Chap002
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Chap002

Course: ACC 103, Spring 2011

School: Ohio State

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Chapter 002 Analyzing and Recording Transactions Summary of Questions by Difficulty Level (DL) and Learning Objective (LO) True/False Item 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. DL Easy Easy Easy Easy Easy Easy Easy Easy Med Med Med Med Med Hard Easy Easy Easy Easy Easy Easy LO C1 C1 C1 C2 C2 C3 C3 C3 C3 C3 C3 C3 C3 C3 C4 C5 C5 C5 C5 C5 Item 21. 22. 23. 24. 25. 26. 27. 28. 29. 30....

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002 Chapter Analyzing and Recording Transactions Summary of Questions by Difficulty Level (DL) and Learning Objective (LO) True/False Item 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. DL Easy Easy Easy Easy Easy Easy Easy Easy Med Med Med Med Med Hard Easy Easy Easy Easy Easy Easy LO C1 C1 C1 C2 C2 C3 C3 C3 C3 C3 C3 C3 C3 C3 C4 C5 C5 C5 C5 C5 Item 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. DL Med Med Med Med Med Med Med Med Hard Hard Hard Med Med Med Hard Hard Easy Med Med Med LO C5 C5 C5 C5 C5 C5 C5 C5 C5 C5 C5 A1 A1 A1 A1 A1 A2 A2 A2 A2 Item 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. DL Med Hard Hard Easy Easy Easy Easy Easy Hard Easy Easy Med Med Med Med Med Med Med Med LO A2 A2 A2 P1 P1 P1 P1 P1 P1 P2 P2 P2 P2 P2 P2 P3 P3 P3 P3 2-1 Chapter 002 Analyzing and Recording Transactions Multiple Choice 2-2 Chapter 002 Analyzing and Recording Transactions Item 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. DL Easy Hard Easy Med Med Med Hard Easy Med Med Med Med Med Med Med Med Hard Med Hard Easy Easy Easy Med Easy Easy LO C1 C1 C2 C2 C2 C2 C2 C3 C3 C3 C3 C3 C3 C3 C3 C3 C3 C4 C4 C5 C5 C5 C5 C5 C5 Item 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. DL Med Med Med Hard Hard Easy Easy Med Med Med Hard Hard Hard Hard Hard Hard Hard Hard Hard Hard Hard Med Med Med Med LO C5 C5 C5 C5 C5 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A2 A2 A2 A2 Item 112. 113. 114. 115. 116. 117. 118. 119. 120. 121. 122. 123. 124. 125. 126. 127. 128. 129. 130. 131. 132. 133. 134. 135. 136. DL Hard Hard Easy Easy Easy Easy Med Med Med Hard Hard Easy Easy Med Med Med Med Med Med Hard Hard Hard Hard Med Hard LO A2 A2 P1 P1 P1 P1 P1 P1 P1 P1,P2 P1 P2 P2 P2 P2 P2 P2 P2 P2 P2 P2 P2 P2 P3 P3 2-3 Chapter 002 Analyzing and Recording Transactions 85. Med C5 111. Med A2 2-4 Chapter 002 Analyzing and Recording Transactions Matching 2-5 Chapter 002 Analyzing and Recording Transactions Item 137. 138. DL Med Med LO C1-C5,P1 C1-C5 P1-P2,A2 Item 139. 140. DL Med Easy LO C1C5,P1 C3 Item 141. DL Med LO C3 Short Essay Item 142. 143. 144. 145. Problems Item 153. 154. 155. 156. 157. 158. 159. 160. 161. DL Easy Med Med Easy Med Med Med Med Med LO C2 C5 C5 A1 A1 A1 A1 A1 A1 Item 162. 163. 164. 165. 166. 167. 168. 169. 170. DL Med Med Hard Med Hard Hard Hard Hard Med LO A1 A1 A1 A1,P2 A1,P3 A1,P3 A1,P3 A1,P3 A2 Item 171. 172. 173. 174. 175. 176. 177. 178. 179. DL Med Easy Med Med Med Hard Hard Med Med LO A2 P1 P2 P2 P2 P2 P2 P3 P3 DL Med Hard Med Med LO A1 A1 C1 C2 Item 147. 148. 149. 150. DL Med Med Hard Med LO C3 C4 C5 A2 Item 150. 151. 152. DL Med Med Med LO P1 P2 A1 Completion Problems Item 180. 181. 182. 183. 184. 185. 186. DL Med Med Med Med Easy Easy Easy LO C1 C1 C1 C2 C3 C3 C3 Item 187. 188. 189. 190. 191. 192. 193. DL Easy Med Med Med Med Easy Easy LO C3 C3 C3 C4 C5 C5 C5 Item 194. 195. 196. 197. 198. 199. 200. DL Med Hard Med Easy Easy Med Med LO C5 A1 A2 P1 P1 P1 P1 2-6 Chapter 002 Analyzing and Recording Transactions True / False Questions 1. Accounting records are also referred to as the books. True False 2. The first step in the analyzing and recording process is to analyze each transaction and event from source documents. True False 3. Preparation of a trial balance is the first step in the analyzing and recording process. True False 4. Source documents provide evidence of business transactions and are the basis for accounting entries. True False 5. Items such as sales slips, invoices, checks and purchase orders are source documents. True False 6. An account is a record of increases and decreases in a specific asset, liability, equity, revenue or expense item. True False 7. A customer's promise to pay is called an account payable to the seller. True False 2-7 Chapter 002 Analyzing and Recording Transactions 8. Dividends are a form of business expense. True False 2-8 Chapter 002 Analyzing and Recording Transactions 9. As prepaid expenses are used up, the costs of these assets become expenses. True False 10. Land and buildings are generally recorded in the same ledger account. True False 11. It is not necessary to keep separate accounts for all items of importance for business decisions. True False 12. Unearned revenues are liabilities. True False 13. Cash dividends should be treated as an expense of the business. True False 14. When a company provides services for which cash will not be received until some future date, the company should record an unearned revenue for the amount charged to the customer. True False 15. The chart of accounts is a list of all the accounts used by a company and includes an identification number assigned to each account. True False 16. An account balance is the difference between the debits and credits for an account including any beginning balance. True False 2-9 Chapter 002 Analyzing and Recording Transactions 17. Debit means the right-hand side of any account. True False 18. In a double-entry accounting system, total amount debited must always equal total amount credited. True False 19. Increases in liability accounts are recorded as debits. True False 20. Debits increase asset and expense accounts. True False 21. Credits always increase account balances. True False 22. Crediting an expense account decreases it. True False 23. Double entry accounting requires that each transaction affects and be recorded in, at least two accounts. True False 24. A revenue account normally has a debit balance. True False 2-10 Chapter 002 Analyzing and Recording Transactions 25. Accounts are normally decreased by debits. True False 26. The dividends account normally has a credit balance since it is an equity account. True False 27. Asset accounts normally have credit balances and expense accounts normally have debit balances. True False 28. Common Stock normally has a debit balance. True False 29. A debit entry is always favorable. True False 30. A transaction that decreases an asset account and increases a liability account must also affect one or more other accounts. True False 31. A transaction that increases an asset and decreases a liability must also affect one or more other accounts. True False 32. If insurance coverage for the next three years is paid for in advance, the amount of the payment is debited to an asset account called Prepaid Insurance. True False 2-11 Chapter 002 Analyzing and Recording Transactions 33. The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to Accounts Payable. True False 34. If a company pays cash to purchase land, the journal entry to record this transaction will include a debit to Cash. True False 35. If a company provides services to a customer on credit the service provider company should credit Accounts Receivable. True False 36. When a company bills a customer for $600 for services rendered, the journal entry to record this transaction will include a $600 debit to Services Revenue. True False 37. The debt ratio reflects the risk of a company to both its owners and creditors. True False 38. The higher the debt ratio the higher risk of a company not being able to meet its obligations. True False 39. The debt ratio is calculated by dividing total assets by total liabilities. True False 2-12 Chapter 002 Analyzing and Recording Transactions 40. A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage. True False 41. If a company is highly leveraged, this means that it has relatively low risk of not being able to repay its debt. True False 42. Hamilton Industries has liabilities of $105 million and total assets of $350 million. Its debt ratio is 33.3%. True False 43. High financial leverage is always bad for a company's owners. True False 44. A compound journal entry affects no more than two accounts. True False 45. Posting is the transfer of journal entry information to the ledger. True False 46. Transactions are first recorded in the ledger. True False 47. The journal is known as a book of original entry. True False 2-13 Chapter 002 Analyzing and Recording Transactions 48. A journal gives a complete record of each transaction in one place and shows the debits and credits for each transaction. True False 49. The journal is known as the book of final entry because financial statements are prepared from it. True False 50. A trial balance that balances is not proof of complete accuracy in recording transactions. True False 51. The trial balance is a list of all accounts and their balances from the ledger. True False 52. Generally, the ordering of accounts in a trial balance typically follows their identification number from the chart of accounts: assets, liabilities, equity, revenues and expenses. True False 53. The trial balance can serve as a replacement for the balance sheet, since debits must balance with credits. True False 54. A trial balance that is in balance is proof that no errors were made in journalizing the transactions, posting to the ledger and preparing the trial balance. True False 2-14 Chapter 002 Analyzing and Recording Transactions 55. If cash was incorrectly debited for $100 instead of correctly credited for $100, the cash account is out of balance by $100. True False 56. The balance sheet provides a link between beginning and ending income statements. True False 57. The heading on each financial statement lists the three W's - Who (the name of the organization), What (the name of the statement) and Where (the organization's address) True False 58. Other names for the income statement are the earnings statement, statement of operations or a profit and loss statement. True False 59. Another name for the balance sheet is the statement of financial position. True False Multiple Choice Questions 60. The accounting process begins with: A. Analysis of business transactions and events B. Preparing financial statements and other reports C. Summarizing the recorded effect of business transactions D. Presentation of financial information to decision-makers E. Preparation of the trial balance 2-15 Chapter 002 Analyzing and Recording Transactions 61. Which of the following list of events properly reflects the early steps taken in the accounting process? A. Record relevant transactions, Post journal information to ledger accounts Analyze each transaction, Prepare and analyze the trial balance B. Post journal information to ledger accounts, Analyze each transaction, Post journal information to ledger accounts, Prepare and analyze the trial balance C. Prepare and analyze the trial balance, Analyze each transaction, Post journal information to ledger accounts, Record relevant transactions D. Analyze each transaction, Post journal information to ledger accounts, Record relevant transactions, Prepare and analyze the trial balance E. Analyze each transaction, Record relevant transactions, Post journal information to ledger accounts, Prepare and analyze the trial balance 62. A sales invoice: A. Is a type of source document B. Is used by sellers for recording purposes C. Is used by buyers for recording purchases D. Gives rise to an entry in the accounting process E. All of the above 63. Source documents include all of the following except: A. Sales tickets B. Ledgers C. Checks D. Purchase orders E. Bank statements 64. Source documents: A. Include the ledger B. Are the sources of accounting information C. Must be in electronic form D. Are based on accounting entries E. Include the chart of accounts 2-16 Chapter 002 Analyzing and Recording Transactions 65. Various types of documents and other papers that companies use when they conduct their business: A. Are called source documents B. Can include sales tickets C. Are the source of information for recording accounting entries D. Can be in electronic form E. All of the above 66. For what reason do most sellers require customers to have their receipts to exchange or return purchased items? A. The receipt contains coded information which the seller needs to prepare and analyze the trial balance B. Sellers wish to ensure that the sale in question was rung up on the register in the first place C. This is a legal requirement mandated by a federal law D. The receipt is serving as a promissory note E. Both B and C are reasons the seller requires customers to have receipts for all exchanges 67. A record of the increases and decreases in a specific asset, liability, equity, revenue or expense is a(n): A. Journal B. Posting C. Trial balance D. Account E. Chart of accounts 68. An account used to record the owner's investments in the business is called: A. Dividends B. Common Stock C. Revenue D. Expense E. Liability 2-17 Chapter 002 Analyzing and Recording Transactions 69. The account used to record the transfers of assets from a business to its stockholders is: A. A revenue account B. The retained earnings account C. Common stock account D. An expense account E. A liability account 70. Which of the following statements is correct? A. When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense B. Promises of future payment are called accounts payable C. Increases and decreases in cash are always recorded in the retained earnings account D. An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business E. Accrued liabilities include accounts receivable 71. Unearned revenues are: A. Revenues that have been earned and received in cash B. Revenues that have been earned but not yet collected in cash C. Liabilities created when a customer pays in advance for products or services before the revenue is earned D. Recorded as an asset in the accounting records E. Increases to retained earnings 72. Prepaid expenses are: A. Payments made for products and services that do not ever expire B. Classified as liabilities on the balance sheet C. Decreases in retained earnings D. Assets that represent prepayments of future expenses E. Promises of payments by customers 2-18 Chapter 002 Analyzing and Recording Transactions 73. A written promise to pay a definite sum of money on a specific future date is a(n): A. Unearned revenue B. Prepaid expense C. Credit account D. Note payable E. Account receivable 74. A collection of all accounts (with account balances) used by a business is called a: A. Journal B. Book of original entry C. General Journal D. Balance column journal E. Ledger 75. A ledger is: A. A record containing increases and decreases in a specific asset, liability, equity, revenue or expense item B. A journal in which transactions are first recorded C. A collection of documents that describe transactions and events entering the accounting process D. A list of all accounts with their debit balances at a point in time E. A list of all accounts a company uses and includes an identification number assigned to each account 76. Which of the following statements about the Cash account are true? A. Because most companies earn their fees in cash, the cash account is categorized as revenue B. For any given transaction Accounts Receivable and Cash can be used interchangeably because both accounts are measured in terms of cash C. The cash account includes the value of any medium of exchange that a bank accepts for deposit D. Both A and B are true statements E. Both B and C are true statements 2-19 Chapter 002 Analyzing and Recording Transactions 77. A list of all accounts used by a company and the identification number assigned to each account is called a: A. Ledger B. Journal C. Trial balance D. Chart of accounts E. General Journal 78. The general ledger of a business A. Is a collection of all accounts used in a company's information system B. Must be kept in a computer file C. A and B D. Is a set standard not affected by a company's size and diversity E. A, B and D 79. A debit is: A. An increase in an account B. The right-hand side of a T-account C. A decrease in an account D. The left-hand side of a T-account E. An increase to a liability account 80. The right side of a T-account is a(n): A. Debit B. Increase C. Credit D. Decrease E. Account balance 2-20 Chapter 002 Analyzing and Recording Transactions 81. Which of the following statements is incorrect? A. The normal balance of accounts receivable is a debit B. The normal balance of dividends is a debit C. The normal balance of unearned revenues is a credit D. The normal balance of an expense account is a credit E. The normal balance of common stock is a credit 82. A credit is used to record: A. A decrease in an expense account B. A decrease in an asset account C. An increase in an unearned revenue account D. An increase in a revenue account E. All of the above 83. A simple account form widely used in accounting to illustrate how debits and credits work is called a: A. Dividend account B. Common stock account C. Drawing account D. T-account E. Balance column sheet 84. Which of the following statements is correct? A. The left side of a T-account is the credit side B. Debits decrease asset and expense accounts and increase liability, equity and revenue accounts C. The left side of a T-account is the debit side D. Credits increase asset and expense accounts and decrease liability, equity and revenue accounts E. In certain circumstances the total amount debited need not equal the total amount credited for a particular transaction 2-21 Chapter 002 Analyzing and Recording Transactions 85. An account balance is: A. The total of the credit side of the account B. The total of the debit side of the account C. The difference between the total debits and total credits for an account including the beginning balance D. Assets = liabilities + equity E. Always a credit 86. Of the following accounts, the one that normally has a credit balance is: A. Cash B. Office Equipment C. Sales Salaries Payable D. Dividends E. Sales Salaries Expense 87. A debit is used to record: A. A decrease in an asset account B. A decrease in an expense account C. An increase in a revenue account D. An increase in the balance of common stock E. A decrease in the balance of retained earnings 88. A credit entry: A. Increases asset and expense accounts and decreases liability, common stock and revenue accounts B. Is always a decrease in an account C. Decreases asset and expense accounts and increases liability, common stock and revenue accounts D. Is recorded on the left side of a T-account E. Is always an increase in an account 2-22 Chapter 002 Analyzing and Recording Transactions 89. Double-entry accounting is an accounting system: A. That records each transaction twice B. That records the effects of transactions and other events in at least two accounts with equal debits and credits C. In which each transaction affects and is recorded in two or more accounts but that could include two debits and no credits D. That may only be used if T-accounts are used E. That insures that errors never occur 90. Which of the following is a true statement regarding debits and credits? A. If a company earned a profit, debits will not equal credits B. For a business, debits are better than credits C. A company's books are not in balance if they have a current period loss D. Assets and expenses are both increased with a debit E. Liabilities and equity are both increased with a debit 91. Rocky Industries received its telephone bill in the amount of $300 and immediately paid it. Rocky's general journal entry to record this transaction will include a A. Debit to Telephone Expense for $300 B. Credit to Accounts Payable for $300 C. Debit to Cash for $300 D. Credit to Telephone Expense for $300 E. Debit to Accounts Payable for $300 92. Management Services, Inc. provides services to clients. On May 1, a client prepaid Management Services $60,000 for 6-months contract in advance. Management Services' general journal entry to record this transaction will include a A. Debit to Unearned Management Fees for $60,000 B. Credit to Management Fees Earned for $60,000 C. Credit to Cash for $60,000 D. Credit to Unearned Management Fees for $60,000 E. Debit to Management Fees Earned for $60,000 2-23 Chapter 002 Analyzing and Recording Transactions 93. Wisconsin Rentals purchased office supplies on credit. The general journal entry made by Wisconsin Rentals will include a: A. Debit to Accounts Payable B. Debit to Accounts Receivable C. Credit to Cash D. Credit to Accounts Payable E. Credit to Retained Earnings 94. An asset created by prepayment of an expense is: A. Recorded as a debit to an unearned revenue account B. Recorded as a debit to a prepaid expense account C. Recorded as a credit to an unearned revenue account D. Recorded as a credit to a prepaid expense account E. Not recorded in the accounting records until the earnings process is complete 95. 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? A. B. C. D. E. 2-24 Chapter 002 Analyzing and Recording Transactions 96. A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is: A. Recorded as a debit to an unearned revenue account B. Recorded as a debit to a prepaid expense account C. Recorded as a credit to an unearned revenue account D. Recorded as a credit to a prepaid expense account E. Not recorded in the accounting records until the earnings process is complete 97. On September 30, the Cash account of Value Company had a normal balance of $5,000. During September, 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 September? A. A $0 balance B. A $4,300 debit balance C. A $4,300 credit balance D. A $5,700 debit balance E. A $5,700 credit balance 98. On October 31, a company's Cash account had a normal balance of $7,000. During October, the account was debited for a total of $4,250 and credited for a total of $5,340. What was the balance in the Cash account at the beginning of October? A. $0 balance B. $1,090 debit balance C. $2,590 credit balance D. $8,090 debit balance E. $9,590 credit balance 99. On April 30, Holden Company 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? A. $5,000 B. $47,000 C. $52,000 D. $57,000 E. $32,000 2-25 Chapter 002 Analyzing and Recording Transactions 100. On November 30, a company had Accounts Receivable of $5,100. During the month of December, total credits to Accounts Receivable were $76,000 from customer payments. The December 31 Accounts Receivable balance was $43,000. What was the amount of credit sales during December? A. $8,100 B. $27,900 C. $70,900 D. $76,000 E. $113,900 101. The Fireside Country Inn is a very popular destination for tourists. The Inn requires guests to make reservations at least two months in advance of their stay. A twenty percent down payment is required at the time the reservation is made. When should this inn recognize room rental revenue? A. On the date the reservation is received B. On the date the money for the reservation is received C. On the date the guests stay in the inn D. On the date the guests pay the remaining eighty percent due E. Once all cash has been received 102. 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? A. $700 B. $1,100 C. $2,900 D. $0 E. $4,300 103. During March, a company had cash receipts of $2,300 and cash disbursements of $6,600. The March 31 cash balance was $2,780. What was the March 1 beginning cash balance? A. $1,520 B. $7,080 C. $4,300 D. $8,900 E. $11,680 2-26 Chapter 002 Analyzing and Recording Transactions 104. The following transactions occurred during July: 1. Received $900 cash for services provided to a customer during July. 2. Received $2,200 cash investment from Barbara Hanson, the owner of the business. 3. Received $750 from a customer in partial payment of his account receivable which arose from sales in June. 4. Provided services to a customer on credit, $375. 5. Borrowed $6,000 from the bank by signing a promissory note. 6. Received $1,250 cash from a customer for services to be rendered next year. What was the amount of revenue for July? A. $900 B. $1,275 C. $2,525 D. $3,275 E. $11,100 105. If Jones Hardware, Inc. pays a cash dividend of $6,000, the entry to record this transaction is to: A. Debit Cash, Credit Retained Earnings B. Debit Dividends, Credit Cash C. Debit Common Stock, Credit Cash D. Debit Cash, Credit Common Stock E. Debit Cash, Credit Dividend Income 106. These transactions were completed by the art gallery opened by Zed Bennett. 1. Started the gallery, Artery, 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 painting for an artist and collected a $4,500 cash commission on the sale. 5. Completed an art appraisal and billed the client $200. What was the balance of the cash account after these transactions were posted? A. $12,230 B. $12,430 C. $43,300 D. $43,430 E. $61,430 2-27 Chapter 002 Analyzing and Recording Transactions 107. The debt ratio is used: A. To measure the relation of equity to expenses B. To reflect the risk associated with a company's debts C. Only by banks when a business applies for a loan D. To determine how much debt a firm should pay off E. All of the above 108. Which of the following is the formula used to calculate the debt ratio? A. Total Equity/Total Liabilities B. Total Liabilities/Total Equity C. Total Liabilities/Total Assets D. Total Assets/Total Liabilities E. Total Equity/Total Assets 109. Which of the following statements is incorrect? A. Higher financial leverage involves higher risk B. Risk is higher if a company has more liabilities C. Risk is higher if a company has higher assets D. The debt ratio is one measure of financial risk E. Lower financial leverage involves lower risk 110. Stride Rite has total assets of $425 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio. A. 38.6% B. 13.4% C. 34.9% D. 25.9% E. 14.9% 2-28 Chapter 002 Analyzing and Recording Transactions 111. A company has total assets of $385 million. Its total liabilities are $100 million and its equity is $285 million. Calculate its debt ratio. A. 35.1% B. 26.0% C. 38.5% D. 28.5% E. 58.8% 112. A company has total liabilities of $550 million and total equity of $300 million. Calculate this company's debt ratio. A. 64.7% B. 100% C. 54.5% D. 1.83 to 1 E. The debt ratio cannot be determined without additional information 113. Which of the following statements is false with regard to the debt ratio? A. It is of use to both internal and external users of accounting information B. A relatively high ratio is always desirable C. The dividing line for a high and low ratio varies from industry to industry D. Many factors such as the company's age, stability, profitability and cash flow influence the determination of what would be interpreted as a high versus a low ratio E. The ratio might be used to help determine if a company is capable of increasing its income by obtaining further debt 114. The process of transferring general journal information to the ledger is: A. Double-entry accounting B. Posting C. Balancing an account D. Journalizing E. Not required unless debits do not equal credits 2-29 Chapter 002 Analyzing and Recording Transactions 115. A column in journals and ledger accounts used to cross reference journal and ledger entries is the: A. Account balance column B. Debit column C. Posting reference column D. Credit column E. Description column 116. The record in which transactions are first recorded is the: A. Account balance B. Ledger C. Journal D. Trial balance E. Cash account 117. The general journal provides a place for recording: A. The transaction date B. The names of the accounts involved C. The amount of each debit and credit D. An explanation of the transaction E. All of the above 118. A balance column ledger account is: A. An account entered on the balance sheet B. An account with debit and credit columns for posting entries and another column for showing the balance of the account after each entry is posted C. Another name for the retained earnings account D. An account used to record the transfers of assets from a business to its stockholders E. A simple form of account that is widely used in accounting to illustrate the debits and credits required in recording a transaction 2-30 Chapter 002 Analyzing and Recording Transactions 119. A general journal is: A. A ledger in which amounts are posted from a balance column account B. Not required if T-accounts are used C. A complete record of each transaction in the place from which transaction amounts are posted to the ledger accounts D. Not necessary in electronic accounting systems E. A book of final entry because financial statements are prepared from it 120. A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is a(n): A. Account B. Trial balance C. Journal D. T-account E. Balance column account 121. A company had the following account balances at year-end: If all of the accounts have normal balances, what are the totals for the trial balance? A. $45,200 B. $67,000 C. $104,800 D. $209,600 E. $186,600 2-31 Chapter 002 Analyzing and Recording Transactions 122. Listed below are two pieces of information. Where is the best place to locate this information, in the journal or the ledger? 1. Details of a transaction which took place on October 3rd 2. All of the sales activity which took place during the current month A. 1. Journal 2. Journal B. 1. Journal 2. Ledger C. 1. Ledger 2. Ledger D. 1. Ledger 2. Journal E. This information is only available on the financial statements 123. A report that lists accounts and their balances, in which the total debit balances should equal the total credit balances is called a(n): A. Account balance B. Trial balance C. Ledger D. Chart of accounts E. General Journal 124. Which of the following statements are true? A. If the trial balance is in balance, it proves that no errors have been made in recording and posting transactions B. The trial balance is a book of original entry C. Another name for trial balance is chart of accounts D. The trial balance is a list of all accounts from the ledger with their balances at a point in time E. The trial balance is another name for the balance sheet as long as debits balance with credits 125. A company failed to post a $50 debit to the Office Supplies account. The effect of this error will be that: A. The Office Supplies account balance will be overstated B. The trial balance will not balance C. The error will overstate the debits listed in the journal D. The total debits in the trial balance will be larger than the total credits E. All of the above effects will be caused by the error 2-32 Chapter 002 Analyzing and Recording Transactions 126. A $15 credit to Sales was posted as a $150 credit. By what amount is Sales in error? A. $150 understated B. $135 overstated C. $150 overstated D. $15 understated E. $135 understated 127. A trial balance taken at year-end showed total credits exceeding total debits by $4,950. This discrepancy could have been caused by: A. An error in the general journal where a $4,950 increase in Accounts Receivable was recorded as an increase in Cash B. A net income of $4,950 C. The balance of $49,500 in Accounts Payable being entered in the trial balance as $4,950 D. The balance of $5,500 in the Office Equipment account being entered on the trial balance as a debit of $550 E. An error in the general journal where a $4,950 increase in Accounts Payable was recorded as a decrease in Accounts Payable 128. In which of the following situations would the trial balance not balance? A. A $1,000 collection of an account receivable was erroneously posted as a debit to Accounts Receivable and a credit to Cash B. The purchase of office supplies on account for $3,250 was erroneously recorded in the journal as $2,350 debit to Office Supplies and credit to Accounts Payable C. A $50 cash receipt for the performance of a service was not recorded at all D. The purchase of office equipment for $1,200 was posted as a debit to Office Supplies and a credit to Cash for $1,200 E. The cash payment of a $750 account payable was posted as a debit to Accounts Payable and a debit to Cash for $750 2-33 Chapter 002 Analyzing and Recording Transactions 129. The credit purchase of a delivery truck for $4,700 was posted to Delivery Trucks as a $4,700 debit and to Accounts Payable as a $4,700 debit. What effect would this error have on the trial balance? A. The total of the Debit column of the trial balance will exceed the total of the Credit column by $4,700 B. The total of the Credit column of the trial balance will exceed the total of the Debit column by $4,700 C. The total of the Debit column of the trial balance will exceed the total of the Credit column by $9,400 D. The total of the Credit column of the trial balance will exceed the total of the Debit column by $9,400 E. The total of the Debit column of the trial balance will equal the total of the Credit column 130. If the Debit and Credit column totals of a trial balance are equal, then: A. All transactions have been recorded correctly B. All entries from the journal have been posted to the ledger correctly C. All ledger account balances are correct D. The total debit entries and total credit entries are equal E. The balance sheet would be correct 131. Accountants at Amalgamated Corporation incorrectly journalized a $50,000 equipment purchase as a debit to Buildings. This error was not discovered before the journal entry was posted. What is the correcting entry? A. Debit Buildings and Credit Equipment for $50,000 each B. Debit Equipment and Credit Buildings for $50,000 each C. Debit Buildings and Credit Equipment for $100,000 each D. Debit Equipment and Credit Buildings for $100,000 each E. Debit Equipment for $100,000 and Credit Buildings for $50,000 2-34 Chapter 002 Analyzing and Recording Transactions 132. A $72,000 receipt of cash from a customer paying on their account was recorded as a $72,000 debit to Accounts Receivable. Assuming this journal entry was posted, what correcting entry (if any) is needed? A. Debit Cash and Credit Accounts Receivable for $72,000 each B. Debit Cash and Credit Accounts Receivable for $144,000 each C. Credit Cash and Debit Accounts Receivable for $72,000 each D. Credit Cash and Debit Accounts Receivable for $144,000 each E. No correcting entry is needed for this transaction 133. Of the following errors, which one by itself will cause the trial balance to be out of balance? A. A $200 cash salary payment posted as a $200 debit to Cash and a $200 credit to Salaries Expense B. A $100 cash receipt from a customer in payment of his account posted as a $100 debit to Cash and a $10 credit to Accounts Receivable C. A $75 cash receipt from a customer in payment of his account posted as a $75 debit to Cash and a $75 credit to Cash D. A $50 cash purchase of office supplies posted as a $50 debit to Office Equipment and a $50 credit to Cash E. An $800 prepayment from a customer for services to be rendered in the future was posted as an $800 debit to Unearned Revenue and an $800 credit to Cash 134. A $130 credit to Office Equipment was credited to Fees Earned by mistake. By what amounts are the accounts under or overstated as a result of this error? A. Office Equipment, understated $130; Fees Earned, overstated $130 B. Office Equipment, understated $260; Fees Earned, overstated $130 C. Office Equipment, overstated $130; Fees Earned, overstated $130 D. Office Equipment, overstated $130; Fees Earned, understated $130 E. Office Equipment, overstated $260; Fees Earned, understated $130 135. Which of the following groups of accounts are not balance sheet accounts? A. Assets B. Liabilities C. Revenues D. Equity accounts E. All of the above are balance sheet accounts 2-35 Chapter 002 Analyzing and Recording Transactions 136. Which of the following is a TRUE statement concerning a company's financial statements? A. Balance Sheet and Income Statement data combined contain the complete financial picture of a given company B. A Trial Balance is another name for a Balance Sheet C. Another name for the Income Statement is the Earnings Statement D. Dividends paid to a company's shareholders are shown on the Income Statement E. The Balance Sheet shows the financial position of a company for a period of time Matching Questions 137. Match the following definitions and terms by placing the letter that identifies the best definition in the blank space next to the term. 1. Ledger The sources of accounting information. ____ An increase in an asset, dividend and expense account and decrease in a liability, common stock and 2. Source revenue account; recorded on the left side of a T-account documents ____ The process of transferring journal entry information 3. T-account to the ledger ____ An accounting system where each transaction affects and is recorded in at least two accounts; the sum of the 4. Debit debits for each entry must equal its credits ____ A file containing all accounts of a company and their 5. Credit balances ____ 6. Double-entry A company's record of each transaction in one place accounting that shows debits and credits for each transaction ____ A record of the increases and decreases in a specific 7. Account asset, liability, equity, revenue or expense item ____ Decrease in an asset, dividend and expense account and increase in a liability, common stock and revenue 8. Posting account; recorded on the right side of a T-account ____ A simple account form used as a helpful tool in showing the effects of transactions and events on specific 9. Journal accounts ____ 10. Accounting Another name for the accounting books or simply the records books ____ 2-36 Chapter 002 Analyzing and Recording Transactions 138. Match the following definitions and terms by placing the letter that identifies the best definition in the blank space next to the term. An increase in an asset, dividend and expense account and a decrease in a liability, common stock and revenue account; recorded on the left side of a T-account A written promise to pay a definite sum of money on a 2. Debt ratio specified future date A file containing all accounts of a company and their 3. Debit balances A complete record of each transaction in one place that 4. Ledger shows debits and credits for each transaction 5. Note The ratio of total liabilities to total assets; used to reflect payable the risk associated with the company's debts 6. Chart of A list of all accounts used by a company and the accounts identification number assigned to each account A list of accounts and their balances at a point in time; the total debit balances should equal the total credit balances 7. Journal A decrease in an asset, dividend and expense account 8. Trial and an increase in a liability, common stock and revenue balance account; recorded on the right side of a T-account 9. Balance column The difference between total debits and total credits for account an account including the beginning balance An account with debit and credit columns for recording entries and a third column for showing the balance of the 10. Credit account after each entry 1. Account balance ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ 2-37 Chapter 002 Analyzing and Recording Transactions 139. Match the following definitions and terms by placing the letter that identifies the best definition in the blank space next to the term. The most flexible type of journal, it can be used to record any kind of transaction A list of all accounts used by a company and the identification number assigned to each account A written promise from a customer to pay a definite sum of money on a specified future date A simple form used as a helpful tool in understanding the effect of transactions and events on specific accounts Liabilities created when customers pay in advance for products or services; satisfied by delivering the products or services in the future 1. Account 2. Unearned revenues 3. T-account 4. Note receivable 5. Chart of accounts 6. Posting reference column ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ A journal entry that affects at least three accounts A column in journals where individual account numbers are entered when entries are posted to ledger 7. Posting accounts 8. General The process of transferring journal entry information journal to the ledger 9. Compound A record of the increases and decreases in a specific journal entry asset, liability, equity, revenue or expense item A list of accounts and their balances at a point in 10. Trial Balance time; the total debit balances should equal the total credit balances 140. Identify each of the following accounts as a revenue (R), expense (E), asset (A), liability (L) or equity (OE) by placing initials (R, E, A, L or OE) in the blanks. 1. Accounts Receivable 2. Prepaid Insurance 3. Common Stock 4. Retained Earnings 5. Cash 6. Unearned Fee Revenue 7. Fees Revenue 8. Accounts Payable 9. Dividends 10. Supplies 11. Salary Expense 12. Equipment Expense Asset Asset Placing Initials Revenue Asset Liability Placing Initials Asset Liability Asset Placing Initials ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ 2-38 Chapter 002 Analyzing and Recording Transactions 141. The following accounts appear on either the Income Statement (IS) or Balance Sheet (BS). In the space provided next to each account write the letters is or BS, that identify the statement on which the account appears. 1. Wages Payable 2. Notes Receivable 3. Office Equipment 4. Cash 5. Common Stock 6. Fees Revenue 7. Accounts Payable 8. Rent Expense 9. Unearned Fees Revenues 10. Rent Expense Balance Sheet Income Statement Balance Sheet Income Statement Balance Sheet Balance Sheet Income Statement Balance Sheet Balance Sheet Balance Sheet ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ 2-39 Chapter 002 Analyzing and Recording Transactions Short Answer Questions 142. Vicki Lake is a computer consultant. Shown below are (a) several accounts in her ledger with each account preceded by an identification number and (b) several transactions completed by Lake. Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction. 2-40 Chapter 002 Analyzing and Recording Transactions 143. David Roberts is a real estate appraiser. Shown below are (a) several accounts in his ledger with each account preceded by an identification number and (b) several transactions completed by Roberts. Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction. 2-41 Chapter 002 Analyzing and Recording Transactions 144. List the steps in processing transactions. 145. Describe source documents and their purpose. 146. Explain how accounts are used in recording information about transactions. 147. Explain the difference between a ledger and a chart of accounts. 2-42 Chapter 002 Analyzing and Recording Transactions 148. Explain debits and credits and their role in the accounting system. 149. Explain the debt ratio and its use in analyzing a company's financial condition. 150. Explain the recording and posting processes. 151. What is a trial balance? What is its purpose? 2-43 Chapter 002 Analyzing and Recording Transactions 152. Sara Blakely founded the Bottom Line. What are some accounting challenges she faced when starting her business? Problems 153. Identify which of the following items would likely serve as a source document by marking an X in the appropriate column. The first one is done as an example 2-44 Chapter 002 Analyzing and Recording Transactions 154. Indicate whether a debit or credit entry would be made to record the following changes in each account. a. To decrease Cash b. To increase Common Stock c. To decrease Accounts Payable d. To increase Salaries Expense e. To decrease Supplies f. To increase Revenue. g. To decrease Accounts Receivable h. To increase Retained Earnings 2-45 Chapter 002 Analyzing and Recording Transactions 155. The following is a list of accounts and identification letters A through J for Shannon Management Co.: Use the form below to identify the type of account and its normal balance. The first item is filled in as an example. 2-46 Chapter 002 Analyzing and Recording Transactions 156. Dolly Barton began Barton Office Services in October and during that month completed these transactions: a. Invested $10,000 cash and $15,000 of computer equipment in exchange for common stock b. Paid $500 cash for an insurance premium covering the next 12 months c. Completed a word processing assignment for a customer and collected $1,000 cash d. Paid $200 cash for office supplies e. Paid $2,000 for October's rent. Prepare journal entries to record the above transactions. Explanations are unnecessary. 157. A company sends a $1,500 bill to a customer for delivery services rendered. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts. 2-47 Chapter 002 Analyzing and Recording Transactions 158. A company paid $2,500 cash to satisfy a previously recorded account payable. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts. 159. A business paid a $100 cash dividend. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts. 160. On December 3, the Matador Company paid $5,400 cash in salaries to office personnel. Prepare the general journal entry to record this transaction. 2-48 Chapter 002 Analyzing and Recording Transactions 161. On February 5, Textron Stores purchased a van that cost $35,000. The firm made a down payment of $5,000 cash and signed a long-term note payable for the balance. Show the general journal entry to record this transaction. 162. Krenz Car Care, owned and operated by Karl Krenz, began business as a corporation in September of the current year. Karl, a master mechanic, had no experience with keeping a set of books. As a result, Karl entered all of September's transactions directly to the ledger accounts. When he tried to locate a particular entry he found it confusing and time consuming. He has hired you to improve his accounting procedures. The accounts in his General Ledger follow: Prepare the general journal entries, in chronological order (a) through (e), from the T-account entries shown. Include a brief description of the probable nature of each transaction. 2-49 Chapter 002 Analyzing and Recording Transactions 163. Flora Accounting Services completed these transactions in February: a. Purchased office supplies on account, $300 b. Completed work for a client on credit, $500 c. Paid cash for the office supplies purchased in (a) d. Completed work for a client and received $800 cash e. Received $500 cash for the work described in (b). f. Received $1,000 from a client for accounting services to be performed in March. Prepare journal entries to record the above transactions. Explanations are not necessary. 164. Leonard Matson completed these transactions during December of the current year: Prepare general journal entries to record these transactions. 2-50 Chapter 002 Analyzing and Recording Transactions 165. Maria Sanchez began business as Sanchez Law Firm on November 1. Record the following November transactions by making entries directly to the T-accounts provided. Then, prepare a trial balance, as of November 30. a. Sanchez invested $15,000 cash and a law library valued at $6,000 in exchange for common stock. b. Purchased $7,500 of office equipment from Johnson Bros. on credit. c. Completed legal work for a client and received $1,500 cash in full payment. d. Paid Johnson Bros. $3,500 cash in partial settlement of the amount owed. e. Completed $4,000 of legal work for a client on credit. f. Paid a $2,000 cash dividend. g. Received $2,500 cash as partial payment for the legal work completed for the client in (e). h. Paid $2,500 cash for the legal secretary's salary. 2-51 Chapter 002 Analyzing and Recording Transactions 166. Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year: If the owners made no investments in the business and no dividends were paid during the year, what was the amount of net income earned by Josephine's Bakery during the current year? 167. Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year: If the owners invested an additional $12,000 in the business during the year, but no dividends were paid, what was the amount of net income earned by Josephine's Bakery during the current year? 2-52 Chapter 002 Analyzing and Recording Transactions 168. Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year: If the owners made no investments and dividends of $5,000 were paid during the year, what was the amount of net income earned by Josephine's Bakery during the current year? 169. Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year: If the owners invested an additional $12,000 in the business and dividends of $5,000 were paid during the year, what was the amount of net income earned by Josephine's Bakery during the current year? 170. A company had total assets of $350,000; total liabilities of $101,500; and total equity of $248,500. Calculate its debt ratio. 2-53 Chapter 002 Analyzing and Recording Transactions 171. Montgomery Marketing Co. had assets of $475,000; liabilities of $275,500; and equity of $199,500. Calculate its debt ratio. 172. List the steps in recording transactions. 173. For each of the following errors, indicate on the table below the amount by which the trial balance will be out of balance and which trial balance column (debit or credit) will have the larger total as a result of the error. a. $100 debit to Cash was debited to the Cash account twice b. $1,900 credit to Sales was posted as a $190 credit c. $5,000 debit to Office Equipment was debited to Office Supplies d. $625 debit to Prepaid Insurance was posted as a $62.50 debit e. $520 credit to Accounts Payable was not posted 2-54 Chapter 002 Analyzing and Recording Transactions 174. After preparing an (unadjusted) trial balance at year-end, G. Chu of Chu Design Company discovered the following errors: 1. Cash payment of the $225 telephone bill for December was recorded twice. 2. Cash payment of a note payable was recorded as a debit to Cash and a debit to Notes Payable for $1,000. 3. A $900 cash dividend was recorded to the correct accounts as $90. 4. An additional investment of $5,000 cash by the owner was recorded as a debit to Common Stock and a credit to Cash. 5. A credit purchase of office equipment for $1,800 was recorded as a debit to the Office Equipment account with no offsetting credit entry. Using the form below, indicate whether the error would cause the trial balance to be out of balance by placing an X in either the yes or no column. Would the error cause the trial balance to be out of balance? 2-55 Chapter 002 Analyzing and Recording Transactions 175. The balances for the accounts of Mike's Maintenance, Inc. for the year ended December 31 are shown below. Each account shown had a normal balance. Calculate the correct balance for Cash and prepare a trial balance. 2-56 Chapter 002 Analyzing and Recording Transactions 176. At year-end, Harris Cleaning Service noted the following errors in its trial balance: 1. It understated the total debits to the Cash account by $500 when computing the account balance. 2. A credit sale for $311 was recorded as a credit to the revenue account, but the offsetting debit was not posted. 3. A cash payment to a creditor for $2,600 was never recorded. 4. The $680 balance of the Prepaid Insurance account was listed in the credit column of the trial balance. 5. A $24,900 truck purchase for cash was recorded as a $24,090 debit to Vehicles and a $24,090 credit to Notes Payable. 6. A purchase of office supplies for $150 was recorded as a debit to Office Equipment. The offsetting credit entry was correct. 7. An additional investment of $4,000 by Del Harris was recorded as a debit to Common Stock and as a credit to Cash. 8. The cash payment of the $510 utility bill for December was recorded (but not paid) twice. 9. A revenue account balance of $79,817 was listed on the trial balance as $97,817. 10. A $1,000 cash dividend was recorded as a $100 debit to Dividends and $100 credit to cash. Using the form below, indicate whether each error would cause the trial balance to be out of balance, the amount of any imbalance and whether a correcting journal entry is required. 2-57 Chapter 002 Analyzing and Recording Transactions 177. The following trial balance was prepared from the general ledger of Hal's Auto Repair. Because the trial balance did not balance, you decided to examine the accounting records. You found that the following errors had been made: 1. A purchase of supplies on account for $245 was posted as a debit to Supplies and as a debit to Accounts Payable. 2. An investment of $500 cash by the owner was debited to Common Stock and credited to Cash. 3. In computing the balance of the Accounts Receivable account, a debit of $600 was omitted from the computation. 4. One debit of $300 to the Dividends account was posted as a credit. 5. Office equipment purchased for $800 was posted to the Repair Equipment account. 6. One entire entry was not posted to the general ledger. The transaction involved the receipt of $125 cash at the time repair services were performed. Prepare a corrected trial balance for the Hal's Auto Repair as of October 31. 2-58 Chapter 002 Analyzing and Recording Transactions 178. The following are all of the accounts of Flaherty Company that have a balance at the end of August. All accounts have normal balances: a. Calculate net income b. Determine the amount of retained earnings to be shown on the August 31 balance sheet. 2-59 Chapter 002 Analyzing and Recording Transactions 179. Based on the following trial balance for Sal's Beauty Shop, prepare an income statement, statement of retained earnings and a balance sheet. Sal made no additional investments in the company during the year. Fill in the Blank Questions 180. ____________________________ and _____________________ are the starting points for the analyzing and recording process. ________________________________________ 181. The second step in the analyzing and recording process is to record the transactions and events in the _____________________________. ________________________________________ 2-60 Chapter 002 Analyzing and Recording Transactions 182. The third step in the analyzing and recording process is to post the information to _________________________. ________________________________________ 183. _________________ identifies and describes transactions and events and provides objective evidence and amounts for recording. ________________________________________ 184. Revenues and expenses are two categories of ____________________ accounts. ________________________________________ 185. The _______________________ is a record containing all accounts (with balances) used by a company. ________________________________________ 186. The three general categories of accounts in a general ledger are __________________, _________________ and __________________________. ________________________________________ 187. ___________________ is promises of payment from customers to sellers. ________________________________________ 188. Unearned revenue is classified as _______________ that is satisfied by delivering products or services in the future. ________________________________________ 2-61 Chapter 002 Analyzing and Recording Transactions 189. The four categories of equity accounts are _____________________, __________________, ______________________ and ______________________. ________________________________________ 190. A _______________ is a list of all the accounts used by a company and their identification codes. ________________________________________ 191. A ___________________ is a record containing all accounts for a company along with their balances. ________________________________________ 192. _____________________________ requires that each transaction affect and be recorded in, at least two accounts. It also means that total amounts debited must equal total amounts credited for each transaction. ________________________________________ 193. The difference between total debits and total credits for an account, including any beginning balance is the ________________________. ________________________________________ 194. Increases in assets are _______________, while increases in liabilities are _______________. ________________________________________ 195. FastForward purchased $25,000 of equipment for cash. The Equipment asset account is _______________ for $25,000 and the cash account is _______________ for $25,000. ________________________________________ 2-62 Chapter 002 Analyzing and Recording Transactions 196. Stride Rite had total liabilities of $130 million and total assets of $375 million. Its debt ratio was _______________. ________________________________________ 197. _______________ is the process of transferring journal entry information to the ledger. ________________________________________ 198. A ___________________________ gives a complete record of each transaction in one place and shows debits and credits for each transaction. ________________________________________ 199. An account format that is similar to a T-account in that it has columns for debits and credits, but that is different in that it has columns for transaction date, explanation and the account balance is the ___________________________________. ________________________________________ 200. The posting process is the link between the _______________ and the _____________. ________________________________________ 2-63 Chapter 002 Analyzing and Recording Transactions Key True / False Questions 1. Accounting records are also referred to as the books. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C1 2. The first step in the analyzing and recording process is to analyze each transaction and event from source documents. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C1 3. Preparation of a trial balance is the first step in the analyzing and recording process. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C1 2-64 Chapter 002 Analyzing and Recording Transactions Key 4. Source documents provide evidence of business transactions and are the basis for accounting entries. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C2 5. Items such as sales slips, invoices, checks and purchase orders are source documents. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C2 6. An account is a record of increases and decreases in a specific asset, liability, equity, revenue or expense item. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C3 2-65 Chapter 002 Analyzing and Recording Transactions Key 7. A customer's promise to pay is called an account payable to the seller. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C3 8. Dividends are a form of business expense. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C3 9. As prepaid expenses are used up, the costs of these assets become expenses. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 2-66 Chapter 002 Analyzing and Recording Transactions Key 10. Land and buildings are generally recorded in the same ledger account. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 11. It is not necessary to keep separate accounts for all items of importance for business decisions. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 12. Unearned revenues are liabilities. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 2-67 Chapter 002 Analyzing and Recording Transactions Key 13. Cash dividends should be treated as an expense of the business. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 14. When a company provides services for which cash will not be received until some future date, the company should record an unearned revenue for the amount charged to the customer. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: C3 15. The chart of accounts is a list of all the accounts used by a company and includes an identification number assigned to each account. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C4 2-68 Chapter 002 Analyzing and Recording Transactions Key 16. An account balance is the difference between the debits and credits for an account including any beginning balance. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C5 17. Debit means the right-hand side of any account. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C5 18. In a double-entry accounting system, total amount debited must always equal total amount credited. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C5 2-69 Chapter 002 Analyzing and Recording Transactions Key 19. Increases in liability accounts are recorded as debits. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C5 20. Debits increase asset and expense accounts. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C5 21. Credits always increase account balances. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 2-70 Chapter 002 Analyzing and Recording Transactions Key 22. Crediting an expense account decreases it. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 23. Double entry accounting requires that each transaction affects and be recorded in, at least two accounts. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 24. A revenue account normally has a debit balance. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 2-71 Chapter 002 Analyzing and Recording Transactions Key 25. Accounts are normally decreased by debits. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 26. The dividends account normally has a credit balance since it is an equity account. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 27. Asset accounts normally have credit balances and expense accounts normally have debit balances. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 2-72 Chapter 002 Analyzing and Recording Transactions Key 28. Common Stock normally has a debit balance. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 29. A debit entry is always favorable. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: C5 30. A transaction that decreases an asset account and increases a liability account must also affect one or more other accounts. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: C5 2-73 Chapter 002 Analyzing and Recording Transactions Key 31. A transaction that increases an asset and decreases a liability must also affect one or more other accounts. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: C5 32. If insurance coverage for the next three years is paid for in advance, the amount of the payment is debited to an asset account called Prepaid Insurance. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 33. The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to Accounts Payable. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 2-74 Chapter 002 Analyzing and Recording Transactions Key 34. If a company pays cash to purchase land, the journal entry to record this transaction will include a debit to Cash. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 35. If a company provides services to a customer on credit the service provider company should credit Accounts Receivable. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 36. When a company bills a customer for $600 for services rendered, the journal entry to record this transaction will include a $600 debit to Services Revenue. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 2-75 Chapter 002 Analyzing and Recording Transactions Key 37. The debt ratio reflects the risk of a company to both its owners and creditors. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: A2 38. The higher the debt ratio the higher risk of a company not being able to meet its obligations. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 39. The debt ratio is calculated by dividing total assets by total liabilities. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 2-76 Chapter 002 Analyzing and Recording Transactions Key 40. A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 41. If a company is highly leveraged, this means that it has relatively low risk of not being able to repay its debt. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 42. Hamilton Industries has liabilities of $105 million and total assets of $350 million. Its debt ratio is 33.3%. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A2 2-77 Chapter 002 Analyzing and Recording Transactions Key 43. High financial leverage is always bad for a company's owners. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A2 44. A compound journal entry affects no more than two accounts. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P1 45. Posting is the transfer of journal entry information to the ledger. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P1 2-78 Chapter 002 Analyzing and Recording Transactions Key 46. Transactions are first recorded in the ledger. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P1 47. The journal is known as a book of original entry. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P1 48. A journal gives a complete record of each transaction in one place and shows the debits and credits for each transaction. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P1 2-79 Chapter 002 Analyzing and Recording Transactions Key 49. The journal is known as the book of final entry because financial statements are prepared from it. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: P1 50. A trial balance that balances is not proof of complete accuracy in recording transactions. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P2 51. The trial balance is a list of all accounts and their balances from the ledger. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P2 2-80 Chapter 002 Analyzing and Recording Transactions Key 52. Generally, the ordering of accounts in a trial balance typically follows their identification number from the chart of accounts: assets, liabilities, equity, revenues and expenses. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 53. The trial balance can serve as a replacement for the balance sheet, since debits must balance with credits. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 54. A trial balance that is in balance is proof that no errors were made in journalizing the transactions, posting to the ledger and preparing the trial balance. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 2-81 Chapter 002 Analyzing and Recording Transactions Key 55. If cash was incorrectly debited for $100 instead of correctly credited for $100, the cash account is out of balance by $100. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 56. The balance sheet provides a link between beginning and ending income statements. FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P3 57. The heading on each financial statement lists the three W's - Who (the name of the organization), What (the name of the statement) and Where (the organization's address) FALSE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P3 2-82 Chapter 002 Analyzing and Recording Transactions Key 58. Other names for the income statement are the earnings statement, statement of operations or a profit and loss statement. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P3 59. Another name for the balance sheet is the statement of financial position. TRUE AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P3 Multiple Choice Questions 60. The accounting process begins with: A. Analysis of business transactions and events B. Preparing financial statements and other reports C. Summarizing the recorded effect of business transactions D. Presentation of financial information to decision-makers E. Preparation of the trial balance AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C1 2-83 Chapter 002 Analyzing and Recording Transactions Key 61. Which of the following list of events properly reflects the early steps taken in the accounting process? A. Record relevant transactions, Post journal information to ledger accounts Analyze each transaction, Prepare and analyze the trial balance B. Post journal information to ledger accounts, Analyze each transaction, Post journal information to ledger accounts, Prepare and analyze the trial balance C. Prepare and analyze the trial balance, Analyze each transaction, Post journal information to ledger accounts, Record relevant transactions D. Analyze each transaction, Post journal information to ledger accounts, Record relevant transactions, Prepare and analyze the trial balance E. Analyze each transaction, Record relevant transactions, Post journal information to ledger accounts, Prepare and analyze the trial balance AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: C1 62. A sales invoice: A. Is a type of source document B. Is used by sellers for recording purposes C. Is used by buyers for recording purchases D. Gives rise to an entry in the accounting process E. All of the above AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C2 2-84 Chapter 002 Analyzing and Recording Transactions Key 63. Source documents include all of the following except: A. Sales tickets B. Ledgers Checks C. D. Purchase orders E. Bank statements AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C2 64. Source documents: A. Include the ledger B. Are the sources of accounting information C. Must be in electronic form D. Are based on accounting entries E. Include the chart of accounts AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C2 2-85 Chapter 002 Analyzing and Recording Transactions Key 65. Various types of documents and other papers that companies use when they conduct their business: A. Are called source documents B. Can include sales tickets C. Are the source of information for recording accounting entries D. Can be in electronic form E. All of the above AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C2 66. For what reason do most sellers require customers to have their receipts to exchange or return purchased items? A. The receipt contains coded information which the seller needs to prepare and analyze the trial balance B. Sellers wish to ensure that the sale in question was rung up on the register in the first place C. This is a legal requirement mandated by a federal law D. The receipt is serving as a promissory note E. Both B and C are reasons the seller requires customers to have receipts for all exchanges AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: C2 2-86 Chapter 002 Analyzing and Recording Transactions Key 67. A record of the increases and decreases in a specific asset, liability, equity, revenue or expense is a(n): A. Journal B. Posting C. Trial balance D. Account E. Chart of accounts AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C3 68. An account used to record the owner's investments in the business is called: A. Dividends B. Common Stock C. Revenue D. Expense E. Liability AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 2-87 Chapter 002 Analyzing and Recording Transactions Key 69. The account used to record the transfers of assets from a business to its stockholders is: A. A revenue account B. The retained earnings account C. Common stock account D. An expense account E. A liability account AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 70. Which of the following statements is correct? A. When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense B. Promises of future payment are called accounts payable C. Increases and decreases in cash are always recorded in the retained earnings account D. An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business E. Accrued liabilities include accounts receivable AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 2-88 Chapter 002 Analyzing and Recording Transactions Key 71. Unearned revenues are: A. Revenues that have been earned and received in cash B. Revenues that have been earned but not yet collected in cash C. Liabilities created when a customer pays in advance for products or services before the revenue is earned D. Recorded as an asset in the accounting records E. Increases to retained earnings AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 72. Prepaid expenses are: A. Payments made for products and services that do not ever expire B. Classified as liabilities on the balance sheet C. Decreases in retained earnings D. Assets that represent prepayments of future expenses E. Promises of payments by customers AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 2-89 Chapter 002 Analyzing and Recording Transactions Key 73. A written promise to pay a definite sum of money on a specific future date is a(n): A. Unearned revenue B. Prepaid expense C. Credit account D. Note payable E. Account receivable AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 74. A collection of all accounts (with account balances) used by a business is called a: A. Journal B. Book of original entry C. General Journal D. Balance column journal E. Ledger AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 2-90 Chapter 002 Analyzing and Recording Transactions Key 75. A ledger is: A. A record containing increases and decreases in a specific asset, liability, equity, revenue or expense item B. A journal in which transactions are first recorded C. A collection of documents that describe transactions and events entering the accounting process D. A list of all accounts with their debit balances at a point in time E. A list of all accounts a company uses and includes an identification number assigned to each account AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 76. Which of the following statements about the Cash account are true? A. Because most companies earn their fees in cash, the cash account is categorized as revenue B. For any given transaction Accounts Receivable and Cash can be used interchangeably because both accounts are measured in terms of cash C. The cash account includes the value of any medium of exchange that a bank accepts for deposit D. Both A and B are true statements E. Both B and C are true statements AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: C3 2-91 Chapter 002 Analyzing and Recording Transactions Key 77. A list of all accounts used by a company and the identification number assigned to each account is called a: A. Ledger B. Journal C. Trial balance D. Chart of accounts E. General Journal AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C4 78. The general ledger of a business A. Is a collection of all accounts used in a company's information system B. Must be kept in a computer file C. A and B D. Is a set standard not affected by a company's size and diversity E. A, B and D AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: C4 2-92 Chapter 002 Analyzing and Recording Transactions Key 79. A debit is: A. An increase in an account B. The right-hand side of a T-account C. A decrease in an account D. The left-hand side of a T-account E. An increase to a liability account AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C5 80. The right side of a T-account is a(n): A. Debit B. Increase C. Credit D. Decrease E. Account balance AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C5 2-93 Chapter 002 Analyzing and Recording Transactions Key 81. Which of the following statements is incorrect? A. The normal balance of accounts receivable is a debit B. The normal balance of dividends is a debit C. The normal balance of unearned revenues is a credit D. The normal balance of an expense account is a credit E. The normal balance of common stock is a credit AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C5 82. A credit is used to record: A. A decrease in an expense account B. A decrease in an asset account C. An increase in an unearned revenue account D. An increase in a revenue account E. All of the above AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 2-94 Chapter 002 Analyzing and Recording Transactions Key 83. A simple account form widely used in accounting to illustrate how debits and credits work is called a: A. Dividend account B. Common stock account C. Drawing account D. T-account E. Balance column sheet AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C5 84. Which of the following statements is correct? A. The left side of a T-account is the credit side B. Debits decrease asset and expense accounts and increase liability, equity and revenue accounts C. The left side of a T-account is the debit side D. Credits increase asset and expense accounts and decrease liability, equity and revenue accounts E. In certain circumstances the total amount debited need not equal the total amount credited for a particular transaction AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C5 2-95 Chapter 002 Analyzing and Recording Transactions Key 85. An account balance is: A. The total of the credit side of the account B. The total of the debit side of the account C. The difference between the total debits and total credits for an account including the beginning balance D. Assets = liabilities + equity E. Always a credit AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 86. Of the following accounts, the one that normally has a credit balance is: A. Cash B. Office Equipment C. Sales Salaries Payable D. Dividends E. Sales Salaries Expense AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 2-96 Chapter 002 Analyzing and Recording Transactions Key 87. A debit is used to record: A. A decrease in an asset account B. A decrease in an expense account C. An increase in a revenue account D. An increase in the balance of common stock E. A decrease in the balance of retained earnings AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 88. A credit entry: A. Increases asset and expense accounts and decreases liability, common stock and revenue accounts B. Is always a decrease in an account C. Decreases asset and expense accounts and increases liability, common stock and revenue accounts D. Is recorded on the left side of a T-account E. Is always an increase in an account AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 2-97 Chapter 002 Analyzing and Recording Transactions Key 89. Double-entry accounting is an accounting system: A. That records each transaction twice B. That records the effects of transactions and other events in at least two accounts with equal debits and credits C. In which each transaction affects and is recorded in two or more accounts but that could include two debits and no credits D. That may only be used if T-accounts are used E. That insures that errors never occur AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: C5 90. Which of the following is a true statement regarding debits and credits? A. If a company earned a profit, debits will not equal credits B. For a business, debits are better than credits C. A company's books are not in balance if they have a current period loss D. Assets and expenses are both increased with a debit E. Liabilities and equity are both increased with a debit AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: C5 2-98 Chapter 002 Analyzing and Recording Transactions Key 91. Rocky Industries received its telephone bill in the amount of $300 and immediately paid it. Rocky's general journal entry to record this transaction will include a A. Debit to Telephone Expense for $300 B. Credit to Accounts Payable for $300 C. Debit to Cash for $300 D. Credit to Telephone Expense for $300 E. Debit to Accounts Payable for $300 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: A1 92. Management Services, Inc. provides services to clients. On May 1, a client prepaid Management Services $60,000 for 6-months contract in advance. Management Services' general journal entry to record this transaction will include a A. Debit to Unearned Management Fees for $60,000 B. Credit to Management Fees Earned for $60,000 C. Credit to Cash for $60,000 D. Credit to Unearned Management Fees for $60,000 E. Debit to Management Fees Earned for $60,000 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: A1 2-99 Chapter 002 Analyzing and Recording Transactions Key 93. Wisconsin Rentals purchased office supplies on credit. The general journal entry made by Wisconsin Rentals will include a: A. Debit to Accounts Payable B. Debit to Accounts Receivable C. Credit to Cash D. Credit to Accounts Payable E. Credit to Retained Earnings AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 94. An asset created by prepayment of an expense is: A. Recorded as a debit to an unearned revenue account B. Recorded as a debit to a prepaid expense account C. Recorded as a credit to an unearned revenue account D. Recorded as a credit to a prepaid expense account E. Not recorded in the accounting records until the earnings process is complete AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 2-100 Chapter 002 Analyzing and Recording Transactions Key 95. 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? A. B. C. D. E. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 96. A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is: A. Recorded as a debit to an unearned revenue account B. Recorded as a debit to a prepaid expense account C. Recorded as a credit to an unearned revenue account D. Recorded as a credit to a prepaid expense account E. Not recorded in the accounting records until the earnings process is complete AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 2-101 Chapter 002 Analyzing and Recording Transactions Key 97. On September 30, the Cash account of Value Company had a normal balance of $5,000. During September, 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 September? A. A $0 balance B. A $4,300 debit balance C. A $4,300 credit balance D. A $5,700 debit balance E. A $5,700 credit balance Normal balance = debit AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 98. On October 31, a company's Cash account had a normal balance of $7,000. During October, the account was debited for a total of $4,250 and credited for a total of $5,340. What was the balance in the Cash account at the beginning of October? A. $0 balance B. $1,090 debit balance C. $2,590 credit balance D. $8,090 debit balance E. $9,590 credit balance Normal balance = debit AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 2-102 Chapter 002 Analyzing and Recording Transactions Key 99. On April 30, Holden Company 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? A. $5,000 B. $47,000 C. $52,000 D. $57,000 E. $32,000 Normal balance = debit AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 100. On November 30, a company had Accounts Receivable of $5,100. During the month of December, total credits to Accounts Receivable were $76,000 from customer payments. The December 31 Accounts Receivable balance was $43,000. What was the amount of credit sales during December? A. $8,100 B. $27,900 C. $70,900 D. $76,000 E. $113,900 Normal balance = debit AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 2-103 Chapter 002 Analyzing and Recording Transactions Key 101. The Fireside Country Inn is a very popular destination for tourists. The Inn requires guests to make reservations at least two months in advance of their stay. A twenty percent down payment is required at the time the reservation is made. When should this inn recognize room rental revenue? A. On the date the reservation is received B. On the date the money for the reservation is received C. On the date the guests stay in the inn D. On the date the guests pay the remaining eighty percent due E. Once all cash has been received AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 102. 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? A. $700 B. $1,100 C. $2,900 D. $0 E. $4,300 X + $7,500 - $8,600 = $1,800 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 2-104 Chapter 002 Analyzing and Recording Transactions Key 103. During March, a company had cash receipts of $2,300 and cash disbursements of $6,600. The March 31 cash balance was $2,780. What was the March 1 beginning cash balance? A. $1,520 B. $7,080 C. $4,300 D. $8,900 E. $11,680 X + $2,300 - $6,600 = $2,780 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 104. The following transactions occurred during July: 1. Received $900 cash for services provided to a customer during July. 2. Received $2,200 cash investment from Barbara Hanson, the owner of the business. 3. Received $750 from a customer in partial payment of his account receivable which arose from sales in June. 4. Provided services to a customer on credit, $375. 5. Borrowed $6,000 from the bank by signing a promissory note. 6. Received $1,250 cash from a customer for services to be rendered next year. What was the amount of revenue for July? A. $900 B. $1,275 C. $2,525 D. $3,275 E. $11,100 900 + 375 = 1,275 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 2-105 Chapter 002 Analyzing and Recording Transactions Key 105. If Jones Hardware, Inc. pays a cash dividend of $6,000, the entry to record this transaction is to: A. Debit Cash, Credit Retained Earnings B. Debit Dividends, Credit Cash C. Debit Common Stock, Credit Cash D. Debit Cash, Credit Common Stock E. Debit Cash, Credit Dividend Income AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 106. These transactions were completed by the art gallery opened by Zed Bennett. 1. Started the gallery, Artery, 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 painting for an artist and collected a $4,500 cash commission on the sale. 5. Completed an art appraisal and billed the client $200. What was the balance of the cash account after these transactions were posted? A. $12,230 B. $12,430 C. $43,300 D. $43,430 E. $61,430 $40,000 - $1,200 + $4,500 = $43,300 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 2-106 Chapter 002 Analyzing and Recording Transactions Key 107. The debt ratio is used: A. To measure the relation of equity to expenses B. To reflect the risk associated with a company's debts C. Only by banks when a business applies for a loan D. To determine how much debt a firm should pay off E. All of the above AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 108. Which of the following is the formula used to calculate the debt ratio? A. Total Equity/Total Liabilities B. Total Liabilities/Total Equity C. Total Liabilities/Total Assets D. Total Assets/Total Liabilities E. Total Equity/Total Assets AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 2-107 Chapter 002 Analyzing and Recording Transactions Key 109. Which of the following statements is incorrect? A. Higher financial leverage involves higher risk B. Risk is higher if a company has more liabilities C. Risk is higher if a company has higher assets D. The debt ratio is one measure of financial risk E. Lower financial leverage involves lower risk AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 110. Stride Rite has total assets of $425 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio. A. 38.6% B. 13.4% C. 34.9% D. 25.9% E. 14.9% $110/$425 = 25.9% AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 2-108 Chapter 002 Analyzing and Recording Transactions Key 111. A company has total assets of $385 million. Its total liabilities are $100 million and its equity is $285 million. Calculate its debt ratio. A. 35.1% B. 26.0% C. 38.5% D. 28.5% E. 58.8% $100/$385 = 26.0% AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 112. A company has total liabilities of $550 million and total equity of $300 million. Calculate this company's debt ratio. A. 64.7% B. 100% C. 54.5% D. 1.83 to 1 E. The debt ratio cannot be determined without additional information $550/($550 + $300) = 64.7% AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A2 2-109 Chapter 002 Analyzing and Recording Transactions Key 113. Which of the following statements is false with regard to the debt ratio? A. It is of use to both internal and external users of accounting information B. A relatively high ratio is always desirable C. The dividing line for a high and low ratio varies from industry to industry D. Many factors such as the company's age, stability, profitability and cash flow influence the determination of what would be interpreted as a high versus a low ratio E. The ratio might be used to help determine if a company is capable of increasing its income by obtaining further debt AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A2 114. The process of transferring general journal information to the ledger is: A. Double-entry accounting B. Posting C. Balancing an account D. Journalizing E. Not required unless debits do not equal credits AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P1 2-110 Chapter 002 Analyzing and Recording Transactions Key 115. A column in journals and ledger accounts used to cross reference journal and ledger entries is the: A. Account balance column B. Debit column C. Posting reference column D. Credit column E. Description column AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P1 116. The record in which transactions are first recorded is the: A. Account balance B. Ledger C. Journal D. Trial balance E. Cash account AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P1 2-111 Chapter 002 Analyzing and Recording Transactions Key 117. The general journal provides a place for recording: A. The transaction date B. The names of the accounts involved C. The amount of each debit and credit D. An explanation of the transaction E. All of the above AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P1 118. A balance column ledger account is: A. An account entered on the balance sheet B. An account with debit and credit columns for posting entries and another column for showing the balance of the account after each entry is posted C. Another name for the retained earnings account D. An account used to record the transfers of assets from a business to its stockholders E. A simple form of account that is widely used in accounting to illustrate the debits and credits required in recording a transaction AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P1 2-112 Chapter 002 Analyzing and Recording Transactions Key 119. A general journal is: A. A ledger in which amounts are posted from a balance column account B. Not required if T-accounts are used C. A complete record of each transaction in the place from which transaction amounts are posted to the ledger accounts D. Not necessary in electronic accounting systems E. A book of final entry because financial statements are prepared from it AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P1 120. A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is a(n): A. Account B. Trial balance C. Journal D. T-account E. Balance column account AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P1 2-113 Chapter 002 Analyzing and Recording Transactions Key 121. A company had the following account balances at year-end: If all of the accounts have normal balances, what are the totals for the trial balance? A. $45,200 B. $67,000 C. $104,800 D. $209,600 E. $186,600 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: P1 Learning Objective: P2 2-114 Chapter 002 Analyzing and Recording Transactions Key 122. Listed below are two pieces of information. Where is the best place to locate this information, in the journal or the ledger? 1. Details of a transaction which took place on October 3rd 2. All of the sales activity which took place during the current month A. 1. Journal 2. Journal B. 1. Journal 2. Ledger C. 1. Ledger 2. Ledger D. 1. Ledger 2. Journal E. This information is only available on the financial statements AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: P1 123. A report that lists accounts and their balances, in which the total debit balances should equal the total credit balances is called a(n): A. Account balance B. Trial balance C. Ledger D. Chart of accounts E. General Journal AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P2 2-115 Chapter 002 Analyzing and Recording Transactions Key 124. Which of the following statements are true? A. If the trial balance is in balance, it proves that no errors have been made in recording and posting transactions B. The trial balance is a book of original entry C. Another name for trial balance is chart of accounts D. The trial balance is a list of all accounts from the ledger with their balances at a point in time E. The trial balance is another name for the balance sheet as long as debits balance with credits AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P2 125. A company failed to post a $50 debit to the Office Supplies account. The effect of this error will be that: A. The Office Supplies account balance will be overstated B. The trial balance will not balance C. The error will overstate the debits listed in the journal D. The total debits in the trial balance will be larger than the total credits E. All of the above effects will be caused by the error AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 2-116 Chapter 002 Analyzing and Recording Transactions Key 126. A $15 credit to Sales was posted as a $150 credit. By what amount is Sales in error? A. $150 understated B. $135 overstated C. $150 overstated D. $15 understated E. $135 understated AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 127. A trial balance taken at year-end showed total credits exceeding total debits by $4,950. This discrepancy could have been caused by: A. An error in the general journal where a $4,950 increase in Accounts Receivable was recorded as an increase in Cash B. A net income of $4,950 C. The balance of $49,500 in Accounts Payable being entered in the trial balance as $4,950 D. The balance of $5,500 in the Office Equipment account being entered on the trial balance as a debit of $550 E. An error in the general journal where a $4,950 increase in Accounts Payable was recorded as a decrease in Accounts Payable AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 2-117 Chapter 002 Analyzing and Recording Transactions Key 128. In which of the following situations would the trial balance not balance? A. A $1,000 collection of an account receivable was erroneously posted as a debit to Accounts Receivable and a credit to Cash B. The purchase of office supplies on account for $3,250 was erroneously recorded in the journal as $2,350 debit to Office Supplies and credit to Accounts Payable C. A $50 cash receipt for the performance of a service was not recorded at all D. The purchase of office equipment for $1,200 was posted as a debit to Office Supplies and a credit to Cash for $1,200 E. The cash payment of a $750 account payable was posted as a debit to Accounts Payable and a debit to Cash for $750 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Decision Making AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 129. The credit purchase of a delivery truck for $4,700 was posted to Delivery Trucks as a $4,700 debit and to Accounts Payable as a $4,700 debit. What effect would this error have on the trial balance? A. The total of the Debit column of the trial balance will exceed the total of the Credit column by $4,700 B. The total of the Credit column of the trial balance will exceed the total of the Debit column by $4,700 C. The total of the Debit column of the trial balance will exceed the total of the Credit column by $9,400 D. The total of the Credit column of the trial balance will exceed the total of the Debit column by $9,400 E. The total of the Debit column of the trial balance will equal the total of the Credit column AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Decision Making AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 2-118 Chapter 002 Analyzing and Recording Transactions Key 130. If the Debit and Credit column totals of a trial balance are equal, then: A. All transactions have been recorded correctly B. All entries from the journal have been posted to the ledger correctly C. All ledger account balances are correct D. The total debit entries and total credit entries are equal E. The balance sheet would be correct AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 131. Accountants at Amalgamated Corporation incorrectly journalized a $50,000 equipment purchase as a debit to Buildings. This error was not discovered before the journal entry was posted. What is the correcting entry? A. Debit Buildings and Credit Equipment for $50,000 each B. Debit Equipment and Credit Buildings for $50,000 each C. Debit Buildings and Credit Equipment for $100,000 each D. Debit Equipment and Credit Buildings for $100,000 each E. Debit Equipment for $100,000 and Credit Buildings for $50,000 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: P2 2-119 Chapter 002 Analyzing and Recording Transactions Key 132. A $72,000 receipt of cash from a customer paying on their account was recorded as a $72,000 debit to Accounts Receivable. Assuming this journal entry was posted, what correcting entry (if any) is needed? A. Debit Cash and Credit Accounts Receivable for $72,000 each B. Debit Cash and Credit Accounts Receivable for $144,000 each C. Credit Cash and Debit Accounts Receivable for $72,000 each D. Credit Cash and Debit Accounts Receivable for $144,000 each E. No correcting entry is needed for this transaction AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: P2 133. Of the following errors, which one by itself will cause the trial balance to be out of balance? A. A $200 cash salary payment posted as a $200 debit to Cash and a $200 credit to Salaries Expense B. A $100 cash receipt from a customer in payment of his account posted as a $100 debit to Cash and a $10 credit to Accounts Receivable C. A $75 cash receipt from a customer in payment of his account posted as a $75 debit to Cash and a $75 credit to Cash D. A $50 cash purchase of office supplies posted as a $50 debit to Office Equipment and a $50 credit to Cash E. An $800 prepayment from a customer for services to be rendered in the future was posted as an $800 debit to Unearned Revenue and an $800 credit to Cash AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Decision Making AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: P2 2-120 Chapter 002 Analyzing and Recording Transactions Key 134. A $130 credit to Office Equipment was credited to Fees Earned by mistake. By what amounts are the accounts under or overstated as a result of this error? A. Office Equipment, understated $130; Fees Earned, overstated $130 B. Office Equipment, understated $260; Fees Earned, overstated $130 C. Office Equipment, overstated $130; Fees Earned, overstated $130 D. Office Equipment, overstated $130; Fees Earned, understated $130 E. Office Equipment, overstated $260; Fees Earned, understated $130 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: P2 135. Which of the following groups of accounts are not balance sheet accounts? A. Assets B. Liabilities C. Revenues D. Equity accounts E. All of the above are balance sheet accounts AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P3 2-121 Chapter 002 Analyzing and Recording Transactions Key 136. Which of the following is a TRUE statement concerning a company's financial statements? A. Balance Sheet and Income Statement data combined contain the complete financial picture of a given company B. A Trial Balance is another name for a Balance Sheet C. Another name for the Income Statement is the Earnings Statement D. Dividends paid to a company's shareholders are shown on the Income Statement E. The Balance Sheet shows the financial position of a company for a period of time AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: P3 2-122 Chapter 002 Analyzing and Recording Transactions Key Matching Questions 137. Match the following definitions and terms by placing the letter that identifies the best definition in the blank space next to the term. 1. Ledger 2. Source documents 3. T-account 4. Debit 5. Credit 6. Double-entry accounting 7. Account 8. Posting 9. Journal 10. Accounting records AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C1-C5 Learning Objective: P1 The sources of accounting information. An increase in an asset, dividend and expense account and decrease in a liability, common stock and revenue account; recorded on the left side of a T-account The process of transferring journal entry information to the ledger An accounting system where each transaction affects and is recorded in at least two accounts; the sum of the debits for each entry must equal its credits A file containing all accounts of a company and their balances A company's record of each transaction in one place that shows debits and credits for each transaction A record of the increases and decreases in a specific asset, liability, equity, revenue or expense item Decrease in an asset, dividend and expense account and increase in a liability, common stock and revenue account; recorded on the right side of a T-account A simple account form used as a helpful tool in showing the effects of transactions and events on specific accounts Another name for the accounting books or simply the books 2 4 8 6 1 9 7 5 3 10 2-123 Chapter 002 Analyzing and Recording Transactions Key 138. Match the following definitions and terms by placing the letter that identifies the best definition in the blank space next to the term. An increase in an asset, dividend and expense account and a decrease in a liability, common stock and revenue account; recorded on the left side of a T-account A written promise to pay a definite sum of money on a specified future date A file containing all accounts of a company and their balances A complete record of each transaction in one place that shows debits and credits for each transaction The ratio of total liabilities to total assets; used to reflect the risk associated with the company's debts A list of all accounts used by a company and the identification number assigned to each account A list of accounts and their balances at a point in time; the total debit balances should equal the total credit balances A decrease in an asset, dividend and expense account and an increase in a liability, common stock and revenue account; recorded on the right side of a T-account 1. Account balance 2. Debt ratio 3. Debit 4. Ledger 5. Note payable 6. Chart of accounts 7. Journal 8. Trial balance 9. Balance column account 10. Credit 3 5 4 7 2 6 8 10 The difference between total debits and total credits for an account including the beginning balance 1 An account with debit and credit columns for recording entries and a third column for showing the balance of the account after each entry 9 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 Learning Objective: C1-C5 Learning Objective: P1 Learning Objective: P2 2-124 Chapter 002 Analyzing and Recording Transactions Key 139. Match the following definitions and terms by placing the letter that identifies the best definition in the blank space next to the term. The most flexible type of journal, it can be used to record any kind of transaction A list of all accounts used by a company and the identification number assigned to each account A written promise from a customer to pay a definite sum of money on a specified future date A simple form used as a helpful tool in understanding the effect of transactions and events on specific accounts Liabilities created when customers pay in advance for products or services; satisfied by delivering the products or services in the future A journal entry that affects at least three accounts A column in journals where individual account numbers are entered when entries are posted to ledger accounts The process of transferring journal entry information to the ledger A record of the increases and decreases in a specific asset, liability, equity, revenue or expense item A list of accounts and their balances at a point in time; the total debit balances should equal the total credit balances 1. Account 2. Unearned revenues 3. T-account 4. Note receivable 5. Chart of accounts 6. Posting reference column 7. Posting 8. General journal 9. Compound journal entry 10. Trial Balance 8 5 4 3 2 9 6 7 1 10 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C1-C5 Learning Objective: P1 2-125 Chapter 002 Analyzing and Recording Transactions Key 140. Identify each of the following accounts as a revenue (R), expense (E), asset (A), liability (L) or equity (OE) by placing initials (R, E, A, L or OE) in the blanks. 1. Accounts Receivable 2. Prepaid Insurance 3. Common Stock 4. Retained Earnings 5. Cash 6. Unearned Fee Revenue 7. Fees Revenue 8. Accounts Payable 9. Dividends 10. Supplies 11. Salary Expense 12. Equipment AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C3 Expense Asset Asset Placing Initials Revenue Asset Liability Placing Initials Asset Liability Asset Placing Initials 11 5 12 3 7 1 8 9 10 6 2 4 2-126 Chapter 002 Analyzing and Recording Transactions Key 141. The following accounts appear on either the Income Statement (IS) or Balance Sheet (BS). In the space provided next to each account write the letters is or BS, that identify the statement on which the account appears. 1. Wages Payable 2. Notes Receivable 3. Office Equipment 4. Cash 5. Common Stock 6. Fees Revenue 7. Accounts Payable 8. Rent Expense 9. Unearned Fees Revenues 10. Rent Expense AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 Balance Sheet Income Statement Balance Sheet Income Statement Balance Sheet Balance Sheet Income Statement Balance Sheet Balance Sheet Balance Sheet 3 8 9 8 7 5 6 4 2 1 2-127 Chapter 002 Analyzing and Recording Transactions Key Short Answer Questions 142. Vicki Lake is a computer consultant. Shown below are (a) several accounts in her ledger with each account preceded by an identification number and (b) several transactions completed by Lake. Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction. 2-128 Chapter 002 Analyzing and Recording Transactions Key AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 2-129 Chapter 002 Analyzing and Recording Transactions Key 143. David Roberts is a real estate appraiser. Shown below are (a) several accounts in his ledger with each account preceded by an identification number and (b) several transactions completed by Roberts. Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction. 2-130 Chapter 002 Analyzing and Recording Transactions Key AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 144. List the steps in processing transactions. Business transactions and events are the starting point. Source documents are analyzed for the effects of the transactions and events on the accounting records. The information is recorded into the journal. The information is then posted to the accounts and a trial balance is prepared. The final step is the preparation of financial statements and reports for decision makers. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C1 2-131 Chapter 002 Analyzing and Recording Transactions Key 145. Describe source documents and their purpose. Source documents are the sources of information that identify and describe transactions and events. They provide objective and reliable evidence about transactions and their amounts. Examples of source documents include checks, invoices, sales receipts, credit card statements and bank statements. They can be in hard copy or electronic form. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C2 146. Explain how accounts are used in recording information about transactions. Accounts are classified into three general categories: assets, liabilities and equity. Accounts are records of increases and decreases of specific items in these categories. The accounts serve as the information resource for financial statements and reports. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Decision Making AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 2-132 Chapter 002 Analyzing and Recording Transactions Key 147. Explain the difference between a ledger and a chart of accounts. A ledger is a record containing all of the accounts of a business and their balances. The chart of accounts is a list of all of the accounts in the ledger that includes an identification number for the accounts. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C4 148. Explain debits and credits and their role in the accounting system. Debit refers to the left side of an account and credit refers to the right side of an account. Debits and credits are part of the double-entry accounting system. This system is based on the concept that all transactions and events affect at least two accounts. The double entry system is organized around the accounting equation which states that assets = liabilities + equity. Assets, expenses and dividends have normal debit balances and liabilities, common stock and revenues have normal credit balances AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: C5 2-133 Chapter 002 Analyzing and Recording Transactions Key 149. Explain the debt ratio and its use in analyzing a company's financial condition. The debt ratio is calculated by dividing total liabilities by total assets. It reveals the percentage of the company's assets that are financed by creditors. The higher the ratio, the more risk a company has in trying to repay the debt with interest. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 150. Explain the recording and posting processes. Information from business transactions and events is recorded in the journal in the form of journal entries. The journal entries include the date, the account titles and debit and credit amounts. Journal entries may also include a further description of the transaction. During the posting process the debit and credit amounts recorded in the journal are transferred to the individual accounts in the ledger. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P1 2-134 Chapter 002 Analyzing and Recording Transactions Key 151. What is a trial balance? What is its purpose? The trial balance is a list of all of the accounts in the ledger with balances at a point in time. The list is organized by debit and credit balances. The purpose of the trial balance is to summarize the account totals and to verify the accuracy of the total debits and credits. If the total debits and credits are not equal, then the trial balance is out of balance which indicates an error in the accounting records. However, even if debits do equal credits this is no guarantee that no errors were made in recording and posting transactions. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 152. Sara Blakely founded the Bottom Line. What are some accounting challenges she faced when starting her business? Sara had to account for many activities such as product costs, office expenses, supplier payments and patent fees. She also expanded sales and struggled to be profitable. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Decision Making AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 2-135 Chapter 002 Analyzing and Recording Transactions Key Problems 153. Identify which of the following items would likely serve as a source document by marking an X in the appropriate column. The first one is done as an example AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C2 2-136 Chapter 002 Analyzing and Recording Transactions Key 154. Indicate whether a debit or credit entry would be made to record the following changes in each account. a. To decrease Cash b. To increase Common Stock c. To decrease Accounts Payable d. To increase Salaries Expense e. To decrease Supplies f. To increase Revenue. g. To decrease Accounts Receivable h. To increase Retained Earnings a. Credit, b. Credit, c. Debit, d. Debit, e. Credit, f. Credit, g. Credit, h. Credit AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 2-137 Chapter 002 Analyzing and Recording Transactions Key 155. The following is a list of accounts and identification letters A through J for Shannon Management Co.: Use the form below to identify the type of account and its normal balance. The first item is filled in as an example. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 2-138 Chapter 002 Analyzing and Recording Transactions Key 156. Dolly Barton began Barton Office Services in October and during that month completed these transactions: a. Invested $10,000 cash and $15,000 of computer equipment in exchange for common stock b. Paid $500 cash for an insurance premium covering the next 12 months c. Completed a word processing assignment for a customer and collected $1,000 cash d. Paid $200 cash for office supplies e. Paid $2,000 for October's rent. Prepare journal entries to record the above transactions. Explanations are unnecessary. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: A1 2-139 Chapter 002 Analyzing and Recording Transactions Key 157. A company sends a $1,500 bill to a customer for delivery services rendered. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 2-140 Chapter 002 Analyzing and Recording Transactions Key 158. A company paid $2,500 cash to satisfy a previously recorded account payable. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 159. A business paid a $100 cash dividend. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 2-141 Chapter 002 Analyzing and Recording Transactions Key 160. On December 3, the Matador Company paid $5,400 cash in salaries to office personnel. Prepare the general journal entry to record this transaction. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 161. On February 5, Textron Stores purchased a van that cost $35,000. The firm made a down payment of $5,000 cash and signed a long-term note payable for the balance. Show the general journal entry to record this transaction. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 2-142 Chapter 002 Analyzing and Recording Transactions Key 162. Krenz Car Care, owned and operated by Karl Krenz, began business as a corporation in September of the current year. Karl, a master mechanic, had no experience with keeping a set of books. As a result, Karl entered all of September's transactions directly to the ledger accounts. When he tried to locate a particular entry he found it confusing and time consuming. He has hired you to improve his accounting procedures. The accounts in his General Ledger follow: Prepare the general journal entries, in chronological order (a) through (e), from the T-account entries shown. Include a brief description of the probable nature of each transaction. 2-143 Chapter 002 Analyzing and Recording Transactions Key AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 2-144 Chapter 002 Analyzing and Recording Transactions Key 163. Flora Accounting Services completed these transactions in February: a. Purchased office supplies on account, $300 b. Completed work for a client on credit, $500 c. Paid cash for the office supplies purchased in (a) d. Completed work for a client and received $800 cash e. Received $500 cash for the work described in (b). f. Received $1,000 from a client for accounting services to be performed in March. Prepare journal entries to record the above transactions. Explanations are not necessary. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A1 2-145 Chapter 002 Analyzing and Recording Transactions Key 164. Leonard Matson completed these transactions during December of the current year: Prepare general journal entries to record these transactions. 2-146 Chapter 002 Analyzing and Recording Transactions Key 2-147 Chapter 002 Analyzing and Recording Transactions Key AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 2-148 Chapter 002 Analyzing and Recording Transactions Key 165. Maria Sanchez began business as Sanchez Law Firm on November 1. Record the following November transactions by making entries directly to the T-accounts provided. Then, prepare a trial balance, as of November 30. a. Sanchez invested $15,000 cash and a law library valued at $6,000 in exchange for common stock. b. Purchased $7,500 of office equipment from Johnson Bros. on credit. c. Completed legal work for a client and received $1,500 cash in full payment. d. Paid Johnson Bros. $3,500 cash in partial settlement of the amount owed. e. Completed $4,000 of legal work for a client on credit. f. Paid a $2,000 cash dividend. g. Received $2,500 cash as partial payment for the legal work completed for the client in (e). h. Paid $2,500 cash for the legal secretary's salary. 2-149 Chapter 002 Analyzing and Recording Transactions Key AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 Learning Objective: P3 2-150 Chapter 002 Analyzing and Recording Transactions Key 166. Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year: If the owners made no investments in the business and no dividends were paid during the year, what was the amount of net income earned by Josephine's Bakery during the current year? Beginning owner's equity = $114,000 - $68,000 = $46,000 Ending owner's equity = $135,000 - $73,000 = $62,000 Increase in owner's equity = $62,000 - $46,000 = $16,000 Since there were no investments or dividends during the year, the net income is $16,000. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 Learning Objective: P3 2-151 Chapter 002 Analyzing and Recording Transactions Key 167. Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year: If the owners invested an additional $12,000 in the business during the year, but no dividends were paid, what was the amount of net income earned by Josephine's Bakery during the current year? Beginning owner's equity = $114,000 - $68,000 = $46,000 Ending owner's equity = $135,000 - $73,000 = $62,000 Increase in owner's equity = $62,000 - $46,000 = $16,000 Net income = $16,000 - $12,000 = $4,000 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 Learning Objective: P3 2-152 Chapter 002 Analyzing and Recording Transactions Key 168. Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year: If the owners made no investments and dividends of $5,000 were paid during the year, what was the amount of net income earned by Josephine's Bakery during the current year? Beginning owner's equity = $114,000 - $68,000 = $46,000 Ending owner's equity = $135,000 - $73,000 = $62,000 Increase in owner's equity = $62,000 - $46,000 = $16,000 Net income = $16,000 + $5,000 = $21,000 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Decision Making AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 Learning Objective: P3 2-153 Chapter 002 Analyzing and Recording Transactions Key 169. Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year: If the owners invested an additional $12,000 in the business and dividends of $5,000 were paid during the year, what was the amount of net income earned by Josephine's Bakery during the current year? Beginning owner's equity = $114,000 - $68,000 = $46,000 Ending owner's equity = $135,000 - $73,000 = $62,000 Increase in owner's equity = $62,000 - $46,000 = $16,000 Net income = $16,000 - $12,000 + $5,000 = $9,000 AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 Learning Objective: P3 170. A company had total assets of $350,000; total liabilities of $101,500; and total equity of $248,500. Calculate its debt ratio. $101,500/$350,000 = 29% AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 2-154 Chapter 002 Analyzing and Recording Transactions Key 171. Montgomery Marketing Co. had assets of $475,000; liabilities of $275,500; and equity of $199,500. Calculate its debt ratio. $275,500/$475,000 = 58% AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 172. List the steps in recording transactions. 1. Analyze transactions and source documents. 2. Apply double-entry accounting. 3. Record the journal entry. 4. Post entry to ledger. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P1 2-155 Chapter 002 Analyzing and Recording Transactions Key 173. For each of the following errors, indicate on the table below the amount by which the trial balance will be out of balance and which trial balance column (debit or credit) will have the larger total as a result of the error. a. $100 debit to Cash was debited to the Cash account twice b. $1,900 credit to Sales was posted as a $190 credit c. $5,000 debit to Office Equipment was debited to Office Supplies d. $625 debit to Prepaid Insurance was posted as a $62.50 debit e. $520 credit to Accounts Payable was not posted AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 2-156 Chapter 002 Analyzing and Recording Transactions Key 174. After preparing an (unadjusted) trial balance at year-end, G. Chu of Chu Design Company discovered the following errors: 1. Cash payment of the $225 telephone bill for December was recorded twice. 2. Cash payment of a note payable was recorded as a debit to Cash and a debit to Notes Payable for $1,000. 3. A $900 cash dividend was recorded to the correct accounts as $90. 4. An additional investment of $5,000 cash by the owner was recorded as a debit to Common Stock and a credit to Cash. 5. A credit purchase of office equipment for $1,800 was recorded as a debit to the Office Equipment account with no offsetting credit entry. Using the form below, indicate whether the error would cause the trial balance to be out of balance by placing an X in either the yes or no column. Would the error cause the trial balance to be out of balance? Would the error cause the trial balance to be out of balance? AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Decision Making AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 2-157 Chapter 002 Analyzing and Recording Transactions Key 175. The balances for the accounts of Mike's Maintenance, Inc. for the year ended December 31 are shown below. Each account shown had a normal balance. Calculate the correct balance for Cash and prepare a trial balance. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P2 2-158 Chapter 002 Analyzing and Recording Transactions Key 176. At year-end, Harris Cleaning Service noted the following errors in its trial balance: 1. It understated the total debits to the Cash account by $500 when computing the account balance. 2. A credit sale for $311 was recorded as a credit to the revenue account, but the offsetting debit was not posted. 3. A cash payment to a creditor for $2,600 was never recorded. 4. The $680 balance of the Prepaid Insurance account was listed in the credit column of the trial balance. 5. A $24,900 truck purchase for cash was recorded as a $24,090 debit to Vehicles and a $24,090 credit to Notes Payable. 6. A purchase of office supplies for $150 was recorded as a debit to Office Equipment. The offsetting credit entry was correct. 7. An additional investment of $4,000 by Del Harris was recorded as a debit to Common Stock and as a credit to Cash. 8. The cash payment of the $510 utility bill for December was recorded (but not paid) twice. 9. A revenue account balance of $79,817 was listed on the trial balance as $97,817. 10. A $1,000 cash dividend was recorded as a $100 debit to Dividends and $100 credit to cash. Using the form below, indicate whether each error would cause the trial balance to be out of balance, the amount of any imbalance and whether a correcting journal entry is required. 2-159 Chapter 002 Analyzing and Recording Transactions Key AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Decision Making AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: P2 2-160 Chapter 002 Analyzing and Recording Transactions Key 177. The following trial balance was prepared from the general ledger of Hal's Auto Repair. Because the trial balance did not balance, you decided to examine the accounting records. You found that the following errors had been made: 1. A purchase of supplies on account for $245 was posted as a debit to Supplies and as a debit to Accounts Payable. 2. An investment of $500 cash by the owner was debited to Common Stock and credited to Cash. 3. In computing the balance of the Accounts Receivable account, a debit of $600 was omitted from the computation. 4. One debit of $300 to the Dividends account was posted as a credit. 5. Office equipment purchased for $800 was posted to the Repair Equipment account. 6. One entire entry was not posted to the general ledger. The transaction involved the receipt of $125 cash at the time repair services were performed. Prepare a corrected trial balance for the Hal's Auto Repair as of October 31. 2-161 Chapter 002 Analyzing and Recording Transactions Key a Cash: Balance $975 + $1,000 (2) + 125 (6) = $2,100 Accounts Receivable: Bal. $3,800 + 600 (3) = $4,400 c Repair Equipment: Bal. $13,000 - 800 (5) = $12,200 d Office Equipment: Bal. $6,600 + 800 (5) = $7,400 e Accounts Payable: Bal $4,510 + 490 (1) = $5,000 f Common Stock = Bal. $10,000 + 1,000 (2) = $11,000 g Dividends: Bal. $4,200 + 600 (4) = $4,800 h Repair fees earned: Bal $10,875 + 125 (6) = $11,000 b AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: P2 2-162 Chapter 002 Analyzing and Recording Transactions Key 178. The following are all of the accounts of Flaherty Company that have a balance at the end of August. All accounts have normal balances: a. Calculate net income b. Determine the amount of retained earnings to be shown on the August 31 balance sheet. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P3 2-163 Chapter 002 Analyzing and Recording Transactions Key 179. Based on the following trial balance for Sal's Beauty Shop, prepare an income statement, statement of retained earnings and a balance sheet. Sal made no additional investments in the company during the year. 2-164 Chapter 002 Analyzing and Recording Transactions Key AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P3 2-165 Chapter 002 Analyzing and Recording Transactions Key Fill in the Blank Questions 180. ____________________________ and _____________________ are the starting points for the analyzing and recording process. Business transactions; events AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C1 181. The second step in the analyzing and recording process is to record the transactions and events in the _____________________________. Journal AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C1 182. The third step in the analyzing and recording process is to post the information to _________________________. Ledger accounts. AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C1 2-166 Chapter 002 Analyzing and Recording Transactions Key 183. _________________ identifies and describes transactions and events and provides objective evidence and amounts for recording. Source documents AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C2 184. Revenues and expenses are two categories of ____________________ accounts. Equity AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C3 185. The _______________________ is a record containing all accounts (with balances) used by a company. General ledger (or ledger) AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C3 2-167 Chapter 002 Analyzing and Recording Transactions Key 186. The three general categories of accounts in a general ledger are __________________, _________________ and __________________________. Assets, liabilities, equity AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C3 187. ___________________ is promises of payment from customers to sellers. Accounts receivable AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C3 188. Unearned revenue is classified as _______________ that is satisfied by delivering products or services in the future. A Liability AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 2-168 Chapter 002 Analyzing and Recording Transactions Key 189. The four categories of equity accounts are _____________________, __________________, ______________________ and ______________________. Common stock; dividends; revenues; expenses AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C3 190. A _______________ is a list of all the accounts used by a company and their identification codes. Chart of accounts AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C4 191. A ___________________ is a record containing all accounts for a company along with their balances. Ledger AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 2-169 Chapter 002 Analyzing and Recording Transactions Key 192. _____________________________ requires that each transaction affect and be recorded in, at least two accounts. It also means that total amounts debited must equal total amounts credited for each transaction. Double-entry accounting AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C5 193. The difference between total debits and total credits for an account, including any beginning balance is the ________________________. Account balance AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: C5 194. Increases in assets are _______________, while increases in liabilities are _______________. Debited, credited AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: C5 2-170 Chapter 002 Analyzing and Recording Transactions Key 195. FastForward purchased $25,000 of equipment for cash. The Equipment asset account is _______________ for $25,000 and the cash account is _______________ for $25,000. Debited, credited AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Hard Learning Objective: A1 196. Stride Rite had total liabilities of $130 million and total assets of $375 million. Its debt ratio was _______________. $130 million/$375million = 34.7% AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: A2 197. _______________ is the process of transferring journal entry information to the ledger. Posting AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P1 2-171 Chapter 002 Analyzing and Recording Transactions Key 198. A ___________________________ gives a complete record of each transaction in one place and shows debits and credits for each transaction. Journal AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Easy Learning Objective: P1 199. An account format that is similar to a T-account in that it has columns for debits and credits, but that is different in that it has columns for transaction date, explanation and the account balance is the ___________________________________. Balance column account AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P1 200. The posting process is the link between the _______________ and the _____________. Journal; ledger AACSB: Analytic AACSB: Communications AICPA BB: Critical Thinking AICPA BB: Industry AICPA FN: Measurement AICPA FN: Reporting Difficulty: Medium Learning Objective: P1 2-172

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Ohio State - ACC - 103
Chapter 02 Analyzing and Recording TransactionsChapter 02 Analyzing and Recording TransactionsStudent Learning Objectives and Related Assignment Materials* Discussion Questions Quick Studies Problems (A &B set)* 2-5 Beyond the NumbersStudent Learning O
Ohio State - ACC - 103
Chapter 2Analyzing and Recording TransactionsQUESTIONS1. a. Common asset accounts: cash, accounts receivable, notes receivable, prepaid expenses (rent, insurance, etc.), office supplies, store supplies, equipment, building, and land. b. Common liabilit
Ohio State - ACC - 103
To The InstructorTo The InstructorThis Instructors Resource Manual is a teaching supplement to Financial and Managerial Accounting 3rd Edition by John J. Wild. It provides for flexibility in both methods of delivery and course content. This design allow
Ohio State - ACC - 103
Student Name: Instructor Class: McGraw-Hill/Irwin Problem 02-02A VENTURE CONSULTANTS General Journal Date Explanation Mar 1 Cash Office Equipment Common Stock 2 Prepaid Rent Cash 3 Office Equipment Office Supplies Accounts Payable 6 Cash Services Revenue
Ohio State - ACC - 103
PROBLEM SET CProblem 2-1C (90 minutes) Part 1June 1 3 4 6 9 Cash.101 Common Stock.301 Owner invested cash. Computer Equipment.163 Accounts Payable.201 Purchased equipment on account. Prepaid Insurance.128 Cash.101 Prepaid two years of insurance. Supplie
Colorado - FIN - 2200
Case 1: Ratios and Financial Planning at S&S AirName: CU ID#:Xiaohan Cui 830336985 2010 actual % 100.0% 70.5% 12.0% 3.3% 14.3% 1.8% 12.5% 5.0% 7.5% 2011 forecast $20,255,000 15,168,000 2,975,000 665,000 1,447,000 627,800 819,200 327,680 491,520 375,000
Colorado - ACCT - 2000
BCOR 2000 - TA Office Hours All office hours will be held in Room 499. You may attend any of the TAs office hours, not just those of your recitation leader.Monday Tuesday Tuesday Wednesday Thursday10:00 12:00 11:00 1:00 1:00 3:00 10:00 12:00 1:00 3:00(
Berkeley - UGBA - 96
1.17.11 1.24.11 1.31.11 2.7.11 2.14.11 2.21.11 2.28.11 3.7.11 3.14.11 3.21.11 3.28.11 4.4.11 4.11.11 4.18.11 4.25.11 5.2.11L&S 5 Spring 2010 (UGBA 96) Class Time: 4:00 - 5:30 p.m. Location: Anderson Auditorium, Haas School of Business No Class - MLK What
Berkeley - UGBA - 96
Letters & Science 5 (UGBA 96): Introduction to Entrepreneurship Professor: TAs: Jennifer Walske (walske@haas.berkeley.edu) Angela Wang (aywang8@berkeley.edu) - Attendance Ayan Agarwal (Agarwal.ayan@berkeley.edu) Speaker Sessions Office & Hours: Monday 5:3
UGA - MATH - 4150
Math 4150/6150: Bonus Problems Spring 2011 Instructor: Dr. Shuzhou Wang Each problem is worth an extra 1% of the course. Note: If you turn in solutions of these problems for credit, you must work independently and must not discuss them with anyone else ex
UNLV - MATH - 132
Chapter7VariableCosting:AToolforManagementSolutionstoQuestions71 Absorptionandvariablecostingdifferin howtheyhandlefixedmanufacturingoverhead. Underabsorptioncosting,fixedmanufacturing overheadistreatedasaproductcostandhence isanassetuntilproductsareso
University of Toronto - MATH - 246
MATHEMATICAL INDUCTIONOriginal Notes adopted from September 11, 2001(Week 1)c P. Rosenthal , MAT246Y1, University of Toronto, Department of MathematicsThe Natural Numbers The set of natural numbers is the set cfw_1, 2, 3, 4, 5, . . ., which is denoted
University of Toronto - MATH - 246
Complete Mathematical Induction and Prime NumbersOriginal Notes adopted from September 18, 2001 (Week 2) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku OngComplete Mathematical Induction If S N such that: a) 1
University of Toronto - MATH - 246
Congruences (Part 1)Original Notes adopted from September 25, 2001 (Week 3) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku OngModular Arithmetic a, b Z , m >1 "a is congruent to b modulo m" means m|(a-b). Equiv
University of Toronto - MATH - 246
Congruences (Part 2) & Fundamental Theorem of ArithmeticOriginal Notes adopted fromOctober 2, 2001 (Week 4) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku OngFundamental Theorem of Arithmetic Every natural numb
University of Toronto - MATH - 246
Congruences (Part 3) & Intro to Rational NumbersOriginal Notes adopted fromOctober 9, 2001 (Week 5) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku Onga & b are relatively prime if their only common factor is 1
University of Toronto - MATH - 246
RSA CodingReceiver chooses 2 distinct large prime p and q, and lets N= pq. Note: NN) = (p-1 ) (q- 1) Receiver also chooses an e relatively prime to NN). Receiver announces the pair (N, e) to all who wish to send messages. Message must be a natural number
University of Toronto - MATH - 246
The Euclidean AlgorithmLet d = greatest common divisor of a + b. Find d as follows: (Suppose b < a; reverse if otherwise ) a = bq + r b = r q1+ r1 r = r1 q2 + r2 r1= r2 q3 + r3 . rk-2= rk-1 qk + rk rk-1= rk qk+1 Then rk is greatest common divisor d. For,
University of Toronto - MATH - 246
Rational and Irrational NumbersOriginal Notes adopted from October 23, 2001 (Week 7) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku OngLemma: If x2 is even then x is even. Theorem: 2 is irrational We can't have
University of Toronto - MATH - 246
Irrational and Algebraic Numbers, IVT, Upper and Lower BoundsOriginal Notes adopted from October 30, 2001 (Week 8)c P. Rosenthal , MAT246Y1, University of Toronto, Department of MathematicsIs 34 irrational? 4 = m/n 4 = m3 /n3 4n3 = m3 then3 3 3 3 22
University of Toronto - MATH - 246
The Real Numbers (Theorems)Original Notes adopted from November 6, 2001 (Week9) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku OngProve 2 + 3 is irrational Suppose 2 + 3 rational 2 + 3 = m/n 2 = m/n - 3 2 = m2
University of Toronto - MATH - 246
Complex NumbersOriginal Notes adopted from November 13, 2001 (Week 10) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku OngPolynomial Equations with Integer Coefficients Eg. 3x + 2 = 0. No Solution in Z, solution
University of Toronto - MATH - 246
Fundamental Theorem of AlgebraOriginal Notes adopted from November 20, 2001 (Week 11) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku Onga + bi + c + di = ( a + c) + (b + d) iTriangle Inequality For z1 , z2 C,
University of Toronto - MATH - 246
Factor Theorem and Intro to CardinalityOriginal Notes adopted from November 27, 2001 (Week 12)c P. Rosenthal , MAT246Y1, University of Toronto, Department of MathematicsIf a and b are irrational, can ab be rational? Yes. Eg. ( 3)2 ( 3) 2 ) 2 = ( 3)2 =
University of Toronto - MATH - 246
Cardinality Part IOriginal Notes adopted from December 3, 2001 (Week 13)c P. Rosenthal , MAT246Y1, University of Toronto, Department of MathematicsS and T have the same cardinality if there exists f : S T one-to-one onto (i.e. a pairing ) or one-to-one
University of Toronto - MATH - 246
Cardinality Part IIOriginal Notes adopted from January 8, 2002 (Week 14)c P. Rosenthal , MAT246Y1, University of Toronto, Department of MathematicsDefinition. |S| = |T | if there exists f : S T (one-to-one and onto) Eg. |Even naturals| = |natural| Defi
University of Toronto - MATH - 246
Cardinality Part IIIOriginal Notes adopted from January 22, 2002 (Week 16)c P. Rosenthal , MAT246Y1, University of Toronto, Department of MathematicsEg. S = cfw_a, b, c Sets of Subsets of S: cfw_, cfw_a, cfw_b, cfw_c, cfw_a, b, cfw_a, c, cfw_b, c, cfw_
University of Toronto - MATH - 246
Cardinality Part IV and Intro to Compass and Straight-EdgeOriginal Notes adopted from January 29, 2002 (Week 17)c P. Rosenthal , MAT246Y1, University of Toronto, Department of MathematicsDenition. A real number is algebraic if there exists a nonzero po
University of Toronto - MATH - 246
Constructible Numbers, Fields and SurdsOriginal Notes adopted from February 5, 2002 (Week 18) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku OngConstructible Numbers If a,b,c are constructible & > 0,if b<c c=x
University of Toronto - MATH - 246
Proof that one can not Trisect an angle of 60 degrees with Straight Edge and CompassOriginal Notes adopted from February 12, 2002 (Week 19) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku OngF, r F, r>0 & if r F
University of Toronto - MATH - 246
Regular Polygons and Constructible AnglesOriginal Notes adopted from February 26, 2002 (Week 20) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku OngSurds: Q Q ( r ) (Q( r )( r1 ), Also Surd = Constructible. Theo
University of Toronto - MATH - 246
More on Constructible Numbers and AnglesOriginal Notes adopted from March 5, 2002 (Week 21) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku OngLemma: If x0 is a root of a polynomial with coefficients in F(r), th
University of Toronto - MATH - 246
Cardinality Aside (Short Example)Original Notes adopted from March 26, 2002 (Week 24)c P. Rosenthal , MAT246Y1, University of Toronto, Department of MathematicsNOTE: Tests were handed back today, and solutions to Term Test 3 were discussed. Everything
University of Toronto - MATH - 246
Topology (Part 1)Original Notes adopted from April 2, 2002 (Week 25) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku OngR, A subset S of R is open if S is a union of open intervals; ie) whenever x S , there exis
University of Toronto - MATH - 246
Topology (Part 2)Original Notes adopted from April 9, 2002 (Week 26) P. Rosenthal , MAT246Y1, University of Toronto, Department of Mathematics typed by A. Ku OngLet X be a topological space. Let S X The relative topology on S (as a subset of X) is the
University of Toronto - MATH - 246
(1) Prove that 1 1 1 n + + . = 12 23 n(n + 1) n+1 (2) Prove that 3 n n+2 1 2 + 2 + 3 + . + n = 2 - n 2 2 2 2 2 (3) Prove that 1 + 2q + 3q 2 + . . . + nq n-1 = 1 - (n + 1)q n + nq n+1 (1 - q)2(4) Find the sum of the following geometric progression x x2 xn
University of Toronto - MATH - 246
n n (1) Consider the binomial expansion (a + b)n = C0 an + C1 an-1 b + . . . + n bn . Cn n n n n Show that C0 - C1 + C2 - . . . Cn = 0 Hint: Pick appropriate a and b. (2) Find all prime numbers smaller than 100. (3) Recall that prime twins are pairs of pr
University of Toronto - MATH - 246
(1) Show that if (a, b, c) is a Pythegorean triple such that a2 + b2 = c2 then a and b can not both be odd. ab (2) Show that lcm(a, b) = (a,b) for any natural numbers a, b. Here lcm(a, b) is the least common multiple of a and b. (3) Find the rule for chec
University of Toronto - MATH - 246
(1) Prove the converse to Wilson's theorem: If (m - 1)! -1( mod m) then m is prime. (2) Without using the uniqueness of prime factorization theorem prove that if a|m, b|m and (a, b) = 1 then ab|m. (3) Use Euclidean algorithm to express (a) (66, 56) as 66x
University of Toronto - MATH - 246
(1) Prove that any natural n we have 1032n+9 7(mod 17). for (2) Prove that 2 + 3 and 2 + 3 2 are irrational. (3) Show that the equation 4x2 - 5y 2 = 2 has no rational solutions. Hint: reduce the equation to an equation in integers and consider it mod m fo
University of Toronto - MATH - 246
(1) Compute 5 up to 2 decimal points without using a calculator. (2) Prove that any interval (a, b) with a < b contains an irrational number. (3) prove that if limn xn = x and limn yn = y then limn (xn + yn ) = x + y. n (4) let m be an integer such that
University of Toronto - MATH - 246
(1) (a) Let f (x), g(x) be polynomials with real coefficients. Prove that there exists a unique polynomial h(x) = xk + ak-1 xk-1 + . . . + a0 such that h(x) divides both f (x) and g(x) and every other polynomial that divides both f (x) and g(x) divides h(
University of Toronto - MATH - 246
(1) For any set S define P (S) to be the set of all subsets of S. for example, if S = cfw_a, b then P (S) = cfw_, cfw_a, cfw_b, cfw_a, b. Let A be a finite set. Show that |P (A)| = 2|A| . Hint: Let A = cfw_x1 , . . . , xn . Represent a subset S of A by a
University of Toronto - MATH - 246
(1) Let S = (0, 1) and T = [0, 1). Let f : S T be given by f (x) = x and g : T S be given by g(x) = x+1 . 2 (a) Find SS , ST , S , TS , TT , T (b) give an explicit formula for a 1-1 and onto map h : S T coming from f and g using the proof of the Schroeder
University of Toronto - MATH - 246
(1) Let a be a constructible number. Show that a is also constructible. 4 (2) (a) let x0 be a root of ( 2+1)x7 +(5-2 2)x +( 2-2) = 0. Construct a polynomial f (x) of degree 14 with rational coefficients such that f (x0 ) = 0. (b) Let F be a number field
University of Toronto - MATH - 246
You do not need to turn in these problems. They are just practice problems on the material of the last lecture. (1) (a) Let f (x) = an xn + . . . a1 x + a0 be a polynopmial with integer coefficients. Suppose x0 = p is a root of f (x) = 0 where p, q Z q an
University of Toronto - CS - a48
CSCA08H/108H Introduction to Computer ProgrammingCathy Jansen Scarborough Campus Diane Horton: Saint George Campus Michael Szamosi Scarborough Campus Michelle Craig Mississauga Campus Steve Engels Saint George Campus1Daniel Zingaro Saint George Campus
University of Toronto - CS - a48
Python Basics11Variables A variable is a name for a value Useful if we need to use that value again and again -we don't have to compute the value after the rst time: give it a name, and just refer to it by nameThe value referred to by a name can ch
University of Toronto - CS - a48
CSCA08/108Week 21AnnouncementsMonday, Sep 20 (Week 2) Last week's lectures are available on the course web site First CodeLab is due tonight: 8 pm We'll take another look at what's involved Discussion board was down over the weekend - don'tknow why;
University of Toronto - CS - a48
AnnouncementsCSCA08/108Week 3 CodeLab (Week 3) is due tonight, 8 p.m. Assignment 1 due Tuesday, Oct 12, 5 p.m. If you haven't read A1, do so right after class! Questions? I have ofce hours 12:30 - 2:00 today,10: 00 - 11:30 tomorrow Midterm 1: Wednesd
University of Toronto - CS - a48
Announcements CSCA08H/108H Week 4 Strings, mutability Reminder: A1 due Tuesday, 5:00 p.m.Sharp.21 2This weekprint and return are not thesame! If the purpose of the function is to provide a value, more with strings loops mutability (huh?) Assignmen
University of Toronto - CS - a48
Announcements CSCA08H/108H Week 5 Strings, mutability Reminder: A1 due Tuesday, 5:00 p.m.Sharp.21 2This weekprint and return are not thesame! If the purpose of the function is to provide a value, more with strings loops mutability (huh?) Assignmen
University of Toronto - CS - a48
Announcements CSCA08H Week 6 more lists A2 coming very soon (today ?)21 2Today:? Questions? collections, lists, indecesQuestions?3344Collections Why can we go through a string in a for loop? It is a collection of characters Sometimes, we want
University of Toronto - CS - a48
CSCA08/108 Week 7 while loops, les,1Announcements A2 due in 18 days! By end of this week you should have nished to Step5 at least!22Get it right!If you don't enter the correct password, you can't proceed:response = raw_input('Enter the password:
University of Toronto - CS - a48
Two new data types this week! tuples: like lists, but safer what's unsafe about lists? - anybody can changethem, as we saw earlier tuples are immutable (just like strings)11Tuples t = (1, 2) r = (1,) s = ('a', 'b', s[0]? s[3]? len(s)? s[0] = 'A'?'
University of Toronto - CS - a48
Testing1Design, Code, Verify! This is what we have been doing all along. As soon as we code something, we should see if it is correct In fact, we design tests before we write code. Why?By stating what we expect to see we state our understanding of wh
University of Toronto - CS - a48
CSCA08H/108H Week 102.5 more weeks of classes! Yikes!1(Object-Oriented Programming)Classes2Using objects You have used many kinds of objects that are built into Python: int, str, list, dict, etc.total = 0 name = Priya # Create a new int object. #
University of Toronto - CS - a48
CSC108H/A08H Week 12 Searching, Searching, .Searching Searching is one of the things computers do verywell How do we know how long it can take to search forsomething? Suppose we look at theget better and better:number of searches necessary to conc
UWO - LINEAR ALG - 1600
Example: Find a matrix that orthogonally diagonalize A, and determine P 1 AP , where A = P 2 1 1 1 2 1 1 1 2 Solution: Find eigenvalues of A; Consider characteristic polynomial 2 1 1 1 2 1 = ( 3)2 1 1 2det (I A) =Hence = 0 and = 3 are eigenvalues of A.
UWO - LINEAR ALG - 1600
Examples: 1. Let p(x) = x2 + 2x + 3, q (x) = 3x + 2. With the inner product < p, q >= a0 b0 + a1 b1 + a2 b2 for p = a0 + a1 x + a2 x2 , q = b0 + b1 x + b2 x2 . Find length of p,q and distance between p and q. Solution: |p| = < p, p > = 1 + 4 + 9 = 14, |q
UWO - LINEAR ALG - 1600
Chapter 3: Euclidean Vector Spaces Section 3.1: Vectors in 2-Space, 3-Space, and n-Space A vector is described by a numerical value with a direction. Representation of vectors: 1. Geometrically: described by initial and terminal points 2. Algebraically: d