Question 1

During the month of February, Hoffer Company had cash receipts of $7,500 and cash disbursements of $8,600.The February 28 cash balance was $1,800.What was the January 31 beginning cash balance?

Accepted Answer

To find the beginning cash balance, we can use the formula: Beginning Cash Balance + Cash Receipts - Cash Disbursements = Ending Cash Balance. Plugging in the numbers: Beginning Cash Balance + $7,500 - $8,600 = $1,800. Solving for the Beginning Cash Balance gives us $2,900.

Question 2

Stride Rite has total assets of $425 million.Its total liabilities are $110 million.Its equity is $315 million.Calculate the debt ratio.

Accepted Answer

The answer of Stride Rite has total assets of $425...

Question 3

Robert Haddon contributed $70,000 in cash and some land worth $130,000 to open a new business, RH Consulting.Which of the following general journal entries will RH Consulting make to record this transaction?

Accepted Answer

The journal entry to record this transaction would be to debit Cash for $70,000 and Land for $130,000, and credit Robert Haddon, Capital for $200,000. This would increase the assets of the business by $200,000, with $70,000 in cash and $130,000 in land, and increase the owner's equity by the same amount. Choice C is the only option that correctly reflects this transaction.

Question 4

These transactions were completed by the art gallery opened by Zed Bennett. a.Bennett started the gallery, Artery, by investing $40,000 cash and equipment valued at $18,000 in exchange for common stock.
B.Purchased $70 of office supplies on credit.
C.Paid $1,200 cash for the receptionist's salary.
D.Sold a painting for an artist and collected a $4,500 cash commission on the sale.
E.Completed an art appraisal and billed the client $200.
What was the balance of the cash account after these transactions were posted?

Accepted Answer

The answer of These transactions were completed by the art...

Question 5

A debit is used to record:

Accepted Answer

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

Question 6

Which of the following statements is incorrect?

Accepted Answer

Risk is not necessarily higher if a company has higher assets. The level of risk depends on various factors such as the type and quality of assets, the level of debt and the operating and financial performance of the company. A company with higher quality assets and lower debt may have lower risk compared to a company with lower quality assets and higher debt.

Question 7

Which of the following statements is false with regard to the debt ratio?

Accepted Answer

A relatively high debt ratio may indicate that a company is heavily indebted, which could lead to financial instability and difficulties in repaying debts. Therefore, a high ratio is not always desirable.

Question 8

Rocky Industries received its telephone bill in the amount of $300 and immediately paid it.Rocky's journal entry to record this transaction will include a

Accepted Answer

The answer of Rocky Industries received its telephone bill in...

Question 9

Wisconsin Rentals purchased office supplies on credit.The journal entry made by Wisconsin Rentals to record this transaction will include a:

Accepted Answer

Wisconsin Rentals purchased office supplies on credit, which means they owe money to the supplier. The account that represents the money owed to the supplier is Accounts Payable. Therefore, Wisconsin Rentals will debit Accounts Payable to record the increase in their liability, and credit the account that represents the expense of office supplies (such as Office Supplies Expense or Supplies Expense). Option D is the correct choice because it shows a credit to Accounts Payable, which is necessary to record the debt owed.

Question 10

Of the following accounts, the one that normally has a credit balance is:

Accepted Answer

Accounts that normally have a credit balance are liabilities and equity accounts, such as Sales Salaries Payable. Accounts that typically have debit balances are assets and expense accounts, such as Cash and Sales Salaries Expense. Dividends is an equity account but it has a debit balance. Office Equipment is an asset account so it also has a debit balance.

Question 11

Double-entry accounting is an accounting system:

Accepted Answer

Double-entry accounting requires each transaction to be recorded in at least two accounts, one with a debit and the other with an equal credit. This ensures that the accounting equation (assets = liabilities + equity) is always in balance and helps prevent errors. The system does not require the use of T-accounts specifically and does not necessarily impact financial statements, although it may be used to prepare them.

Question 12

The following transactions occurred during July: A.Received $900 cash for services provided to a customer during July.
B.Received $2,200 cash investment from Barbara Hanson, the owner of the business.
C.Received $750 from a customer in partial payment of his account receivable, which arose from sales in June.
D.Provided services to a customer on credit, $375.
E.Signed a promissory note for a $6,000 bank loan.
F.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, not when cash is received. Transactions a, c, d, and f all relate to the receipt of cash but not the provision of services in July. Therefore, the only transaction that generates revenue is transaction b, which is a cash investment and not revenue. Thus, the total revenue for July is $0.

Question 13

Which of the following is a true statement regarding debits and credits?

Accepted Answer

Assets and expenses both increase with a debit, while liabilities, equity, and revenue increase with a credit. Therefore, a debit does not always mean a better financial position for a business, as it depends on the account being debited. Additionally, whether a company earns a profit is irrelevant to whether debits equal credits, as debits and credits must always be equal in every transaction. Lastly, a company's books can still be in balance with a current period loss, as long as the total debits still equal the total credits.

Question 14

The debt ratio is used:

Accepted Answer

The debt ratio is used to reflect the risk associated with a company's debts. It is a financial ratio that compares a company's total debt to its total assets, giving investors insight into how much debt a company is using to finance its assets and the riskiness of the company's financial leverage.

Question 15

A credit entry:

Accepted Answer

A credit entry decreases asset and expense accounts, and increases liability, common stock, and revenue accounts. This is in accordance with the double-entry accounting system where debits and credits must balance.

Question 16

Which of the following formulas can be used to calculate the debt ratio?

Accepted Answer

The debt ratio measures the percentage of assets financed through debt. It can be calculated by dividing total liabilities by total assets. Choice C is the only formula that correctly reflects this calculation.

Question 17

Management Services, Inc.provides services to clients.On May 1, a client prepaid Management Services $60,000 for a six-month contract in advance.Management Services' journal entry to record this transaction will include a:

Accepted Answer

The journal entry to record the prepaid contract would include a credit to Unearned Management Fees for $60,000, since the company has not yet earned this revenue. There would also be a corresponding debit to Cash for $60,000, reflecting the payment received from the client. Overall, this entry would have no impact on Management Fees Earned, as that revenue will be recognized over the six-month contract period.

Question 18

An account balance is:

Accepted Answer

An account balance is the difference between the total debits and total credits for an account including the beginning balance. This means that a balance can be either a debit or a credit depending on which side has the greater total. Option A and E are incorrect because an account balance can be either a debit or a credit, not just a credit. Option D is the accounting formula for the balance sheet, not a definition of the account balance. Option B is incorrect because this only includes one side of the account, not the total balance.

Question 19

A company has total liabilities of $550 million and total equity of $300 million.Calculate this company's debt ratio.

Accepted Answer

The answer of A company has total liabilities of $550...

Question 20

An asset created by prepayment of an expense is:

Accepted Answer

Prepayment of an expense creates an asset, which is recorded as a debit to a prepaid expense account. This asset will be gradually recognized as an expense over the time period in which it is consumed.

Quiz 15: Basic Accounting for Transactions