Download Acct 11 Chapter 5 Review

Acct 11
Chapter 5 Review
1. Complete each of the following statements by supplying the missing word or words. (10 pts)
credit
debit
net loss
net
matching drawings
increasing
decrease
income
principle
decreasing time
increase
fiscal
income
accounting revenue
period
statement
recognition
concept
convention
a) If drawings are greater than ___________in a year, and the owner makes no other investments,
then Capital will ___________
b) Expenses are recorded on the _______ side of the expense account because owner’s equity is
__________
c) A __________ results when expenses are greater than revenue.
d) The period of time over which earnings are measured is called the _________ period or the
____________ period.
e) Revenue is recorded in the Fees Earned account as a _________ because owner’s equity is
_________________
f) If J. Smith, an owner, takes money out of the business to pay a personal bill, these 2 entries
would need to be recorded in the Accounts: a debit to the J. Smith, ________ account, and a __
_____ to the bank account
g) The _______________ is used to determine the amount of income tax a business will pay.
h) The ______________ states that revenue must be recorded in the accounts at the time the
transaction is completed
i) The __________________ states that each expense item related to revenue earned must be
recorded in the same time period as the revenue it helped to earn.
j) The __________________states that accounting will take place over a specific time period
known as the fiscal periold.
2. Name the four types of accounts found in the equity section of the ledger, and the type of
balance they usually have (debit or credit)?
(5 pts)
Account Type
1)
2)
3)
4)
Type of Balance
3. Indicate which accounts you would debit and credit for the following transactions for
Splinters Building Supplies. Write complete account titles.
(10 pts)
1
September
3 Issued a bill for $560 to W. Thomson for services
performed on account.
9 Issued a cheque for $200 to the owner,
P. Schelling, for his personal use.
12 Received a bill from Imperial Garage for repairs to
the company car.
14 Received a memo from the owner stating the bank
had reduced the bank loan by $500.
16 Issued a cheque for $80 in payment of the
telephone bill.
19 Received cash from a customer for services
performed.
20 Issued a cheque for $400, the wages of
an employee.
22 Received a cheque from W. Thomson for $300
in partial payment of his account balance.
24 Purchased supplies on account from Home
Hardware, $380.
27 Issued Cheque No. 3 to Comeau Hardware
on account.
Debit Account
Credit Account
4. P. Simpson began business as an engineering consultant on October 1, 2005. He set up the
following chart of accounts to be used in his business:
101 Bank
110
111
120
125
130
210
A/R—R. Arthur
A/R—J. Morrison
Supplies
Equipment
Automobile
A/P—Ace Finance Co.
A/P—Grand’s
211 Stationers
212 A/P—Star Oil Co.
301 P. Simpson, Capital
P. Simpson,
302 Drawings
401 Fees Earned
505 Car Expense
510 Office Expense
515 Rent Expense
520 Wages Expense
a) work out the changes for the transaction and record these changes in the T-accounts (20 pts)
b) Calculate and record the account balances.
(10 pts)
2
Transactions
1. On October 1, 20—, Mr. Simpson started his business with the following assets and
liabilities: Bank $4 651; Equipment $2 465; Automobile $8 460; A/P—Ace Finance Co.
$2 850; and
A/P—Grand’s Stationers $1 000.
2. Performed a service for S. Stewart and received $200 cash in payment.
3. Received a bill from Grand’s Stationers for $400 of supplies purchased on account.
4. Issued a cheque to O. Mack for wages, $500.
5. Received a bill from Star Oil Co. for gasoline and oil used in the business car, $60.
6. Issued a cheque to Ace Finance Company for regular monthly payment, $400.
7. Issued a cheque to J. Mahoney for the rent for the month, $700.
8. Issued a bill to J. Morrison for services performed, $500.
9. Issued a cheque for postage stamps, $30.
10. Issued a cheque for car repairs, $120.
11. Received a cheque from J. Morrison on account, $300.
12. Issued a cheque to R. Gordon for cleaning the office, $100.
13. Issued a cheque to P. Simpson, the owner, for personal use, $800.
14. Issued a bill to R. Arthur for services performed, $1 000.
ASSETS
Bank
101
A/R—R. Arthur
110
A/R—J. Morrison
111
Supplies
120
Equipment
125
Automobile
130
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4
LIABILITIES AND EQUITY
A/P—Ace Finance Co.
210
A/P—Grand’s Stationers
211
A/P—Star Oil Co.
212
P. Simpson, Capital
301
P. Simpson, Drawings
302
Fees Earned
401
Car Expense
505
Office Expense
510
Rent Expense
515
Wages Expense
520
5
c) Balance the ledger of P. Simpson by means of a trial balance dated October 31, 2005.
(10 pts)
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Accounts
6
Debits
Credits
d)
Prepare an income statement for P. Simpson as of October 31, 2005.
(20 pts)
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
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d) Prepare the equity section of the balance sheet for P. Simpson as of October 31, 2005. (10 pts)
5.
Mrs. D. Reynolds started a business on January 1, investing $10 000 cash in it at this
time. During the year, the business had revenues of $50 000 and expenses of $38 000. Mrs.
Reynolds withdrew $15 000 for her personal use and invested an additional $4 000.
a) What is the net income of the business for the year? Show your calculations.
b) What is the equity balance of the business at the end of the year? Show all calculations.
c) What caused the increase or decrease in capital during the year?
6. The balance in the Capital account of O.K. Suppliers on January 1, 2005, was $26 000. The
balance in this account was $27 500 at the end of the year. Net income for the year was $5
000. Explain why the balance in the Capital account was not $31 000.
7. Complete the following schedule. Each row is a separate business.
Net Income or
Opening Capital Net Loss (–)
a) $35 000
$18 000
b) 51 000
76 000
c)
18 000
d) 40 000
e)
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Drawings
–30 000
Ending
Capital
$39 000
75 000
15 000
35 000
20 000
15 000
20 000
70 000
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