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Exam 13: The Double-Entry Accounting System

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Question 31

True/False

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Indicate whether each of the following statements is true or false. a)________ An asset source transaction may involve a debit to an asset and a credit to a stockholders' equity account.b)________ An asset use transaction may involve a debit to an asset account and a credit to a liability.c)________ A credit to the Common Stock account would be included in an asset use transaction.d)________ The payment of rent in advance involves a debit to Prepaid Rent and a credit to Cash.e)________ Recognition of Rent Expense (when a cash payment had previously been made in advance)involves a debit to Rent Expense and a credit to Prepaid Rent.

A) True
B) False

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Question 32

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The adjusting entry to record an expense related to the use of a delivery van would involve which of the following?

A) A debit to Accumulated Depreciation
B) A credit to Delivery Van
C) A debit to Depreciation Expense
D) A debit to Retained Earnings

E) A) and D)
F) A) and C)

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Question 33

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Indicate how each event affects the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts. Increase = I Decrease = DNot Affected = NA An adjusting entry recorded as a debit to Salaries Expense and a credit to Salaries Payable.

Kincaid Company provided consulting services of $2,500 to a customer who paid $1,300 and promised to pay the remainder next month. Which of the following journal entries correctly records this transaction?

Posting is the process of determining the balance in an account by subtracting debits and credits.

Packard Company engaged in the following transactions during Year 1, its first year of operations: (Assume all transactions are cash transactions.) 1) Acquired $950 cash from the issue of common stock.2) Borrowed $420 from a bank.3) Earned $650 of revenues.4) Paid expenses of $250.5) Paid a $50 dividend. During Year 2, Packard engaged in the following transactions: (Assume all transactions are cash transactions.) 1) Issued an additional $325 of common stock.2) Repaid $220 of its debt to the bank.3) Earned revenues of $750.4) Incurred expenses of $360.5) Paid dividends of $100. What is the after-closing amount of retained earnings that will be reported on Packard's balance sheet at the end of Year 2?(Assume that closing entries have been made) .

On November 1, Year 1, Shumate Company paid $1,200 in advance for an insurance policy that covered the company for six months. Which of the following will be included in the adjustment required on December 31, Year 1?

If you debit an expense account, what impact does that have on stockholders' equity?

Indicate how each event affects the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts. Increase = I Decrease = DNot Affected = NA A transaction recorded as a debit to Furniture and a credit to Cash.

The Wagner Company acquired $500,000 cash from the issue of common stock. How would this transaction be recorded in the company's T-accounts?

Which of the following statements about debits is false?

What is the term that is used to describe the difference between the total debit and credit amounts in a T-account?

Debits decrease asset accounts.

The Youngstown Company recorded the following adjustment in general journal format: Which of the following choices accurately reflects how this event would affect the company's financial statements?

What effect do debits have on asset accounts? On liability accounts?

Indicate how each event affects the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts. Increase = I Decrease = DNot Affected = NA An adjusting entry recorded as a debit to Rent Expense and a credit to Prepaid Rent.

Consider each of the following unrelated transactions: a)Issued common stock for cashb)Provided services for cashc)Purchased supplies on accountd)Paid for the supplies purchased abovee)Paid cash dividends to stockholders Required:Using the table below, indicate the account that will be debited and the account that will be credited to record each of the transactions.

Nelson Company began operations on December 1, Year 1. The following transactions and adjustments were recorded in December and posted to the company's ledger accounts: 1) Acquired $5,800 cash from the issue of common stock to its stockholders.2) Provided services on account for $5,300.3) Paid $2,900 cash for land.4) Owed $2,400 of salaries expenses to employees for work done in December that will be paid during January.5) Purchased $1,000 of supplies on account to be used in January.6) Collected $2,700 from customers. What is the total of the debit account balances that will be reported on the company's adjusted trial balance at December 31, Year 1?

The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: What is the amount of net income that will be reported on the Year 1 income statement?

A business's chart of accounts is prepared to verify the equality of debits and credits.