Lehman College, CUNY - ACC 171Sumeya Baker - ACC 171 - REVIEW AND PRACTICE CHAPTER 2 REVIEW AND PRACTICE.

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Lehman College, CUNY - ACC 171Sumeya Baker - ACC 171 - REVIEW AND PRACTICE CHAPTER 2 REVIEW AND PRACTICE LEARNING OBJECTIVES REVIEW 1.Describe how accounts, debits, and credits are used to record b... usiness transactions. 1. 2.Indicate how a journal is used in the recording process. 3.Explain how a ledger and posting help in the recording process. 2. 4.Prepare a trial balance. 3. GLOSSARY REVIEW Account Chart of accounts Compound entry Credit Debit Double-entry system General journal General ledger Journal Journalizing Ledger Normal balance Posting Simple entry T-account Three-column form of account Trial balance PRACTICE MULTIPLE-CHOICE QUESTIONS 2-1. (LO 1) Which of the following statements about an account is true? • (a) The right side of an account is the debit or increase side. • (b) An account is an individual accounting record of increases and decreases in specific asset, liability, and owner's equity items. • (c) There are separate accounts for specific assets and liabilities but only one account for owner's equity items. • (d) The left side of an account is the credit or decrease side. 2-2. (LO 1) Debits: • (a) increase both assets and liabilities. • (b) decrease both assets and liabilities. • (c) increase assets and decrease liabilities. • (d) decrease assets and increase liabilities. 2-3. (LO 1) A revenue account: • (a) is increased by debits. • (b) is decreased by credits. • (c) has a normal balance of a debit. • (d) is increased by credits. 2-4. (LO 1) Accounts that normally have debit balances are: • (a) assets, expenses, and revenues. • (b) assets, expenses, and owner's capital. • (c) assets, liabilities, and owner's drawings. • (d) assets, owner's drawings, and expenses. 2-5. (LO 1) The expanded accounting equation is: • (a) . • (b) . • (c) . • (d) . 2-6. (LO 2) Which of the following is not part of the recording process? • (a) Analyzing transactions. • (b) Preparing a trial balance. • (c) Entering transactions in a journal. • (d) Posting transactions. 2-7. (LO 2) Which of the following statements about a journal is false? • (a) It is not a book of original entry. • (b) It provides a chronological record of transactions. • (c) It helps to locate errors because the debit and credit amounts for each entry can be readily compared. • (d) It discloses in one place the complete effect of a transaction. 2-8. (LO 2) The purchase of supplies on account should result in: • (a) a debit to Supplies Expense and a credit to Cash. • (b) a debit to Supplies Expense and a credit to Accounts Payable. • (c) a debit to Supplies and a credit to Accounts Payable. • (d) a debit to Supplies and a credit to Accounts Receivable. 2-9. (LO 3) The order of the accounts in the ledger is: • (a) assets, revenues, expenses, liabilities, owner's capital, owner's drawings. • (b) assets, liabilities, owner's capital, owner's drawings, revenues, expenses. • (c) owner's capital, assets, revenues, expenses, liabilities, owner's drawings. • (d) revenues, assets, expenses, liabilities, owner's capital, owner's drawings. 2-10. (LO 3) A ledger: • (a) contains only asset and liability accounts. • (b) should show accounts in alphabetical order. • (c) is a collection of the entire group of accounts maintained by a company. • (d) is a book of original entry. 2-11. (LO 3) Posting: • (a) normally occurs before journalizing. • (b) transfers ledger transaction data to the journal. • (c) is an optional step in the recording process. • (d) transfers journal entries to ledger accounts. 2-12. (LO 3) Before posting a payment of $5,000, the Accounts Payable of Senator Company had a normal balance of $16,000. The balance after posting this transaction was: • (a) $21,000. • (b) $5,000. • (c) $11,000. • (d) Cannot be determined. 2-13. (LO 4) A trial balance: • (a) is a list of accounts with their balances at a given time. • (b) proves the journalized transactions are correct. • (c) will not balance if a correct journal entry is posted twice. • (d) proves that all transactions have been recorded. 2-14. (LO 4) A trial balance will not balance if: • (a) a correct journal entry is posted twice. • (b) the purchase of supplies on account is debited to Supplies and credited to Cash. • (c) a $100 cash drawing by the owner is debited to Owner's Drawings for $1,000 and credited to Cash for $100. • (d) a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45. • (c) 2-15. (LO 4) The trial balance of Jeong Company had accounts with the following normal balances: Cash $5,000, Service Revenue $85,000, Salaries and Wages Payable $4,000, Salaries and Wages Expense $40,000, Rent Expense $10,000, Owner's Capital $42,000, Owner's Drawings $15,000, and Equipment $61,000. In preparing a trial balance, the total in the debit column is: • (a) $131,000. • (b) $216,000. • (c) $91,000. • (d) $116,000. • (a) $131,000. . The normal balance for Assets, Expenses, and Owner's Drawings is a debit. The other choices are incorrect because (b) revenue of $85,000 should not be included in the total of $216,000 and its normal balance is a credit; (c) the total of $91,000 is missing the Salaries and Wages Expense of $40,000, which has a normal balance of a debit; and (d) the total of $116,000 is missing the Owner's Drawings of $15,000, which has a normal balance of a debit. PRACTICE EXERCISES 2-1. Analyze transactions and determine their effect on accounts. (LO 1) Presented below is information related to Hammond Real Estate Agency. Oct.  1 Lia Berge begins business as a real estate agent with a cash investment of $30,000 2 Paid rent, $700, on office space. 3 Purchases office equipment for $2,800, on account. 6 Sells a house and lot for Hal Smith; bills Hal Smith $4,400 for realty services performed. 27 Pays $1,100 on the balance related to the transaction of October 3. 30 Receives bill for October utilities, $130 (not paid at this time). Instructions Journalize the transactions. (You may omit explanations) 2-2. Journalize transactions from account data and prepare a trial balance. (LO 2, 4) The T-accounts below summarize the ledger of Depot Company at the end of the first month of operations. Cash No. 101 Unearned Service Revenue No. 209 4/1 16,000 4/15 700 4/30 1,600 4/12 1,200 4/25 1,600 4/29 900 4/30 1,600 Accounts Receivable No. 112 Owner's Capital No. 301 4/7 2,900 4/29 900 4/1 16,000 Supplies No. 126 Service Revenue No. 400 4/4 1,900 4/7 2,900 4/12 1,200 Accounts Payable No. 201 Salaries and Wages Expense No. 726 4/25 1,600 4/4 1,900 4/15 700 Instructions (a) Prepare the complete general journal (including explanations) from which the postings to Cash were made. (b) Prepare a trial balance at April 30, 2017. PRACTICE PROBLEM Journalize transactions, post, and prepare a trial balance. (LO 1, 2, 3, 4) Bob Sample opened the Campus Laundromat on September 1, 2017. During the first month of operations, the following transactions occurred. Sept. 1 Bob invested $20,000 cash in the business. 2 The company paid $1,000 cash for store rent for September. 3 Purchased washers and dryers for $25,000, paying $10,000 in cash and signing a $15,000, 6-month, 12% note payable. 4 Paid $1,200 for a one-year accident insurance policy. 10 Received a bill from the Daily News for online advertising of the opening of the laundromat $200. 20 Bob withdrew $700 cash for personal use. 30 The company determined that cash receipts for laundry services for the month were $6,200. The chart of accounts for the company is the same as that for Pioneer Advertising plus No. 610 Advertising Expense. Instructions (a) Journalize the September transactions. (Use J1 for the journal page number.) (b) Open ledger accounts and post the September transactions. (c) Prepare a trial balance at September 30, 2017. [Show More]

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