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[Question]
97. Liabilities normally carry a _______
balance and are shown in the ______________.
a. Debit; Statement of stockholders’
equity.
b. Debit; Income statement.
c. Credit; Balance sheet.
d. Debit; Balance Sheet.
Answer: c
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
AICPA: FN Reporting
Blooms: Understand
Topic: Debits and Credits
Topic: Balance Sheet
[Question]
98. Which of the following accounts has a
debit balance?
a. Accounts Payable.
b. Unearned Revenue.
c. Service Revenue.
d. Salaries Expense.
Answer: d
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credit
[Question]
99. Which of the following accounts would
normally have a credit balance?
a. Accounts Payable, Service Revenue, Common
Stock.
b. Salaries Payable, Unearned Revenue, Delivery
Expense.
c. Income Tax Payable, Service Revenue, Dividends.
d. Cash, Repairs and Maintenance Expense, Dividends.
Answer: a
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credits
[Question]
100. Which of the following accounts would
normally have a debit balance?
a. Accounts Payable, Service Revenue, Common
Stock.
b. Salaries Payable, Unearned Revenue, Utilities
Expense.
c. Income Tax Payable, Service Revenue, Dividends.
d. Cash, Delivery expense, Dividends.
Answer: d
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credits
[Question]
101. Which of the following accounts would
normally have a debit balance and appear in the balance sheet?
a. Accounts Receivable.
b. Unearned Revenue.
c. Salaries Expense.
d. Dividends.
Answer: a
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
AICPA: FN Reporting
Blooms: Understand
Topic: Debits and Credits
Topic: Balance Sheet
[Question]
102. Which of the following accounts has a
credit balance?
a. Salaries Expense.
b. Income Tax Payable.
c. Land.
d. Prepaid Rent.
Answer: b
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credits
[Question]
103. The following statements pertain to
recording transactions. Which of them are true?
I. Total debits should equal total credits.
II. It is possible to have multiple debits
or credits in one journal entry.
III. Assets are always listed first in
journal entries.
IV. Some journal entries will have debits
only.
a. I only.
b. I and II.
c. I, II, and IV.
d. II, III, and IV.
Answer: b
Learning Objective: 02-04
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Analyze
Topic: Recording Transactions
[Question]
104. Which of the following is not a possible journal entry?
a. Credit assets; Debit expenses.
b. Debit assets; Debit stockholders’
equity.
c. Credit revenues; Debit assets.
d. Debit expenses; Credit liabilities.
Answer: b
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
105. Which of the accounts are increased
with a debit and decreased with a credit?
a. Liabilities, stockholders’ equity, and
revenues.
b. Dividends, liabilities, and assets.
c. Expenses, dividends, and stockholders’
equity.
d. Assets, dividends, and expenses.
Answer: d
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credits
[Question]
106. Consider the following list of
accounts:
Cash Retained
Earnings
Service
Revenue Utilities
Expense
Salaries
Expense Accounts
Receivable
Accounts
Payable Common Stock
Equipment Dividends
How many of these accounts have a normal
debit balance?
a. Four.
b. Five.
c. Six.
d. Seven.
Answer: c
Feedback: Cash, Salaries Expense,
Equipment, Utilities Expense, Accounts Receivable, Dividends.
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credits
[Question]
107. Consider the following list of
accounts:
Accounts
Payable
Cash
Prepaid
Rent
Common
Stock
Salaries
Payable
Equipment
Supplies
Rent
Expense
How many of these accounts have a normal
credit balance?
a. Two.
b. Three.
c. Four.
d. Five.
Answer: b
Feedback: Accounts Payable, Common Stock,
Salaries Payable.
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credits
[Question]
108. Consider the following accounts:
Utilities
Expense
Accounts
Payable
Service
Revenue
Common
Stock
How many of these accounts are increased
with debits?
a. One.
b. Two.
c. Three.
d. Four.
Answer: a
Feedback: Utilities Expense.
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credits
[Question]
109. Which one of the
following accounts will have a credit balance?
a. Dividends
b. Salary Expense
c. Supplies
d. Common Stock
Answer: d
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credits
[Question]
110. Consider the following accounts:
Dividends
Insurance
Expense
Cash
Service
Revenue
How many of these accounts are increased
with credits?
a. One.
b. Two.
c. Three.
d. Four.
Answer: a
Feedback: Service Revenue.
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credits
[Question]
111. Providing services on account would be
recorded with a:
a. Debit to Service Revenue.
b. Credit to Accounts Receivable.
c. Credit to Accounts Payable.
d. Debit to Accounts Receivable.
Answer: d
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
112. Xenon Corporation borrows $75,000 from
First Bank. Xenon Corporation records this transaction with a:
a. Debit to Investments.
b. Credit to Retained Earnings.
c. Credit to Notes Payable.
d. Credit to Interest Expense.
Answer: c
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
113. Childers Service Company provides
services to customers totaling $3,000, for which it billed the customers. How
would the transaction be recorded?
a. Debit Cash $3,000, credit Service Revenue
$3,000.
b. Debit Accounts Receivable $3,000, credit
Service Revenue $3,000.
c. Debit Accounts Receivable $3,000, credit
Cash $3,000.
d. Debit Service Revenue $3,000, credit Accounts
Receivable $3,000.
Answer: b
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
114. A company received a bill for
newspaper advertising services, $400. The bill will be paid in 10 days. How
would the transaction be recorded today?
a. Debit Advertising Expense $400, credit Accounts
Payable $400.
b. Debit Accounts Payable $400, credit Advertising
Expense $400.
c. Debit Accounts Payable $400, credit Cash
$400.
d. Debit Advertising Expense $400, credit Cash
$400.
Answer: a
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
115. When a company pays utilities of
$1,800 in cash, the transaction is recorded as:
a. Debit Utilities Expense $1,800, credit Utilities
Payable $1,800.
b. Debit Utilities Payable $1,800, credit Cash
$1,800.
c. Debit Cash $1,800, credit Utilities Expense
$1,800.
d. Debit Utilities Expense $1,800, credit Cash
$1,800.
Answer: d
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
116. Assume that cash is paid for rent to
cover the next year. The appropriate debit and credit are:
a. Debit Rent Expense, credit Cash.
b. Debit Prepaid Rent, credit Rent Expense.
c. Debit Prepaid Rent, credit Cash.
d. Debit Cash, credit Prepaid Rent.
Answer: c
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
117. Summer Leasing received $12,000 for 24
months rent in advance. How should Summer record this transaction?
a. Debit Prepaid Rent; credit Rent Expense.
b. Debit Cash; credit Unearned Revenue.
c. Debit Cash; credit Service Revenue.
d. Debit Rent Expense; credit Cash.
Answer: b
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
118. Styleson Inc. performed cleaning
services for its customers for cash. These transactions would be recorded as:
a. Debit Service Revenue, credit Cash.
b. Debit Cash, credit Service Revenue.
c. Debit Cash, credit Accounts Receivable.
d. Debit Accounts Receivable, credit Service
Revenue.
Answer: b
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
119. Assume that $18,000 cash is paid for
insurance to cover the next year. The appropriate
debit and credit are:
a. Debit Insurance Expense $18,000, credit Prepaid
Insurance $18,000.
b. Debit Prepaid Insurance $18,000, credit Insurance
Expense $18,000.
c. Debit Prepaid Insurance $18,000, credit Cash
$18,000.
d. Debit Cash $18,000, credit Prepaid Insurance
$18,000.
Answer: c
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
120. Schooner Inc. purchased equipment by
signing a note payable. This transaction would be recorded as:
a. Debit Equipment, credit Cash.
b. Debit Cash, credit Notes Payable.
c. Debit Notes Payable, credit Equipment.
d. Debit Equipment, credit Notes Payable.
Answer: d
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
121. When a company pays $2,500 dividends
to its stockholders, the transaction should be recorded as:
a. Debit Cash; credit Dividends.
b. Debit Retained Earnings; credit Dividends.
c. Debit Dividends; credit Cash.
d. Debit Dividends; credit Accounts Payable.
Answer: c
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
122. Daniel Dino Restaurant owes employee salaries
of $15,000. This would be recorded as:
a. Debit Salaries Expense, credit Cash.
b. Debit Salaries Payable, credit Cash.
c. Debit Salaries Expense, credit Salaries Payable.
d. Debit Salaries Payable, credit Salaries Expense.
Answer: c
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
123. Jerome purchased a building for his
business by signing a note to be repaid over the next ten years. Which of the
following correctly describes how to record this transaction?
a. Debit assets, credit liabilities.
b. Debit assets, credit stockholders’
equity.
c. Debit liabilities, credit assets.
e. Debit expenses, credit liabilities.
Answer: a
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
124. Incurring an expense for advertising
on account would be recorded by:
a. Debiting liabilities.
b. Crediting assets.
c. Debiting an expense.
d. Debiting assets.
Answer: c
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
125. Tyler Incorporated receives $150,000
from investors in exchange for shares of its common stock. Tyler Incorporated
records this transaction with a:
a. Debit to Investments.
b. Credit to Retained Earnings.
c. Credit to Common Stock.
d. Credit to Service Revenue.
Answer: c
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
126. The owner of an office building should
report rent collected in advance as a debit to Cash and a credit to:
a. A liability.
b. An asset other than Cash.
c. Revenue.
d. Stockholders’ equity.
Answer: a
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
127. Clement Company paid an account
payable related to a previous utility bill of $1,000. This transaction should
be recorded as follows on the payment date:
a. Debit Accounts Payable $1,000, credit Cash
$1,000.
b. Debit Cash $1,000, credit Accounts Payable
$1,000.
c. Debit Utilities Expense $1,000, credit Cash
$1,000.
d. Debit Cash $1,000, credit Utilities Expense
$1,000.
Answer: a
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
128. On July 7, Saints Inc. received
$10,000 in cash from a customer for services to be provided on October 10.
Which of the following describes how the transaction should be recorded on July
7?
a. Debit Cash $10,000, credit Service Revenue
$10,000.
b. Debit Accounts Receivable $10,000,
credit Service Revenue $10,000.
c. Debit Cash $10,000, credit Unearned Revenue
$10,000.
d. Debit Unearned Revenue $10,000, credit Cash
$10,000.
Answer: c
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
129. On December 1, Bears Inc. signed a
contract with a retailer to supply maintenance for the next calendar year. How
should this transaction be recorded on December 1?
a. Debit Cash, credit Service Revenue.
b. Debit Cash, credit Accounts Receivable.
c. Debit Accounts Receivable, credit Service
Revenue.
d. No transaction should be recorded on
December 1.
Answer: d
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
130. Following are transactions of Gotebo
Tanners, Inc., a new company, during the month of January:
1. Issued 10,000 shares of common
stock for $15,000 cash.
2. Purchased land for $12,000,
signing a note payable for the full amount.
3. Purchased office equipment for
$1,200 cash.
4. Received cash of $14,000 for
services provided to customers during the month.
5. Purchased $300 of office supplies
on account.
6. Paid employees $10,000 for their
first month’s salaries.
What was the balance of Gotebo’s Cash
account following these six transactions?
a. $29,800.
b. $19,300.
c. $17,800.
d. $22,400.
Answer: c
Feedback: Cash = ($15,000 - $1,200 +
$14,000 - $10,000) = $17,800.
Learning Objective: 02-02
Learning Objective: 02-04
Difficulty: Hard
AACSB: Analytic
AICPA: FN Measurement
Blooms: Analyze
Topic: Effect of Transactions on Accounting
Equation
Topic: Posting Transactions
[Question]
131. Sooner purchased office supplies on
account. The transaction would be recorded as:
a. Debit Supplies, Credit Cash
b. Debit Cash, Credit Accounts Payable
c. Debit Accounts Payable, Credit Supplies
d. Debit Supplies, Credit Accounts Payable
Answer: d
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
132. Tomlin &
Company provides music for special occasions.
On January 14, the Smith family hired Tomlin for an upcoming family
wedding for an agreed upon fee of $10,000.
The wedding was scheduled for May 23.
As part of the agreement, the Smiths paid Tomlin half of the fee at the
end of April with the remaining amount due by the end of June. How would Tomlin record the receipt of the
final payment in June?
a. Credit to Accounts Receivable.
b. Credit to Service Revenue.
c. Credit to Cash.
d. Debit to Unearned Revenue.
Answer: a
Learning Objective: 02-04
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Analyze
Topic: Recording Transactions
[Question]
133. Bostel wanted to
expand the size of its warehouse in order to generate more profits. The company decided to purchase the building
adjacent to its existing warehouse. The
company pays for the building by borrowing from the bank. The purchase would be recorded as:
a. Debit Cash; credit Notes Payable.
b. Debit Buildings; credit Cash.
c. Debit Buildings; credit Notes Payable.
d. Debit Cash and Buildings; credit Notes
Payable.
Answer: c
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
134. On July 5,
Harris Company purchased supplies from the hardware store for $600 on
account. On July 10, Harris receives a
bill from the hardware store as a reminder about the account balance. On July 17, Harris pays the account in full. How does Harris record the transaction on
July 17?
a. Supplies 600
Accounts
Payable 600
b. Accounts Payable 600
Supplies 600
c. Cash 600
Accounts
Payable 600
d. Accounts Payable 600
Cash 600
Answer: d
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
135. Which of the
following is possible for a particular business transaction?
a. Increase assets; Decrease
liabilities
b. Decrease assets; Increase assets
c. Decrease assets; Increase
stockholders’ equity
d. Decrease liabilities; Increase
expenses
Answer: b
Learning Objective: 02-04
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Apply
Topic: Effect of Transactions on Accounting
Equation
[Question]
136. On July 31, ALOE
Inc. received $5,000 cash from a customer who previously purchased ALOE’s
products on account. What entry should ALOE Inc. record at the time it receives
cash?
a. Debit Accounts Receivable, $5,000; credit Cash,
$5,000.
b. Debit Cash, $5,000; credit Accounts Receivable,
$5,000.
c. Debit Cash, $5,000; credit Accounts Payable,
$5,000.
d. Debit Cash, $5,000; credit Service Revenue,
$5,000.
Answer: b
Learning Objective: 02-04
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Recording Transactions
[Question]
137. The Accounts Payable account has a
beginning balance of $12,000 and the company purchased $50,000 of supplies on
account during the month. The ending balance was $10,000. How much did the
company pay to creditors during the month?
a. $50,000.
b. $52,000.
c. $60,000.
d. $62,000.
Answer: b
Feedback: $12,000 + $50,000 
$10,000 = $52,000.
$10,000 = $52,000.
Learning Objective: 02-05
Difficulty: Hard
AACSB: Analytic
AICPA: FN Measurement
Blooms: Analyze
Topic: Posting Transactions
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