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Exam 2: Analyzing Transactions

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Question 101

Multiple Choice

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For each of the following accounts, indicate whether its normal balance is on the credit side or the debit side of the T account. -Interest Earned

A) Credit side
B) Debit side

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Question 102

Multiple Choice

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The chart of accounts for the Corning Company includes the following: $\begin{array} { | l | l | } \hline \text { Account Name } &{ \text { Account Number } } \\\hline \text { Cash } & 11 \\\hline \text { Accounts Receivable } & 13 \\\hline \text { Prepaid Insurance } & 15 \\\hline \text { Accounts Payable } & 21 \\\hline \text { Unearned Revenue } & 24 \\\hline \text { Common Stock } & 31 \\\hline \text { Dividends } & 32 \\\hline \text { Fees Earned } & 41 \\\hline \text { Salaries Expense } & 54 \\\hline \text { Rent Expense } & 56 \\\hline\end{array}$ Page 3 of the journal contains the following entry: $\begin{array} { | c | l | l | } \hline \text { Prepaid Insurance } & 1,530 & \\\hline \text { Cash } & & 1,530 \\\hline\end{array}$ -The chart of accounts for the Miguel Company includes the following: $\begin{array} { | l | l | } \hline \text { Account Name } &{ \text { Account Number } } \\\hline \text { Cash } & 11 \\\hline \text { Accounts Receivable } & 13 \\\hline \text { Prepaid Insurance } & 15 \\\hline \text { Accounts Payable } & 21 \\\hline \text { Unearned Revenue } & 24 \\\hline \text { Common Stock } & 31 \\\hline \text { Dividends } & 32 \\\hline \text { Fees Earned } & 41 \\\hline \text { Salaries Expense } & 54 \\\hline \text { Rent Expense } & 56 \\\hline\end{array}$ Page 3 of the journal contains the following transaction: $\begin{array} { | c | l | l | } \hline \text { Cash } & 640 & \\\hline \text { Fees Earned } & & 640 \\\hline\end{array}$ What posting references will be found in the journal entry?

A) 41, 3
B) 3, 11
C) 11, 41
D) 11, 3

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Question 103

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The accounts in the ledger of Monroe Entertainment Co. are listed below. All accounts have normal balances. $\begin{array} { l c l l } \text { Accounts Payable } & \$ 1,500 & \text { Fees Earned } & \$ 3,600 \\\text { Accounts Receivable } & 1,800 & \text { Insurance Expense } & 1,300 \\\text { Prepaid Insurance } & 2,000 & \text { Land } & 3,000 \\\text { Cash } & 3,200 & \text { Wages Expense } & 1,400 \\\text { Dividends } & 1,200 & \text { Common Stock } & 8,800\end{array}$ Prepare a trial balance. The total of the debits is

Journal entries include both debit and credit accounts for each transaction.

The chart of accounts for the Corning Company includes the following: $\begin{array} { | l | l | } \hline \text { Account Name } &{ \text { Account Number } } \\\hline \text { Cash } & 11 \\\hline \text { Accounts Receivable } & 13 \\\hline \text { Prepaid Insurance } & 15 \\\hline \text { Accounts Payable } & 21 \\\hline \text { Unearned Revenue } & 24 \\\hline \text { Common Stock } & 31 \\\hline \text { Dividends } & 32 \\\hline \text { Fees Earned } & 41 \\\hline \text { Salaries Expense } & 54 \\\hline \text { Rent Expense } & 56 \\\hline\end{array}$ Page 3 of the journal contains the following entry: $\begin{array} { | c | l | l | } \hline \text { Prepaid Insurance } & 1,530 & \\\hline \text { Cash } & & 1,530 \\\hline\end{array}$ -What is the posting reference that will be found in the prepaid insurance account?

The chart of accounts for the Corning Company includes the following: $\begin{array} { | l | l | } \hline \text { Account Name } &{ \text { Account Number } } \\\hline \text { Cash } & 11 \\\hline \text { Accounts Receivable } & 13 \\\hline \text { Prepaid Insurance } & 15 \\\hline \text { Accounts Payable } & 21 \\\hline \text { Unearned Revenue } & 24 \\\hline \text { Common Stock } & 31 \\\hline \text { Dividends } & 32 \\\hline \text { Fees Earned } & 41 \\\hline \text { Salaries Expense } & 54 \\\hline \text { Rent Expense } & 56 \\\hline\end{array}$ Page 3 of the journal contains the following entry: $\begin{array} { | c | l | l | } \hline \text { Prepaid Insurance } & 1,530 & \\\hline \text { Cash } & & 1,530 \\\hline\end{array}$ -What posting references will be found in the journal entry?

Which of the following entries records the payment of a bill for your insurance premium?

The classification and normal balance of the accounts payable account is

The normal balance of the dividends account is a debit.

Which of the following entries records the payment of an account payable?

Dividends decrease stockholders' equity and are listed on the income statement as a deduction from revenue.

Which of the following will increase stockholders' equity?

Several types of errors can be made during the journalizing and posting process. Match the following with their best description. -Wrong amount posted to an account.

The recording of cash payments from the cash account is done by entering the amount as a credit.

Which of the following is true about T accounts?

Journalizing always eliminates fraudulent activity.

On January 8, stockholders transfer ownership of several pieces of office equipment to the new business, JumpStart, for common stock. When new, these items were worth $72,500. The fair market value of the equipment is $60,000. Journalize this transfer.

The chart of accounts classifies the accounts to make identification of the accounts easier. Describe the numbering system businesses use in setting up the chart of accounts.

The chart of accounts is designed to

On January 1, Merry Walker and other stockholders established a catering service. Listed below are accounts to use for transactions a) through e), each identified by a number. Following this list are the transactions that occurred in Walker's first month of operation. You are to indicate for each transaction the accounts that should be debited and credited by placing the account numbers) in the appropriate box. 1. Cash 2. Accounts Receivable 3. Supplies 4. Prepaid Insurance 5. Equipment 6. Truck 7. Notes Payable 8. Accounts Payable 9. Common Stock 10. Dividends 11. Fees Earned 12. Wages Expense 13. Rent Expense 14. Utilities Expense 15. Truck Expense 16. Miscellaneous Expense 17. Insurance Expense