A.Debit Automobile; Credit Bank

Accounting 1, 7th Edition / Name ______
Date ______/ Score ____/____
Percent ______

Chapter 5—Test 1

1.For each of the following, circle the best answer to each question.

A.H. Hyland, the owner of Sparkling Dry Cleaners, submitted an invoice received from Speedy Auto Service for repairs to his wife’s car. He has instructed you to issue a cheque in full payment of the account. The correct entry is

a.debit Automobile; credit Bank.

b.debit Car Expense; credit Bank.

c.debit Car Expense; credit H. Hyland, Drawings.

d.debit Car Expense: credit Accounts Payable.

e.debit H. Hyland, Drawings; credit Bank.

B.Which of the following would not be correct in the heading of an income statement?

a.December 31, 20–

b.Al’s Tireland Ltd.

c.Income Statement

d.Year Ended June 30, 20–

e.All of the above are correct.

C.The fiscal period is usually

a.measured in weeks.

b.six months long.

c.a length of time that is less than one year.

d.one year long.

e.Two of the above are true.

D.The income statement will

a.indicate to the owner the cash position of the business.

b.be used to determine the amount of income tax the business must pay.

c.tell bankers if the business is in a good position to pay its bills.

d.reveal the amount of money withdrawn by the owner.

e.Two of the above are true.

E.The Fees Earned figure could include

a.sale of the owner’s personal assets.

b.sale of company’s office furniture.

c.sale of company’s automobile.

d.All of the above.

e.None of the above.

Chapter 5 Test / Name
______

F.The fiscal year-end for a business is December 31, 20–1. On December 28, 20–1, the business pays the rent for January 20–2, and the accounting clerk debits Rent Expense and credits Bank. Which accounting standard has been violated?

a.the time period concept

b.the revaluation model

c.the matching principle

d.the business entity concept

e.No accounting standard has been violated.

G.What is the correct journal entry for when cash services are performed?

a.Accounts Receivable is debited, Fees Earned is credited.

b.Cash is debited, Fees Earned is credited.

c.Cash is debited, Accounts Receivable is credited.

d.Fees Earned is debited, Cash is credited.

e.None of the above.

H.During the lifetime of a business, accountants produce financial statements at specific points in time in accordance with which basic accounting concept?

a.the time period concept

b.the cost principle

c.the matching principle

d.the business entity concept

e.None of the above.

I.The expanded ledger is useful because

a.it makes it easier to calculate the trial balance.

b.it matches more closely with the income statement.

c.it follows the matching principle.

d.it makes it easier to evaluate the effectiveness of a business.

e.All of the above are true.

J.The number of the Interest Revenue account is in the

a.100s.

b.200s.

c.300s.

d.400s.

e.500s.

Chapter 5 Test / Name
______

2.What type of balance do the following accounts usually have?

A.A revenue account______

B.An expense account______

C.A Drawings account______

D.A Capital account______

3.Indicate which accounts you would debit and credit for the following transactions for Splinters Building Supplies. Write complete account titles. Use Fees Earned for revenue transactions.

September / Debit Account / Credit Account
1 / Issued Cheque No. 1 to M. Goulet for the September rent. / ______/ ______
3 / Received a bill from Comeau Hardware for the purchase of supplies on account. / ______/ ______
6 / Issued a bill to R. Mancini for services performed during the previous week. / ______/ ______
9 / Received cash from a customer for services performed. / ______/ ______
11 / Issued Cheque No. 2 to J. Varcoe, the owner, for personal use. / ______/ ______
12 / Issued Cheque No. 3 to Comeau Hardware on account. / ______/ ______
15 / Received a bill from Imperial Garage for gasoline and oil used in the truck. / ______/ ______
16 / Issued Cheque No. 4 to Woo Bros. for supplies purchased. / ______/ ______
18 / Received a cheque from R. Mancini in full payment of his account balance. / ______/ ______
Chapter 5 Test / Name
______

4.T.J. Chan, an engineering consultant, decided to begin a business of his own. Chan has set up the following chart of accounts to be used in his business.

101 / Bank / 210 / A/P—Eustace Bros. / 510 / Car Expense
110 / A/R—M. Armota / 211 / A/P—Regal Oil / 515 / Miscellaneous Expense
111 / A/R—F. Morsi / 301 / T.J. Chan, Capital / 520 / Rent Expense
120 / Supplies / 302 / T.J. Chan, Drawings / 525 / Telephone Expense
125 / Equipment / 401 / Fees Earned / 530 / Wages Expense
130 / Automobile / 505 / Bank Charges

A.For each of the transactions listed below, work out the changes for the transaction and recordthese changes in the T-accounts. After finishing the transactions, calculate and record theaccount balances.

Transactions

1.On March 1, 20–, when T.J. began his business, he invested in the business a bank balance of $8000, an automobile worth $14 000, and equipment costing $6000.

2.Issued cheque for $465 to Royalty Trust Co. in payment of the monthly rent.

3.Issued cheque for $200 to the owner for personal use.

4.Received a bill in the amount of $900 from Eustace Bros. for office supplies purchased on account.

5.Issued cheque for $350 to West End Garage as payment for repairs to the owner’s personal car.

6.Issued bill to F. Morsi for services performed, $500.

7.Issued cheque for $400 to pay the office secretary’s weekly wage.

8.Received an invoice for $90 from Regal Oil for gasoline and oil used in the business automobile, due in 30 days.

9.Received a memorandum stating that $50 had been deducted by the bank from the business’s account to cover bank charges for the month.

10.Issued cheque for $150 to the City Telephone Company in payment of the telephone bill that arrived today.

11.Issued bill to M. Armota for services performed, $800.

12.Received $250 cash from C. Fuda to pay for services performed.

13.Purchased a magazine subscription for the office for $75, paid by cheque.

Chapter 5 Test / Name
______
Chapter 5 Test / Name
______

B.Balance the ledger of T.J. Chan by means of a trial balance dated March 31, 20–.

Chapter 5 Test / Name
______

C.Prepare an income statement for T.J. Chan as of March 31, 20–.

D.Prepare the equity section of the balance sheet for T.J. Chan as of March 31, 20–

Chapter 5 Test / Name
______

A partially completed summary of financial data is given below. The data pertain to the fundamental accounting equation for Duncan Goodwin over a period of two years.

Assets / Liabilities / Equity
End of 20–1 / $52 800
End of 20–2 / $32 000

A.Fill in the missing figures, given the following.

a.revenues for 20–2 are $62 000

b.expenses for 20–2 are $34 000

c.drawings for 20–2 are $16 000

d.the liabilities decreased by $6000 from the end of 20–1 to the end of 20–2

B.Show how you calculated the missing figures for 20–1.

______

6.A.R. Smith began business on January 1 by investing $20 000 cash in his company. During the year, the business had revenue of $60 000 and expenses of $44 500. He withdrew $8000 during the year for his personal use. He turned over to the business, for use by the business, his personal automobile valued at $9000.

A.What was the net income of the business for the year? Show your calculations.

______

B.What was the amount in the Capital account on January 1st? On December 31st?

______

C.What caused the increase or decrease in capital during the year?

______