In order for a transaction to be recorded in a business’ accounting records, the effects of the transaction must be faithfully represented. What is faithful representation, and why is it important?
> Which of the following statements are true? I. A journal provides a chronological record of a transaction. II. A journal entry contains the complete effect of a transaction. III. The first step in preparing a journal entry involves analyzing the transact
> Debits will: a. increase assets, expenses, and dividends. b. decrease liabilities, revenues, and dividends. c. increase assets, liabilities, revenues, expenses, and dividends. d. decrease assets, liabilities, revenues, expenses, and dividends.
> Which of the following statements are true? I. Debits represent decreases, and credits represent increases. II. Debits must always equal credits. III. Assets have normal debit balances while liabilities and stockholders’ equity have normal credit balance
> Which of the following statements is false? a. The left side of a T-account is called the credit side. b. All T-accounts have both a debit and a credit side. c. Transactions are frequently analyzed using a T-account. d. The amount in an account at any ti
> The effects of paying salaries for the current period are to: a. increase assets and increase stockholders’ equity. b. increase assets and increase liabilities. c. decrease assets and decrease liabilities. d. decrease assets and decrease stockholders’ eq
> The effects of purchasing inventory on credit are to: a. increase assets and increase liabilities. b. increase assets and increase stockholders’ equity. c. decrease assets and decrease stockholders’ equity. d. decrease assets and decrease liabilities.
> Taylor Company recently purchased a piece of equipment for $2,000 which will be paid within 30 days after delivery. At what point would the event be recorded in Taylor’s accounting system? a. When Taylor signs the agreement with the seller b. When Taylor
> Which principle requires that expenses be recorded and reported in the same period as the revenue that it helped generate? a. Historical cost b. Revenue recognition c. Conservatism d. Expense recognition
> An analysis of the transactions of Cavernous Homes Inc. yields the following totals at December 31, 2019: cash, $3,200; accounts receivable, $4,500; notes payable, $5,000; supplies, $8,100; common stock, $7,000; and retained earnings, $3,800. Required:
> Which of the following is not an assumption that underlies accounting? a. Historical cost b. Economic entity c. Time-period d. Going-concern
> Relevant information possesses this quality: Freedom from Error Predictive Value a. Yes Yes b. No Yes c. Yes No d. No No
> Information that provides feedback about prior expectations is: Relevant Faithfully Represented a. Yes Yes b. No Yes c. Yes No d. No No
> Which of the following is not a characteristic of useful information? a. Comparability b. Relevance c. Faithful representation d. Conservatism
> Which of the following is not a benefit derived from the conceptual framework? a. Supports the objective of providing information useful for making business and economic decisions. b. Provides a logical structure to aid in the understanding of complex ac
> Presented below are the four assumptions and four principles used in measuring and reporting accounting information. Assumptions Principles a. Economic entity e. Historical cost b. Going-concern f. Revenue recognition c. Time-period g. Expense r
> The following accounts and account balances are available for Badger Auto Parts at December 31, 2019: Accounts Payable $ 8,500 Income Taxes Payable $ 3,600 Accounts Receivable 40,800 Interest Expense 6,650 Accumulated Depreciation 47,300 I
> Rosenthal Decorating Inc. is a commercial painting and decorating contractor that began operations in January 2019. The following transactions occurred during the year: a. On January 15, Rosenthal sold 500 shares of its common stock to WilliamHensley for
> Pasta House Inc. was organized in January 2019. During the year, the transactions below occurred: a. On January 14, Pasta House sold Martin Halter, the firm’s founder and sole owner, 10,000 shares of its common stock for $8 per share. b. On the same day,
> Remington Communications has been providing cellular phone service for several years. During November and December, the following transactions occurred: Nov. 2 Remington received $2,400 for November phone service from Enrico Company. 6 Remington purchas
> Balance Sheet listed below are items that may appear on a balance sheet. Item Classification 1. Accounts payable........................................ a. Current assets 2. Machinery................................................... b. Property,
> Kauai Adventures rents and sells surfboards, snorkeling, and scuba equipment. During March, Kauai engaged in the following transactions: March 2 Received $51,500 cash from customers for rental. 3 Purchased on credit ten new surfboards (which Kauai class
> Jefferson Framers engaged in the following transactions: a. Purchased land for $35,200 cash. b. Purchased equipment for $16,400 in exchange for a 1-year, 8% note payable. c. Purchased office supplies on credit for $1,500 from Office Depot. d. Paid the $1
> Lincoln Corporation was involved in the following transactions during the current year: a. Lincoln borrowed cash from the local bank on a note payable. b. Lincoln purchased operating assets on credit. c. Lincoln paid dividends in cash. d. Lincoln purchas
> The following accounts are available for Haubstadt Shoe Works: Accounts Payable Accounts Receivable Accumulated Depreciation (Equipment) Advertising Expense Cash Common Stock Cost of Goods Sold Depreciation Expense (Equipment) Equipment Interest Expense
> Each of the balance sheet changes below is associated with a particular transaction: a. Equipment increases by $5,000 and cash decreases by $5,000. b. Cash increases by $4,100 and stockholders’ equity increases by $4,100. c. Supplies increases by $400 an
> During December, Cynthiana Refrigeration Service engaged in the following transactions: a. On December 3, Cynthiana sold a 1-year service contract to Cub Foods for $12,000 cash. b. On December 10, Cynthiana repaired equipment of the A&W Root Beer Dri
> Goal Systems, a business consulting firm, engaged in the following transactions: a. Issued common stock for $75,000 cash. b. Borrowed $35,000 from a bank. c. Purchased equipment for $12,000 cash. d. Prepaid rent on office space for 6 months in the amount
> Each of the following balance sheet changes is associated with a particular transaction: a. Cash decreases by $22,000 and land increases by $22,000. b. Cash decreases by $9,000 and retained earnings decreases by $9,000. c. Cash increases by $100,000 and
> The accountant for Compton Inc. has collected the following information: a. Compton purchased a tract of land from Jacobsen Real Estate for $875,000 cash. b. Compton issued 2,000 shares of its common stock to George Micros in exchange for $125,000 cash.
> Amanda Webb opened a home health care business under the name Home Care Inc. During its first month of operations, the business had the following transactions: a. Issued common stock to Ms. Webb and other stockholders in exchange for $30,000 cash. b. Pai
> Financial Statements listed below are elements of the financial statements. a. Liabilities b. Net change in cash c. Assets d. Revenue e. Cash flow from operating activities f. Expenses g. Stockholders’ equity h. Dividends Required: Match each financial
> The following events occurred for Parker Company. a. Performed consulting services for a client in exchange for $3,200 cash. b. Performed consulting services for a client on account, $1,700. c. Paid $30,000 cash for land. d. Purchased office supplies on
> The following economic events related to K&B Grocery Store occurred during 2019: a. On February 7, K&B received a bill from Indianapolis Power and Light indicating that it had used electric power during January 2019 at a cost of $220; the bill need not b
> Several events are listed below. a. Common stock is issued to investors. b. An agreement is signed with a janitorial service to provide cleaning services over the next 12 months. c. Inventory is purchased. d. Inventory is sold to customers. e. Two invest
> Listed below are the fundamental and enhancing qualitative characteristics that make accounting information useful. . Relevance . Faithful representation . Comparability . Verifiability . Timeliness . Understandability Required: 1. Match the appropriate
> The bookkeeper for Riley Inc. made the following errors: a. A cash purchase of supplies of $348 was recorded as a debit to Supplies for $384 and a credit to Cash of $384. b. A cash sale of $3,128 was recorded as a debit to Cash of $3,128 and a credit to
> What kinds of errors will a trial balance detect? What kinds of errors will not be detectable by a trial balance?
> Why is the term double-entry an appropriate expression for describing an accounting system?
> When a journal entry is made, what must be equal? Why?
> All accounts have normal balances. What is the normal balance of each of these accounts? a. Cash b. Sales c. Notes payable d. Inventory e. Retained earnings f. Salary expense g. Equipment h. Unearned revenue
> Describe the constraint on providing useful information.
> At the beginning of the year, Morgan Company had total assets of $425,000 and total liabilities of $260,000. Required: Use the fundamental accounting equation to answer the following independent questions: 1. What is total stockholders’ equity at the be
> Can accounting transactions be directly recorded in the general ledger? If so, why do most companies initially record transactions in the journal?
> The words debit and credit are used in two ways in accounting: ‘‘to debit an account’’ and ‘‘a debit balance.’’ Explain both usages of the terms debit and credit.
> Do you agree with the statement that ‘‘debits mean increase and credits mean decrease’’? If not, what do debit and credit mean?
> What is a T-account? Describe the basic components of any account.
> How do revenues and expenses affect the accounting equation?
> In analyzing a transaction, can a transaction only affect one side of the accounting equation? If so, give an example.
> What is the basic process used in transaction analysis?
> Of all the events that occur each day, how would you describe those that are recorded in a firm’s accounting records?
> How are the financial statements related to generally accept accounting principles?
> Listed below are three independent scenarios. Required: Use the fundamental accounting equation to find the missing amounts. Scenario Assets Liabilities Equity $ (a) 115,000 54,000 $42,000 (b) 18,500 $56,000 77,000 (c) 2 3
> Discuss the four principles that are used to measure and record business transactions.
> Identify the four assumptions that underlie accounting.
> Distinguish between comparability and consistency.
> Discuss the trade-offs that may be necessary between the qualitative characteristics.
> Identify the characteristics of useful information.
> What is the conceptual framework of accounting?
> What are the initial steps in the accounting cycle and what happens in each step?
> Four statements are given below. a. Quagmire Company recognizes revenue when the goods are delivered to a customer, even though cash will not be collected from the customer for 30 days. b. Inventory, which was recently damaged by a flood, is reported at
> Four statements are given below. a. Pewterschmidt Company values its inventory reported in the financial statements in terms of dollars instead of units. b. Property, plant, and equipment is recorded at cost (minus any accumulated depreciation) instead o
> Three statements are given below. a. A financial item that may be useful to investors is not required to be reported because the cost of measuring and reporting this information is judged to be too great. b. Timely information that is used to predict fut
> Define current assets and current liabilities. Why are current assets and current liabilities separated from noncurrent assets and long-term liabilities on the balance sheet?
> Three statements are given below. a. When financial information is free from error or bias, the information is said to possess this characteristic. b. Griffin Company uses the same depreciation method from period to period. c. A trash can that is purchas
> Four transactions that occurred during May are listed below. a. May 5: Borrowed cash of $40,000 from Middle State Bank. b. May 10: Made cash sales of $28,500 to customers. c. May 19: Paid salaries of $15,600 to employees for services performed. d. May 22
> Four transactions that occurred during June are listed below. a. June 1: Issued common stock to several investors for $100,000. b. June 8: Purchased equipment for $16,800 cash. c. June 15: Made cash sales of $23,200 to customers. d. June 29: Paid a $4,50
> Refer to the accounts listed below. a. Accounts Payable b. Accounts Receivable c. Retained Earnings d. Sales e. Equipment f. Common Stock g. Salary Expense h. Repair Expense Required: For each of the accounts, complete the following table by entering the
> The Mendholm Company entered into the following transactions: a. Performed services on account, $21,500. b. Collected $9,500 from client related to services performed in Item a. c. Paid $500 dividend to stockholders. d. Paid salaries of $4,000 for the cu
> Morgan Inc. entered into the following transactions: a. Issued common stock to investors in exchange for $30,000 cash. b. Borrowed $10,000 cash from First State Bank. c. Purchased $3,000 of supplies on credit. d. Paid for the purchase in Transaction c.
> Four transactions are listed below. a. Sold goods to customers on credit. b. Collected amounts due from customers. c. Purchased supplies on account. d. Used supplies in operations of the business. Required: Prepare three columns labeled assets, liabilit
> Listed below are the ledger accounts for Borges Inc. at December 31, 2019. All accounts have normal balances. Service Revenue $23,150 Dividends $ 1,500 Cash 12,850 Salaries Expense 4,300 Accounts Payable 2,825 Equipment 12,725 Common
> Susan Eel wants to sell you her wholesale fish store. She shows you a balance sheet with total assets of $150,000 and total liabilities of $20,000. According to the income statement, last year’s net income was $40,000. When examining the accounting recor
> After much consideration, Cam and Anna decide to organize their company as a corporation. On January 1, 2019, Front Row Entertainment Inc. begins operations. Due to Cam’s family connections in the entertainment industry, Cam assumes the major responsibil
> What information is included in the heading of each of the four financial statements?
> Ehrlich Smith, the owner of The Shoe Box, has asked you to help him understand the proper way to account for certain accounting items as he prepares his 2019 financial statements. Smith has provided the following information and observations: a. A 3-year
> Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com. Required: 1. Determine the amounts in the accounting equation for the year ending December 31, 2016,
> Obtain General Electric’s 2016 annual report either through the ‘‘Investor Relations’’ portion of its website (do a web search for GE investor relations) or go to www.sec.gov and click ‘‘Company Filings Search’’ under ‘‘Filings.’’ Required: 1. Determine
> Kathryn Goldsmith is the chief accountant for Clean Sweep, a national carpet-cleaning service with a December fiscal year-end. As Kathryn was preparing the 2019 financial statements for Clean Sweep, she noticed several odd transactions in the general led
> You have the following data for Cable Company’s accounts receivable and accounts payable for 2019: Accounts receivable, 1/1/2019............................ $ 6,325 2019 Sales on credit............................................. 93,680 Accounts receiv
> Five common accounting practices are listed below: a. A customer pays $20 to mail a package on December 30. The delivery company recognizes revenue when the package is delivered in January. b. Jim Trotter owns C&S Heating Company. In preparing the financ
> Six statements are given below: a. The two fundamental qualitative characteristics that information should possess are __________ and __________. b. __________ is the characteristic that allows external users to identify similarities and differences betw
> Listed below are selected T-accounts and their beginning balances for Galle Inc. Cash Accounts Receivable 12,000 6,300 .
> Galle Inc. entered into the following transactions during January. a. January 1: Borrowed $50,000 from First Street Bank by signing a note payable. b. January 4: Purchased $25,000 of equipment for cash. c. January 6: Paid $500 to landlord for rent for Ja
> Refer to the accounts listed below. a. Accounts Receivable b. Accounts Payable c. Cash d. Equipment e. Notes Payable f. Rent Expense g. Salaries Expense h. Service Revenue Required: For each of the accounts, indicate the normal balance of the account an
> Write the fundamental accounting equation. Why is it significant?
> Galle Inc. entered into the following transactions during January. a. Borrowed $50,000 from First Street Bank by signing a note payable. b. Purchased $25,000 of equipment for cash. c. Paid $500 to landlord for rent for January. d. Performed services for
> Several events are listed below. a. Paid $30,000 for land. b. Purchased office supplies for cash. c. Performed consulting services for a client with the amount to be collected in 30 days. d. Signed a contract to perform consulting services over the next
> The following trial balance that was prepared by the bookkeeper of Mason Company does not balance. Required: Prepare a correct trial balance. Assume all accounts have normal balances. Mason Company Trial Balance December 31, 2019 Debit Credit Cash $2
> At the beginning of 2019, KJ Corporation had total assets of $525,700, total liabilities of $290,800, common stock of $100,000, and retained earnings of $134,900. During 2019, KJ had net income of $205,500, paid dividends of $70,000, and issued additiona
> Leno Corporation reported the following amounts for assets and liabilities at the beginning and end of a recent year. Required: Calculate Leno’s net income or net loss for the year in each of the following independent situations: 1. Len
> Data from the financial statements of four different companies are presented in separate columns in the table below. Each column has one or more data items missing. Required: Use your understanding of the relationships among the financial statement items
> McDonald Marina provides docking and cleaning services for pleasure boats at its marina in southern Florida. The following account balances are available: Accounts payable $ 26,400 Interest expense $ 236,000 Accounts receivable 268,700 I
> The table below presents the retained earnings statements for Dillsboro Corporation for 3 successive years. Certain numbers are missing. Required: Use your understanding of the relationship between successive retained earnings statements to calculate the
> Magical Experiences Vacation Company has the following data available: Dividends, 2019 $ 14,000 Retained earnings, 12/31/2018 $ 55,300 Dividends, 2020 16,000 Revenues, 2019 221,900 Expenses, 2019 188,500 Revenues, 2020 325,400 Expenses, 20
> Ross Airport Auto Service provides parking and minor repair service at the local airport while customers are away on business or pleasure trips. The following account balances (except for retained earnings) are available for Ross Airport Auto Service at
> What is point-in-time measurement? How does it differ from period-of-time measurement?
> Define accounting. How does accounting differ from bookkeeping?
> Procter & Gamble is a $77 billion company that sells products that are part of most of our daily lives, including Mr. Clean, Cheer, Crest, Vicks, Scope, Pringles, Folgers, Vidal Sassoon, Zest, and Charmin. The annual report for P&G contained the followin
> The stockholders’ equity section on the December 31, 2011, balance sheet of American Corporation follows: Required: Complete the following statements and show your computations. 1. The number of shares of preferred stock issued was
> Complete the following requirements for each independent case. Case A: The charter for Rogers, Incorporated, authorized the following capital stock: Common stock, par $10, 103,000 shares Preferred stock, 9 percent, par value $8 per share, 4,000 shares Th
