Connect Financial Accounting Chapter 2

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Connect Financial Accounting Chapter 2

Q1. Following are the transactions of a new company called Pose-for-Pics.

  • Aug 1 – Madison Harris, the owner, invested $12,500 cash and $53,750 of photography equipment in the company in exchange for common stock.
  • Aug 2 – The company paid $3,700 cash for an insurance policy covering the next 24 months.
  • Aug 5 – The company purchased office supplies for $2,375 cash.
  • Aug 20 – The company received $2,650 cash in photography fees earned.
  • Aug 31 – The company paid $883 cash for August utilities.

Prepare general journal entries for the above transactions.

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Q2. The transactions of Spade Company appear below.

  • Kacy Spade, owner, invested $20,000 cash in the company in exchange for common stock.
  • The company purchased office supplies for $580 cash.
  • The company purchased $11,060 of office equipment on credit.
  • The company received $2,360 cash as fees for services provided to a customer.
  • The company paid $11,060 cash to settle the payable for the office equipment purchased in transaction c.
  • The company billed a customer $4,240 as fees for services provided.
  • The company paid $520 cash for the monthly rent.
  • The company collected $1,781 cash as partial payment for the account receivable created in transaction f.
  • The company paid $1,100 cash in dividends to the owner (sole shareholder).

Required:
1.
Prepare general journal entries to record the transactions above for Spade Company by using the following accounts: Cash; Accounts Receivable; Office Supplies; Office Equipment; Accounts Payable; Common Stock; Dividends; Fees Earned; and Rent Expense. Use the letters beside each transaction to identify entries.

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2. Post the above journal entries to T-accounts, which serve as the general ledger for this assignment.

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Q3. The transactions of Spade Company appear below.

  • Kacy Spade, owner, invested $19,000 cash in the company in exchange for common stock.
  • The company purchased office supplies for $551 cash.
  • The company purchased $10,507 of office equipment on credit.
  • The company received $2,242 cash as fees for services provided to a customer.
  • The company paid $10,507 cash to settle the payable for the office equipment purchased in transaction c.
  • The company billed a customer $4,028 as fees for services provided.
  • The company paid $535 cash for the monthly rent.
  • The company collected $1,692 cash as partial payment for the account receivable created in transaction f.
  • The company paid $900 cash in dividends to the owner (sole shareholder).

Prepare the Trial Balance.

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Connect Financial Accounting Chapter 2 Quiz

Q1. Identify the accounts that would normally have balances in the credit column of a business’s trial balance.

  • Liabilities and expenses
  • Assets and revenues.
  • Revenues and expenses.
  • Revenues and liabilities.
  • Dividends and liabilities.

Q2. A company’s formal promise to pay (in the form of a promissory note) a future amount is a(n):

  • Unearned revenue.
  • Prepaid expense.
  • Credit account.
  • Note payable.
  • Account receivable.

Q3. A debit is used to record an increase in all of the following accounts except:

  • Supplies
  • Cash
  • Accounts Payable
  • Dividends
  • Prepaid Insurance

Q4. The debt ratio of Company A is .31 and the debt ratio of Company B is .21. Based on this information, an investor can conclude:

  • Company B has more debt than Company A.
  • Company B has a lower risk from its financial leverage.
  • Company A has a lower risk from its financial leverage.
  • Company A has 10% more assets than Company B.
  • Both companies have too much debt.

Q5. On a trial balance, if the Debit and Credit column totals are equal, then:

  • All transactions have been recorded correctly.
  • All entries from the journal have been posted to the ledger correctly.
  • All ledger account balances are correct.
  • Equal debits and credits have been recorded for transactions.
  • The balance sheet would be correct.

Q6. The debt ratio of Jackson’s Shoes is .9 and the debt ratio of Billy’s Catering is 1.0. Based on this information, an investor can conclude:

  • Billy’s Catering finances a relatively lower portion of its assets with liabilities than Jackson’s Shoes.
  • Billy’s Catering has a lower risk from its financial leverage.
  • Jackson’s Shoes has a higher risk from its financial leverage
  • Billy’s Catering has the exact same dollar amount of total liabilities and total assets.
  • Jackson’s Shoes has less equity per dollar of assets than Billy’s Catering.

Q7. At year-end, a trial balance showed total credits exceeding total debits by $4,950. This difference could have been caused by:

  • An error in the general journal where a $4,950 increase in Accounts Receivable was recorded as an increase in Cash.
  • A net income of $4,950.
  • The balance of $49,500 in Accounts Payable being entered in the trial balance as $4,950.
  • The balance of $5,500 in the Office Equipment account being entered on the trial balance as a debit of $550.
  • An error in the general journal where a $4,950 increase in Accounts Payable was recorded as a decrease in Accounts Payable.

Q8. Prepaid accounts (also called prepaid expenses) are generally:

  • Payments made for products and services that never expire.
  • Classified as liabilities on the balance sheet.
  • Decreases in equity.
  • Assets that represent prepayments of future expenses.
  • Promises of payments by customers.

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