Question 1

Which of the following will not cause a trial balance to be out of balance?
A)The balance for an account is incorrectly computed.
B)A debit entry is posted as a credit.
C)A credit entry is posted to the wrong account as a credit.
D)An account is accidentally omitted from the trial balance.

Accepted Answer

Option C will not cause a trial balance to be out of balance because the error does not affect the total debits and credits. Posting a credit entry to the wrong account as a credit still maintains the overall balance between total debits and credits.

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 is applicable to all businesses. The chart of accounts may vary depending on the nature of the business, its size, and the accounting standards used. However, there are some standardized charts of accounts available, such as those established by the International Financial Reporting Standards (IFRS) or the Generally Accepted Accounting Principles (GAAP) in the United States.

Question 3

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

Accepted Answer

An external event refers to an interaction between an entity and its environment, such as a person interacting with nature or a business responding to market forces. Therefore, the statement is true.

Question 4

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 5

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 corrected balances for the trial balance are as follows:

Cash                 $6,200
Accounts Receivable  3,900
Office Supplies        90
Prepaid Rent        2,400
Equipment           8,000
Accum. Depr.         (600)
Accounts Payable    1,200
Salaries Payable      800
Unearned Revenue    2,500
Common Stock        5,000
Retained Earnings   1,480
Dividends           (300)
Service Revenue    11,600
Rent Revenue        1,000
Office Expense      1,620
Salaries Expense     800
Depreciation Expense  600
Supplies Expense      470
Total              $16,180

Question 6

The accounting equation must balance after each transaction.

Accepted Answer

The accounting equation, which is Assets = Liabilities + Equity, must always balance after each transaction. This means that the total value of assets must always equal the total of liabilities and equity, ensuring that the company's books are accurate and error-free.

Question 7

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

Accepted Answer

Debit entries represent an increase in assets and a decrease in either liabilities or stockholders' equity depending on the transaction being recorded.

Question 8

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

Accepted Answer

The chart of accounts is a list of all the accounts that a company needs to track its financial transactions, and it will vary based on the nature of the company's business. Different industries and businesses have different accounting needs and will require a different chart of accounts to accurately track their finances.

Question 9

The initial step in the recording process is posting.

Accepted Answer

The initial step in the recording process is actually pre-production, where ideas are developed, arrangements are made, and rehearsals are conducted. Posting may occur later in the process when sharing the finished product, but it is not the initial step.

Question 10

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

Accepted Answer

Under the cost principle, assets are initially recorded at their historical cost and are subsequently reported at their historical cost minus any accumulated depreciation or impairment losses. The cost principle does not allow for assets to be carried at their current market value.

Question 11

Wolfe Inc. Wolfe Inc.reports these account balances at January 1,2014:
 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 31,2014,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...

Question 12

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

Accepted Answer

The answer of Payment of a dividend increases both cash...

Question 13

Dividends are a determinant of net income.

Accepted Answer

Dividends are payments made to shareholders from a company's profits. They are not a determinant of net income. The calculation of net income is based on total revenue minus expenses, taxes, and interest.

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

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, an increase in assets (equipment) is offset by an increase in liabilities (notes payable). Therefore, the total assets and liabilities of the company will increase, resulting in no change in equity.

Question 16

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 17

Wolfe Inc. Wolfe Inc.reports these account balances at January 1,2014:
 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 1,2014,the total of the credit column is:
A)$182,000
B)$286,000
C)$196,000
D)$166,000

Accepted Answer

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

Question 18

A T account for Cash cannot contain any credits.

Accepted Answer

A T account for Cash can contain credits when there are deposits or other inflows of cash into the account.

Question 19

Wolfe Inc. Wolfe Inc.reports these account balances at January 1,2014:
 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 31,2014,the total liabilities are:
A)$0
B)$56,000
C)$41,000
D)$30,000

Accepted Answer

As per the given information, the only transactions that occurred during the month of January are the collection of accounts receivable and payment of note payable. 
The accounts receivable balance is not provided, so we cannot determine the total amount of accounts receivable collected. However, we do know that $12,000 of accounts receivable were collected. 
Therefore, the accounts receivable balance on January 31 would be (accounts receivable balance at January 1) - $12,000. 
The note payable balance is also not provided, but we do know that $11,000 was paid on the note payable. 
Therefore, the note payable balance on January 31 would be (note payable balance at January 1) - $11,000. 
Using the account balances at January 1 and the changes that occurred during January, we can calculate the total liabilities as follows:

Accounts payable: $25,000 
Notes payable: ($50,000 - $11,000) = $39,000 
Total liabilities: $25,000 + $39,000 = $64,000

Therefore, the correct answer is C) $41,000.

Question 20

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

Accepted Answer

The issuance of stock increases both a company's assets (cash from selling the stock) and its stockholders' equity (the value of the newly issued stock). It does not decrease the company's assets.

Quiz 3: Processing Accounting Information

Which of the following will not cause a trial balance to be out of balance?