Practice Problems - Module 3

Practice Problems - Module 3 - Practice Problems Module 3...

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Practice Problems Module 3 Introduction to Financial Accounting in the 21 st Century © Gaber, Hayes & Porporato 2011 1 Module 3 Practice Problems & Solutions
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Practice Problems Module 3 Introduction to Financial Accounting in the 21 st Century © Gaber, Hayes & Porporato 2011 2 PROBLEM 1 – MULTIPLE CHOICE QUESTIONS 1. In recording transactions, (a) The word debit means to increase and the word credit means to decrease. (b) Assets, expenses, and owners' drawing accounts are debited for increases. (c) Liabilities, revenue, and owners' drawing accounts are debited for increases. (d) Assets, expenses, and owners' capital accounts are debited for increases. (e) None of the above 2. Which of the following combinations of trial balance totals does not indicate a transposition error? (a) $65,470 debit and $64,570 credit (b) $32,540 debit and $35,420 credit (c) $25,670 debit and $26,670 credit (d) $14,517 debit and $15,471 credit 3. Sara had a beginning credit balance of $21,000 in her capital account. At the close of the period, Sara's drawing account had a debit balance of $2,200. On the end-of-period balance sheet, Sara's capital balance is $32,000. If Sara contributed an additional $2,000 to the firm during the period, what is the period's net income? (a) $12,400 (b) $11,200 (c) $9,000 (d) $10,800 4. Which of the following is not true of a general ledger trial balance? A. If it balances, it proves that the total debits equal total credits. B. It facilitates the preparation of financial statements. C. If it balances, it proves that no errors have been made in recording transactions. D. It will not detect an error where the accounts debited and credited are reversed in recording a particular transaction.
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Practice Problems Module 3 Introduction to Financial Accounting in the 21 st Century © Gaber, Hayes & Porporato 2011 3 5. During May, Hal Company invoiced customers $5,000 for goods delivered in May and collected $6,000 from customers. Included in the $6,000 was $500 which was an advance for a sales order which would be filled in June. Hal should report revenue for May of A. $5,000 B. $6,000. C. $4,500. D. $5,500 E. Other 6. The Haul-It Cartage Company purchased a new truck at a cost of $36,000 on July 1, 1996. The truck is estimated to have a useful life of 6 years and Haul-It Cartage Company does not expect to receive anything when it disposes of the truck at the end of 6 years. How much depreciation expense should have been recorded for the truck during the year ended December 31, 1996? A. $3,000. B. $3,500. C. $4,000. D. $6,000. E. Other 7. Apartments-for-Rent Corporation received cash of $7,200 on August 1, 1998 for one year's rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 1998 adjusting entry is A. Debit Rent Revenue and credit Unearned Rent, $3,000 B. Debit Rent Revenue and credit Unearned Rent, $4,200 C. Debit Unearned Rent and credit Rent Revenue, $3,000 D. Debit Cash and credit Unearned Rent, $4,200 E. None of the above 8. During January, Kubbrick Company invoiced customers $10,000 for goods delivered in January and collected $12,000 from customers. Included in the $12,000 was $1,000 which was an advance for a sales order which would be filled in February. Kubbrick should report revenue for January of A. $10,000 B. $12,000 C. $9,000 D. $11,000 E. none of
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Practice Problems - Module 3 - Practice Problems Module 3...

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