Chapter 3

1.

Debit/Credit Questions

3131 Intermediate Accounting I

A company received cash in exchange for issuing stock. This transaction: a. increased assets and increased equity b. increased assets and increased liabilities c. increased assets and increased revenues d. increased assets and increased expenses A company purchased office supplies on account. This transaction: a. increased assets and increased equity b. increased assets and increased liabilities c. increased assets and increased revenues d. increased assets and increased expenses A company performed services for a customer on account. This transaction: a. increased assets and decreased equity b. increased assets and increased liabilities c. increased assets and increased revenues d. increased assets and increased expenses A company paid cash for employee wages. This transaction: a. decreased cash and decreased expenses b. decreased cash and increased liabilities c. decreased cash and decreased revenues d. decreased cash and increased expenses A company paid cash for an amount owed to a creditor. This transaction: a. decreased cash and decreased expenses b. decreased cash and decreased liabilities c. decreased cash and decreased revenues d. decreased cash and increased expenses The owner of a business paid cash from his personal checking account to purchase an automobile for his personal use. This transaction: a. decreased cash and increased expenses b. increased a liability account and increased liabilities c. increased assets and increased owners equity d. is not a transaction recognized by the business Which type of account is increased when a company records a debt? a. expense b. retained earnings c. liability d. asset The payment of an amount owed to a creditor would: a. increase assets b. increase liabilities c. decrease net income d. decrease liabilities The payment of salaries to employees would: a. increase assets b. increase net income c. increase liabilities d. decrease stockholders equity When a company performs a service and immediately collects the cash from the customer, which of the following would occur? a. net income would increase b. expenses would decrease c. assets would decrease

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3131 Intermediate Accounting I

d. stockholders equity would decrease

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Purchasing supplies and paying cash for them would: a. increase total assets b. decrease total assets c. have no effect on total assets d. increase total liabilities and stockholders equity Paying a utility bill would: a. increase expenses b. increase liabilities c. increase owners equity d. decrease revenues Borrowing money from the bank by signing a note payable would: a. increase stockholders equity b. increase net income c. decrease liabilities d. have no effect on stockholders equity Receiving a payment from a customer on account would: a. have no effect on stockholders equity b. increase net income c. increase stockholders equity d. increase liabilities The purchase of land for cash would: a. increase total assets b. decrease stockholders equity c. increase the total debits on the trial balance d. not affect the total of debits or credits on the trial balance An owner investment of a building, valued at $100,000 with an $80,000 outstanding mortgage, into the business would: a. increase assets by $20,000 b. increase assets by $80,000 c. increase stockholders equity by $20,000 d. increase stockholders equity by $100,000 Performing services on account would: a. increase assets and liabilities b. increase assets and decrease stockholders equity c. increase revenue and decrease stockholders equity d. increase net income and stockholders equity Which of the following statements regarding accounts is false? a. An asset is increased by a debit and decreased by a credit. b. Dividends are increased by credits and decreased by debits. c. A liability is decreased by a debit and increased by a credit. d. Revenue is increased by a credit and an expense is increased by a debit. Which accounts are increased by debits? a. Assets and owners equity b. Expenses and owners equity c. Assets and expenses d. Assets, expenses, and owners equity The debit side of the account always indicates:

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a. b. c. d.

Debit/Credit Questions
amount of decrease in an account amount of increase in an account amount received in the transaction amount given in the transaction

3131 Intermediate Accounting I

21.

A business purchases a truck by signing a note payable to the seller. Such a transaction would include a: a. credit to Truck b. debit to Note Payable c. credit to Note Payable d. debit to an expense account The accounting transaction to record payment of an electric bill would include a: a. debit to Cash b. credit to Accounts Payable c. debit to Utilities Expense d. debit to Accounts Receivable The entry to record $750 received from a customer for services previously rendered to that customer would be: a. Cash 750 Accounts Receivable 750 b. Cash 750 Service Revenue 750 c. Service Revenue 750 Accounts Receivable 750 d. Dividends 750 Cash 750 The entry to record the purchase of supplies on account would include a debit to: a. Supplies b. Accounts Payable c. Cash d. Retained Earnings The accounting transaction to record the payment of salaries to employees would include a: a. credit to Salary Expense b. debit to Accounts Payable c. debit to Salary Expense d. debit to Cash The journal entry to record performing a service on account would include a debit to: a. Cash b. Revenue c. Accounts Receivable d. Retained Earnings The payment for rent of the office building for one month would include a: a. debit to Cash b. credit to Accounts Payable c. debit to Rent Expense d. credit to Revenue The purchase of office furniture on account would include a debit to : a. Accounts Payable b. Office Furniture c. Office Furniture Expense d. Cash An owner makes an investment of cash into the business. This transaction would include a:

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a. b. c. d.

Debit/Credit Questions

3131 Intermediate Accounting I

debit to Common Stock and a credit to Common Stock debit to Cash and a credit to Common Stock debit to Cash and a credit to Retained Earnings debit to Common Stock and a credit to Retained Earnings

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An owners investment of land and a building into the business would include a: a. debit to Land and a credit to Common Stock b. debit to Land and a credit to Building c. debit to Common Stock and a credit to Building d. debit to Building and a debit to Common Stock The purchase of an automobile with a cash down payment and a promise to pay the balance in the future would include a: a. credit to Cash and a credit to Note Payable b. debit to Cash and a credit to Automobile c. debit to Note Payable and a credit to Cash d. debit to Cash and a debit to Note Payable The purchase of office computers for cash would include a: a. debit to Cash and a credit to Office Equipment b. debit to Office Equipment and a credit to Cash c. debit to Accounts Payable and credit to Office Equipment d. debit to Office Equipment and credit to Accounts Payable Paying a dividend to the companys stockholders would include a: a. debit to Cash and a credit to Dividends b. debit to Dividends and a credit to Cash c. debit to Retained Earnings and a credit to Dividends d. debit to Accounts Payable and a credit to Retained Earnings Receiving a check from a customer on account would include a: a. debit to Accounts Receivable and a credit to Cash b. debit to Cash and a credit to Accounts Payable c. debit to Accounts Payable and a credit to Cash d. debit to Cash and a credit to Accounts Receivable Making a cash payment to settle a debt would include a: a. debit to Cash and a credit to Accounts Receivable b. debit to Accounts Receivable and a credit to Cash c. debit to Accounts Payable and a credit to Cash d. debit to Accounts Payable and a credit to Accounts Receivable Purchasing a three-year insurance policy for cash would include a: a. debit to Cash and a credit to Prepaid Insurance b. debit to Insurance Expense and a credit to Dividends c. debit to Prepaid Insurance and a credit to Insurance Expense d. debit to Prepaid Insurance and a credit to Cash The entry to record the purchase of office supplies on account for $100 would be: a. Office Supplies 100 Cash 100 b. Accounts Payable 100 Cash 100 c. Office Supplies 100 Accounts Payable 100 d. Cash 100 Office Supplies Expense 100 The entry to record an owner investment of $500 into the business would be:

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Debit/Credit Questions

3131 Intermediate Accounting I

500 500 500 500 500 500 500 500

a. Dividends Cash b. Cash Dividends c. Cash Service Revenue d. Cash Common Stock

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The entry to record the payment of $895 to a supplier for office supplies previously purchased on account would be: a. Cash 895 Accounts Payable 895 b. Accounts Payable 895 Cash 895 c. Office Supplies Expense 895 Cash 895 d. Office Supplies Expense 895 Accounts Payable 895 The normal balance of Accounts Receivable is a account. a. credit, liability b. debit, expense c. credit, stockholders equity d. debit, asset The normal balance of the Supplies account is a a. credit, liability b. debit, asset c. credit, expense d. debit, stockholders equity because it is a(n)

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because it is a(n)

account.

42. The normal balance of the Accounts Payable account is a

account. a. debit, asset b. credit, stockholders equity c. credit, liability d. credit, revenue

because it is a(n)

43. The normal balance of the Common Stock account is a

a. b. c. d. debit, assets credit, stockholders equity credit, liabilities debit, expenses

because it increases

44. The normal balance of an expense account is a

. a. b. c. d. credit, assets debit, stockholders equity credit, liabilities debit, revenue

because expenses decrease

45. The normal balance of the Dividends account is a

a. b. c. d. debit, stockholders equity debit, liabilities debit, assets credit, revenue

because it decreases

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Debit/Credit Questions

3131 Intermediate Accounting I

46. The normal balance of a revenue account is a

a. b. c. d. debit, assets debit, dividends credit, liabilities credit, stockholders equity

because revenues increase

47. On December 1, 2006, Debbies Plantscape receives $1,800 in advance for an agreement to care, in equal monthly effort, for a clients office plants during the months of December, January, and February. As of December 31, 2006, Debbies Plantscape: a. would have a $1,200 liability to its client under accrual accounting, or have a $1,800 liability to its client under cash-basis accounting b. would have recognized $600 revenue under accrual accounting, or have recognized $1,800 revenue under cash-basis accounting c. would have a $0 liability to its client under accrual accounting, or have a $1,200 liability to its client under cash-basis accounting d. would have recognized $600 cash under accrual accounting, or have recognized $1,800 cash under cash-basis accounting 48. An adjustment for which the business paid or received cash in advance is: a. a deferral b. an accrual c. unearned revenue d. revenue recognition 49. Which account is credited in the adjusting entry to record insurance expired during the current period? a. Prepaid Insurance b. Insurance Expense c. Accrued Insurance d. Insurance Payable 50. Which account is debited in the adjusting entry to allocate the cost of equipment? a. Equipment Expense b. Depreciation Expense c. Accumulated Equipment d. Accumulated Depreciation 51. Which account is credited in the adjusting entry to record salaries owed to employees but not paid until the next accounting period? a. Salary Expense b. Unearned Salaries c. Salary Payable d. Deferred Salary 52. On September 1 of the current year, Prepaid Rent was debited $4,800 for six months of rent, in advance. The amount of the adjusting entry on December 31 is: a. $1,600 b. $3,200 c. $4,800 d. $0 53. On September 1, Wall Street Company paid $4,800 for one year of rent, in advance. Which of the following accounts and amounts will appear on an adjusted trial balance prepared on December 31? a. Prepaid Rent, $4,800 b. Prepaid Rent, $1,600 c. Rent Expense, $3,200 d. Rent Expense, $1,600

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Debit/Credit Questions

3131 Intermediate Accounting I

54. On November 1 of the current year, Jamie Simmons received $5,400 for legal services to be performed evenly throughout the next twelve months. The adjusting entry on December 31 of the current year would include a: a. credit to Unearned Service Revenue $900 b. debit to Unearned Service Revenue for $4,500 c. debit to Service Revenue $4,500 d. credit to Service Revenue $900 55. On August 1, 2006, Magic Carpet Entertainment received $3,600 for services to be performed evenly over the next twelve months. The adjusting entry on December 31, 2006, would include a: a. debit to Cash for $3,600 b. credit to Service Revenue for $3,600 c. debit to Unearned Service Revenue for $1,500 d. debit to Unearned Service Revenue for $2,100 56. On November 1 of the current year, Jamie Simmons received $5,400 for legal services to be performed evenly throughout the next twelve months. An adjusted trial balance prepared on December 31 of the current year will show a credit balance in Unearned Revenue in the amount of: a. $0 b. $900 c. $4,500 d. $5,400 57. A company started the year with $200 of supplies. During the year the company purchased an additional $1,200 of supplies. There were $800 of supplies on hand at the end of the year. An adjusting entry prepared at the end of the accounting period includes a: a. debit to Supplies for $800 b. debit to Supplies $600 c. debit to Supplies Expense for $800 d. debit to Supplies Expense for $600 58. A company started the year with $200 of supplies. During the year the company purchased additional supplies costing $1,200. There were $800 of supplies on hand at the end of the year. An adjusted trial balance prepared at the end of the accounting period will show the following balance in Supplies: a. $1,400 b. $800 c. $600 d. $0 59. OConnor Company purchased supplies totaling $16,800. By year end, $4,700 of supplies were still on hand. How much supplies expense should OConnor recognize? a. $4,700 b. $12,100 c. $16,800 d. $0 59. On December 31, 2006, salaries owed to employees total $2,350. These will be paid on January 4, 2007. The adjusting entry prepared on December 31, 2006, includes a: a. debit to Salary Expense for $2,350 b. debit to Salary Payable for $2,350 c. credit to Cash for $2,350 d. credit to Salary Expense for $2,350 60. On December 31, 2006, salaries owed to employees total $2,350. These will be paid on January 4, 2007. An adjusted trial balance prepared on December 31, 2006, includes which of the following? a. Salaries Expense, $2,350 b. Salaries Payable, $2,350 c. Unearned Salaries, $2,350 d. Both Salaries Expense, $2,350 and Salaries Payable, $2,350 are correct.

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Debit/Credit Questions

3131 Intermediate Accounting I

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