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Exam 2: Analyzing Business Transactions

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Question 51

Multiple Choice

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The rent paid for future months is a(n) :

A) asset.
B) liability.
C) revenue.
D) expense.

E) A) and B)
F) A) and C)

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Question 52

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The statement of owner's equity is prepared before the balance sheet so that the ending capital balance is available.

A) True
B) False

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Question 53

Multiple Choice

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When the owner withdraws cash for personal use,

If there is an excess of expenses over revenues, the excess represents a profit.

When the owner writes a company check to pay the company's electric bill,

When revenue is greater than expenses, the result is a net ________.

The following information should be used for questions. The transactions listed below took place at the Mitchell Advertising Agency. These transactions affected the following accounts. Indicate the accounts affected and use plus and minus to show the changes caused by each transaction. $\begin{array}{|l|l|}\hline \text { Cash } & \text { K. Mitchell, Capital } \\\hline \text { Accounts Receivable } & \text { Revenue } \\\hline \text { Equipment } & \text { Expenses } \\\hline \text { Accounts Payable } & \\\hline\end{array}$ -Sent a check to a creditor

The Balance Sheet heading includes each of the following except:

The statement of financial position is another term for which financial statement?

Choose the option below that reflects the correct order in which to prepare the three financial statements

The account used to record amounts that are owed for goods or services purchased on credit is known as ________.

Guy McKinley started the McKinley Charter Service at the beginning of August 2019. On August 31, 2019, the accounting records of the business showed the following information. Prepare an income statement and a statement of owner's equity for the month and a balance sheet as of August 31, 2019. $\begin{array}{|l|r|r|r|}\hline \text { Equipment } & \$ 18,000 & \text { Rent Expense } & \$ 4,800 \\\hline \text { Accounts Receivable } & 2,600 & \text { Cash } & 6,200 \\\hline \text { Fees Income } & 30,000 & \text { Salaries Expense } & 10,800 \\\hline \text { Boats } & 103,000 & \text { Utilities Expense } & 1,900 \\\hline \text { Gasoline Expense } & 7,500 & \text { Supplies } & 3,600 \\\hline \text { Loans Payable } & 77,500 & \text { Initial Investment } & 51,000 \\\hline \text { Owners' Withdrawal } & 4,100 & \text { Accounts Payable } & 4,000\\\hline\end{array}$

Given the options below, identify the correct accounting equation formula.

When cash is collected from accounts receivable, the total amount of assets increases.

When a business pays cash for salaries, assets decrease and expenses ________.

When equipment is purchased on credit,

In a business transaction, when revenue increases, owner's equity will ________ .

Which financial statement is a representation of the accounting equation?

The following information should be used for questions 99-100. Cullen Beatty plans to start a consulting business–Cullen Consulting Services. In preparation to do this, on April 1, 2019, he invested $56,000 in cash and $23,000 in equipment, and opened an account at Office Plus by purchasing $1,750 in office supplies which is due by the end of the month. He then signed a one-year lease agreement on an office building for $8,400, paying the full amount in advance. -Prepare a Balance Sheet for Cullen Consulting Services as of April 1, 2019, before he conducts any services.

When a business sells services for cash, assets increase and revenue ________.