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					                                       MODULE 2
                                RECORDING TRANSACTIONS

                                   Demonstration Problem 1
                                     Debits and Credits

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

        Account Name               Side used to Record Increases
        Owners' Equity                         Credit
        Sales Revenue                          Credit
          Equipment                            Debit
       Utilities Expense                       Debit
       Supplies Expense                        Debit
       Service Revenue                         Credit
            Supplies                           Debit
         Rent Expense                          Debit
        Notes Payable                          Credit
      Cost of Goods Sold                       Debit




                                              26
                                    Demonstration Problem 2
                                      Debits and Credits

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

                   Transaction                             Debit           Credit
1. Purchased furniture on credit.                   Furniture          Accounts
                                                                       Payable
2. Purchased inventory for cash.                   Inventory           Cash
3. Sold goods to customers on credit.              Accounts Receivable Sales Revenue
4. Record cost of goods sold on the previous sale. Cost of Goods Sold  Inventory
5. Purchased supplies.                             Supplies            Cash
6. Borrowed money from a bank.                     Cash                Notes Payable
7. Paid employee wages for the month.              Wages Expense       Cash
8. Paid for the furniture purchased previously.    Accounts Payable    Cash
9. Paid rent for the month.                        Rent Expense        Cash
10. Collected cash from a customer for goods sold Cash                 Accounts
previously.                                                            Receivable




                                             27
                                       Practice Problem 1
                                       Debits and Credits

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

       Account Name                Side used to Record Increases
       Owners' Equity                          Credit
      Service Revenue                          Credit
             Cash                              Debit
          Furniture                            Debit
      Utilities Expense                        Debit
           Supplies                            Debit
       Sales Revenue                           Credit
      Accounts Payable                         Credit
     Accounts Receivable                       Debit
     Cost of Goods Sold                        Debit




                                              28
                                        Practice Problem 2
                                        Debits and Credits

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

                  Transaction                             Debit               Credit
1. Purchased a computer for cash.                  Computer             Cash
2. Purchased inventory on credit.                  Inventory            Accounts Payable
3. Purchased supplies.                             Supplies             Cash
4. Sold goods to customers on credit.              Accounts             Sales Revenue
                                                   Receivable
5. Record the cost of the goods sold.              Cost of Goods Sold   Inventory
6. Borrowed money from a bank.                     Cash                 Notes Payable
7. Paid employee wages for the month.              Wages Expense        Cash
8. Paid for the inventory purchased previously.    Accounts Payable     Cash
9. Collected cash from a customer for goods        Cash                 Accounts
sold previously.                                                        Receivable




                                              29
                                    Homework Problem 1
                                 Debit and Credit Terminology

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

        Account Name                  Debit              Credit
Cash                              Debit
Supplies Expense                  Debit
Accounts Payable                                    Credit
Utilities Expense                 Debit
Owners' Equity                                      Credit
Service Revenue                                     Credit
Supplies                          Debit
Rent Expense                      Debit
Notes Payable                                       Credit
Salaries Expense                  Debit




                                              30
                                    Homework Problem 2
                                 Debit and Credit Terminology

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

Account Name                 Debit                          Credit
Supplies Expense             Debit
Cash                         Debit
Accounts Payable                                            Credit
Equipment                    Debit
Owners' Equity                                              Credit
Service Revenue                                             Credit
Furniture                    Debit
Rent Expense                 Debit
Notes Payable                                               Credit
Salaries Expense             Debit




                                              31
                                    Homework Problem 3
                                 Debit and Credit Terminology

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


                    Transaction                           Debit               Credit
1.   Borrowed money from a bank.                   Cash                 Notes Payable
2.   Purchased inventory for cash.                 Inventory            Cash
3.   Purchased inventory on credit.                Inventory            Accounts Payable
4.   Sold goods to customers for cash.             Cash                 Sales Revenue
5.   Sold goods to customers on credit.            Accounts             Sales Revenue
                                                   Receivable
6. Paid employee wages for the month.              Wages Expense        Cash
7. Paid utilities for the current month.           Utilities Expense    Cash
8. Recorded supplies used during the month.        Supplies Expense     Supplies
9. Paid for equipment purchased previously.        Accounts Payable     Cash
10. Repaid the note to the bank.                   Note Payable         Cash




                                              32
                                   Homework Problem 4
                                Debit and Credit Terminology

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


                    Transaction                          Debit               Credit
1. Borrowed money from a bank.                     Cash                Notes Payable
2. Purchased supplies for cash.                    Supplies            Cash
3. Purchased equipment on credit.                  Equipment           Accounts Payable
4. Sold goods to customers for cash.               Cash                Sales Revenue
5. Sold goods to customers on credit.              Accounts Receivable Sales Revenue
6. Paid employee wages for the month.              Wages Expense       Cash
7. Paid utilities for the current month.           Utilities Expense   Cash
8. Recorded supplies used during the month.        Supplies Expense    Supplies
9. Paid for the equipment purchased                Accounts Payable    Cash
previously.
10. Repaid the note to the bank.                   Notes Payable         Cash




                                              33
                                        Homework Quiz
                                       Debits and Credits

1.   The Equipment account's proper classification is:
     a.     Revenue
     b.     Liability
     c.     Expense
     d.     Asset

2.   The Supplies account's proper classification is:
     a.     Asset
     b.     Revenue
     c.     Liability
     d.     Expense

3.   The Cost of Goods Sold account's proper classification is:
     a.     Asset
     b.     Revenue
     c.     Liability
     d.     Expense

4.   The Fees Earned account's proper classification is:
     a.     Asset
     b.     Liability
     c.     Owner's equity
     d.     Revenue

5.   The Accounts Payable account's proper classification and normal account balance are:
     a.     Asset
     b.     Liability
     c.     Owner's equity
     d.     Revenue

6.   The Inventory account's proper classification is:
     a.     Revenue
     b.     Expense
     c.     Liability
     d.     Asset

7.   The Accounts Receivable account's proper classification is:
     a.     Asset
     b.     Liability
     c.     Owner's equity
     d.     Revenue




                                               34
8.    Altoona Plumbing acquired Office Supplies on account. Which of the following entries properly
      records this transaction?
      a.      Debit: Office Supplies; Credit: Cash
      b.      Debit: Cash; Credit: Office Supplies
      c.      Debit: Office Supplies; Credit: Accounts Payable
      d.      Debit: Accounts Payable; Credit: Office Supplies

9.    Altoona Plumbing acquired Equipment by making a Cash down payment and issuing a note to
      finance the remaining balance. Which of the following entries properly records this transaction?
      a.      Debit: Equipment; Credit: Cash, Accounts Payable
      b.      Debit: Equipment; Credit: Cash, Notes Payable
      c.      Debit: Equipment; Credit: Cash
      d.      Debit: Equipment; Credit: Cash, Accounts Payable, Notes Payable

10.   Altoona Plumbing made its monthly office rent payment. Which of the following entries properly
      records this transaction?
      a.      Debit: Cash; Credit: Rent Expense
      b.      Debit: Rent Expense; Credit: Cash
      c.      Debit: Rent Expense; Credit: Accounts Payable
      d.      Debit: Accounts Payable; Credit: Rent Expense

11.   Altoona Plumbing recorded its monthly service revenue reflecting both cash sales and sales on
      account. Which of the following entries properly records this transaction?
      a.      Debit: Accounts Receivable; Credit: Service Revenue
      b.      Debit: Service Revenue;         Credit: Accounts Receivable, Cash
      c.      Debit: Accounts Receivable, Cash; Credit: Service Revenue
      d.      Debit: Cash; Credit: Accounts Receivable

12.   Josephine Marlow, M.D. just recorded her billing to clients for services rendered. Which of the
      following entries properly records this transaction?
      a.      Debit: Accounts Receivable; Credit: Fees Earned
      b.      Debit: Accounts Receivable; Credit: Cash
      c.      Debit: Fees Earned; Credit: Accounts Receivable
      d.      Debit: Cash; Credit: Fees Earned

13.   Josephine Marlow, M.D. recorded the collection of cash from her cash customers. Which of the
      following entries properly records this transaction?
      a.      Debit: Fees Earned; Credit: Cash
      b.      Debit: Fees Earned; Credit: Accounts Receivable
      c.      Debit: Cash; Credit: Fees Earned
      d.      Debit: Accounts Receivable; Credit: Fees Earned

14.   Josephine Marlow, M.D., a sole proprietor, collected cash from customers for services performed
      and billed previously. Which of the following entries properly records this transaction?
      a.      Debit: Fees Earned; Credit: Cash
      b.      Debit: Fees Earned; Credit: Accounts Receivable
      c.      Debit: Cash; Credit: Accounts Receivable
      d.      Debit: Accounts Receivable; Credit: Fees Earned




                                               35
15.   Ronald's Appliance Shop purchased Office Supplies for      $1,000 on account. After inspecting
      the purchase, $200 of the goods was found to be defective and returned. Which of the following
      entries properly records the return of these goods?
      a.       Debit: Cash, $200; Credit: Office Supplies, $200
      b.       Debit: Cash, $800; Credit: Office Supplies, $800
      c.       Debit: Accounts Payable, $200; Credit: Office Supplies, $200
      d.       Debit: Accounts Payable, $800; Credit: Office Supplies, $800

16.   Richard Valort, owner of Valort Landscaping Service, recently issued paychecks to his
      employees. The proper entry to record this transaction includes:
      a.     A debit to the Drawing account
      b.     A debit to Wages Payable
      c.     A debit to Wages Earned
      d.     A debit to Wages Expense

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

18.   Overstreet Computer Services bills all customers on account. Overstreet billed clients $80,000
      during July. Overstreet's beginning Accounts Receivable balances for July was $32,200. How
      would July's customer billing be reflected on Overstreet's books?
      a.      Debit Accounts Receivable, $32,200; Credit Fees Earned, $32,200
      b.      Debit Accounts Receivable, $28,000; Credit Fees Earned, $28,00
      c.      Debit Accounts Receivable, $80,000; Credit Fees Earned, $80,00
      d.      Debit Cash, $32,200; Credit Fees Earned, $32,200

19.   Overstreet Computer Services bills all customers on account. Overstreet billed clients $80,000
      during July (Debit, Accounts Receivable; Credit, Fees Earned). No cash collections from
      customers were received during July. Overstreet's beginning Accounts Receivable balance for
      July was $32,200. Overstreet's ending Accounts Receivable balance for July was:
      a.      $ 28,000
      b.      $ 47,800
      c.      $ 80,000
      d.      $ 112,200

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


                                              36
21.   Which of the following account is increased by debits?
      a. Notes Payable
      b. Accounts Receivable
      c. Revenue
      d. Owners' Equity

22.   Which of the following account is increased by credits?
      a. Supplies Expense
      b. Accounts Payable
      c. Inventory
      d. Accounts Receivable

23.   Tony's Landscaping Service borrowed $7,500 from a bank. To record this transaction:
      a. Notes Payable must be credited; Cash must be debited
      b. Cash must be credited; Notes Payable must be debited
      c. Cash debited; Notes Receivable must be credited
      d. Cash credited; Notes Receivable must be debited

24.   Tony's Landscaping Service purchased a truck for $2,500. $1,000 was paid in cash and
      a note payable was signed for the balance. To record this transaction:
      a. Notes Payable must be credited
      b. Notes Payable must be debited
      c. Cash must be debited
      d. Trucks must be credited

25.   A business paid $100 for utilities. To record this transaction:
      a. Utilities Expense must be credited;Cash must be debited
      b. Cash and Utilities Expense must be debited
      c. Cash and Utilities Expense must be credited
      d. Utilities Expense must be debited; Cash must be credited

26.   A business paid $100 to buy supplies. To record this transaction:
      a. Supplies Expense must be credited
      b. Accounts Payable must be debited
      c. Supplies must be debited
      d. Supplies must be credited

27.   A business sold goods to customers for $1,800 on credit. To record this transaction:
      a. Accounts Receivable must be credited
      b. Accounts Payable must be debited
      c. Accounts Receivable must be debited
      d. Accounts Payable must be credited




                                               37
28.   A business paid $475 to a supplier for inventory purchased previously. To record this:
      transaction
      a. Accounts Payable must be credited; Cash must be debited
      b. Cash must be credited; Accounts Payable must be debited
      c. Cash debited; Accounts Receivable must be credited
      d. Cash credited; Accounts Receivable must be debited

29.   Cash was collected from a customer for services provided previously. To record this:
      transaction
      a. Accounts Receivable must be credited
      b. Accounts Payable must be debited
      c. Accounts Receivable must be debited
      d. Accounts Payable must be credited

30.   Supplies costing $80 were used by a business. To record this transaction:
      a. Supplies Expense must be credited
      b. Supplies Expense must be debited
      c. Supplies must be debited
      d. Cash must be credited




                                               38
                                           MODULE 2
                                       Sole-Proprietorships
                                     Demonstration Problem 1
                                          Clean-Rite Service

This example analyzes the transactions for Clean-Rite Service for March 2000. Clean-Rite Service is a
sole-proprietorship.
The transactions are recorded in the journal and posted to the ledger.

Mar. 1      Lisa used $500 of her own money to start Clean-Rite Service.
Mar. 2      Lisa's company borrowed $1,500 from her dad.
Mar. 4      Clean-Rite Service paid $400 for a used vacuum cleaner and shampoo machine.
Mar. 9      Clean-Rite Service purchased a used truck for $1,000 from Fuller Trucks Inc. Lisa paid $250
                down and signed a note payable for the balance.
Mar. 11     Clean-Rite Service paid $115 for cleaning supplies.
Mar. 15     During the first half of March, Clean-Rite Service performed $450 of cleaning services.
                Customers paid $200 in cash and promised the remaining payment by March 30.
Mar. 17     Clean-Rite Service used $80 of the cleaning supplies.
Mar. 22     $250 was collected from customers for services performed previously.
Mar. 24     Lisa's company paid back $500 to her dad.
Mar. 31         Lisa withdrew $100 from the business.

 DATE                    ACCOUNT           DEBIT       CREDIT
 2000
 Mar. 1      Cash                             500
              Lisa, Capital                                 500
 Mar. 2      Cash                           1,500
              Notes Payable                                1,500
 Mar. 4      Equipment                        400
              Cash                                          400
 Mar. 9      Truck                          1,000
              Cash                                          250
              Notes Payable                                 750
 Mar. 11     Supplies                         115
              Cash                                          115
 Mar. 15     Cash                             200
             Accounts Receivable              250
              Service Revenue                               450
 Mar. 17     Supplies Expense                  80
              Supplies                                         80
 Mar. 22     Cash                             250
              Accounts Receivable                           250
 Mar. 24     Notes Payable                    500
              Cash                                          500
 Mar. 31     Lisa, Drawings                   100
              Cash                                          100




                                                39
                                           Practice Problem 1
                                          Burton Precision Tools

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

Jan. 2        The business purchased inventory for $5,800 on credit.
Jan. 3        Sold goods for $7,200 to customers for cash.
Jan. 3        The cost of the goods sold in the previous transaction was $5,100.
Jan. 9        Purchased supplies for $150.
Jan. 11       Paid $4,800 to suppliers for the inventory purchased previously.
Jan. 12       Paid $85 for utilities.
Jan. 17       Supplies costing $45 were used in January.
Jan. 28           Paid rent of $500 for January.

          DATE                  ACCOUNT           DEBIT      CREDIT
          2000
          Jan. 2    Inventory                      5,800
                     Accounts Payable                            5,800
          Jan. 3    Cash                           7,200
                      Sales Revenue                              7,200
          Jan. 3    Cost of Goods Sold             5,100
                      Inventory                                  5,100
          Jan. 9    Supplies                         150
                     Cash                                          150
          Jan. 11   Accounts Payable               4,800
                     Cash                                        4,800
          Jan. 12   Utilities Expense                   85
                     Cash                                           85
          Jan. 17   Supplies Expense                    45
                     Supplies                                       45
          Jan. 28   Rent Expense                     500
                      Cash                                         500




                                                   40
                                             Practice Problem 2
                                             East West Travels

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

Apr. 1             Brian Smith started East West Travels by investing $40,000.
Apr. 2             $15,000 was borrowed by issuing a note payable.
Apr. 4             $500 was paid to purchase office supplies.
Apr. 9             Travel arrangement services performed for customers totaled $2,000. Of this
                   amount, $800 was collected in cash.
Apr. 11            Office supplies costing $200 were consumed.
Apr. 14            An additional $300 of supplies were purchased.
Apr. 17            A payment of $5,000 was made on the note payable.
Apr. 18            $600 of accounts receivable was collected.
Apr. 22            Services totaling $450 were performed ($200 for cash with the balance on credit).
Apr. 28            $150 of supplies were consumed.
Apr. 29            $200 of outstanding accounts receivable was collected.
Apr. 30            Brian withdrew $500 from the business for personal use.

          DATE                   ACCOUNT           DEBIT       CREDIT
          2000
          Apr. 1     Cash                           40,000
                      Brian, Capital                              40,000
          Apr. 2     Cash                           15,000
                      Notes Payable                               15,000
          Apr. 4     Supplies                           500
                      Cash                                          500
          Apr. 9     Cash                              800
                     Accounts Receivable             1,200
                      Service Revenue                              2,000
         Apr. 11     Supplies Expense                   200
                      Supplies                                      200
         Apr. 14     Supplies                           300
                      Cash                                          300
         Apr. 17     Notes Payable                   5,000
                      Cash                                         5,000
         Apr. 18     Cash                               600
                      Accounts Receivable                           600
         Apr. 22     Cash                               200
                     Accounts Receivable                250
                      Service Revenue                               450
      Apr. 28        Supplies Expense                   150
                      Supplies                                      150
         Apr. 29     Cash                               200
                      Accounts Receivable                           200
         Apr. 30     Brian, Drawings                    500
                      Cash                                          500



                                                   41
                                       Homework Problem 1
                                        Aiken Consulting

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

Mar. 1     $12,000 was borrowed from a bank.
Mar. 2     Purchased supplies for $250.
Mar. 4     Consulting services were provided to clients for $2,800 on credit.
Mar. 9     Paid wages of $1,000 to the secretary.
Mar. 11    $1,200 was collected from customers for services provided previously.
Mar. 15    The cost of supplies used in March was $80.
Mar. 17    $2,000 of the note payable was paid.
Mar. 31    A payment of $700 was made for rent.


       DATE                  ACCOUNT          DEBIT      CREDIT
        2000
 Mar. 1          Cash                          12,000
                  Notes Payable                            12,000
 Mar. 2          Supplies                         250
                  Cash                                        250
 Mar. 4          Accounts Receivable            2,800
                  Service Revenue                            2,800
 Mar. 9          Wages Expense                  1,000
                  Cash                                       1,000
 Mar. 11         Cash                           1,200
                 Accounts Receivable                         1,200
 Mar. 15         Supplies Expense                   80
                  Supplies                                     80
 Mar. 17         Notes Payable                  2,000
                  Cash                                       2,000
 Mar. 31         Rent Expense                     700
                  Cash                                        700




                                               42
                                        Homework Problem 2
                                          Annie’s Bakery

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

Chart of Accounts

Nov. 1      $5,000 was borrowed from a bank.
Nov. 2      Merchandise costing $750 was purchased on 30-day credit.
Nov. 4      Purchased supplies for $75.
Nov. 9      Goods were sold for $1,400 in cash.
Nov. 9      The cost of the goods sold was $500.
Nov. 14     $85 was paid for utilities.
Nov. 17     Supplies costing $35 were used in November.
Nov. 18     Paid $750 to the supplier for the merchandise purchased previously.
Nov. 22         Paid rent of $500 for November.



       DATE                   ACCOUN        DEBIT      CREDIT
                  T
     2000
 Nov. 1           Cash                        5,000
                   Notes Payable                           5,000
 Nov. 2           Inventory                    750
                   Accounts Payable                          750
 Nov. 4           Supplies                       75
                   Cash                                       75

 Nov. 9           Cash                        1,400
                   Sales Revenue                           1,400
 Nov. 9           Cost of Goods Sold           500
                   Inventory                                 500
 Nov. 14          Utilities Expense              85
                   Cash                                       85
 Nov. 17          Supplies Expense               35
                   Supplies                                   35
 Nov. 18          Accounts Payable             750
                      Cash                                   750

 Nov. 22          Rent Expense                 500
                   Cash                                      500




                                                43
                                           Homework Problem 3
                                             Carlson Realty I

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

Jun. 1              George invested $8,000 in the business.
Jun. 2              Supplies were purchased on credit for $520.
Jun. 4              Furniture was purchased for $5,500. $2,500 was paid in cash and a note was
                    signed for the balance.
Jun. 9              $250 was paid for the supplies purchased previously.
Jun. 11             The business earned sales commissions of $11,000. The customers paid cash.
Jun. 29             The receptionist was paid a salary of $2,400 for June.
Jun. 29             Rent of $1,400 was paid for June.
Jun. 30             The business paid $1,350 for automobile expenses.
Jun. 30             $140 was paid for utilities for June.
Jun. 30             Supplies costing $135 were used in June.
Jun. 30             George withdrew $1,000 for personal use.


          DATE                   ACCOUN        DEBIT      CREDIT
                      T
          2000
          Jun. 1      Cash                       8,000
                       George, Capital                       8,000
          Jun. 2      Supplies                    520
                       Accounts Payable                        520
          Jun. 4      Furniture                  5,500
                       Cash                                  2,500
                       Notes Payable                         3,000
           Jun. 9     Accounts Payable            250
                       Cash                                    250
          Jun. 11     Cash                     11,000
                       Service Revenue                      11,000
          Jun. 29     Salaries Expense           2,400
                       Cash                                  2,400
          Jun. 29     Rent Expense               1,400
                       Cash                                  1,400
          Jun. 30     Automobile Expense         1,350
                       Cash                                  1,350
          Jun. 30     Utilities Expense           140
                       Cash                                    140
          Jun. 30     Supplies Expense            135
                       Supplies                                135
          Jun. 30     George, Drawings           1,000
                       Cash                                  1,000




                                                   44
                                        Homework Problem 4
                                        Jackie’s Floral Designs

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

Feb. 1          Jackie Simmons started Jackie's Floral Designs by investing $12,500.
Feb. 5          Merchandise costing $5,700 was purchased on 30-day credit.
Feb. 7          $350 was paid for supplies.
Feb. 28         Goods were sold for $8,000. $5,500 was collected in cash.
Feb. 28         The cost of the goods sold was $5,000.
Feb. 28         Supplies costing $175 were used during February.
Feb. 28         Employees were paid $1,200 in wages for February.
Feb. 28         A payment of $1,700 was made for the merchandise purchased previously.
Feb. 28         A payment of $800 was made for rent for February.
Feb. 28         $150 was paid for utilities for February.
Feb. 28     Jackie withdrew $500 for personal expenses.

 DATE                         ACCOUN         DEBIT       CREDIT
                  T
 2000
 Feb. 1           Cash                       12,500
                   Jackie, Capital                         12,500
 Feb. 5           Inventory                    5,700
                   Accounts Payable                         5,700
 Feb. 7           Supplies                      350
                    Cash                                      350
 Feb. 28          Cash                         5,500
                  Accounts Receivable          2,500
                   Sales Revenue                            8,000
 Feb. 28          Cost of Goods Sold           5,000
                   Inventory                                5,000
 Feb. 28          Supplies Expense              175
                   Supplies                                   175
 Feb. 28          Wages Expense                1,200
                   Cash                                     1,200
 Feb. 28          Accounts Payable             1,700
                   Cash                                     1,700
 Feb. 28          Rent Expense                  800
                   Cash                                       800
 Feb. 28          Utilities Expense             150
                   Cash                                       150
 Feb. 28          Jackie, Drawings              500
                   Cash                                       500




                                                 45
                                        Homework Quiz
                                      Sole-Proprietorships

1.   A business, operated for profit and owned by one person, is called a:
     a.     Nonprofit organization
     b.     Partnership
     c.     Corporation
     d.     Sole Proprietorship

2.   A business entity can be organized in one of three major types. They are:
     a.     Corporations, partnerships, and sole proprietorships
     b.     Corporations, associations, and nonprofit organizations
     c.     Profit, nonprofit, and corporate organizations
     d.     Institutions, partnerships, and corporations

3.   A sole proprietorship can obtain financial resources from which of the following types of
     accounts?
     a.      Liabilities
     b.      Owner's Equity
     c.      Assets
     d.      Both a and b

4.   In a sole proprietorship, which of the following accounts reflects the owner's financial position in
     the business?
     a.       Capital Stock
     b.       Retained Earnings
     c.       Inventory
     d.       Owner's Capital

5.   In a sole proprietorship, the Owner's Capital account balance appears in:
     a.       The Owner's Equity section of the balance sheet.
     b.       The Asset section of the balance sheet.
     c.       The Liability section of the balance sheet.
     d.       Both the Asset and Owner's Equity sections of the balance sheet.

6.   Robert Pringle, a sole proprietor, invested $10,000 in his business to fund initial operations. This
     transaction will be reflected as a:
     a.      Debit to Cash and a credit to Note Payable.
     b.      Debit to Cash and a credit to Accounts Receivable.
     c.      Debit to Cash and a credit to Robert Pringle, Capital.
     d.      Debit to Cash and a credit to Fees Earned.

7.   Robert Pringle, a sole proprietor, borrowed $10,000 from a local bank. It will be repaid with
     interest over the next year. This transaction will be reflected as a:
     a.       Debit to Cash and a credit to Note Payable.
     b.       Debit to Cash and a credit to Accounts Receivable.
     c.       Debit to Cash and a credit to Robert Pringle, Capital.
     d.       Debit to Cash and a credit to Fees Earned.




                                               46
8.    Robert Pringle, a sole proprietor, repaid $2,000 of the $10,000 he recently borrowed from a local
      bank. The payment applied exclusively to the principal borrowed. This transaction will be
      reflected as a:
      a.      Debit to Note Payable and a credit to Robert Pringle, Capital.
      b.      Debit to Note Payable and a credit to Accounts Receivable.
      c.      Debit to Note Payable and a credit to Cash.
      d.      Debit to Notes Payable and a credit to Fees Earned.


9.    Robert Pringle, a sole proprietor, purchased Supplies on account for $2,500 during June. These
      items will be used over the next 18 months. This transaction will be recorded as a:
      a.      Debit to Supplies Expense and a credit to Cash.
      b.      Debit to Supplies Expense and a credit to Accounts Payable.
      c.      Debit to Supplies and a credit to Cash.
      d.      Debit to Supplies and a credit to Accounts Payable.

10.   Of the supplies purchased in question #9, $1,500 was used in the current year. The entry
      reflecting this consumption will include a:
      a.       Debit to Supplies
      b.       Debit to Supplies Expense
      c.       Credit to Supplies Expense
      d.       Credit to Supplies Revenue

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

12.   Ruth's Computer Consulting, a sole proprietorship, purchased supplies during July of $3,000 and
      recorded the acquisition as a debit to the asset account, Supplies. At the end of July, the supplies
      on hand at July 31 totaled $2,800. The amount to be recorded as Supplies Expense for July is:
      a.      $200
      b.      $2,800
      c.      $3,000
      d.      $5,800

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




                                                47
14.   Ruth's Computer Consulting is a sole proprietorship. Her Office Supplies account has a balance
      of $1,950 at the beginning of the year and was debited during the year for $5,600, representing
      the total of supplies purchased during the year. If $1,500 of supplies is on hand at the end of the
      year, the supplies expense to be reported on the income statement for the year is:
      a.       $1,500
      b.       $1,950
      c.       $5,600
      d.       $6,050

15.   Ruth's Computer Consulting is a sole proprietorship. She recently purchased Computer
      Equipment costing $15,000. One third was paid in cash and the remainder was on account. To
      record this entry, Ruth should include a:
      a.      Debit to Computer Equipment of $5,000.
      b.      Debit to Computer Equipment for $10,000.
      c.      Debit to Computer Equipment of $15,000.
      d.      Debit to Computer Expense of $10,000.

16.   Ruth's Computer Consulting is a sole proprietorship. She recently purchased Computer
      Equipment costing $15,000. One third was paid in cash and the remainder was on account. To
      record this entry, Ruth should include a:
      a.      Credit to Cash for $5,000.
      b.      Credit to Cash for $10,000.
      c.      Credit to Cash for $15,000.
      d.      Credit to Cash for some other amount.

17.   Ruth's Computer Consulting is a sole proprietorship. She recently purchased Computer
      Equipment costing $15,000. One third was paid in cash and the remainder was on account. To
      record this entry, Ruth should include a:
      a.      Credit to Accounts Payable for $5,000.
      b.      Credit to Accounts Payable for $10,000.
      c.      Credit to Accounts Payable for $15,000.
      d.      Credit to Accounts Payable for some other amount.

18.   Ruth's Computer Consulting is a sole proprietorship. During August, she billed clients $12,000
      for services rendered on account. To record this entry, Ruth should:
      a.       Debit Cash and credit Fees Earned.
      b.       Debit Accounts Receivable and credit Fees Earned.
      c.       Debit Cash and credit Accounts Receivable.
      d.       Debit Fees Earned and credit Cash.

19.   Ruth's Computer Consulting is a sole proprietorship. During September, she billed clients
      $15,000 for services rendered and received $10,000 in payment of prior Accounts Receivable.
      Ruth's entries for September should include a:
      a.      Debit to Cash for $5,000.
      b.      Debit to Cash for $10,000.
      c.      Debit to Cash for $15,000.
      d.      Debit to Cash for $25,000.



                                                48
20.   Ruth's Computer Consulting is a sole proprietorship. During September, she billed clients
      $15,000 for services rendered and received $10,000 in payment of prior Accounts Receivable.
      Ruth's entries for September should include a:
      a.      Debit to Accounts Receivable for $5,000.
      b.      Debit to Accounts Receivable for $10,000.
      c.      Debit to Accounts Receivable for $15,000.
      d.      Debit to Accounts Receivable for $25,000.

21.   A business paid $800 for rent. To record this transaction:
      a.     Rent Expense must be credited; Cash must be debited
      b.     Rent Expense must be debited; Cash must be credited
      c.     Cash debited; Rent Revenue must be credited
      d.     Cash credited; Rent Revenue must be debited

22.   A sole-proprietorship and its owners are distinct entities:
      a.      From a legal standpoint
      b.      From an accounting standpoint
      c.      From an accounting and legal standpoint
      d.      None of the above

23.   The account used by sole-proprietorships to record owner investments is:
      a.     Capital
      b.     Retained Earnings
      c.     Capital Stock
      d.     Drawings

24.   A business paid $100 to buy supplies. To record this transaction:
      a.     Supplies Expense must be credited
      b.     Supplies must be debited
      c.     Supplies must be credited
      d.     None of the above

25.   To record the payment of cash for inventory purchased on credit earlier:
      a.     Accounts Payable must be debited
      b.     Accounts Payable must be credited
      c.     Accounts Receivable must be debited
      d.     Accounts Receivable must be credited

26.   The account used to record withdrawals of cash by owners of sole-proprietorships is:
      a.     Capital
      b.     Retained Earnings
      c.     Capital Stock
      d.     Drawings




                                                49
27.   Owner investments in sole-proprietorships are recorded by:
      a.     Debiting Capital; crediting Cash
      b.     Debiting Cash; crediting Capital
      c.     Debiting Capital Stock; crediting Cash
      d.     Debiting Cash; crediting Capital Stock

28.   Which of the following accounts are increased by credits?
      a.     Supplies
      b.     Accounts Receivable
      c.     Inventory
      d.     Revenue

29.   Withdrawals of cash by owners of sole-proprietorships is recorded by:
      a.     Debiting Drawings; crediting Cash
      b.     Debiting Cash; crediting Drawings
      c.     Debiting Dividends; crediting Cash
      d.     Debiting Cash; crediting Dividends

30.   A business paid salaries of $1,800 for November. To record this transaction:
      a.     Salaries Expense must be credited
      b.     Salaries Expense must be debited
      c.     Cash must be debited
                                          d.     None of the above




                                               50
                                            MODULE 2
                                           Corporations


                                    Demonstration Problem 1
                                         Music Stop

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

Apr. 2     Music Stop issued stock for $10,000.
Apr. 2     The company signed a two year note for $40,000.
Apr. 4     Merchandise costing $20,000 was purchased on credit.
Apr. 9     The company paid $12,000 for equipment.
Apr. 11    Goods were sold to customers for $5,500.
Apr. 11    The cost of the goods sold in the previous transaction was $3,000.
Apr. 17    Employees were paid $1,000 in wages.
Apr. 22    The company paid the utility bill of $100.
Apr. 24    A payment of $5,000 was made for the merchandise purchased previously.
Apr. 30       Music Stop declared and paid dividends of $1,000.


 DATE                   ACCOUNT            DEBIT       CREDIT
 2000
 Apr. 2     Cash                            10,000
             Capital Stock                               10,000
 Apr. 2     Cash                            40,000
             Notes Payable                               40,000
 Apr. 4     Inventory                       20,000
             Accounts Payable                            20,000
 Apr. 9     Equipment                       12,000
             Cash                                        12,000
 Apr. 11    Cash                             5,500
               Sales Revenue                              5,500
 Apr. 11    Cost of Goods Sold               3,000
              Inventory                                   3,000
 Apr. 17    Wages Expense                    1,000
             Cash                                         1,000
 Apr. 22    Utilities Expense                  100
             Cash                                           100
 Apr. 24    Accounts Payable                 5,000
             Cash                                         5,000
 Apr. 30    Dividends                        1,000
              Cash                                        1,000




                                                51
                                          Practice Problem 1
                                        Downtown Fitness Center

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

Apr. 2        $5,000 was borrowed from a bank.
Apr. 2        Purchased equipment on credit for $10,000.
Apr. 4        Purchased supplies for $200. Paid cash.
Apr. 9        Services were provided to customers on credit for $3,500.
Apr. 11       Paid the utilities bill of $105 for April.
Apr. 15       Paid employees’ salaries of $1,000 for April.
Apr. 17       Rent of $600 was paid for April.
Apr. 28       $2,500 was paid to the supplier for the equipment purchased previously.
Apr. 30       $1,500 was collected from customers for services provided previously


          DATE                  ACCOUNT          DEBIT       CREDIT
          2000
          Apr. 2    Cash                           5,000
                     Notes Payable                              5,000
          Apr. 2    Equipment                     10,000
                     Accounts Payable                          10,000
          Apr. 4    Supplies                         200
                     Cash                                         200
          Apr. 9    Accounts Receivable            3,500
                     Service Revenue                            3,500
       Apr. 11      Utilities Expense                105
                     Cash                                         105
       Apr. 15      Salaries Expense               1,000
                     Cash                                       1,000
       Apr. 17      Rent Expense                     600
                     Cash                                         600
       Apr. 28      Accounts Payable               2,500
                     Cash                                       2,500
       Apr. 30      Cash                           1,500
                     Accounts Receivable                        1,500




                                                  52
                                           Practice Assignment 2
                                         O’Grady Building Supplies

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

July 1            The owners started the business by investing $50,000. O’Grady Building
                  Supplies issued stock for $50,000.
July 2        The business purchased inventory on credit for $22,500.
July 5        The business purchased supplies for $500.
July 31           Goods were sold to customers for $18,000. The customers paid cash.
July 31       The cost of goods sold for the month was $13,500.
July 31       Supplies costing $100 was used during the month.
July 31           Rent of $1,800 was paid for July.
July 31       $6,000 was paid to suppliers for inventory purchased previously.


          DATE                 ACCOUNT           DEBIT      CREDIT
          2000
          Jul. 1    Cash                         50,000
                     Capital Stock                           50,000
          Jul. 2    Inventory                    22,500
                      Accounts Payable                       22,500
          Jul. 5    Supplies                        500
                     Cash                                       500
          Jul. 31   Cash                         18,000
                     Sales Revenue                           18,000

          Jul. 31   Cost of Goods Sold           13,500
                     Inventory                               13,500
         Jul. 31    Supplies Expense                100
                     Supplies                                   100
          Jul. 31   Rent Expense                   1,800
                     Cash                                      1,800
          Jul. 31   Accounts Payable               6,000
                     Cash                                      6,000




                                                  53
                                          Homework Problem 1
                                         Osborne Office Supplies

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

Jan. 1        $15,000 was borrowed by issuing a note payable.
Jan. 2        Merchandise costing $3,000 was purchased on credit.
Jan. 4        Office supplies were sold to customers on credit for $2,000.
Jan. 4        The cost of the supplies sold was $1,100.
Jan. 11       Goods were sold to customers for $2,700 for cash.
Jan. 11       The cost of the goods sold in the previous transaction was $1,400.
Jan. 17       Paid $2,000 to the supplier for the merchandise purchased previously.
Jan. 18       $600 of accounts receivable was collected.
Jan. 22       Rent of $600 was paid for January.
Jan. 28       $100 was paid for utilities for January.
Jan. 29       Employees were paid $800 for wages.

          DATE                  ACCOUNT          DEBIT       CREDIT
          2000
          Jan. 1    Cash                          15,000
                     Notes Payable                             15,000
          Jan. 2    Inventory                      3,000
                      Accounts Payable                          3,000
          Jan. 4    Accounts Receivable            2,000
                     Sales Revenue                              2,000
          Jan. 4    Cost of Goods Sold             1,100
                      Inventory                                 1,100
          Jan. 11   Cash                           2,700
                     Sales Revenue                              2,700
          Jan. 11   Cost of Goods Sold             1,400
                      Inventory                                 1,400
          Jan. 17   Accounts Payable               2,000
                     Cash                                       2,000
          Jan. 18   Cash                             600
                      Accounts Receivable                         600
          Jan. 22   Rent Expense                     600
                      Cash                                        600
          Jan. 28   Utilities Expense                100
                      Cash                                        100
          Jan. 29   Wages Expense                    800
                      Cash                                        800




                                                  54
                                          Homework Problem 2
                                            Discount Books

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

Sept. 1       Boston Bank loaned the firm $16,000 in exchange for the firm's one year note payable.
Sept. 2       Merchandise costing $8,000 was purchased on 30-day credit.
Sept. 5       Goods were sold for $3,000 in cash.
Sept. 5       The cost of the goods sold was $2,000.
Sept. 9       Employees were paid $1,000 in wages.
Sept. 12      A payment of $2,000 was made for the merchandise purchased previously.
Sept. 16      Goods were sold for cash totaling $4,500.
Sept. 16      The cost of the goods sold was $3,000.
Sept. 22      $1,800 of notes payable was paid.
Sept. 28      A payment of $800 was made for rent.

       DATE                     ACCOUN        DEBIT      CREDIT
                    T
           2000
       Sept. 1      Cash                      16,000
                     Notes Payable                         16,000
       Sept. 2      Inventory                   8,000
                     Accounts Payable                       8,000
       Sept. 5      Cash                        3,000
                     Sales Revenue                          3,000
       Sept. 5      Cost of Goods Sold          2,000
                     Inventory                              2,000
       Sept. 9      Wages Expense               1,000
                     Cash                                   1,000
      Sept. 12      Accounts Payable            2,000
                     Cash                                   2,000
      Sept. 16      Cash                        4,500
                     Sales Revenue                          4,500
      Sept. 16      Cost of Goods Sold          3,000
                     Inventory                              3,000
      Sept. 22      Notes Payable               1,800
                     Cash                                   1,800
      Sept. 28      Rent Expense                 800
                     Cash                                     800




                                                  55
                                       Homework Problem 3
                                       The Audio Exchange

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

Nov. 1        Audio exchange issued stock for $12,000.
Nov. 1        Supplies were purchased for $500.
Nov. 4        An inventory of audio equipment was purchased on credit for $15,000.
Nov. 7        $700 was paid for advertising that appeared in the paper during the month.
Nov. 8     $120 was paid for repairs.
Nov. 10       $6,000 was paid to the supplier for the inventory purchased earlier.
Nov. 12       Services provided to clients for cash totaled $3,300.
Nov. 16       Services totaling $2,500 were performed on credit.
Nov. 18       Audio equipment was sold to customers for $4,000.
Nov. 24       The cost of the equipment sold was $2,500.
Nov. 24       $200 of the supplies were used during the month.
Nov. 30       Audio Exchange declared and paid dividends of $1,000.


       DATE                  ACCOUNT         DEBIT     CREDIT
       2000
       Nov. 1    Cash                        12,000
                  Capital Stock                          12,000
       Nov. 1    Supplies                       500
                   Cash                                     500
       Nov. 4    Inventory                   15,000
                   Accounts Payable                      15,000
       Nov. 7    Advertising Expense            700
                   Cash                                     700
      Nov. 8     Repairs Expense                120
                   Cash                                     120
     Nov. 10     Accounts Payable             6,000
                   Cash                                   6,000
     Nov. 12     Cash                         3,300
                   Service Revenue                        3,300
     Nov. 16     Accounts Receivable          2,500
                  Service Revenue                         2,500
     Nov. 18     Cash                         4,000
                   Sales Revenue                          4,000
     Nov. 24     Cost of Goods Sold           2,500
                   Inventory                              2,500
     Nov. 24     Supplies Expense               200
                   Supplies                                 200
     Nov. 30     Dividends                    1,000
                  Cash                                    1,000




                                                56
                                             Homework Problem 4
                                             Hoffman Consulting

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

Oct. 1              The owners started the business by investing $25,000. Hoffman Consulting Inc. issued
                    stock for $25,000.
Oct. 5              A computer system was purchased for $2,000 on credit.
Oct. 10             $400 was paid for office supplies.
Oct. 17             Services were performed for $2,500 on credit.
Oct. 21             $1,000 was paid for the computer purchased previously.
Oct. 31             Services were performed for $8,000. The customers paid cash.
Oct. 31             $275 was paid for advertisements in October.
Oct. 31             $155 was paid for utilities for October.
Oct. 31             Supplies costing $135 were used in October.
Oct. 31             Customers paid $1,500 for services performed previously on credit.
Oct. 31             $1,800 was paid as rent for the office for October.


          DATE                   ACCOUNT         DEBIT    CREDIT
          2000
          Oct. 1      Cash                       25,000
                       Capital Stock                        25,000
          Oct. 5      Computer                    2,000
                       Accounts Payable                       2,000
          Oct. 10     Supplies                      400
                       Cash                                    400
          Oct. 17     Accounts Receivable         2,500
                       Service Revenue                        2,500
         Oct. 21      Accounts Payable            1,000
                       Cash                                   1,000
         Oct. 31      Cash                        8,000
                       Service Revenue                        8,000
          Oct. 31     Advertising Expense           275
                       Cash                                    275
         Oct. 31      Utilities Expense             155
                       Cash                                    155
         Oct. 31      Supplies Expense              135
                       Supplies                                135
         Oct. 31      Cash                        1,500
                       Accounts Receivable                    1,500
         Oct. 31      Rent Expense                1,800
                       Cash                                   1,800




                                                   57
                                           Homework Quiz
                                            Corporations

1.   Which organizational form allows the business to be a separate, distinct entity from the owners?
     a.     Proprietorship
     b.     Partnership
     c.     Corporation
     d.     All of the above

2.   The Retained Earnings account is unique to which of the following forms of business organization?
     a.     Partnership
     b.     Proprietorship
     c.     Corporation
     d.     A Retained Earnings account is used in all of the above choices.

3.   The issuance of a cash dividend:
     a.      Increases a corporation's retained earnings balance.
     b.      Decreases the value of outstanding stock.
     c.      Increases the number of shares of outstanding stock.
     d.      Decreases a corporation's retained earnings balance.

4.   Which of the following is true of a corporation's Retained Earnings account?
     a.     It usually equals cash on hand.
     b.     It includes all of the Corporation's Liabilities.
     c.     It includes the transfer of dividends declared during the period.
     d.     It is shown as a section of the corporation's income statement.

5.   A corporation issuing only one class of stock will usually title it:
     a.     Common Stock
     b.     Treasury Stock
     c.     No-par Stock
     d.     Preferred Stock

6.   Bob and Ray recently purchased shares of BR, Incorporated, a corporation, for $100,000 each. This
     transaction will consist of the following entries to BR, Incorporated's records:
     a.       Debit Accounts Receivable; credit Capital Stock
     b.       Debit Cash; credit Accounts Payable
     c.       Debit Cash; credit Capital Stock
     d.       Debit Accounts Receivable; credit Accounts Payable

7.   Bob and Ray organized BR, Incorporated, a corporation for which they are the only stockholders.
     At the end of the first year of operations, they elect to withdraw dividends in the amount of $2,000
     each. This transaction will consist of the following entries on BR Incorporated's records:
     a.      Debit Drawing; credit Cash
     b.      Debit Wages Expense; credit Cash
     c.      Debit Capital Stock; credit Cash
     d.      Debit Dividends; credit Cash




                                                 58
8.    Bob and Ray have just purchased shares of BR, Incorporated, a corporation, for $100,000 each.
      This transaction will impact the corporation's Stockholders' Equity by what amount?
      a.      $ -0-
      b.      $ 100,000
      c.      $ 200,000
      d.      Some other amount.

9.    Which of the following properly reflects the transaction to record a Corporation's issuance of stock?
      a.     Capital Stock: Credit; Cash: Debit
      b.     Capital Stock: Debit; Cash: Debit
      c.     Capital Stock: Credit; Cash: Credit
      d.     Capital Stock: Debit; Cash: Credit

10.   Which of the following properly reflects a Corporation's issuance of stock on the Capital Stock and
      Dividends accounts?
      a.     Capital Stock: Increases; Dividends: Decreases
      b.     Capital Stock: Increases; Dividends: No effect
      c.     Capital Stock: No effect; Dividends: Increases
      d.     Capital Stock: Decreases; Dividends: Increases

11.   BR, Incorporated, a corporation, pays $4,000 in dividends. This $4,000 payment will:
      a.      Increase the Cash account.
      b.      Increase the Dividends account.
      c.      Increase the Capital Stock account.
      d.      Decrease the Capital Stock account.

12.   BR, Incorporated, a corporation, pays $4,000 in dividends. This $4,000 payment will be recorded
      as a:
      a.      Dividends: Credit; Cash: Debit
      b.      Dividends: Debit; Cash: Credit
      c.      Dividends: No effect; Cash: No effect
      d.      Dividends: Debit; Cash: No effect

13.    BR, Incorporated, a corporation, has a $100,000 Capital Stock balance at the beginning of the year.
      Additional Common Stock of $45,000 was issued during the year. The Capital Stock balance at the
      end of the year is:
      a.       $ 145,000
      b.       $ 100,000
      c.       $ 55,000
      d.       $ 45,000

14.   BR, Incorporated issued $100,000 in Capital Stock to each of its two shareholders. The
      Corporation paid Dividends of $20,000 during the year. The balance in the Capital Stock account at
      the end of the year is:
      a. $ 220,000
      b. $ 200,000
      c. $ 120,000
      d. $ 100,000




                                                59
15.   Carriage Company, Inc.'s Capital Stock balance was $38,000 on December 31, 2001. Additional
      stock of $13,000 was issued during the year. Carriage's Capital Stock balance on January 1, 2001
      was:
      a.       $51,000
      b.       $38,000
      c.       $25,000
      d        $13,000

16.   StarCo, a newly formed corporation, paid its office rental for the month of April 2001. What
      accounts are impacted by this transaction?
      a.      Debit Dividends; credit Capital Stock
      b.      Debit Rent Revenue; credit Cash
      c.      Debit Drawings; credit Capital Stock
      d.      Debit Rent Expense; credit Cash

17.   StarCo, a newly formed corporation, purchased Inventory on account from a vendor. What
      accounts are impacted by this transaction?
      a.      Debit Inventory; credit Cash
      b.      Debit Inventory; credit Accounts Payable
      c.      Debit Drawings; credit Cash
      d.      Debit Drawings; credit Accounts Payable

18.   The corporation, Joe's Discount Furniture, recorded sales for the month of May 2001 amounting to
      $200,000. Sixty percent (60%) of these sales were on account. As a result of this transaction, Joe's
      Accounts Receivable account will increase by:
      a.     $ -0-
      b.     $ 80,000
      c.     $120,000
      d.     $200,000

19.   The corporation, Joe's Discount Furniture, recorded sales for the month of May 2001 amounting to
      $200,000. Sixty percent (60%) of these sales were on account. As a result of this transaction, Joe's
      Revenue account will increase by:
      a.     $ -0-
      b.     $ 80,000
      c.     $120,000
      d.     $200,000

20.   The corporation, Joe's Discount Furniture, recorded sales for the month of May 2001 amounting to
      $200,000. Sixty percent (60%) of these sales were on account. As a result of this transaction, how
      will the following accounts be impacted?
      a.       Cash: $ -0-; Capital Stock: $200,000 increase
      b.       Cash: $ 80,000 increase; Capital Stock: No effect
      c.       Cash: $120,000 increase; Capital Stock: No effect
      d.       Cash: $200,000 increase; Capital Stock: $200,000 increase




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21.   A corporation and its' owners are distinct entities:
      a.     From a legal standpoint
      b.     From an accounting standpoint
      c.     From an accounting and legal standpoint
      d.     None of the above

22.   After analyzing a transaction, it is recorded in:
      a.      The general ledger
      b.      The general journal
      c.      T-accounts
      d.      Trial balance

23.   The account used by corporations to record owner investments is:
      a.     Capital
      b.     Retained Earnings
      c.     Capital Stock
      d.     Drawings

24.   Which of the following accounts is debited for increases?
      a.     Capital
      b.     Retained Earnings
      c.     Capital Stock
      d.     Dividends

25.   The account used by corporations to record reinvested profits is:
      a.     Capital
      b.     Retained Earnings
      c.     Capital Stock
      d.     Drawings

26.    Which of the following accounts is debited for decreases?
      a.     Capital
      b.     Cash
      c.     Dividends
      d.     Drawings

27.   To record the repayment of a loan to a creditor:
      a.     Notes Payable must be credited
      b.     Cash must be debited
      c.     Notes Payable must be debited
      d.     Both a and b are correct




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28.   Owner investments in corporations are recorded by:
      a.     Debiting Capital; crediting Cash
      b.     Debiting Cash; crediting Capital
      c.     Debiting Capital Stock; crediting Cash
      d.     Debiting Cash; crediting Capital Stock

29.   To record the sale of goods to customers on credit:
      a.     Accounts Payable must be debited
      b.     Accounts Payable must be credited
      c.     Accounts Receivable must be debited
      d.     Accounts Receivable must be credited

30.   The distribution of cash to investors of corporations are recorded by:
      a.      Debiting Drawings; crediting Cash
      b.      Debiting Cash; crediting Drawings
      c.      Debiting Dividends; crediting Cash
      d.      Debiting Cash; crediting Dividends




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