Principles of Accounting

Description

1. Balance of account = Debits – __
2. Asset accounts have a __ normal balance.
3. The owner’s drawing account has a __ normal balance.
4. Revenue accounts have a _ normal balance.
5. Expense accounts have a _ normal balance.
6. Liabilities and owner’s equity accounts normally have a _ balance.
7. Owner’s equity = Income statement accounts – ______
8. Determine which type of account is being described in each of the following definitions.
   a. Resources of the company b. Owner’s residual rights to assets after creditors c. Sales of services or products d. Amounts owed by the company e. Consuming assets or services in order to produce revenue
9. Determine whether each of the following accounts is an asset, liability, revenue, expense, or owner’s equity account. a. Equipment b. Utilities incurred & paid c. Unearned Revenue d. Sales e. Peter Rice, Capital
10. Would a debit and credit increase or decrease the following account balances?
    a. Prepaid Insurance b. Interest Revenue c. Long-Term Debt
11. Is the normal balance a debit or credit for the following accounts?
    a. The property, Plant, and Equipment b. Accounts Payable c. Sales
12. Do the following accounts have a normal debit or credit balance?
    a. Unearned Revenue b. Salaries Expense c. Interest Revenue
13. Would the following accounts have a normal debit or credit balance?
    a. Owner’s Drawing Account b. Fees Earned c. Rent Expense
14. Prepare the journal entry to record payment of salaries for $750, rent for $675, utilities for $250 and legal expenses for $130 on January 15, 2015.
15. Record the journal entry to record:
    a) The purchase of inventory on account for $1,200 on September 22, 2015.
    b) For rental revenue earned on August 9, 2015, for $890 that the customers paid for on account?
16. Given the following account balances, prepare an unadjusted trial balance for Bakeshop Corp. as of December 31, 2015. • Income Taxes Payable, credit balance $1,200
    • Sales Revenue, credit balance $8,750
    • PP&E, debit balance $7,500
    • Cost of Sales, debit balance $5,500
    • Accounts Payable, credit balance $1,240
    • Interest Revenue, credit balance $1,500
    • Cash, debit balance $2,000
    • Rental Expense, debit balance $3,550
    • Kim Atkinson, Capital, credit balance $2,460
    • Long-Term Debt, credit balance $7,400
    • Accounts Receivable, debit balance $1,500
    • Salaries Expense, debit balance $1,200
    • Inventory, debit balance $1,300
17. Create Red Road Co.’s unadjusted trial balance for March 31, 2015, given the following balances (assume all accounts have a normal balance):
    • Property, Plant, and equipment, $15,500
    • Wages Expense, $8,750
    • Rental Revenue, $3,500
    • Unearned Revenue, $4,270
    • Noah Gosling, Capital, $6,500
    • Accounts Payable, $3,280
    • Prepaid Expenses, $1,200
    • Notes Payable, $,3,950
    • Fees Earned, $12,500
    • Cash, $2,250
    • Wages Payable, $4,150
    • Rental Expense, $7,250
    • Accounts Receivable $3,200
18. Perform a horizontal analysis of the income statement below, showing changes in dollars and percentages (rounded to the nearest whole percentage). Determine if changes are favorable or unfavorable.
    Jeffy's Bike Store
    Income Statements
    For the Years Ended September 30
    Year 2 Year 1
    Rental revenue $100,000 $92,000
    Operating expenses:
    Rent expense $ 12,000 $11,500
    Interest expense 1,500 1,600
    Utilities expense 3,200 2,660
    Wages expense 5,500 5,000
    Total operating expenses $ 22,200 $20,760
    Net income $ 77,800 $71,240
19. Identify favorable and unfavorable trends from the income statements below by performing a horizontal analysis. Show changes in amounts and percentages (rounded to the nearest whole percentage).
    Wheeler & Fetch, CPA
    Income Statements
    For the Years Ended June 30
    Year 2 Year 1
    Fees earned $185,000 $179,500
    Operating expenses:
    Rent expense $ 15,000 $ 13,400
    Salaries expense 25,000 19,500
    Utilities expense 6,700 6,500
    Supplies expense 9,000 9,700
    Total operating expenses $ 55,700 $ 49,100
    Net income $129,300 $130,400
20. By performing a horizontal analysis on the following income statements, identify favorable and unfavorable trends. Show changes in amounts and percentages (rounded to the nearest whole percentage).
    Mig’s Market
    Income Statements
    For the Years Ended October 31
    Year 2 Year 1
    Sales $79,000 $68,500
    Cost of sales $17,550 $15,750
    Operating expenses:
    Rent expense $13,200 $12,000
    Salaries expense 11,500 13,000
    Utilities expense 4,200 3,600
    Legal expense 10,000 13,200
    Total operating expenses $38,900 $41,800
    Net income $22,550 $10,950