Acct 11 Chapter 3 Review
1. Complete the following sentences by inserting the correct word or words:
a) A financial event changing the value of items on the balance sheet is called a(n) ______________________________.
b) Generally, if a business is better off as a result of a transaction, then Capital has __________________.
c) After analyzing each transaction, the fundamental accounting equation must still _______________________.
d) When transactions occur, a minimum of _________________balance sheet item(s) must change.
e) The accounting department learns of transactions from business papers called __________________________.
f) The GAAP that requires transactions to be recorded on the basis of factual evidence is called the __________________.
g) The owner’s withdrawal of cash for personal use reduces Cash and ________________________.
2. Indicate the effect each of the following transactions has on the total assets, the total liabilities, or the owner’s
equity, by writing “I” for an increase, “D” for a decrease, or “NC” for no change.
Transaction Total Assets Total Liabilities Owner’s Equity
Example: A cash payment is made to Ace Supplies, a
creditor. D D NC
a) $400 of supplies are purchased from Paper Servicentre,
but not paid for.
b) A new truck is purchased from Modern Motors at a
cost of $7 500 with a $2 500 down payment.
c) $880 cash is received from H. Vernon in part payment
of the amount owed by him.
d) $750 paid to Vacation Inns in payment of the amount
owed to them.
e) The owner of the business withdraws $500 cash from
the business funds for his personal use.
f) The owner invested $10 000 cash in her business
g) The business bought equipment for $2 000 cash
h) The business paid one-half of a bill owed to a creditor
i) The business received $2 000 for providing services
j) The owner withdrew $400 from the business for her
3. Partial figures for the ABC Company appear below. Fill in the three blanks if liabilities increased by $25 000 in 2002.
Year Assets Liabilities Equity
2001 $60 000 $40 000
2002 $90 000
4. Reynolds Appliance Store, located in Revelstoke, B.C., is owned by Delores Reynolds. On the morning of June 1,
2005, she has the following assets and liabilities. (15 pts)
Cash $ 4 000 Accounts Payable
Accounts Receivable —Ace Supplies $4 000
—J. Lam 1 500 —Pine Motors 6 000
Equipment 3 000
Delivery Truck 12 000
Building 75 000
a) Fill out the equation analysis sheet provided in Excel (see the chp.3 web page).
add the starting balances to the sheet
use formulas to calculate the new balances for the assets, liabilies and the equity after each transaction,
Add a formula for the Zero Proof column to check your work (=sum(assets) –sum (liabilities, equity))
Analyze the transactions of June 1, listed below, and record the necessary changes on the equation analysis sheet..
After completing the transactions, make sure the equation is still in balance.
Use formulas to calculate the Assets, Liabilities and Owner’s Equity at the bottom
f) Prepare a new balance sheet, using the new totals, on the sheet provided in Excel (see the chp 3 web page)
use formulas to calculate the totals
make sure to format it correctly with single lines, double lines and dollar signs
Make sure to list assets and liabilities in order of liquidity
Transactions for June 1, 2005
1. A cash payment of $2 000 is made to Ace Supplies.
2. J. Lam makes a cash payment of $800 on his debt.
3. Reynolds performs a service for a customer, J. Cooke, who pays $1 000 for it.
4. A new printer for the office is purchased for $600 cash from Equipment Supply Co.
5. Reynolds invests an additional $2 500 in her business.
6. An old cash register, included in Equipment at a value of $800, is sold for $250 cash.
7. Reynolds has a minor repair made on some equipment. She pays the bill for $150 immediately.
5. Shown below is an equation analysis sheet for the business of. Examine the entries made on this sheet and list five
transactions that could have caused the changes in financial position.
ACME Auto Repair
ASSETS LIABILITIES OWNER’S Zero
A/R A/R A/P A/P J. Laforêt
Cash T. Lee Small Supplies Equipment Truck T. Ray Satton Capital
Balances 2 000 300 500 1 000 5 000 9 000 1 000 4 000 12 800 0
Transaction 1 ( 500) 1 000 500 0
Transaction2 200 200 0
Transaction 3 ( 500) ( 500) 0
Transaction 4 100 150 250 0
Transaction 5 ( 200) 1 200 1 000 0
Totals 900 300 650 1 200 7 200 9 000 1 700 5 000 12 550 0