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Exam 2: Analyzing and Recording Transactions

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Question 91

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Able Graphics received a $400 utility bill for the current month's electricity. It is not due until the end of the next month which is when they intend to pay it. Which of the following general journal entries will Able Graphics make to record this transaction? A) $\begin{array}{|l|l|l|}\hline \text { No journal entry is required } & & \\\hline & & \\\hline\end{array}$ B) $\begin{array}{|l|r|r|}\hline \text { Utilities Expense } & 400 & \\\hline \text { Cash } & & 400 \\\hline\end{array}$ C) $\begin{array}{|l|r|r|}\hline \text { Utilities Expense } & 400 & \\\hline \text { Accounts Payable } & & 400 \\\hline\end{array}$ D) $\begin{array}{|l|r|r|}\hline \text { Accounts Payable } & 400 & \\\hline \text { Utilities Expense } & & 400 \\\hline\end{array}$ $\begin{array}{l}\text { E) }\\\begin{array} { | l | r | r | } \hline \text { Cash } & 400 & \\\hline \text { Utilities Expense } & & 400 \\\hline\end{array}\end{array}$

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Question 92

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The right side of an account is called the debit side.

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Question 93

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List the steps in processing transactions.

A law firm billed a client $1,800 for work performed in the current month. Which of the following general journal entries will the firm make to record this transaction?

Geraldine Parker, the owner of Gi Gi's Dance Studio, started the business by investing $10,000 cash and donating a building worth $20,000. Identify the general journal entry below that Gi Gi's will make to record the transaction. $\begin{array}{l}\text { A) }\\\begin{array} { | l | r | r | } \hline \text { Cash } & 10,000 & \\\hline \text { G. Parker, Capital } & & 30,000 \\\hline\end{array}\end{array}$ B) $\begin{array}{|l|r|r|}\hline \text { Cash \& Building } & 30,000 & \\\hline \text { G. Parker, Capital } & & 30,000 \\\hline\end{array}$ C) $\begin{array}{|l|r|r|}\hline \text { Owner's Investments } & 30,000 & \\\hline \text { G. Parker, Capital } & & 30,000 \\\hline\end{array}$ D) $\begin{array}{|l|r|r|}\hline \text { Cash } & 10,000 & \\\hline \text { Building } & 20,000 & \\\hline \text { G. Parker, Capital } & & 30,000 \\\hline\end{array}$ E) $\begin{array}{|l|r|r|}\hline \text { G. Parker, Capital } & 30,000 & \\\hline \text { Cash } & & 10,000 \\\hline \text { Building } & & 20,000 \\\hline\end{array}$

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

Owner investments always decrease equity.

The debt ratio of Company A is .31 and the debt ratio of Company B is .21. Based on this information, an investor can conclude:

The financial statement that summarizes the changes in an owner's capital account is called the balance sheet.

A debit is used to record which of the following:

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

J. Smith withdrew $100 from Jay's Limo Services for personal use. Which of the following general journal entries will Jay's Limo Services make to record this transaction? A) $\begin{array}{|l|r|r|}\hline \text { J. Smith, Capital } & 100 & \\\hline \text { J. Smith, Withdrawals } & & 100 \\\hline\end{array}$ B) $\begin{array}{|l|r|r|}\hline \text { J. Smith, Withdrawals } & 100 & \\\hline \text { J. Smith, Capital } & & 100 \\\hline\end{array}$ C) $\begin{array}{|l|r|r|}\hline \text { Cash } & 100 & \\\hline \text { J. Smith, Withdrawals } & & 100 \\\hline\end{array}$ D) $\begin{array}{|l|r|r|}\hline \text { Cash } & 100 & \\\hline \text { J. Smith, Capital } & & 100 \\\hline\end{array}$ $\begin{array}{l}\text { E) }\\\begin{array} { | l | r | r | } \hline \text { J. Smith, Withdrawals } & 100 & \\\hline \text { Cash } & & 100 \\\hline\end{array}\end{array}$

A journal entry that affects no more than two accounts is called a compound entry.

Neither U.S. GAAP nor IFRS require the use of accrual basis accounting.

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

The trial balance can serve as a replacement for the balance sheet, since total debits must equal total credits.

When a company provides services for which cash will not be received until some future date, the company should record the amount billed as accounts receivable.

A customer's promise to pay on credit is classified as an account payable by the seller.