1. In the first month of operations, the total of the debit entries to the cash account amounted to $1900 and the total of the credit entries to the cash account amounted to $800. The cash account has a balance of……………….
2. Dawson’s Delivery Service purchased equipment for $3,500. Dawson paid $500 in cash and signed a note for the balance. Dawson debited the Equipment account, credited Cash and
a. debited the Dawson, Capital account for $2,000.
b. credited another asset account for $500.
c. credited a liability account for $3,000.
d. nothing further must be done.
3. Grayton Industries purchased supplies for $1,200. They paid $500 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 $1,200, a credit to a liability account for $700. Which of the following would be the correct way to complete the recording of the transaction?
a. Credit another liability account for $500.
b. Credit the Grayton, Capital account for $500.
c. Debit the Grayton, Capital account for $500.
d. Credit an asset account for $700.
4. On January 14, Franco Industries purchased supplies of $500 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.
5. On June 1, 2008, Delbert Inc. reported a cash balance of $12,000. During June, Delbert made deposits of $3,000 and made disbursements totalling $16,000. What is the cash balance at the end of June?
a. $1,000 debit balance
b. $15,000 debit balance
c. $1,000 credit balance
d. $4,000 credit balance
6. At January 1, 2008, Burton Industries reported owner’s equity of $130,000. During 2008, Burton had a net income of $30,000 and owner drawings of $20,000. At December 31, 2008, the amount of owner’s equity is
a. $130,000.
b. $140,000.
c. $100,000.
d. $80,000.
7. Able Company pays its employees twice a month, on the 7th and the 21st. On June 21, Able Company paid employee salaries of $5,000. This transaction would
a. decrease net income for the month by $5,000.
b. increase owner’s equity by $4,000.
c. decrease the balance in Salaries Expense by $4,000.
d. be recorded by a $4,000 debit to Salaries Payable and a $4,000 credit to Salaries Expense.
8. In the first month of operations for Pocket Industries, the total of the debit entries to the cash account amounted to $9,000 ($5,000 investment by the owner and revenues of $4,000). The total of the credit entries to the cash account amounted to $5,000 (purchase of equipment $2,000 and payment of expenses $3,000). At the end of the month, the cash account has a(n)
a. $2,000 credit balance.
b. $2,000 debit balance.
c. $3,000 credit balance.
d. $4,000 debit balance.
9. Denton Company showed the following balances at the end of its first year:
Cash $ 7,000
Prepaid insurance 700
Accounts receivable 3,500
Accounts payable 2,800
Notes payable 4,200
Denton, Capital 1,400
Denton, Drawing 700
Revenues 21,000
Expenses 17,500
What did Denton Company show as total credits on its trial balance?
a.$30,100
b.$29,400
c.$28,700
d.$30,800
10. Cerner Company showed the following balances at the end of its first year:
Cash $ 5,000
Prepaid insurance 500
Accounts receivable 2,500
Accounts payable 2,000
Notes payable 3,000
Cerner, Capital 1,000
Cerner, Drawing 500
Revenues 15,000
Expenses 12,500
What did Cerner Company show as total credits on its trial balance?
a. $21,500
b. $21,000
c. $20,500
d. $22,000
11. During February 2008, its first month of operations, the owner of Rutwing Enterprises invested cash of $25,000. Rutwing had cash revenues of $4,000 and paid expenses of $7,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28?
a. $3,000 credit
b. $22,000 debit
c. $29,000 debit
d. $18,000 credit
12. At January 31, 2008, the balance in Prieto Inc.’s supplies account was $250. During February, Prieto purchased supplies of $300 and used supplies of $400. At the end of February, the balance in the supplies account should be
a. $250 debit.
b. $350 credit.
c. $950 debit.
d. $150 debit.
13. At December 1, 2008, Marco Company’s accounts receivable balance was $1,200. During December, Marco had credit revenues of $5,000 and collected accounts receivable of $4,000. At December 31, 2008, the accounts receivable balance is
a. $1,200 debit.
b. $2,200 debit.
c. $6,200 debit.
d. $2,200 credit.
14. The following is selected information from J Corporation for the fiscal year ending October 31, 2008.
Cash received from customers $300,000
Revenue earned 380,000
Cash paid for expenses 170,000
Cash paid for computers on November 1, 2007 that will be used
for 3 years (annual depreciation is $16,000) 48,000
Expenses incurred, not including any depreciation 200,000
Proceeds from a bank loan, part of which was used to pay for
the computers 100,000
Based on the accrual basis of accounting, what is J Corporation’s net income for the year ending October 31, 2008?
Use the following information for questions 15–16.
Sheepskin Company had the following transactions during 2008.
Sales of $5,500 on account
Collected $2,225 for services to be performed in 2009
Paid $600 cash in salaries
Purchased airline tickets for $255 in December for a trip to take place in 2009
15. What is Sheepskin’s 2008 net income using accrual accounting?
a. $3,875
b. $5,875
c. $4,900
d. $3,625
16. What is Sheepskin’s 2008 net income using cash basis accounting?
1) Cash account balance is 1900-800 = $1100
2) Journal entry :
| Date | account and explanation | debit | credit |
| Equipment | 3500 | ||
| Cash | 500 | ||
| Notes payable | 3000 |
So answer is c) credited a liability account for $3,000.
3) Journal entry :
| Date | account and explanation | debit | credit |
| Supplies | 1200 | ||
| Cash | 500 | ||
| Account payable | 700 |
so answer is a) Credit another liability account for $500.
4) Journal entry :
| Date | account and explanation | debit | credit |
| Supplies | 500 | ||
| Account payable | 500 | ||
So answer is a) a debit to Supplies and a credit to Accounts Payable.
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