Question 1

Paul's Landscaping paid $500 on account for supplies purchased in the prior month.Which of the following general journal entries will Paul's Landscaping make to record this transaction?

Accepted Answer

Paying on account for previously purchased supplies decreases Accounts Payable (a liability) and decreases Cash (an asset). Therefore, Accounts Payable should be debited to show a decrease in liability, and Cash should be credited to show a decrease in assets.

Question 2

J.Smith,the sole stockholder,received a $100 dividend from Jay's Limo Services.Which of the following general journal entries will Jay's Limo Services make to record this transaction?

Accepted Answer

When a company pays a dividend, it decreases its cash account (an asset) and increases its dividends account (which reduces retained earnings, an equity account). The correct journal entry debits Dividends and credits Cash, reflecting the outflow of cash and the recording of the dividend payment.

Question 3

Samuel Sorenson,the sole stockholder,contributed $70,000 in cash and land worth $130,000 in exchange for common stock to open a new business,SS Consulting.Which of the following general journal entries will SS Consulting make to record this transaction?

Accepted Answer

The proper way to record this transaction is to debit cash for the amount contributed in cash ($70,000), debit land for the fair market value of the land ($130,000), and credit common stock for the total contributed amount ($200,000). Option A is incorrect because it only credits common stock and does not record the land. Option B is incorrect because it only has one credit account and does not separate the contributions. Option D is incorrect because it debits common stock, which is not an account that is typically debited. Option E is incorrect because it credits assets, which is too broad of an account and does not specify the exact assets being recorded.

Question 4

Trimble Graphic Design receives $1,500 from a client billed in a previous month for services provided.Which of the following general journal entries will Trimble Graphic Design make to record this transaction?

Accepted Answer

When a client pays an amount that was previously billed, the company records the receipt of cash and reduces the accounts receivable balance, reflecting that the client's debt has been paid.

Question 5

Paul's Landscaping purchased $500 of office supplies on credit.The company's policy is to initially record prepaid and unearned items in balance sheet accounts.Which of the following general journal entries will Paul's Landscaping make to record this transaction?

Accepted Answer

Since the office supplies were purchased on credit, the journal entry should include a credit to Accounts payable. Additionally, since the company's policy is to initially record prepaid and unearned items in balance sheet accounts, the debit should be to an asset account. Therefore, the correct journal entry is to debit Office supplies for $500 and credit Accounts payable for $500.

Question 6

S.Green Consulting paid $2,500 cash for a 5-month insurance policy which begins on December 1.Given the choices below,determine the general journal entry that S.Green Consulting will make to record the cash payment.Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

Accepted Answer

The correct journal entry for paying for a prepaid insurance policy is to debit Prepaid Insurance and credit Cash, reflecting the increase in a prepaid asset and the decrease in cash.

Question 7

A law firm collected $1,800 for work to be performed in the following month.Which of the following general journal entries will the firm make to record this transaction?

Accepted Answer

The law firm collected cash, so the entry will be a debit to Cash and a credit to Unearned Legal Fees Revenue to record the liability for work to be performed in the future. This option is the only one that reflects this transaction accurately.

Question 8

Willow Rentals purchased $800 of office supplies on credit.Which of the following general journal entries will Willow Rentals make to record this transaction?

Accepted Answer

Since Willow Rentals bought office supplies on credit, they would record the purchase by debiting Office Supplies and crediting Accounts Payable. Therefore, the correct journal entry is D: Debit Office Supplies,$800; credit Accounts Payable,$800. Option A is incorrect because it implies that Willow Rentals already owes money to someone, which is not the case. Option B doesn't make sense as there is no money to be received in this scenario. Option C is also incorrect as it is reversing the order; if it were a sale, we would credit Accounts Receivable, not debit it. Finally, option E doesn't apply as Willow Rentals did not pay by cash.

Question 9

A law firm billed a client $1,800 for work performed in the current month.Which of the following general journal entries will the firm make to record this transaction?

Accepted Answer

The journal entry should reflect that the law firm has earned revenue from providing legal services to the client, and that the client now owes the firm for those services. Therefore, the firm should debit Accounts Receivable (to show that the client owes them money) and credit Legal Fees Revenue (to show that they earned revenue from providing legal services). Option D reflects this correctly. Option A, B, and E are incorrect because they wrongly credit Unearned Legal Fees Revenue instead of Legal Fees Revenue. Option C is incorrect because it wrongly credits Accounts Receivable instead of debiting it.

Question 10

Annie's Catering provided $1,000 of catering services and billed its client for the amount owed.Given the choices below,determine the general journal entry that Annie's Catering will make to record this transaction.

Accepted Answer

When services are provided on credit, the company records an increase in Accounts Receivable and an increase in Revenue. This reflects that the company is owed money for the services rendered and has earned revenue.

Question 11

Spafford Services,Inc.provides services to clients.On May 1,a client prepaid Spafford Services $30,000 for 6-months services in advance.Spafford Services' general journal entry to record this transaction will include a:

Accepted Answer

The transaction involves receiving cash in advance for services yet to be provided, which is a liability. Therefore, Spafford Services should credit the liability account of Unearned Management Fees. The debit entry would be to Cash.

Question 12

A.Egert Consulting immediately paid $500 cash for utilities for the current month.Given the choices below,determine the general journal entry that A.Egert Consulting will make to record this transaction.

Accepted Answer

The correct journal entry to record the payment of utilities with cash is to debit Utilities Expense and credit Cash, reflecting an increase in expenses and a decrease in cash.

Question 13

Kim's Auto Services paid $300 cash to employees for work performed in the current period.Which of the following general journal entries will Kim's Auto Services make to record this transaction?

Accepted Answer

The correct journal entry to record payment of cash to employees for work performed involves debiting Salaries Expense and crediting Cash, reflecting an increase in expense and a decrease in cash.

Question 14

On October 27,Able Graphics received a $400 utility bill for the current month's electricity.It is not due until the end of the next month which is when the bill will be paid.Which of the following general journal entries will Able Graphics make on October 27 to record this transaction?

Accepted Answer

Since the bill is received but not paid until the next month, it is recorded as an expense (Utilities Expense) and a liability (Accounts Payable) at the time of receipt.

Question 15

Annie's Catering received $800 cash from a customer for catering services to be provided next month.Given the choices below,determine the general journal entry that Annie's Catering will make to record the cash receipt.Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

Accepted Answer

Since the service has not yet been provided, the cash received is recorded as a liability (Unearned Catering Revenue) until the service is performed. Cash is increased because it was received.

Question 16

An asset created by prepayment of an insurance premium is:

Accepted Answer

When a company prepays for an insurance premium, it creates an asset called Prepaid Insurance. This is recorded as a debit because it is an increase in assets. Therefore, the correct choice is B - Recorded as a debit to Prepaid Insurance.

Question 17

A law firm collected $1,800 on account for work performed in the previous month.Which of the following general journal entries will the firm make to record this transaction?

Accepted Answer

When a law firm collects cash on account for work already performed, it increases its Cash account (an asset) and decreases its Accounts Receivable (also an asset). This is because the firm is receiving payment for a service it has already recorded as revenue, thus the correct entry is to debit Cash (to increase it) and credit Accounts Receivable (to decrease it).

Question 18

Wiley Consulting purchased $7,000 worth of supplies and paid cash immediately.Which of the following general journal entries will Wiley Consulting make to record this transaction? Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

Accepted Answer

The correct entry is to debit Supplies for $7,000 and credit Cash for $7,000, reflecting the purchase of supplies paid in cash.

Question 19

Ralph Pine Consulting received its telephone bill in the amount of $300,and immediately paid it.Which of the following general journal entries will Pine Consulting make to record this transaction?

Accepted Answer

The correct journal entry to record the payment of a telephone bill involves debiting (increasing) Telephone Expense to recognize the expense and crediting (decreasing) Cash to reflect the payment made. This accurately reflects the decrease in cash due to the payment of the telephone bill and the recognition of the expense.

Question 20

A double-entry accounting system is an accounting system:

Accepted Answer

A double-entry accounting system records the effects of transactions and other events in at least two accounts with equal debits and credits. This ensures that the accounting equation (assets = liabilities + equity) is always in balance and allows for more accurate financial reporting.

Quiz 2: Financial Statements and the Accounting System