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Principles 2002e

of

Financial

Accounting,

A. Debit Accounts Receivable, credit Jack Smith, Capital. B. Debit Accounts Receivable, credit Service Revenue.

Chapter 2: Measuring Business Transactions

1. The recognition issue concerns A. Where to transaction. record a a a business business business

C. Debit Accounts Payable, Service Revenue.

credit

B. When to record transaction. C. How to classify transaction.

D. No journal entry would be recorded at this time. 6. Which of the following is not a proper step in preparing a trial balance? A. List each ledger account that has a balance, listing debit balances and credit balances in the left and right columns, respectively. B. List the accounts in alphabetical order. C. Total each column. D. Compare the totals of the columns. 7. Which of the following would not cause the trial balance to be out of balance? A. An error being made in carrying the account balance to the trial balance B. The balance of an account being incorrectly computed C. An account with a debit balance being recorded as a credit or vice versa D. A debit to Utilities Expense being posted as a debit to Rent Expense * Use the following information to answer Question 8: - Account Cash Accounts Payable Julie Fox, Capital Equipment Balance as of 12 / 31 / 04 $ 2,500 3,000 2,000 4,000

D. assigning a dollar amount to a business transaction 2. Which of the following accounts is a liability? A. Unexpired Insurance B. Insurance Expense C. Prepaid Insurance D. Unearned Insurance Fees 3. Which of the following accounts is increased with a credit? A. Salaries Payable B. Accounts Receivable C. Withdrawals D. Rent Expense 4. McCaffrey Company accepts an advance fee of $400 for services to be provided next year. This transaction would include a A. Credit to Cash. B. Debit to Accounts Receivable. C. Credit to Unearned Service Fees. D. Credit to Service Fees. 5. Jack Smith sent an invoice to a client for $250 for a window-washing job completed that day. The journal entry to record the transaction is

C. source documents to the ledger. Fees Earned Utilities Expense 10,000 1,500 D. journal to the ledger. 11. When Heath Company places an order for electric motors, the amount of the order should be recognized and recorded in the company's accounting records. A. True B. False 12. Withdrawals normally appear on the statement of owner's equity, but do not appear on the income statement. A. True B. False 13. The double-entry system is possible because all business transactions have two equal and opposite aspects. A. True B. False 14. When an owner withdraws cash from a company, the Withdrawals account is debited and Cash is credited. A. True B. False 15. Office supplies are purchased from a supplier on credit. The journal entry to record this transaction is debit Office Supplies and credit Accounts Payable. A. True B. False 16. On June 3, payment was made for supplies purchased on May 31. The journal entry to record this transaction includes a debit to Accounts Payable and a credit to Cash. A. True B. False 17. Prepaid Insurance has a normal credit balance.

Accounts Receivable 1,000 Wages Expense Julie Withdrawals Fox, 6,000 500

8. A company has the accounts and balances listed above at the end of its accounting period. All accounts carry a normal balance. After preparing the trial balance A. total debits exceed total credits by $500. B. total debits exceed total credits by $1,500. C. total debits exceed total credits by $3,500. D. total debits exceed total credits by $2,500. 9. Which of the following is not true about a proper journal entry? A. A line is skipped between each debit and each credit. B. The name of the account to be debited is written next to the left margin of the first line. C. A brief explanation is written to explain and identify the transaction. D. The Posting Reference column is left blank until the entries are posted. 10. Posting is performed by transferring information from the A. source documents to the journal. B. ledger to the journal.

A. True B. False 18. When the columns of a trial balance equal each other, it means that no errors have occurred in recording and posting transactions. A. True B. False 19. A compound entry is two transactions that have been combined into one. A. True B. False 20. In practice, the ledger account form is more commonly used than the T account form. A. True B. False