Question

Choose the TRUE statement.

A company with Liabilities of $80,000 and Stockholders' equity of $50,000 will have Assets of $30,000.

A company with Net Income will also have a cash increase from operating activities.

A company with total stockholders' equity of $120,000 and contributed capital of $75,000 must have total retained earnings of $45,000.

How many of the following statements regarding posting and classification are true?

If a purchase of supplies on account for $100 is recorded with a debit to supplies of $10 and a credit to accounts payable for $10, the accounting equation will not balance.

If a $100 debit is erroneously posted to an account as a $100 credit, the accounts will be out of balance by $100.

If a $5,000 liability is misclassified as stockholders' equity then the accounting equation will still balance.

Posting journal entries involves copying the dollar amounts from the ledger into the journal.

If a company has total revenues of $80,000, total expenses of $50,000 and dividends of $10,000, they will have net income of $20,000.

A company receives $100,000 cash from investors in exchange for stock. Several weeks later, the company buys a $250,000 machine using all of the cash from the stock issue and signing a promissory note for the remainder. The accounts involved in these two transactions are:

Cash; Equipment; Contributed Capital; and Notes Payable.

Equipment; Notes Payable; and Retained Earnings.

Cash; Long-term Investments; Contributed Capital; and Notes Payable.

Cash; Equipment; Long-term Investments; and Accounts Payable

A credit of $500 to Equipment was mistakenly credited to Revenue. What is the effect of this error?

Equipment is overstated and Revenue is understated.

Equipment is overstated and Revenue is overstated.

Equipment is understated and Revenue is overstated.

Equipment is understated and Revenue is understated.

Which of the following is not a correct statement?

The Dividends account is closed with a credit.

Expense accounts are closed with credits.

The Retained Earnings account is closed with a debit.

Revenue accounts are closed with debits.

The cashier uses the cash register and its accompanying point-of-sale accounting system to perform three important functions. Which of the following is not one of those functions?

Restrict access

Document total cash sales

Segregate duties

Document amount charged for each item sold

Which of the following items appearing on a bank reconciliation require a journal entry to bring the Cash account up-to-date?

Deposit in transit

An error made by the bank in recording a deposit

Check from customers returned as NSF

Outstanding check

Answer 1

1. A company with total stockholders' equity of $120,000 and contributed capital of $75,000 must have total retained earnings of $45,000.

2.Below are the True Statements

• If a purchase of supplies on account for $100 is recorded with a debit to supplies of $10 and a credit to accounts payable for $10, the accounting equation will not balance.

• If a $100 debit is erroneously posted to an account as a $100 credit, the accounts will be out of balance by $100.

• If a $5,000 liability is misclassified as stockholders' equity then the accounting equation will still balance.

3.

Cash; Equipment; Contributed Capital; and Notes Payable.

	Debit	Credit
Cash	100,000.00
Contributed Capital		100,000.00
Equipment	250,000.00
Cash		100,000.00
Notes Payable		150,000.00

4.

Equipment is overstated and Revenue is overstated.

5.

The Retained Earnings account is closed with a debit.

6.

Segregate duties

7.

Check from customers returned as NSF