QUESTION 14 A company purchases supplies on account, what is the effect on the accounting equation?…
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Question “QUESTION 14 A company purchases supplies on account, what is the effect on the accounting equation?…”
QUESTION 14
A company purchases supplies on account, what is the effect on
the accounting equation?
Assets decrease; equity increases
Assets decrease; equity decreases
Liabilities decrease; equity decreases
Liabilities increase; equity increases
Liabilities increase; assets increase
4 points
QUESTION 15
Unearned revenues are:
Revenues that have been earned and received in cash
Revenues that have been earned but not yet collected in cash
Liabilities created when a customer pays in advance for products
or services before the revenue is earnedRecorded as an asset in the accounting records
Increases to retained earnings
4 points
QUESTION 16
A debit is:
An increase in an account
The right-hand side of a T-account
A decrease in an account
The left-hand side of a T-account
An increase to a liability account
4 points
QUESTION 17
Acme Company had equity of $55,000 at the end of the current
year. During the year the company had a $2,000 net loss and
investments by owners in exchange for stock of $7,000. Compute
equity as of the beginning of the year.$5,000
$46,000
$50,000
$52,000
$64,000
4 points
QUESTION 18
If Beginning Retained Earnings was $184,300, the company
distributed $46,000 in dividends and Ending Retained Earnings was
$345,000, what was the net income for the period?$154,700
$206,700
$114,700
$575,300
$160,700
4 points
QUESTION 19
In which of the following situations would the trial balance not
balance?A $1,000 collection of an account receivable was erroneously
posted as a debit to Accounts Receivable and a credit to CashThe purchase of office supplies on account for $3,250 was
erroneously recorded in the journal as $2,350 debit to Office
Supplies and credit to Accounts PayableA $50 cash receipt for the performance of a service was not
recorded at allThe purchase of office equipment for $1,200 was posted as a
debit to Office Supplies and a credit to Cash for $1,200The cash payment of a $750 account payable was posted as a debit
to Accounts Payable and a debit to Cash for $750
4 points
QUESTION 20
Which of the following is the appropriate journal entry if a
company performs a service and is paid immediately?Debit to Cash, Debit to Revenue
Debit to Cash, Credit to Revenue
Debit to Accounts Receivable, Credit to Cash
Debit to Revenue, Credit to Accounts Receivable
Debit to Accounts Receivable, Credit to Revenue
4 points
QUESTION 21
Indicate whether a debit or credit entry would be made to record the following changes in each account. a. To decrease Cash. b. To increase Common Stock. c. To decrease Accounts Payable. d. To increase Salaries Expense. e. To decrease Supplies. f. To increase Revenue. g. To decrease Accounts Receivable. h. To increase Retained Earnings.
i. To increase unearned revenue j. To increase dividends
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10 points
QUESTION 22
Using the trial balance below: complete the income statement,
the statement of retained earnings and a balance sheet.Johnny Dollar’s Body Shop Trial Balance December 31, 2020 Cash 6500 Accounts receivable 475 Body shop supplies 2500 Office supples 600 Body shop equipment 35200 Accounts payable 1500 Common stock 10000 Retained earnings 11775 Dividends 36000 Revenue earned 95000 Body shop supplies expense 3425 Office supplies expense 775 Rent expense 6000 Utilities expense 4800 Wages expense 22000 118275 118275 — Font family –Andale MonoArialArial BlackBook AntiquaComic
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Answer
Question 14
The correct answer is: Liabilities rise; assets grow.
The inventory on hand increases when supplies are purchased on account. The Balance Sheet will show the assets side of the inventory. Assets increased. The purchase is done on account. It increases the amount of accounts due. Accounts payable are a liability that is shown on the balance sheet’s liability side. As a result, liability rises.
Question 15
Correct answer: Liabilities are created when customers pay in advance for services or products before they earn revenue.
Unearned revenue refers to the revenue that was not earned and is still to be received. It will be delivered or performed at a later date. Unearned revenue can be received in cash but it cannot be considered revenue unless it is earned. Because of the obligation to provide product and service, unearned revenue is considered a liability in accounting records. Only when revenue is earned, it will be added to the retained earnings.
Question 16
Correct answer: The left-hand side a T-account.
The left-hand side of a T account is its debit side. When posting is done on the debit side, it means that the transaction is entered in the left-hand side of the Taccounts.
Credit is the right-hand side of a T account. A Credit is an increase in the liability. A debit is a decrease in the liability.
Question 17
The correct answer is $50,000.
Equity was at $50,000 as of the start of the year.
Equity at the end the current year = $55,000
Net loss for the year: $2,000
Owners make investments in stock exchanges = $7,000.
Equity as at the beginning of the year = Equity by the end + Net loss – Investments made by owners = $55,000 + $2,000-$7,000 = $50,000
Question 18
The correct answer is $206,700.
The period saw a net income of $206,700.
Starting Retained Earnings = $184 300
Dividends distributed = $46,000
Ending Retained Earnings = 3445,000
Net income = Ending Retained Earnings + Dividends – Beginning Retained earnings
= $345,000 + $46,000 – $184,300 = $206,700
Question 19
Correct answer: The cash payment for a $750 account payable was posted in two ways. One, it was a debit from Accounts Payable, and one, it was a debit from Cash for $750.
The $750 cash payment for an account payable was posted as both a debit on Accounts Payable (for $750) and a debit on Cash (for $750). A debit to accounts payable will reduce liability, while a debit onto Cash will increase asset. A debit to accounts payable will decrease the trial credit balance, while a debit cash will increase the trial debit balance. It will therefore affect the trial balance, but it won’t balance.
A $1,000 collection of an account receivable has been incorrectly posted as a debit and credit to Accounts Receivable. A debit to Assets Receivable will increase an asset account’s balance, while a credit and cash will decrease it by the same amount. It will both increase and decrease the asset the same amount. It won’t affect your trial balance.
The $3,250 purchase of office supplies was incorrectly recorded in the journal as $2350 debit to Office Supplies, and credit to Accounts payable – A debit from Office Supplies will increase an asset account’s balance, while a credit to Accounting Payable will increase a liability account’s balance. It will increase both the trial balance and the liability account. It won’t affect trial balance.
The receipt of $50 for the performance a service was not recorded – no entry was made. It won’t affect either side of the trial balance.
The $1,200 purchase of office equipment was recorded as a debit to Office Supplies, and a credit for Cash at $1,200. Assets will be increased if there is a debit for Office Supplies. Assets will decrease if there is a credit for Cash. It will both increase or decrease the asset by the exact same amount. It won’t affect your trial balance.
Question 20
Correct answer: Debit to cash, Credit to revenue.
Cash is debited when a service is rendered and is immediately paid. Revenue is credited as an increase in income, which is an increase in equity.
QUESTION 21
a. To reduce Cash – Credit entry would be made, because cash is an asset. Credit is a decrease in asset.
b. Increase Common Stock – Credit entry would be required because Common stock is part of Equity. Credit is an increase in Equity.
c. To decrease Accounts payable – A debit entry would be made since Accounts Payable are a liability and decreases in liability is Debit.
d. To Increase Salaries Expense – A Debit entry would have to be made, as salaries expense is an expense. An increase in Expense will also be debit.
e. To reduce Supplies – A Credit entry would have to be made since Supplies is an asset, and decrease in asset is credit.
f. To Increase Revenue – Credit Entry would be made since revenue is income and an increase in income is credit.
g. To reduce Accounts Receivable – A Credit entry would be made. Accounts receivables are an asset, and decrease in asset is credit.
h. To increase retained earnings – Credit entry would be made since Retained Earnings are a part Equity and an increase in Equity is credit.
i. Increase unearned revenue – Credit would be entered because unearned revenues are a liability, and Credit is an increase in liability.
j. Increase dividends – You would need to make a Debit entry. Dividends are a decrease in Equity and increase in Equity.
Question 22
A income statement is prepared in order to determine the net income and loss from business operations. It is prepared by balancing revenues and expenses.
The statement of retained earnings shows changes in stockholders equity. It includes net income and dividends.
A balance sheet shows the financial position of the company in terms of assets or liabilities.
Conclusion
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