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Exam 2: Analyzing for Business Transactions

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Question 141

True/False

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The higher a company's debt ratio,the lower the risk of a company not being able to meet its obligations.

A) True
B) False

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Question 142

Multiple Choice

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The process of transferring general journal entry information to the ledger is called:

A) Double-entry accounting.
B) Posting.
C) Balancing an account.
D) Journalizing.
E) Not required unless debits do not equal credits.

F) A) and E)
G) A) and B)

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Question 143

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Compare the list of accounts below and choose the list that contains only accounts that would be classified as asset accounts on the Chart of Accounts.

A simple tool that is widely used in accounting to represent a ledger account and to understand how debits and credits affect an account balance is called a:

Larry Bar opened a frame shop and completed these transactions: 1.Larry started the shop by investing $40,000 cash and equipment valued at $18,000 in exchange for common stock. 2.Purchased $70 of office supplies on credit. 3.Paid $1,200 cash for the receptionist's salary. 4.Sold a custom frame service and collected $1,500 cash on the sale. 5.Completed framing services and billed the client $200. What was the balance of the cash account after these transactions were posted?

Match the following terms with the appropriate definition. -Credit

The financial statement that summarizes the changes in the retained earnings account is called the balance sheet.

Identify each of the following accounts as a revenue (R), expense (E), asset (A), liability (L), or equity (SE). -Review the transactions below and identify with an "X" those that would be posted as a credit in the ledger (The first one has been done for you): __X_1.Salary Payable was increased. ____ 2.Cash was decreased ____ 3.Equipment was increased ____ 4.Common Stock was increased ____ 5.Salaries Expense was increased ____ 6.Accounts Receivable was decreased ____ 7.Unearned Revenue was increased ____ 8.Dividends was increased ____ 9.Supplies was increased ____ 10.Building was increased ____ 11.Utilities Expense was increased ____ 12.Service Revenue was increased A)L B)SE C)R D)E E)A 212) $\text { Salary Expense }$

Ralph Pine Consulting received its telephone bill in the amount of $300,and immediately paid it.Pine's general journal entry to record this transaction will include a

Bologna Lodging had the following accounts and balances as of December 31: $\begin{array}{lrr}\text {Account}&\text {Debit}&\text {Credit}\\\text { Cash } & \$ 20,000 \\\text { Accounts Receivable } & 2,000 \\\text { Salaries Expense } & 500\\\text { Accounts Pavable }&&\$ 4000\\\text { Lodging Revenue } & & 7,000 \\\text { Utilities Expense } & 500 & \\\text { Prepaid Insurance } & 1,400 & \\\text { Supplies } & 1,500 & \\\text { Common Stock } & & 10,000 \\\text { Retained Earnings } & &4,900 \\\text { Totals } & \$ 25,900 & \$ 2,9,900 \\\end{array}$ Using the information in the table,calculate the total assets reported on Bologna's balance sheet for the period.

The debt ratio of Jackson's Shoes is .9 and the debt ratio of Billy's Catering is 1.0.Based on this information,an investor can conclude:

The four categories of equity accounts are ________,________,________,and ________.

A debit:

________ documents identify and describe transactions and events and provide objective evidence and amounts for recording.

The right side of a T-account is a(n) :

The balances for the accounts of Milo's Management Co.for the year ended December 31 are shown below.Each account shown had a normal balance. $\begin{array} { | l | l | l | } \hline \text { Accounts Payable ..... } & \$ 6,500 &\text { Wages Expense ......... } & 36,000 \\\hline \text { Accounts Receivable... } & 7,000& \text { Rent Expense .......... } & 6,000 \\\hline \text { Cash ............... } & ? & \\\hline \text { Office Supplies. } & 1,200 & \\\hline \text { Building ............. } & 21,500& \text { Land .................. } & 50,000 \\\hline \text { Supplies Expense ...... } & 118,70& \text { Unearned Management Fees } & 4,000 \\\hline \text { Common Stock......... } & 175,00 &\text { Dividends } & 48,000 \\\hline\end{array}$

At the end of the current year,Leer Company reported total liabilities of $300,000 and total equity of $100,000.The company's debt ratio on the last year-end was:

Dividends are not reported on a business's income statement.

On February 5,Teddy's Catering purchased an oven that cost $35,000.The firm made a down payment of $5,000 cash and signed a long-term note payable for the balance.Show the general journal entry to record this transaction.

Dividends distributed to stockholders should be treated as an expense of the business.