7. The journal entry to record a particular business transaction includes a debit to a liability account. This transaction is most likely also to include: A cash receipt. The purchase of an asset on account. A cash payment. A credit to Accounts Receivable. 8. A trial balance will indicate the existence of an error if: a The purchase of a typewriter for $870 is entered in the accounting records as a debit of $87 to Office Equipment and a credit of $87 to Accounts Payable. The collection of $75 cash is recorded by a debit to Accounts Receivable and a credit to Cash. A ledger account with a credit balance is listed as a debit amount in the trial balance. A journal entry debiting Equipment is posted as a debit to the Building account. 9. The Accountant for the Mccarthy Company forgot to make an adjusting entry to record depreciation for the current year. The effect of this error would be: An overstatement of net income and an understatement of assets. An overstatement of assets offset by an understatement of owners equity. An overstatement of assets, net income, and owners' equity. An overstatement of assets and of net income and an understatement of owners' equity. 10. The balance in retained earnings of Dayton Company at the beginning of the year was $65,000. During the year, the corporation earned revenue of $430,000 and incurred expenses of $360,000, dividends of $50,000 were declared and paid, and the balance of the Cash account increased by $10,000. The company's net income and the year-end balance in the retained earnings account are, respectively: $20,000 and $95,000 $70,000 and $85,000. $20,000 and $85,000. $70,000 and $95,000. 11. The balance of an unearned revenue account: Appears in the balance sheet as a component of stockholders' equity. Appears in the income statement along with other revenue accounts Appears in a separate section of the income statement for revenue not yet earned. Appears in the liability section of the balance sheet. 12. The concept of materiality: Treats as material only those items that are greater than 2% or 3% of net income. Justifies ignoring the matching principle in certain circumstances. Affects only items reported in the income statement. Results in financial statements that are less useful to decision makers because many details have been omitted. 13. In a perpetual inventory system, purchases of merchandise on account are recorded by debiting: Cost of Goods Sold. Accounts Payable. Purchases. Inventory. 14. In a multiple-step income statement, interest expense usually is not classified as an operating expense because interest charges do not contribute to the production of revenue. Stem from the manner in which assets are financed, not the manner in which they are used in business operations. Relate directly to the cost of goods sold