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Interactive Quiz 0078110874 1 5 no Analyzing and Re

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1 INCORRECT

A proprietorship employs one full-time accountant. This person is considered an employee. On the desk in front of her are five different business documents. Which one of the following would not be considered an original source document from the proprietorship's point of view? A bank receipt for $10,000 evidencing yesterday's cash receipts deposited A) in the bank. The original copy of the insurance policy taken out by the proprietorship to insure the vehicle it purchased during its first month of operations. The B) annual insurance premium of $500 was printed within the contract. The invoice received by the proprietorship from Samsung Electronics when the proprietorship purchased its first lot of inventory to be sold to its C) customers. A cancelled check for $500 representing payment in full for the annual D) insurance premium mentioned in item B above. A copy of the Balance Sheet at the end of the company's first year of E) existence. Feedback: A bank receipt would be considered an original source document. C1
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2 CORRECT

At any given point in time, it is possible to describe general ledger accounts as having an expected or "normal" balance: either a debit balance or a credit balance. This normal balance is on the side of the account, that is, the debit side or credit side, which represents the "increase" side of the account. In order, what is the normal balance for the Equipment account, the Owner's Equity account, and the Sales Revenue account? A) B) C) D) Debit, credit, credit. Debit, debit, debit. Credit, debit, credit. Credit, credit, debit.

Debit, debit, credit. E) Feedback: Equipment is an asset account. Owner's Equity is an Equity account. Sales Revenue is a revenue account. The side of the account which represents the increase side for each of these, in order, is debit, credit, and credit. C3
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3 INCORRECT

The Baker sole proprietorship started operations on January 1, 2011 and uses a calendar-year accounting period. On February 7, 2011, the company purchases an automobile with an invoice cost of $10,000. To settle this transaction, the company immediately pays $3,000 cash to the automobile dealership and signs a three-month note payable for the $7,000 purchase price balance. A partial

general journal entry is given below. Which item accurately describes the partial entry from Baker's viewpoint? A) Cash is debited for $3,000 and Notes Payable is credited for $7,000.

The asset account Vehicles is debited for $7,000 and Cash is credited for B) $3,000. The asset account Vehicles is credited for $10,000 and Cash is credited for C) $3,000. D) Cash is credited for $3,000 and Notes Payable is credited for $7,000.

Notes Payable is credited for $7,000 and the asset Vehicles is credited for E) $3,000. Feedback: The correct complete entry includes a credit (rather than a debit) to the asset Cash account for $3,000. A1
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4 INCORRECT

A company buys a one-year insurance policy on February 1, 2011, and immediately pays in cash the $720 insurance premium. The company's bookkeeper records the transaction by crediting the Cash account for $720 but debits Insurance Expense for $720, instead of debiting Prepaid Insurance, which would be the correct entry. Based on this information, which statement concerning the trial balance is correct if the company fails to correct this bookkeeping error? A) B) C) D) The trial balance is correct as it is. The total trial balance debits do not equal the total trial balance credits. The total trial balance debits are higher than the total trial balance credits. The total trial balance credits are lower than the total trial balance debits.

The total trial balance debits equal the trial balance credits but one or more E) account balances are incorrect. Feedback: The total trial balance debits will equal the trial balance credits, but the trial balance is not correct as it is. P2
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5 INCORRECT

A company buys a new car on February 15, 2011, and immediately pays in cash the $25,000 purchase price. The company's bookkeeper fails to record the transaction at all. Based on this information, which statement concerning the trial balance is correct if the company fails to correct this bookkeeping error? A) B) C) The trial balance is correct as it is. The total trial balance debits do not equal the total trial balance credits. The total trial balance debits are higher than the total trial balance credits.

The total trial balance debits are equal to the total trial balance credits, but D) one or more accounts have incorrect balances.

The total trial balance debits equal the trial balance credits, but only one E) account balance is incorrect. Feedback: The total trial balance debits will equal the trial balance credits, but the trial balance is not correct as it is. P2
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6 INCORRECT

Amelia Company received its telephone bill on February 15, 2011 in the amount of $325. This bill covered the period from January 1, 2011 through January 31, 2011. Amelia paid this bill immediately. The company uses a calendar year accounting period and prepares its financial statements only once a year at the end of the year. The general journal entry to record this transaction includes: A) B) C) D) A debit to the Cash account for $325. A credit to the Telephone Expense account for $325. A debit to the Telephone Expense account for $325. A credit to Accounts Payable for $325.

A debit to Accounts Payable for $325. E) Feedback: This transaction will decrease the Cash account. As such, the correct entry includes a credit (rather than a debit) to the Cash account. C4
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7 INCORRECT

A proprietorship has total assets of $1,000,000, total liabilities of $300,000, and total owner's equity of $700,000. What is the debt ratio (rounded to the nearest percent)? A) B) C) D) 33%. 40%. 70%. 30%.

10%. E) Feedback: The debt ratio is the amount of the total liabilities divided by the amount of the total assets. A2
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8 INCORRECT

On March 1, 2011, a company collects a $500 deposit from a customer for the installation of a home-theater system. The installation is scheduled for May 5, 2012. How should the company record this entry on March 1, 2011? A) B) The Cash account is credited for $500. The Sales Revenue account is credited for $500.

C) D)

The Unearned Sales Revenue account is credited for $500. The Unearned Sales Revenue account is debited for $500.

None of the above are correct. E) Feedback: This transaction increases the Cash account balance. As such, the correct entry includes a debit (rather than a credit) to the cash account. A1
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9 INCORRECT

A company which sells and services medical insurance policies received one payment of $14,000 cash from a customer for insurance coverage for the next two years. Recording the receipt of this cash when it is received will require which of the following? A) B) C) D) Withdrawals to be debited, an asset to be credited A liability to be debited, an asset to be credited An asset to be debited, capital to be credited An asset to be debited, a liability to be credited

One asset to be debited, another asset to be credited E) Feedback: This transaction does not include a withdrawal by the owner, so the Withdrawals account should not be included in the entry. P1
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10 INCORRECT

Olivia, the proprietor, deposited $40,000 in the company's bank account. She received the money as the result of a settlement of a class action lawsuit and decided to invest it in her business to help with expansion. Recording the transaction on the company books will require which of the following? A) B) C) D) An asset to be debited, a liability to be credited. A liability to be debited, an asset to be credited. An asset to be debited, capital to be credited. Withdrawals to be debited, an asset to be credited.

One asset to be debited, another asset to be credited. E) Feedback: This transaction does not involve a decrease to a liability account. P1
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11 INCORRECT

Which of the following statements is true? Revenue accounts are increased by debit entries.

A) Journalizing entries occurs after posting entries. Debit entries are entries involving the right-hand side on an account. An account shows increases and decreases and an account balance.

B) C) D)

Journalizing errors should be erased and a correct entry made. E) Feedback: Revenue accounts are increased by credit (rather than debit) entries. P1
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12 INCORRECT

Assets total $100,000 and liabilities total $40,000. What is the debt ratio? A) B) C) D) 10%. 25%. 40%. 60%.

100%. E) Feedback: The debt ratio equals total liabilities divided by total assets. A2
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13 INCORRECT

The personal residence of Samuel Leonard was landscaped with all new trees, shrubs, and flowers. This improvement was paid for with a check written against Samuel's business checking account. The landscaping provides no benefit to Samuel's business. What account should be debited for this transaction? A) B) C) D) Samuel Leonard, Capital. Samuel Leonard, Withdrawals. Landscaping Improvements. Landscaping Expense.

None of the above. E) Feedback: Only investments in the business by its owner are recorded in the Capital account. A1
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14 INCORRECT

One of your company's business checks clears the bank at its correct amount of $500. The transaction that underlies this check was the cash purchase of office supplies. The entry was recorded as a debit to Insurance Expense for $50 and a

credit to Cash for $50. The correcting entry should include which of the following? A) B) C) D) A debit to Accounts Receivable for $450. A credit to Supplies Expense for $500. A credit to Cash for $50. A credit to Cash for $450.

A credit to Cash for $540. E) Feedback: The transaction did not involve the use of supplies, which would be recorded as an increase to the Supplies Expense account. Since the entry, as originally recorded, did not include Supplies Expense, that account would not be included in the correcting entry. P1
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15 INCORRECT

Double-entry accounting requires which of the following? A) B) C) D) E) All journal entries must be posted twice. At least two accounts are involved, with at least one debit and one credit. The total amount debited must equal the total amount credited. Both A and C are correct. Both B and C are correct.