c

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 The normal balance of all accounts is a debit.
False
o Revenues are a subdivision of owner's capital.
True
 Each transaction must be analyzed in terms of its effect on the accounts before it can be
recorded in a journal.
True
o Transactions are entered in the ledger accounts and then transferred to journals.
False
 A compound journal entry requires several debits to one account and several credits to
one account.
False
o A trial balance does not prove that all transactions have been recorded or that the ledger is
correct.
True
 The trial balance will not balance when incorrect account titles are used in journalizing or
posting.
False

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The right side of an account
a.is the correct side. B. reflects all transactions for the
accounting period.
c.shows all the balances of the accounts in the system. d. is the credit
side.
Answer: d
The double-entry system requires that each transaction must be
recorded
a. in at least two different accounts. c. in two sets of books.
b. in a journal and in a ledger. D. first as a revenue and then as an
expense.
Answer: a

A credit is not the normal balance for which account listed below?
a. Capital account b. Revenue account c. Liability account d.
Owner’s Drawings account
Answer: d 3
Assets normally show
a. credit balances. B. debit balances.C. debit and credit balances. d. debit or credit
balances.
Answer: b

During February 2020, its first month of operations, the owner of Loeng Investments
invested cash of £5,000,000. Loeng had cash revenues of £1,600,000 and paid expenses of
£2,100,000. Assuming no other transactions impacted the cash account, what is the balance in
Cash at February 29?
a. £500,000 credit b. £500,000 debit c. £4,500,000 debit d. £5,500,000 debit
Answer: c

On June 1, 2020 Ben Caseski buys a copier machine for his business and finances this
purchase with cash and a note. When journalizing this transaction, he will
a. use two journal entries.
b. make a compound entry.
c. make a simple entry.
d. list the credit entries first, which is proper form for this type of transaction.
Answer: b

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When three or more accounts are required in one journal entry, the entry is
referred to as a
a. compound entry. B. triple entry. C. multiple entry. D. simple entry.
Answer: a

A debit is not the normal balance for which of the following?

a. Asset account b. Owner’s Drawings account
c. Expense account d. Owner’s Capital account
Answer: d

Which of the following rules is incorrect?

a. Credits decrease the owner’s drawings account.
b. Debits increase the owner’s capital account.
c. Credits increase revenue accounts.
d. Debits decrease liability accounts.
Answe: b
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A trial balance is a listing of
a. transactions in a journal.
b. the chart of accounts.
c. general ledger accounts and balances.
d. the totals from the journal pages.
Answer: c
Which of the following is the correct sequence of steps in the recording process?
a. Posting, journalizing, analyzing
b. Journalizing, analyzing, posting
c. Analyzing, posting, journalizing
d. Analyzing, journalizing, posting
Answer: d
Haselhof Limited purchases equipment for £2,400 and supplies for £700 from Behrman Co. for £3,100
cash. The entry for this transaction will include a
a. debit to Equipment £2,400 and a debit to Supplies Expense £700 for Behrman.
b. credit to Cash for Behrman.
c. credit to Accounts Payable for Haselhof.
d. debit to Equipment £2,400 and a debit to Supplies £700 for Haselhof.
Answer: b

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Carey Company buys land for £50,000 on 12/31/19. As of 3/31/20, the land has appreciated in value
to £50,900. On 12/31/20, the land has an appraised value of £51,600. By what amount should the
Land account be increased in 2020?
a. £0 b. £700 c. £900 d. £1,600
Answer: a
Hull Company acquires land for £86,000 cash. Additional costs are as follows:
Removal of shed £300
Filling and grading £1,500
Salvage value of lumber of shed £120
Broker commission £1,530
Paving of parking lot £10,000
Closing costs £560
Hull will record the acquisition cost of the land as
a. 386,000. b. £88,090. c. £89,990. d. £89,770.
Answer: d
On October 3, Ken Steele, a carpenter, received a cash payment for services previously billed to a
client. Ken paid his telephone bill, and he also bought equipment on credit. For the three
transactions, at least one of the entries will include a
a. credit to Owner’s Capital. C. credit to Notes Payable.
b. debit to Accounts Receivable. D. credit to Accounts Payable.
Answer: d 7
Choi Company purchased equipment and these costs were incurred:
Cash price £27,500
Sales taxes £1,800
Insurance during transit £320
Installation and testing £430
Total costs £30,050
Choi will record the acquisition cost of the equipment as
a. £27,500.
b. £29,300.
c. £29,620.
d. £30,050.
Answer: D
The final step in the recording process is to transfer the journal information to the
a. trial balance.
b. financial statements.
c. ledger.
d. file cabinets.
Answer: c

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Robin Company acquires a piece of land on which it intends to build a factory to produce its primary
product. The land is listed for sale at €460,000, but Robin Company's real estate broker is able to negotiate
a sales price of €430,000. The land contains an old office building that is razed at a cost of €25,000
(€29,000 in costs less €4,000 proceeds from salvaged materials). Robin Company pays a commission to the
real estate broker of €23,000 and an attorney's fee of €6,000. On its statement of financial position at
December 31, 2020, what amount will Robin Company record as the cost of the land?
a. €499,000 b. €455,000 c. €484,00 d. €524,000
Answer: c
On January 1, 2020, Chicago Furniture purchases a new delivery truck. The company pays $80,000 for the
truck, sales taxes of $4,500, and delivery costs of $2,300. Chicago Furniture pays a local vendor $4,800 to
paint the company's name and logo on the side of the truck. The company also pays $16,000 for an annual
insurance policy and $1,700 for a motor vehicle license. At what amount will Chicago Furniture record the
truck on its statement of financial position at January 1, 2020?
a. $80,000 b. $87,100 c. $91,60 d. $109,300
Answer: c
In computing depreciation, residual value is
a. the fair value of a plant asset on the date of acquisition.
b. subtracted from accumulated depreciation to determine the plant asset's depreciable cost.
c. an estimate of a plant asset's value at the end of its useful life.
d. ignored in all the depreciation methods.
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Answer: c
On October 1, 2020, Holt Company places a new asset into service. The cost of the
asset is €160,000 with an estimated 5-year life and €40,000 residual value at the end
of its useful life. What is the book value of the plant asset on the December 31, 2020,
statement of financial position assuming that Holt Company uses the double-
declining-balance method of depreciation?
a. €104,000 b. €120,000 c. €144,000 d. €152,000
Answer: c
Farr Company purchased a new van for floral deliveries on January 1, 2019. The van
cost €56,000 with an estimated life of 5 years and €14,000 residual value at the end of
its useful life. The double-declining-balance method of depreciation will be used.
What is the balance of the Accumulated Depreciation account at the end of 2020?
a. €8,960 b. €26,880 c. €35,84 d. €13,440
Answer: c
Moreno Company purchased equipment for $900,000 on January 1, 2018, and will
use the double-declining-balance method of depreciation. It is estimated that the
equipment will have a 3-year life and a $40,000 residual value at the end of its useful
life. The amount of depreciation expense recognized in the year 2020 will be
a. $100,000. b. $60,000. c. $108,880. d. $68,880.
Answer: b 10
Equipment was purchased for €300,000. Freight charges amounted to €14,000 and
there was a cost of €40,000 for building a foundation and installing the equipment. It
is estimated that the equipment will have a €60,000 residual value at the end of its 5-
year useful life. Depreciation expense each year using the straight-line method will be
a. €70,800. b. €58,800. c. €49,200. d. €48,000.
Answer: b
Equipment was purchased for $85,000 on January 1, 2019. Freight charges amounted
to $3,500 and there was a cost of $10,000 for building a foundation and installing the
equipment. It is estimated that the equipment will have a $15,000 residual value at
the end of its 5-year useful life. What is the amount of accumulated depreciation at
December 31, 2020, if the straight-line method of depreciation is used?
a. $33,400 b. $16,700 c. $14,300 d. $28,600
Answer: a
On May 1, 2020, Pinkley Company sells office furniture for €80,000 cash. The office
furniture originally cost €200,000 when purchased on January 1, 2012. Depreciation
is recorded by the straight-line method over 10 years with a residual value of €20,000.
What depreciation expense should be recorded on this asset in 2020?
a. €6,000. b. €6,667. c. €9,000. d. €18,000.
Answer: a 11
Cora Crawley withdraws £700 cash from her business for personal use. The entry for this transaction
will include a debit of £700 to
a. Owner’s Drawings.
b. Owner’s Capital.
c. Owner’s Salaries Expense.
d. Salaries and Wages Expense.
Answer: a

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