Question 1

At December 1, 2015, Cursive Company's accounts receivable balance was $1,800. During December, Cursive had revenues on account of $7,200 and collected accounts receivable of $6,000. At December 31, 2015, the accounts receivable balance is
A) $600 debit.
B) $3,000 debit.
C) $600 credit.
D) $3,000 credit.

Accepted Answer

The accounts receivable balance is calculated as the beginning balance plus revenues on account minus collections. So, $1,800 + $7,200 - $6,000 = $3,000 debit.

Question 2

Assets normally show
A) credit balances.
B) debit balances.
C) debit and credit balances.
D) debit or credit balances.

Accepted Answer

Assets have debit balances, meaning they increase on the debit side and decrease on the credit side of the accounting equation.

Question 3

In the first month of operations for Gallowsbird Industries, the total of the debit entries to the cash account amounted to $36,000 ($16,000 investment by stockholders and revenues of $20,000). The total of the credit entries to the cash account amounted to $22,000 (purchase of equipment $8,000 and payment of expenses $14,000). At the end of the month, the cash account has a(n)
A) $6,000 credit balance.
B) $6,000 debit balance.
C) $14,000 debit balance.
D) $14,000 credit balance.

Accepted Answer

The answer of In the first month of operations for...

Question 4

When a company distributes dividends
A) it doesn't have to be cash, it could be another asset.
B) the dividends account will be increased with a credit.
C) the retained earnings account will be directly increased with a debit.
D) the dividends account will be decreased with a debit.

Accepted Answer

The answer of When a company distributes dividends
A) it doesn't...

Question 5

If a company has overdrawn its bank balance, then
A) its cash account will show a debit balance.
B) its cash account will show a credit balance.
C) the cash account debits will exceed the cash account credits.
D) it cannot be detected by observing the balance of the cash account.

Accepted Answer

When a company overdraws its bank balance, it means the bank account has a negative balance, which is represented in the company's books as a credit balance in the cash account.

Question 6

On June 1, 2015, Portugal Inc. reported a cash balance of $12,000. During June, Portugal made deposits of $5,000 and made disbursements totalling $14,000. What is the cash balance at the end of June?
A) $3,000 debit balance
B) $17,000 debit balance
C) $3,000 credit balance
D) $2,000 credit balance

Accepted Answer

The answer of On June 1, 2015, Portugal Inc. reported...

Question 7

TransAm Mail Service purchased equipment for $2,500. TransAm paid $400 in cash and signed a note for the balance. TransAm debited the Equipment account, credited Cash and
A) nothing further must be done.
B) debited the retained earnings account for $2,100.
C) credited another asset account for $400.
D) credited a liability account for $2,100.

Accepted Answer

Since TransAm signed a note for the balance ($2,100), it means they took on a liability for the remaining amount. Thus, they should credit a liability account for $2,100.

Question 8

On January 14, Edamame Industries purchased supplies of $700 on account. The entry to record the purchase will include
A) a debit to Supplies and a credit to Accounts Payable.
B) a debit to Supplies Expense and a credit to Accounts Receivable.
C) a debit to Supplies and a credit to Cash.
D) a debit to Accounts Receivable and a credit to Supplies.

Accepted Answer

When supplies are purchased on account, it means the company has received the supplies but has not yet paid for them. Therefore, the entry to record the purchase will include a debit to Supplies (an asset account) to increase the company's inventory and a credit to Accounts Payable (a liability account) to increase the amount the company owes to its suppliers. Options B, C, and D are not correct because they do not reflect the fact that the purchase was made on account.

Question 9

Which account below is not a subdivision of retained earnings?
A) Dividends
B) Revenues
C) Expenses
D) Common stock

Accepted Answer

Common stock is not a subdivision of retained earnings. Common stock is a part of shareholder's equity and represents the amount of money that shareholders have invested in the company by purchasing shares. Retained earnings, on the other hand, represent the profits that a company has kept after paying dividends and can be used for reinvestment in the business or other purposes.

Question 10

At January 1, 2015, Alligator Industries reported retained earnings of $150,000. During 2015, Alligator had a net loss of $30,000 and paid dividends of $15,000. At December 31, 2015, the amount of retained earnings is
A) $105,000.
B) $120,000.
C) $135,000.
D) $165,000.

Accepted Answer

The answer of At January 1, 2015, Alligator Industries reported...

Question 11

Electrelane Company showed the following balances at the end of its first year: $$\begin{array} { l r } 
\text { Cash } & \$ 4,000 \
\text { Prepaid insurance } & 7,000 \
\text { Accounts receivable } & 5,000 \
\text { Accounts payable } & 4,000 \
\text { Notes payable } & 6,000 \
\text { Common stock } & 2,000 \
\text { Dividends } & 1,000 \
\text { Revenues } & 32,000 \
\text { Expenses } & 25,000
\end{array}$$ What did Electrelene Company show as total credits on its trial balance?
A) $9,000
B) $44,000
C) $45,000
D) $49,000

Accepted Answer

The answer of Electrelane Company showed the following balances at...

Question 12

The Dividends account
A) appears on the income statement along with the expenses of the business.
B) must show transactions every accounting period.
C) is increased with debits and decreased with credits.
D) is not a proper subdivision of retained earnings.

Accepted Answer

The Dividends account is a temporary owner's equity account used to track the distribution of profits to shareholders. This account is increased with debits and decreased with credits, meaning that when dividends are declared and paid, the balance of this account is reduced. The Dividends account is not a proper subdivision of retained earnings, which is a permanent owner's equity account. The Dividends account does not appear on the income statement as it is a distribution of profits rather than an expense of the business. It only needs to show transactions when dividends are declared and paid.

Question 13

A credit to a liability account
A) indicates an increase in the amount owed to creditors.
B) indicates a decrease in the amount owed to creditors.
C) is an error.
D) must be accompanied by a debit to an asset account.

Accepted Answer

A credit to a liability account indicates an increase in the amount owed to creditors. In double-entry accounting, credits increase liability accounts.

Question 14

At January 31, 2015, the balance in Aislers Inc.'s supplies account was $750. During February, Aislers purchased supplies of $900 and used supplies of $1,125. At the end of February, the balance in the supplies account should be
A) $525 debit.
B) $975 debit.
C) $525 credit.
D) $775 debit.

Accepted Answer

The answer of At January 31, 2015, the balance in...

Question 15

In the first month of operations, the total of the debit entries to the cash account amounted to $1,200 and the total of the credit entries to the cash account amounted to $800. The cash account has a(n)
A) $800 credit balance.
B) $1,200 debit balance.
C) $400 debit balance.
D) $400 credit balance.

Accepted Answer

The cash account has a debit balance because the total of the debit entries ($1,200) is greater than the total of the credit entries ($800), resulting in a difference of $400. Therefore, the answer is (C) $400 debit balance.

Question 16

During February 2015 its first month of operations, the stockholders of Ariel Pink Enterprises invested cash of $50,000. Ariel had cash revenues of $10,000 and paid expenses of $14,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28?
A) $4,000 credit
B) $4,000 debit
C) $46,000 debit
D) $54,000 debit

Accepted Answer

The answer of During February 2015 its first month of...

Question 17

Mt. Zion Inc. pays its employees twice a month, on the 7^th and the 21^st. On June 21, Mt. Zion Inc. paid employee salaries of $5,000. This transaction would A) increase stockholders' equity by $5,000. B) decrease the balance in Salaries and Wages Expense by $5,000. C) decrease net income for the month by $5,000. D) be recorded by a $5,000 debit to Salaries and Wages Payable and a $4,000 credit to Salaries and Wages Expense.

Accepted Answer

The answer of Mt. Zion Inc. pays its employees twice...

Question 18

Which of the following statements is incorrect?
A) Expenses increase stockholders' equity.
B) Expenses have normal debit balances.
C) Expenses decrease stockholders' equity.
D) Expenses are a negative factor in the computation of net income.

Accepted Answer

Expenses decrease stockholders' equity, not increase it. Expenses represent costs incurred in operating a business, and as such they reduce the amount of income or revenue available to be distributed to stockholders as earnings.

Question 19

Radio Moscow Industries purchased supplies for $1,000. They paid $400 in cash and agreed to pay the balance in 30 days. The journal entry to record this transaction would include a debit to an asset account for $1,000, a credit to a liability account for $600. Which of the following would be the correct way to complete the recording of the transaction?
A) Credit an asset account for $400.
B) Credit another liability account for $400.
C) Credit the retained earnings account for $400.
D) Debit the retained earnings account for $400.

Accepted Answer

The answer of Radio Moscow Industries purchased supplies for $1,000....

Question 20

An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?
A) A debit balance in the dividends account
B) A credit balance in an expense account
C) A credit balance in a liabilities account
D) A credit balance in a revenue account

Accepted Answer

Normally, expenses have debit balances and should be recorded as such. A credit balance in an expense account would indicate an error in recording the transaction. A debit balance in the dividends account is normal because it represents a reduction in retained earnings. A credit balance in a liabilities account is normal because it represents a source of funds for the company. A credit balance in a revenue account is normal because it represents an increase in the company's income.

Quiz 2: The Recording Process

At December 1, 2015, Cursive Company's accounts receivable balance was $1,800. During December, Cursive had revenues on account of $7,200 and collected accounts receivable of $6,000. At December 31, 2015, the accounts receivable balance is

Assets normally show

When a company distributes dividends

If a company has overdrawn its bank balance, then

On June 1, 2015, Portugal Inc. reported a cash balance of $12,000. During June, Portugal made deposits of $5,000 and made disbursements totalling $14,000. What is the cash balance at the end of June?

TransAm Mail Service purchased equipment for $2,500. TransAm paid $400 in cash and signed a note for the balance. TransAm debited the Equipment account, credited Cash and

On January 14, Edamame Industries purchased supplies of $700 on account. The entry to record the purchase will include

Which account below is not a subdivision of retained earnings?

At January 1, 2015, Alligator Industries reported retained earnings of $150,000. During 2015, Alligator had a net loss of $30,000 and paid dividends of $15,000. At December 31, 2015, the amount of retained earnings is

The Dividends account

A credit to a liability account

At January 31, 2015, the balance in Aislers Inc.'s supplies account was $750. During February, Aislers purchased supplies of $900 and used supplies of $1,125. At the end of February, the balance in the supplies account should be

In the first month of operations, the total of the debit entries to the cash account amounted to $1,200 and the total of the credit entries to the cash account amounted to $800. The cash account has a(n)

During February 2015 its first month of operations, the stockholders of Ariel Pink Enterprises invested cash of $50,000. Ariel had cash revenues of $10,000 and paid expenses of $14,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28?

Mt. Zion Inc. pays its employees twice a month, on the 7th and the 21st. On June 21, Mt. Zion Inc. paid employee salaries of $5,000. This transaction would

Which of the following statements is incorrect?

An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?

Mt. Zion Inc. pays its employees twice a month, on the 7^th and the 21^st. On June 21, Mt. Zion Inc. paid employee salaries of $5,000. This transaction would