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Exam 2: Accounting for Business Transactions

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Question 61

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Mary Sunny,the sole stockholder,began business as Sunny Law Firm on November 1.Record the following November transactions by making entries directly to the T-accounts provided.Next,prepare a trial balance as of November 30. a)Mary invested $15,000 cash and a law library valued at $6,000 in exchange for common stock. b)Purchased $7,500 of office equipment from John Bronx on credit. c)Completed legal work for a client and received $1,500 cash in full payment. d)Paid John Bronx $3,500 cash in partial payment of the amount owed. e)Completed $4,000 of legal work for a client on credit. f)Paid $2,000 in cash dividends. g)Received $2,500 cash as partial payment for the legal work completed for the client in (e). h)Paid $2,500 cash for the secretary's salary.

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Question 62

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An expense account normally has a credit balance.

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B) False

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Question 63

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Indicate whether a debit or credit entry would be required to record the following changes in each account. a.To decrease Cash b.To increase Common Stock c.To decrease Accounts Payable. d.To increase Salaries Expense. e.To decrease Supplies. f.To increase Revenue. g.To decrease Accounts Receivable. h.To increase Dividends.

Explain the recording and posting processes.

Stark Co.has liabilities of $105 million and total assets of $350 million.Its debt ratio is 40.0%.

A transaction that decreases a liability and increases an asset must also affect one or more other accounts.

The debt ratio helps to assess the risk a company has of failing to pay its debts and is helpful to both its owners and creditors.

The balances for the accounts of Milo's Management Co.for the year ended December 31 are shown below.Each account shown had a normal balance. Calculate the correct balance for Cash and prepare a trial balance.

Based on the following trial balance for Barry's Automotive Shop,prepare an income statement,statement of retained earnings,and a balance sheet.There were no additional stock issuances during the year.

Jason Hope opened a hotel.Prepare journal entries to record the following transactions.Hope uses the accounts Room Rental Revenue and Event Revenue.All expenses for special events are recorded as Event Expense.(Omit explanations.)

Identify the account used by businesses to record the transfer of assets from a business to its stockholders:

A general journal provides a place for recording all of the following except:

A journal entry that affects only two accounts is called a compound entry.

Explain debits and credits and their role in the accounting system of a business.

What is a trial balance? What is its purpose?

Revenues and expenses are two categories of ________ accounts.

For each of the following accounts,identify whether a debit or credit yields the indicated change a.To increase Fees Earned b.To decrease Cash c.To decrease Unearned Revenue d.To increase Accounts Receivable e.To increase Common Stock f.To decrease Notes Payable g.To increase Prepaid Rent h.To increase Salaries Expense i.To increase Accounts Payable j.To decrease Prepaid Insurance

Identify which error will cause the trial balance to be out of balance.

Identify the account below that impacts the equity of a business:

At year-end,a trial balance showed total credits exceeding total debits by $4,950.This difference could have been caused by: