ASSESSMENT IN DOUBLE ENTRY ACCOUNTING

1. If total liabilities decreased by $15,000 and owner’s equity decreased by $5,000 during a
period of time, then total assets must change by what amount and direction during that
same period?

a. $20,000 increase
b. $10,000 increase
c. $20,000 decrease
d. $10,000 decrease

2. The accounting equation for Goodboys Enterprises is as follows: 

Assets       Liabilities     Owner’s Equity 
$120,000 = $60,000     +     $60,000 
If Goodboys purchases office equipment on account for $12,000, the accounting equation
will change to 

Assets      Liabilities Owner’s Equity

a. $120,000  =  $60,000   + $60,000
b. $132,000  =  $60,000   + $72,000 
c. $132,000  =  $66,000   + $66,000 
d. $132,000  =  $72,000   + $60,000

3. As of June 30, 2008, Houston Company has assets of $100,000 and owner’s equity of
$5,000. What are the liabilities for Houston Company as of June 30, 2008?

a. $85,000 
b. $90,000 
c. $95,000 
d. $100,000 

4. If total liabilities increased by $4,000, then

a. assets must have decreased by $4,000. 

b. owner's equity must have increased by $4,000. 
c. assets must have increased by $4,000, or owner's equity must have decreased by
$4,000. 
d. assets and owner's equity each increased by $2,000.

5. Collection of a $500 Accounts Receivable

a. increases an asset $500; decreases an asset $500. 

b. increases an asset $500; decreases a liability $500. 
c. decreases a liability $500; increases owner's equity $500. 
d. decreases an asset $500; decreases a liability $500.

6. As of December 31, 2008, Anders Company has assets of $35,000 and owner's equity of
$20,000. What are the liabilities for Anders Company as of December 31, 2008?

a. $15,000 
b. $10,000 
c. $25,000 
 d. $20,000

Jimmy's Car Repair Shop started the year with total assets of $270,000 and total liabilities of
$180,000. During the year, the business recorded $450,000 in car repair revenues, $255,000 in
expenses, and Jimmy withdrew $45,000.

7. Jimmy's Capital balance at the end of the year was

a. $240,000. 
b. $225,000. 
c. $285,000. 
d. $195,000.

8. The net income reported by Jimmy's Car Repair Shop for the year was

a. $150,000. 
b. $195,000. 
c. $90,000. 
d. $405,000.

9. Jimmy's Capital balance changed by what amount from the beginning of the year to the end
of the year?

a. $45,000 
b. $195,000 
c. $90,000 
d. $150,000

10. Benson Company began the year with owner’s equity of $175,000. During the year, the
company recorded revenues of $250,000, expenses of $190,000, and had owner drawings
of $20,000. What was Benson’s owner’s equity at the end of the year?

a. $255,000 
b. $215,000 
c. $405,000 
d. $235,000

11. Ed Dexter began the Dexter Company by investing $20,000 of cash in the business. The
company recorded revenues of $185,000, expenses of $160,000, and had owner drawings
of $10,000. What was Dexter’s net income for the year?

a. $15,000 
b. $35,000 
c. $25,000 
d. $45,000

12. Jenner Company began the year with owner’s equity of $15,000. During the year, Jenner
received additional owner investments of $21,000, recorded expenses of $60,000, and had
owner drawings of $4,000. If Jenner’s ending owner’s equity was $46,000, what was the
company’s revenue for the year?
 a. $70,000 
b. $74,000 
c. $91,000 
d. $95,000

13. Janzen Company began the year with owner’s equity of $217,000. During the year, Janzen
received additional owner investments of $294,000, recorded expenses of $840,000, and
had owner drawings of $56,000. If Janzen’s ending owner’s equity was $531,000, what was
the company’s revenue for the year?

a. $860,000 
b. $916,000 
c. $1,154,000 
d. $1,210,000

Benny’s Repair Shop started the year with total assets of $100,000 and total liabilities of
$80,000.  During the year, the business recorded $210,000 in revenues, $110,000 in expenses,
and owner drawings of $20,000.

14. Owner’s equity at the end of the year was

a. $120,000. 
b. $100,000. 
c. $80,000. 
d. $90,000.

15. The net income reported by Benny’s Repair Shop for the year was

a. $80,000. 
b. $100,000. 
c. $60,000. 
d. $190,000.

Berwick Company compiled the following financial information as of December 31, 2008: 
Revenues $ 140,000
Berwick, Capital (1/1/08) 105,000
Equipment 40,000
Expenses 125,000
Cash 35,000
Berwick, Drawings 10,000
Supplies 5,000
Accounts payable 20,000
Accounts receivable 15,000

16. Berwick’s assets on December 31, 2008 are

a. $235,000. 
b. $170,000. 
c. $80,000. 
d. $95,000.
17. Berwick’s owner’s equity on December 31, 2008 is

a. $105,000. 
b. $110,000. 
c. $80,000. 
d. $120,000.

18. Owner’s equity changed by what amount from the beginning of the year to the end of the
year?

a. $15,000 
b. $14,000 
c. $6,000 
d. $3,000

19. During the year 2008, Toronto Enterprises earned revenues of $45,000, had expenses of
$25,000, purchased assets with a cost of $5,000 and had owner drawings of $3,000. Net
income for the year is

a. $45,000. 
b. $20,000. 
c. $17,000. 
d. $15,000.

20. At October 1, Bennington Enterprises reported owner’s equity of $35,000. During October,
no additional investments were made and the company earned net income of $4,000. If
owner’s equity at October 31 totals $32,000, what amount of owner drawings were made
during the month?

a. $0 
b. $1,000 
c. $3,000 
d. $7,000

EXERCISE 1.
Use the following information to calculate for the year ended December 31, 2008 (a) net income
(net loss), (b) ending owner’s equity, and (c) total assets.

Supplies $ 1,000 Revenues $ 23,000

Operating expenses 12,000 Cash 15,000
Accounts payable 9,000 Drawings 1,000
Accounts receivable 3,000 Notes payable 1,000
Beginning Capital 5,000 Equipment 6,000

Answers:
a) Net income:
Revenues $ 23,000
Operating expenses (12,000)
Net income $ 11,000
b) Ending owner's equity:
Beginning Capital $ 5,000

Net income 11,000

Drawings (1,000)
Increase in Capital 10,000
Ending owner's equity $ 15,000

c) Total assets:
Cash $ 15,000
Accounts receivable 3,000
Supplies 1,000
Equipment 6,000
Total assets $ 25,000

EXERCISE 2.
At the beginning of 2008, Clemens Company had total assets of $550,000 and total liabilities of
$330,000. Answer each of the following questions.

1) If total assets increased $60,000 and owner's equity decreased $90,000 during the year,
determine the amount of total liabilities at the end of the year. 

Assets = Liabilities + Owner’s Equity

$ 550,000 $330,00 ($550,000-330,000) $ 220,000
+ 60,000 ________ - 90,000

$ 610,000 = ($610,000-130,000) $ 480,000 + $ 130,000

Therefore, the total liabilities is $480,000 ($610,000 of total assets minus $130,000 of total
owner’s equity, since owner's equity + liabilities is equal to the total assets).

2) During the year, total liabilities decreased $75,000 and owner's equity increased $50,000.
Compute the amount of total assets at the end of the year. 

Assets = Liabilities + Owner’s Equity

$ 550,000 $330,00 ($550,000-330,000) $ 220,000
- 75,000 + 50,000

($255,000+270,000) $ 525,000 = $ 255,000 + $ 270,000

Therefore, the total assets is $525,000 ($255, 000 of total liabilities plus $270,000 of total
owner's equity, since liabilities + owner’s equity is equal to the total assets).

3) If total assets decreased $100,000 and total liabilities increased $55,000 during the year,
determine the amount of owner's equity at the end of the year.

Assets = Liabilities + Owner’s Equity

 $ 550,000 $330,00 ($550,000-330,000) $ 220,000
- 100,000 + 55,000 ________

$ 450,000 = $ 385,000 + ($450,000-385,000) $ 65,000

Therefore, the amount of owner’s equity is $65,000 ($450,000 of total assets minus
$385,000 of total liabilities, since liabilities + owner’s equity is equal to the total assets).

EXERCISE 3.
Presented below is a balance sheet for Jim Dixon Lawn Service at December 31, 2008.
JIM DIXON LAWN SERVICE
Balance Sheet
December 31, 2008

Assets Liabilities and Owner's Equity

Cash $ 13,000 Liabilities
Accounts receivable 6,000 Accounts payable $ 8,000
Supplies 9,000 Notes payable 15,000
Equipment 11,000 Owner's Equity
Jim Dixon, Capital 16,000
________
Total assets $ 39,000 Total liabilities and owner's equity $ 39,000

The following additional data are available for the year which began on January 1: All expenses
(excluding supplies expense) total $6,000. Supplies on January 1, were $11,000 and $5,000 of
supplies were purchased during the year. Net income for the year was $8,000 and drawings
were $6,000.

Instructions 
Determine the following:  (Show all computations.)
1) Supplies used during the year.

January 1 $ 11,000
Purchased supplies 5,000
Supplies $ 16,000

2) Total expenses for the year. 

Expenses $ 6,000
Supplies expenses ($16,000-9, 000) 7,000
Total expenses $ 13,000

3) Service revenues for the year. 

Expenses $ 13,000
Net income 8,000
 Service revenues $ 21,000

4) Jim Dixon's capital balance on January 1.

Capital, Dec. 31 $ 16,000

Net income 8,000

Drawings (6,000)
Increase in Capital (2,000)

Capital, Jan. 1 $ 14,000