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Exam 3: The Double-Entry Accounting System

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Question 1

Multiple Choice

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If a $200 debit to Interest Receivable was instead recorded as a $200 debit to Cash:

A) the trial balance would be out of balance by $200.
B) cash flows from investing activities would be overstated by $200.
C) cash flows from operating activities would be overstated by $200.
D) assets would be overstated by $200.

E) C) and D)
F) A) and B)

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Question 2

Multiple Choice

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Bridgewater Company paid $450 in interest on a loan. $300 of the interest had been accrued in a prior accounting period. Which of the following journal entries correctly records this transaction?

A)
B)
C)
D)

E) B) and C)
F) A) and B)

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Question 3

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The following information was taken from the books of Vulcan Corporation. A partial list of accounts and balances as of December 31, 2013: Required: a) Prepare the necessary closing entries in general journal form. b) Assuming the balance of Retained Earnings prior to closing was $3,400, what is its balance immediately after closing?

An increase to the account Dividends would be recorded as a debit; as a result, the account Dividends normally has a debit balance.

Phoenix Corporation recorded an adjusting entry using T-accounts as follows: Which of the following reflects how this adjustment affects the company's financial statements?

A high value of the debt to asset ratio may indicate that a company has a high level of debt risk.

Which company has the highest level of debt risk?

A liability account normally has a debit balance.

To record the acquisition of office supplies on account, an accountant would credit Office Supplies.

The difference between the debit and credit side of a T-account is known as the

A transaction recorded as a debit to Office Supplies and a credit to Accounts Payable.

A transaction recorded as a debit to Cash and a credit to Common Stock.

Posting is the process of determining the balance in an account by subtracting debits and credits.

A company's adjusted trial balance provides the information needed to prepare the balance sheet and income statement.

The entry to record revenue earned on account includes a debit to accounts receivable and a credit to retained earnings.

Below are listed several transactions that a business may enter into. 1. Provide services to customers on account 2. Purchase land by paying cash 3. Purchase a fire insurance policy that will provide coverage for a two-year period 4. Acquire cash by issuing common stock 5. Recognize expense for amount of office supplies that had been used during the period 6. Receive payment from a customer for services that will be provided over the next six months Required: a) In the table below, indicate the accounts that would be debited and credited for each of the preceding transactions. b) Show how each transaction affects the financial statements by placing a + for increase, - for decrease, and NA for not affected under each component in the horizontal financial statements model shown below. In the Cash Flow column, use the letters OA for operating activities, IA for investing activities, and FA for financing activities.

Record the general journal entries for the following transactions for Stein Corporation for 2013. 1) Performed services for $26,000 cash. 2) Purchased $800 of office supplies on account. 3) Purchased land for $95,000 cash. 4) Paid salary expense of $16,500. 5) Paid for $600 of the supplies purchased in event 2. 6) Collected $15,000 in advance for services to be provided over the next 12 months. 7) Recognized $10,000 of revenue on the contract from event 6. 8) Accrued $5,500 of salary expense.

Credit entries

Peterson Corporation recorded an adjusting entry using T-accounts as follows: Which of the following reflects how this adjustment affects the company's financial statements?

During a company's first year, the asset account, Office Supplies, was debited for $2,300 for the purchases of supplies. At year end, office supplies on hand were counted and determined to be $825. The proper adjusting entry crediting supplies will