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Exam 2: Analyzing and Recording Transactions

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Question 51

Multiple Choice

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A law firm collected $1,800 on account for work performed in the previous month. Which of the following general journal entries will the firm make to record this transaction?

A) Debit Accounts Receivable, $1,800; credit Legal Fees Revenue, $1,800.
B) Debit Cash, $1,800; credit Unearned Legal Fees Revenue, $1,800.
C) Debit Cash, $1,800; credit Accounts Receivable, $1,800.
D) Debit Legal Fees Revenue, $1,800; credit Accounts Receivable, $1,800.
E) Debit Accounts Receivable, $1,800; credit Unearned Legal Fees Revenue, $1,800.

F) All of the above
G) B) and C)

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Question 52

Multiple Choice

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The chronological record of each complete transaction that has occurred is called the:

A) Journal.
B) Trial balance.
C) Ledger.
D) Account balance.
E) Cash account.

F) A) and E)
G) A) and D)

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Question 53

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Identify the statement below that is correct.

The general journal is known as the book of final entry because financial statements are prepared from it.

The balance sheet reports the financial position of a company at a point in time.

A company's list of accounts and the identification numbers assigned to each account is called a:

ABC Catering received $800 cash from a customer for catering services to be provided next month. Given the choices below, determine the general journal entry that ABC Catering will make to record the cash receipt. Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts. A) $\begin{array}{|l|r|r|}\hline \text { Cash } & 800 & \\\hline \text { Unearned Catering Revenue } & & 800 \\\hline\end{array}$ B) $\begin{array}{|l|r|r|}\hline \text { Accounts Receivable } & 800 & \\\hline \text { Catering Revenue } & & 800 \\\hline\end{array}$ C) $\begin{array}{|l|r|r|}\hline \text { Cash } & 800 & \\\hline \text { Accounts Receivable } & & 800 \\\hline\end{array}$ D) $\begin{array}{|l|r|r|}\hline \text { Unearned Catering Revenue } & 800 & \\\hline \text { Catering Revenue } & & 800 \\\hline\end{array}$ $\begin{array}{l}\text { E) }\\\begin{array} { | l | r | r | } \hline \text { Cash } & 800 & \\\hline \text { Catering Revenue } & & 800 \\\hline\end{array}\end{array}$

On February 5, Teddy's Catering purchased an oven 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.

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

Prepaid accounts (also called prepaid expenses) are generally:

A transaction that decreases a liability and increases an asset must also affect one or more other accounts.

Drew Castle is an insurance appraiser. Shown below are (a)several accounts in his ledger with each account preceded by an identification number, and (b)several transactions completed by Castle. Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction. $\begin{array} { l l} \text {1. Accounts Payable }& \text { 8. Office Supplies Expense} \\ \text {2. Accounts Receivable }& \text {9. Prepaid Insurance } \\ \text {3. Appraisal Fees Earned }& \text {10. Salaries Expense } \\ \text {4. Cash }& \text {11. Telephone Expense } \\ \text {5. Insurance Expense }& \text { 12. Unearned Appraisal Fees} \\ \text {6. Office Equipment }& \text { 13. Drew Castle, Capital} \\ \text { 7. Office Supplies}& \text {14. Drew Castle, Withdrawals } \\\end{array}$ $\begin{array} { ll }& \text {Example: } \\& \text {Completed an appraisal tor a client who promised to } \\& \text {pay at a later date. } \\& \text {Received cash in advance for appraising a hail damage } \\ \text { A.}& \text { claim} \\& \text {Purchased office supplies on credit } \\ \text { B.}& \text {Drew Castle used cash from the business to pay his } \\& \text {home telephone bill. There were no business calls on } \\ \text { C.}& \text { the bill.} \\& \text {Received the telephone bill of the business and } \\ \text {D. }& \text {immediately paid it } \\ \text {E. }& \text { Paid the salary of the office assistant.} \\ \text {F. }& \text { Paid for the supplies purchased in transaction} \\&B\\ \text {G. }& \text { Completed an sppraisal for a client and immediately } \\& \text {collected cash for the work done. } \\\end{array}$ $\begin{array}{c|c}\hline \text { Debit } & \text { Credit } \\\hline & \\\hline 2 & 3 \\\hline & \\\hline & \\\hline & \\\hline & \\\hline & \\\hline & \\\hline\end{array}$

The record of all accounts and their balances used by a business is called a:

If a company is highly leveraged, this means that it has relatively high risk of not being able to repay its debt.

Paul's Landscaping purchased $500 of office supplies on credit. The company's policy is to initially record prepaid and unearned items in balance sheet accounts. Which of the following general journal entries will Paul's Landscaping make to record this transaction?

Review the transactions below and identify with an "X" those that would be posted as a credit in the ledger (The first one has been done for you): _ X_ 1. Salary Payable was increased. _____2. Cash was decreased _____3. Equipment was increased _____4. Owner, Capital was increased _____5. Salaries Expense was increased _____6. Accounts Receivable was decreased _____7. Unearned Revenue was increased _____8. Owner, Withdrawals was increased _____9. Supplies was increased _____10. Building was increased _____11. Utilities Expense was increased _____12. Service Revenue was increased

Posting is the transfer of journal entry information to the ledger.

Identify each of the following accounts. Match of the following

Booth Industries has liabilities of $105 million and total assets of $350 million. Its debt ratio is 40.0%.

A general journal gives a complete record of each transaction in one place, and shows the debits and credits for each transaction.