reflected a normal balance of $52,000 for accounts receivable. During January, the company collected $14,800 from customers on account and provided additional services to customers on account totaling $12,500. Additionally, during January one customer paid Mikey $5,000 for services to be provided in the future. At the end of January, the balance in the accounts receivable account should be:

Accepted Answer

The answer of At the beginning of January of the...

Question 5

On April 30, Victor Services had an Accounts Receivable balance of $18,000. During the month of May, total credits to Accounts Receivable were $52,000 from customer payments. The May 31 Accounts Receivable balance was $13,000. What was the amount of credit sales during May?

Accepted Answer

The answer of On April 30, Victor Services had an...

Question 6

Andrea Apple opened Apple Photography on January 1 of the current year. During January, the following transactions occurred and were recorded in the company's books: • Andrea invested $13,500 cash in the business in exchange for common stock.
• Andrea contributed $20,000 of photography equipment to the business in exchange
For common stock.
• The company paid $2,100 cash for an insurance policy covering the next 24 months.
• The company received $5,700 cash for services provided during January.
• The company purchased $6,200 of office equipment on credit.
• The company provided $2,750 of services to customers on account.
• The company paid cash of $1,500 for monthly rent.
• The company paid $3,100 on the office equipment purchased in transaction #5 above.
• Paid $275 cash for January utilities.
Based on this information, the amount of total stockholders' equity reported on the Balance Sheet at the end of the month would be:

Accepted Answer

The total stockholders' equity at the end of the month would be the sum of the common stock and retained earnings.

Common stock:
-$13,500 + $20,000 = $6,500

Retained earnings:
Revenue from services provided = $5,700 
Expenses:
-Insurance = $2,100/24 = $87.50 (this represents the portion of the insurance policy that has expired during the month)
-Rent = $1,500 
-Office equipment expense = $3,100 
-Utilities = $275 
Total expenses = $5,962.50 
Net income = $5,700 - $5,962.50 = ($262.50)

Since the company incurred a net loss for the month, the amount of retained earnings will decrease by $262.50.

Therefore, the total stockholders' equity at the end of the month would be: 
$6,500 (common stock) - $262.50 (retained earnings) = $6,237.50 
$6,237.50 * 6 (since the company's fiscal year is comprised of 12 months) = $37,425

Therefore, the answer is D) $40,175.

Question 7

The following transactions occurred during July: • Received $900 cash for services provided to a customer during July.
• Received $2,200 cash investment from Bob Johnson, the owner of the business.
• Received $750 from a customer in partial payment of his account receivable which
Arose from sales in June.
• Provided services to a customer on credit, $375.
• Borrowed $6,000 from the bank by signing a promissory note.
• Received $1,250 cash from a customer for services to be rendered next year.
What was the amount of revenue for July?

Accepted Answer

Revenue is recognized when services are provided or goods are sold. Only cash received for services provided in July should be counted as revenue, which is $900. The $1,250 received for services to be rendered next year does not count as revenue for July. Therefore, the total revenue for July is $900.

Question 8

Mary Martin, the sole stockholder of Martin Consulting, started the business by investing $40,000 cash. Identify the general journal entry below that Martin Consulting will make to record the transaction.

Accepted Answer

The transaction involves Mary Martin investing cash into the business, which would increase the company's common stock equity. Therefore, the correct journal entry would be to debit Cash for $40,000 and credit Common Stock for $40,000. Choice A is the only option that has the correct accounts and the correct debit/credit amounts. The other choices either have the wrong accounts or the wrong debit/credit amounts.

Question 9

If cash is received from customers in payment for products or services that have not yet been delivered to the customers, the business would record the cash receipt as:

Accepted Answer

When cash is received from customers for products or services that have not yet been delivered, it is considered as unearned revenue. Unearned revenue is a liability account, and a credit entry is made to recognize the receipt of the cash. Therefore, the correct option is a credit to an unearned revenue account (option C).

Question 10

On May 31, the Cash account of Bottle's R US had a normal balance of $5,000. During May, the account was debited for a total of $12,200 and credited for a total of $11,500. What was the balance in the Cash account at the beginning of May?

Accepted Answer

Beginning Cash Balance + Debits - Credits = Ending Cash Balance
Beginning Cash Balance + $12,200 - $11,500 = $5,000
Beginning Cash Balance + $700 = $5,000; Beginning Balance = $4,300 debit balance

Question 11

On January 1 of the current year, Jimmy's Sandwich Company reported stockholders' equity totaling $122,500. During the current year, total revenues were $96,000 while total expenses were $85,500. Also, during the current year paid $20,000 in cash dividends. No other changes in equity occurred during the year. If, on December 31 of the current year, total assets are $196,000, the change in total stockholders' equity during the year was:

Accepted Answer

The answer of On January 1 of the current year,...

Question 12

HH Consulting & Design provided $800 of consulting work and $100 of design work to the same client. It billed the client for the total amount and is expecting to collect from the customer next month. Which of the following general journal entries will HH Consulting & Design make to record this transaction?

Accepted Answer

HH Consulting & Design provided both consulting and design work to the same client and billed the client for the total amount, expecting to collect the payment next month. This transaction involves revenue and accounts receivable. Therefore, we need to debit the revenue accounts (Consulting Revenue and Design Revenue) and credit the accounts receivable account for the total billed amount. The correct journal entry is:

Accounts Receivable          900
Consulting Revenue         800
Design Revenue               100

Question 13

During the month of March, Harley's Computer Services made purchases on account totaling $43,500. Also during the month of March, Harley was paid $8,000 by a customer for services to be provided in the future and paid $36,900 of cash on its accounts payable balance. If the balance in the accounts payable account at the beginning of March was $77,300, what is the balance in accounts payable at the end of March?

Accepted Answer

The answer of During the month of March, Harley's Computer...

Question 14

Mary Martin, the sole stockholder of Martin Consulting, received a $2,000 dividend from the company. Identify the general journal entry below that Martin Consulting will make to record the transaction.

Accepted Answer

The general journal entry for recording a dividend payment involves debiting the Dividends account and crediting Cash account. Option A reflects this transaction correctly. Option B credits Corrunon Stock account, which is not the correct account. Option C debits Dividends account, which is not correct. Option D credits Corrmon Stock, which is not correct either. Option E debits Cash account, which is not correct.

Question 15

A company provided $12,000 of consulting services on account. The customer promises payment in 30 days. Identify the journal entry below that properly records this transaction.

Accepted Answer

The correct journal entry records an increase in Accounts Receivable (debit) and an increase in Consulting Services Revenue (credit) since the services were provided on account.

Question 16

Andrea Apple opened Apple Photography on January 1 of the current year. During January, the following transactions occurred and were recorded in the company's books: • Andrea invested $13,500 cash in the business in exchange for common stock.
• Andrea contributed $20,000 of photography equipment to the business.
• The company paid $2,100 cash for an insurance policy covering the next 24 months.
• The company received $5,700 cash for services provided during January.
• The company purchased $6,200 of office equipment on credit.
• The company provided $2,750 of services to customers on account.
• The company paid cash of $1,500 for monthly rent.
• The company paid $3,100 on the office equipment purchased in transaction #5 above.
• Paid $275 cash for January utilities.
Based on this information, the balance in the cash account at the end of January would be:

Accepted Answer

The cash balance is calculated as follows: Starting with $13,500 (investment), add $5,700 (services provided), subtract $2,100 (insurance), $1,500 (rent), $3,100 (office equipment payment), and $275 (utilities). This results in a cash balance of $12,225.

Question 17

Geraldine Parker, the sole stockholder of Gi Gi's Dance Studio, started the business by investing $10,000 cash and donating a building worth $20,000 in exchange for common stock. Identify the general journal entry below that Gi Gi's will make to record the transaction.

Accepted Answer

This journal entry correctly identifies the two accounts affected by the transaction and the appropriate amounts, with cash being debited for the $10,000 investment and building being credited for the $20,000 donation. The common stock account is credited for the total value of the investment and donation, which is $30,000. The other options either have incorrect account titles or incorrect debits/credits.

Question 18

If Taylor Willow, the sole stockholder of Willow Hardware, uses cash of the business to purchase a family automobile, the business should record this use of cash with an entry to:

Accepted Answer

When a sole stockholder of a business uses business cash for personal use, it is treated as a withdrawal of equity, typically recorded as dividends. Therefore, the correct entry is to debit Dividends (increasing the dividends account, which reduces equity) and credit Cash (decreasing the cash asset).

Question 19

Larry Bar opened a frame shop and completed these transactions: 1. Larry started the shop by investing $40,000 cash and equipment valued at $18,000 in exchange for common stock.
2) Purchased $70 of office supplies on credit.
3) Paid $1,200 cash for the receptionist's salary.
4) Sold a custom frame service and collected $1,500 cash on the sale.
5) Completed framing services and billed the client $200.
What was the balance of the cash account after these transactions were posted?

Accepted Answer

- Larry invested $40,000 cash and $18,000 equipment, so the total assets he contributed were $58,000.
- Transaction 2 did not involve cash, so the cash balance remains at $40,000.
- Transaction 3 decreased the cash balance by $1,200: $40,000 - $1,200 = $38,800.
- Transaction 4 increased the cash balance by $1,500: $38,800 + $1,500 = $40,300.
- Transaction 5 did not involve cash and therefore did not affect the cash balance.

Thus, the final cash balance is $40,300.

Question 20

Gi Gi's Dance Studio provided $150 of dance instruction and rented out its dance studio to the same client for another $100. The client paid immediately. Identify the general journal entry below that Gi Gi's will make to record the transaction.

Accepted Answer

Cash is debited for the total amount received, and Rental Revenue and Instruction Revenue are credited for the amounts earned by renting out the studio and providing dance instruction, respectively.

Quiz 15: Analyzing for Business Transactions