Question 1

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

Accepted Answer

The balance at the end of February is calculated as the beginning balance plus purchases minus supplies used: $750 + $900 - $1,125 = $525 debit.

Question 2

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)

Accepted Answer

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

Question 3

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?

Accepted Answer

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

Question 4

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

Accepted Answer

Expenses have a normal debit balance, so a credit balance in an expense account would indicate an error in recording. A debit balance in the dividends account is normal since dividends are a reduction in retained earnings. A credit balance in a liabilities account is normal since liabilities represent amounts owed by the company. A credit balance in a revenue account is normal since revenues increase equity.

Question 5

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

Accepted Answer

Retained earnings at December 31, 2015 = $150,000 - $30,000 - $15,000 = $105,000

Question 6

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

Accepted Answer

The purchase was made on account, meaning the company did not pay cash at the time of purchase. Therefore, the accounts payable account is credited to indicate that a liability has been incurred, and the supplies account is debited to indicate that an asset has been acquired.

Question 7

Electrelane Company showed the following balances at the end of its first year:  What did Electrelene Company show as total credits on its trial balance?

Accepted Answer

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

Question 8

Which account below is not a subdivision of retained earnings?

Accepted Answer

Common stock is not a subdivision of retained earnings as it represents ownership in the company and is recorded separately in the equity section of the balance sheet. Retained earnings, on the other hand, represent the accumulated profits of the company that have not been distributed as dividends. Dividends, revenues, and expenses are all subdivisions of retained earnings as they affect the overall balance of the account.

Question 9

A credit to a liability 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 10

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

Accepted Answer

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

Question 11

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?

Accepted Answer

The initial cash investment was $50,000. Ariel had cash revenues of $10,000, increasing cash to $60,000. Expenses paid were $14,000, reducing cash to $46,000. Thus, the cash balance is $46,000 debit.

Question 12

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

Accepted Answer

The purchase of equipment for $2,500 was made with a combination of cash and a note payable. The Equipment account should be debited for the full purchase price of $2,500. The Cash account should be credited for the amount paid in cash, which is $400. The remainder of the purchase, $2,100, was made with a note payable. Therefore, a liability account should be credited for $2,100 to reflect the amount owed on the note. The answer is D, credited a liability account for $2,100.

Question 13

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)

Accepted Answer

The difference between the debit entries ($1,200) and the credit entries ($800) is $400, which indicates a debit balance. Therefore, the cash account has a $400 debit balance.

Question 14

If a company has overdrawn its bank balance, then

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 15

When a company pays dividends

Accepted Answer

Dividends can be paid in forms other than cash, such as stock or other assets.

Question 16

Which of the following statements is incorrect?

Accepted Answer

Expenses decrease stockholders' equity, not increase it. When expenses are incurred, they result in a decrease in the company's assets (usually cash) and an increase in its liabilities (accounts payable or accrued expenses). As a result, stockholders' equity is reduced.

Question 17

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

Accepted Answer

Starting AR balance = $1,800 
Credit revenues = $7,200 
Total AR = AR balance + credit revenues = $1,800 + $7,200 = $9,000 
Collected AR = $6,000 
Ending AR balance = Total AR - Collected AR = $9,000 - $6,000 = $3,000 debit.

Question 18

The Dividends account

Accepted Answer

The Dividends account is a temporary equity account that tracks distributions of earnings to shareholders. It is increased with debits (when dividends are declared) and decreased with credits (when dividends are paid). It does not appear on the income statement or impact net income, as it is not an expense. It is also a proper subdivision of retained earnings, as it reflects a portion of earnings that have been paid out to shareholders. However, it does not necessarily need to show transactions every accounting period, as dividends may not be declared or paid out every period.

Question 19

Assets normally show

Accepted Answer

Assets are accounts that have a natural debit balance, meaning they increase with debits and decrease with credits. Therefore, assets normally show debit balances.

Question 20

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?

Accepted Answer

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

Quiz 2: The Recording Process