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Exam 2: Analyzing Business Transactions

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Question 41

True/False

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One can obtain a clear picture of a company's liquidity by referring to its statement of cash flows.

A) True
B) False

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Question 42

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The purpose of the ledger is to

A) keep a record of documentation to support each transaction.
B) make sure that all assets, liabilities, etc., have credit balances at all times.
C) record chronologically the day's transactions.
D) maintain a separate account for each asset, liability, etc.

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

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Question 43

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It is sometimes correct for a compound entry's debit totals and credit totals to be unequal.

Which of the following transactions decreases both assets and stockholders' equity?

Journal entries are typically posted only at the end of the year.

Which of the following events does not result in the recording of an expense?

Which of the following errors will not cause the debit and credit columns of the trial balance to be unequal?

If a debit to Supplies were posted as a credit,and a credit of the same amount to Cash were posted as a debit,what would be the effect,if any,on the two accounts and on the trial balance column totals?

Fair Value is the exchange price associated with a business transaction at the time the transaction is recognized.

Using the alphabetical list of account balances presented below,all of which are normal,prepare a trial balance for T.and C.Corporation at June 30,2010,in proper order.Compute the balance of the Cash account. $\begin{array}{l}\text { Accounts Payable } &\$140\\\text { Accounts Receivable } &280\\\text { Cash } &?\\\text { Common Stock }&200\\\text { Equipment } & 400 \\\text { Office Expense } & 180 \\\text { Retained Earnings } & 240 \\\text { Seqrice Revrenue } & 300\end{array}$

Here is the trial balance for McLeary Corporation: $\begin{array}{c}\text { McLeary Corporation}\\\text { Trial Balance}\\\text { January 31, 2010}\\\begin{array}{lrr}\text { Cash } & \$ 3,000 \\\text { Accounts Receivable } & 2,000 \\\text { Art Supplies } & 3,000 \\\text { Office Supplies } & 5,000 \\\text { Prepaid Rent } & 7,000 \\\text { Prepaid Insurance } & 5,000 \\\text { Art Equipment } & 5,000 \\\text { Office Equipment } & 3,000\\\text { Accounts Payable } & & \$ 10,000 \\\text { Common Stock } && 5,000 \\\text { Retained Earnings } & &5,000\\\text {Dividends}&?\\\text {Advertising Fees Earned}&&?\\\text {Wages Expense}&?\\\text {Utilities Expense}&5,000\\\text {Telephone Expense}&3,000\\&\$A&\$B\end{array}\end{array}$ If the trial balance showed a balance of $7,000 in the Dividends account and a balance of $11,000 in the Wages Expense account,what would be the amount of Advertising Fees Earned for the period?

The issue of deciding when to record a transaction is solved by

Which of the following accounts is increased with a credit?

Which of the following accounts might be placed first in a journal entry?

Which of the following accounts is decreased with a credit?

Given the following ledger account and postings,complete the Balance column.Assume no previous postings in the account.

A net income of $10,000 means that the business received $10,000 more in cash from its customers than it spent to run the business.

A credit to an asset account means that asset account has been increased.

The declaration and payment of a dividend will

For which of the following accounts would a related Accumulated Depreciation account be recorded?