Financial Accounting Tools for Business Decision Making 6th Edition Solutions Manual and Test Bank

Solutions Manual and Test Bank Financial Accounting Tools for Business Decision Making 6th Edition   -- $35

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CHAPTER 3 THE ACCOUNTING INFORMATION SYSTEM

MULTIPLE CHOICE QUESTIONS

53. Stockholders’ equity is increased by
a. dividends.
b. revenues.
c. expenses.
d. liabilities.

  SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

54. If total liabilities increased by $5,000, then
a. assets must have decreased by $5,000.
b. stockholders’ equity must have increased by $5,000.
c. assets must have increased by $5,000, or stockholders’ equity must have decreased by $5,000.
d. assets and stockholders’ equity each increased by $2,500.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

55. If total liabilities decreased by $4,000, then
a. stockholders’ equity must have decreased by $4,000.
b. assets must have decreased by $4,000, or stockholders’ equity must have increased by $4,000.
c. assets and stockholders’ equity each increased by $2,000.
d. assets must have increased by $4,000.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

56. Collection of a $600 Accounts Receivable
a. increases an asset $600; decreases an asset $600.
b. increases an asset $600; decreases a liability $600.
c. decreases a liability $600; increases stockholders’ equity $600.
d. decreases an asset $600; decreases a liability $600.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

57. If an individual asset is increased, then
a. there could be an equal decrease in a specific liability.
b. there could be an equal decrease in stockholders’ equity.
c. there could be an equal decrease in another asset.
d. none of these is possible.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

58. If services are rendered on account, then
a. assets will decrease.
b. liabilities will increase.
c. stockholders’ equity will increase.
d. liabilities will decrease.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

59. If services are rendered for cash, then
a. assets will increase.
b. liabilities will increase.
c. stockholders’ equity will decrease.
d. liabilities will decrease.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

60. If expenses are paid in cash, then
a. assets will increase.
b. liabilities will decrease.
c. stockholders’ equity will increase.
d. assets will decrease.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

61. An investment by the stockholders in a business increases
a. assets and stockholders’ equity.
b. assets and liabilities.
c. liabilities and stockholders’ equity.
d. assets only.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

62. The purchase of an asset for cash
a. increases assets and stockholders’ equity.
b. increases assets and liabilities.
c. decreases assets and increases liabilities.
d. leaves total assets unchanged.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

63. The purchase of an asset on credit
a. increases assets and stockholders’ equity.
b. increases assets and liabilities.
c. decreases assets and increases liabilities.
d. leaves total assets unchanged.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

64. The payment of a liability
a. decreases assets and stockholders’ equity.
b. increases assets and decreases liabilities.
c. decreases assets and increases liabilities.
d. decreases assets and liabilities.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

65. The sale of an asset on credit for what it cost
a. increases assets and liabilities.
b. decreases assets and liabilities.
c. leaves total assets unchanged.
d. decreases assets and increases liabilities.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

66. When collection is made on Accounts Receivable,
a. total assets will remain the same.
b. stockholders equity will increase.
c. total assets will increase.
d. total assets will decrease.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

67. A revenue generally
a. increases assets and liabilities.
b. increases assets and stockholders’ equity.
c. increases assets and decreases stockholders’ equity.
d. leaves total assets unchanged.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

68. A paid dividend
a. decreases assets and stockholders’ equity.
b. increases assets and stockholders’ equity.
c. increases assets and decreases stockholders’ equity.
d. decreases assets and increases stockholders’ equity.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

69. Receiving payment of a portion of Accounts Receivable will
a. not affect total assets.
b. increase liabilities.
c. increase stockholders’ equity.
d. decrease net income.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

70. An expense
a. decreases assets and liabilities.
b. decreases stockholders’ equity.
c. leaves stockholders’ equity unchanged.
d. is basically the same as a liability.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

71. Which of the following items has no effect on retained earnings?
a. Expense
b. Dividends
c. Land purchase
d. Revenue

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

72. If a company buys a $700 machine on credit, this transaction will affect the:
a. income statement and retained earnings statement only.
b. income statement only.
c. income statement, retained earnings statement, and balance sheet.
d. balance sheet only.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

73. A payment of a portion of Accounts Payable will
a. not affect total assets.
b. increase liabilities.
c. not affect stockholders’ equity.
d. decrease net income.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

74. Powers Corporation received a cash advance of $500 from a customer. As a result of this event,
a. assets increased by $500.
b. equity increased by $500.
c. liabilities decreased by $500.
d. Both a and b.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

75. Courtney Company purchased equipment for $1,800 cash. As a result of this event,
a. equity decreased by $1,800.
b. assets increased by $1,800.
c. assets remained unchanged.
d. Both a and b.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

76. Comstock Company provided consulting services and billed the client $2,500. As a result of this event
a. assets remained unchanged.
b. assets increased by $2,500.
c. equity increased by $2,500
d. Both b and c.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting


77. Budke Corporation paid dividends of $5,000. As a result of this event,
a. The dividends account was debited for $5,000.
b. The dividends account was credited for $5,000.
c. The cash account was debited for $5,000.
d. Both b and c.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

78. If a company pays dividends of $10,000,
a. Equity will be reduced by $10,000.
b. Net income will be reduced by $10,000.
c. Retained earnings will be reduced by $10,000.
d. Both a and c.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

79. If a company issues common stock for $40,000 and uses $30,000 of the cash to purchase a truck,
a. Assets will be increased by $10,000.
b. Equity will be reduced by $40,000.
c. Assets will be increased by $40,000.
d. Assets will be unchanged.

  SO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

80. Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not?
a. Yes, they are treated as revenue at the time of receipt because the company has access to the cash
b. No, the amount of revenue cannot be adequately determined until the company completes the work.
c. Yes, The intent of the company is to perform the work and the customer is confident that the services will be completed.
d. No, revenue cannot be recognized until the work is performed.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

81. Is the purchase of equipment treated as an expense at the time of purchase? Why or why not?
a. No, GAAP requires that 10% of the cost be expensed each year. This minimizes attempts to mislead financial statement users.
b. Yes, the matching principle requires that the cost be expensed in the period of purchase.
c. No, the cost needs to be allocated to the years of expected use.
d. Yes, the actual life of the asset is not known, thus there is no acceptable way to allocate the cost.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting


82. On March 1, 2012, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not?
a. Yes, the company is now obligated to pay the employee, thus that event must be recorded.
b. No, hiring an employee is an important event; however it is not an economic event that should be recorded.
c. Yes, failure to record the event would cause the financial statements to be misleading.
d. No, the financial position of the company has been changed, however, the dollar amount of the transaction is not yet known.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

83. Howard Company had a transaction that caused a $5,000 increase in both assets and total liabilities. This transaction could have been a(n):
a. Purchase of office equipment for $12,000, paying $7,000 cash and issuing a note payable for the balance.
b. Investment of $5,000 cash in the business by the stockholders.
c. Purchase of office equipment for $5,000 cash.
d. Repayment of a $5,000 bank loan.

  SO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

84. Jamal Company began the year with $64,000 in its Common Stock account and a debit balance in Retained Earnings of $36,000. During the year, the company earned net income of $18,000 and declared and paid $6,000 of dividends. In addition, the company sold additional common stock amounting to $22,000. Based on this information, what should the transaction analysis show for the ending total of all stockholders' equity accounts?
a. $134,000
b. $146,000
c. $62,000
d. $90,000

  SO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

85. Crawford Company started the year with $30,000 in its Common Stock account and a credit balance in Retained Earnings of $12,000. During the year, the company earned net income of $24,000 and declared and paid $10,000 of dividends. In addition, the company sold additional common stock amounting to $14,000. As a result, the amount of its retained earnings at the end of the year would be:
a. $70,000
b. $26,000
c. $56,000
d. $40,000

  SO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting


86. All of the following are characteristics of every accounting information system except:
a. It is a system that collects transaction data.
b. It is a system that processes transaction data.
c. It is a system that communicates financial information to decision makers.
d. It is a system of data storage hardware for the chart of accounts.

  SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Leverage Technology, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Business Applications

87. The left side of an account is
a. blank.
b. a description of the account.
c. the debit side.
d. the balance of the account.

  SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

88. Which one of the following is not a part of an account?
a. Credit side
b. Trial balance
c. Debit side
d. Title

  SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

89. An account is a part of the financial information system and is described by all except which one of the following?
a. An account has a debit and credit side.
b. An account is a source document.
c. An account consists of three parts.
d. An account has a title.

  SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

90. The right side of an account
a. is the correct side.
b. reflects all transactions for the accounting period.
c. shows all the balances of the accounts in the system.
d. is the credit side.

  SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

91. An account consists of
a. a title, a debit balance, and a credit balance.
b. a title, a left side, and a debit balance.
c. a title, a debit side, and a credit side.
d. a title, a right side, and a debit balance.

  SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA


92. A T account is
a. a way of depicting the basic form of an account.
b. a special account used instead of a journal.
c. a special account used instead of a trial balance.
d. used for accounts that have both a debit and credit balance.

  SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

93. Which statement about an account is true?
a. In its simplest form, an account consists of two parts.
b. An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders’ equity items.
c. There are separate account for specific assets and liabilities but only one account for stockholders’ equity items.
d. The left side of an account is the credit or decrease side.

  SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

94. In its simplest form, an account consists of all of the following except
a. right (credit) side
b. account title
c. left side
d. explanation column

  SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

95. A debit to an asset account indicates a(n)
a. error.
b. credit was made to a liability account.
c. decrease in the asset.
d. increase in the asset.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

96. Debits
a. increase both assets and liabilities.
b. decrease both assets and liabilities.
c. increase assets and decrease liabilities.
d. decrease assets and increase liabilities.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

97. The normal balance of any account is the
a. left side.
b. right side.
c. side which increases that account.
d. side which decreases that account.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA


98. The double-entry system requires that each transaction must be recorded
a. in at least two different accounts.
b. in two sets of books.
c. in a journal and in a ledger.
d. first as a revenue and then as an expense.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

99. A credit is not the normal balance for which account listed below?
a. Common Stock account
b. Revenue account
c. Liability account
d. Dividends account

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

100. The classification and normal balance of the Dividends account is
a. revenue with a credit balance.
b. an expense with a debit balance.
c. a liability with a credit balance.
d. stockholders’ equity with a debit balance.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

101. Which of the following describes the classification and normal balance of the Retained Earnings account?
a. Asset, debit
b. Stockholders’ equity, credit
c. Revenues, credit
d. Expense, debit

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

102. Which of the following describes the classification and normal balance of the Unearned Revenue account?
a. Asset, debit
b. Liability, credit
c. Revenues, credit
d. Expense, debit

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

103. A revenue account
a. is increased by debits.
b. is decreased by credits.
c. has a normal balance of a debit.
d. is increased by credits.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA


104. Which one of the following represents the expanded basic accounting equation?
a. Assets = Liabilities + Common Stock + Dividends – Revenue – Expenses
b. Assets + Dividends + Expenses = Liabilities + Common Stock + Revenues
c. Assets – Liabilities – Dividends = Common Stock + Revenues – Expenses
d. Assets = Revenues + Expenses – Liabilities

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

105. Which of the following correctly identifies normal balances of accounts?
a. Assets Debit
Liabilities Credit
Common Stock Credit
Revenues Debit
Expenses Credit

b. Assets Debit
Liabilities Credit
Common Stock Credit
Revenues Credit
Expenses Credit

c. Assets Credit
Liabilities Debit
Common Stock Debit
Revenues Credit
Expenses Debit

d. Assets Debit
Liabilities Credit
Common Stock Credit
Revenues Credit
Expenses Debit

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

106. Which accounts normally have debit balances?
a. Assets, expenses, and revenues.
b. Assets, expense, and retained earnings.
c. Assets, liabilities, and dividends.
d. Assets, expenses, and dividends.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

107. Which accounts normally have credit balances?
a. Revenues, liabilities, and dividends.
b. Revenues, liabilities, and assets.
c. Revenues, liabilities, and retained earnings.
d. Revenues, liabilities, and expenses.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting


108. The best interpretation of the word “credit” is the
a. offset side of an account.
b. increase side of an account.
c. right side of an account.
d. decrease side of an account.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

109. In recording an accounting transaction in a double-entry system
a. the number of debit accounts must equal the number of credit accounts.
b. there must always be entries made on both sides of the accounting equation.
c. the amount of the debits must equal the amount of the credits.
d. there must only be two accounts affected by any transaction.

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

110. A debit is not the normal balance for which account listed below?
a. Dividends
b. Cash
c. Accounts Receivable
d. Service Revenue

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

111. An accountant has debited an asset account for $1,000 and credited a liability account for $500. What can be done to complete the recording of the transaction?
a. Nothing further must be done.
b. Debit a stockholders’ equity account for $500.
c. Debit another asset account for $500.
d. Credit a different asset account for $500.

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

112. An accountant has debited an asset account for $800 and credited a liability account for $600. Which of the following would be an incorrect way to complete the recording of the transaction?
a. Credit an asset account for $200.
b. Credit another liability account for $200.
c. Credit a stockholders’ equity account for $200.
d. Debit a stockholders’ equity account for $200.

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

113. An accountant has debited an asset account for $900 and credited a liability account for $500. What can be done to complete the recording of the transaction?
a Debit a stockholders’ equity account for $400.
b. Debit another asset account for $400.
c. Credit a different asset account for $400.
d. Nothing further must be done.

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA


114. Which of the following accounts is increased with a debit?
a. Dividends
b. Service Revenue
c. Interest payable
d. Common Stock

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

115. Which of the following accounts is increased with a credit?
a. Supplies expense
b. Supplies
c. Sales Revenue
d. Dividends

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

116. Which pair of accounts follows the rules of debit and credit in relation to increases and decreases in the same manner?
a. Dividends Payable and Rent Expense
b. Utilities Expense and Notes Payable
c. Prepaid Insurance and Advertising Expense
d. Service Revenue and Equipment

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

117. Which of the following accounts follows the rules of debit and credit in relation to increases and decreases in the opposite manner?
a. Prepaid Insurance and Dividends
b. Dividends and Interest Revenue
c. Interest Payable and Common Stock
d. Advertising Expense and Land

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

118. Which of the following is not true of the terms debit and credit?
a. They can be abbreviated as Dr. and Cr.
b. They can be interpreted to mean increase and decrease.
c. They can be used to describe the balance of an account.
d. They can be interpreted to mean left and right.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

119. An account will have a credit balance if the
a. credits exceed the debits.
b. first transaction entered was a credit.
c. debits exceed the credits.
d. last transaction entered was a credit.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA


120. For the basic accounting equation to stay in balance, each transaction recorded must
a. affect two or less accounts.
b. affect two or more accounts.
c. always affect exactly two accounts.
d. affect the same number of asset and liability accounts.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

121. Which of the following statements is true?
a. Debits increase assets and increase liabilities.
b. Credits decrease assets and decrease liabilities.
c. Credits decrease assets and increase liabilities.
d. Debits increase liabilities and decrease assets.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

122. Which pair of the listed accounts follows the rules of debits and credits in relation to increases and decreases in the same manner?
a. Salaries and Wages Expense and Notes Payable
b. Common Stock and Rent Expense
c. Prepaid Rent and Advertising Expense
d. Service Revenue and Equipment

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

123. Which pair of the listed accounts follows the rules of debits and credits in relation to increases and decreases in the opposite manner?
a. Salaries and Wages Expense and Notes Payable
b. Common Stock and Unearned Rent Revenue
c. Prepaid Rent and Advertising Expense
d. Service Revenue and Notes Payable

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

124. A company that receives money in advance of performing a service
a. debits Cash and credits Unearned Service Revenue.
b. debits Unearned Service Revenue and credits Accounts Payable
c. debits Cash and credits Prepaid Insurance.
d. debits Cash and credits Accounts Receivable.

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

125. When a company performs a service but has not yet received payment, it
a. debits Service Revenue and credits Accounts Receivable.
b. debits Accounts Receivable and credits Service Revenue.
c. debits Service Revenue and credits Accounts Payable.
d. makes no entry until cash is received.

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA


126. Assets normally show
a. credit balances.
b. debit balances.
c. debit and credit balances.
d. debit or credit balances.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

127. An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?
a. A debit balance in the Dividends account
b. A credit balance in an expense account
c. A credit balance in a liabilities account
d. A credit balance in a revenue account

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

128. If a company has overdrawn its bank balance, then
a. its Cash account will show a debit balance.
b. its Cash account will show a credit balance.
c. the Cash account debits will exceed the cash account credits.
d. it cannot be detected by observing the balance of the Cash account.

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

129. Which account below is not a subdivision of stockholders’ equity?
a. Dividends
b. Revenues
c. Expenses
d. Liabilities

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

130. When a corporation distributes a dividend the
a. most common form of distribution is a cash dividend.
b. Dividends account will be increased with a credit.
c. Retained Earnings account will be directly increased with a debit.
d. Dividends account will be decreased with a debit.

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics

131. The Dividends account
a. appears on the income statement along with the expenses of the business.
b. must show transactions every accounting period.
c. is increased with debits and decreased with credits.
d. is not a proper subdivision of stockholders’ equity.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting


132. A revenue account
a. is increased with a debit.
b. is decreased with a credit.
c. is increased with a credit.
d. has a normal balance of a debit.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

133. Which of the following statements is not true?
a. Expenses increase stockholders’ equity.
b. Expenses have normal debit balances.
c. Expenses decrease stockholders’ equity.
d. Expenses are a negative factor in the computation of net income.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

134. A credit to a liability account
a. indicates an increase in the amount owed to creditors.
b. indicates a decrease in the amount owed to creditors.
c. is an error.
d. must be accompanied by a debit to an asset account.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

135. In the first month of operations, the total of the debit entries to the Cash account amounted to $1,400 and the total of the credit entries to the Cash account amounted to $600. The Cash account has a
a. $600 credit balance.
b. $1,400 debit balance.
c. $800 debit balance.
d. $800 credit balance.

  SO: 3, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

136. In the first month of operations, the total of the debit entries to the Cash account amounted to $1,200 and the total of the credit entries to the Cash account amounted to $800. The Cash account has a
a. $800 credit balance.
b. $400 debit balance.
c. $1,200 debit balance.
d. $400 credit balance.

  SO: 3, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

137. In the first month of operations, the total of the debit entries to the Cash account amounted to $1,000 and the total of the credit entries to the Cash account amounted to $400. The Cash account has a
a. $400 credit balance.
b. $1,000 debit balance.
c. $600 debit balance.
d. $400 credit balance.

  SO: 3, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting


138. The Cash account has a credit balance. Which statement is true?
a. This is the normal balance for cash.
b. An error has occurred and must be corrected before financial statements can be prepared.
c. The account needs to be analyzed to determine the reason for the credit balance.
d. Debit postings exceed the credit postings for the accounting period.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

139. Which statement is incorrect?
a. Dividends represent a distribution by a corporation to its stockholders.
b. Dividends are shown on the income statement.
c. Dividends reduce stockholders’ equity, thus the Dividends account increases on the left side.
d. The Dividends account has a normal debit balance.

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

140. Why are expenses increased with a debit?
a. They are always paid by cash, which is credited. Thus expenses are debited.
b. They decrease stockholders’ equity thus they increase with a debit.
c. They have the same rules of debits and credits as the retained earnings account.
d. None of the statements are correct.

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics

141. Barnes Company showed the following balances at the end of its first year:
Cash $11,000
Prepaid insurance 700
Accounts receivable 3,500
Accounts payable 2,800
Notes payable 4,200
Common stock 5,400
Dividends 700
Revenues 21,000
Expenses 17,500

What did Barnes Company show as total credits on its trial balance?
a. $34,100
b. $33,400
c. $32,700
d. $34,800

  SO: 3, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA


142. Winrow Company showed the following balances at the end of its first year:
Cash $9,000
Prepaid insurance 500
Accounts receivable 2,500
Accounts payable 2,000
Notes payable 3,000
Common stock 5,000
Dividends 500
Revenues 15,000
Expenses 12,500

What did Winrow Company show as total credits on its trial balance?
a. $25,500
b. $25,000
c. $24,500
d. $26,000

  SO: 3, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

143. During January 2012, its first month of operation, Osborn Enterprises earned net income of $1,900 and paid dividends to the owners of $500. At January 31, the balance in Retained Earnings will be
a. $0
b. $1,900 credit
c. $1,400 credit
d. $500 debit

  SO: 3, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

144. On June 1, 2012, England Inc. reported a cash balance of $18,000. During June, England made deposits of $8,000 and made disbursements totaling $24,000. What is the cash balance at the end of June?
a. $2,000 credit balance.
b. $26,000 debit balance.
c. $2,000 debit balance.
d. $6,000 credit balance.

  SO: 3, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

145. At January 1, 2012, Troyer Industries reported Retained Earnings of $260,000. During 2012, Troyer had a net loss of $60,000 and paid dividends to the stockholders of $40,000. At December 31, 2012, the balance in Retained Earnings is
a. $260,000 debit
b. $280,000 credit
c. $200,000 debit
d. $160,000 credit

  SO: 3, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting


146. During January 2012, Carey Services Inc. paid a cash dividends of $2,000. This transaction
a. reduces stockholders' equity by $2,000.
b. increases stockholders' equity by $2,000.
c. reduces net income by $2,000.
d. increases expenses by $2,000.

  SO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

147. During February 2012, its first month of operations, the owner of Schwenn Enterprises invested cash of $50,000. Schwenn had cash sales of $8,000 and paid expenses of $14,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28?
a. $6,000 credit
b. $44,000 debit
c. $58,000 debit
d. $36,000 credit

  SO: 3, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

148. At September 1, 2012, Kern Enterprises reported a cash balance of $90,000. During the month, Kern collected cash of $30,000 and made disbursements of $50,000. At September 30, 2012, the cash balance is
a. $50,000 credit
b. $70,000 credit
c. $120,000 debit
d. $70,000 debit

  SO: 3, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

149. All of the following statements regarding the double-entry system are true except:
a. A two-sided effect of each transaction is recorded in appropriate accounts when using the double-entry system.
b. The double-entry system provides a logical method for recording transactions.
c. Both sides of the accounting equation must be affected when recording a transaction using the double-entry system.
d. When using the double-entry system, the sum of all debits to the accounts must equal the sum of all credits.

  SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Applications

150. Which of the following accounts has a normal debit balance?
a. Accounts Payable
b. Prepaid Rent
c. Retained Earnings
d. Common Stock

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting


151. Which of the following accounts has a normal credit balance?
a. Prepaid Rent
b. Notes Receivable
c. Rent Revenue
d. Rent Expense

  SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

152. During 2012, its first year of operations, Jane's Bakery had revenues of $60,000 and expenses of $33,000. The business paid cash dividends of $18,000. What is the balance in Retained Earnings at December 31, 2012?
a. $0.
b. $18,000 debit.
c. $9,000 credit.
d. $27,000 credit.

  SO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

153. At January 31, 2012, the balance in Goebel Inc.'s supplies account was $500. During February. Goebel purchased supplies of $600 and used supplies of $800. At the end of February, the balance in the Supplies account should be
a. $500 debit.
b. $700 credit.
c. $1,900 debit.
d. $300 debit

  SO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

154. At December 1, 2012, Orear Company's Accounts Receivable balance was $3,600. During December, Orear had credit sales of $15,000 and collected accounts receivable of $12,000. At December 31, 2012, the Accounts Receivable balance is
a. $3,600 debit
b. $6,600 debit
c. $18,400 debit
d. $6,600 credit

  SO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

155. At October 1, 2012, Metz Industries had an Accounts Payable balance of $60,000. During the month, the company made purchases on account of $50,000 and made payments on account of $80,000. At October 31, 2012, the Accounts Payable balance is
a. $60,000 debit
b. $20,000 credit
c. $30,000 credit
d. $80,000 credit

  SO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting


156. At September 1, 2012, Baxter Inc. reported Retained Earnings of $272,000. During the month, Baxter generated revenues of $40,000, incurred expenses of $24,000, purchased equipment for $10,000 and paid dividends of $4,000. What is the balance in Retained Earnings at September 30, 2012?
a. $272,000 debit
b. $16,000 credit
c. $274,000 credit
d. $284,000 credit

  SO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

157. The usual sequence of steps in the transaction recording process is:
a. journalize analyze post to the ledger.
b. analyze journalize post to the ledger.
c. journalize post to the ledger analyze.
d. post to the ledger journalize analyze.

  SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Applications

158. In recording accounting transactions, evidence that a transaction has taken place is obtained from
a. source documents.
b. the Internal Revenue Service.
c. the public relations department.
d. the Securities and Exchange Commission.

  SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

159. After a business transaction has been analyzed and entered in the book of original entry, the next step in the recording process is to transfer the information to
a. the company's bank.
b. stockholders’ equity.
c. ledger accounts.
d. financial statements.

  SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Applications

160. The first step in the recording process is to
a. prepare financial statements.
b. analyze the transaction in terms of its effect on the accounts.
c. post to a journal.
d. prepare a trial balance.

  SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Applications

161. Which of the following is not part of the recording process?
a. Analyzing transactions.
b. Preparing a trial balance.
c. Entering transactions in a journal.
d. Posting journal entries.

  SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Applications


162. Evidence that would not help with determining the effects of a transaction on the accounts would be a(n)
a. cash register sales tape.
b. bill.
c. advertising brochure.
d. check.

  SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Applications

163. After transaction information has been recorded in the journal, it is transferred to the
a. trial balance.
b. income statement.
c. general journal.
d. ledger.

  SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Applications

164. The usual sequence of steps in the recording process is to
a. analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts.
b. analyze each transaction, enter the transaction in the ledger, and transfer the information to the journal.
c. analyze each transaction, enter the transaction in the book of accounts, and transfer the information to the journal.
d. analyze each transaction, enter the transaction in the book of original entry, and transfer the information to the journal.

  SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

165. The final step in the recording process is to transfer the journal information to the
a. trial balance.
b. financial statements.
c. ledger.
d. file cabinets.

  SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

166. The recording process occurs
a. once a year.
b. once a month.
c. repeatedly during the accounting period.
d. infrequently in a manual accounting system.

  SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

167. Which of the following is not an example of a source document that provides evidence of a transaction?
a. A cancelled check.
b. A sales slip.
c. A trial balance.
d. A cash register tape.

  SO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA


168. All of the following are significant contributions that the journal makes to the recording process except:
a. The journal discloses the complete effect of a transaction in one place.
b. The journal helps prevent or locate errors because debits and credits can be readily compared.
c. The journal keeps complete information about changes in a specific account balance in one place.
d. The journal provides a chronological record of transactions.

  SO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

169. A journal provides
a. the balances for each account.
b. information about a transaction in several different places.
c. a list of all accounts used in the business.
d. a chronological record of transactions.

  SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

170. The basic format of a journal would not include a(n)
a. brief explanation.
b. account title column.
c. T account.
d. date column.

  SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

171. Transactions in a journal are initially recorded in
a. account number order.
b. dollar amount order.
c. alphabetical order.
d. chronological order.

  SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

172. A journal is not useful for
a. disclosing in one place the complete effect of a transaction.
b. preparing financial statements.
c. providing a record of transactions.
d. locating and preventing errors.

  SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

173. A complete journal entry does not show
a. the date of the transaction.
b. the new balance in the accounts affected by the transaction.
c. a brief explanation of the transaction.
d. the accounts and amounts to be debited and credited.

  SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA


174. The name given to entering transaction data in the journal is
a. chronicling.
b. listing.
c. posting.
d. journalizing.

  SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

175. The basic form of a journal entry has the
a. debit account entered first and indented.
b. credit account entered first and indented.
c. debit account entered first at the extreme left margin.
d. credit account entered first at the extreme left margin.

  SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

176. Which of the following journal entries is recorded correctly and in the basic format?
a. Salaries/Wages Expense 550
Cash 1,500
Advertising Expense 950

b. Salaries/Wages Expense 550
Advertising Expense 950
Cash 1,600

c. Cash 1,500
Salaries/Wages Expense 550
Advertising Expense 950

d. Salaries/Wages Expense 550
Advertising Expense 950
Cash . 1,500

  SO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

177. When a company has performed a service but has not yet received payment, it
a. debits accounts receivable and credits revenue from services.
b. debits revenue from services and credits accounts receivable.
c. debits revenue from services and credits accounts payable.
d. makes no entry until the cash is received.

  SO: 5, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

178. A company that receives money in advance of performing a service
a. debits cash and credits prepaid fees.
b. debits unearned fees and credits accounts payable.
c. debits cash and credits unearned fees.
d. debits cash and credits accounts receivable.

  SO: 5, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA


179. When a company receives a utility bill but will not pay it right away, it should
a. debit Utilities Expense and credit Accounts Receivable.
b. debit Utilities Expense and credit Accounts Payable.
c. debit Accounts Payable and credit Utilities Expense.
d. make no entry until the bill is paid.

  SO: 5, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

180. When a service has been performed, but no cash has been received, which of the following statements is true?
a. No journal entry is made.
b. The entry includes a debit to accounts payable.
c. The entry includes a credit to unearned revenue.
d. The entry includes a debit to accounts receivable.

  SO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

181. Equipment costing $20,000 machine is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a
a. credit to Notes Payable.
b. debit to Cash.
c. credit to Notes Receivable.
d. credit to Equipment.

  SO: 5, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

182. Equipment costing $20,000 is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a
a. debit to Notes Payable.
b. credit to Cash.
c. credit to Notes Receivable.
d. credit to Equipment.

  SO: 5, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

183. An accounting record that includes a list of accounts and their balances at a given time is called a
a. trial balance.
b. general journal.
c. general ledger.
d. chart of accounts.

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

184. Typically the chart of accounts begins with
a. asset accounts.
b. liability accounts.
c. revenue accounts.
d. expense accounts.

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting


185. The purpose of the ledger is to
a. record chronologically the day’s transactions.
b. keep a record of documentation to support each transaction.
c. keep in one place all information about changes in specific account balances.
d. make sure that all assets, liabilities, etc., have normal balances at all times.

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

186. Which of the following accounts probably would be listed before the others in a chart of accounts?
a. Accumulated Depreciation—Buildings
b. Insurance Expense
c. Dividends
d. Notes Payable

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

187. Which of the following accounts probably would be listed after the others in a chart of accounts?
a. Accumulated Depreciation—Buildings
b. Insurance Expense
c. Dividends
d. Notes Payable

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

188. The Unearned Service Revenue account is classified as a(n)
a. asset.
b. revenue.
c. expense.
d. liability.

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

189. A ledger:
a. contains only asset and liability accounts.
b. is a collection of the entire group of accounts maintained by a company.
c. provides a chronological record of transactions.
d. should show accounts in alphabetical order.

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

190. Which of the following is an asset?
a. Service Revenue
b. Notes Payable
c. Supplies Expense
d. Prepaid Rent

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting


191. A person who wants to determine the balance of a particular account should refer to the
a. ledger.
b. source document.
c. chart of accounts.
d. journal.

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

192. A journal:
a. contains only asset and liability accounts.
b. is a collection of the entire group of accounts maintained by a company.
c. provides a chronological record of transactions.
d. should show accounts in alphabetical order.

  SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

193. The usual ordering of accounts in the general ledger is
a. assets, liabilities, stockholders’ equity, revenues, and expenses.
b. assets, liabilities, stockholders’ equity, expenses, and revenues.
c. liabilities, assets, stockholders’ equity, revenues, and expenses.
d. stockholders’ equity, assets, liabilities, expenses, and revenues.

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

194. Management could determine the amounts due from customers by examining which ledger account?
a. Service Revenue
b. Accounts Payable
c. Accounts Receivable
d. Supplies

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

195. The ledger accounts should be arranged in
a. chronological order.
b. alphabetical order.
c. financial statement order.
d. order of appearance in the journal.

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

196. Which statement is incorrect?
a. A chart of accounts is a listing of accounts used by a business.
b. New accounts can be added to the chart of accounts.
c. Stockholders’ Equity is an account that is included in the chart of accounts.
d. Account titles for the chart of accounts are used in general journal entries.

  SO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting


197. The procedure of transferring journal entries to the ledger accounts is called
a. journalizing.
b. analyzing.
c. reporting.
d. posting.

  SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

198. A chart of accounts for a business firm
a. is a graph.
b. indicates the amount of profit or loss for the period.
c. lists the accounts in the ledger.
d. shows the balance of each account in the general ledger.

  SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

199. Posting
a. should be performed in account number order.
b. accumulates the effects of journalized transactions in the individual accounts.
c. involves transferring all debits and credits on a journal page to the trial balance.
d. is accomplished by examining ledger accounts and seeing which ones need updating.

  SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

200. The principal purpose of posting is to
a. help identify errors made in the journal.
b. accumulate the effects of journalized transactions in the individual accounts.
c. enter transactions directly into the ledger.
d. help determine if the financial statements are ready to be prepared.

  SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

201. Posting is performed by transferring information from the
a. source documents to the journal.
b. ledger to the journal.
c. source documents to the ledger.
d. journal to the ledger.

  SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

202. Posting:
a. transfers journal entries to ledger accounts.
b. transfers ledger transaction data to the journal.
c. involves transferring all debits and credits on a journal page to the trial balance.
d. provides a chronological record of transactions.

  SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

203. Posting
a. transfers ledger transaction data to the journal.
b. normally occurs before journalizing.
c. accumulates the effects of journalized transactions in the individual accounts.
d. enters transaction data in the journal.

  SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

204. A list of accounts and their balances at a given time is called a(n)
a. journal.
b. posting.
c. trial balance.
d. income statement.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

205. On January 14, Decker industries purchased supplies of $500 on account. The entry to record the purchase will include.
a. a debit to Supplies and a credit to Accounts Payable.
b. a debit to Supplies expense and a credit to Accounts Receivable.
c. a debit to Supplies and a credit to Cash.
d. a debit to Accounts Receivable and a credit to Supplies.

  SO: 7, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

206. On July 7, 2012, Shireman Enterprises received cash $1,400 for services rendered. The entry to record this transaction will include:
a. a debit to Service Revenue of $1,400.
b. a credit to Accounts Receivable of $1,400.
c. a debit to Cash of $1,400
d. a credit to Accounts Payable of $1,400.

  SO: 7, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

207. The primary purpose of the trial balance is to:
a. disclose the complete effect of a transaction in one place.
b. make sure a journal entry is not posted twice.
c. transfer journal entries to the ledger accounts.
d. prove the equality of the debit and credit amounts after posting.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

208. The accountant for Mega Stores, Inc. should have recorded the following correct entry:
Jan 15 Notes Receivable 243
Equipment 243
Instead, he misunderstood the transaction and recorded an incorrect entry. Which of the following wrong entries pertaining to this transaction could have been detected as erroneous when using a trial balance?
a. Jan 15 Notes Payable 243
Cash 243
b. Jan 15 Notes Receivable 234
Equipment 234
c. Jan 15 Equipment 243
Notes Receivable 243
d. Jan 15 Notes Receivable 243
Equipment 234

  SO: 8, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA


209. If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates
a. no errors have been made.
b. no errors can be discovered.
c. that all accounts reflect correct balances.
d. the mathematical equality of the accounting equation.

  SO: 8, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

210. A trial balance is a listing of
a. transactions in a journal.
b. the chart of accounts.
c. general ledger accounts and balances.
d. the totals from the journal pages.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

211. Customarily, a trial balance is prepared
a. at the end of each day.
b. after each journal entry is posted.
c. at the end of an accounting period.
d. only at the inception of the business.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

212. A trial balance would only help in detecting which one of the following errors?
a. A transaction that is not journalized
b. A journal entry that is posted twice
c. Offsetting errors made in recording the transaction
d. A transposition error when transferring the debit side of journal entry to the ledger

  SO: 8, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

213. A trial balance proves
a. the mathematical equality of debits and credits after the posting process.
b. the ledger is posted correctly.
c. that all transactions have been recorded correctly.
d. that all transactions have been posted.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

214. A trial balance
a. is a list of accounts with their balances at a given point in time.
b. will not balance if a correct journal entry is posted twice.
c. will tell you if a transaction is not posted at all.
d. proves the factual accuracy of journalized transactions.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting


215. A trial balance will not balance if
a. a correcting journal entry is posted twice.
b. a $50 cash dividend is debited to dividends for $500 and credit to cash for $50.
c. a $300 payment on accounts payable is debited to accounts payable for $30 and credited to cash for $30.
d. a transaction is not posted at all.

  SO: 8, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

216. If the totals of a trial balance are not equal, it could be due to
a. a failure to record a transaction or to post a transaction.
b. recording the same erroneous amount for both the debit and the credit parts of a transaction.
c. an error in calculating the account balances.
d. recording the transaction more than once.

  SO: 8, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

217. Which of the following errors, each considered individually, would cause the trial balance to be out of balance?
a. A payment of $148 to a creditor was posted as a debit to Accounts Payable and a debit of $148 to Cash.
b. Cash of $530 received from a customer on account was posted as a debit of $350 to Cash and as a credit of $350 to Accounts Payable.
c. A payment of $59 for supplies was posted as a debit of $95 to Supplies and a credit of $95 to Cash.
d. A transaction was not posted.

  SO: 8, Bloom: AN, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

218. The sum of the debit account balances equals the sum of the credit account balances in the trial balance. This indicates that
a. the ledger accounts are error free.
b. the ledger accounts are in balance.
c. it is time to prepare the financial statements.
d. all transactions of the accounting period have been posted.

  SO: 8, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting



BRIEF EXERCISES
Be. 219
Presented here are five economic events. For each item, indicate whether the event increased (+), decreased (–), or had no effect (NE) on assets, liabilities, and stockholders’ equity.

Stockholders’
Assets = Liabilities +      Equity
1. Received cash for services rendered.
2. Purchased supplies on account.
3. Paid employees' salaries.
4. Dividends paid in cash.
5. Expenses paid in cash.

Ans: N/A, SO: 1, Bloom: C, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting



Be. 220
At June 1, 2012, Massoth Industries had an Accounts Receivable balance of $15,000. During the month, the company had credit sales of $25,000 and collected Accounts Receivable of $27,000. What is the balance in Accounts Receivable at June 30, 2012?

Ans: N/A, SO: 2, Bloom: C, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Be. 221
For each item below, indicate whether a debit or credit applies.

1. Increase in Accounts Payable ____ __
2. Increase in Accounts Receivable ____ __
3. Increase in Retained Earnings ____ __
4. Decrease in Unearned Service Revenue ____ __
5. Decrease in Interest Payable ____ __

Ans: N/A, SO: 3, Bloom: K, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA


Be. 222
For each of the following accounts indicate the effect of a debit or a credit on the account and the normal balance. Increase (+), Decrease (–).

  Debit   _Credit_ Normal Balance
1. Salaries and Wages Expense.
2. Accounts Receivable.
3. Service Revenue.
4. Dividends
5. Retained Earnings.

Ans: N/A, SO: 3, Bloom: K, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting


Be. 223
Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transaction.

1. Owner invested $50,000 in exchange for common stock of the corporation.
2. Hires an employee to be paid $400 per week, starting tomorrow.
3. Paid two years’ rent in advance, $7,200.
4. Paid the worker’s weekly wage.
5. Recorded service revenue earned and received for the week, $1,500.

Ans: N/A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Be 224
Prepare a corrected trial balance for Shafer Company. All accounts should have a normal balance
Shafer Corporation
Trial Balance
For the Quarter Ended March 31, 2012
    Debit   Credit
Cash $28,000
Accounts Receivable $30,000
Prepaid Insurance 2,500
Equipment 60,000
Accounts Payable 15,000
Unearned Service Revenue 10,000
Notes Payable 20,000
Common Stock 30,000
Retained Earnings 27,000
Dividends  1,500
Service Revenue 50,000
Salaries and Wages Expense 15,000
Utilities Expense 5,000
Rent Expense 10,000
$157,500 $146,500





















Ans: N/A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Be. 225
For each of the following transactions of Woods Inc., identify the account to be debited and the account to be credited.

1. Purchased 18-month insurance policy for cash.
2. Paid weekly payroll.
3. Purchased supplies on account.
4. Received utility bill to be paid at later date.

Ans: N/A, SO: 5, Bloom: C, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Be. 226
Identify the impact on the accounting equation of the following transactions.

1. Purchased 24-month insurance policy for cash.
2. Purchased supplies on account.
3. Received utility bill to be paid at later date.
4. Paid utility bill previously accrued.

Ans: N/A, SO: 1, Bloom: C, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA


Be. 227
The transactions of the Stormont Store are recorded in the general journal below. You are to post the journal entries to T accounts and compute the August 31 balances.

General Journal

Date Account Titles and Explanation Debit Credit

2012
Aug. 5 Accounts Receivable 2,800
Service Revenue 2,800
10 Cash 3,000
Service Revenue 3,000
19 Rent Expense 1,000
Cash 1,000
25 Cash 1,400
Accounts Receivable 1,400

Be. 227 (Cont.)
General Ledger

Cash Accounts Receivable








Service Revenue Rent Expense







Ans: N/A, SO: 7, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Be. 228
Prepare a trial balance from the ledger accounts of Swisher Company as of January 31, 2012.

Accounts Payable 1,500 Rent Expense $ 500
Accounts Receivable 2,000 Service Revenue 3,000
Cash 1,600 Supplies   200
Common Stock 2,200 Salaries/Wages Expense 1,000
Dividends 1,400

Ans: N/A, SO: 8, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting



Exercises
Ex. 229
Selected transactions for the Sleezer Company are listed below. List the number of the transaction and then describe the effect of each transaction on assets, liabilities, and stockholders’ equity.

Sample:  Made initial cash investment in the business.
The answer would be—Increase in assets and increase in stockholders’ equity.

1. Paid monthly utility bill.
2. Purchased new display case for cash.
3. Paid cash for repair work on security system.
4. Billed customers for services performed.
5. Received cash from customers billed in transaction 4.
6. Dividends paid to owners.
7. Incurred advertising expenses on account.
8. Paid monthly rent.
9. Received cash from customers when service was rendered.

Ans: N/A, SO: 1, Bloom: C, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA


Ex. 230
Selected accounts from the ledger of McDaniel Corporation appear below. For each account, indicate the following:

(a) In the first column at the right, indicate the nature of each account, using the following abbreviations:

Asset - A Liability - L None of the above - N
Expense - E Revenues - R

(b) In the second column, indicate the normal balance by inserting Dr. or Cr.

Type of Normal
Account Balance
1. Supplies ………………………………..
2. Notes Payable ………………………….
3. Service Revenue……………………….
4. Dividends……………………………….
5. Accounts Payable……………………..
6. Salaries and Wages Expense………………………
7. Common Stock…………………………
8. Accounts Receivable…………………..
9. Equipment……………………………..
10. Notes Receivable………………………

Ans: N/A, SO: 3, Bloom: K, Difficulty: Medium, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

Ex. 231
Analyze the transactions of a business organized as a corporation described below and indicate their effect on the basic accounting equation. Use a plus sign (+) to indicate an increase and a minus sign (–) to indicate a decrease.
Stockholders’
Assets = Liabilities +      Equity
1. Received cash for services rendered.
2. Purchased office equipment on credit.
3. Paid employees' salaries.
4. Received cash from customer in payment
on account.
5. Paid telephone bill for the month.
6. Paid for office equipment purchased in
transaction 2.
7. Purchased office supplies on credit.
8. Dividends were paid.
9. Obtained a loan from the bank.
10. Billed customers for services rendered.

Ans: N/A, SO: 1, Bloom: C, Difficulty: Medium, Min: 10, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting


Ex. 232
Sara Obermeyer decides to open a pizza parlor near the local college campus that will operate as a corporation. Analyze the following transactions for the month of June in terms of their effect on the basic accounting equation. Record each transaction by increasing (+) or decreasing (–) the dollar amount of each item affected. Indicate the new balance of each item after a transaction is recorded. It is not necessary to identify the cause of changes in stockholders’ equity.
Transactions
(1) Sara Obermeyer invests $25,000 cash in exchange for common stock to start a pizza parlor business on June 1.
(2) Purchased equipment for $4,000 paying $2,000 in cash and the remainder due in 30 days.
(3) Purchased supplies for $1,200 cash.
(4) Received a bill from Campus News for $200 for advertising in the campus newspaper.
(5) Cash receipts from customers for pizza sales amounted to $1,500.
(6) Paid salaries of $200 to student workers.
(7) Billed the Tiger Football Team $300 for pizzas ordered.
(8) Paid $200 to Campus News for advertising that was previously billed in Transaction 4.
(9) Sara Obermeyer was paid dividends of $1,000.
(10) Incurred utility expenses for month on account, $100.

Trans- Accounts Accounts Common Retained
action Cash + Receivable + Supplies + Equipment = Payable + Stock + Earnings
(1)

Balance
(2)

Balance
(3)

Balance
(4)

Balance
(5)

Balance
(6)

Balance
(7)

Balance
(8)

Balance
(9)

Balance
(10)

Totals


Ans: N/A, SO: 1, Bloom: AP, Difficulty: Medium, Min: 20, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA


Ex. 233
Analyze the following transactions in terms of their effect on the basic accounting equation. Record each transaction by increasing (+) or decreasing (–) the dollar amount of each item affected. Indicate the new balance of each item after a transaction is recorded.

(1) Issued stock to investors for $20,000 in cash.
(2) Purchased supplies on credit for $700.
(3) Billed customers $1,000 for services provided.
(4) Paid for supplies purchased in transaction 2.
(5) Paid dividends of $300 cash to stockholders.
(6) Received half from customers billed in transaction 3.
(7) Received and paid utility bill for $50.

Trans- Accounts Accounts Common Retained
action Cash + Receivable + Supplies = Payable + Stock + Earnings
(1)

Balance
(2)

Balance
(3)

Balance
(4)

Balance
(5)

Balance
(6)

Balance
(7)

Totals


Ans: N/A, SO: 1, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA




Ex. 234
A tabular analysis of the transactions made during August 2012 by Mazzone Company during its first month of operations is shown below. Each increase and decrease in stockholders' equity is explained.

                                   Assets =         Liab.+                 Stockholders' Equity
Retained Earnings
Cash + A/R + Supp. + Equip = Accts Pay Com. Stock + Rev. - Exp. - Div.
1. +$30,000 +$30,000 Com. Stock
2.     –1,000 +$5,000 +$4,000
3.        –750 +$750
4.     +2,400 +$6,900 +9,300 Serv. Exp.
5.     –1,500 – 1,500
6.     –3,000 –3,000 Div.
7.        –800   –800 Rent Exp.
8.        +450     –450
9.     –4,000 –4,000 Sal. Exp.
10. +500   –500 Util. Exp.

Instructions
(a) Determine how much stockholders' equity increased for the month.
(b) Compute the net income for the month.

Ans: N/A, SO: 1, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting




Ex. 235
The tabular analysis of transactions for Baxter Company is presented below.

                                   Assets =         Liab. +                 Stockholders' Equity
                 Retained Earnings
Accts
Cash + A/R + Supp. + Equip. = Payable + C/S + Rev. - Exp. - Div.
1. +$30,000 +$30,000 Com. stock
2.     –1,000 +$11,000 +$10,000
3.        –950 +$950
4.     +2,400 +$6,900 +9,300 Serv. Exp.
5.     –1,500  –1,500
6.     –3,000 –3,000 Div.
7.        –800   –800 Rent Exp.
8.        +450     –450
9.     –4,000 –4,000 Sal. Exp.
   10.     +500   –500 Util. Exp.

Instructions
Prepare a retained earnings statement for August and a classified balance sheet at August 31, 2012.

Ans: N/A, SO: 1, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting


Ex. 236
The accounts in the ledger of Dependable Delivery Service contain the following balances on July 31, 2012.

Accounts Receivable $11,400 Prepaid Insurance $  1,800
Accounts Payable 7,400 Maintenance/Repairs Expense 1,200
Cash 17,940 Service Revenue 15,500
Equipment 59,360 Dividends 800
Gasoline Expense 950 Common Stock 40,000
Insurance Expense 600 Salaries and Wages Expense 6,400
Notes Payable, due 2015 31,450 Salaries and Wages Payable 900
Retained Earnings 5,200
  (July 1, 2012)

Instructions
Prepare an income statement, a retained earnings statement, and a classified balance sheet for the month of July 2012.

Ans: N/A, SO: 1, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting


Ex. 237
Selected transactions for Stockton Corporation during its first month in business are presented below:

Sept. 1 Issued common stock in exchange for $25,000 cash received from investors.
5 Purchased equipment for $20,000, paying $2,000 in cash and the balance on account.
25 Paid $6,000 cash on balance owed for equipment.
30 Paid $1,000 cash dividend.

Stockton's chart of accounts shows: Cash, Equipment, Accounts Payable, Common Stock, and Dividends.

Instructions
(a) Prepare a tabular analysis of the September transactions. The column headings should be: Cash + Equipment = Accounts Payable + Stockholders' Equity. For transactions affecting stockholders' equity, provide explanations in the right margin.
(b) Journalize the transactions. Do not provide explanations.
(c) Post the transactions to T accounts.

Ans: N/A, SO: 1, 5, 7, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting


Ex. 238
For each item below, indicate whether a debit or credit applies.

1. Decrease in Notes Payable ____ __
2. Increase in Dividends ____ __
3. Increase in Common Stock ____ __
4. Increase in Unearned Rent Revenue ____ __
5. Decrease in Interest Payable ____ __
6. Increase in Prepaid Insurance ____ __
7. Decrease in Salaries Wages Expense ____ __
8. Decrease in Supplies ____ __
9. Increase in Revenues ____ __
10. Decrease in Accounts Receivable ____ __

Ans: N/A, SO: 3, Bloom: K, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA



Ex. 239
For each item below, indicate whether a debit or credit applies.

1. Decrease in Prepaid Rent ____ __
2. Increase in Service Revenue ____ __
3. Decrease in Unearned Rent Revenue ____ __
4. Increase in Dividends ____ __
5. Decrease in Interest Receivable ____ __
6. Increase in Depreciation Expense ____ __
7. Decrease in Accounts Payable ____ __
8. Increase in Supplies ____ __
9. Increase in Salaries/Wages Expense ____ __
10. Decrease in Accounts Receivable ____ __

Ans: N/A, SO: 3, Bloom: K, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA


Ex. 240
The chart of accounts used by Norton Printing Company is listed below. You are to indicate the proper accounts to be debited and credited for the following transactions by writing the account number(s) in the appropriate boxes.

CHART OF ACCOUNTS

1 Cash 8 Common Stock
2 Accounts Receivable 9 Retained Earnings
3 Supplies 10 Dividends
4 Equipment 11 Service Revenue
5 Accounts Payable 12 Advertising Expense
6 Notes Payable 13 Rent Expense
7 Unearned Service Revenue


Number(s) Number(s)
of account(s) of account(s)
debited credited
1. Stockholders invest $90,000 cash to start the business.


2. Purchased three digital copy machines for $400,000, paying $100,000 cash and signing a 5-year, 6% note for the remainder.


3. Purchased $5,000 paper supplies on credit.


4. Cash received for photocopy services amounted to $7,000.


5. Paid $500 cash for radio advertising.


6. Paid $800 on account for paper supplies purchased in transaction 3.


7. Dividends of $1,500 were paid to stockholders.


8. Paid $1,200 cash for rent for the current month.


9. Received $2,000 cash advance from a customer for future copying.


10. Billed a customer for $450 for photocopy services completed.


Ans: N/A, SO: 3, Bloom: C, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA



Ex. 241
Under a double-entry system, show how the entry in each statement is entered in the ledger by using debit or credit to indicate the increase or decrease in the affected account.

       Debit or Credit

1. An increase in Salaries and Wages Expense.

2. An increase in Accounts Payable.

3. An increase in Prepaid Insurance.

4. An increase in Common Stock.

5. A increase in Supplies.

6. An increase in Dividends.

7. An increase in Service Revenue.

8. A decrease in Accounts Receivable.

9. An increase in Rent Expense.

10. A decrease in Equipment.

Ans: N/A, SO: 3, Bloom: K, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Ex. 242
For the accounts listed below, indicate if the normal balance of the account is a debit or credit.
    Normal Balance
Accounts      Debit or Credit
1. Service Revenue
2. Rent Expense
3. Accounts Receivable
4. Accounts Payable
5. Common Stock
6. Supplies
7. Insurance Expense
8. Dividends
9. Buildings
10. Notes Payable

Ans: N/A, SO: 3, Bloom: K, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Ex. 243
During an accounting period, a business has numerous transactions affecting each of the following accounts. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries.

(1) Advertising Expense (6) Dividends
(2) Service Revenue (7) Cash
(3) Accounts Payable (8) Salaries and wages Expense
(4) Accounts Receivable (9) Notes Payable
(5) Common Stock (10) Insurance Expense

Ans: N/A, SO: 3, Bloom: K, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA



Ex. 244
Eight transactions are recorded in the following T accounts:

Cash Accounts Receivable
(1) 35,000 (2) 3,500 (5) 27,500 (7) 22,500
(7) 22,500 (3) 1,950
(4) 2,225
(6) 8,000
(8) 4,500

Supplies Equipment
(3) 1,950 (2) 13,500

Common Stock Service Revenue
(1) 35,000 (5) 27,500

Accounts Payable Dividends
(6) 8,000 (2) 10,000 (8) 4,500

Salaries Expense
(4) 2,225


Indicate for each debit and each credit:  (a) whether an asset, liability, common stock, dividends, revenue, or expense account was affected and (b) whether the account was increased (+) or (–) decreased. Answers should be presented in the following chart form:

Transaction Account Debited Account Credited
No. Type Effect Type Effect

(1) (Example) Asset + Common Stock +

(2)

(3)

(4)

(5)

(6)

(7)

(8)

Ans: N/A, SO: 3, Bloom: C, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA



Ex. 245
For each of the following accounts indicate (a) the type of account (Asset, Liability, Stockholders’ Equity, Revenue, and Expense), (b) the debit and credit effects, and (c) the normal account balance.

Example
0. Cash a. Asset account
b. Debit increases, credit decreases
c. Normal balance - debit

Accounts
1. Accounts Payable 5. Service Revenue
2. Accounts Receivable 6. Insurance Expense
3. Common Stock 7. Notes Payable
4. Dividends 8. Equipment

Ans: N/A, SO: 3, Bloom: K, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA


Ex. 246
Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions.
1. Stockholders invest $25,000 in cash in starting a real estate office operating as a corporation.
2. Purchased $500 of supplies on credit.
3. Purchased equipment for $15,000, paying $3,500 in cash and signed a 30-day, $11,500, note payable.
4. Real estate commissions billed to clients amount to $4,000.
5. Paid $700 in cash for the current month's rent.
6. Paid $250 cash on account for office supplies purchased in transaction 2.
7. Received a bill for $800 for advertising for the current month.
8. Paid $2,500 cash for office salaries.
9. Paid $1,200 cash dividends to stockholders.
10. Received a check for $2,000 from a client in payment on account for commissions billed in transaction 4.

Ans: N/A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Ex. 247
Journalize the following business transactions in general journal form.  Identify each transaction by number.  You may omit explanations of the transactions.

1. Received $35,000 from stockholders.
2. Purchased equipment for $60,000, paying $15,000 in cash and giving a note payable for the remainder.
3. Paid $3,000 rent for the month.
4. Recorded $12,500 of services provided on account.
5. Paid wages of $9,500.
6. Received $7,000 in cash for services provided.
7. Collected $2,000 from customers on account.

Ans: N/A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Ex. 248
Transactions for the Hartman Company for the month of November are presented below. Journalize each transaction and identify each transaction by number. You may omit journal explanations.
1. Stockholders invested an additional $36,000 cash in the business.
2. Purchased land costing $18,000 for cash.
3. Purchased equipment costing $30,000 for $4,500 cash and the remainder on credit.
4. Purchased supplies on account for $800.
5. Paid $3,000 for a one-year insurance policy.
6. Received $2,000 cash for services performed.
7. Received $5,000 for services previously performed on account.
8. Paid wages to employees for $2,500.
9. Paid dividends to stockholders of $400.

Ans: N/A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Ex. 249
This information relates to Hanshew Real Estate Agency.

Oct.  1 Stockholders invested $25,000 in exchange for common stock of the corporation.
 2 Hires an administrative assistant at an annual salary of $36,000.
 3 Buys equipment for $3,500 on account.
 6 Sells a house and lot for M Springer; commissions due from Springer, $10,000 (not paid by Springer at this time).
10 Receives cash of $140 as commission for acting as rental agent renting an apartment.
27 Pays $700 on account for the equipment purchased on October 3.
30 Pays the administrative assistant $3,000 in salary for October.

Instructions
(a) Journalize the transactions. Do not provide explanations.
(b) Post the transactions to T accounts.

Ans: N/A, SO: 5, 7, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA


Ex. 250
These T accounts summarize the ledger of Garner's Gardening Company Inc. at the end of the first month of operations, April 2012.

       Cash Unearned Service Revenue
Apr. 1 15,000 Apr. 15 1,200 Apr. 30 900
12 700 25 3,500
29 800
30 900

        Accounts Receivable Common Stock
Apr. 7 2,400 Apr. 29 800 Apr.  1 15,000

         Supplies Service and Wages Revenue
Apr. 4 5,700 Apr.  7 2,400
12 700

        Account Payable Salaries Expense
Apr. 25 3,500 Apr.  4 5,700 Apr. 15 1,200
Ex. 250 (Cont.)

Instructions
(a) Prepare in the order they occurred the journal entries (including explanations) that resulted in the amounts posted to the accounts.
(b) Prepare a trial balance at April 30, 2012.

Ans: N/A, SO: 5, 8, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA


Ex. 251
The transactions of the Speedy Delivery Service are recorded in the general journal below. You are to post the journal entries to the accounts in the general ledger. After all entries have been posted, you are to prepare a trial balance on the form provided.

General Journal

Date Account Titles and Explanation Debit Credit

2012
Sept. 1 Cash 25,000
Common Stock 25,000
(Stockholders invested cash in business)

4 Equipment 50,000
Cash 10,000
Notes Payable 40,000
(Paid cash and issued 2-year, 6%, note for
delivery trucks)

8 Rent Expense 1,000
Cash 1,000
(Paid September rent)

15 Prepaid Insurance 1,400
Cash 1,400
(Paid one-year liability insurance)

18 Cash 2,500
Service Revenue 2,500
(Received cash for delivery services)

Ex. 251 (Cont.)

20 Salaries Expense 500
Cash 500
(Paid salaries for current period)

25 Utility Expense 100
Accounts Payable 100
(Received a bill for September utilities)

30 Dividends 750
Cash 750
(Paid dividends)

30 Accounts Receivable 1,000
Service Revenue 1,000
(Billed customer for delivery service)

General Ledger

Cash Accounts Receivable







Prepaid Insurance Equipment






Accounts Payable Notes Payable






Ex. 251 (Cont.)

Common Stock Dividends





Service Revenue Rent Expense





Salaries and Wages Expense Utilities Expense






SPEEDY DELIVERY SERVICE
Trial Balance
September 30, 2012
Accounts Credit Debit














Ex. 252
Selected transactions from the journal of Giambi Inc. during its first month of operations are presented here.

Date Account Titles Debit Credit
Aug.   1 Cash 10,000
   Common Stock 10,000
10 Cash 1,700
   Service Revenue 1,700
12 Equipment 8,200
   Cash 1,200
   Notes Payable 7,000
25 Accounts Receivable 2,500
   Service Revenue 2,500
31 Cash    600
   Accounts Receivable    600


Ex. 252 (Cont.)

Instructions
(a) Post the transactions to T accounts.
(b) Prepare a trial balance at August 31, 2012.

Ans: N/A, SO: 7, 8, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Ex. 253
The accounts in the ledger of Dependable Delivery Service contain the following balances on July 31, 2012.

Accounts Receivable $16,400 Prepaid Insurance $  1,800
Accounts Payable 7,400 Maintenance/Repairs Expense 1,200
Cash ? Service Revenue 13,500
Equipment 59,360 Dividends 800
Gasoline Expense 950 Common Stock 50,000
Insurance Expense 600 Salaries and Wages  Expense 6,400
Notes Payable, due 2015 28,450 Salaries and Wages Payable 900
Retained Earnings 5,200
  (July 1, 2012)

Instructions
Prepare a trial balance with the accounts arranged as illustrated in the chapter, and fill in the missing amount for Cash.

Ans: N/A, SO: 8, Bloom: AP, Difficulty: Medium, Min: 8, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting


Ex. 254
The trial balance of the Gavin Company shown below does not balance.

GAVIN COMPANY
Trial Balance
June 30, 2012

  Debit  Credit
Cash $  2,600
Accounts Receivable 7,600
Supplies 600
Equipment 8,300
Accounts Payable $  9,766
Common Stock 1,941
Dividends 1,500
Service Revenue 15,200
Salaries and Wages Expense 3,800
Maintenance/Repairs Expense    1,600
Totals $26,000 $26,907

An examination of the ledger and journal reveals the following errors:
1. Each of the above listed accounts has a normal balance per the general ledger.
2. Cash of $350 received from a customer on account was debited to Cash $530 and credited to Accounts Receivable $530.
3. Dividends of $300 paid to stockholders were posted as a credit to Dividends, $300, and a credit to Cash $300.
4. Wages Expense of $300 was omitted from the trial balance.
5. The purchase of equipment on account for $700 was recorded as a debit to Repair Expense and a credit to Accounts Payable for $700.
6. Services were performed on account for a customer, $510, for which Accounts Receivable was debited $510 and Service Revenue was credited $51.
7. A payment on account for $215 was credited to Cash for $215 and credited to Accounts Payable for $251.

Instructions
Prepare a correct trial balance.

Ans: N/A, SO: 8, Bloom: AN, Difficulty: Medium, Min: 25, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: FSA




Ex. 255
Some of the following errors would cause the debit and credit columns of the trial balance to have unequal totals. For each of the four cases, state whether the error would cause unequal totals in the trial balance. If the error causes unequal totals, indicate the amount of difference between the columns and state whether the debit or credit is larger. Each case is to be considered independently of the others.
1. A payment of $900 to a creditor was recorded by a debit to Accounts Payable of $90 and a credit to Cash of $900.
2. A $340 payment for a printer was recorded by a debit to Equipment of $34 and a credit to Cash for $34.
3. An account receivable in the amount of $3,000 was collected in full. The collection was recorded by a debit to Cash for $3,000 and a debit to Accounts Payable for $3,000.
4. An account payable was paid by issuing a check for $800. The payment was recorded by debiting Accounts Payable $800 and crediting Accounts Receivable $800.

Ans: N/A, SO: 8, Bloom: AN, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting



Ex. 256
Some of the following errors would cause the debit and credit columns of the trial balance to have unequal totals. For each of the four cases, state whether the error would cause unequal totals in the trial balance. If the error causes unequal totals, indicate the amount of difference between the columns and state whether the debit or credit is larger. Each case is to be considered independently of the others.

A collection on account of $400 was journalized and posted as a debit to Cash $400 and a credit to Service Revenue $400.
A $950 purchase of supplies on account was recorded as a debit of $950 to Equipment and a credit of $950 to Accounts Payable.
A purchase of equipment for $3,500 on account was not recorded.
A $250 receipt on account was recorded as a $520 debit to Cash and a $250 credit to Accounts receivable.

Ans: N/A, SO: 8, Bloom: AN, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting


Ex. 257
Sue Sloan and Associates is a financial planning service. The account balances at December 31, 2012 are shown by the following alphabetical list:

Accounts Payable $    29,000
Accounts Receivable 16,000
Buildings 120,000
Cash 24,500
Common Stock 167,700
Equipment 79,300
Land 42,000
Notes Payable 95,000
Notes Receivable 9,100
Supplies 800

Instructions
Prepare a trial balance with the accounts arranged in financial statement order.

Ans: N/A, SO: 8, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting



Ex. 258
The ledger accounts of the Get Fit Gym at July 31, 2012 are shown below:

Accounts Payable $   9,100
Accounts Receivable 1,050
Buildings 55,400
Common Stock 65,100
Cash 6,000
Equipment 45,900
Notes Payable 45,000
Supplies 350
Dividends 10,500

Instructions

Prepare a trial balance with the ledger accounts arranged in the proper financial statement order. Include the appropriate heading.

Ans: N/A, SO: 8, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting



COMPLETION STATEMENTS
259. An _______________ is an individual accounting record of increases and decreases in specific assets, liabilities, and stockholders’ equity items.

Ans: N/A, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

260. The act of entering an amount on the left side of an account is called _______________ the account, and making an entry on the right side is called _________________ the account.

Ans: N/A, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

261. _____________, ______________, and _______________ have debit normal account balances whereas _______________, ______________, ______________, and ________________ have credit normal account balances.

Ans: N/A, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

262. The five subdivisions of stockholders’ equity are ______________, _______________, _________________, __________________, and _________________.

Ans: N/A, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

263. The basic steps in the recording process are: _______________ each transaction, enter the transaction in a ______________, and transfer the _______________ information to appropriate accounts in the ________________.

Ans: N/A, SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA



264. A sales slip, a check, and a cash register tape are examples of ________________ used as evidence that a transaction has taken place.

Ans: N/A, SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

265. An accounting record where transactions are initially recorded in chronological order is called a ________________.

Ans: N/A, SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

266. Posting is the procedure of transferring journal entries to ________________.

Ans: N/A, SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

267. The entire group of accounts and their balances maintained by a company is called the ________________.

Ans: N/A, SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

268. A two column list of all accounts and their balances at a given time is a ______________.

Ans: N/A, SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

MATCHING
269. Match the items below by entering the appropriate code letter in the space provided.

A. Account F. Journal
B. Normal account balance G. Posting
C. Debit H. Chart of accounts
D. Revenue account I. Trial balance
E. Ledger J. Source document
1. The entire group of accounts maintained by a company.
2. Transferring journal entries to ledger accounts.
3. The side which increases an account.
4. A list of all the accounts used by a company.
5. An accounting record of increases and decreases in specific assets, liabilities, and stockholders’ equity items.
6. Left side of an account.
7. Evidence that a transaction has taken place.
8. Shows the debit and credit effects of specific transactions.
9. A list of accounts and their balances at a given time.
10. Has a credit normal balance

Ans: N/A, SO: 1-8, Bloom: K, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

SHORT-ANSWER ESSAY QUESTIONS

S-A E 270
Describe the accounting information system and the steps in the recording process.

Ans: N/A, SO: 4, Bloom: K, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Communications, IMA: Business Applications


S-A E 271
A classmate is considering dropping his accounting class because he cannot understand the rules of debits and credits.

Can the student be successful in the course without an understanding of the rules of debits and credits? Explain the rules of debits and credits in a way that will help him understand them.

Ans: N/A, SO: 3, Bloom: K, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Communications, IMA: Business Applications


S-A E 272
During a study session, a classmate states that it is not necessary to make journal entries and then post them to the ledger. She states that it is sufficient to analyze the transaction and simply record the information in T accounts.
What is your response to this statement? Be brief, yet concise.

Ans: N/A, SO: 4, 5, Bloom: C, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Communications, IMA: Business Applications


S-A E 273
An account is an important accounting record where financial information is stored until needed. Briefly explain (1) the nature of an account, (2) the different types of accounts, and (3) the manner in which an account is increased and decreased and its normal balance.

Ans: N/A, SO: 2, 3, Bloom: C, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Communications, IMA: FSA



S-A E 274
Why is the dividends account increased by a debit?  Explain in terms of its relationship to stockholders’ equity.

Ans: N/A, SO: 3, Bloom: C, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Communications, IMA: Business Applications

S-A E 275
Steve Rondelli, a fellow student, contends that the double-entry system means each transaction must be recorded twice. Is Steve correct? Explain.

Ans: N/A, SO: 3, Bloom: K, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Communications, IMA: FSA

S-A E 276
(a) Can accounting transaction debits and credits be recorded directly in the ledger accounts?
(b) What are the advantages of first recording transactions in the journal and then posting to the ledger?

Ans: N/A, SO: 5, Bloom: C, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Communications, IMA: FSA


S-A E 277
Describe the process of preparing a trial balance. What is the purpose of preparing a trial balance? If a trial balance does not balance, identify what might be the reasons why it does not balance. If the trial balance does balance, does that insure that the ledger accounts are correct? Explain.

Ans: N/A, SO: 8, Bloom: C, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Communications, IMA: Reporting



S-A E 278 (Ethics)
Robert Harder, Jr. was appointed the manager of Westbrook Properties, a recently formed company that manages residential rental properties. Maria Valdez is the accountant. She prepared a chart of accounts based on an analysis of the expenditures of the company. One of the largest expense categories is Travel and Entertainment. Mr. Harder believes that it is important to maintain a presence in the social life of the city. In this, he sharply differs from his father, Robert Harder, Sr. the elder Mr. Harder has set up Westbrook Properties in order to test his son's management skills before allowing him to manage a more lucrative commercial property business. Mr. Harder, Sr. provided the capital for Westbrook, and maintains close contact with the company. He allowed his son, however, to hire his own employees.

Mr. Harder has asked Ms. Valdez to name the Travel and Entertainment account Property Development. He hopes to deflect his father's attention away from the amount he has spent on travel and entertainment until he has proven that his methods work. When Ms. Valdez resisted, he reminded her that he, not his father, hired her. He also reminded her that she had been enthusiastic about his business plans when she was hired.

Required:
1. Who are the stakeholders in this situation?
2. Should Ms. Valdez agree to the change in the Travel and Entertainment account to Property Development?  Explain.

Ans: N/A, SO: 2, Bloom: E, Difficulty: Easy, Min: 5, AACSB: Ethics, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Professional Demeanor, IMA: FSA


S-A E 279 (Communication)
The following trial balance was obtained from Gentry Company's computer system.

RPT TR BAL
DPT ACC MGR
PRIORITY 2
RUN BY R.HAMES
SEQUENCE 997411

ACCOUNT BAL
CASH 18700
SUPPLIES 5600
ACC PAY 7500-
NOTE PAY 1200-
COMMON STOCK 10000-
DIVIDENDS 500
SERVICE REVENUE 11000-
SALARY EXP 3500
RENT EXP 900
OTHER EXP 500
BAL 0
***TRIAL BALANCE IS IN BALANCE***

Required:
1. What features make this trial balance difficult to read?
2. Prepare an improved trial balance.

Ans: N/A, SO: 8, Bloom: AN, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Communications, IMA: Reporting

IFRS QUESTIONS

1. Which of the following statements is true regarding debits and credits?
a. On the income statement, debits are used to increase account balances, whereas on the statement of financial position, credits are used to increase account balances.
b. The basic equation on the statement of financial position is Assets + Liabilities = Equity.
c. The rules for debit and credit and the normal of balance of Share Capital – Ordinary are the same as for liabilities.
d. On the income statement, revenues are increased by debit whereas on the statement of financial position retained is increased by a credit.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

2. Which of the following accounts is reported in the Equity section of the statement of financial position?
a. Dividends.
b. Share capital – ordinary.
c. Revenues.
d. All of the choices are reported in the Equity section of the statement of financial position

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

3. Revenues are
a. Impacted by debits and credits in the same way that expenses are impacted by debits and credits.
b. A subdivision of equity, providing information about why equity is increased.
c. Reported on the statement of financial position as a current item.
d. All of the choices are correct regarding revenues.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

4. Basic steps in the recording process include all of the following except
a. Transfer the journal information to the appropriate account in the statement of financial position.
b. Analyze each transaction for its effect on the accounts.
c. Enter the transaction information in a journal.
d. All of the choices are correct regarding the basic steps in the recording process.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting


5. Which of the following statements is true regarding simple and compound entries?
a. Simple entries can be prepared by anyone whereas compound entries need to be prepared by a skilled accountant.
b. Simple entries are recorded on the income statement whereas compound entries are recorded on the statement of financial position.
c. Simple entries involve one account, whereas compound entries involved 2 or more accounts.
d. An example of a compound entry would be the purchase of a machine for $400 cash and a $2,000 note payable.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

6. Compound entries
a. Would include an entry to record the purchase of a computer for cash.
b. Require at least one debit and one credit entry.
c. Require that all credits be listed before the debits for entries affecting the statement of financial position.
d. Should be broken into their component parts and recorded as simple entries.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

7. The entire group of accounts maintained by a company is the
a. Journal.
b. Statement of financial position.
c. Ledger.
d. T-account.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

8. Accounts maintained within the ledger that appear on the statement of financial position include all of the following except
a. Salaries expense.
b. Interest payable.
c. Supplies.
d. Share capital – ordinary.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

9. The chart of accounts
a. Lists the accounts and account numbers that identify their location in the ledger.
b. Uses a numbering system that identifies the accounts and usually starts with the income statement accounts followed by the statement of financial position accounts.
c. Is usually limited to approximately twenty to thirty accounts for most large companies.
d. All of the choices are true regarding the chart of accounts.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting


10. Posting
a. Accumulates the effects of ledger entries and transfers them to the general journal.
b. Is done only for income statement activity; activity related to the statement of financial position does not require posting.
c. Is done at least once per year.
d. Is done by posting all the debits and credits of one entry before moving on to the next entry.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

11. The trial balance
a. Is a listing of all the accounts and their balances in the order the accounts appear on the statement of financial position.
b. Has as its primary purpose to prove (check) that all journal entries were made for the period.
c. Can be used to uncover errors in journalizing and posting.
d. Is used to prepare the statement of financial position while the general ledger is used to prepare the income statement.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

12. Numerous errors may exist even though the trial balance columns agree. Which of the following is not one of these types of errors?
a. A transaction is not journalized.
b. Transposition error related to the statement of financial position.
c. A journal entry is posted twice.
d. A journal entry to purchase $100 worth of equipment is posted as a $1,000 purchase.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

13. Which of the following statements is false concerning use of currency signs?
a. Currency signs do not appear in journals or ledgers.
b. Currency signs are generally only shown for the first item in a column and for the column total.
c. Currency signs are not typically used in the trial balance.
d. All of the choices are correct regarding currency signs.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting


14. Which of the following statements is true regarding the recording process?
a. Because IFRS (International Financial Reporting Standards) rely more on fair value and less on historical cost than U.S. GAAP, the double-entry accounting system is not widely used by companies who use IFRS.
b. Both IFRS (International Financial Reporting Standards) and U.S. GAAP use the same general rules of debits and credits and the steps in the recording process.
c. A trial balance using IFRS (International Financial Reporting Standards) is organized by first showing the accounts from the statement of financial position followed by accounts from the income statement; a tribal balance using U.S. GAPP is organized using the opposite order.
d. All of the choices are correct regarding the recording process.

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

15. Under U.S. GAPP
a. Currency signs are generally used in the journal, ledger, trial balance, and financial statements.
b. Share Capital – Ordinary is referred to as Retained Earnings.
c. The statement of financial position is often called the statement of changes in financial position.
d. The rules of debits and credits, and the steps in the recording process are the same as under IFRS (International Financial Reporting Standards).

  SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting