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Exam 13: The Double-Entry Accounting System

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Question 61

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Generally accepted accounting principles require that a business's fiscal year must end on December 31.

A) True
B) False

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Question 62

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Which types of accounts are closed out to the Retained Earnings account at the end of an accounting period?. a)________ The settlement of an account payable requires a credit to a liability account.b)________ The payment of a cash expense requires a debit to cash and a credit to the related expense account.c)________ Debits are entered on the left and credits are entered on the right in a T-account.d)________ A credit entry decreases an asset account.e)________ Increases in revenues are recorded with debits to the revenue accounts.

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Revenues, expenses, and dividends are te...

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Question 63

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A transaction has been recorded in the T-accounts of Simpson Company as follows: Which of the following could be an explanation for this transaction?

The Lazarus Company recorded the following adjustment in general journal format: Which of the following choices accurately reflects how this event would affect the company's financial statements?

Abbott Company purchased $6,500 of merchandise inventory on account. Which of the following entries would be required to record this transaction?

Source documents provide information that serves as the basis for entries into the accounting system. Examples of source documents include invoices and deposit tickets.

The following is a list of adjusted account balances for Shenandoah Company as of December 31, Year 1: Required:a)Prepare an adjusted trial balance.b)Prepare the closing entries as of December 31, Year 1 in journal entry format.c)Prepare an income statement.d)Determine the balance in retained earnings after the closing entries had been posted.

Levitt Company prepared the following adjusted trial balance at the end of its fiscal year: Required:a)Draw T-accounts for all of the accounts that will be affected by the closing entries and insert the existing account balance in each of those accounts.b)Enter the closing entries in the T-accounts.c)Prepare a post-closing trial balance.

Indicate whether each of the following statements is true or false. a)________ Every journal entry includes at least one debit and one credit.b)________ The double-entry accounting format always records two separate events simultaneously.c)________ The double-entry system requires that total debits equal total credits.d)________ When an asset decreases in a double-entry system, a stockholders' equity account may also decrease.e)________ The double entry system ensures the accuracy of a company's accounting records.

The Grayson Clinic provides dental care services. During Year 1, the clinic entered into the following transactions: 1)On October 1, collected $9,000 in advance of services being provided. The services are to be performed equally over the next 12 months.2)On April 1, purchased insurance costing $36,000. The insurance policy would cover the next 12 months. Required:a)Draw T-accounts and record each of the adjustments required in those T-accounts.b)Analyze how the year end adjusting entries affect the financial statements using the horizontal financial model below. (Put parentheses around amounts that decrease a financial statement element.)

During a company's first yearof operations, the asset account, Office Supplies, was debited for $3,900 for the purchases of supplies. At year-end, a physical count of the supplies on hand revealed that $1,625 of unused supplies were available for future use. How will the related adjusting entry affect the company's financial statements?

A transaction has been recorded in the T-accounts of Hough Company as follows: Which of the following reflects how this event affects the company's financial statements?

Phelps Company entered into the following transactions during Year 1: 1)Provided services to customers for cash, $70,0002)Purchased land by paying cash, $32,0003)Paid rent in advance for 6 months, $24,0004)Acquired cash of $50,000 by issuing common stock5)Purchased supplies on account, $5,4006)Receive payment of $6,000 from a customer for services that will be provided over the next six months. Required:a)Prepare journal entries for each of the preceding transactions. b)Show how each transaction affects the financial statements by inserting the related dollar amounts. Precede each amount with a plus sign ("+")if the transaction increases, a minus sign ("−")if the transaction decreases, or "NA" if the transaction does not affect a given element of the financial statements.In the last column, use the letters "OA" for operating activities, "IA" for investing activities, and "FA" for financing activities, or "NA" if the statement of cash flows is not affected.

Why are adjusting entries recorded at the end of the accounting period?

Packard Company engaged in the following transactions during Year 1, its first year of operations: (Assume all transactions are cash transactions.) 1) Acquired $950 cash from the issue of common stock.2) Borrowed $420 from a bank.3) Earned $650 of revenues.4) Paid expenses of $250.5) Paid a $50 dividend. During Year 2, Packard engaged in the following transactions: (Assume all transactions are cash transactions.) 1) Issued an additional $325 of common stock.2) Repaid $220 of its debt to the bank.3) Earned revenues of $750.4) Incurred expenses of $360.5) Paid dividends of $100.What was the balance of Packard's Retained Earnings account before closing in Year 1?

At the end of its fiscal year, a company must adjust its accounting records for unrecorded accruals and deferrals before it can prepare financial statements.

Which of the following statements is true regarding a trial balance that balances?

All of a company's temporary accounts appear on the income statement.

Fitzpatrick Company had $500 of accrued salary expenses that will be paid during the following accounting period. How would the related adjusting entry be recorded in the company's T-accounts?

What is the term used to describe the right side of a T-account?