Question 1

Unfortunately, the bookkeeper notices that two transactions for Patio Publications were not reflected in the balances of the trial balance: one to record $800 of accrued wages and salaries to be paid in the next period, and the other was the use of $560 of office supplies from the supplies on hand.If the Trial Balance column totals are $15,380 prior to discovering these mistakes, what are the totals of the Trial Balance columns after the corrections are made?
A)$15,860
B)$15,140
C)$16,740
D)$16,180

Accepted Answer

The adjustment for accrued wages and salaries is a debit to Wages and Salaries Expense for $800 and a credit to Accrued Wages and Salaries Payable for $800. The adjustment for office supplies used is a debit to Office Supplies Expense for $560 and a credit to Office Supplies for $560. Adding the adjustments to the original trial balance gives us a total of $16,180 for both columns.

Question 2

There is a universal chart of accounts that is applicable to all businesses.

Accepted Answer

There is no universal chart of accounts that applies to all businesses. While there are industry-specific chart of accounts templates available, each business typically creates its own chart of accounts based on its unique needs, operations, and financial structure.

Question 3

Under the double-entry system of accounting, every transaction is entered in at least two accounts on opposite sides of T accounts.

Accepted Answer

The double-entry system of accounting requires every transaction to be recorded in at least two accounts on opposite sides of T accounts. This ensures that the accounting equation (assets = liabilities + equity) remains in balance.

Question 4

Payment of a dividend increases both cash and stockholders' equity of the distributing business.

Accepted Answer

Payment of a dividend decreases cash as it is paid out to shareholders and reduces stockholders' equity because it is a distribution of earnings.

Question 5

The accounting equation must balance after each transaction.

Accepted Answer

The accounting equation, which states that assets equal liabilities plus equity, must always balance after each transaction. This ensures that the financial information being recorded is accurate and reliable.

Question 6

An external event involves interaction between an entity and its environment.

Accepted Answer

An external event is defined as an event that involves interaction between an entity and its environment. This interaction can be physical or virtual and can impact the entity and its surroundings. Examples of external events include natural disasters, changes in regulations, and economic shifts.

Question 7

The normal balance of the Dividends account is a credit.

Accepted Answer

The normal balance of the Dividends account is a debit because dividends reduce retained earnings, which is an equity account, and equity accounts typically have a credit balance.

Question 8

The initial step in the recording process is posting.

Accepted Answer

The initial step in the recording process is actually pre-production, which involves planning, songwriting, and rehearsal. Posting may refer to sharing the finished product online or physically distributing it, but it is not the first step in the process.

Question 9

Wolfe Inc.
Wolfe Inc.reports these account balances at January 1, 2015: 
-See the account balances for Wolfe Inc.
On January 31, Wolfe collected $12,000 of its accounts receivable and paid $11,000 on its note payable.On January 31, 2015, the total liabilities are:
A)$0
B)$56,000
C)$41,000
D)$30,000

Accepted Answer

- The accounts receivable balance is $35,000 and Wolfe collected $12,000, leaving a balance of $23,000
- The note payable balance is $18,000 and Wolfe paid $11,000, leaving a balance of $7,000
- Adding the remaining accounts payable balance of $11,000 and the note payable balance of $7,000 gives a total liabilities balance of $41,000.

Question 10

If a company purchases equipment by issuing a note payable, its total assets will not change.

Accepted Answer

When a company purchases equipment by issuing a note payable, it increases its assets (by the value of the equipment) but also increases its liabilities (by the amount of the note payable). Therefore, the total assets and liabilities of the company will both increase, and the impact on the overall financial position will depend on the specific amounts involved and the terms of the note payable.

Question 11

A T account for Cash cannot contain any credits.

Accepted Answer

A T account for Cash can contain credits when there is a deposit or a receipt of cash.

Question 12

A debit is a negative entry.

Accepted Answer

A debit is actually a positive entry that increases assets or decreases liabilities. It is represented by a debit (+) symbol in accounting.

Question 13

Under the cost principle, assets are always carried at their current market value.

Accepted Answer

Under the cost principle, assets are carried on the balance sheet at their historical cost, not their current market value. This means that assets are recorded at the amount paid to acquire them, including any additional costs incurred to get them ready for use.

Question 14

The origins of single-entry accounting were documented in a book written by Pacioli over 500 years ago.It includes the concepts of bookkeeping that are still applied today.

Accepted Answer

Pacioli documented the double-entry accounting system, not the single-entry system, in his book "Summa de Arithmetica, Geometria, Proportioni et Proportionalita" in 1494, which laid the foundation for modern accounting practices.

Question 15

A company's chart of accounts will reflect the nature of its business.

Accepted Answer

This is because the chart of accounts is a system of organizing and categorizing financial transactions according to the type of transaction and the relevant account classification. Therefore, it must be tailored to the specific business activities and financial reporting requirements of the company.

Question 16

Dividends are a determinant of net income.

Accepted Answer

Dividends are not a determinant of net income. Net income is calculated by subtracting all expenses and taxes from total revenue. Dividends are a distribution of profits to shareholders, after net income has been determined.

Question 17

A debit entry increases assets, decreases liabilities, or decreases stockholders' equity.

Accepted Answer

Debit entries follow the principle of double-entry accounting system and are used to record an increase in assets, decrease in liabilities or decrease in stockholders' equity.

Question 18

The issuance of stock decreases a company's assets and increases its stockholders' equity.

Accepted Answer

The issuance of stock increases both assets (cash received from the issuance) and stockholders' equity (the funds contributed by shareholders).

Question 19

Every accounting transaction affects both the balance sheet and the income statement.

Accepted Answer

Not every accounting transaction affects both the balance sheet and the income statement. Some transactions may only affect the balance sheet without impacting the income statement, such as a transaction involving only asset exchanges or liability adjustments.

Question 20

Wolfe Inc.
Wolfe Inc.reports these account balances at January 1, 2015: 
-See the account balances for Wolfe Inc.
On January 31, Wolfe collected $12,000 of its accounts receivable and paid $11,000 on its note payable.In Wolfe's trial balance prepared on January 31, 2015, the total of the credit column is:
A)$297,000
B)$287,000
C)$286,000
D)$275,000

Accepted Answer

The answer of Wolfe Inc.
Wolfe Inc.reports these account balances at...

Quiz 3: Processing Accounting Information