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Exam 3: The Double-Entry Accounting System

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Question 41

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Indicate whether each of the following statements is true or false. _____ a) A journal entry includes at least one debit and one credit entry. _____ b) The double-entry accounting format 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, an equity account may also decrease. _____ e) The double entry system does not ensure complete accuracy in a company's accounting records.

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a) True b) False c) True d) True e) True...

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Question 42

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The Warner Company issued common stock for $500,000 cash. Which of the following shows the proper entry using T-accounts?

A)
B)
C)
D)

E) A) and D)
F) B) and C)

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Question 43

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The adjusting entry to record expense related to the use of a delivery van would involve which of the following?

Which of the following is decreased with a credit?

A transaction recorded as a debit to Cash and a credit to Common Stock.

Adjusting entries are made at the end of the period because of the need to

The three primary asset use transactions are incurring expenses, settling liabilities, and paying dividends.

A trial balance can only be prepared at the end of the fiscal year, as part of the adjusting and closing processes.

At the end of 2013, the following information is available for ABC Company and XYZ Company: Required: 1) For each company, calculate the debt to assets ratio and the return on equity ratio. 2) For each company, calculate the return on assets ratio. 3) Which company had a greater level of debt risk? Why? 4) What is financial leverage? Which company is using financial leverage more successfully?

When a company receives cash in advance from a customer, it should debit Cash and credit Accounts Receivable.

Explain the significance of the return on equity ratio. Who (what category or type of financial statement users) would normally be most interested in this ratio?

Which company has the highest return on assets?

Which is one effect of the following journal entry?

What transaction does the following general journal entry represent?

What is the meaning of the terms "debit" and "credit"?

Indicate whether each of the following statements is true or false _____ a) The general journal is often called the book of original entry. _____ b) Transactions are first recorded in the ledger and then transferred to the journal. _____ c) The process of making entries into a journal is called posting. _____ d) The ledger is an example of a source document. _____ e) The list of a business's account titles and account numbers is called a chart of accounts.

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.

Domino Co. purchased land and paid the full purchase price in cash. The journal entry necessary to record this event includes a:

Newcomb Company began operations on December 1, 2013. The following transactions were recorded in December: 1) The business received $3,000 cash from the issuance of common stock to its stockholders. 2) Provided services on account for $2,500. 3) Paid $1,500 cash for land. 4) Accrued $1,000 of salaries expenses. 5) Purchased $300 of supplies on account to be used in January. 6) Collected $1,300 from customers. At December 31, 2011, the total debits in the company's adjusted trial balance would be

Explain how the following general journal entry affects the accounting equation.