1. Complete the following table:

Account	Debit	Credit
Asset
	Increase	Decrease
Liability
	Decrease	Increase
	Decrease	Increase

2. Which of the following is not an Asset and Liability?

1. Money owed to bank
2. Cash borrowed from a friend
3. Money borrowed from bank to buy building
4. Money paid to purchase stock investments

3. Finish the equation: _______________ - ________________= Equity.
4. Finish the statement:
   1. When assets _____________, it is a debit.
   2. When liabilities decrease, it is a ______________.
   3. When expenses ________________, it is a credit.
   4. When revenues decrease, it is a _______________.

5. Which of the following statements are false? There may be more than one answer.

1. When you receive a loan from the bank, you increase a revenue account.
2. When you pay cash to buy supplies, you decrease an asset account.
3. When you purchase investments, you increase an asset account.
4. When you pay back the loan from the bank, you increase a liability account.

6. Identify the following accounts as an Asset, Liability, Revenue or Expense AND identify which financial statement(s) each would be reported.
   1. Cash
   2. Accounts Payable
   3. Notes Payable
   4. Service Fees
   5. Utilities
   6. Investment
   7. Stock
   8. Unearned Revenue
   9. Supplies
   10. Building
   11. Salaries
   12. Accounts Receivable
   13. Prepaid Insurance
   14. Cash investment to start business
   15. Revenue earned, not yet received
   16. Fees earned from providing tax services
   17. Advertising Bill
   18. Long-term debt
   19. Accrued Revenue
   20. Prepaid Rent
   21. Land
7. Which of the following is not a long-term asset?
   1. Furniture
   2. Accrued Revenue
   3. Building
   4. Land

8. What is the entry on the balance sheet and income statement when a company purchases land and a building for $55,000, paying 25% in cash and the remaining as a note payable and paid rent for the current month of $2,000?
   1. $13,750 credit in current liabilities; $2,000 debit in rent expense.
   2. $41,250 credit in current liabilities; $2,000 debit in rent payable.
   3. $41,250 credit in non-current liabilities; $2,000 debit in rent expense.
   4. $13,750 credit in non-current liabilities; $1,000 debit in non-current assets.
9. Annas Hair Salon started the year with total assets of $320,000 and total liabilities of $140,000. During the year the business recorded $86,000 in revenue/sales of which 50% was received in cash and the remaining on credit, $45,000 in expenses, assets of $8,000 and liabilities of $15,000. The equity AND net income reported by Annas Hair Salon for the year was:

a. $135,000 in Equity and $45,000 in net income.

b. $173,000 in Equity and $41,000 in net income.

c. $216,000 in Equity and $41,000 in net income.

d. $216,000 in Liabilities and $41,000 in net income.

10. What happens to the balance sheet when a company pays utilities payable of $1,570?
    1. $1,570 credit in cash; $1,570 debit in accounts receivable.

2. $1,570 credit in cash; $1,570 debit in utilities expense.

3. $1,570 debit in utilities payable; $1,570 credit in cash.

4. $1,570 debit in cash; $1,570 debit in utilities payable.

11. If at the end of the month, the liabilities total $98,000, and equity totals $42,000, then what must be the total of the assets?

1. $56,000
2. $140,000
3. $156,000
4. $90,000
5. None of the above

12. Assets total $400,000 and liabilities total $120,000. What is the equity of the business?
    1. $280,000
    2. $520,000
    3. $420,000
    4. $480,000
    5. None of the above

13. If during the accounting period the assets increased by $45,000, and equity increased by $12,000, then how did liabilities change?

1. Increased by $12,000
2. Increased by $57,000
3. Decreased by $33,000
4. Decreased by $57,000
5. Increased by $33,000

14. Problem #1 Smith CPA opens his own tax services company and completes the following transactions in October and November:

• 10/1 Smith invests $92,000 of capital into the business.
• 10/2 Borrowed $45,000 from the bank paying 5% interest annually.
• 10/4 Purchased $3,800 of equipment, paying 50% cash and the rest on account.
• 10/9 Paid $1,360 for a three-year insurance policy.
• 10/16 Purchased office supplies for cash, $2,300.
• 10/19 Purchased a new computer for $5,500. Paid $2,500 in cash agreed to pay the remainder in 30 days.
• 10/20 Billed clients $4,000 for tax services that were performed, receiving 35% in cash.
• 10/24 Paid for the equipment purchased on October 4th.
• 10/25 Received 25% payment from clients for tax services performed on 10/20.
• 10/30 Paid salaries payable of $10,000.
• 11/1 Paid interest on the bank loan from 10/2.
• 11/5 Record the entry for the prepaid insurance policy for the month of November.
• 11/8 Received the remaining payment from clients for tax services performed on 10/20.
• 11/15 Performed services for clients in the amount of $4,300.
• 11/19 Paid balance on equipment purchased on 10/19.
• 11/25 Recorded salaries payable of $12,000.
• 11/30 Paid utilities expense in the amount of $450.

Required: Prepare the journal entries to record these transactions. How much cash did Smith have at the end of October AND November?

15. Problem #2 Roberto Thomas started the Grass Cutting Business. He began operations on August 1st and completed the following transactions, which included his initial investment of $19,000 cash. After these transactions, the ledger included the following accounts with normal balances.

• Cash $ 10,625
• Office Supplies 1,500
• Equipment 13,000
• Accounts Payable 2,500
• Notes Payable 12,000
• Lawncare Revenue 6,200
• Gas and Oil Expense 780

Required: Prepare a balance sheet and income statement for this business at the end of August.