Questions and Answers of Financial And Managerial Accounting The Basis For Business Decisions

John Grey & Company, a firm of real estate brokers, carried out the following trans¬actions during the month of May. Which of these transactions represented revenue to the firm during the month of
A business had the following transactions, among others, during January. Which of these transactions represented expenses for January? Explain, LO8 a Paid $1,500 salary to a salesperson for time
Supply the missing figures in the following five independent cases: LO8 a Owner's equity at end of year. Owner's drawings during the year Net income for the year. Owner's equity at beginning of year
The income statement prepared by Grayling Company for the month of March showed net income of $18,500. In recording the transactions of the month, however, the accountant had made some errors. Study
When beginning operations, Land Company established its ledger with the accounts arranged in alphabetical order, but found this sequence inconvenient for preparing financial statements. You are to
Label each of the following statements as true or false. Explain the reasoning under¬lying your answer and give an example of a transaction which supports your posi¬ tion. LO8 a Every transaction
An employee of Service Company prepared the following closing entries from the ledger accounts for the year of 19 - LO8 a Identify any errors which the employee made, b Prepare correct closing
The March transactions of Boulevard Motors, an automobile repair shop, included the following: LO8(1) On March 1, paid rent for the month of March, $600.(2) On March 3, at request of National
Friendly Plumber performs repair work on both a cash and credit basis. Credit customers are required to pay within 30 days from date of billing. Revenue is re¬corded in an account entitled Repair
At year-end, Wildwood Park prepared the following adjusted trial balance. LO8Instructions .a Prepare journal entries to close the accounts. Use four entries: (1) to close the revenue account, (2) to
Growers’ Service closes its accounts and prepares financial statements at the end of each calendar year. The following adjusted trial balance was prepared at December 31 of the most recent year.
Carl Smith, after several years of employment in the television industry, resigned from his job and invested his time and money in a new business, Village TV, which opened its doors to customers for
The operations of Sunset Realty consist of obtaining listings of houses being offered for sale by owners, advertising these houses, and showing them to prospective buy¬ers. The company earns revenue
John Ryan organized Freeway Express on June 1, 19 _ , to provide long-distance moving of household furniture. During June the following transactions occurred:June 1 Ryan deposited $270,000 cash in a
The transactions during October for Pacific Plumbing Company included the follow¬ ing: LO8(1) On October 1, paid $640 cash for the month’s rent.(2) On October 3, made repairs for First National
Ski Flights provides transportation by helicopter for skiers, backpackers, and others to remote mountainous areas. Among the ledger accounts used by the company are the following: LO8Some of the
An adjusted trial balance for Marina Center at December 31 appears below. LO8Prepare journal entries to close the accounts. Use four entries: (1) to close the revenue account, (2) to close the
During the month of June, John Trent organized and began to operate an air taxi service to provide air transportation from a major city to a number of small towns not served by scheduled airlines.
Plaza Parking System was organized on March 1 for the purpose of operating an automobile parking lot. Included in the company’s ledger are the following ledger accounts and their identification
Home Repair is a new business which began operations on July 1. The company follows a policy of closing its accounts and preparing financial statements at the end of each month. A trial balance at
Sarah Weiss, M.D., after completing her medical education, established her own practice on May 1. The following transactions occurred during the first month. LO8 May 1 Weiss opened a bank account in
Which of the following statements do you consider most acceptable? LO8 a Adjusting entries affect balance sheet accounts only.b Adjusting entries affect income statement accounts only, c An
The recording of depreciation involves two ledger accounts: Depreciation Ex¬pense and Accumulated Depreciation. Explain the purpose of each account; indi¬cate whether it normally has a debit
At the end of the current year, the adjusted trial balance of the Midas Company showed the following account balances, among others: LO8 Building, $31,600 Depreciation Expense: Building, $1,580
The net income reported by Haskell Company for the year was $21,400, and the capital account of the owner, J. B. Haskell, stood at $36,000. However, the com¬pany had failed to recognize that
Office supplies on hand in the Melville Company amounted to $600 at the begin¬ning of the year. During the year additional office supplies were purchased at a cost of $1,560 and charged to the asset
The X Company at December 31 recognized the existence of certain unexpired costs which would provide benefits to the company in future periods. Give exam¬ples of such unexpired costs and state where
From the following list of ledger accounts, identify those which would not be included in an after-closing trial balance. Accounts Payable; Unearned Revenue;Commissions Receivable; Insurance Expense;
In performing the regular end-of-period accounting procedures, does the prepara¬tion of the work sheet precede or follow the posting of adjusting entries to ledger accounts? Why? LO8
The Adjustments columns of the work sheet for Davis Company contained only three adjustments, as follows: LO8 depreciation of building, $3,600; expiration of in¬surance, $500; and salaries accrued
Should the Adjusted Trial Balance columns of the work sheet be totaled before or after the adjusted amounts are carried to the Income Statement and Balance Sheet columns? Explain. LO8
In extending adjusted account balances from the Adjusted Trial Balance col¬umns to the Income Statement and Balance Sheet columns, is there any particu¬lar sequence to be followed in order to
Do the totals of the balance sheet ordinarily agree with the totals of the Balance Sheet columns of the work sheet? LO8
Is a work sheet ever prepared when there is no intention of closing the accounts?Explain. LO8
Does a statement of owner’s equity cover a period of time or (like a balance sheet) show financial information for a single date? What elements does it in¬clude other than the amount of the
The weekly payroll of Stevens Company amounts to $15,000 and employees are paid up to date every Friday. On January 1 of the current year, the Salaries Expense account showed a credit balance of
What is the meaning of the term revenue? Does the receipt of cash by a business indicate that revenue has been earned? Explain.LO3
What is the meaning of the term expenses? Does the payment of cash by a business indicate that an expense has been incurred? Explain.LO3
The Milan Company, owned by Robert Gennaro, completed its first year of operation on December 31, 1983. State the proper heading for the first annual income statement.LO3
Does a well-prepared income statement provide an exact measurement of net income for the period, or does it represent merely an approximation of net in¬come? Explain. LO3
How does depreciation expense differ from other operating expenses?LO3
Assume that a business acquires a delivery truck at a cost of $4,800. Estimated life of the truck is four years. State the amount of depreciation expense per year and per month. Give the adjusting
Explain the rules of debit and credit with respect to transactions recorded in revenue and expense accounts.LO3
Supply the appropriate term (debit or credit) to complete the following state¬ments. LO3 a The owner’s equity account, income summary account, and revenue accounts are increased by _ entries.b
Supply the appropriate term (debit or credit) to complete the following state¬ments. LO3 a When a business is operating profitably, the journal entry to close the Income Summary account will consist
All ledger accounts belong in one of the following five groups: asset, liability, owner's equity, revenue, and expense. For each of the following accounts, state the group in which it belongs. Also
Which of the following accounts should be closed by a debit to Income Summary and a credit to the account listed? James Harris, Drawing Fees Earned Advertising Expense Accounts Receivable and
Supply the appropriate terms to complete the following statements. accounts are closed at the end of each account- ing period by transferring their balances to a summary account called balance in
Which of the ten accounts listed below are affected by closing entries at the end of the accounting period?Cash Fees Earned ' Income Summary Accounts Payable Telephone Expense James Miller, Drawing
During its first year of operations, Appliance Repair Center performed services for customers as follows: for credit, $42,000; for cash, $50,000. During this first year expenses were incurred as
The following ledger accounts are among those in the ledger of Daniel Drew, Surveyor. Which of these accounts would you expect to appear in the after¬closing trial balance? Notes Receivable,
Analyze separately each of the following transactions using the format illustrated at the end of the exercise. In each situation, explain the debit portion of the transaction before the credit
The first six transactions of a newly organized company appear in the following T accounts.For each of the six transactions in turn, indicate the type of accounts affected (asset, liability, or
Enter the following transactions in T accounts drawn on ordinary notebook paper.Label each debit and credit with the letter identifying the transaction. Prepare a trial balance at May 31.(a) On May
Enter the following transactions in the two-column journal of Crystal Pool Service Company. Include a brief explanation of the transaction as part of each journal entry. Do not include in the
The single proprietorship of Andrew Duncan, CPA, had the following transactions, among others, during October. You are to record these transactions in a two-column general journal. Include an
The following accounts of Lakeland Real Estate Company at June 30, 19 _ , are listed below in alphabetical order. The amount in the account for Notes Payable has been purposely omitted. You are to
Some of the following errors would cause the debit and credit columns of the trial balance to have unequal totals. For each of the four paragraphs, write a statement explaining with reasons whether
The trial balance prepared by Studio Patrol Service at December 31 was not in balance. In searching for the error, an employee discovered that a transaction for the purchase of a typewriter on credit
Jensen Services, a single proprietorship owned by Paul Jensen, had the following transactions early in June:(a) On June 1, collected cash of $2,400 from accounts receivable.(b) On June 2, Paul Jensen
After several seasons of World Team tennis competition, Anne Peckham had saved enough money to start her own tennis school, to be known as Rancho Tennis College.During June, while organizing the
Opinion Research Service was organized to conduct polls on various issues of interest to political candidates. The following alphabetical list shows the account balances at February 28, 19
The following T accounts summarize the information contained in the ledger of Call Company at October 31.Instructions Determine the balances of the accounts and prepare a trial balance at October 31,
On October 1 Jon Linden, a licensed real estate broker, decided to organize a busi¬ness, to be known as Linden Realty. The following events occurred during October.Oct. 1 Jon Linden opened a bank
After playing several seasons of professional football, Joe Bolt had saved enough money to start a business, to be called Number One Auto Rental. The transactions during March while the new business
The ledger accounts of Cheviot Hills Golf Club at September 30 are shown below in an alphabetical listing.Instructions a Prepare a balance sheet at September 30.b Assume that immediately after the
After several years of experience as a real estate broker, Helen Finley organized her own firm on July 1 under the name of Helen Finley & Associates. During July the company had the following
The transactions of Valley Ice Skating Rink, a newly formed business, have been recorded by the owner, Casey Gaunt, in informally constructed T accounts. Gaunt asks you to transfer this information
At March 31, an alphabetical list of the accounts of the Community Theater showed the following balances:Instructions Prepare a trial balance with the accounts arranged in the usual finan¬cial
Kahala Secretarial Service is located in a suburban office building and provides typing, duplicating, and other services to the tenants of the building and to other clients. As of March 31, the
Coast Property Management was started on November 1 by Jeanne Daly to provide managerial services for the owners of apartment buildings. The organizational period extended throughout November and
James Gray, an attorney, resigned from a position with a large law firm to establish his own law practice. The business transactions during September while the new venture was being organized are
Educational TV was organized in February 19 _ , to operate as a local television station. The account titles and numbers used by the business are listed below:The transactions for February were as
In broad general terms, what is the purpose of accounting? LO3
Why is a knowledge of accounting terms and concepts useful to persons other than professional accountants? LO3
What is meant by the term business transaction? LO3
What are financial statements and how do they relate to the accounting system? LO3
Explain briefly why each of the following groups is interested in the financial statements of a business: LO3 a Creditors b Potential investors c Labor unions
Distinguish between accounting and bookkeeping. LO3
What is the principal function of certified public accountants? What other serv¬ices are commonly rendered by CPA firms? LO3
Private accounting includes a number of subfields or specialized phases, of which cost accounting is one. Name four other such specialized phases of private ac¬counting. LO3
The SEC is concerned with the financial statements of what kind of business entity? LO3
Is the Financial Accounting Standards Board (FASB) a government agency?What is its principal function? LO3
One primary objective of every business is to operate profitably. What other primary objective must be met for a business to survive? Explain. LO3
Not all the significant happenings in the life of a business can be expressed in monetary terms and entered in the accounting records. Identify two or more significant events affecting a business
Information available from the accounting records provides a basis for making many business decisions. List five examples of business decisions requiring the use of accounting information. LO3
State briefly the purpose of a balance sheet. LO3
Define assets. List five examples. LO3
State briefly two proposals which have been made to enable accounting to func¬tion better during a period of inflation. LO3
Define liabilities. List two examples. LO3
Tom Ray, president of the Ray Company, was offered $500,000 cash for the land and buildings occupied by the business. These assets had been acquired five years ago at a price of $300,000. Ray refused
Explain briefly the concept of the business entity. LO3
State the accounting equation in two alternative forms. LO3
The owner’s equity in a business arises from what two sources? LO3
Why are the total assets shown on a balance sheet always equal to the total of the liabilities and the owner’s equity? LO3
Can a business transaction cause one asset to increase or decrease without affect¬ing any other asset, liability, or the owner’s equity? LO3
If a transaction causes total liabilities to decrease but does not affect the owner’s equity, what change, if any, will occur in total assets? LO3
Give examples of transactions that would: LO3 a Cause one asset to increase and another asset to decrease without any effect on the liabilities or owner’s equity.b Cause both total assets and total
What is an account and how does it differ from a ledger? LO5
In its simplest form, an account has only three elements or basic parts. What are these three elements? LO5

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