Questions and Answers of College Accounting A Contemporary Approach 5th Edition

4-3 Post journal entries to general ledger accounts.
4-2 Prepare compound journal entries.
4-1 Record transactions in the general journal.
4. How do the income statement and the balance sheet help management make sound decisions?
3. How can management find out, at any time, whether a firm can pay its bills as they become due?
2. If a firm’s expenses equal or exceed its revenue, what actions might management take?
1. In discussing a firm’s latest financial statements, a manager says that it is the “results on the bottom line” that really count. What does the manager mean?
Problems 3.3 At the beginning of the summer, Brent Davis was looking for a way to earn money to pay for his college tuition in the fall. He decided to start a lawn service business in his
Problem 3.2AUsing T accounts to record transactions involving assets, liabilities, and owner’s equity.The following transactions took place at Calhoun Counseling Services, a business established by
Problem 3.1AUsing T accounts to record transactions involving assets, liabilities, and owner’s equity.The following transactions occurred at several different businesses and are not
Exercise 3.8Preparing a chart of accounts.The accounts that will be used by Dad & Sons Moving Company follow. Prepare a chart of accounts for the firm. Classify the accounts by type, arrange them in
Exercise 3.6Preparing a trial balance and an income statement.Using the account balances from Exercise 3.5, prepare a trial balance and an income statement for Residential Relocators. The trial
Exercise 3.5Determining account balances.The following T accounts show transactions that were recorded by Residential Relocators, a firm that specializes in local housing rentals. The entries for the
Exercise 3.4Identifying debits and credits.In each of the following sentences, fill in the blanks with the word debit or credit:1. Revenue accounts normally have ? balances. These accounts increase
Exercise 3.3Determining debit and credit balances.Indicate whether each of the following accounts normally has a debit balance or a credit balance:1. Equipment 2. Accounts Receivable 3. Salaries
Exercise 3.2Using T accounts to analyze transactions.Derrick Wells decided to start a dental practice. The first five transactions for the business follow.For each transaction, (1) determine which
Exercise 3.1Setting up T accounts.Anderson Cleaning Service has the following account balances on December 31, 2019. Set up a T account for each account and enter the balance on the proper side of
11. Are the following accounts permanent or temporary accounts?a. Fees Incomeb. Johnny Jones, Drawingc. Accounts Payabled. Accounts Receivablee. Johnny Jones, Capitalf. Prepaid Rent g. Cash h.
10. Why is the modern system of accounting usually called the double-entry system?
9. Why is Prepaid Rent considered an asset account?
8. The terms debit and credit are often used in describing the effects of transactions on different accounts. What do these terms mean?
7. Indicate whether each of the following types of accounts would normally have a debit balance or a credit balance:a. An asset accountb. A liability accountc. The owner’s capital accountd. A
6. How is the balance of an account determined?
5. Accounts are classified as permanent or temporary accounts. What do these classifications mean?
4. When a chart of accounts is created, number gaps are left within groups of accounts.Why are these number gaps necessary?
3. In what order do accounts appear in the chart of accounts?
2. What is the purpose of a chart of accounts?
1. What are accounts?
5. Your friend has prepared financial statements for her business. She has asked you to review the statements for accuracy. The trial balance debit column totals $91,000 and the credit column totals
4. On which side of asset, liability, and owner’s equity accounts are decreases recorded?
3. What type of accounts are found on the balance sheet?
2. What are withdrawals and how are they recorded?
1. What is a chart of accounts?
6. Describe the errors in the Parker Interiors trial balance.DEBIT CREDIT Parker Interiors Trial Balance December 31, 2019 Cash Accts. Rec.Equip.Accts. Pay.C. Parker, Capital C. Parker, Drawing Fees
5. The company owner took$5,000 cash for personal use. What is the entry for this transaction?a. Debit Cash and credit Caleb Parker, Capital.b. Debit Cash and credit Caleb Parker, Drawing.c. Debit
4. Which account has a normal debit balance?a. Fees Incomeb. Jim Davis, Drawingc. Jim Davis, Capitald. Accounts Payable
3. What is a trial balance and what is its purpose?
2. What is a transposition? A slide?
1. What is the increase side for Cash; Accounts Payable;and Trayton Eli, Capital?
6. Foot and find the balance of the Cash account.a. 58,000b. 32,000c. 33,450d. 24,100 36,000 22,000 Cash −12,000 5,000 5,200 2,350
5. From the following accounts, show that the fundamental accounting equation is in balance. All accounts have normal balances.Cash—$15,400 Accounts Payable—$10,000 Todd Dodd, Capital—$30,000
4. The Richey Company purchased new equipment for $40,400 from Office Supplies, Inc., to be paid in 30 days.Which of the following is correct?a. Equipment is increased by$40,400. Accounts Payable is
3. What is meant by the “normal balance”of an account? What is the normal balance side for asset, liability, and owner’s equity accounts?
2. What is a footing?
1. Increases are recorded on which side of asset, liability, and owner’s equity accounts?
3-8 Define the accounting terms new to this chapter.
3-7 Develop a chart of accounts.
3-6 Prepare an income statement, a statement of owner’s equity, and a balance sheet.
3-5 Prepare a trial balance from T accounts.
3-4 Set up T accounts for revenue and expenses.
3-3 Determine the balance of an account.
3-2 Analyze business transactions and enter them in the accounts.
3-1 Set up T accounts for assets, liabilities, and owner’s equity.
4. How does an accounting system help managers control operations and make sound decisions?
3. Why should managers be concerned with changes in the amount of creditors’ claims against the business?
2. Is it reasonable to expect that all new businesses will have a net income from the first month’s operations? From the first year’s operations?
1. After examining financial data for a monthly period, the owner of a small business expressed surprise that the firm’s cash balance had decreased during the month even though there was
Exercise 2.7 Financial Statements The following account balances are for William Giese, Certified Public Accountant, as of April 30, 2019.Cash $60,000 Accounts Receivable 24,000 Maintenance Expense
Exercise 2.6 The Computer Store had the following revenue and expenses during the month ended July 31. Did the firm earn a net income or incur a net loss for the period? What was the amount?Fees for
Exercise 2.5 Determining the effects of transactions on the accounting equation.The Copy Center had the transactions listed below during the month of June. Show how each transaction would be recorded
Exercise 2.4Determining balance sheet amounts.The following financial data are for the dental practice of Dr. Donna Wells when she began operations in July. Determine the amounts that would appear in
Exercise 2.3 Determining the effects of transactions on the accounting equation.Indicate the impact of each of the transactions below on the fundamental accounting equation(Assets = Liabilities +
Exercise 2.2 The fundamental accounting equations for several businesses follow. Supply the missing amounts.Objectives 2-1, 2-2◀Assets = Liabilities + Owner’s Equity 1. $32,350 = $6,720 + $ ?2.
Exercise 2.1 Just before Johnson Laboratories opened for business, Howard Johnson, the owner, had the following assets and liabilities. Determine the totals that would appear in the firm’s
12. Why does the third line of the headings differ on the balance sheet and the income statement?
11. What information is shown in the heading of a financial statement?
10. What information does the statement of owner’s equity contain?
9. What information does the income statement contain?
8. What information does the balance sheet contain?
7. What are assets, liabilities, and owner’s equity?
6. What is the fundamental accounting equation?
5. Describe the effects of each of the following business transactions on assets, liabilities, and owner’s equity.a. Bought equipment on credit.b. Paid salaries to employees.c. Sold services for
4. How does net income affect owner’s equity?
3. How is net income determined?
2. What are expenses?
1. What is revenue?
5. In what order are the financial statements prepared? Why?
4. What effect does revenue and expenses have on owner’s equity?
3. Describe a transaction that will cause Accounts Payable and Cash to decrease by $1,200.
2. If one side of the fundamental accounting equation is decreased, what will happen to the other side? Why?
1. What is the difference between buying for cash and buying on account?
6. What information is contained in the income statement?a. revenues and expenses for a period of timeb. assets, liabilities, and owner’s equity for a period of timec. revenue and expenses on a
5. U Fix It Hardware had revenues of$210,000 and expenses of $120,000.How does this affect owner’s equity?ANALYSIS
4. Interior Designs has assets of$240,000 and liabilities of $90,000.What is the owner’s equity?a. $50,000b. $30,000c. $150,000d. $110,000
3. What information is included in the financial statement headings?
2. If an owner gives personal tools to the business, how is the transaction recorded?
1. What are withdrawals and how do they affect the basic accounting equation?
6. Persian Import Co. has no liabilities.The assets and owner’s equity balances are as follows. What is the balance of “Supplies”?(Answers to Section 1 Self Review are on page 48.)Cash $ 75,000
5. Jane Nelson began a new business by depositing $130,000 in the business bank account. She wrote two checks from the business account: $19,000 for office furniture and $6,000 for office supplies.
4. Kathryn Carter purchased a computer for $3,350 on account for her business. What is the effect of this transaction?a. Equipment decrease of $3,350 and accounts payable increase of$3,350.b.
3. What does the term “accounts payable”mean?EXERCISES
2. Describe a transaction that increases an asset and the owner’s equity.
1. What is a business transaction?
2-6 Define the accounting terms new to this chapter.
2-5 Prepare a statement of owner’s equity and a balance sheet.
2-4 Prepare an income statement.
2-3 Analyze the effects of business transactions on a firm’s assets, liabilities, and owner’s equity and record these effects in accounting equation form.
2-2 Define, identify, and understand the relationship between asset, liability, and owner’s equity accounts.
2-1 Record in equation form the financial effects of a business transaction.
Indicate the impact of each of the transactions below on the fundamental accounting equation (Assets = Liabilities + Owner’s Equity) by placing an “I” to indicate an increase and a “D” to

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