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Account Classification Topic 3

What type of account is increased with a debit but is a decrease to retained earnings?

  1. Liability
  2. Asset
  3. Revenue
  4. Expense

Journal Entry - Inventory Topic 3

Prepare the journal entry for the following transaction:

Purchased $16,000 of inventory, paid $12,000 in cash and the rest remained on account.

Journal Entry - Sales Topic 3

Prepare the journal entry for the following transaction:

Sold $90,000 of goods to customers, receiving $65,000 in cash and the remained on account.

Land Purchased With Cash Topic 3

Determine the effect on a company’s Assets and Net Income from the following transaction: land is purchased with cash.

Assets Net Income
A Decreased Decreased
B Decreased No effect
C Increased No effect
D Increased Increased
E None of the above

T/F: Liabilities and Equity Topic 3

The payment of a liability in cash will decrease stockholders’ equity.

True / False

T/F: T-Account Logic Topic 3

A T-account shows total debits of $26,000 and total credits of $20,000; therefore, it has a $6,000 debit balance.

True / False?

Normal Balances Topic 3

For each account listed below, mark whether it has a debit or credit normal balance.

Account Debit Credit
Revenues
Assets
Retained Earnings
Inventory
Prepaid Insurance
Prepaid Rent
Prepaid Expenses
Accounts Receivable
Expenses
Insurance Expense
Accounts Payable
Cost of Goods Sold
Dividends
Land
Liabilities
Cash
Notes Payable
Rent Expense
Capital Stock

The Effect of Journal Entries Topic 3

For each of the following transactions listed below, select the two effects it will have:

Transaction Effect 1 Effect 2
1 Provided services and received cash
2 Provided services on account
3 Received payment from customers on account
4 Received payment in advance from customers
5 Paid wages earned this week
6 Paid 6 month’s rent in advance
7 Borrowed cash from the bank and signed a note
8 Loaned cash to employee who signed a note
9 Purchased equipment with cash
10 Purchases supplies on account
11 Received cash and issued stock
12 Paid for supplies bought earlier on account
13 Paid dividends to stockholders

What Should Be Journaled Topic 3

A company experienced the following financial events on Sept. 29, Year 1. How many of these economic events would require a journal entry on that day?

  1. The company signed a new contract with an employees’ union that requires a $2.00 per hour increase in wages and a longer lunch break, effective 10/1/Y1.
  2. The company president is retiring and will be replaced by the vice president of finance who will be paid $50,000 more per year.
  3. The company purchased a fire insurance policy for $5,000 that will pay $1,000,000 if the facility is destroyed. The policy insures the company from 11/1/Y1 - 10/31/Y2
  1. One
  2. Two
  3. Three
  4. None