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Exam 2: Analyzing and Recording Transactions

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Question 31

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Describe the link between the income statement, the statement of owner's equity, and the balance sheet.

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The income statement shows the amount of...

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Question 32

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Which financial statement reports an organization's financial position at a point in time?

A) Income statement.
B) Balance sheet.
C) Statement of owner's equity.
D) Cash flow statement.
E) Trail balance.

F) B) and D)
G) C) and E)

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Question 33

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The right side of a T-account is a(n) :

An owner's capital account normally has a debit balance.

Source documents:

An asset created by prepayment of an expense is:

A company had total assets of $350,000 and total liabilities of $101,500 and total equity of $248,500. Calculate its debt ratio.

Source documents include all of the following except:

At year-end, Harris Cleaning Service noted the following errors in its trial balance: 1. It understated the total debits to the Cash account by $500 when computing the account balance. 2. A credit sale for $311 was recorded as a credit to the revenue account, but the offsetting debit was not posted. 3. A cash payment to a creditor for $2,600 was never recorded. 4. The $680 balance of the Prepaid Insurance account was listed in the credit column of the trial balance. 5. A $24,900 truck purchase was recorded as a $24,090 debit to Vehicles and a $24,090 credit to Notes Payable. 6. A purchase of office supplies for $150 was recorded as a debit to Office Equipment. The offsetting credit entry was correct. 7. An additional investment of $4,000 by Del Harris was recorded as a debit to Del Harris, Capital and as a credit to Cash. 8. The cash payment of the $510 utility bill for December was recorded (but not paid) twice. 9. The revenue account balance of $79,817 was listed on the trial balance as $97,817. 10. A $1,000 cash withdrawal was recorded as a $100 debit to Del Harris, Withdrawal and $100 credit to cash. Using the form below, indicate whether each error would cause the trial balance to be out of balance, the amount of any imbalance, and whether a correcting journal entry is required.

At the beginning of the current year, Taunton Company's total assets were $248,000 and its total liabilities were $175,000. During the year, the company reported total revenues of $93,000, total expenses of $76,000 and owner withdrawals of $5,000. There were no other changes in owner's capital during the year and total assets at the end of the year were $260,000. Taunton Company's debt ratio at the end of the current year is:

Based on the following trial balance for Smyth's Repair Shop, prepare an income statement, statement of owner's equity, and a balance sheet. Smyth made no additional investments in the company during the year.

The journal is known as a book of original entry.

The higher a company's debt ratio is, the higher the risk of a company not being able to meet its obligations.

Andrea Conaway opened Wonderland Photography on January 1 of the current year. During January, the following transactions occurred and were recorded in the company's books: Conaway invested $13,500 cash in the business. 2) Conaway contributed $20,000 of photography equipment to the business. 3) The company paid $2,100 cash for an insurance policy covering the next 24 months. 4) The company received $5,700 cash for services provided during January. 5) The company purchased $6,200 of office equipment on credit. 6) The company provided $2,750 of services to customers on account. 7) The company paid cash of $1,500 for monthly rent. 8) The company paid $3,100 on the office equipment purchased in transaction #5 above. 9) Paid $275 cash for January utilities. Based on this information, the balance in the cash account at the end of January would be:

A column in journals and ledger accounts used to cross reference journal and ledger entries is the:

Identify whether a debit or credit yields the indicated change for each of the following accounts.

During the month of February, Hoffer Company had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the January 31 beginning cash balance?

On February 5, Textron Stores purchased a van that cost $35,000. The firm made a down payment of $5,000 cash and signed a long-term note payable for the balance. Show the general journal entry to record this transaction.

An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.

Krenz Car Care, owned and operated by Karl Krenz, began business in September of the current year. Karl, a master mechanic, had no experience with keeping a set of books. As a result, Karl entered all of September's transactions directly to the ledger accounts. When he tried to locate a particular entry he found it confusing and time consuming. He has hired you to improve his accounting procedures. The accounts in his General Ledger follow: Prepare the general journal entries, in chronological order (a) through (e), from the T-account entries shown. Include a brief description of the probable nature of each transaction.