Financial and Managerial Accounting, 9th Edition Test Bank

Chapter 02 – Analyzing Business Transactions TRUE/FALSE 1. When a company receives a product previously ordered, a recordable transaction has occurred. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: measurement issues| recording transactions 2. When a business hires a new employee, a recordable transaction has occurred. ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: measurement issues| recording transactions 3. The valuation issue deals with how the components of a transaction should be categorized. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Recall 4. In accounting, to recognize means to record a transaction or event. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Recall 5. Purchase requisitions are recognized in the accounting records. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Comprehension 6. When a company purchases goods that it will resell, it must record the goods in an expense account. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Comprehension 7. The cost principle is a solution to the recognition issue. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Recall 8. The recognition issue deals with when a user of financial statements should use accounting information. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Recall 9. The most generally accepted value used in accounting is market value. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Recall 10. Fair Value is the exchange price associated with a business transaction at the time the transaction is recognized. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Recall 11. The classification issue involves the assignment of accounts to business transactions. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Recall 12. When a company receives an order, a transaction has occurred. ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: measurement issues| recording transactions 13. A credit to an asset account means that asset account has been increased. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: T accounts OBJ: LO2 LOC: Learning type: Recall 14. A debit has an unfavorable effect on an account. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: T accounts OBJ: LO2 LOC: Learning type: Recall 15. For a T account, an account balance is the difference in total dollars between total debit footings and total credit footings. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: T accounts OBJ: LO2 LOC: Learning type: Recall 16. Column totals are called footings. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: T accounts OBJ: LO2 LOC: Learning type: Recall 17. A decrease in a liability is recorded by a debit. ANS: T PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic KEY: T accounts| analyze transactions LOC: Learning type: Recall 18. An increase in an asset is recorded by a debit. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: T accounts| analyze transactions OBJ: LO2 LOC: Learning type: Recall 19. The double-entry system is possible because all business transactions have two equal and opposite aspects. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions OBJ: LO2 LOC: Learning type: Recall 20. A decrease in a stockholders’ equity account is recorded with a credit. ANS: F PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: analyze transactions| effects of transactions on accounting equation 21. An increase in revenue is recorded with a credit. ANS: T PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: analyze transactions| effects of transactions on accounting equation 22. Dividends should appear on the statement of retained earnings. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: dividends OBJ: LO2 LOC: Learning type: Recall 23. The account Dividends has a normal credit balance. ANS: F PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: analyze transactions| effects of transactions on accounting equation 24. Revenues have a normal credit balance. ANS: T PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: analyze transactions| effects of transactions on accounting equation 25. Retained Earnings has a normal debit balance. ANS: F PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: analyze transactions| effects of transactions on accounting equation 26. Accounts Payable has a normal credit balance. ANS: T PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: analyze transactions| effects of transactions on accounting equation 27. When stockholders make an investment, the Common Stock account is debited. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions OBJ: LO3 LOC: Learning type: Recall 28. When a dividend is declared and paid, the Dividends account is debited and Cash is credited. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions OBJ: LO3 LOC: Learning type: Recall 29. Liabilities are established with debits and eliminated with credits. ANS: F PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: analyze transactions| effects of transactions on accounting equation 30. Generally, before Accounts Receivable is debited, it is credited. ANS: F PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| effects of transactions on accounting equation 31. Generally, before Accounts Payable is debited, it is credited. ANS: T PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| effects of transactions on accounting equation 32. When payment is received for services not yet rendered, no entry is recorded until that service has been rendered. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions OBJ: LO3 LOC: Learning type: Recall 33. When revenue has been earned, no entry is recorded until the related cash has been collected. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions OBJ: LO3 LOC: Learning type: Recall 34. A contract is an example of a source document. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions OBJ: LO3 LOC: Learning type: Comprehension 35. A basic storage unit for accounting data is the account. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: accounts OBJ: LO2 LOC: Learning type: Recall 36. In a trial balance, all debits are listed before all credits. ANS: F PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 37. A trial balance is normally prepared at the end of the day. ANS: F PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 38. When the columns of the trial balance equal each other, it means that no errors have occurred in recording and posting the transactions. ANS: F PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 39. A transposition error will cause the trial balance to be out of balance by an amount that is evenly divisible by 9. ANS: T PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 40. Recording an account with a debit balance as a credit, or vice versa, will cause the trial balance to be out of balance by an amount that is evenly divisible by 2. ANS: T PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 41. The amount of profit would always be equal to the ending cash balance. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: business goals OBJ: LO5 LOC: Learning type: Recall 42. One can obtain a clear picture of a company’s liquidity by referring to its income statement. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: liquidity and current liabilities OBJ: LO5 LOC: Learning type: Recall 43. One can obtain a clear picture of a company’s liquidity by referring to its statement of cash flows. ANS: T PTS: 1 NAT: AACSB correlation: analytic OBJ: LO5 LOC: Learning type: Recall KEY: liquidity and current liabilities 44. Revenue should be recorded when it has been earned, not when the related cash has been collected. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO5 LOC: Learning type: Recall 45. Expenses should be recorded when they are paid, not when they have been incurred. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO5 LOC: Learning type: Recall 46. 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. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: recording transactions OBJ: LO5 LOC: Learning type: Comprehension 47. Accounts Receivable and Accounts Payable are used when there is a time delay between a transaction and its related cash flow. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: recording transactions OBJ: LO5 LOC: Learning type: Comprehension 48. The journal is a chronological record of all transactions. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: recording transactions OBJ: SO6 LOC: Learning type: Recall 49. Entering transactions into the journal is called posting. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: recording transactions OBJ: SO6 LOC: Learning type: Recall 50. In a journal entry, assets are always recorded before liabilities. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: recording transactions OBJ: SO6 LOC: Learning type: Recall 51. In a journal entry, credits are always indented. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: recording transactions OBJ: SO6 LOC: Learning type: Recall 52. In a journal entry, the Post. Ref. column is left blank until the entry has been posted. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: posting transactions OBJ: SO6 LOC: Learning type: Recall 53. It is sometimes correct for a compound entry’s debit totals and credit totals to be unequal. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: posting transactions OBJ: SO6 LOC: Learning type: Recall 54. The ledger account form has a Balance column. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: posting transactions OBJ: SO6 LOC: Learning type: Recall 55. One might see “J2” correctly placed in the Post. Ref. column of the journal. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: posting transactions OBJ: SO6 LOC: Learning type: Recall 56. Despite the advantages of a computer accounting information system, posting still must be done manually. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: posting transactions OBJ: SO6 LOC: Learning type: Comprehension 57. Journal entries are typically posted only at the end of the year. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: posting transactions OBJ: SO6 LOC: Learning type: Recall 58. In a financial report, a double line is placed below the final total(s). ANS: T AACSB correlation: communication PTS: 1 OBJ: SO6 LOC: Learning type: Recall KEY: financial statements| recording transactions 59. Another name for the ledger is the book of original entry. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: posting transactions OBJ: SO6 LOC: Learning type: Recall 60. The chart of accounts makes finding accounts in the ledger easier. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: chart of accounts OBJ: SO6 LOC: Learning type: Recall 61. All companies use the same standard set of accounts. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: chart of accounts OBJ: SO6 LOC: Learning type: Recall 62. The accounts in a chart of accounts are normally listed in alphabetical order. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: chart of accounts OBJ: SO6 LOC: Learning type: Recall 63. The numbering scheme of a chart of accounts should contain no gaps. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: chart of accounts OBJ: SO6 LOC: Learning type: Recall 64. Wages payable is a type of expense. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: liabilities OBJ: SO6 LOC: Learning type: Recall 65. Dividends are classified as an expense. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: owner’s equity OBJ: SO6 LOC: Learning type: Recall 66. Unearned revenues are classified as liabilities on the balance sheet. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: liabilities OBJ: SO6 LOC: Learning type: Recall 67. Another word for expense is debt. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: accounts OBJ: SO6 LOC: Learning type: Recall 68. Office supplies are classified as an expense. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: assets OBJ: SO6 LOC: Learning type: Recall 69. The Land and Building accounts may be combined into one account. ANS: F PTS: 1 NAT: AACSB correlation: analytic KEY: accounts OBJ: SO6 LOC: Learning type: Recall 70. Investments by stockholders are recorded in the Common Stock account, not in the Retained Earnings account. ANS: T PTS: 1 NAT: AACSB correlation: analytic KEY: owner’s equity OBJ: SO6 LOC: Learning type: Recall MULTIPLE CHOICE 1. When a business records revenue before it has been earned, it has violated the measurement issue of a. recognition. b. evaluation. c. classification. d. valuation. ANS: A PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Comprehension 2. When a business reports an asset at an inflated dollar amount, it has violated the measurement issue of a. recognition. b. valuation. c. classification. d. realization. ANS: B PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Comprehension 3. When a business erroneously records expenses as assets, it has violated the measurement issue of a. communication. b. classification. c. valuation. d. recognition. ANS: B PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Comprehension 4. Which of the following is a business event that is not considered a recordable transaction? a. A company receives a product previously ordered. b. A company pays an employee for work performed. c. A customer inquires about the availability of a service. d. A customer purchases a service. ANS: C PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Comprehension 5. Which of the following is a business event that is considered a recordable transaction? a. A company hires a new employee. b. A customer purchases merchandise. c. A company orders a product from a supplier. d. An employee sends a purchase requisition to the purchasing department. ANS: B PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Comprehension 6. A purchase is recognized in the accounting records when a. payment is made for the item purchased. b. the purchase requisition is sent to the purchasing department. c. title transfers from the seller to the buyer. d. the buyer receives the seller’s bill. ANS: C PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Recall 7. Which of the following is not a measurement issue in accounting? a. When to record a business transaction b. How to classify the items of a business transaction c. What value to place on a business transaction d. Where to record a business transaction ANS: D PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Recall 8. Which of the following is an illustration of the classification issue? a. At what amount should an old machine be shown on the balance sheet? b. At what point should the purchase of art supplies be recorded? c. Should tools be recorded as an asset or as an expense? d. At what point should a bill be paid for the purchase of an item? ANS: C PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Comprehension 9. The issue of deciding when to record a transaction is solved by a. properly classifying the transaction. b. deciding on a point of recognition. c. assigning historical cost to the transaction. d. analyzing the intent of management. ANS: B PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Recall 10. Which of the following is not a measurement issue in accounting? a. Valuation b. Recognition c. Evaluation d. Classification ANS: C PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Recall 11. The cost principle relates most closely to the a. recognition point. b. recognition issue. c. valuation issue. d. classification issue. ANS: C PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Recall 12. Which of the following business events is not a transaction? a. Signing a contract b. Paying wages c. Receiving goods d. Purchasing a service ANS: A PTS: 1 NAT: AACSB correlation: analytic KEY: measurement issues OBJ: LO1 LOC: Learning type: Comprehension 13. If Accounts Receivable has debit postings of $29,000, credit postings of $22,000, and a normal ending balance of $24,000, which of the following was its beginning balance? a. $31,000 Dr. b. $17,000 Dr. c. $17,000 Cr. d. $31,000 Cr. ANS: B PTS: 1 NAT: AACSB correlation: analytic KEY: T accounts OBJ: LO2 LOC: Learning type: Application 14. To determine the balance of a particular account, one should refer to the a. source documents. b. chart of accounts. c. book of original entry. d. ledger. ANS: D PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 15. Which of the following accounts is increased with a debit? a. Common Stock b. Rent Payable c. Legal Fees Earned d. Dividends ANS: D PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: effects of transactions on accounting equation 16. Which of the following accounts is increased with a credit? a. Supplies b. Fees Earned c. Supplies Expense d. Dividends ANS: B PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: effects of transactions on accounting equation 17. If Accounts Payable has debit postings of $17,000, credit postings of $14,000, and a normal ending balance of $6,000, what was its beginning balance? a. $9,000 Cr. b. $3,000 Cr. c. $9,000 Dr. d. $3,000 Dr. ANS: A PTS: 1 NAT: AACSB correlation: analytic KEY: T accounts OBJ: LO2 LOC: Learning type: Application 18. Which pair of accounts follows the rules of debit and credit in the same manner? a. Revenue from Services and Equipment b. Prepaid Rent and Advertising Expense c. Repair Expense and Notes Payable d. Common Stock and Rent Expense ANS: B PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: effects of transactions on accounting equation 19. Which pair of accounts follows the rules of debit and credit in the opposite manner? a. Prepaid Insurance and Dividends b. Advertising Expense and Land c. Dividends and Medical Fees Earned d. Interest Payable and Common Stock ANS: C PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: effects of transactions on accounting equation 20. Which of the following accounts has a normal credit balance? a. Dividends b. Automotive Equipment c. Advertising Fees Earned d. Interest Expense ANS: C PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: effects of transactions on accounting equation 21. Which of the following accounts has a normal debit balance? a. Dividends b. Common Stock c. Unearned Fees d. Retained Earnings ANS: A PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: effects of transactions on accounting equation 22. Which of the following accounts has a normal debit balance? a. Art Fees Earned b. Notes Payable c. Prepaid Insurance d. Unearned Art Fees ANS: C PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: effects of transactions on accounting equation 23. Which of the following accounts has a normal credit balance? a. Accounts Receivable b. Common Stock c. Wages Expense d. Dividends ANS: B PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: effects of transactions on accounting equation 24. Which of the following accounts has a normal debit balance? a. Wages Payable b. Fees Earned c. Rent Expense d. Common Stock ANS: C PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: effects of transactions on accounting equation 25. Which of the following accounts is decreased with a debit? a. Notes Payable b. Cash c. Interest Expense d. Dividends ANS: A PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: effects of transactions on accounting equation 26. Which of the following accounts is decreased with a credit? a. Advertising Fees Earned b. Insurance Expense c. Common Stock d. Unearned Revenue ANS: B PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: T accounts| effects of transactions on accounting equation 27. When collection is made on Accounts Receivable, a. stockholders’ equity increases. b. total assets decrease. c. total assets remain the same. d. total assets increase. ANS: C PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| effects of transactions on accounting equation 28. If office equipment is sold at cost in exchange for a promissory note, a. total liabilities increase. b. total liabilities and stockholders’ equity decrease. c. total assets decrease. d. total assets remain the same. ANS: D PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| effects of transactions on accounting equation 29. The declaration and payment of a dividend will a. decrease net income. b. increase liabilities. c. not affect total assets. d. decrease stockholders’ equity. ANS: D PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| effects of transactions on accounting equation 30. Payment on a portion of Accounts Payable will a. not affect stockholders’ equity. b. decrease net income. c. increase total liabilities. d. not affect total assets. ANS: A PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| effects of transactions on accounting equation 31. A transaction in which six months’ rent is paid in advance results in which of the following journal entries? a. Prepaid Rent – Debit; Cash – Credit b. Rent Receivable – Debit; Cash – Credit c. Rent Revenue – Debit; Cash – Credit d. Rent Expense– Debit; Cash – Credit ANS: A PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions OBJ: LO3 LOC: Learning type: Comprehension 32. Which of the following events does not require a journal entry? a. Purchase of a one-year insurance policy b. Agreement to perform a service at a future date c. Performance of a service agreed to at a past date d. Payment for a service performed previously ANS: B PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions OBJ: LO1 LOC: Learning type: Comprehension 33. Which of the following events does not result in the recording of an expense? a. Payment of a dividend b. Purchase of gasoline for fill-up of a company car c. Receipt of a bill from the telephone company d. Payment of wages ANS: A PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions OBJ: LO3 LOC: Learning type: Comprehension 34. A company that receives money in advance of performing a service. What is the journal entry for the transaction? a. Unearned Revenue – Debit; Accounts Payable – Credit b. Cash – Debit; Unearned Revenue – Credit c. Cash – Debit; Prepaid Fees – Credit d. Cash – Debit; Accounts Receivable. – Credit ANS: B PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| recording entries 35. When a company has performed a service but has not yet received payment, what is the required journal entry to be recorded? a. Accounts Receivable – Debit; Revenue from Services – Credit b. Revenue from Services – Debit; Accounts Payable – Credit c. No entry is required until the cash is received. d. Revenue from Services – Debit; Accounts Receivable – Credit ANS: A PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| recording entries 36. When a company receives an electric bill but does not pay it right away, what is the required journal entry to be recorded? a. Utilities Expense – Debit; Accounts Receivable – Credit b. No entry is required until the bill is paid. c. Utilities Expense – Debit; Accounts Payable – Credit d. Accounts Payable – Debit; Utilities Expense – Credit ANS: C PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| recording entries 37. When a magazine company receives advance payment for a subscription, what is the required journal entry to be recorded? a. Cash – Debit; Unearned Subscriptions Revenue – Credit b. Prepaid Subscriptions – Debit; Cash – Credit c. Cash – Debit; Subscriptions Revenue – Credit d. Unearned Subscriptions Revenue – Debit; Cash – Credit ANS: A PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| recording entries 38. When a service has been performed, but no cash has been received, which of the following statements is true? a. The entry would include a debit to Accounts Receivable. b. No journal entry would be made. c. The entry would include a debit to Accounts Payable. d. The entry would include a credit to Unearned Revenue. ANS: A PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| recording entries 39. Which of the following transactions decreases both assets and stockholders’ equity? a. Declaration and payment of a dividend b. Advance payment made for insurance c. Receipt of a phone bill, to be paid at a later time d. Payment of a liability ANS: A PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| effects of transactions on accounting equation 40. A $4,000 machine is purchased by paying $1,000 cash and issuing a promissory note for the remainder. The journal entry should include a a. credit to Machinery. b. credit to Notes Payable. c. credit to Notes Receivable. d. debit to Cash. ANS: B PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| recording entries 41. All of the following are examples of source documents except a. checks. b. invoices. c. journals. d. receipts. ANS: C PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions OBJ: LO3 LOC: Learning type: Recall 42. Which of the following transactions increases both assets and stockholders’ equity? a. Payment received from a credit customer b. Received a bank loan c. Rendered a service, payment not yet received d. Declared and paid a dividend ANS: C PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| effects of transactions on accounting equation 43. Which of the following accounts will not affect stockholders’ equity? a. Advertising Expense b. Dividends c. Land d. Sales ANS: C PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| effects of transactions on accounting equation 44. A dividend will reduce which of the following accounts? a. Dividends b. Retained Earnings c. Common Stock d. Accounts Payable ANS: B PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| effects of transactions on accounting equation 45. Which of the following does not affect retained earnings? a. Declaration and payment of dividends b. Earning of revenues c. Investments by stockholders d. Incurring of expenses ANS: C PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: analyze transactions| effects of transactions on accounting equation 46. A $70 credit item is accidentally posted as a debit. The trial balance column totals will therefore differ by a. $0. b. $35. c. $70. d. $140. ANS: D PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: post entries and prepare trial balance 47. Which of the following gives the correct sequence of accounting procedures? a. Financial statements, trial balance, ledger, journal b. Financial statements, journal, ledger, trial balance c. Journal, ledger, trial balance, financial statements d. Ledger, trial balance, journal, financial statements ANS: C PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: post entries and prepare trial balance| prepare financial statements 48. Here is the trial balance for McLeary Corporation: McLeary Corporation Trial Balance January 31, 2010 Cash Accounts Receivable $3,000 2,000 Art Supplies Office Supplies Prepaid Rent Prepaid Insurance Art Equipment Office Equipment Accounts Payable Common Stock Retained Earnings Dividends Advertising Fees Earned Wages Expense Utilities Expense Telephone Expense 3,000 5,000 7,000 5,000 5,000 3,000 $10,000 5,000 5,000 ? ? $ ? 5,000 3,000 A ________ $ B If the balance of the Dividends account were $36,000 and the balance of the Wages Expense account were $5,000, what would be the amount of B? a. $48,000 b. $61,000 c. $82,000 d. $62,000 ANS: C PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Analysis KEY: post entries and prepare trial balance 49. Here is the trial balance for McLeary Corporation: McLeary Corporation Trial Balance January 31, 2010 Cash Accounts Receivable Art Supplies Office Supplies Prepaid Rent Prepaid Insurance Art Equipment Office Equipment Accounts Payable Common Stock Retained Earnings Dividends Advertising Fees Earned Wages Expense Utilities Expense Telephone Expense $3,000 2,000 3,000 5,000 7,000 5,000 5,000 3,000 $10,000 5,000 5,000 ? ? $ ? 5,000 3,000 A ________ $ B 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? a. $49,000 b. $39,000 c. $54,000 d. $24,000 ANS: B PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Analysis KEY: post entries and prepare trial balance 50. Here is the trial balance for McLeary Corporation: McLeary Corporation Trial Balance January 31, 2010 Cash Accounts Receivable Art Supplies Office Supplies Prepaid Rent Prepaid Insurance Art Equipment Office Equipment Accounts Payable Common Stock Retained Earnings Dividends Advertising Fees Earned Wages Expense Utilities Expense Telephone Expense $5,500 2,000 3,000 5,000 7,000 5,000 5,000 3,000 $10,000 5,000 5,000 ? ? $ ? 5,000 3,000 ________ A $ B On the trial balance, total assets equal a. $45,500. b. $43,500. c. $35,500. d. $25,500. ANS: C PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Analysis KEY: post entries and prepare trial balance 51. Here is the trial balance for McLeary Corporation: McLeary Corporation Trial Balance January 31, 2010 Cash Accounts Receivable Art Supplies Office Supplies $3,000 2,000 3,000 5,000 Prepaid Rent Prepaid Insurance Art Equipment Office Equipment Accounts Payable Common Stock Retained Earnings Dividends Advertising Fees Earned Wages Expense Utilities Expense Telephone Expense 7,000 5,000 5,000 3,000 $10,000 5,000 5,000 ? ? $ ? 5,000 3,000 A $ ________ B If the trial balance showed a balance of $8,000 in the Wages Expense account and a balance of $34,000 in the Advertising Fees Earned account, what would be the amount of A? a. $54,000 b. $44,000 c. $59,000 d. $49,000 ANS: A PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Analysis KEY: post entries and prepare trial balance 52. Here is the trial balance for McLeary Corporation: McLeary Corporation Trial Balance January 31, 2010 Cash Accounts Receivable Art Supplies Office Supplies Prepaid Rent Prepaid Insurance Art Equipment Office Equipment Accounts Payable Common Stock Retained Earnings Dividends Advertising Fees Earned Wages Expense Utilities Expense Telephone Expense $3,000 2,000 3,000 5,000 7,000 5,000 5,000 3,000 $10,000 5,000 5,000 ? ? $ ? 5,000 3,000 A $ ________ B If the trial balance showed a balance of $4,000 in the Wages Expense account and a balance of $30,000 in the Advertising Fees Earned account, what would be the amount of Dividends? a. $25,000 b. $14,000 c. $5,000 d. $19,000 ANS: C PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Analysis KEY: post entries and prepare trial balance 53. Which of the following errors will not cause the debit and credit columns of the trial balance to be unequal? a. A debit entry was recorded in the wrong account. b. A debit was entered in an account as a credit. c. The account balance was carried to the wrong column of the trial balance. d. The balance of an account was incorrectly computed. ANS: A PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: post entries and prepare trial balance 54. The primary purpose of the trial balance is to test the a. recording of transactions. b. analysis of transactions. c. equality of debit and credit balances in the ledger. d. equality of debit and credit entries in the journal. ANS: C PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 55. A $190 credit item is posted as a debit. The trial balance column totals therefore will differ by a. $380. b. $760. c. $190. d. $0. ANS: A PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: post entries and prepare trial balance 56. Which of the following errors will not cause the debit and credit columns of a trial balance to be unequal? a. A debit was posted to an account as a credit. b. A journal entry was posted twice. c. The trial balance was incorrectly summed. d. Only part of a journal entry was posted. ANS: B PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: post entries and prepare trial balance 57. Which of the following errors will cause a trial balance to be out of balance? a. The bookkeeper forgot to journalize a transaction. b. The bookkeeper forgot to post a journal entry to the ledger. c. A credit was posted to an account as a debit. d. A debit to Office Equipment was incorrectly debited to Office Supplies. ANS: C PTS: 1 NAT: AACSB correlation: analytic OBJ: LO4 LOC: Learning type: Comprehension KEY: post entries and prepare trial balance 58. Which of the following errors will cause a trial balance to be out of balance? a. Posting a debit to Land as a debit to Machinery b. Placing a debit balance amount into the credit balance column of the ledger c. Omitting an entire transaction d. Incorrectly recording the purchase of land for cash as a debit to Cash and a credit to Land ANS: B PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: post entries and prepare trial balance 59. Which of the following errors will cause the trial balance to be out of balance? a. An entire transaction was entered in the general journal as $27 instead of $72. b. An entire transaction was omitted from the general journal. c. The balance of an account was incorrectly computed. d. A debit entry was entered in the wrong debit account. ANS: C PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: post entries and prepare trial balance 60. Which of the following accounts might be used when there is a time delay between a transaction and its related cash flow? a. Accounts Payable b. Fees Earned c. Cash d. Prepaid Rent ANS: A PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions| liabilities OBJ: LO5 LOC: Learning type: Comprehension 61. Which of the following accounts will eventually be followed with an inflow of cash? a. Prepaid Insurance b. Unearned Revenue c. Dividends d. Accounts Receivable ANS: D PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions OBJ: LO5 LOC: Learning type: Comprehension 62. Which of the following accounts will eventually be followed with an outflow of cash? a. Design Revenue b. Notes Receivable c. Accounts Payable d. Prepaid Rent ANS: C PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions OBJ: LO5 LOC: Learning type: Comprehension 63. All of the following actions can help a business manage its cash flows except a. convince its creditors to allow payment over a period of time. b. pay for all expenditures immediately. c. be efficient in making collections from its customers. d. arrange for a line of credit at the bank, should the funds be needed. ANS: B PTS: 1 NAT: AACSB correlation: analytic KEY: cash flow and current liabilities OBJ: LO5 LOC: Learning type: Comprehension 64. The general journal does not have a column titled a. Description. b. Account Balance. c. Date. d. Post. Ref. ANS: B PTS: 1 OBJ: SO6 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 65. Which of the following terms does not mean the same as the others? a. Footing b. Folio c. LP d. Post. Ref. ANS: A PTS: 1 OBJ: SO6 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 66. To find an explanation of a transaction, one should look at the a. ledger. b. trial balance. c. journal. d. chart of accounts. ANS: C PTS: 1 OBJ: SO6 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 67. Which of the following accounts might be placed first in a journal entry? a. Bonds Payable, when it has been decreased b. Cash, when it has been decreased c. Unearned Revenue, when it has been increased d. Interest Income, when it has been increased ANS: A PTS: 1 NAT: AACSB correlation: analytic KEY: recording entries OBJ: SO6 LOC: Learning type: Comprehension 68. Which of the following statements is true about a journal entry? a. The Post. Ref. column is filled in prior to posting. b. All debits are listed before any credits. c. The name of the month should be repeated for each entry. d. An explanation must follow each debit and each credit. ANS: B PTS: 1 NAT: AACSB correlation: analytic OBJ: SO6 LOC: Learning type: Recall KEY: recording entries 69. Which of the following statements is false about a journal entry? a. It may have more than one debit or credit entry. b. Credits are always indented. c. Accounts that are increased are always listed first. d. A space should be skipped between journal entries. ANS: C PTS: 1 NAT: AACSB correlation: analytic KEY: recording entries OBJ: SO6 LOC: Learning type: Comprehension 70. Which of the following accounts should be credited in a journal entry? a. Dividends, when it has been increased b. Accounts Receivable, when it has been decreased c. Wages Expense, when it has been increased d. Wages Payable, when it has been decreased ANS: B PTS: 1 NAT: AACSB correlation: analytic KEY: recording entries OBJ: SO6 LOC: Learning type: Comprehension 71. Which of the following statements is true about a journal entry? a. Decreases in liabilities are indented. b. The Post. Ref. column is left blank until entries are posted. c. A line is skipped between each debit and each credit. d. Assets are entered before liabilities. ANS: B PTS: 1 NAT: AACSB correlation: analytic KEY: recording entries OBJ: SO6 LOC: Learning type: Recall 72. Which of the following statements is not necessarily true about a journal entry? a. Liabilities are indented. b. An explanation follows the journal entry. c. The Post. Ref. column is left blank until the entry is posted. d. All debits must be recorded before any credits. ANS: A PTS: 1 NAT: AACSB correlation: analytic KEY: recording entries OBJ: SO6 LOC: Learning type: Recall 73. The process of transferring journal entry information from the journal to the ledger is called a. journalizing. b. posting. c. footing. d. analyzing. ANS: B PTS: 1 OBJ: SO6 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 74. The Post. Ref. column in the general journal is used to show that an amount has been posted to the ledger when which of the following is placed in it? a. An X b. Journal number c. Journal page number d. Account number ANS: D PTS: 1 OBJ: SO6 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 75. The principal purpose of posting is to a. enter transactions directly into the ledger. b. help identify errors made in the journal. c. obtain updated account balances. d. help determine if the financial statements are ready to be prepared. ANS: C PTS: 1 OBJ: SO6 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 76. The account most recently posted is determined most efficiently by referring to the a. Post. Ref. column of the ledger. b. balance column of the ledger. c. date column of the general journal. d. Post. Ref. column of the general journal. ANS: D PTS: 1 OBJ: SO6 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: post entries and prepare trial balance 77. Posting is performed by transferring information from the a. source documents to the journal. b. source documents to the ledger. c. journal to the ledger. d. ledger to the journal. ANS: C PTS: 1 OBJ: SO6 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 78. The Post. Ref. column in the general ledger shows that an amount has been posted when which of the following is placed in it? a. The journal page number b. An X c. A check mark d. The account number ANS: A PTS: 1 OBJ: SO6 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 79. Which of the following bookkeeping techniques generally is not acceptable? a. Dollar signs on financial statements b. Commas and periods in ruled columns c. A double line after final totals d. A dash in the cents column to indicate zero cents ANS: B PTS: 1 OBJ: SO6 NAT: AACSB correlation: analytic KEY: bookkeeping LOC: Learning type: Recall 80. The chart of accounts is the starting point for a a. journal. b. trial balance. c. ledger. d. financial statement. ANS: C PTS: 1 NAT: AACSB correlation: analytic KEY: chart of accounts OBJ: SO6 LOC: Learning type: Recall 81. Typically, the chart of accounts begins with a. revenue accounts. b. asset accounts. c. liability accounts. d. expense accounts. ANS: B PTS: 1 NAT: AACSB correlation: analytic KEY: chart of accounts OBJ: SO6 LOC: Learning type: Recall 82. 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. ANS: D PTS: 1 OBJ: SO6 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: post entries and prepare trial balance 83. Which of the following accounts probably would be listed before the others in a chart of accounts? a. Insurance Expense b. Dividends c. Notes Payable d. Accumulated Depreciation, Buildings ANS: D PTS: 1 NAT: AACSB correlation: analytic KEY: chart of accounts OBJ: SO6 LOC: Learning type: Comprehension 84. Which of the following accounts probably would be listed after the others in a chart of accounts? a. Unearned Art Fees b. Prepaid Rent c. Retained Earnings d. Art Fees Earned ANS: D PTS: 1 NAT: AACSB correlation: analytic KEY: chart of accounts OBJ: SO6 LOC: Learning type: Comprehension 85. The Office Supplies account is classified as a(n) a. expense. b. stockholders’ equity account. c. asset. d. liability, if the supplies have not yet been paid for. ANS: C PTS: 1 NAT: AACSB correlation: analytic KEY: assets OBJ: SO6 LOC: Learning type: Comprehension 86. The Unearned Fees account is classified as a(n) a. liability. b. revenue. c. asset. d. expense. ANS: A PTS: 1 NAT: AACSB correlation: analytic KEY: liabilities OBJ: SO6 LOC: Learning type: Comprehension 87. Which of the following accounts is an asset? a. Retained Earnings b. Notes Payable c. Prepaid Rent d. Supplies Expense ANS: C PTS: 1 NAT: AACSB correlation: analytic KEY: assets OBJ: SO6 LOC: Learning type: Comprehension 88. Which of the following accounts is not a stockholders’ equity account? a. Common Stock b. Retained Earnings c. Notes Payable d. Dividends ANS: C PTS: 1 NAT: AACSB correlation: analytic KEY: owner’s equity OBJ: SO6 LOC: Learning type: Comprehension 89. Unearned revenues are recorded by companies that a. receive money in advance of the performance of a service. b. pay money at the time the performance of a service is complete. c. receive money at the time the performance of a service is complete. d. pay money in advance of the performance of a service. ANS: A PTS: 1 NAT: AACSB correlation: analytic KEY: analyze transactions| liabilities OBJ: SO6 LOC: Learning type: Recall 90. Office supplies become expenses a. when they are consumed (used up). b. when they are paid for. c. at no time, since they are an asset. d. when they are purchased. ANS: A PTS: 1 NAT: AACSB correlation: analytic OBJ: SO6 LOC: Learning type: Comprehension KEY: analyze transactions 91. Which of the following accounts is classified differently from the others listed? a. Accounts Receivable b. Retained Earnings c. Prepaid Rent d. Cash ANS: B PTS: 1 NAT: AACSB correlation: analytic KEY: assets OBJ: SO6 LOC: Learning type: Comprehension 92. Which of the following accounts is classified differently from the others listed? a. Notes Payable b. Unearned Revenue c. Accounts Payable d. Fees Earned ANS: D PTS: 1 NAT: AACSB correlation: analytic KEY: liabilities OBJ: SO6 LOC: Learning type: Comprehension 93. For which of the following accounts would a related Accumulated Depreciation account be recorded? a. Office Equipment b. Land c. Office Supplies d. Prepaid Rent ANS: A PTS: 1 NAT: AACSB correlation: analytic OBJ: SO6 KEY: assets SHORT ANSWER 1. Use this journal entry to answer the following question. Nov. 16 Accounts Payable Cash Recorded payment of a liability 685 685 Explain how the above journal entry relates to the measurement issues of (a) recognition, (b) valuation, and (c) classification. ANS: a. The transaction occurred and was recognized on November 16. b. A valuation of $685 was placed on the transaction. c. The accounts involved were determined to be (classified as) Accounts Payable and Cash. PTS: 1 OBJ: LO1 LOC: Learning type: Comprehension NAT: AACSB correlation: analytic KEY: measurement issues 2. Explain why the dollar amount of total stockholders’ equity probably will not equal the dollar amount that would remain if all the assets were sold and all the liabilities were then settled. ANS: The valuation of assets on the balance sheet is based primarily on historical cost, not on liquidation value. The proceeds from the sale of assets most likely would differ from the amount originally paid. PTS: 1 OBJ: LO1 LOC: Learning type: Critical Thinking NAT: AACSB correlation: analytic KEY: effects of transactions on accounting equation 3. Amalgamated Campus Stores, Inc. (ACS) employed student representatives to market grooming aids, casual clothes, and other such products on college campuses. The representatives organized parties at which they displayed samples of all the products. Students who bought products paid the representative, who in turn ordered the products and paid ACS for them. When the products arrived, the student representatives delivered them to the buyers. The representatives paid ACS less than they charged the buyers. The difference represented the earnings of the representatives, who were not employees of ACS. Wall Street investors admired ACS because the company had enjoyed several years of rapid growth in sales and earnings. Last year, the president of ACS predicted further increases in sales of 30 percent. By December, however, it was apparent that the forecasted sales goals would not be met. So during the last two weeks of December, ACS shipped $23 million of merchandise to the sales representatives to be held for future sales parties. The company billed the student representatives and recorded the shipments as sales. In this way, ACS was able to meet its sales goal for the year. Were these merchandise shipments properly recorded as sales? ANS: The shipments were improperly recorded as sales. The goods had not been ordered by or sold to actual customers, and the student representatives had the right to return all the products unconditionally. In this type of arrangement, to report shipments as legitimate sales is certainly unethical and can be, as in this case, illegal when the intent is to deceive. It may turn out that most of the $23 million of products will be returned during January and February. PTS: 1 OBJ: LO1 LOC: Learning type: Critical Thinking NAT: AACSB correlation: analytic KEY: analyze transactions 4. Discuss the difference between business events that are transactions and those that are not. Why is the distinction important? ANS: Business events become transactions and are recorded when title passes from the seller to the buyer or, in the case of services, when the service is performed. The distinction is important because the recording of a transaction will have an effect on the financial position of the business. PTS: 1 OBJ: LO1 LOC: Learning type: Comprehension NAT: AACSB correlation: analytic KEY: business transactions 5. For each item below, indicate whether a debit or a credit applies. a. Decrease in Accounts Payable b. Decrease in Land c. Increase in Retained Earnings d. Increase in Unearned Revenue e. Decrease in Interest Payable f. Increase in Prepaid Insurance g. Increase in Wages Expense h. Decrease in Art Supplies i. Increase in Advertising Fees Earned ANS: a. Debit b. Credit c. Credit d. Credit e. Debit f. Debit g. Debit h. Credit i. Credit PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: T accounts| effects of transactions on accounting equation 6. For each item below, indicate whether a debit or a credit applies. a. Increase in Art Fees Earned b. Decrease in Prepaid Rent c. Decrease in Unearned Fees d. Increase in Common Stock e. Increase in Depreciation Expense, Buildings f. Increase in Interest Receivable g. Decrease in Retained Earnings h. Increase in Dividends i. Increase in Notes Payable ANS: a. Credit b. Credit c. Debit d. Credit e. Debit f. Debit g. Debit h. Debit i. Credit PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: T accounts| effects of transactions on accounting equation 7. Why is the Dividends account increased by a debit? Explain in terms of its relationship to stockholders’ equity. ANS: Dividends represent a decrease in stockholders’ equity. According to the rules of debit and credit, a decrease in stockholders’ equity is recorded as a debit. PTS: 1 OBJ: LO2 LOC: Learning type: Comprehension NAT: AACSB correlation: analytic KEY: effects of transactions on accounting equation 8. Indicate whether each account below has a normal debit or a normal credit balance. a. Automobiles b. Accounts Payable c. Common Stock d. Prepaid Rent e. Advertising Expense f. Service Revenue ANS: a. Debit b. Credit c. Credit d. Debit e. Debit f. Credit g. Dividends h. Retained Earnings i. Land j. Interest Payable k. Notes Receivable g. Debit h. Credit i. Debit j. Credit k. Debit PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: T accounts| effects of transactions on accounting equation 9. Indicate whether each account below has a normal debit or a normal credit balance. a. Cash b. Wages Payable c. Wages Expense d. Unearned Fees e. Prepaid Insurance f. Notes Payable ANS: a. Debit b. Credit c. Debit d. Credit e. Debit f. Credit g. Interest Receivable h. Store Equipment i. Legal Fees Earned j. Common Stock k. Depreciation Expense, Buildings g. Debit h. Debit i. Credit j. Credit k. Debit PTS: 1 OBJ: LO2 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: T accounts| effects of transactions on accounting equation 10. Harris Corporation provided monthly waste-removal services for Goble Corporation, which resulted in the following transactions in Harris’s records: Using T accounts, prepare the corresponding entries in Goble’s records. ANS: PTS: 1 OBJ: LO3 LOC: Learning type: Critical Thinking NAT: AACSB correlation: analytic KEY: T accounts| analyze transactions 11. By what amount, if any, would each of the following errors cause a trial balance to be out of balance? a. A purchase of supplies of $840 was recorded as a debit to Equipment and a credit to Cash for $840. b. An $890 balance in Prepaid Insurance was copied to the trial balance as a debit of $980. c. A $600 balance in Accounts Payable was copied to the trial balance as a debit of $600. ANS: a. $0 b. $90 c. $1,200 PTS: 1 OBJ: LO4 LOC: Learning type: Analysis NAT: AACSB correlation: analytic KEY: trial balance 12. 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? ANS: The Cash account would be overstated, Supplies would be understated, and the trial balance would balance. PTS: 1 OBJ: LO4 LOC: Learning type: Comprehension NAT: AACSB correlation: analytic KEY: post entries and prepare trial balance 13. Record the following transactions, using proper form, in the journal provided. Mar. 2 Provided services in the amount of $2,000, receiving $600 in partial payment. 12 Received $800 of the amount owed from March 2. Date Description General Journal Post. Ref. Debit Page 1 Credit ANS: General Journal Date Description Post. Ref. Debit Page 1 Credit Mar. 2 Cash Accounts Receivable Service Revenue Received cash in partial payment of services rendered 600 1,400 2,000 12 Cash Accounts Receivable Received payment on account PTS: 1 OBJ: SO6 LOC: Learning type: Application 800 800 NAT: AACSB correlation: analytic KEY: recording entries 14. In the journal provided, prepare journal entries without explanations for the following transactions. Write “no entry” if none is needed. a. Received a $1,500 invoice for this month’s rent. Payment will not be made right away. b. Paid $1,600 for insurance premiums to cover the next six months. c. A $350 dividend is declared and paid. d. The rent of a is paid. e. Purchased land for $60,000. The company paid half in cash and issued a promissory note for the other half. Date Description General Journal Post. Ref. Debit Page 1 Credit ANS: General Journal Date Description a. Rent Expense Rent Payable (or Accounts Payable) Post. Ref. Debit Page 1 Credit 1,500 1,500 b. Prepaid Insurance Cash 1,600 1,600 c. Dividends Cash 350 350 d. Rent Payable (or Accounts Payable) Cash 1,500 e. Land Cash Notes Payable 60,000 PTS: 1 OBJ: SO6 LOC: Learning type: Application 1,500 30,000 30,000 NAT: AACSB correlation: analytic KEY: recording entries 15. Provide explanations for the following related journal entries: a. Cash Common Stock 6,000 b. Law Library Accounts Payable 3,400 c. Cash Accounts Receivable Legal Fees Earned 600 1,000 d. Cash Accounts Receivable 500 e. Accounts Payable Cash 6,000 3,400 1,600 500 3,400 3,400 ANS: a. Stockholders invested cash into the business. b. Purchased a law library, to be paid for at a later time. c. Rendered $1,600 in legal services; $600 was received in cash, the remainder to be received at a later time. d. Received $500 from c. e. Paid for the law library of b. PTS: 1 OBJ: SO6 LOC: Learning type: Application NAT: AACSB correlation: analytic KEY: analyze transactions 16. Provide explanations for the following related journal entries: a. Prepaid Rent Cash 4,000 b. Trucks and Automobile Notes Payable 36,000 4,000 36,000 c. Cash Accounts Receivable 600 600 d. Notes Payable Cash 18,000 e. Cash Unearned Fees 2,500 18,000 2,500 ANS: a. Made advance payment of rent. b. Issued promissory note for purchase of company vehicle. c. Received payment from credit customer. d. Paid half of promissory note for purchase of company vehicle. e. Received cash in advance of performing a service. PTS: 1 OBJ: SO6 LOC: Learning type: Application NAT: AACSB correlation: analytic KEY: analyze transactions 17. Given the following ledger account and postings, complete the Balance column. Assume no previous postings in the account. Unearned Art Fees Date 2010 May Item 1 7 8 12 Account No. 213 Post. Ref. J1 J1 J2 J2 Debit Credit Balance Debit Credit 2,500 700 500 200 ANS: Unearned Art Fees Date 2010 May Item 1 7 8 12 Account No. 213 Post. Ref. J1 J1 J2 J2 PTS: 1 OBJ: SO6 LOC: Learning type: Application Debit Credit 2,500 700 500 200 Balance Debit Credit 2,500 1,800 2,300 2,100 NAT: AACSB correlation: analytic KEY: post entries and prepare trial balance 18. Given the following ledger account and postings, complete the Balance column. Assume no previous postings in the account. Accounts Payable Date 2010 Dec. Item 1 7 8 12 Account No. 212 Post. Ref. J1 J1 J2 J2 Debit Credit Balance Debit Credit 8,200 2,800 600 800 ANS: Accounts Payable Date 2010 Dec. Item 1 7 8 12 Account No. 212 Post. Ref. J1 J1 J2 J2 PTS: 1 OBJ: SO6 LOC: Learning type: Application Debit Credit Balance Debit Credit 8,200 8,200 5,400 6,000 5,200 2,800 600 800 NAT: AACSB correlation: analytic KEY: post entries and prepare trial balance 19. Given the following ledger account and postings, complete the Balance column. Assume no previous postings in the account. Accounts Receivable Date 2010 Feb. Item 1 3 9 14 Account No. 113 Post. Ref. J2 J3 J3 J3 Debit Credit 1,820 320 700 410 ANS: Accounts Receivable Date 2010 Feb. Item 1 3 9 14 Balance Debit Credit Account No. 113 Post. Ref. J2 J3 J3 J3 PTS: 1 OBJ: SO6 LOC: Learning type: Application Debit Credit 1,820 320 700 410 Balance Debit Credit 1,820 1,500 800 1,210 NAT: AACSB correlation: analytic KEY: post entries and prepare trial balance 20. What two purposes are served by using the Post. Ref. columns of a journal and ledger? ANS: The Post. Ref. columns provide cross-referencing between the journal and the ledger. That is, one can determine from what journal page an item was posted and to which account it was posted in the ledger. One also can more easily determine (by use of the Post. Ref. column) the last account posted from the journal. PTS: 1 OBJ: SO6 LOC: Learning type: Comprehension NAT: AACSB correlation: analytic KEY: post entries and prepare trial balance 21. Briefly explain the difference between Unearned Art Fees and Art Fees Earned. ANS: Unearned Art Fees appears on the balance sheet as a liability, and represents an obligation to earn the payment that was received in advance. Art Fees Earned appears on the income statement as revenue, based on services rendered or goods delivered. PTS: 1 OBJ: SO6 LOC: Learning type: Comprehension NAT: AACSB correlation: analytic KEY: accounts| liabilities 22. Use the following descriptive phrases to determine the account name that would be used for each. In addition, classify the account as an asset (A), liability (L), stockholders’ equity (SE), revenue (R), or expense (E). a. Amount due to creditor for merchandise purchased b. Coins and currency c. Property to be used in the business d. An amount paid to stockholders resulting from profits e. Income recorded for performance of legal services f. Amount due to bank for loan to purchase building g. Stationery, pencils, etc., purchased but not yet used h. Stationery, pencils, etc., that have been consumed (used) i. An insurance premium paid covering the next two years j. Representation of stockholders’ investments in a business ANS: a. Accounts Payable (L) b. Cash (A) c. Land (A) d. Dividends (SE) e. Legal Fees Earned (R) f. Mortgage Payable (L) g. Office Supplies (A) h. Office Supplies Expense (E) i. Prepaid Insurance (A) j. Common Stock (SE) PTS: 1 OBJ: SO6 LOC: Learning type: Application NAT: AACSB correlation: analytic KEY: accounts 23. Briefly discuss the differences between Prepaid Insurance and Insurance Expense. ANS: Prepaid Insurance appears on the balance sheet as an asset and represents unexpired insurance coverage. Insurance Expense appears on the income statement and represents insurance that has expired. PTS: 1 OBJ: SO6 LOC: Learning type: Comprehension NAT: AACSB correlation: analytic KEY: assets| balance sheet| income statement 24. Using the following transactions, calculate (a) the ending balance of Cash, (b) the ending balance of Accounts Receivable, (c) total liabilities, and (d) net income for the period. a. Opened business by issuing common stock for $20,000. b. Billed customers for services rendered, $4,000. c. Paid for six months’ subscription in advance, $1,000. d. Received advertising bill, to be paid next week, $200. e. Dividends of $1,600 were declared and paid. f. Received $3,000 from customers billed in b. g. Paid half of advertising bill. h. Received $400 in advance of performing a service. ANS: a. $20,700 debit ($20,000 + $3,000 + $400 – $1,000 – $1,600 – $100) b. $1,00 debit ($4,000 – $3,000) c. $500 ($200 + $400 – $100) d. $3,800 ($4,000 – $200) PTS: 1 OBJ: LO3 LOC: Learning type: Analysis NAT: AACSB correlation: analytic KEY: T accounts| analyze transactions 25. Using the following transactions, calculate (a) net income for the period, as well as the ending balances of (b) total assets, (c) total liabilities, and (d) Cash. a. Opened business by issuing common stock for $36,000. b. Paid one year’s insurance in advance, $2,400. c. Billed customers for services rendered, $6,000. d. Received utility bill, to be paid next month, $400. e. Received $800 in advance of performing a service. f. Received $4,400 from customers billed in c. g. Paid $300 on the utility bill of d. h. Dividends of $2,000 were declared and paid. ANS: a. $5,600 ($6,000 – $400) b. $40,500 ($36,000 + $6,000 + $800 – $300 – $2,000) c. $900 ($400 + $800 – $300) d. $36,500 debit ($36,000 + $800 + $4,400 – $2,400 – $300 – $2,000) PTS: 1 OBJ: LO3 LOC: Learning type: Analysis NAT: AACSB correlation: analytic KEY: T accounts| analyze transactions 26. Using the T accounts below, record the following transactions. Label each entry with the appropriate letter. a. The stockholders contributed cash of $40,000 and a truck worth $48,000 into the business in exchange for 8,800 shares of $10 par value stock. b. Paid two months’ rent in advance, $2,400. c. Agreed to do a hauling job for a price of $6,400. d. Performed the hauling job. Will get paid later. e. Received payment of $2,000 on the hauling job. f. Purchased gasoline on credit, $40. ANS: c) No entry PTS: 1 OBJ: LO3 LOC: Learning type: Application NAT: AACSB correlation: analytic KEY: T accounts| analyze transactions 27. From the following alphabetical list of account balances, all of which are normal, for Kasper Corporation on July 31, 2010, prepare a trial balance in proper form (the amount of Dividends must be computed). Accounts Payable Accounts Receivable Cash Common Stock Dividends Equipment Prepaid Advertising Retained Earnings Revenue Earned Wages Expense Wages Payable $500 200 80 90 ? 700 20 60 400 70 50 ANS: Kasper Corporation Trial Balance July 31, 2010 Cash Accounts Receivable Prepaid Advertising Equipment Accounts Payable Wages Payable Common Stock Retained Earnings Dividends Revenue Earned Wages Expense $ 80 200 20 700 $ 500 50 90 60 30 70 $1,100 PTS: 1 OBJ: LO3 LOC: Learning type: Application 400 ______ $1,100 NAT: AACSB correlation: analytic KEY: post entries and prepare trial balance 28. From the following alphabetical list of account balances, all of which are normal, for Aloha Corporation on September 30, 2010, prepare a trial balance in proper form (the amount of Dividends must be computed). Accounts Payable Accounts Receivable Cash Common Stock Dividends Equipment Prepaid Advertising $ 780 460 400 800 ? 1,380 20 Retained Earnings Revenue Earned Wages Expense Wages Payable 400 1,000 60 20 ANS: Cash Accounts Receivable Prepaid Advertising Equipment Accounts Payable Wages Payable Common Stock Retained Earnings Dividends Revenue Earned Wages Expense Aloha Corporation Trial Balance September 30, 2010 $ 400 460 20 1,380 $ 780 20 800 400 680 60 $3,000 PTS: 1 OBJ: LO4 LOC: Learning type: Analysis 1,000 ______ $3,000 NAT: AACSB correlation: analytic KEY: post entries and prepare trial balance 29. 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. Accounts Payable Accounts Receivable Cash Common Stock Equipment Office Expense Retained Earnings Service Revenue $140 280 ? 200 400 180 240 300 ANS: T. and C. Corporation Trial Balance June 30, 2010 Cash Accounts Receivable Equipment Accounts Payable Common Stock Retained Earnings Service Revenue Office Expense $ 20 280 400 180 $ 140 200 240 300 _____ $880 PTS: 1 OBJ: LO4 LOC: Learning type: Analysis $880 NAT: AACSB correlation: analytic KEY: post entries and prepare trial balance 30. In the journal provided, prepare journal entries (in good form) for the following transactions. If no entry is required, write “no entry.” Omit explanations. Apr. 1 3 6 9 17 17 20 21 23 24 26 30 Investors opened a dry cleaning service, called Same Day Cleaners, by depositing $60,000 into a business bank account and receiving 60,000 shares of $1 par value stock in exchange. Paid two years’ rent in advance, $14,400. Purchased dry cleaning equipment for $40,000. Paid $8,000 in cash, the remainder to be paid in two weeks. Hired a part-time worker, to be paid $300 per week, starting tomorrow. Paid the worker’s weekly wage. Recorded cash received for services performed during the week, $3,000. Paid for the remainder of the equipment purchased on April 6. Received $200 in advance of cleaning and boxing a wedding gown. Performed $500 of dry cleaning services for Asa’s Tuxedo Shop. It will remit payment in three days. Paid the weekly wages. Received payment from Asa’s Tuxedo Shop. Received a telephone bill for $100, which will be paid in two weeks. General Journal Date Description Page 1 Post. Ref. Debit Credit ANS: General Journal Page 1 Post. Ref. Date Description Apr. 1 Cash Common Stock Debit 60,000 Credit 60,000 3 Prepaid Rent Cash 14,400 6 Dry Cleaning Equipment Cash Accounts Payable 40,000 14,400 8,000 32,000 9 No entry 17 Wages Expense Cash 300 300 17 Cash Dry Cleaning Revenue 3,000 20 Accounts Payable Cash 32,000 3,000 32,000 21 Cash Unearned Dry Cleaning Revenue 200 23 Accounts Receivable Dry Cleaning Revenue 500 24 Wages Expense Cash 300 26 Cash Accounts Receivable 500 30 Telephone Expense Accounts Payable 100 PTS: 1 OBJ: SO6 LOC: Learning type: Application 200 500 300 500 100 NAT: AACSB correlation: analytic KEY: recording entries 31. In the journal provided, prepare journal entries (in good form) for the following transactions. If no entry is required, write “no entry.” Omit explanations. May 1 3 6 10 17 17 20 21 23 24 26 30 Investors opened a dry cleaning service, called Junction Cleaners, by depositing $100,000 into a business bank account and receiving 50,000 shares of $2 par value stock in exchange. Paid two years’ rent in advance, $11,200. Purchased dry cleaning equipment for $36,000. Paid $14,000 in cash, the remainder to be paid in two weeks. Hired a worker, to be paid $550 per week. Paid the worker’s weekly wage. Recorded cash received for services rendered during the week, $5,000. Paid for the remainder of the equipment purchased on May 6. Received $240 in advance of cleaning and boxing a wedding gown. Performed $390 of dry cleaning services for Tuxedos Unlimited. It will remit payment in three days. Paid the weekly wages. Received payment from Tuxedos Unlimited. Received a telephone bill for $114, which will be paid in two weeks. General Journal Date Description Page 1 Post. Ref. Debit Credit ANS: General Journal Page 1 Post. Ref. Date Description May 1 Cash Common Stock Debit Credit 100,000 100,000 3 Prepaid Rent Cash 11,200 6 Dry Cleaning Equipment Cash Accounts Payable 36,000 11,200 14,000 22,000 10 No entry 17 Wages Expense Cash 550 550 17 Cash Dry Cleaning Revenue 5,000 20 Accounts Payable Cash 22,000 5,000 22,000 21 Cash Unearned Dry Cleaning Revenue 240 23 Accounts Receivable Dry Cleaning Revenue 390 24 Wages Expense Cash 550 26 Cash Accounts Receivable 390 30 Telephone Expense Accounts Payable 114 PTS: 1 OBJ: SO6 LOC: Learning type: Application 240 390 550 390 114 NAT: AACSB correlation: analytic KEY: recording entries 32. In the journal provided, prepare journal entries (in good form) for the following transactions. If no entry is required, write “no entry.” Omit explanations. Mar. 1 2 4 Investors opened a dance school, called Yolonda’s Dance Studio, by depositing $15,000 into a business bank account in exchange for 15,000 shares of $1 par value stock. Paid three months’ rent in advance, $1,800. Hired a part-time assistant, to be paid $250 per week, starting next week. 6 8 17 17 20 21 23 Purchased sound equipment for $2,000. Paid $400 in cash, the remainder to be paid in installments of $800 every two weeks. Signed up five students, who will begin lessons on March 10, at $80 per week per student. Received the first week’s tuition from four students; the fifth student will remit payment in three days. Paid the assistant his first week’s wages. Received payment from the fifth student. Paid the first installment on the sound equipment purchased on March 6. Received an electric bill of $100, to be paid April 1. General Journal Date Description Page 1 Post. Ref. Debit Credit ANS: General Journal Date Description Mar. 1 Cash Common Stock Page 1 Post. Ref. Debit 15,000 Credit 15,000 2 Prepaid Rent Cash 1,800 1,800 4 No entry 6 Sound Equipment Cash Accounts Payable 2,000 400 1,600 8 No entry 17 Cash Accounts Receivable Tuition Revenue 320 80 17 Wages Expense Cash 250 20 Cash Accounts Receivable 80 21 Accounts Payable Cash 800 23 Utilities Expense Accounts Payable 100 PTS: 1 OBJ: SO6 LOC: Learning type: Application 400 250 80 800 100 NAT: AACSB correlation: analytic KEY: recording entries 33. In the journal provided, prepare journal entries (in good form) for the following transactions. If no entry is required, write “no entry.” Omit explanations. Nov. 1 2 4 6 8 17 17 20 20 23 Investors opened a dance school called Olga’s Dance Studio by depositing $24,000 into a business bank account in exchange for 24,000 shares of $1 par value stock. Paid three months’ rent in advance, $2,400. Hired a part-time assistant, to be paid $275 per week. Purchased sound equipment for $4,200. Paid $600 in cash, the remainder to be paid in installments of $1,200 every two weeks. Signed up ten students, who will begin lessons on November 10, at $100 per week per student. Received the first week’s tuition from nine students; the tenth student will remit payment in three days. Paid the assistant his first week’s wages. Received payment from the tenth student. Paid the next installment on the sound equipment purchased on November 6. Received an electric bill of $150, to be paid on December 1. General Journal Page 1 Date Description Post. Ref. Debit Credit ANS: General Journal Date Description Nov. 1 Cash Common Stock 2 Prepaid Rent Cash Page 1 Post. Ref. Debit 24,000 Credit 24,000 2,400 2,400 4 No entry 6 Sound Equipment Cash Accounts Payable 8 No entry 4,200 600 3,600 17 Cash Accounts Receivable Tuition Revenue 900 100 17 Wages Expense Cash 275 20 Cash Accounts Receivable 100 1,000 275 100 20 Accounts Payable Cash 1,200 23 Utilities Expense Accounts Payable 150 1,200 150 PTS: 1 OBJ: SO6 LOC: Learning type: Application NAT: AACSB correlation: analytic KEY: recording entries 34. Post the following transaction. General Journal Page 14 Date Description 2010 July 20 Accounts Receivable Commissions Earned Commission earned on sale of painting Post. Ref. Credit 415 415 Accounts Receivable Date Debit Account No. 112 Item Post. Ref. Item Post. Ref. Debit Credit Balance Debit Credit 2010 Commissions Earned Date 2010 ANS: Account No. 411 Debit Credit Balance Debit Credit General Journal Page 14 Post. Ref. Debit Date Description 2010 July 20 Accounts Receivable Commissions Earned Commission earned on sale of painting 112 411 Accounts Receivable Date 2010 July 20 Post. Ref. Debit J14 Credit 415 Balance Debit Credit 415 415 Commissions Earned 2010 July 415 Account No. 112 Item Date Credit Account No. 411 Item 20 Post. Ref. Debit Credit J14 PTS: 1 OBJ: SO6 LOC: Learning type: Application Balance Debit Credit 415 415 NAT: AACSB correlation: analytic KEY: post entries and prepare trial balance 35. Post the following transaction. General Journal Page 8 Date Description 2010 May 12 Land Notes Payable Issued note for purchase of land Post. Ref. Credit 5,000 5,000 Land Date Debit Account No. 141 Item Post. Ref. Debit Credit Balance Debit Credit 2010 Notes Payable Date 2010 Account No. 211 Item Post. Ref. Debit Credit Balance Debit Credit ANS: General Journal Page 8 Date Description 2010 May 12 Land Notes Payable Issued note for purchase of land Post. Ref. 141 211 Land Item 12 Post. Ref. Debit J8 5,000 Credit 5,000 5,000 Date Balance Debit Credit 5,000 Notes Payable 2010 May Credit Account No. 141 Date 2010 May Debit Account No. 211 Item 12 PTS: 1 OBJ: SO6 LOC: Learning type: Application Post. Ref. J8 Debit Credit Balance Debit Credit 5,000 NAT: AACSB correlation: analytic KEY: posting transactions 5,000