Q1. Match the terms on the left with the descriptions on the right. Each description should be
used only once.
Q2. A number of business transactions carried out by Smalling Manufacturing Company are as
follows.
a. Borrowed money from a bank.
b. Sold land for cash at a price equal to its cost.
c. Paid a liability.
d. Returned for credit some of the office equipment previously purchased on credit but not yet
paid for. (Treat this the opposite of a transaction in which you purchased office equipment on
credit.)
e. Sold land for cash at a price in excess of cost. (Hint: The difference between cost and sales
price represents a gain that will be in the company’s income statement.)
f. Purchased a computer on credit.
g. The owner invested cash in the business.
h. Purchased office equipment for cash.
i. Collected an account receivable.
Indicate the effects of each of these transactions on the total amounts of the company’s assets,
liabilities, and owners’ equity. Organize your answer in tabular form, using the following column
headings and the code letters I for increase, D for decrease, and NE for no effect. The answer
for transaction a is provided as an example.
Q3. The following six transactions of Memphis Moving Company, a corporation, are
summarized in equation form, with each of the six transactions identified by a letter. For each of
the transactions (a) through (f) write a separate statement explaining the nature of the transaction.
For example, the explanation of transaction (a) could be as follows: Purchased equipment for
cash at a cost of $3,200.
Q4. Listed as follows in random order are the eight steps comprising a complete accounting
cycle.
Prepare a trial balance.
Journalize and post the closing entries.
Prepare financial statements.
Post transaction data to the ledger.
Prepare an adjusted trial balance.
Make end-of-period adjustments.
Journalize transactions.
Prepare an after-closing trial balance.
List these steps in the sequence in which they would normally be performed.
Q5. Five account classifications are shown as column headings in the following table. For each
account classification, indicate the manner in which increases and decreases are recorded (i.e., by
debits or by credits).
Q6. Shown as follows are selected transactions of the architectural firm of Baxter, Claxter, and
Stone, Inc.
April 5 Prepared building plans for Spangler Construction Company. Sent Spangler an invoice
for $13,200 requesting payment within 30 days. (The appropriate revenue account is entitled
Drafting Fees Earned.)
May 17 Declared a cash dividend of $2,400. The dividend will not be paid until June 25.
May 29 Received a $5,400 bill from Bob Needham, CPA, for accounting services performed
during May. Payment is due by June 10. (The appropriate expense account is entitled
Professional Expenses.)
June 4 Received full payment from Spangler Construction Company for the invoice sent on
April 5.
June 10 Paid Bob Needham, CPA, for the bill received on May 29.
June 25 Paid the cash dividend declared on May 17.
a. Prepare journal entries to record the transactions in the firm’s accounting records.
b. Identify any of these transactions that will not result in a change in the company’s net income.
Q7. In June, current year, Wendy Winger organized a corporation to provide aerial photography
services. The company, called Aerial Views, began operations immediately. Transactions during
the month of June were as follows.
June 1 The corporation issued 60,000 shares of capital stock to Wendy Winger in exchange for
$60,000 cash.
June 2 Purchased a plane from Utility Aircraft for $220,000. Made a $40,000 cash down
payment and issued a note payable for the remaining balance.
June 4 Paid Woodrow Airport $2,500 to rent office and hangar space for the month.
June 15 Billed customers $8,320 for aerial photographs taken during the first half of June.
June 15 Paid $5,880 in salaries earned by employees during the first half of June.
June 18 Paid Hannigan’s Hangar $1,890 for maintenance and repair services on the company
plane.
June 25 Collected $4,910 of the amounts billed to customers on June 15.
June 30 Billed customers $16,450 for aerial photographs taken during the second half of the
month.
June 30 Paid $6,000 in salaries earned by employees during the second half of the month.
June 30 Received a $2,510 bill from Peatree Petroleum for aircraft fuel purchased in June. The
entire amount is due July 10.
June 30 Declared a $2,000 dividend payable on July 15.
Required:
a. Prepare journal entries (including explanations) for each transaction.
b. Post each transaction to the appropriate ledger accounts.
c. Prepare a trial balance dated June 30, current year.
d. Using figures from the trial balance prepared in part c, compute total assets, total liabilities,
and owners’ equity. Are these the figures that the company will report in its June 30 balance
sheet? Explain your answer briefly.