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Exam 13: The Double-Entry Accounting System

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Question 1

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Are liability accounts increased by debits or credits?

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CreditsDebits decrease liabili...

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Question 2

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Benson Company purchased land and paid the full purchase price in cash. Which of the following would be included in the journal entry necessary to record this event?

A) A debit to Land and a debit to Cash
B) A debit to Cash and a credit to Land
C) A credit to Land and a credit to Cash
D) A debit to Land and a credit to Cash

E) A) and C)
F) B) and C)

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Question 3

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A transaction has been recorded in the journal of Davis Company as follows: Which of the following describes the effect of this transaction on the company's financial statements?

Manhattan Company recorded an adjusting entry to accrue interest owed of $1,200 as of December 31, Year 1. When the related note was paid during Year 2, the company paid $2,250 in interest. Which of the following journal entries correctly records this Year 2 transaction? (Assume that the entry to record the payment of the note itself was recorded in a separate journal entry.)

Packard Company engaged in the following transactions during Year 1, its first year of operations: (Assume all transactions are cash transactions.) 1) Acquired $1,020 cash from the issue of common stock.2) Borrowed $490 from a bank.3) Earned $790 of revenues.4) Paid expenses of $320.5) Paid a $85 dividend. During Year 2, Packard engaged in the following transactions: (Assume all transactions are cash transactions.) 1) Issued an additional $395 of common stock.2) Repaid $290 of its debt to the bank.3) Earned revenues of $820.4) Incurred expenses of $430.5) Paid dividends of $170. What was the balance of Packard's Retained Earnings account before closing in Year 1?

Indicate how each event affects the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts. Increase = I Decrease = DNot Affected = NA An adjusting entry recorded as a debit to Supplies Expense and a credit to Supplies.

Consider the following list of transactions: 1)Provide services to customers on account2)Purchase land by paying cash.3)Purchase a fire insurance policy that will provide coverage for a two-year period4)Acquire cash by issuing common stock.5)Recognize expense for the amount of supplies that had been used during the period6)Receive payment from a customer for services that will be provided over the next six monthsRequired:a)In the table below, indicate the accounts that would be debited and credited for each of the transactions listed above. b)Indicate how each transaction affects the financial statements using a "+" to signify an increase, "−" to signify a decrease, or "NA" to signify not affected under each component in the horizontal financial statements model shown below. In the last column, use the letters "OA" for operating activities, "IA" for investing activities, and "FA" for financing activities, or "NA" if the statement of cash flows is not affected.

Callahan Corporation recorded an adjusting entry using T-accounts as follows: Which of the following reflects how this adjustment affects the company's financial statements?

Warren Company began the accounting period with a $32,000 debit balance in its accounts receivable account. During the accounting period, the company recorded revenue on account amounting to $88,000. The accounts receivable account at the end of the accounting period contained a $16,000 debit balance. Based on this information, what is the amount of cash collected from customers during the period?

The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: What is the amount of total assets that will be reported on the balance sheet as of December 31, Year 1?

Indicate how each event affects the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts. Increase = I Decrease = DNot Affected = NA An adjusting entry recorded as a debit to Depreciation Expense and a credit to Accumulated Depreciation.

On October 1, Year 1, Senegal Company paid $1,200 in advance for rent of office space for one year and recorded a journal entry debiting Prepaid Rent and crediting Cash for $1,200. On December 31, Year 1, the required adjusting entry was recorded. What are the adjusted account balances at December 31, Year 1?

The following is a trial balance of Barnhart Company as December 31, Year 1: What is the total amount of assets that will be reported on the balance sheet prepared as of December 31, Year 1?

The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: The amount of Carolina's retained earnings on December 31, Year 1 was:

Natalie Preston had the following transactions for Preston Business Services for Year 1: 1)Provided services on account for $30,000.2)Purchased $7,500 of supplies on account.3)At the end of the year, an adjusting entry was prepared for the supplies that had been used. The amount of supplies still on hand was $750. Required: a)Fill in the three components of the accounting equation. Then, show the effect of each of these three events on the accounting equation by entering the dollar amounts in the appropriate columns. (Put parentheses around amounts that decrease a component of the accounting equation.)

The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: What is the amount of total assets that will be reported on the balance sheet as of December 31, Year 1?

A transaction has been recorded in the general journal of Manella Company as follows: Which of the following could be an explanation for this transaction?

Assume that a company recorded the following journal entry, with regards to the impact of this journal entry. a)_____ Net income decreasesb)_____ Total assets decreasec)_____ Total liabilities stay the samed)_____ Cash flows from investing activities decreasee)_____ Stockholders' equity decreases

The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: What is the amount of net income that will be reported on the Year 1 income statement?

Kincaid Company provided consulting services of $4,500 to a customer who paid $2,300 and promised to pay the remainder next month. Which of the following journal entries correctly records this transaction?