Chapter Two Assignment
MCQS:
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. 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.
3. 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.
4. 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.
5. The expanded accounting equation is:
a) Assets + Liabilities = Owner’s Capital + Owner’s Drawings + Revenues + Expenses.
b) Assets = Liabilities + Owner’s Capital + Owner’s Drawings + Revenues - Expenses.
c) Assets = Liabilities - Owner’s Capital - Owner’s Drawings - Revenues - Expenses.
d) Assets = Liabilities + Owner’s Capital - Owner’s Drawings + Revenues - Expenses.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
Solve Problems
Problem 1:
Halladay Enterprises had the following selected transactions.
1. Bo Halladay invested $4,000 cash in the business.
2. Paid office rent of $840.
3. Performed consulting services and billed a client $5,200.
4. Bo Halladay withdrew $750 cash for personal use.
Instructions:
(a) Indicate the effect each transaction has on the accounting equation
(Assets = Liabilities + Owner’s Equity), using plus and minus signs.
(b) Journalize each transaction. (Omit explanations.)
Problem 2:
Selected transactions for A. Mane, an interior decorator, in her first month of business, are as follows.
Jan. 2 Invested $10,000 cash in business.
Jan. 3 Purchased used car for $3,000 cash for use in business. Analyze statements about accounting and the
recording process.
Jan. 9 Purchased supplies on account for $500.
Jan. 11 Billed customers $2,400 for services performed.
Jan. 16 Paid $350 cash for advertising.
Jan. 20 Received $700 cash from customers billed on January 11.
Jan. 23 Paid creditor $300 cash on balance owed.
Jan. 28 Withdrew $1,000 cash for personal use by owner.
Instructions For each transaction, indicate the following:
a) The basic type of account debited and credited (asset, liability, owner’s equity).
b) The specific account debited and credited (Cash, Rent Expense, Service Revenue, etc.).
c) Whether the specific account is increased or decreased.
d) The normal balance of the specific account. Use the following format, in which the January 2
transaction is given as an example.
Account Debited Account Credited
(a) (b) (c) (d) (a) (b) (c) (d)
Basic Specific Normal Basic Specific Normal
Date Type Account Effect Balance Type Account Effect Balance
Jan.2 Asset Cash Increase Debit Owner’s Owner’s Increase Credit
Equity Capital
Problem 3:
1: On April 01, 2016 Anees started business with. 100,000 and other transactions for the month are
2. Purchase Furniture for Cash. 7,000
8. Purchase Goods for Cash. 2,000 and for Credit. 1,000 from Khalid Retail Store
14. Sold Goods to Khan Brothers. 12,000 and Cash Sales. 5,000
18. Owner withdrew of worth 2,000 for personal use
22. Paid Khalid Retail Store 500
26. Received 10,000 from Khan Brothers
30. Paid Salaries Expense 2,000
Instruction: prepare journal entries
Problem 4:
1. Jan 1 Issued $100,000 in stock to owners in exchange for cash to start the business.
2. Jan 5 Borrowed $50,000 from the bank by signing a note payable.
3. Jan 10 Purchase equipment by paying cash for $25,000.
3. Jan 15 Paid January rent of $2,400 for the office space
4. Jan 18 Performed services for customers and received cash immediately for $8,000.
5. Jan 20 Purchased $2,000 in supplies on account
Instruction:
a) Prepare journal entries to record the January transactions.
b) Post the journal entries to general ledger accounts.
c) Prepare a trial balance at January 31.
d) Prepare financial statements at January 31.
Problem 5:
XY company was opened on March 1 by Ali. The following selected events and transactions occurred
during March.
1. Mar. 1 Invested $20,000 cash in the business.
2. Mar. 2 Purchased spaces of Land for $15,000 cash. The price consists of land $12,000, shed
$2,000, and equipment $1,000. (Make one compound entry.)
3. Mar. 5. Paid advertising expenses of $900.
4. Mar. 6. Paid cash $600 for a one-year insurance policy.
5. Mar. 10. Purchased golf discs and other equipment for $1,050 from Stevenson Company payable
in 30 days.
6. Mar. 18. Received $1,100 in cash for golf fees (XY Co. records golf fees as service revenue).
7. Mar. 19. Sold 150 coupon books for $10 each.
8. Mar. 25. Withdrew $800 cash for personal use.
9. Mar. 30. Paid salaries of $250.
10. Mar. 30. Paid Stevenson Company in full.
11. Mar. 31. Received $2,700 cash for golf fees.
XY Company uses the following accounts: Cash, Prepaid Insurance, Land, Buildings, Equipment,
Accounts Payable, Unearned Service Revenue, Owner’s Capital, Owner’s Drawings, Service Revenue,
Advertising Expense, and Salaries and Wages Expense. Instructions Journalize the March transactions.
Instruction:
a) Prepare journal entries to record the January transactions.
b) Post the journal entries to general ledger accounts.
c) Prepare a trial balance at March 31.
d) Prepare financial statements for March 31.