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Sample Questions
Introduction to Financial Accounting I
Transactions
 
Scenario I
Mark Smith started a lawn mowing business as a sole proprietorship last month. He invested $3,000 of his own cash into the firm. He used that cash to purchase a riding mower, a push mower, and a weed-cutter, all used and gas powered, for a total of $1,000. He also purchased a cell phone for $60 and signed a service contract that provides unlimited local service for $50 per month. Each month's use is billed at the end of the month. During the month, he mowed 75 lawns at a price of $20 each in cash. He purchased 40 gallons of gasoline during the month for his pick-up truck and the equipment at a price of $3.00 per gallon.

1) Write the journal entry for the start-up transaction.

 a)  Capital - Mark Smith   .....................   3,000.00
          Cash   ..................................              3,000.00
             To record owner's investment in firm.


 b)  Capital - Mark Smith   .....................   4,060.00
          Cash   ..................................              4,060.00
             To record owner's investment in firm.


 c)  Cash   .....................................   3,000.00
          Capital - Mark Smith   ..................              3,000.00
             To record owner's investment in firm.


 d)  Cash   .....................................   3,000.00
          Capital Stock   .........................              3,000.00
             To record owner's investment in firm.


 e)  None of the above.



2) Write the journal entry for the equipment purchase.

 a)  Mowing Equipment   .........................   1,000.00
          Cash    .................................              1,000.00
             To record purchase of equipment.


 b)  Mowing Equipment   .........................   1,000.00
       Office Equipment   .........................      60.00
          Cash   ..................................              1,060.00
             To record purchase of equipment.


 c)  Cash   .....................................   1,060.00
          Mowing Equipment   ......................              1,060.00
             To record purchase of equipment.


 d)  Cash   .....................................   1,060.00
          Mowing Equipment   ......................              1,000.00
          Office Equipment   ......................                 60.00
             To record purchase of equipment.


 e)  None of the above.



3) Write the journal entry for the phone usage.

 a)  Phone Expense   ..............................    50.00
          Cash   ..................................                 50.00
             To record cell phone expense.


 b)  Cash   .......................................    50.00
          Phone Expense   .........................                 50.00
             To record cell phone expense.


 c)  Accounts Payable   ............................   50.00
          Phone Expense   .........................                 50.00
             To record cell phone expense.


 d)  Phone Expense   ...............................   50.00
          Accounts Payable   ......................                 50.00
             To record cell phone expense.


 e)  None of the above.



4) Write the journal entry for the month's revenues.

 a)  Cash   .....................................   1,500.00
          Sales   .................................              1,500.00
             To record mowing revenues.


 b)  Sales   ....................................      75.00
          Cash   ..................................                 75.00
             To record mowing revenues.


 c)  Sales   ....................................   1,500.00
          Accounts Receivable   ...................              1,500.00
             To record mowing revenues.


 d)  Accounts Receivable   ......................   1,500.00
          Sales   .................................              1,500.00
             To record mowing revenues.


 e)  None of the above.



5) Write the journal entry for the month's operating expenses.

 a)  Gas Expense   .................................   40.00
          Cash   .....................................              40.00
             To record operating expenses.


 b)  Gas Expense   ................................   120.00
          Cash   ....................................              120.00
             To record operating expenses.


 c)  Cash   .......................................   120.00
          Gas Expense   .............................              120.00
             To record operating expenses.


 d)  Cash   .......................................    60.00
          Gas Expense   .............................               60.00
             To record operating expenses.


 e)  None of the above.





Scenario II
Diedre Jackson recently left her job as a building services manager to start her own small cleaning services business as a sole proprietorship. She invested $2,500 of her own cash into the firm, as well as van with a fair market value of $4,000, a computer with fair market value of $500, and a fax machine with a fair market value of $0.00. She has 4 regular clients who each pay her $2,500 per month for cleaning services. Three of them have paid their bill for the current month while the fourth's payment is still outstanding. The van depreciates at $100 per month, while other equipment depreciates at $200 per month. She has 2 employees who each have annual salaries of $18,000, paid every 2 weeks. Ms. Jackson herself withdrew $2,000 during the month for her own living expenses.

6) Write the journal entry for the start-up transaction.

 a)  Capital - Diedre Jackson   .................   2,500.00
          Cash   ..................................              2,500.00
             To record owner's investment in firm.


 b)  Cash   .....................................   7,000.00
          Capital - Diedre Jackson   ..............              7,000.00
             To record owner's investment in firm.


 c)  Capital - Diedre Jackson   .................   7,000.00
          Cash   ..................................              7,000.00
             To record owner's investment in firm.


 d)  Cash   .....................................   7,000.00
          Capital Stock   .........................              7,000.00
             To record owner's investment in firm.


 e)  None of the above.



7) Write the journal entry for the equipment depreciation.

 a)  Cleaning Equipment   .........................   100.00
          Depreciation Expense   ....................              100.00
             To record depreciation.


 b)  Depreciation Expense   .......................   300.00
          Cash   ....................................              300.00
             To record depreciation.


 c)  Depreciation Expense   .......................   300.00
          Accumulated Depreciation   ................              300.00
             To record depreciation.


 d)  Depreciation Expense   .......................   200.00
          Accumulated Depreciation   ................              200.00
             To record depreciation.


 e)  None of the above.



8) Write the journal entry for the month's salaries.

 a)  Wages Expense   ............................   3,000.00
          Cash   ..................................              3,000.00
             To record salaries expense.


 b)  Wages Expense   ............................   1,500.00
          Cash   ..................................              1,500.00
             To record salaries expense.


 c)  Cash   .....................................   3,000.00
          Wages Expense   .........................              3,000.00
             To record salaries expense.


 d)  Wages Expense   ............................   3,000.00
          Wages Payable   .........................              3,000.00
             To record salaries expense.


 e)  None of the above.



9) Write the journal entry for the month's revenues.

 a)  Cash   ....................................   10,000.00
          Sales   ................................              10,000.00
             To record cleaning revenues.


 b)  Sales   ....................................   7,500.00
          Cash   ..................................              7,500.00
             To record cleaning revenues.


 c)  Accounts Receivable   .....................   10,000.00
          Sales   ................................              10,000.00
             To record cleaning revenues.


 d)  Accounts Receivable   .....................    2,500.00
       Cash   ....................................    7,500.00
          Sales   ................................              10,000.00
            To record cleaning revenues.


 e)  None of the above.



10) Write the journal entry for the owner's withdrawal.

 a)  Wages Expense   ............................   2,000.00
          Cash   ..................................              2,000.00
             To record owner's withdrawal.


 b)  Capital - Diedre Jackson   .................   2,000.00
          Cash   ..................................              2,000.00
             To record owner's withdrawal.


 c)  Wages Payable   ............................   2,000.00
          Cash   ..................................              2,000.00
             To record owner's withdrawal.


 d)  Cash   .....................................   2,000.00
          Capital - Diedre Jackson   ..............              2,000.00
             To record owner's withdrawal.


 e)  None of the above.





Scenario III
Paul Delgado just graduated from college with a degree in business. He had not exercised good study habits, preferring to enjoy himself surfing at the nearby beach and having a good time on Spring Break. He earned only average grades despite being smart, so he didn't have a job offer upon graduation. He came upon a way to earn money and enjoy the beach at the same time. He decided to open his own mobile fruit shake stand and sell fruit shakes from a van to tourists on the beach.

He borrowed $7,000 from his father and incorporated a firm called Delgado's Batidos Inc. He issued 5,000 shares to himself for $5,000 and loaned the remaining $2,000 to the new firm. The incorporation cost $250. Paul bought a used mobile ice cream truck for $1,500 cash, and had it repainted with his own design for another $500. He bought a refurbished freezer to keep water, ice, and fruit cold at a cost of $200. And he acquired 2 blenders, an electric juicer, plastic jugs, sieves, and metal knives and spoons for a total of $150. Paul found that the truck's electricity generator needed reconditioning and that cost $400. A tape player and loudspeaker to play a jingle to the public cost $150. He designed and printed up 1,000 flyers advertising his product for $200.

Finally he was ready to start. He bought 2,000 plastic cups in 2 sizes for $100, 10 boxes of straws for $25, 10 boxes of napkins for $15, 20 gallons of water for $100, 50 pounds of ice for $50, and all kinds of fresh and frozen fruit (bananas, pineapple, strawberries, mangos, blueberries, peaches, etc.) for $500. Business was slow at first, but picked up after 2 weeks. He had sold 200 large shakes at $3 each and 100 small shakes at $2 each. Now his van was getting popular. He needed to buy more ice, water, and fruit at a total cost of $1,200 and he needed an assistant. He hired his younger brother paying him $200 per week. After another 2 weeks Paul and his brother had sold 500 large shakes and 400 small shakes. All the driving used up 80 gallons of gasoline at $3.50 a gallon. Paul paid himself $1,000 during the 4 weeks. He also bought, on credit, $250 worth of advertising space in the local newspaper for next month. He repaid his father $500. Paul wanted to make a tally of his first month in business and needed to record the transactions.

11) Write the journal entry for the incorporation.

 a)  Capital - Paul Delgado   ...................   7,000.00
          Cash   ..................................              7,000.00
             To record owner's investment in firm.


 b)  Cash   .....................................   7,000.00
          Capital - Paul Delgado   ................              7,000.00
             To record owner's investment in firm.


 c)  Cash   .....................................   7,000.00
          Loans Payable   .........................              2,000.00
          Capital - Paul Delgado   ................              5,000.00
             To record owner's investment in firm.


 d)  Cash   .....................................   7,000.00
          Loans Payable   .........................              2,000.00
          Capital Stock   .........................              5,000.00
             To record owner's investment in firm.


 e)  None of the above.



12) Write the journal entry for the equipment purchases.

 a)  Large Equipment   ..........................   2,600.00
          Cash   ..................................              2,600.00
             To record purchase of equipment.


 b)  Large Equipment   ..........................   2,600.00
       Small Equipment   ..........................     300.00
          Cash   ..................................              2,300.00
            To record purchase of equipment.


 c)  Large Equipment   ..........................   2,600.00
       Small Equipment   ..........................     300.00
          Cash   ..................................              2,900.00
            To record purchase of equipment.


 d)  Cash   .....................................   2,900.00
            Equipment   ...........................              2,900.00
             To record purchase of equipment.


 e)  None of the above.



13) Write the journal entry for the supplies purchase.

 a)  Supplies Expense   ..........................  1,700.00
          Cash   ...................................             1,700.00
             To record supplies purchase.


 b)  Cash   ......................................  1,990.00
          Supplies Expense   .......................             1,990.00
             To record supplies purchase.


 c)  Fruit Supplies   .............................   500.00
       Non-fruit Supplies   .........................   290.00
          Cash   ....................................              790.00
            To record supplies purchase.


 d)  Supplies   ..................................  1,990.00
          Cash   ...................................             1,990.00
             To record supplies purchase.


 e)  None of the above.



14) Write the journal entry for, what could be considered, selling and administrative expenses.

 a)  Cash   .......................................   250.00
          S&A Expenses   ............................              250.00
             To record selling and admin. expenses.


 b)  S&A Expenses   ...............................   450.00
          Cash   ....................................              450.00
             To record selling and admin. expenses.


 c)  S&A Expenses   ...............................   200.00
          Cash   ....................................              200.00
             To record selling and admin. expenses.


 d)  S&A Expenses   ...............................   450.00
          Accounts Payable   ........................              450.00
             To record selling and admin. expenses.


 e)  None of the above.



15) Write the journal entry for the month's revenues.

 a)  Cash   .....................................   2,100.00
          Sales   .................................              2,100.00
             To record fruit shake revenues.


 b)  Sales   ....................................   3,100.00
          Cash   ..................................              3,100.00
             To record fruit shake revenues.


 c)  Cash   .....................................   3,100.00
          Sales   .................................              3,100.00
             To record fruit shake revenues.


 d)  Accounts Receivable   ......................   3,100.00
          Sales   .................................              3,100.00
             To record fruit shake revenues.


 e)  None of the above.



16) Write the journal entry for the brother's salary.

 a)  Wages Expense   .............................    400.00
          Cash   ...................................               400.00
             To record salaries expense.


 b)  Wages Expense   .............................    200.00
          Cash   ...................................               200.00
             To record salaries expense.


 c)  Cash   ......................................    400.00
          Wages Expense   ..........................               400.00
             To record salaries expense.


 d)  Wages Expense   .............................    400.00
          Wages Payable   ..........................               400.00
             To record salaries expense.


 e)  None of the above.



17) Write the journal entry for Paul's withdrawal.

 a)  Capital - Paul Delgado   ...................   1,000.00
          Cash   ..................................              1,000.00
             To record owner's withdrawal.


 b)  Wages Expense   ............................   1,000.00
          Cash   ..................................              1,000.00
             To record owner's withdrawal.


 c)  Capital Stock   ............................   1,000.00
          Wages Expense   .........................              1,000.00
             To record owner's withdrawal.


 d)  Wages Expense   ............................   1,000.00
          Wages Payable   .........................              1,000.00
             To record owner's withdrawal.


 e)  None of the above.



18) Write the journal entry for the month's gas expenses.

 a)  Gas Expense   ................................   280.00
          Cash   ....................................              280.00
             To record gas expenses.


 b)  Gas Expense   ................................    80.00
          Cash   ....................................               80.00
             To record gas expenses.


 c)  Cash   .......................................   280.00
          Gas Expense   .............................              280.00
             To record gas expenses.


 d)  Cash   .......................................   240.00
          Gas Expense   .............................              240.00
             To record gas expenses.


 e)  None of the above.



19) Write the journal entry for the next month's advertising.

 a)  Cash   .......................................   250.00
          Advertising Expense   .....................              250.00
             To record prepaid advertising.


 b)  Advertising Expense   ........................   250.00
          Cash   ....................................              250.00
             To record prepaid advertising.


 c)  Prepaid Advertising   ........................   250.00
          Cash   ....................................              250.00
             To record prepaid advertising.


 d)  Prepaid Advertising   ........................   250.00
          Accounts Payable   ........................              250.00
             To record prepaid advertising.


 e)  None of the above.



20) Write the journal entry for Paul's repayment of his father's loan.

 a)  Loans Payable   ............................     500.00
          Cash   ..................................                500.00
             To record loan repayment to father.


 b)  Loans Receivable   .........................     500.00
          Cash   ..................................                500.00
             To record loan repayment to father.


 c)  Cash   .....................................     500.00
          Loans Payable   .........................                500.00
             To record loan repayment to father.


 d)  Cash   .....................................     500.00
          Capital Stock   .........................                500.00
             To record loan repayment to father.


 e)  None of the above.






 

 

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