Week 2_9/10 class examples and notes taking

Example 1
Mason Company issues common stock for $200,000, and the payment of salaries expense of
$105,000. What net effect do these transactions have on stockholders’ equity?
a. Increase of $200,000.
b. Increase of $135,000.
c. Increase of $95,000. ANSWER
d. Increase of $30,000.
Example 2
A general journal chronologically lists transactions and other events, expressed in terms of
debits and credits to accounts.
TRUE ANSWER FALSE
Example 3:
Car repair shop had the following transactions during the first month of business.
8/7 Purchased supplies on account for $500

Supplies $500
Accounts Payable $500

8/12 performed service for clients for which $1300 was collected in cash and $670 was billed to
clients
Cash $670
Accounts Receivables $630
Service Revenue $1300
Example 4:
A trial balance may prove that debits and credits are equal, but
a. an amount could be entered in the wrong account.
b. a transaction could have been entered twice.
c. a transaction could have been omitted.
d. All of these answer choices are correct. ANSWER
Example 5
The accounting equation must remain in balance
a. throughout each step in the accounting cycle. ANSWER
b. only when journal entries are recorded.
c. only at the time the trial balance is prepared.
d. only when formal financial statements are prepared.
Example 6

How do these prepaid expenses expire?

Rent Supplies
a. With the passage of time Through use and consumption
b. With the passage of time With the passage of time
c. Through use and consumption Through use and consumption
d. Through use and consumption With the passage of time
a. With the passage of time and Through use and consumption ANSWER
Example 7: Supplies.
Pioneer Advertising purchased advertising supplies costing $25,000 on October 5. Prepare
the journal entry to record the purchase of the supplies.
Prepaid Supplies $25000
Cash $25000
Supplies. A physical count at the close of business on October 31 reveals that $10,000 of the
advertising supplies are still on hand.
Supplies Expenses $15000
Prepaid Supplies $15000

Example 8: Prepaid
Insurance. On Oct. 4th, Pioneer Advertising paid $6,000 for a one-year fire insurance policy,
coverage beginning October 1. Prepare the entry to record the purchase of the insurance.
Prepaid Insurance $6000
Cash $6000
Insurance. An analysis of the policy reveals that $500 ($6,000 ÷ 12) of insurance expires each
month. Prepare the entry to record the insurance cost expired in October.
Insurance Expense $500
Prepaid Insurance $500

Example 9.
An unearned revenue can best be described as an amount
a. collected and currently matched with expenses.
b. collected and not currently matched with expenses. ANSWER
c. not collected and currently matched with expenses.
d. not collected and not currently matched with expenses.

Example 10: Unearned Revenues

Unearned Revenue. Pioneer Advertising received $12,000 on October 2nd from KC for
advertising services expected to be completed by December 31. Prepare the journal entry to
record the receipt on October 2nd.
Cash $12000
Unearned Revenue $12000

Unearned Revenues. Analysis reveals that Pioneer Advertising earned $4,000 of the advertising
services in October. Prepare the entry to record the revenue for services performed.

Unearned Revenue $4000

Service Revenue $4000

RASHA YATMEEN