1. If a company’s Assets are $159,000 and Liabilities are $27,000, then Equity i
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Question
1. If a company’s Assets are $159,000 and Liabilities are $27,000, then Equity
is____________.
2. If a company’s Liabilities are $51,000 and Equity is $69,000, then the Assets is
____________.
3. If a company’s Assets are $180,000 and Equity is $62,000, then the Liabilities are
_____________.
4. Debits are always an “addition” or increase to the account.
a. True
b. False
5. The two major components of stockholder’s equity in the balance sheet are contributed
capital and retained earnings.
a. True
b. False
6. Double entry bookkeeping requires at least two entries to be made in the accounts.
a. True
b. False
7. The point of original entry into the accounting system is the general journal
a. True
b. False
8. All transactions journalized in the general journal are then posted to an account in the
general ledger
a. True
b. False
9. Expenses paid in cash and recorded as a current asset before they are used are called :
a. Prepaid expenses
b. Deferred expenses
c. Unearned expenses
d. None of the above
10. Which statement would answer the questions “how did the business perform this
year?”
a. The balance sheet
b. The income statement
c. The funds flow statement
11. Jung Company has paid off $35,000 of its “accounts payable” in cash. What would be
the effect of this transaction on the Asset side of the accounting equation?
a. Debit Cash $35,000
b. Credit Cash $35,000
c. Credit Equity $35,000
12. In the above transaction, what would be the effect on the Liability side of the
accounting equation?
a. Debit Accounts Payable $35,000
b. Credit Accounts Payable $35,000
c. Credit Equity $35,000
13. How would you record the billing of a client for $20,000 for consulting work
completed?
a. Debit Accounts Receivable for $20,000 and credit Accounts Payable for $20,000
b. Debit Accounts Receivable for $20,000 and credit Cash for $20,000
c. Debit Accounts Receivable for $20,000 and credit Revenue for $20,000
14. The Company buys office equipment for $80,000 on credit. What would be the effects
on this transaction on the accounting equation?
a. Assets increase by $80,000 and expenses increase by $80,000
b. Assets increase by $80,000 and liabilities increase by $80,000
c. Liabilities increase by $80,000 and expenses decrease by $80,000
15. Determine the Net Income of a company given the following information:
Consulting Revenue $480,000 / Salary Expense $200,000 / Rent expense $40,000
a. $240,000
b. $290,000
c. $480,000
d. $720,000
16. Copley Computer Services had an accounts payable balance of $78,000 at the
beginning of the month. It made purchases on account for $44,900. It was paid
$10,000 by a customer for previous purchases. It paid $37,600 in cash on its accounts
payable balance. What is the balance in the accounts payable at the end of the month?
a. $85,300
b. $95,400
c. $75,200
d. $5,600
17. On December 1, a building management company received $40,000 of rent in advance
for a large building. The term of the rental is one year. What would be the entry on
December 1?
a. Debit cash for $40,000 and credit rent payable for the same amount
b. Debit unearned income for $40,000 and credit rent payable for the same amount
c. Debit cash for $40,000 and credit unearned rental income for the same amount
18. Charlotte Smith opened Smith’s Repairs on March 1. During March, the following
transactions occurred and were recorded in the company’s books:
1. Smith invested $35,000 cash in the business
2. Smith contributed $110,000 of equipment to the business
3. The Company paid $3,000 cash to rent office space for the month
4. The Company received $26,000 cash for repair services
5. The Company paid $7,200 in salaries for the month
6. The Company paid cash of 1,500 for monthly utilities
7. Smith withdrew $6,000 for personal use
8. The Company provided $4,000 of services to a customer on account
What is the Company’s net income for the month?
a. $18,300
b. $23,400
c. $6,300
d. $23,500
19. Company purchases in cash a building for $100,000 but is valued at $105,000. What
would the journal entry be at the time of purchase?
a. Debit building and credit cash for $100,000
b. Debit building and credit cash for $105,000
c. Debit cash and credit building for $105,000
20. A company has $550,000 on net sales and $193,000 on gross profit This means that the
cost of goods sold is
a. $743,000
b. $550,000
c. $357,000
d. $193,000
21. A company purchased $4,500 of merchandise on May 1 with terms 2/10, n/30. On May
6, it returned $250 of that merchandise. On May 8, it paid the balance owed for
merchandise, taking any discount it was entitled to. The cash paid in May 8 is:
a. $4,500
b. $4,165
c. $4,400
22. The replacement cost of an inventory item is $10, the actual cost of the item is $9.50,
the market value of the item is $12. Using the cost rule, what is the inventory valuation
for that item?
a. $10
b. $12
c. $9.50
23. A company had not office supplies available at the beginning of the year. During the
year, the company purchased $330 worth of office supplies. On December 31, $105
worth of office supplies remained. How much should the company report as office
supplies expense for the year?
a. $105
b. $225
c. $330
d. $435
24. The method that assigns cost of inventory that the most recent purchases are sold first
is called:
a. FIFO
b. LIFO
c. Perpetual
d. Cash basis
25. Current assets are:
a. Presented on the balance sheet in order of liquidity
b. Assets that will be converted to cash or sold within one year
c. Generally valued at their cost at the time acquired
d. All of the above
Transactions ( 5 points each ). Indicate what accounts you would debit and credit and the
amount:
1. Whitney Consulting purchased $8,200 worth of supplies and paid $5,000 in cash
immediately.
a. Debit : _______________________________________
b. Credit: _______________________________________
c. Credit: ______________________________________
2. Amy Catering received $2,000 in cash from a customer to provide catering services
next month.
a. Debit: _______________________________________
b. Credit: ______________________________________
3. Trimble Graphics receives $1,500 from a client billed in a previous month for services
provided.
a. Debit: ______________________________________
b. Credit: _____________________________________
4. On January 1, 2017, a company purchased a five-year insurance policy for $5,000. The
purchase was recorded in the “Prepaid Insurance Account”. What entry should be
posted on December 31, 2017?
a. Debit: ______________________________________
b. Credit: _____________________________________
5. On October 12, Dubois Engineering paid $5,000 on for equipment purchased on credit
on September 1.
a. Debit: ______________________________________
b. Credit: _
Explanation / Answer
Assets = Equity + Liabilities.
1. Assets = 159000.
Liabilities = 27000.
>> 159000 = Equity + 27000
>> Equity = 132000.
2. Liabilities = 51000
Equity = 69000
>> Assets = 51000 + 69000
>> Assets = 120000
3. Assets = 180000.
Equity = 62000
>> 180000 = 62000 + Liabilities.
>> Liabilities = 118000
4. Answer is False.
Because If Liabilities account is debited then it results in decrease of account. The increase or decrease if debited or creadited is all depends on Nature of Account.
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