Essential Accounting Principles: Transactions to Equity

The Double-Entry System

The double-entry system requires that each transaction must be recorded:

• in a journal and in a ledger.
• first as a revenue and then as an expense.
• in two sets of books.
• in at least two different accounts.

Completing a Transaction Recording

An accountant has debited an asset account for $1200 and credited a liability account for $500. What can be done to complete the recording of the transaction?

• Credit a different asset account for $700.
• Nothing further must be done.
• Debit a Stockholders' Equity account for $700.
• Debit another asset account for $700.

Recording a Purchase on Account

On January 14, Edamame Industries purchased supplies of $700 on account. The entry to record the purchase will include:

• a debit to Supplies Expense and a credit to Accounts Receivable.
• a debit to Supplies and a credit to Cash.
• a debit to Accounts Receivable and a credit to Supplies.
• a debit to Supplies and a credit to Accounts Payable.

Chik Chik Company: Trial Balance Credits

Chik Chik Company showed the following balances at the end of its first year:

What did Chik Chik Company show as total credits on its trial balance?

• $62200
• $70200
• $60800
• $51400

Promise Ring Co.: Stockholders' Equity

At September 1, 2018, Promise Ring Co. reported stockholders’ equity of $156000. During the month, Promise Ring generated revenues of $38000, incurred expenses of $21000, purchased equipment for $5000 and paid dividends of $2000. What is the amount of stockholders’ equity at September 30, 2018?

• $176000
• $166000
• $171000
• $173000

Revenue Recognition Principle

A flower shop makes a large sale for $1200 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1200 considered to be recognized?

• December 5.
• December 10.
• November 30.
• December 1.

Equipment Book Value & Depreciation

On January 1, 2018, Superfuzz Company purchased equipment for $40000. The company is depreciating the equipment at the rate of $800 per month. The book value of the equipment at December 31, 2018 is:

• $9600.
• $0.
• $30400.
• $40000.

Accrued Interest Expense Adjusting Entry

Uncle Tupelo's Gifts signs a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $75000 with annual interest of 12%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest?

• Interest Expense           2250
      Interest Payable           2250
              

• Interest Expense           1500
      Interest Payable           1500
              

• Interest Expense           1500
      Cash                       1500
              

• Interest Expense           1500
      Notes Payable              1500