Question 1

List the steps in processing transactions.

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Question 2

ABC Company made a $2,500 payment on account, to satisfy a previously recorded account payable. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

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Question 3

Explain the debt ratio and its use in analyzing a company's financial condition.

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Question 4

Using the following list of accounts and identification letters A through J for Homer's Management Co., Inc., enter the type of account and its normal balance into the table below. The first item is filled in as an example:

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Question 5

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

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Question 6

Miley Block, Inc. is a building consultant. Shown below are (a) several accounts in her ledger with each account preceded by an identification number, and (b) several transactions completed by Block. Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction.

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Question 7

BBB Company sends a $2,500 invoice to a customer for catering services it provided during the month. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

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Question 8

On December 3, the ABBJ Company paid $1,400 cash in salaries to office personnel. Prepare the general journal entry to record this transaction.

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Question 9

On February 5, Teddy's Catering purchased an oven that cost $35,000. The firm made a down payment of $5,000 cash and signed a long-term note payable for the balance. Show the general journal entry to record this transaction.

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Question 10

What is a trial balance? What is its purpose?

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Question 11

Identify by marking an X in the appropriate column, whether each of the following items would likely serve as a source document. The first one is done as an example $$\begin{array} { | l | l | l | l | } 
\hline & & \text { Yes } & \text { No } \
\hline \text { Ex. } & \text { Credit card } & & \mathbf { X } \
\hline \text { a. } & \text { Credit card receipt } & & \
\hline \text { b. } & \text { Purchase order } & & \
\hline \text { c. } & \text { Invoice } & & \
\hline \text { d. } & \text { Balance sheet } & & \
\hline \text { e. } & \text { Bank statement } & & \
\hline \text { f. } & \text { Journal entry } & & \
\hline \text { g. } & \text { Telephone bill } & & \
\hline \text { h. } & \text { Employee earnings record } & & \
\hline
\end{array}$$

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Question 12

Explain the difference between a general ledger and a chart of accounts.

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Question 13

Rowdy Bolton began Bolton Office Services, Inc. in October and during that month completed these transactions:
a. Invested $10,000 cash, and $15,000 of computer equipment.
b. Paid $500 cash for an insurance premium covering the next 12 months.
c. Completed a word processing assignment for a customer and collected $1,000 cash.
d. Paid $200 cash for office supplies.
e. Paid $2,000 for October's rent.
Prepare journal entries to record the above transactions. Explanations are unnecessary.

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Question 14

Jarrod Automotive, Inc. owned and operated by Jarrod Johnson, began business in September of the current year. Jarrod, a mechanic, had no experience with recording business transactions. As a result, Jarrod entered all of September's transactions directly into the ledger accounts. When he tried to locate a particular entry he found it confusing and time consuming. He has hired you to improve his accounting procedures. The accounts in his General Ledger follow:    Prepare the general journal entries, in chronological order (a) through (e), from the T-account entries shown. Include a brief description of the probable nature of each transaction.

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Question 15

Larry Matt, Inc. completed these transactions during December of the current year: \[\begin{array} { | r | l | } 
\hline \text { Dec. } 1 & \begin{array} { l } 
\text { Began a financial services practice by investing } \$ 15,000 \text { cash and office } \
\text { equipment having a } \$ 5,000 \text { value. }
\end{array} \
\hline 2 & \text { Purchased } \$ 1,200 \text { of office equipment on credit. } \
\hline 3 & \text { Purchased } \$ 300 \text { of office supplies on credit. } \
\hline 4 & \text { Completed work for a client and immediately received a payment of } \$ 900 \text { cash. } \
\hline 8 & \text { Completed work for Precept Paper Co. on credit, } \$ 1,700 . \
\hline 10 & \text { Paid for the supplies purchased on credit on December } 3 . \
\hline 14 & \text { Paid for the annual } \$ 960 \text { premium on an insurance policy. } \
\hline 18 & \begin{array} { l } 
\text { Received payment in full from Precept Paper Co. for the work completed on } \
\text { December } 8 .
\end{array} \
\hline 27 & \text { The company paid } \$ 650 \text { cash in dividends to the owner. (sole shareholder) } \
\hline 30 & \text { Paid } \$ 175 \text { cash for the December utility bills. } \
\hline 30 & \text { Received } \$ 2,000 \text { from a client for financial services to be rendered next year. } \
\hline
\end{array}\] Prepare general journal entries to record these transactions.

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Question 16

At year-end, Henry Laundry Service, Inc. noted the following errors in its trial balance:
1. It understated the total debits to the Cash account by $500 when computing the account balance.
2. A credit sale for $311 was recorded as a credit to the revenue account, but the offsetting debit was not posted.
3. A cash payment to a creditor for $2,600 was never recorded.
4. The $680 balance of the Prepaid Insurance account was listed in the credit column of the trial balance.
5. A $24,900 van purchase was recorded as a $24,090 debit to Equipment and a $24,090 credit to Notes Payable.
6. A purchase of office supplies for $150 was recorded as a debit to Office Equipment. The offsetting credit entry was correct.
7. An additional investment of $4,000 by Del Henry was recorded as a debit to Common Stock and as a credit to Cash.
8. The cash payment of the $510 utility bill for December was recorded (but not paid) twice.
9. The revenue account balance of $79,817 was listed on the trial balance as $97,817.
10. A $1,000 cash withdrawal by the stockholder was recorded as a $100 debit to Dividends and $100 credit to cash.
Using the form below, indicate whether each error would cause the trial balance to be out of balance, the amount of any imbalance, and whether a correcting journal entry is required.

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Question 17

Jerry's Butcher Shop, Inc. had the following assets and liabilities at the beginning and end of the current year:
$\begin{array}{llcc}
 & \text { Assets} &\text {  Liabilities  }\
 \text { Beginning of the year ............ } &\$114,000& \$68,000\
 \text { End of the year ......................} &135,000&73,000\
\end{array}$

If Jerry invested an additional $12,000 in the business and withdrew $5,000 during the year, what was the amount of net income earned by Jerry's Butcher Shop, Inc.?

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Question 18

For each of the accounts in the following table (1) identify the type of account as an asset, liability, equity, revenue, or expense, and (2) identify the normal balance of the account. $$\begin{array} { | l | l | l | } 
\hline & \text { Account Type } & \text { Normal Balance } \
\hline \text { a. Wages Experse } & & \
\hline \text { b. Accounts Receivable } & & \
\hline \text { c. Commissions Eamed } & & \
\hline \text { d. Salaries Payable } & & \
\hline \text { e. Common Stock } & & \
\hline \text { f. Unearned Advertising Revenue } & & \
\hline \text { E. Salaries Expense } & & \
\hline \text { H. Magazine Subscription Revenue } & & \
\hline \text { i. Dividends } & & \
\hline \text { j. Prepaid Insurance } & & \
\hline
\end{array}$$

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Question 19

List the four steps in recording transactions.

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Question 20