Indicate whether the statement is true or false.

____ 1.Each transaction will have at least two effects on the accounting equation.

____ 2.Separate ledger accounts are maintained for each type of expense and revenue of a business.

____ 3.A trial balance is a list, as of a certain date, of all ledger accounts with their balances.

____ 4.Recording a purchase of office supplies on account involves a debit to the Accounts Payable account in the journal.

____ 5.If land costing $90,000 is acquired with a $50,000 down payment and the balance on account, the Land account is debited for $50,000.

____ 6.A transposition error occurs when a number is recorded with an incorrectly placed decimal point.

____ 7.A recording error discovered after posting is corrected by erasing the error and redoing the journal entry.

____ 8.The adjusting entry for expired insurance involves transferring the amount that has expired to the owner's capital account.

____ 9.A net loss would require a credit to the Income Summary account during the closing process.

____ 10.Permanent accounts appear on a balance sheet at the end of the accounting period.

Problem

31.a balance sheet in report form for Laura's Landscaping Service as of December 31, 20X3, based on the following amounts.

Hint: You will have to compute the balance in Laura Brown, Capital as of December 31, 20X3.

32.The following payroll data pertain to four employees of the Comfort Shoe Corporation. Compute the gross earnings of each employee.

.Calculate the FICA taxes to be withheld for the current period for each of the following employees of Wilson Company. Assume that the OASDI rate is 6.2% of the first $102,000 earned per year and the HI rate is 1.45% of all earnings.

Employee Cumulative Earnings Gross Earnings Current Period FICA Taxes

OASDI

John McKenzie 101,000 2,000

Rhonda Kitchens 95,000 2,000

James Worthington 118,000 8,000

Erica Smith 102,000 2,000

JAN 2PURCHASED MERCHANDISE FROM HENRY CO$ 1,7002/10,n/30

JAN 4RETURNED$ 100OF MERCHANDISE to HENRY CO

JAN 6 PAID FOR MERCHANDISE LESS RETURN AND DISCOUNT

FEB 5 SOLD MERCHANDISE to LARRY CO$ 1,6003/10,n/30

FEB 6 SALES RETURNS $200

FEB 8 RECEIVED CASH FROM LARRY CO LESS RETURNS AND DISCOUNT

DEC 31ADJUSTMENT FOR MERCHANDISE INVENTORY:

JAN 1MERCHANDISE INVENTORY BALANCE $ 10,000

DEC 31MERCHANDISE INVENTORY BALANCE $ 12,000

____ 11.The basic accounting equation is normally written as

a.

Assets + Liabilities = Owner's Equity.

b.

Assets = Liabilities + Owner's Equity.

c.

Assets = Revenues - Expenses.

d.

Assets + Owner's Equity = Liabilities.

____ 12.Tracy purchased a new drill press for his business at a cost of $2,500.He purchased the drill press on credit.What is the impact on the basic accounting equation?

a.

Decrease Assets by $2,500 and increase Liabilities by $2,500

b.

Increase Assets by $2,500 and increase Owner's Equity by $2,500

c.

Increase Liabilities by $2,500 and increase Expenses by $2,500

d.

Increase Assets by $2,500 and increase Liabilities by $2,500

____ 13.James received a check for $1,000 from one of his clients for work he had performed in a prior accounting period.How should James record the receipt of this check?

a.

Increase Cash $1,000; decrease Accounts Payable $1,000

b.

Increase Cash $1,000; increase Revenue $1,000

c.

Increase Cash $1,000; increase Owner's Capital $1,000

d.

Increase Cash $1,000; decrease Accounts Receivable $1,000

____ 14.Dennis is the owner of Smitty's Auto Restoration and withdraws $2,500 cash from the business for personal use.The effect on the accounting equation is

a.

a decrease to Assets and an increase to Expenses by $2,500.

b.

an increase to Liabilities and an increase to Expenses by $2,500.

c.

a decrease to Assets and a decrease to Owner's Capital by $2,500.

d.

an increase to Expenses and a decrease to Owner's Capital by $2,500.

15.The purchase of supplies on credit

a.

decreases liabilities.

c.

increases owner's equity.

b.

has no effect on the accounting equation.

d.

increases liabilities.

____ 16.When the owner invests cash in the business,

a.

there is no effect on the accounting equation.

b.

liabilities are increased.

c.

assets are decreased.

d.

owner's equity is increased.

____ 17.The three basic financial statements are the

a.

income statement, bank statement, and balance sheet.

b.

income statement, statement of owner's equity, and balance sheet.

c.

bank statement, invoice, and revenue statement.

d.

statement of owner's equity, balance sheet, and worksheet.

____ 18.Which of the following is not part of a standard account?

a.

Date column

b.

Account number

c.

Classification column to tell whether the account is an asset, liability, or aspect of owner's equity

d.

Item column to record a brief description of entry, if necessary

____ 19.Mr. Smith purchases office supplies for cash. This transaction causes

a.

assets to increase and liabilities to increase.

b.

liabilities to increase and owner's equity to decrease.

c.

one asset to increase and another asset to decrease.

d.

liabilities to decrease and owner's equity to increase.

20.Leslie's Landscaping and Painting completed a job and mailed an invoice to the customer for $2,000.How should Leslie record this event?

a.

Debit Cash $2,000; credit Accounts Payable $2,000.

b.

Debit Accounts Receivable $2,000; credit Service Revenue $2,000.

c.

Debit Accounts Receivable $2,000; credit Unearned Revenue $2,000.

d.

No transaction should be recorded because Leslie has not been paid.

____ 21.The following accounts have normal balances as shown below.What is the trial balance total for debits and credits?

Cash

$ 1,000

Accounts Receivable

2,000

Equipment

5,000

Accounts Payable

1,500

Notes Payable

3,500

Capital

4,000

Withdrawals

1,000

a.

$8,000 debit and $8,000 credit

c.

$9,000 debit and $9,000 credit

b.

$10,000 debit and $10,000 credit

d.

$8,000 debit and $10,000 credit

____ 22.Denise bought a new computer valued at $3,000.She paid $1,000 down and will pay the balance in 90 days.The correct journal entry to record this purchase is

a.

debitCash$3,000 and credit Computer Equipment $3,000.

b.

debit Computer Equipment $3,000 and credit Cash $1,000 and Accounts Payable $2,000.

c.

debit Computer Equipment $3,000 and credit Owner's Capital $3,000.

d.

debit Computer Equipment $2,000 and Cash $1,000 and credit Accounts Payable $3,000.

_ 23.When the new balance of an account is calculated,

a.

a debit posting is added if the account has a credit balance.

b.

a credit posting is subtracted if the account has a credit balance.

c.

a debit posting is subtracted if the account has a debit balance.

d.

a debit posting is subtracted if the account has a credit balance.

____ 24.Which of these lists accurately reflects the sequence followed when recording transactions?

a.

General journal, general ledger, trial balance, source documents

b.

Source documents, general journal, general ledger, trial balance

c.

Trial balance, source documents, general ledger, general journal

d.

General ledger, general journal, source documents, trial balance

____ 25.The trial balance is prepared from

a.

source documents.

c.

the general journal.

b.

the balance sheet.

d.

the general ledger.

____ 26.Equipment purchased on January 1, 20XX, for $30,000 has an estimated trade-in value of $6,000 and a useful life of four years. The annual depreciation using the straight-line method will be

a.

$4,000.

c.

$8,000.

b.

$6,000.

d.

$7,500.

____ 27.James Henry, CPA, purchased computer equipment costing $6,000 at the beginning of the year.Depreciation expense for the year was $1,500.What is the balance in the Computer Equipment account at the end of the year?

a.

$6,000

c.

$4,500

b.

$1,500

d.

$0

____ 28.A credit to an asset account for the expired portion of the asset will appear on the work sheet in the

a.

Adjustments Credit column.

c.

Trial Balance Credit column.

b.

Adjusted Trial Balance Credit column.

d.

Income Statement Credit column.

____ 29.The Owner's Drawing account is closed to

a.

Expenses.

c.

Assets.

b.

Income Summary.

d.

Owner's Capital.

____ 30.Revenue for Bailey's Consignment Shop was $18,000.Which of the following is the correct entry to close Revenue for the period?

a.

Revenue18,000

Income Summary18,000

b.

Revenue18,000

Owner's Capital18,000

c.

Income Summary18,000

Revenue18,000

d.

Income Summary18,000

Owner's Capital18,000