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Exam 3: The Double-Entry Accounting System

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Source documents provide information that serves as the basis for entries into the accounting system.Examples of source documents include invoices and deposit tickets.

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Question 2

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The financial statement ratio that may be of greatest interest to a company's stockholders is the amount of its return on assets.

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Below are listed several transactions that a business may enter into. 1.Provide services to customers on account 2.Purchase land by paying cash 3.Purchase a fire insurance policy that will provide coverage for a two-year period 4.Acquire cash by issuing common stock 5.Recognize expense for amount of office supplies that had been used during the period 6.Receive payment from a customer for services that will be provided over the next six months Required: a)In the table below,indicate the accounts that would be debited and credited for each of the preceding transactions. b)Show how each transaction affects the financial statements by placing a + for increase,- for decrease,and NA for not affected under each component in the horizontal financial statements model shown below.In the Cash Flow column,use the letters OA for operating activities,IA for investing activities,and FA for financing activities.Insert NA if cash flow is not affected.

Use the following information to answer questions At the end of 2016 the following information is available for Grumpy,Happy,and Doc Companies. -Which company has the highest return on assets?

Which of the following accounts normally has a debit balance?

Indicate whether each of the following statements concerning the debit-credit feature of the accounting model is true or false. _____ a)Upon payment of an account payable,the liability account should be credited. _____ b)Payment of a cash expense requires a debit to cash and a credit to the expense. _____ c)On a T-account debits are entered on the left and credits are entered on the right. _____ d)A credit entry decreases an asset account. _____ e)Increases in revenues are recorded as debits.

The account balances alphabetically listed below are for Shenandoah Company as of December 31,2016.These balances include the effect of year-end adjusting entries. Required: a)Prepare an adjusted trial balance for Shenandoah Company. b)Prepare journal entries for Shenandoah's closing entries for the year. c)Prepare an income statement for Shenandoah Company for 2016. d)What was the balance in Retained Earnings after the closing entries had been made and posted?

Use the following information to answer questions Wichita,Inc.had the following amounts on its 12/31/16 financial statements. -The return on equity ratio for Wichita is:

Use the following information to answer questions -Select the true statement (note: an answer may be true even if it does not identify all accounts that have debit balances on that particular financial statement) .

A business's chart of accounts is prepared to verify the equality of debits and credits.

Which is one effect of the following journal entry?

The Youngstown Company recorded the following adjustment in general journal form: Which of the following choices accurately reflects how this event would affect the company's financial statements?

Flannigan Company prepared a trial balance at December 31,2016.A trial balance that balances

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts. -An adjusting entry recorded as a debit to Unearned Service Revenue and a credit to Service Revenue.

Which of the following is increased with a debit?

Indicate the effect of debits or credits on the balance of the following accounts.

The left side of a T-account is the debit side.

The employees of Able Company have worked the last two weeks of 2016,but the employees' wages have not been paid or recorded as of December 31,2016.The adjusting entry that Able should make for these unpaid wages on December 31,2016 is:

Journals are sometimes called books of original entry because transactions are recorded in journals before amounts are entered into the ledger.

The year for which companies prepare their financial statements is their fiscal year.