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Chapter 3 Question Review1Chapter 3 QuestionsMultiple Choice1.a.b.c.d.If services are rendered on account, thenassets will decrease.liabilities will increase.stockholders’ equity will increase.liabilities will decrease.2.a.b.c.d.The purchase of an asset for cashincreases assets and stockholders’ equity.increases assets and liabilities.decreases assets and increases liabilities.leaves total assets unchanged.3. The right side of a t-account isa. the balance of an account.b. the debit side.c. the credit side.d. blank.4.a.b.c.d.Powers Corporation received a cash advance of 500 from a customer. As a result of this event,assets increased by 500.equity increased by 500.liabilities decreased by 500.Both assets and equity increased by 500.5.a.b.c.d.Debitsincrease both assets and liabilities.decrease both assets and liabilities.increase assets and decrease liabilities.decrease assets and increase liabilities.6.a.b.c.d.A debit is NOT the normal balance for which account listed below?RevenueCashAccounts ReceivableDividends7. Which of the following describes the classification and normal balance of the Unearned RentRevenue account?a. Asset, debitb. Liability, creditc. Revenues, creditd. Expense, debit
Chapter 3 Question Review8.a.b.c.d.Which accounts normally have credit balances?Revenues, liabilities, and dividendsRevenues, liabilities, and assetsRevenues, liabilities, and retained earningsRevenues, liabilities, and expenses9.a.b.c.d.Which of the following accounts is increased with a debit?LandService RevenueInterest PayableCommon Stock10. When a company performs a service but has not yet received payment, ita. debits Service Revenue and credits Accounts Receivable.b. debits Accounts Receivable and credits Service Revenue.c. debits Service Revenue and credits Accounts Payable.d. makes no entry until cash is received.11. In the first month of operations, the total of the debit entries to the Cash account amounted to 3,000 and the total of the credit entries to the Cash account amounted to 1,800. The Cash accounthas aa. 1,800 credit balance.b. 3,000 debit balance.c. 1,200 debit balance.d. 1,800 credit balance.12. At November 1, 20XX, Johnson Inc. had an Accounts Receivable balance of 200,000. During themonth, the company made sales on account of 300,000. In addition, Johnson Inc. collected 400,000from customers that owed them money. At November 30, 2018, the Accounts Receivable balance isa. 100,000 debitb. 100,000 creditc. 500,000 debitd. 300,000 credit13. Which of the following steps in the accounting process is done after analyzing businesstransactions?a. Preparing the financial statementsb. Preparing a trial balancec. Entering transactions in a journald. Posting journal entries14. On July 7, 20XX, Shireman Enterprises received cash 1,400 for services rendered. The entry torecord this transaction will includea. a debit to Service Revenue of 1,400.b. a credit to Accounts Receivable of 1,400.c. a debit to Cash of 1,400.d. a credit to Accounts Payable of 1,400.2
Chapter 3 Question Review315. The primary purpose of the trial balance is toa. disclose the complete effect of a transaction in one place.b. make sure a journal entry is not posted twice.c. transfer journal entries to the ledger accounts.d. prove the equality of the debit and credit amounts after posting.EXERCISES1. Presented here are five economic events. For each item, indicate whether the event increased ( ),decreased (–), or had no effect (NE) on assets, liabilities, and stockholders’ equity. Liabilities Stockholders’Equitya. Received cash for services rendered.Assetsb. Purchased supplies on account.c. Paid employees' salaries.d. Dividends paid in cash.e. Expenses paid in cash.2. For each of the following accounts indicate the effect of a debit or a credit on the account and thenormal balance (Debit or Credit). Increase ( ), Decrease (–).a. Salaries and Wages Expense.DebitCreditNormal Balanceb. Accounts Receivable.c. Service Revenue.d. Dividendse. Retained Earnings.3. Prepare a trial balance from the ledger accounts of Swisher Company as of January 31, 20XX.Accounts PayableAccounts ReceivableCashCommon StockDividends1,5002,5001,6002,2001,400Rent ExpenseService RevenueSuppliesSalaries and Wages Expense 5003,5002001,000
Chapter 3 Question Review44. Selected accounts from the ledger of McDaniel Corporation appear below. For each account, indicatethe following:(a) In the first column at the right, indicate the nature of each account, using the followingabbreviations:AssetExpense- A- ELiability- LRevenues - RNone of the above- N(b) In the second column, indicate the normal balance by inserting Dr. or Cr.Type ofAccounta.b.c.d.e.f.g.h.i.j.NormalBalanceSupplies .Notes Payable .Service Revenue .Dividends .Accounts Payable .Salaries and Wages Expense Common Stock Accounts Receivable .Equipment .Notes Receivable 5. Journalize the following business transactions in general journal form. Identify each transaction by number. Youmay omit explanations of the transactions. (USE THE LINES ON THE NEXT PAGE TO RECORD YOUR JOURNALENTRIES)Jan. 1 Stockholders invest 40,000 in cash in starting a real estate office operating as a corporation.Jan. 5 Purchased 500 of supplies on credit.Jan. 10 Purchased equipment for 25,000, paying 3,500 in cash and signed a 30-day, 21,500, note payable.Jan. 15 Real estate commissions billed to clients amount to 4,000.Jan. 20 Paid 700 in cash for the current month's rent.Jan. 25 Paid 250 cash on account for office supplies purchased in transaction 2.Jan. 28 Received a bill for 800 for advertising for the current month.Jan. 31 Paid 2,500 cash for office salaries.Jan. 31 Paid 1,200 cash dividends to stockholders.Jan. 31 Received a check for 2,000 from a client in payment on account for commissions billed in transaction 4.
Chapter 3 Question ReviewExample: Bought supplies for 500 on Jan.1.SuppliesCash5DateJan. 1DebitCredit500500
Chapter 3 Question Review6Chapter 3 SolutionsMultiple Choice Solutions1. C2. D3. C4. A5. C6. A7. B8. C9. A10. B11. C12. A13. C14. C15. DExercise Solutions1.a. Received cash for services rendered.b. Purchased supplies on account.c. Paid employees' salaries.d. Dividends paid in cash.e. Expenses paid in cash.a. Salaries and Wages Expense.Debit b. Accounts Receivable –Drc. Service Revenue.– Crd. Dividends –Dre. Retained Earnings– Cr2. LiabilitiesNE NENENECredit– Stockholders’Equity NE–––Assets –––Normal BalanceDr
Chapter 3 Question Review7Exercise Solutions (Cont.)3.Swisher CompanyTrial BalanceJanuary 31, 20XXDebitCashAccounts ReceivableSuppliesAccounts PayableCommon StockDividendsService RevenueRent ExpenseSalaries and Wages Expense4.a.b.c.d.e.f.g.h.i.j.Supplies .Note Payable .Service Revenue .Dividends .Accounts Payable .Salaries and Wages Expense Common Stock Accounts Receivable .Equipment .Notes Receivable Credit 1,6002,500200 1,5002,2001,4003,5005001,000 7,200Type Cr.Dr.Dr.Dr. 7,200
Chapter 3 Question Review8Exercise Solutions (Cont.)5.Example: Bought supplies for 500 on Jan.1.SuppliesDateJan. 1DebitCredit500Cash500CashCommon StockJan. 1SuppliesAccounts PayableJan. 5EquipmentCashNotes PayableJan. 10Accounts ReceivableService RevenueJan. 15Rent ExpenseCashJan. 20Accounts PayableCashJan. 25Advertising ExpenseAccounts PayableJan. 28Salaries and Wages ExpenseCashJan. 31DividendsCashJan. 31CashAccounts ReceivableJan. 7002502508008002,5002,5001,2001,2002,0002,000
Chapter 3 Question Review9
2. The purchase of an asset for cash a. increases assets and stockholders' equity. b. increases assets and liabilities. c. decreases assets and increases liabilities. d. leaves total assets unchanged. 3. The right side of a t-account is a. the balance of an account. b. the debit side. c. the credit side. d. blank. 4.
