iFinancial Accounting ntmod1_2

MODULE 1THE ACCOUNTING EQUATION

Demonstration Problem 1Clean-Rite Service

This example analyzes the transactions for Clean-Rite Service for March 2000. The example lists the types of accounts affected by each transaction to show that the accounting equation remains in balance after every transaction.

1. Lisa used $500 of her own money to start Clean-Rite Service.2. Lisa's company borrowed $1,500 from her dad.3. Clean-Rite Service paid $400 for a used vacuum cleaner and shampoo machine.4. Clean-Rite Service purchased a used truck for $1,000 from Fuller Trucks Inc. She signed a note

payable for $1,000.5. Clean-Rite Service paid $115 for cleaning supplies.6. During the first half of March, Clean-Rite Service performed $450 of cleaning services.

Customers paid $200 in cash and promised the remaining payment by March 30.7. The company paid the utility bill of $100.8. Clean-Rite Service used $80 of the cleaning supplies.9. $250 was collected from customers for services performed previously.10. Lisa's company paid back $500 to her dad.11. Lisa withdrew $100 from the business.

Transaction Number

Assets Liabilities Owners’ Equity

1 increase increase2 increase increase3 increase

decrease4 increase increase5 increase

decrease6 increase increase7 decrease decrease8 decrease decrease9 Increase

decrease10 decrease decrease11 decrease decrease

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Practice Assignment 1Downtown Fitness Center

This example requires you to analyze the transactions for Downtown Fitness Center for September 2000.

1. Debbie invested $10,000 of her own money in the business.2. Downtown Fitness Center borrowed $35,000 from People's Cooperative Bank.3. Purchased equipment for $10,000. Paid cash.4. Purchased supplies for $200. Paid cash.5. Customers paid $4,500 for services provided in September. 6. Paid the utility bill of $105 for September.7. Paid employees salaries of $1,500 for September. 8. Supplies costing $90 were used in September.9. Rent of $600 was paid for September.

Transaction Number



decrease4 increase

decrease5 increase increase6 decrease decrease7 decrease decrease8 decrease decrease9 decrease decrease

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Practice Assignment 2Miller Graphics

This example requires you to analyze the transactions for Miller Graphics for September 2000.

1. John Miller invested $12,500 of his own money to start Miller Graphics.2. Miller Graphics borrowed $8,000 from Westside Bank.3. Purchased equipment for $7,000. Paid cash.4. Purchased supplies for $600. Paid cash.5. Customers paid $5,500 for services provided in September.6. Paid employees salaries of $1,500 for September.7. Rent of $600 was paid for September.8. John withdrew $500 from the business.

Transaction Number



decrease4 increase

decrease5 increase increase6 decrease decrease7 decrease decrease8 decrease decrease

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Homework Problem 1Super Subs

This assignment lists some typical transactions for Super Subs for March 2000. You have to specify the types of accounts affected by each transaction and show that the accounting equation remains in balance after every transaction.

1. The owners started Super Subs by investing $15,000.2. $10,000 was borrowed from a bank by signing a two year note.3. $12,000 was paid for equipment.4. Goods were sold for $1,500. 5. $200 was paid for utilities.6. Employees were paid wages of $1,200 for March.7. $700 was paid for rent for March.8. $500 was distributed to owners.

Transaction Number



decrease4 increase increase5 decrease decrease6 decrease decrease7 decrease decrease8 decrease decrease

Homework Problem 2Mark Turner, CPA

This assignment lists some typical transactions for Mark Turner, CPA for August 2000. You have to specify the types of accounts affected by each transaction and show that the accounting equation remains in balance after every transaction.

1. Mark Turner invested $12,000 in the business.2. $20,000 was borrowed from Boston Bank.3. A computer was purchased for $2,000.4. $150 was paid for office supplies.5. Services were performed for clients for $3,500. The customers paid cash.6. Rent of $650 was paid for August7. Employee wages of $1,000 were paid for August.8. Mark withdrew $1,000 for personal expenses.

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Transaction Number



decrease4 increase

decrease5 increase increase6 decrease decrease7 decrease decrease8 decrease decrease

Homework Problem 3Anderson Architects

This assignment lists some transactions for Anderson Architects for September 2000. You have to specify the types of accounts affected by each transaction and show that the accounting equation remains in balance after every transaction.

1. Jeff invested $6,000 to start Anderson Architects.2. $7,500 was borrowed from a bank.3. Purchased furniture for $3,500 cash.4. Paid $125 for utilities.5. Provided services for $2,800 to customers for cash.6. Purchased supplies for $130. Paid cash.7. $600 was paid for rent.8. John withdrew $500 from the business.

Transaction Number



decrease4 decrease decrease5 increase increase6 increase


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Homework Problem 4Bookworld

This assignment lists some typical transactions for Bookworld for November 2000. You have to specify the types of accounts affected by each transaction and show that the accounting equation remains in balance after every transaction.

1. The owners started Bookworld by investing $6,500 in the business.2. $2,500 was borrowed from a bank.3. Purchased a computer for $2,500 cash.4. Paid $125 for utilities.5. Employees were paid $1,200 for salaries.6. Purchased supplies for $125. Paid cash.7. $800 was paid for rent.8. The owners withdrew $500 from the business.

Transaction Number



decrease4 decrease decrease5 decrease decrease6 increase


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Homework Quiz

Questions 1 - 4: Warren is beginning his new business and needs to evaluate several alternatives prior to consulting with his potential investors. He has asked for your help in this analysis. Each question should be considered independently.

1. Warren expects total liabilities will increase by $40,000 during the first year and owner's equity will increase by $10,000 during the same period. The amount and direction (increase or decrease) of the period's change in total assets is:

a. $40,000 increaseb. $40,000 decreasec. $50,000 increased. $50,000 decrease

2. Warren projects total liabilities will decrease by $24,000 during the next year and owner's equity will increase by $18,000 during the same period. The amount and direction (increase or decrease) of the period's change in total assets is:

a. $6,000 increaseb. $6,000 decreasec. $24,000 increased. $21,000 decrease

3. Warren must pay $15,000 to a vendor for merchandise purchased previously. He asks you to determine the impact of this transaction on the accounting equation. You respond:

a. Decrease one asset, increase another assetb. Decrease an asset, decrease a liabilityc. Increase an asset, decrease a liabilityd. Increase an asset, increase owner's equity

4. Warren expects total assets will decrease by $74,000 during the coming month and owner's equity will increase by $48,000 during the same period. The amount and direction (increase or decrease) of the period's change in total liabilities is:

a. $26,000 decreaseb. $74,000 increasec. $148,000 increased. $122,000 decrease

5. The basic accounting equation, Assets = Liabilities + Owner's Equity may also be expressed as: a. Owner's Equity = Assets - Liabilitiesb. Assets = Equities - Liabilitiesc. Assets + Liabilities = Owner's Equityd. Assets + Owner's Equity = Liabilities

6. A transaction that increases an asset account may also:a. Decrease owner's equityb. Decrease another assetc. Decrease a liabilityd. None of the above

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7. The price of goods or services sold to customers is called a(n): a. expenseb. liabilityc. revenued. asset

8. A business's claim against a customer for a sale made on account is called a(n): a. revenueb. account payablec. expensed. account receivable

9. Owner's equity is decreased by: a. owner's investmentsb. expensesc. revenuesd. liabilities

10. The purchase of supplies on account affects the basic accounting equation by: a. increasing assets and decreasing liabilitiesb. increasing assets and increasing owner's equityc. increasing assets and increasing liabilitiesd. increasing liabilities and decreasing owner's equity

11. Howard renders legal services to Dorothy, who promises to pay him within the next month. How does this affect the basic accounting equation for Howard's enterprise?

a. increase assets and increase liabilitiesb. decrease assets and increase owner's equityc. increase assets and increase owner's equity d. increase liabilities and decrease owner's equity

12. As of September 1 of the current year, the assets and liabilities of Ben Chase, CPA, are as follows: Cash, $8,000; Accounts Receivable, $16,400; Supplies, $52,100; Accounts Payable, $13,060. What is the amount of Owner's Equity (Ben Chase's capital) as of September 1 of the current year?

a. $61,340b. $63,440c. $84,500d. $97,560

13. As of December 1 of the current year, the assets and liabilities of Perri Mason, ESQ are as follows: Cash, $16,000; Accounts Receivable, $32,800; Supplies, $???; Accounts Payable, $32,000; Perri Mason, Capital, $43,000. What is the amount of Supplies as of December 1 of the current year?

a. $26,200b. $32,400c. $48,800d. $75,000

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14. Given the information presented below, determine the missing amount for each of the following:

Assets Liabilities Owner's Equity(i) ? $12,000 $6,000(ii) $20,000 ? $14,000(iii) $33,000 $25,000 ?

a. $18,000 $8,000 $48,000b. $18,000 $6,000 $ 8,000c. $ 6,000 $6,000 $48,000d. $ 6,000 $8,000 $ 6,000

15. Transactions that affect owner's equity include: a. owner's investments, owner's withdrawals, revenues, and expensesb. owner's investments and owner's withdrawalsc. owner's investments, revenues, and expensesd. owner's withdrawals, revenues, and expenses

Questions 16 - 20: Rob, a sole proprietor, is assessing his deli's performance for the current month. He asks for your input. Consider each question independently.

16. Rob sold goods to customers totaling $75,000 for the month. $60,000 was received in cash and the customers promised to pay the remaining $15,000 in the next 10 days. Rob withdrew $10,000 from the business for personal use. The revenue for the month is:

a. $85,000b. $60,000c. $65,000d. $75,000

17. Rob sold goods to customers totaling $75,000 for the month. $60,000 was received in cash and the customers promised to pay the remaining $15,000 in the next 10 days. Rob paid $30,000 to vendors for food supplies used to generate this revenue and withdrew $10,000 from the business for personal use. The change in Rob's capital account was a:

a. $15,000 decreaseb. $35,000 increasec. $45,000 increased. $60,000 increase

18. Rob sold goods to customers totaling $75,000 for the month. $60,000 was received in cash and the customers promised to pay the remaining $15,000 in the next 10 days. Rob received payment on the full accounts receivable balance. This $15,000 receipt had the following impact on his accounts:

a. A $15,000 decrease in cashb. No increase in total assetsc. A $15,000 increase in accounts receivabled. A $15,000 increase in total assets

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19. Rob sold goods to customers totaling $75,000 for the month. He paid $15,000 in rent and $65,000 for food supplies; invested an additional $5,000 in the business and withdrew $10,000. The change in Rob's capital account was a:

a. $15,000 decreaseb. $10,000 decreasec. $ 5,000 decreased. $10,000 increase

20. Rob sold goods to customers totaling $75,000 for the month. He paid $15,000 in rent and $65,000 for food supplies; invested an additional $5,000 in the business and withdrew $10,000. Rob's beginning capital account totaled $25,000. Rob's ending capital account balance was:

a. $15,000b. $10,000c. $ 5,000d. $10,000

21. Resources owned by a business are called:a. assetsb. liabilitiesc. revenuesd. owners' equity

22. Rick started a business by investing $10,000. This transaction:a. increased liabilitiesb. increased assets and equityc. increased liabilities and equityd. increased assets and liabilities

23. Which of the following transactions decreases assets and liabilities?a. owner invested money in the businessb. a business purchased equipment and paid cashc. a business purchased equipment on creditd. a business repaid money to a creditor

24. Liabilities increase when a business:a. receives money from ownersb. borrows moneyc. earns revenued. repays a creditor

25. Amounts owed to creditors are called:a. assetsb. liabilitiesc. revenuesd. owners' equity

26. The accounting equation states that:

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a. assets = liabilities + owners' equityb. assets + liabilities = owners' equityc. liabilities = owners' equity- assetsd. assets = owners' equity-liabilities

27. Tony's Landscaping Service purchased a truck for $2,500. $1,000 was paid in cash and a note payable was signed for the balance. As a result of this transaction liabilities:

a. increased by $1,500b. decreased by $1,500c. increased by $2,500d. did not change

28. Tony's Landscaping Service purchased a truck for $2,500. $1,000 was paid in cash and a note payable was signed for the balance. As a result of this transaction total assets:

a. increased by $1,500b. decreased by $1,500c. increased by $2,500d. did not change

29. A business has $25,000 in assets and $10,000 in liabilities. The owners' equity is:a. $35,000b. $10,000c. $15,000d. $0

30. A business owes $15,000 to creditors. The owners' equity is $10,000. The amounts of assets are:

a. $25,000b. $5,000c. $15,000d. $10,000

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MODULE 1TRANSACTION ANALYSIS

Demonstration ProblemClean-Rite Service

1. Lisa used $500 of her own money to start Clean-Rite Service.2. Lisa's company borrowed $1,500 from her dad.3. Clean-Rite Service purchased a used truck for $1,000 from Fuller Trucks Inc. Lisa paid $250

down and signed a note payable for the balance.4. Clean-Rite Service paid $115 for cleaning supplies.5. During the first half of March, Clean-Rite Service performed $450 of cleaning services.

Customers paid $200 in cash and promised the remaining payment by March 30.6. Clean-Rite Service used $80 of the cleaning supplies.7. $250 was collected from customers for services performed previously.8. Lisa's company paid back $500 to her dad.9. Lisa withdrew $100 from the business.

Transaction Number

Cash Accounts Receivable

Supplies Trucks Accounts Payable

Notes Payable

Owners’ Equity

1 500 5002 1,500 1,5003 (250) 1,000 7504 (115) 1155 200 250 4506 (80) (80)7 250 (250)8 (500) (500)9 (100) (100)

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Practice Assignment 1Frozen Delite

Frozen Delite is known for its line of low fat ice creams and frozen yogurts. This assignment lists some typical transactions for Frozen Delite for August 1997. You have to specify the types of accounts affected by each transaction and show that the accounting equation remains in balance after every transaction.

1. The owners started Frozen Delite by investing $12,000.2. $8,000 was borrowed from a bank by signing a two year note.3. Furniture was purchased for $4,200 on credit.4. Inventory of $2,100 was purchased on credit.5. Goods were sold for $3,200. The customers paid cash.6. The cost of the inventory sold in the previous transaction was $1,800.7. $200 was paid for utilities.8. Employees were paid wages of $1,100 for March.9. $1,500 was paid for the inventory purchased previously.10. $700 was paid for rent for March.

Transaction Number


Inventory Furniture Accounts Payable

Notes Payable

Owners’ Equity

1 12,000 12,0002 8,000 8,0003 4,200 4,2004 2,100 2,1005 3,200 3,2006 (1,800) (1,800)7 (200) (200)8 (1,100) (1,100)9 (1,500) (1,500)

10 (700) (700)

Practice Assignment 2Gifts Galore

This assignment lists some typical transactions for Gifts Galore for May 2000. You have to specify the types of accounts affected by each transaction and show that the accounting equation remains in balance after every transaction.

1. The owners started Gifts Galore by investing $15,000.2. $5,000 was borrowed from a bank by signing a two-year note.3. Inventory of $1,600 was purchased on credit.4. Supplies were purchased for $180.5. Goods were sold for $2,000. The customers paid cash.6. The cost of the inventory sold in the previous transaction was $1,100.7. $600 was paid for rent.8. Employees were paid wages of $1,100 for March.

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9. $1,600 was paid for the inventory purchased previously.10. Supplies costing $100 were used in May.

Transaction Number

Cash Inventory Supplies Accounts Payable

Notes Payable

Owners’ Equity

1 15,000 15,0002 5,000 5,0003 1,600 1,6004 (180) 1805 2,000 2,0006 (1,100) (1,100)7 (600) (600)8 (1,100) (1,100)9 (1,600) (1,600)

10 (100) (100)

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Assignment 1Rainbow Paints Incorporated

This assignment lists some typical transactions for Rainbow Paints Inc. for March 2000. You have to specify the types of accounts affected by each transaction and show that the accounting equation remains in balance after every transaction.

1. The owners started Rainbow Paints Inc. by investing $10,000.2. $15,000 was borrowed from a bank by signing a two year note.3. $12,000 was paid for equipment.4. Inventory of $5,000 was purchased on credit.5. Goods were sold for $2,200. The customers paid cash.6. The cost of the inventory sold in the previous transaction was $1,200.7. $200 was paid for utilities.8. Employees were paid wages of $2,000 for March.9. $1,500 was paid for the inventory purchased previously.10. $700 was paid for rent for March.

Transaction Number


Inventory Equipment Accounts Payable

Notes Payable

Owners’ Equity

1 10,000 10,0002 15,000 15,0003 (12,000) 12,0004 5,000 5,0005 2,200 2,2006 (1,200) (1,200)7 (200) (200)8 (2,000) (2,000)9 (1,500) (1,500)

10 (700) (700)

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Assignment 2Coreira’s Landscaping Service

This assignment lists some typical transactions for Coreira's Landscaping Service for October 2000. You have to specify the types of accounts affected by each transaction and show that the accounting equation remains in balance after every transaction.

1. Gilbert Coreira invested $7,500 in the business.2. $15,000 was borrowed from a bank by signing a three year note.3. Equipment was purchased for $12,000. $5,000 was paid in cash and a note was signed

for the remaining amount.4. Supplies were purchased for $250.5. Landscaping services were performed for $1,200. The customer paid cash.6. Landscaping services were performed on credit for $1,800.7. Employee wages of $1,000 were paid for October.8. $750 was collected from customers for services provided previously.

Transaction Number


Supplies Equipment Accounts Payable

Notes Payable

Owners’ Equity

1 7,500 7,5002 15,000 15,0003 (5,000) 12,000 7,0004 (250) 2505 1,200 1,2006 1,800 1,8007 (1,000) (1,000)8 750 (750)

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Assignment 3Total System Solutions Incorporated

This assignment lists some typical transactions for Total System Solutions Inc. for August 2000. You have to specify the types of accounts affected by each transaction and show that the accounting equation remains in balance after every transaction.

1. The owners invested $25,000 to start Total System Solutions Inc. 2. $20,000 was borrowed from Pioneer Bank.3. Furniture was purchased on credit for $4,800.4. Office supplies were purchased for $150.5. Services were performed for clients for $6,600. Of this amount, $2,400 was collected in cash.6. Paid a salary of $1,000 to the secretary for August.7. $2,000 was paid for the furniture purchased previously.8. Supplies worth $80 were used during the month.9. $1,000 was collected from customers for services provided previously on credit.

Transaction Number


Supplies Furniture Accounts Payable

Notes Payable

Owners’ Equity

1 25,000 25,0002 20,000 20,0003 4,800 4,8004 (150) 1505 2,400 4,200 6,6006 (1,000) (1,000)7 (2,000) (2,000)8 (80) (80)9 1,000 (1,000)

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Assignment 4Web Designs

Web Designs sets up home pages for businesses on the World Wide Web. This assignment lists some typical transactions for Web Designs for May 2000. You have to specify the types of accounts affected by each transaction and show that the accounting equation remains in balance after every transaction.

1. The owners invested $15,000 to start Web Designs. 2. $7,500 was borrowed from Pioneer Bank.3. A computer was purchased for $2,500.4. Office supplies were purchased for $250.5. Services were performed for clients for $4,600 on credit.6. Paid rent of $650 for May.7. Supplies worth $100 were used during the month.8. $1,000 was collected from customers for services provided previously on credit.9. The owners withdrew $700 from the business.

Transaction Number


Supplies Computer Accounts Payable

Notes Payable

Owners’ Equity

1 15,000 15,0002 7,500 7,5003 (2,500) 2,5004 (250) 2505 4,600 4,6006 (650) (650)7 (100) (100)8 1,000 (1,000)9 (700) (700)

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Homework Quiz

1. Which of the following reflects the investment of cash by Rickie James in her sole proprietorship?a. James, Capital increase; Cash decrease b. Cash increase; James, Capital increase c. James, Drawing increase; Cash decrease d. Cash increase; James, Drawing increase

2. Which of the following reflects payment of a utilities bill from the power company? a. Utilities Expense increase; Cash decrease b. Utilities Payable decrease; Cash increase c. Cash decrease; Utilities Expense decrease d. Cash decrease; Utilities Payable increase

3. Clinton Repair Shop sold Office Supplies, at cost, to a competitor, for cash. Which of the following reflects the impact of this transaction? a. Office Supplies increase; Cash decrease b. Office Supplies increase; Accounts Payable increase c. Cash increase; Office Supplies decrease d. Accounts Payable decrease; Office Supplies decrease

4. Clinton Repair Shop returned Office Supplies purchased on account. Which of the following illustrates the impact of this transaction? a. Cash increase; Office Supplies decrease b. Office Supplies increase; Cash decrease c. Office Supplies increase; Accounts Payable increase d. Accounts Payable decrease; Office Supplies decrease

5. Clinton Repair shop paid creditors on account. Which of the following demonstrates the impact of this transaction? a. Cash increase; Accounts Payable increase b. Accounts Payable decrease; Cash decrease c. Accounts Receivable increase; Cash decrease d. Cash increase; Account Receivable decrease

6. The acquisition of Office Supplies on credit has the following impact on the affected accounts: a. Office Supplies increase; Cash decrease b. Cash increase; Office Supplies decrease c. Office Supplies increase; Accounts Payable increase d. Accounts Payable decrease; Office Supplies decrease

7. A cash payment for Rented Equipment has the following impact on the affected accounts: a. Cash increase; Rented Equipment Expense decrease b. Rented Equipment Expense increase; Cash decrease c. Rented Equipment Expense increase; Accounts Payable increase d. Accounts Payable decrease; Rented Equipment Expense decrease

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8. John Tortoro, M.D. billing for the month of January amounted to $85,000. Of this total, $60,000 was received in cash and the remainder is on account. Which of the following illustrates the impact on the accounting records? a. Cash increase $60,000; Accounts Receivable decrease $25,000; Fees Earned increase $85,000 b. Fees Earned increase $60,000; Accounts Receivable decrease $25,000; Cash increase $85,000 c. Cash increase $85,000; Fees Earned increase $85,000 d. Fees Earned increase $85,000; Accounts Receivable increase $25,000; Cash increase $60,000

9. An owner's withdrawal of cash from the company for personal use impacts which of the following accounts? a. Wage Expense increase; Cash decrease b. Owner's Capital decrease; Cash increase c. Accounts Payable decrease; Cash decrease d. Owner's Drawing increase; Cash decrease.

10. Which of the following titles reflect an asset account, an owner's equity account and an expense account respectively? a. Equipment, Owner's Drawing, Inventory b. Accounts Receivable, Owner's Capital, Rent Expense c. Accounts Payable, Owner's Drawing, Salaries Payable d. Accounts Receivable, Owner's Capital, Inventory

11. Gross increases in owner's equity that can be attributed to ongoing business activities are:a. Expenses b. Drawings c. Revenues d. Assets

12. Equipment is purchased with a cash down payment of $60,000 and a signed note for $100,000. The net effect of this transaction will be: a. An increase in assets of $60,000 b. An increase in assets of $100,000 c. An increase in assets of $160,000 d. No increase in assets.

13. A note payable is given to settle an existing account payable. The result of this transaction on the accounting records is: a. No change in assets, liabilities, or owners' equity b. Total Assets are increased c. Total Liabilities are increased d. Total Owner's Equity is increased

14. Carter Cleaning completed the following transactions:

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Purchased $18,000 of Office Supplies for $8,000 cash and the remainder on credit. Purchased equipment for $7,950 on credit.

As a result of these transactions, Carter's total assets will:

a. Increase by $25,950 b. Increase by $17,950 c. Increase by $10,050 d. Increase by $ 7,950

15. Ford Photo Supplies balances at the beginning of January were: Cash $25,000; Accounts Receivable $15,000; Inventory $30,000; Accounts Payable $18,000; Notes Payable $17,000; Owner's Capital $??. Ford completed the following transactions during January:

Paid off the note payable of $17,000. Sold $36,525 of merchandise to customers on account. Cost of goods sold was $21,250. Paid accounts payable of $3,500. Collected $25,000 of the amounts due from customers. As a result of these transactions, liabilities and owners' equity at the end of January will total:

a. Liabilities: $35,000; Owner's Equity: $35,000 b. Liabilities: $31,500; Owner's Equity: $71,525 c. Liabilities: $14,500; Owner's Equity: $50,275 d. Liabilities: $18,000; Owner's Equity: $15,275

16. Ford Photo Supplies balances at the beginning of January were: Cash $25,000; Accounts Receivable $15,000; Inventory $30,000; Accounts Payable $18,000; Notes Payable $17,000; Owner's Capital $??. Ford completed the following transactions during January:

Paid off the note payable of $17,000. Sold $36,525 of merchandise to customers on account. Cost of goods sold was $21,250. Paid accounts payable of $3,500. Collected $25,000 of the amounts due from customers. As a result of these transactions, asset balances at the end of January will total:

a. Cash: $ 4,500; Accts Rec.: $51,525; Inventory: $ 8,750 b. Cash: $ 8,000; Accts Rec.: $15,000; Inventory: $30,000 c. Cash: $ 4,500; Accts Rec.: $26,525; Inventory: $21,250 d. Cash: $29,500; Accts Rec.: $26,525; Inventory: $ 8,750

17. At the beginning of October, Nirvana Carting had total assets of $86,000. During October, Nirvana had the following transactions:

Collected receivables of $17,400 from previous periods. Generated revenues of $50,000, of which 60 percent were cash.

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Incurred total expenses of $36,000, 40 percent of which were paid. After these transactions are recorded, Nirvana's total assets amount to:

a. $ 97,400 b. $121,600 c. $133,400 d. $139,000

18. At the beginning of October, Nirvana Carting had total assets of $86,000. During October, Nirvana had the following transactions:

Collected the opening receivables balance of $17,400. Generated revenues of $50,000, of which 60 percent were cash. Incurred total expenses of $36,000, 40 percent of which were paid. Nirvana had no payables balance at the beginning of October. After these transactions are recorded, Nirvana's Accounts Receivable and Accounts Payable amount to:

a. Accounts Rec.: $ -0-; Accounts Pay.: $ -0- b. Accounts Rec.: $ 17,400; Accounts Pay.: $14,400 c. Accounts Rec.: $ 20,000; Accounts Pay.: $21,600 d. Accounts Rec.: $ 37,400; Accounts Pay.: $30,000

19. At the beginning of October, Nirvana Carting had total owner's equity of $86,000. During October, Nirvana had the following transactions:

Collected the opening receivables balance of $17,400. Generated revenues of $50,000, of which 60 percent were cash. Incurred total expenses of $36,000, 40 percent of which were paid. Nirvana had no payables balance at the beginning of October. After these transactions are recorded, Nirvana's Owner's Equity balance amounts to:

a. $ 14,000 b. $ 86,000 c. $ 135,000 d. $ 100,000

20. On May 1, Ace Cleaners had total assets of $438,500. During May, the company completed the following transactions:

Kerry Ace, owner of the firm, donated equipment to Ace Cleaners. The equipment had a value of $3,350 at this time.

Purchased a building for $39,000 and signed a note for the purchase.

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Purchased $750 of supplies on credit. After these transactions are recorded, total assets will have a balance of:

a. $481,600 b. $481,500 c. $480,850 d. $472,850

21. Joe's Appliances purchased inventory for $12,800 on credit. This transaction:a. increased accounts payable and inventoryb. increased inventory and decreased accounts receivablec. increased inventory and accounts receivabled. increased inventory and decreased accounts payable

22. Music Land sold goods for $4,800 on credit. This transaction: a. increased accounts payable and owners' equityb. increased accounts receivable and cashc. increased accounts receivable and owners' equityd. increased cash and owners' equity

23. Music Land collected $2,400 from customers for goods sold in the previous transaction. This transaction:a. decreased accounts payable and owners' equityb. decreased accounts receivable and increased cashc. decreased accounts receivable and increased owners' equityd. increased cash and owners' equity

24. Which of the following transactions decreases assets and liabilities?a. pay suppliers for goods purchased on creditb. provide services to customers for cashc. borrow from a bankd. purchase equipment for cash

25. Amounts owed by customers for goods sold on credit are called:a. accounts receivableb. accounts payablec. cost of goods soldd. inventory

26. Which of the following transactions decreases assets and owners' equity?a. purchase supplies for cashb. pay suppliers for goods purchased on creditc. use suppliesd. repay amount borrowed from a bank

27. Amounts owed to suppliers for credit purchases are called:a. accounts receivableb. accounts payable

c. cost of goods sold d. notes payable

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28. The cost of merchandise sold in a period is called:a. suppliesb. accounts payablec. cost of goods sold

d. inventory

29. Lakeside Realty purchased supplies for $250. This transaction:a. increased supplies and decreased cashb. increased inventory and decreased cashc. increased supplies expense and decreased cashd. increased supplies expense and decreased supplies

30. Lakeside Realty used supplies costing $50. This transaction:a. decreased supplies and decreased cashb. increased inventory and decreased cashc. increased supplies expense and decreased cashd. increased supplies expense and decreased supplies

31. Cost of goods sold is an:a. assetb. liabilityc. revenued. expense

32. An expense is recognized when:a. a business buys inventoryb. a business buys suppliesc. a business pays rentd. a business repays a loan

33. Accounts Receivable decreases when:a. goods are sold on creditb. goods are purchased on creditc. customers pay for goods previously purchased on creditd. a payment is made for goods purchased on credit

34. Accounts payable increases when:a. goods are sold on creditb. goods are purchased on creditc. customers pay for goods previously purchased on creditd. a payment is made for goods purchased on credit

35. Which of the following is an example of a fixed asset?a. buildingb. suppliesc. inventoryd. cash

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iFinancial Accounting ntmod1_2

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