Question

35) Which one of the following account groups normally has a debit balance? A) Habilities and revenues B) revenues and expenses C) assets and liabilities D) assets and expenses 36) The accountant for Eagle Financial Services, Inc. failed to make an adjusting entry to record $3,000 of telephone expenses incurred in the last two months of the year but unpaid at year-end. Which of the following statements is true? A) The total assets will be overstated. B) The total liabilities will be understated. The total liabilities will be overstated. D) The total assets will be understated. 37) The current ratio measures a company's A) proportion of assets that are financed by debt B) rate of cash flow C) ability to pay current liabilities from current assets D) overall ability to pay liabilities 38) The proportion of assets that are financed with debt can be calculated using the A) cash B) asset C) quick ratio. D) debt 10

Answer 1

35) Answer - D - ASSETS AND EXPENSES

Liabilities and Incomes normally has credit balance . Assets and Expenses has Debit Balance.

36) Answer - B - Total Liabilities will be understated

Adjustment entry required: Debit to telephone expenses and Credit to Telephone Expenses payable. So telephone expense payable would be understated by $3000.

37) Answer -C - Ability to pay current Liability from current assets

Current ratio = Current Assets/ Current Liabilities

To analyse the proportion of current assets to the current liabilities owed by the company.

38) Answer - D - Debt Ratio

Debt ratio = debt/ assets

Debt ratio measures a company's leverage.

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