$5,000 was borrowed from a bank



MODULE 2

RECORDING TRANSACTIONS

Demonstration Problem 1

Debits and Credits

For each of the following accounts, indicate the side of the account that should be used to

record an increase in that account.

|Account Name |Side used to Record Increases |

|Owners' Equity |Credit |

|Sales Revenue |Credit |

|Equipment |Debit |

|Utilities Expense |Debit |

|Supplies Expense |Debit |

|Service Revenue |Credit |

|Supplies |Debit |

|Rent Expense |Debit |

|Notes Payable |Credit |

|Cost of Goods Sold |Debit |

Demonstration Problem 2

Debits and Credits

For each of the following independent transactions, identify the account that would be debited and the account that would be credited.

|Transaction |Debit |Credit |

|1. Purchased furniture on credit. |Furniture |Accounts Payable |

|2. Purchased inventory for cash. |Inventory |Cash |

|3. Sold goods to customers on credit. |Accounts Receivable |Sales Revenue |

|4. Record cost of goods sold on the previous sale. |Cost of Goods Sold |Inventory |

|5. Purchased supplies. |Supplies |Cash |

|6. Borrowed money from a bank. |Cash |Notes Payable |

|7. Paid employee wages for the month. |Wages Expense |Cash |

|8. Paid for the furniture purchased previously. |Accounts Payable |Cash |

|9. Paid rent for the month. |Rent Expense |Cash |

|10. Collected cash from a customer for goods sold previously. |Cash |Accounts Receivable |

Practice Problem 1

Debits and Credits

For each of the following accounts, indicate the side of the account that should be used to record an increase in that account.

|Account Name |Side used to Record Increases |

|Owners' Equity |Credit |

|Service Revenue |Credit |

|Cash |Debit |

|Furniture |Debit |

|Utilities Expense |Debit |

|Supplies |Debit |

|Sales Revenue |Credit |

|Accounts Payable |Credit |

|Accounts Receivable |Debit |

|Cost of Goods Sold |Debit |

Practice Problem 2

Debits and Credits

For each of the following independent transactions, identify the account that would be debited and the account that would be credited.

|Transaction |Debit |Credit |

|1. Purchased a computer for cash. |Computer |Cash |

|2. Purchased inventory on credit. |Inventory |Accounts Payable |

|3. Purchased supplies. |Supplies |Cash |

|4. Sold goods to customers on credit. |Accounts Receivable |Sales Revenue |

|5. Record the cost of the goods sold. |Cost of Goods Sold |Inventory |

|6. Borrowed money from a bank. |Cash |Notes Payable |

|7. Paid employee wages for the month. |Wages Expense |Cash |

|8. Paid for the inventory purchased previously. |Accounts Payable |Cash |

|9. Collected cash from a customer for goods sold previously. |Cash |Accounts Receivable |

Homework Problem 1

Debit and Credit Terminology

For each of the following accounts, indicate the side of the account that should be used to record an increase in that account.

|Account Name |Debit |Credit |

|Cash |Debit | |

|Supplies Expense |Debit | |

|Accounts Payable | |Credit |

|Utilities Expense |Debit | |

|Owners' Equity | |Credit |

|Service Revenue | |Credit |

|Supplies |Debit | |

|Rent Expense |Debit | |

|Notes Payable | |Credit |

|Salaries Expense |Debit | |

Homework Problem 2

Debit and Credit Terminology

For each of the following accounts, indicate the side of the account that should be used to record an increase in that account.

|Account Name |Debit |Credit |

|Supplies Expense |Debit | |

|Cash |Debit | |

|Accounts Payable | |Credit |

|Equipment |Debit | |

|Owners' Equity | |Credit |

|Service Revenue | |Credit |

|Furniture |Debit | |

|Rent Expense |Debit | |

|Notes Payable | |Credit |

|Salaries Expense |Debit | |

Homework Problem 3

Debit and Credit Terminology

For each of the following independent transactions, identify the account that would be debited and the account that would be credited.

|Transaction |Debit |Credit |

|1. Borrowed money from a bank. |Cash |Notes Payable |

|2. Purchased inventory for cash. |Inventory |Cash |

|3. Purchased inventory on credit. |Inventory |Accounts Payable |

|4. Sold goods to customers for cash. |Cash |Sales Revenue |

|5. Sold goods to customers on credit. |Accounts Receivable |Sales Revenue |

|6. Paid employee wages for the month. |Wages Expense |Cash |

|7. Paid utilities for the current month. |Utilities Expense |Cash |

|8. Recorded supplies used during the month. |Supplies Expense |Supplies |

|9. Paid for equipment purchased previously. |Accounts Payable |Cash |

|10. Repaid the note to the bank. |Note Payable |Cash |

Homework Problem 4

Debit and Credit Terminology

For each of the following independent transactions, identify the account that would be debited and the account that would be credited.

|Transaction |Debit |Credit |

|1. Borrowed money from a bank. |Cash |Notes Payable |

|2. Purchased supplies for cash. |Supplies |Cash |

|3. Purchased equipment on credit. |Equipment |Accounts Payable |

|4. Sold goods to customers for cash. |Cash |Sales Revenue |

|5. Sold goods to customers on credit. |Accounts Receivable |Sales Revenue |

|6. Paid employee wages for the month. |Wages Expense |Cash |

|7. Paid utilities for the current month. |Utilities Expense |Cash |

|8. Recorded supplies used during the month. |Supplies Expense |Supplies |

|9. Paid for the equipment purchased previously. |Accounts Payable |Cash |

|10. Repaid the note to the bank. |Notes Payable |Cash |

Homework Quiz

Debits and Credits

1. The Equipment account's proper classification is:

a. Revenue

b. Liability

c. Expense

d. Asset

2. The Supplies account's proper classification is:

a. Asset

b. Revenue

c. Liability

d. Expense

3. The Cost of Goods Sold account's proper classification is:

a. Asset

b. Revenue

c. Liability

d. Expense

4. The Fees Earned account's proper classification is:

a. Asset

b. Liability

c. Owner's equity

d. Revenue

5. The Accounts Payable account's proper classification and normal account balance are:

a. Asset

b. Liability

c. Owner's equity

d. Revenue

6. The Inventory account's proper classification is:

a. Revenue

b. Expense

c. Liability

d. Asset

7. The Accounts Receivable account's proper classification is:

a. Asset

b. Liability

c. Owner's equity

d. Revenue

8. Altoona Plumbing acquired Office Supplies on account. Which of the following entries properly records this transaction?

a. Debit: Office Supplies; Credit: Cash

b. Debit: Cash; Credit: Office Supplies

c. Debit: Office Supplies; Credit: Accounts Payable

d. Debit: Accounts Payable; Credit: Office Supplies

9. Altoona Plumbing acquired Equipment by making a Cash down payment and issuing a note to finance the remaining balance. Which of the following entries properly records this transaction?

a. Debit: Equipment; Credit: Cash, Accounts Payable

b. Debit: Equipment; Credit: Cash, Notes Payable

c. Debit: Equipment; Credit: Cash

d. Debit: Equipment; Credit: Cash, Accounts Payable, Notes Payable

10. Altoona Plumbing made its monthly office rent payment. Which of the following entries properly records this transaction?

a. Debit: Cash; Credit: Rent Expense

b. Debit: Rent Expense; Credit: Cash

c. Debit: Rent Expense; Credit: Accounts Payable

d. Debit: Accounts Payable; Credit: Rent Expense

11. Altoona Plumbing recorded its monthly service revenue reflecting both cash sales and sales on account. Which of the following entries properly records this transaction?

a. Debit: Accounts Receivable; Credit: Service Revenue

b. Debit: Service Revenue; Credit: Accounts Receivable, Cash

c. Debit: Accounts Receivable, Cash; Credit: Service Revenue

d. Debit: Cash; Credit: Accounts Receivable

12. Josephine Marlow, M.D. just recorded her billing to clients for services rendered. Which of the following entries properly records this transaction?

a. Debit: Accounts Receivable; Credit: Fees Earned

b. Debit: Accounts Receivable; Credit: Cash

c. Debit: Fees Earned; Credit: Accounts Receivable

d. Debit: Cash; Credit: Fees Earned

13. Josephine Marlow, M.D. recorded the collection of cash from her cash customers. Which of the following entries properly records this transaction?

a. Debit: Fees Earned; Credit: Cash

b. Debit: Fees Earned; Credit: Accounts Receivable

c. Debit: Cash; Credit: Fees Earned

d. Debit: Accounts Receivable; Credit: Fees Earned

14. Josephine Marlow, M.D., a sole proprietor, collected cash from customers for services performed and billed previously. Which of the following entries properly records this transaction?

a. Debit: Fees Earned; Credit: Cash

b. Debit: Fees Earned; Credit: Accounts Receivable

c. Debit: Cash; Credit: Accounts Receivable

d. Debit: Accounts Receivable; Credit: Fees Earned

15. Ronald's Appliance Shop purchased Office Supplies for $1,000 on account. After inspecting the purchase, $200 of the goods was found to be defective and returned. Which of the following entries properly records the return of these goods?

a. Debit: Cash, $200; Credit: Office Supplies, $200

b. Debit: Cash, $800; Credit: Office Supplies, $800

c. Debit: Accounts Payable, $200; Credit: Office Supplies, $200

d. Debit: Accounts Payable, $800; Credit: Office Supplies, $800

16. Richard Valort, owner of Valort Landscaping Service, recently issued paychecks to his employees. The proper entry to record this transaction includes:

a. A debit to the Drawing account

b. A debit to Wages Payable

c. A debit to Wages Earned

d. A debit to Wages Expense

17. An employee of Valort Landscaping Service, a sole proprietorship reported an overpayment error to the owner, Richard Valort. (The error was made in computing and paying the employee's wages.) Valort receives cash from the employee for the amount of the overpayment, which of the following entries will Valort make?

a. Cash, debit; Wages Expense, credit

b. Wages Payable, debit; Wages Expense, credit

c. Wages Expense, debit, Cash, credit

d. Wages Expense, debit; Wages Payable, credit

18. Overstreet Computer Services bills all customers on account. Overstreet billed clients $80,000 during July. Overstreet's beginning Accounts Receivable balances for July was $32,200. How would July's customer billing be reflected on Overstreet's books?

a. Debit Accounts Receivable, $32,200; Credit Fees Earned, $32,200

b. Debit Accounts Receivable, $28,000; Credit Fees Earned, $28,00

c. Debit Accounts Receivable, $80,000; Credit Fees Earned, $80,00

d. Debit Cash, $32,200; Credit Fees Earned, $32,200

19. Overstreet Computer Services bills all customers on account. Overstreet billed clients $80,000 during July (Debit, Accounts Receivable; Credit, Fees Earned). No cash collections from customers were received during July. Overstreet's beginning Accounts Receivable balance for July was $32,200. Overstreet's ending Accounts Receivable balance for July was:

a. $ 28,000

b. $ 47,800

c. $ 80,000

d. $ 112,200

20. Overstreet Computer Services bills all customers on account. Overstreet billed clients $80,000 during July and collected $25,500 in customer payments. Overstreet's beginning Accounts Receivable balances for July was $32,200. How would July's customer payments be reflected on Overstreet's books?

a. Debit Cash, $25,500; Credit, Accounts Receivable, $25,500

b. Debit Cash, $32,200; Credit, Accounts Receivable, $32,200

c. Debit Cash, $80,000; Credit, Accounts Receivable, $80,000

d. Debit Cash, $32,200; Credit, Fees Earned, $32,200

21. Which of the following account is increased by debits?

a. Notes Payable

b. Accounts Receivable

c. Revenue

d. Owners' Equity

22. Which of the following account is increased by credits?

a. Supplies Expense

b. Accounts Payable

c. Inventory

d. Accounts Receivable

23. Tony's Landscaping Service borrowed $7,500 from a bank. To record this transaction:

a. Notes Payable must be credited; Cash must be debited

b. Cash must be credited; Notes Payable must be debited

c. Cash debited; Notes Receivable must be credited

d. Cash credited; Notes Receivable must be debited

24. Tony's Landscaping Service purchased a truck for $2,500. $1,000 was paid in cash and

a note payable was signed for the balance. To record this transaction:

a. Notes Payable must be credited

b. Notes Payable must be debited

c. Cash must be debited

d. Trucks must be credited

25. A business paid $100 for utilities. To record this transaction:

a. Utilities Expense must be credited;Cash must be debited

b. Cash and Utilities Expense must be debited

c. Cash and Utilities Expense must be credited

d. Utilities Expense must be debited; Cash must be credited

26. A business paid $100 to buy supplies. To record this transaction:

a. Supplies Expense must be credited

b. Accounts Payable must be debited

c. Supplies must be debited

d. Supplies must be credited

27. A business sold goods to customers for $1,800 on credit. To record this transaction:

a. Accounts Receivable must be credited

b. Accounts Payable must be debited

c. Accounts Receivable must be debited

d. Accounts Payable must be credited

28. A business paid $475 to a supplier for inventory purchased previously. To record this: transaction

a. Accounts Payable must be credited; Cash must be debited

b. Cash must be credited; Accounts Payable must be debited

c. Cash debited; Accounts Receivable must be credited

d. Cash credited; Accounts Receivable must be debited

29. Cash was collected from a customer for services provided previously. To record this:

transaction

a. Accounts Receivable must be credited

b. Accounts Payable must be debited

c. Accounts Receivable must be debited

d. Accounts Payable must be credited

30. Supplies costing $80 were used by a business. To record this transaction:

a. Supplies Expense must be credited

b. Supplies Expense must be debited

c. Supplies must be debited

d. Cash must be credited

MODULE 2

Sole-Proprietorships

Demonstration Problem 1

Clean-Rite Service

This example analyzes the transactions for Clean-Rite Service for March 2000. Clean-Rite Service is a sole-proprietorship.

The transactions are recorded in the journal and posted to the ledger.

Mar. 1 Lisa used $500 of her own money to start Clean-Rite Service.

Mar. 2 Lisa's company borrowed $1,500 from her dad.

Mar. 4 Clean-Rite Service paid $400 for a used vacuum cleaner and shampoo machine.

Mar. 9 Clean-Rite Service purchased a used truck for $1,000 from Fuller Trucks Inc. Lisa paid $250 down and signed a note payable for the balance.

Mar. 11 Clean-Rite Service paid $115 for cleaning supplies.

Mar. 15 During the first half of March, Clean-Rite Service performed $450 of cleaning services. Customers paid $200 in cash and promised the remaining payment by March 30.

Mar. 17 Clean-Rite Service used $80 of the cleaning supplies.

Mar. 22 $250 was collected from customers for services performed previously.

Mar. 24 Lisa's company paid back $500 to her dad.

Mar. 31 Lisa withdrew $100 from the business.

|DATE | ACCOUNT |DEBIT |CREDIT |

|2000 | | | |

|Mar. 1 |Cash |500 | |

| |Lisa, Capital | |500 |

|Mar. 2 |Cash |1,500 | |

| |Notes Payable | |1,500 |

|Mar. 4 |Equipment |400 | |

| |Cash | |400 |

|Mar. 9 |Truck |1,000 | |

| |Cash | |250 |

| |Notes Payable | |750 |

|Mar. 11 |Supplies |115 | |

| |Cash | |115 |

|Mar. 15 |Cash |200 | |

| |Accounts Receivable |250 | |

| |Service Revenue | |450 |

|Mar. 17 |Supplies Expense |80 | |

| |Supplies | |80 |

|Mar. 22 |Cash |250 | |

| |Accounts Receivable | |250 |

|Mar. 24 |Notes Payable |500 | |

| |Cash | |500 |

|Mar. 31 |Lisa, Drawings |100 | |

| |Cash | |100 |

Practice Problem 1

Burton Precision Tools

This assignment lists some transactions for Burton Precision Tools for January 2000. You have to analyze the accounts affected by each transaction and record it in the general journal.

Jan. 2 The business purchased inventory for $5,800 on credit.

Jan. 3 Sold goods for $7,200 to customers for cash.

Jan. 3 The cost of the goods sold in the previous transaction was $5,100.

Jan. 9 Purchased supplies for $150.

Jan. 11 Paid $4,800 to suppliers for the inventory purchased previously.

Jan. 12 Paid $85 for utilities.

Jan. 17 Supplies costing $45 were used in January.

Jan. 28 Paid rent of $500 for January.

| DATE | ACCOUNT |DEBIT |CREDIT |

| 2000 | | | |

| Jan. 2 |Inventory |5,800 | |

| |Accounts Payable | |5,800 |

| Jan. 3 |Cash |7,200 | |

| |Sales Revenue | |7,200 |

| Jan. 3 |Cost of Goods Sold |5,100 | |

| |Inventory | |5,100 |

| Jan. 9 |Supplies |150 | |

| |Cash | |150 |

| Jan. 11 |Accounts Payable |4,800 | |

| |Cash | |4,800 |

| Jan. 12 |Utilities Expense |85 | |

| |Cash | |85 |

| Jan. 17 |Supplies Expense |45 | |

| |Supplies | |45 |

| Jan. 28 |Rent Expense |500 | |

| |Cash | |500 |

Practice Problem 2

East West Travels

East West Travels began operations in April 2000. The company is a sole-proprietorship. This assignment requires you to record the transactions for April in the general journal.

Apr. 1 Brian Smith started East West Travels by investing $40,000.

Apr. 2 $15,000 was borrowed by issuing a note payable.

Apr. 4 $500 was paid to purchase office supplies.

Apr. 9 Travel arrangement services performed for customers totaled $2,000. Of this

amount, $800 was collected in cash.

Apr. 11 Office supplies costing $200 were consumed.

Apr. 14 An additional $300 of supplies were purchased.

Apr. 17 A payment of $5,000 was made on the note payable.

Apr. 18 $600 of accounts receivable was collected.

Apr. 22 Services totaling $450 were performed ($200 for cash with the balance on credit).

Apr. 28 $150 of supplies were consumed.

Apr. 29 $200 of outstanding accounts receivable was collected.

Apr. 30 Brian withdrew $500 from the business for personal use.

| DATE | ACCOUNT |DEBIT |CREDIT |

| 2000 | | | |

| Apr. 1 |Cash |40,000 | |

| |Brian, Capital | |40,000 |

| Apr. 2 |Cash |15,000 | |

| |Notes Payable | |15,000 |

| Apr. 4 |Supplies |500 | |

| |Cash | |500 |

| Apr. 9 |Cash |800 | |

| |Accounts Receivable |1,200 | |

| |Service Revenue | |2,000 |

| Apr. 11 |Supplies Expense |200 | |

| |Supplies | |200 |

| Apr. 14 |Supplies |300 | |

| |Cash | |300 |

| Apr. 17 |Notes Payable |5,000 | |

| |Cash | |5,000 |

| Apr. 18 |Cash |600 | |

| |Accounts Receivable | |600 |

| Apr. 22 |Cash |200 | |

| |Accounts Receivable |250 | |

| |Service Revenue | |450 |

| Apr. 28 |Supplies Expense |150 | |

| |Supplies | |150 |

| Apr. 29 |Cash |200 | |

| |Accounts Receivable | |200 |

| Apr. 30 |Brian, Drawings |500 | |

| |Cash | |500 |

Homework Problem 1

Aiken Consulting

This assignment lists some typical transactions for Aiken Consulting for March 2000. You have to analyze the accounts affected by each transaction and record it in a journal.

Mar. 1 $12,000 was borrowed from a bank.

Mar. 2 Purchased supplies for $250.

Mar. 4 Consulting services were provided to clients for $2,800 on credit.

Mar. 9 Paid wages of $1,000 to the secretary.

Mar. 11 $1,200 was collected from customers for services provided previously.

Mar. 15 The cost of supplies used in March was $80.

Mar. 17 $2,000 of the note payable was paid.

Mar. 31 A payment of $700 was made for rent.

| DATE | ACCOUNT |DEBIT |CREDIT |

| 2000 | | | |

|Mar. 1 |Cash |12,000 | |

| |Notes Payable | |12,000 |

|Mar. 2 |Supplies |250 | |

| |Cash | |250 |

|Mar. 4 |Accounts Receivable |2,800 | |

| |Service Revenue | |2,800 |

|Mar. 9 |Wages Expense |1,000 | |

| |Cash | |1,000 |

|Mar. 11 |Cash |1,200 | |

| |Accounts Receivable | |1,200 |

|Mar. 15 |Supplies Expense |80 | |

| |Supplies | |80 |

|Mar. 17 |Notes Payable |2,000 | |

| |Cash | |2,000 |

|Mar. 31 |Rent Expense |700 | |

| |Cash | |700 |

Homework Problem 2

Annie’s Bakery

This assignment lists some typical transactions for Annie's Bakery for November 2000. You have to analyze the accounts affected by each transaction and record it in the journal.

Chart of Accounts

Nov. 1 $5,000 was borrowed from a bank.

Nov. 2 Merchandise costing $750 was purchased on 30-day credit.

Nov. 4 Purchased supplies for $75.

Nov. 9 Goods were sold for $1,400 in cash.

Nov. 9 The cost of the goods sold was $500.

Nov. 14 $85 was paid for utilities.

Nov. 17 Supplies costing $35 were used in November.

Nov. 18 Paid $750 to the supplier for the merchandise purchased previously.

Nov. 22 Paid rent of $500 for November.

| DATE | ACCOUNT |DEBIT |CREDIT |

| 2000 | | | |

|Nov. 1 |Cash |5,000 | |

| |Notes Payable | |5,000 |

|Nov. 2 |Inventory |750 | |

| |Accounts Payable | |750 |

|Nov. 4 |Supplies |75 | |

| |Cash | |75 |

|Nov. 9 |Cash |1,400 | |

| |Sales Revenue | |1,400 |

|Nov. 9 |Cost of Goods Sold |500 | |

| |Inventory | |500 |

|Nov. 14 |Utilities Expense |85 | |

| |Cash | |85 |

|Nov. 17 |Supplies Expense |35 | |

| |Supplies | |35 |

|Nov. 18 |Accounts Payable |750 | |

| |Cash | |750 |

|Nov. 22 |Rent Expense |500 | |

| |Cash | |500 |

Homework Problem 3

Carlson Realty I

On June 1, 2000, George Carlson started Carlson Realty. The company is a sole-proprietorship.This assignment requires you to record the transactions for the first month of operations in the accounting system.

Jun. 1 George invested $8,000 in the business.

Jun. 2 Supplies were purchased on credit for $520.

Jun. 4 Furniture was purchased for $5,500. $2,500 was paid in cash and a note was

signed for the balance.

Jun. 9 $250 was paid for the supplies purchased previously.

Jun. 11 The business earned sales commissions of $11,000. The customers paid cash.

Jun. 29 The receptionist was paid a salary of $2,400 for June.

Jun. 29 Rent of $1,400 was paid for June.

Jun. 30 The business paid $1,350 for automobile expenses.

Jun. 30 $140 was paid for utilities for June.

Jun. 30 Supplies costing $135 were used in June.

Jun. 30 George withdrew $1,000 for personal use.

| DATE | ACCOUNT |DEBIT |CREDIT |

| 2000 | | | |

| Jun. 1 |Cash |8,000 | |

| |George, Capital | |8,000 |

| Jun. 2 |Supplies |520 | |

| |Accounts Payable | |520 |

| Jun. 4 |Furniture |5,500 | |

| |Cash | |2,500 |

| |Notes Payable | |3,000 |

| Jun. 9 |Accounts Payable |250 | |

| |Cash | |250 |

| Jun. 11 |Cash |11,000 | |

| |Service Revenue | |11,000 |

| Jun. 29 |Salaries Expense |2,400 | |

| |Cash | |2,400 |

| Jun. 29 |Rent Expense |1,400 | |

| |Cash | |1,400 |

| Jun. 30 |Automobile Expense |1,350 | |

| |Cash | |1,350 |

| Jun. 30 |Utilities Expense |140 | |

| |Cash | |140 |

| Jun. 30 |Supplies Expense |135 | |

| |Supplies | |135 |

| Jun. 30 |George, Drawings |1,000 | |

| |Cash | |1,000 |

Homework Problem 4

Jackie’s Floral Designs

Jackie's Floral Designs sells plants, flowers, and silk and dried arrangements. The company is a sole-proprietorship. This assignment requires you to record the transactions for February 2000 in the accounting system.

Feb. 1 Jackie Simmons started Jackie's Floral Designs by investing $12,500.

Feb. 5 Merchandise costing $5,700 was purchased on 30-day credit.

Feb. 7 $350 was paid for supplies.

Feb. 28 Goods were sold for $8,000. $5,500 was collected in cash.

Feb. 28 The cost of the goods sold was $5,000.

Feb. 28 Supplies costing $175 were used during February.

Feb. 28 Employees were paid $1,200 in wages for February.

Feb. 28 A payment of $1,700 was made for the merchandise purchased previously.

Feb. 28 A payment of $800 was made for rent for February.

Feb. 28 $150 was paid for utilities for February.

Feb. 28 Jackie withdrew $500 for personal expenses.

|DATE | ACCOUNT |DEBIT |CREDIT |

|2000 | | | |

|Feb. 1 |Cash |12,500 | |

| |Jackie, Capital | |12,500 |

|Feb. 5 |Inventory |5,700 | |

| |Accounts Payable | |5,700 |

| Feb. 7 |Supplies |350 | |

| |Cash | |350 |

|Feb. 28 |Cash |5,500 | |

| |Accounts Receivable |2,500 | |

| |Sales Revenue | |8,000 |

|Feb. 28 |Cost of Goods Sold |5,000 | |

| |Inventory | |5,000 |

|Feb. 28 |Supplies Expense |175 | |

| |Supplies | |175 |

|Feb. 28 |Wages Expense |1,200 | |

| |Cash | |1,200 |

|Feb. 28 |Accounts Payable |1,700 | |

| |Cash | |1,700 |

|Feb. 28 |Rent Expense |800 | |

| |Cash | |800 |

|Feb. 28 |Utilities Expense |150 | |

| |Cash | |150 |

|Feb. 28 |Jackie, Drawings |500 | |

| |Cash | |500 |

Homework Quiz

Sole-Proprietorships

1. A business, operated for profit and owned by one person, is called a:

a. Nonprofit organization

b. Partnership

c. Corporation

d. Sole Proprietorship

2. A business entity can be organized in one of three major types. They are:

a. Corporations, partnerships, and sole proprietorships

b. Corporations, associations, and nonprofit organizations

c. Profit, nonprofit, and corporate organizations

d. Institutions, partnerships, and corporations

3. A sole proprietorship can obtain financial resources from which of the following types of accounts?

a. Liabilities

b. Owner's Equity

c. Assets

d. Both a and b

4. In a sole proprietorship, which of the following accounts reflects the owner's financial position in the business?

a. Capital Stock

b. Retained Earnings

c. Inventory

d. Owner's Capital

5. In a sole proprietorship, the Owner's Capital account balance appears in:

a. The Owner's Equity section of the balance sheet.

b. The Asset section of the balance sheet.

c. The Liability section of the balance sheet.

d. Both the Asset and Owner's Equity sections of the balance sheet.

6. Robert Pringle, a sole proprietor, invested $10,000 in his business to fund initial operations. This transaction will be reflected as a:

a. Debit to Cash and a credit to Note Payable.

b. Debit to Cash and a credit to Accounts Receivable.

c. Debit to Cash and a credit to Robert Pringle, Capital.

d. Debit to Cash and a credit to Fees Earned.

7. Robert Pringle, a sole proprietor, borrowed $10,000 from a local bank. It will be repaid with interest over the next year. This transaction will be reflected as a:

a. Debit to Cash and a credit to Note Payable.

b. Debit to Cash and a credit to Accounts Receivable.

c. Debit to Cash and a credit to Robert Pringle, Capital.

d. Debit to Cash and a credit to Fees Earned.

8. Robert Pringle, a sole proprietor, repaid $2,000 of the $10,000 he recently borrowed from a local bank. The payment applied exclusively to the principal borrowed. This transaction will be reflected as a:

a. Debit to Note Payable and a credit to Robert Pringle, Capital.

b. Debit to Note Payable and a credit to Accounts Receivable.

c. Debit to Note Payable and a credit to Cash.

d. Debit to Notes Payable and a credit to Fees Earned.

9. Robert Pringle, a sole proprietor, purchased Supplies on account for $2,500 during June. These items will be used over the next 18 months. This transaction will be recorded as a:

a. Debit to Supplies Expense and a credit to Cash.

b. Debit to Supplies Expense and a credit to Accounts Payable.

c. Debit to Supplies and a credit to Cash.

d. Debit to Supplies and a credit to Accounts Payable.

10. Of the supplies purchased in question #9, $1,500 was used in the current year. The entry reflecting this consumption will include a:

a. Debit to Supplies

b. Debit to Supplies Expense

c. Credit to Supplies Expense

d. Credit to Supplies Revenue

11. Ruth's Computer Consulting, a sole proprietorship, purchased computer supplies and recorded the acquisition as a debit to the asset account, Supplies. The entry to record the cost of supplies used during an accounting period is:

a. Debit Supplies; credit Accounts Payable

b. Debit Accounts Payable; credit Supplies

c. Debit Supplies Expense; credit Supplies

d. Debit Supplies Expense; credit Accounts Payable

12. Ruth's Computer Consulting, a sole proprietorship, purchased supplies during July of $3,000 and recorded the acquisition as a debit to the asset account, Supplies. At the end of July, the supplies on hand at July 31 totaled $2,800. The amount to be recorded as Supplies Expense for July is:

a. $200

b. $2,800

c. $3,000

d. $5,800

13. Ruth's Computer Consulting is a sole proprietorship. The balance in her Office Supplies account on March 1 was $3,200. Supplies purchased during March amounted to $2,800, and the supplies on hand at March 31 were $2,500. The amount to be used for debited to Supplies Expense on March 31st is:

a. $3,500

b. $2,800

c. $3,200

d. $2,500

14. Ruth's Computer Consulting is a sole proprietorship. Her Office Supplies account has a balance of $1,950 at the beginning of the year and was debited during the year for $5,600, representing the total of supplies purchased during the year. If $1,500 of supplies is on hand at the end of the year, the supplies expense to be reported on the income statement for the year is:

a. $1,500

b. $1,950

c. $5,600

d. $6,050

15. Ruth's Computer Consulting is a sole proprietorship. She recently purchased Computer Equipment costing $15,000. One third was paid in cash and the remainder was on account. To record this entry, Ruth should include a:

a. Debit to Computer Equipment of $5,000.

b. Debit to Computer Equipment for $10,000.

c. Debit to Computer Equipment of $15,000.

d. Debit to Computer Expense of $10,000.

16. Ruth's Computer Consulting is a sole proprietorship. She recently purchased Computer Equipment costing $15,000. One third was paid in cash and the remainder was on account. To record this entry, Ruth should include a:

a. Credit to Cash for $5,000.

b. Credit to Cash for $10,000.

c. Credit to Cash for $15,000.

d. Credit to Cash for some other amount.

17. Ruth's Computer Consulting is a sole proprietorship. She recently purchased Computer Equipment costing $15,000. One third was paid in cash and the remainder was on account. To record this entry, Ruth should include a:

a. Credit to Accounts Payable for $5,000.

b. Credit to Accounts Payable for $10,000.

c. Credit to Accounts Payable for $15,000.

d. Credit to Accounts Payable for some other amount.

18. Ruth's Computer Consulting is a sole proprietorship. During August, she billed clients $12,000 for services rendered on account. To record this entry, Ruth should:

a. Debit Cash and credit Fees Earned.

b. Debit Accounts Receivable and credit Fees Earned.

c. Debit Cash and credit Accounts Receivable.

d. Debit Fees Earned and credit Cash.

19. Ruth's Computer Consulting is a sole proprietorship. During September, she billed clients $15,000 for services rendered and received $10,000 in payment of prior Accounts Receivable. Ruth's entries for September should include a:

a. Debit to Cash for $5,000.

b. Debit to Cash for $10,000.

c. Debit to Cash for $15,000.

d. Debit to Cash for $25,000.

20. Ruth's Computer Consulting is a sole proprietorship. During September, she billed clients $15,000 for services rendered and received $10,000 in payment of prior Accounts Receivable. Ruth's entries for September should include a:

a. Debit to Accounts Receivable for $5,000.

b. Debit to Accounts Receivable for $10,000.

c. Debit to Accounts Receivable for $15,000.

d. Debit to Accounts Receivable for $25,000.

21. A business paid $800 for rent. To record this transaction:

a. Rent Expense must be credited; Cash must be debited

b. Rent Expense must be debited; Cash must be credited

c. Cash debited; Rent Revenue must be credited

d. Cash credited; Rent Revenue must be debited

22. A sole-proprietorship and its owners are distinct entities:

a. From a legal standpoint

b. From an accounting standpoint

c. From an accounting and legal standpoint

d. None of the above

23. The account used by sole-proprietorships to record owner investments is:

a. Capital

b. Retained Earnings

c. Capital Stock

d. Drawings

24. A business paid $100 to buy supplies. To record this transaction:

a. Supplies Expense must be credited

b. Supplies must be debited

c. Supplies must be credited

d. None of the above

25. To record the payment of cash for inventory purchased on credit earlier:

a. Accounts Payable must be debited

b. Accounts Payable must be credited

c. Accounts Receivable must be debited

d. Accounts Receivable must be credited

26. The account used to record withdrawals of cash by owners of sole-proprietorships is:

a. Capital

b. Retained Earnings

c. Capital Stock

d. Drawings

27. Owner investments in sole-proprietorships are recorded by:

a. Debiting Capital; crediting Cash

b. Debiting Cash; crediting Capital

c. Debiting Capital Stock; crediting Cash

d. Debiting Cash; crediting Capital Stock

28. Which of the following accounts are increased by credits?

a. Supplies

b. Accounts Receivable

c. Inventory

d. Revenue

29. Withdrawals of cash by owners of sole-proprietorships is recorded by:

a. Debiting Drawings; crediting Cash

b. Debiting Cash; crediting Drawings

c. Debiting Dividends; crediting Cash

d. Debiting Cash; crediting Dividends

30. A business paid salaries of $1,800 for November. To record this transaction:

a. Salaries Expense must be credited

b. Salaries Expense must be debited

c. Cash must be debited

d. None of the above

MODULE 2

Corporations

Demonstration Problem 1

Music Stop

This example analyzes the transactions for Music Stop for April 2000. The company is a corporation. The transactions are recorded in the general journal and posted to the general ledger.

Apr. 2 Music Stop issued stock for $10,000.

Apr. 2 The company signed a two year note for $40,000.

Apr. 4 Merchandise costing $20,000 was purchased on credit.

Apr. 9 The company paid $12,000 for equipment.

Apr. 11 Goods were sold to customers for $5,500.

Apr. 11 The cost of the goods sold in the previous transaction was $3,000.

Apr. 17 Employees were paid $1,000 in wages.

Apr. 22 The company paid the utility bill of $100.

Apr. 24 A payment of $5,000 was made for the merchandise purchased previously.

Apr. 30 Music Stop declared and paid dividends of $1,000.

|DATE | ACCOUNT |DEBIT |CREDIT |

|2000 | | | |

|Apr. 2 |Cash |10,000 | |

| |Capital Stock | |10,000 |

|Apr. 2 |Cash |40,000 | |

| |Notes Payable | |40,000 |

|Apr. 4 |Inventory |20,000 | |

| |Accounts Payable | |20,000 |

|Apr. 9 |Equipment |12,000 | |

| |Cash | |12,000 |

|Apr. 11 |Cash |5,500 | |

| |Sales Revenue | |5,500 |

|Apr. 11 |Cost of Goods Sold |3,000 | |

| |Inventory | |3,000 |

|Apr. 17 |Wages Expense |1,000 | |

| |Cash | |1,000 |

| Apr. 22 |Utilities Expense |100 | |

| |Cash | |100 |

| Apr. 24 |Accounts Payable |5,000 | |

| |Cash | |5,000 |

| Apr. 30 |Dividends |1,000 | |

| |Cash | |1,000 |

Practice Problem 1

Downtown Fitness Center

This assignment lists some typical transactions for Downtown Fitness Center for April 2000. After analyzing the transactions, you must record them in the general journal.

Apr. 2 $5,000 was borrowed from a bank.

Apr. 2 Purchased equipment on credit for $10,000.

Apr. 4 Purchased supplies for $200. Paid cash.

Apr. 9 Services were provided to customers on credit for $3,500.

Apr. 11 Paid the utilities bill of $105 for April.

Apr. 15 Paid employees’ salaries of $1,000 for April.

Apr. 17 Rent of $600 was paid for April.

Apr. 28 $2,500 was paid to the supplier for the equipment purchased previously.

Apr. 30 $1,500 was collected from customers for services provided previously

| DATE | ACCOUNT |DEBIT |CREDIT |

| 2000 | | | |

| Apr. 2 |Cash |5,000 | |

| |Notes Payable | |5,000 |

| Apr. 2 |Equipment |10,000 | |

| |Accounts Payable | |10,000 |

| Apr. 4 |Supplies |200 | |

| |Cash | |200 |

| Apr. 9 |Accounts Receivable |3,500 | |

| |Service Revenue | |3,500 |

| Apr. 11 |Utilities Expense |105 | |

| |Cash | |105 |

| Apr. 15 |Salaries Expense |1,000 | |

| |Cash | |1,000 |

| Apr. 17 |Rent Expense |600 | |

| |Cash | |600 |

| Apr. 28 |Accounts Payable |2,500 | |

| |Cash | |2,500 |

| Apr. 30 |Cash |1,500 | |

| |Accounts Receivable | |1,500 |

Practice Assignment 2

O’Grady Building Supplies

This assignment analyzes the transactions for O'Grady Building Supplies for July 2000. This companyt is a corporation. After analyzing the transactions, you must record them in the general journal.

July 1 The owners started the business by investing $50,000. O’Grady Building

Supplies issued stock for $50,000.

July 2 The business purchased inventory on credit for $22,500.

July 5 The business purchased supplies for $500.

July 31 Goods were sold to customers for $18,000. The customers paid cash.

July 31 The cost of goods sold for the month was $13,500.

July 31 Supplies costing $100 was used during the month.

July 31 Rent of $1,800 was paid for July.

July 31 $6,000 was paid to suppliers for inventory purchased previously.

| DATE | ACCOUNT |DEBIT |CREDIT |

| 2000 | | | |

| Jul. 1 |Cash |50,000 | |

| |Capital Stock | |50,000 |

| Jul. 2 |Inventory |22,500 | |

| |Accounts Payable | |22,500 |

| Jul. 5 |Supplies |500 | |

| |Cash | |500 |

| Jul. 31 |Cash |18,000 | |

| |Sales Revenue | |18,000 |

| Jul. 31 |Cost of Goods Sold |13,500 | |

| |Inventory | |13,500 |

| Jul. 31 |Supplies Expense |100 | |

| |Supplies | |100 |

| Jul. 31 |Rent Expense |1,800 | |

| |Cash | |1,800 |

| Jul. 31 |Accounts Payable |6,000 | |

| |Cash | |6,000 |

Homework Problem 1

Osborne Office Supplies

This assignment lists some typical transactions for Osborne Office Supplies for January 2000. You have to record each transaction in the general journal.

Jan. 1 $15,000 was borrowed by issuing a note payable.

Jan. 2 Merchandise costing $3,000 was purchased on credit.

Jan. 4 Office supplies were sold to customers on credit for $2,000.

Jan. 4 The cost of the supplies sold was $1,100.

Jan. 11 Goods were sold to customers for $2,700 for cash.

Jan. 11 The cost of the goods sold in the previous transaction was $1,400.

Jan. 17 Paid $2,000 to the supplier for the merchandise purchased previously.

Jan. 18 $600 of accounts receivable was collected.

Jan. 22 Rent of $600 was paid for January.

Jan. 28 $100 was paid for utilities for January.

Jan. 29 Employees were paid $800 for wages.

| DATE | ACCOUNT |DEBIT |CREDIT |

| 2000 | | | |

| Jan. 1 |Cash |15,000 | |

| |Notes Payable | |15,000 |

| Jan. 2 |Inventory |3,000 | |

| |Accounts Payable | |3,000 |

| Jan. 4 |Accounts Receivable |2,000 | |

| |Sales Revenue | |2,000 |

| Jan. 4 |Cost of Goods Sold |1,100 | |

| |Inventory | |1,100 |

| Jan. 11 |Cash |2,700 | |

| |Sales Revenue | |2,700 |

| Jan. 11 |Cost of Goods Sold |1,400 | |

| |Inventory | |1,400 |

| Jan. 17 |Accounts Payable |2,000 | |

| |Cash | |2,000 |

| Jan. 18 |Cash |600 | |

| |Accounts Receivable | |600 |

| Jan. 22 |Rent Expense |600 | |

| |Cash | |600 |

| Jan. 28 |Utilities Expense |100 | |

| |Cash | |100 |

| Jan. 29 |Wages Expense |800 | |

| |Cash | |800 |

Homework Problem 2

Discount Books

This assignment lists some transactions for Discount Books for September 2000. You have to analyze the accounts affected by each transaction and record it in the general journal.

Sept. 1 Boston Bank loaned the firm $16,000 in exchange for the firm's one year note payable.

Sept. 2 Merchandise costing $8,000 was purchased on 30-day credit.

Sept. 5 Goods were sold for $3,000 in cash.

Sept. 5 The cost of the goods sold was $2,000.

Sept. 9 Employees were paid $1,000 in wages.

Sept. 12 A payment of $2,000 was made for the merchandise purchased previously.

Sept. 16 Goods were sold for cash totaling $4,500.

Sept. 16 The cost of the goods sold was $3,000.

Sept. 22 $1,800 of notes payable was paid.

Sept. 28 A payment of $800 was made for rent.

| DATE | ACCOUNT |DEBIT |CREDIT |

| 2000 | | | |

| Sept. 1 |Cash |16,000 | |

| |Notes Payable | |16,000 |

| Sept. 2 |Inventory |8,000 | |

| |Accounts Payable | |8,000 |

| Sept. 5 |Cash |3,000 | |

| |Sales Revenue | |3,000 |

| Sept. 5 |Cost of Goods Sold |2,000 | |

| |Inventory | |2,000 |

| Sept. 9 |Wages Expense |1,000 | |

| |Cash | |1,000 |

| Sept. 12 |Accounts Payable |2,000 | |

| |Cash | |2,000 |

| Sept. 16 |Cash |4,500 | |

| |Sales Revenue | |4,500 |

| Sept. 16 |Cost of Goods Sold |3,000 | |

| |Inventory | |3,000 |

| Sept. 22 |Notes Payable |1,800 | |

| |Cash | |1,800 |

| Sept. 28 |Rent Expense |800 | |

| |Cash | |800 |

Homework Problem 3

The Audio Exchange

The Audio Exchange sells used audio equipment and provides repair services. Below are the transactions occurring during November 2000. This assignment requires you to prepare journal entries for these transactions.

Nov. 1 Audio exchange issued stock for $12,000.

Nov. 1 Supplies were purchased for $500.

Nov. 4 An inventory of audio equipment was purchased on credit for $15,000.

Nov. 7 $700 was paid for advertising that appeared in the paper during the month.

Nov. 8 $120 was paid for repairs.

Nov. 10 $6,000 was paid to the supplier for the inventory purchased earlier.

Nov. 12 Services provided to clients for cash totaled $3,300.

Nov. 16 Services totaling $2,500 were performed on credit.

Nov. 18 Audio equipment was sold to customers for $4,000.

Nov. 24 The cost of the equipment sold was $2,500.

Nov. 24 $200 of the supplies were used during the month.

Nov. 30 Audio Exchange declared and paid dividends of $1,000.

| DATE | ACCOUNT |DEBIT |CREDIT |

| 2000 | | | |

| Nov. 1 |Cash |12,000 | |

| |Capital Stock | |12,000 |

| Nov. 1 |Supplies |500 | |

| |Cash | |500 |

| Nov. 4 |Inventory |15,000 | |

| |Accounts Payable | |15,000 |

| Nov. 7 |Advertising Expense |700 | |

| |Cash | |700 |

| Nov. 8 |Repairs Expense |120 | |

| |Cash | |120 |

| Nov. 10 |Accounts Payable |6,000 | |

| |Cash | |6,000 |

| Nov. 12 |Cash |3,300 | |

| |Service Revenue | |3,300 |

| Nov. 16 |Accounts Receivable |2,500 | |

| |Service Revenue | |2,500 |

| Nov. 18 |Cash |4,000 | |

| |Sales Revenue | |4,000 |

| Nov. 24 |Cost of Goods Sold |2,500 | |

| |Inventory | |2,500 |

| Nov. 24 |Supplies Expense |200 | |

| |Supplies | |200 |

| Nov. 30 |Dividends |1,000 | |

| |Cash | |1,000 |

Homework Problem 4

Hoffman Consulting

The transactions for the first month of operations of Hoffman Consulting Inc. are given below. This assignment requires you to prepare journal entries for these transactions.

Oct. 1 The owners started the business by investing $25,000. Hoffman Consulting Inc. issued

stock for $25,000.

Oct. 5 A computer system was purchased for $2,000 on credit.

Oct. 10 $400 was paid for office supplies.

Oct. 17 Services were performed for $2,500 on credit.

Oct. 21 $1,000 was paid for the computer purchased previously.

Oct. 31 Services were performed for $8,000. The customers paid cash.

Oct. 31 $275 was paid for advertisements in October.

Oct. 31 $155 was paid for utilities for October.

Oct. 31 Supplies costing $135 were used in October.

Oct. 31 Customers paid $1,500 for services performed previously on credit.

Oct. 31 $1,800 was paid as rent for the office for October.

| DATE | ACCOUNT |DEBIT |CREDIT |

| 2000 | | | |

| Oct. 1 |Cash |25,000 | |

| |Capital Stock | |25,000 |

| Oct. 5 |Computer |2,000 | |

| |Accounts Payable | |2,000 |

| Oct. 10 |Supplies |400 | |

| |Cash | |400 |

| Oct. 17 |Accounts Receivable |2,500 | |

| |Service Revenue | |2,500 |

| Oct. 21 |Accounts Payable |1,000 | |

| |Cash | |1,000 |

| Oct. 31 |Cash |8,000 | |

| |Service Revenue | |8,000 |

| Oct. 31 |Advertising Expense |275 | |

| |Cash | |275 |

| Oct. 31 |Utilities Expense |155 | |

| |Cash | |155 |

| Oct. 31 |Supplies Expense |135 | |

| |Supplies | |135 |

| Oct. 31 |Cash |1,500 | |

| |Accounts Receivable | |1,500 |

| Oct. 31 |Rent Expense |1,800 | |

| |Cash | |1,800 |

Homework Quiz

Corporations

1. Which organizational form allows the business to be a separate, distinct entity from the owners?

a. Proprietorship

b. Partnership

c. Corporation

d. All of the above

2. The Retained Earnings account is unique to which of the following forms of business organization?

a. Partnership

b. Proprietorship

c. Corporation

d. A Retained Earnings account is used in all of the above choices.

3. The issuance of a cash dividend:

a. Increases a corporation's retained earnings balance.

b. Decreases the value of outstanding stock.

c. Increases the number of shares of outstanding stock.

d. Decreases a corporation's retained earnings balance.

4. Which of the following is true of a corporation's Retained Earnings account?

a. It usually equals cash on hand.

b. It includes all of the Corporation's Liabilities.

c. It includes the transfer of dividends declared during the period.

d. It is shown as a section of the corporation's income statement.

5. A corporation issuing only one class of stock will usually title it:

a. Common Stock

b. Treasury Stock

c. No-par Stock

d. Preferred Stock

6. Bob and Ray recently purchased shares of BR, Incorporated, a corporation, for $100,000 each. This transaction will consist of the following entries to BR, Incorporated's records:

a. Debit Accounts Receivable; credit Capital Stock

b. Debit Cash; credit Accounts Payable

c. Debit Cash; credit Capital Stock

d. Debit Accounts Receivable; credit Accounts Payable

7. Bob and Ray organized BR, Incorporated, a corporation for which they are the only stockholders. At the end of the first year of operations, they elect to withdraw dividends in the amount of $2,000 each. This transaction will consist of the following entries on BR Incorporated's records:

a. Debit Drawing; credit Cash

b. Debit Wages Expense; credit Cash

c. Debit Capital Stock; credit Cash

d. Debit Dividends; credit Cash

8. Bob and Ray have just purchased shares of BR, Incorporated, a corporation, for $100,000 each. This transaction will impact the corporation's Stockholders' Equity by what amount?

a. $ -0-

b. $ 100,000

c. $ 200,000

d. Some other amount.

9. Which of the following properly reflects the transaction to record a Corporation's issuance of stock?

a. Capital Stock: Credit; Cash: Debit

b. Capital Stock: Debit; Cash: Debit

c. Capital Stock: Credit; Cash: Credit

d. Capital Stock: Debit; Cash: Credit

10. Which of the following properly reflects a Corporation's issuance of stock on the Capital Stock and Dividends accounts?

a. Capital Stock: Increases; Dividends: Decreases

b. Capital Stock: Increases; Dividends: No effect

c. Capital Stock: No effect; Dividends: Increases

d. Capital Stock: Decreases; Dividends: Increases

11. BR, Incorporated, a corporation, pays $4,000 in dividends. This $4,000 payment will:

a. Increase the Cash account.

b. Increase the Dividends account.

c. Increase the Capital Stock account.

d. Decrease the Capital Stock account.

12. BR, Incorporated, a corporation, pays $4,000 in dividends. This $4,000 payment will be recorded as a:

a. Dividends: Credit; Cash: Debit

b. Dividends: Debit; Cash: Credit

c. Dividends: No effect; Cash: No effect

d. Dividends: Debit; Cash: No effect

13. BR, Incorporated, a corporation, has a $100,000 Capital Stock balance at the beginning of the year. Additional Common Stock of $45,000 was issued during the year. The Capital Stock balance at the end of the year is:

a. $ 145,000

b. $ 100,000

c. $ 55,000

d. $ 45,000

14. BR, Incorporated issued $100,000 in Capital Stock to each of its two shareholders. The Corporation paid Dividends of $20,000 during the year. The balance in the Capital Stock account at the end of the year is:

a. $ 220,000

b. $ 200,000

c. $ 120,000

d. $ 100,000

15. Carriage Company, Inc.'s Capital Stock balance was $38,000 on December 31, 2001. Additional stock of $13,000 was issued during the year. Carriage's Capital Stock balance on January 1, 2001 was:

a. $51,000

b. $38,000

c. $25,000

d $13,000

16. StarCo, a newly formed corporation, paid its office rental for the month of April 2001. What accounts are impacted by this transaction?

a. Debit Dividends; credit Capital Stock

b. Debit Rent Revenue; credit Cash

c. Debit Drawings; credit Capital Stock

d. Debit Rent Expense; credit Cash

17. StarCo, a newly formed corporation, purchased Inventory on account from a vendor. What accounts are impacted by this transaction?

a. Debit Inventory; credit Cash

b. Debit Inventory; credit Accounts Payable

c. Debit Drawings; credit Cash

d. Debit Drawings; credit Accounts Payable

18. The corporation, Joe's Discount Furniture, recorded sales for the month of May 2001 amounting to $200,000. Sixty percent (60%) of these sales were on account. As a result of this transaction, Joe's Accounts Receivable account will increase by:

a. $ -0-

b. $ 80,000

c. $120,000

d. $200,000

19. The corporation, Joe's Discount Furniture, recorded sales for the month of May 2001 amounting to $200,000. Sixty percent (60%) of these sales were on account. As a result of this transaction, Joe's Revenue account will increase by:

a. $ -0-

b. $ 80,000

c. $120,000

d. $200,000

20. The corporation, Joe's Discount Furniture, recorded sales for the month of May 2001 amounting to $200,000. Sixty percent (60%) of these sales were on account. As a result of this transaction, how will the following accounts be impacted?

a. Cash: $ -0-; Capital Stock: $200,000 increase

b. Cash: $ 80,000 increase; Capital Stock: No effect

c. Cash: $120,000 increase; Capital Stock: No effect

d. Cash: $200,000 increase; Capital Stock: $200,000 increase

21. A corporation and its' owners are distinct entities:

a. From a legal standpoint

b. From an accounting standpoint

c. From an accounting and legal standpoint

d. None of the above

22. After analyzing a transaction, it is recorded in:

a. The general ledger

b. The general journal

c. T-accounts

d. Trial balance

23. The account used by corporations to record owner investments is:

a. Capital

b. Retained Earnings

c. Capital Stock

d. Drawings

24. Which of the following accounts is debited for increases?

a. Capital

b. Retained Earnings

c. Capital Stock

d. Dividends

25. The account used by corporations to record reinvested profits is:

a. Capital

b. Retained Earnings

c. Capital Stock

d. Drawings

26. Which of the following accounts is debited for decreases?

a. Capital

b. Cash

c. Dividends

d. Drawings

27. To record the repayment of a loan to a creditor:

a. Notes Payable must be credited

b. Cash must be debited

c. Notes Payable must be debited

d. Both a and b are correct

28. Owner investments in corporations are recorded by:

a. Debiting Capital; crediting Cash

b. Debiting Cash; crediting Capital

c. Debiting Capital Stock; crediting Cash

d. Debiting Cash; crediting Capital Stock

29. To record the sale of goods to customers on credit:

a. Accounts Payable must be debited

b. Accounts Payable must be credited

c. Accounts Receivable must be debited

d. Accounts Receivable must be credited

30. The distribution of cash to investors of corporations are recorded by:

a. Debiting Drawings; crediting Cash

b. Debiting Cash; crediting Drawings

c. Debiting Dividends; crediting Cash

d. Debiting Cash; crediting Dividends

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