Chapter 1 practice

The delivery increases Supplies and Accounts Payable. The completed work increases Wages Expense and Wages Payable.

Neither event changes assets, liabilities, revenue, or expenses under the stated facts.

Completed employee work increases Wages Expense and Wages Payable, but an interview alone changes no account balance.

Many business events matter without changing an account balance on that date.

Answer: A

The accepted delivery increases Supplies and Accounts Payable. The completed employee work increases Wages Expense and Wages Payable. The proposal, cancellable order, and interview do not change any account balances under the stated facts.

At delivery, the company receives the supplies and becomes obligated to pay. The invoice checks the recorded purchase, and payment later settles part of the payable.

The cancellable order alone does not give the company the supplies or obligate it to pay, and the later cash payment must be recorded.

The company accepted the supplies and became obligated at delivery. The invoice does not change the recorded balances. Payment reduces Cash and Accounts Payable.

The invoice provides evidence for the purchase already recorded. Recording it again would duplicate the supplies and payable.

Answer: A

The cancellable order requires no entry under the stated facts. At delivery, Supplies and Accounts Payable each increase by $5,000. The invoice checks the recorded amount but does not change either balance. Paying $2,000 reduces Cash and the payable. Ending Cash is $8,000, Supplies are $5,000, total assets are $13,000, liabilities are $3,000, and equity is $10,000.

The company controls the equipment and owes the supported price on December 29.

The invoice supports the amount but does not delay the asset and obligation created by delivery.

Payment settles the payable that already exists; it does not create the equipment purchase.

The company controls the delivered equipment before it begins using it.

Answer: A

Lakeview Packaging records the equipment and payable on December 29, when it accepts delivery and becomes obligated to pay the stated price. The invoice and payment support later steps but do not set the purchase date.

The completed service increases Service Revenue and Accounts Receivable. The later collection increases Cash and decreases Accounts Receivable.

The completed and accepted service gives the company a receivable; the invoice documents that amount.

Cash collection increases Cash and decreases Accounts Receivable. It does not increase revenue again.

Recording revenue again at collection would count the same service twice.

Answer: A

Harbor Research records $8,400 of Accounts Receivable and Service Revenue on September 28. On October 18, it records Cash and removes the receivable. The invoice documents the amount but does not cause another accounting entry.

This treats the $4,000 customer advance and the $1,000 collection as revenue, even though only the separate $2,000 service was performed.

The credit service increases revenue by $2,000, the current utility service increases expense by $1,200, and the unperformed customer advance remains a $4,000 liability.

This measures revenue and expense correctly but omits the obligation created by the advance.

This records revenue when $1,000 is collected rather than when the $2,000 service is performed.

Answer: B

The $4,000 advance increases Cash and liabilities because no related work has been performed. The separate $2,000 service increases Accounts Receivable and revenue. Collecting $1,000 reduces the receivable and increases Cash without increasing revenue again. Paying $1,200 for current utility service increases expense. Revenue is $2,000, expense is $1,200, liabilities are $4,000, and equity is $800.

This subtracts the cash paid but omits the equipment acquired, treating the purchase as an immediate expense.

Cash decreases by $18,000 while equipment increases by $18,000, leaving total assets and equity unchanged.

No borrowing or unpaid purchase is stated, so the equipment purchase does not increase liabilities.

This adds equipment without removing the cash paid and therefore counts the same resources twice.

Answer: B

The contribution produces $60,000 cash and $60,000 equity. Paying $18,000 cash for equipment changes the asset composition to $42,000 cash and $18,000 equipment. Total assets remain $60,000; liabilities remain zero; equity remains $60,000.

Cash and Accounts Payable both decrease by the payment amount. The supplies and equity are unchanged.

The payment settles an existing payable and does not record a second expense.

Paying the supplier reduces Cash as well as Accounts Payable.

Only $4,000 of the $6,000 payable is paid, leaving $2,000 outstanding.

Answer: A

Cash falls from $14,000 to $10,000, while Supplies remain $6,000. Total assets therefore fall from $20,000 to $16,000. Accounts Payable falls from $6,000 to $2,000, and equity remains $14,000.

Cash increases, and the obligation to provide future service increases Unearned Revenue.

The company has not provided the service, so the receipt increases a liability rather than revenue.

The cash receipt and the obligation both exist on the receipt date.

The receipt does not reverse an expense under the stated facts.

Answer: A

Cash increases from $30,000 to $39,000. Unearned Revenue increases from zero to $9,000 because Easton Fitness owes the customer future training sessions. Equity remains $30,000.

This labels every cash receipt as revenue and ignores the bank's repayment claim and the owner's financing role.

Only the completed customer service is revenue. The bank receipt increases a liability, and the owner receipt increases equity through an owner investment.

This correctly identifies the loan but incorrectly treats the owner investment as revenue in addition to the customer service.

This treats the owner as a creditor even though the transfer is explicitly for an ownership interest.

Answer: B

The owner transfer increases Cash and equity through an investment by owner. The bank transfer increases Cash and liabilities. Only the customer payment for the completed service is revenue. Assets are $30,000, liabilities are $10,000, and equity is $20,000.

This treats every cash payment as expense, omitting the equipment asset and the owner nature of the distribution.

The equipment purchase exchanges assets, utility use is expense, and the owner payment reduces equity as a distribution.

This combines the utility cost and owner distribution as expense even though only the utility service is an activity-related cost.

This classifies the utility and distribution correctly but also reduces equity for equipment that remains an asset.

Answer: B

The $4,000 equipment purchase changes the asset mix but not total assets or equity at acquisition. The $2,000 utility service is expense. The $3,000 owner's draw is a distribution, not expense. Ending Cash is $21,000, Equipment is $4,000, and total assets and equity are $25,000.

Ending Cash is $26,000 and Equipment is $11,000. Revenue increases equity by $6,000, and Wages Expense reduces it by $2,000.

This treats the $11,000 equipment purchase as an immediate expense instead of an exchange of assets.

This adds the equipment without subtracting the cash paid for it.

The bank loan increases Cash and liabilities by $8,000.

Answer: A

Cash ends at $26,000 ($25,000 + $8,000 - $11,000 + $6,000 - $2,000). Equipment is $11,000, so total assets are $37,000. The loan leaves an $8,000 liability. Equity is $29,000 ($25,000 + $6,000 - $2,000).

Balance proves none of those factual or timing claims; each requires evidence and an appropriate accounting analysis.

The invoice is a vendor document that can support what occurred; the journal entry is what the company writes in its own books to record the affected accounts.

This gives the balance check its proper scope without treating it as proof that the entry describes the underlying transaction.

A wrong account can preserve debit-credit equality while misstating assets, expenses, or net income.

Answer: C

A journal entry represents the classified event, and equal sides provide an arithmetic check. The company's evidence must still support the event, date, account selection, and amount.

Cash increases for the service and decreases for the wage payment. Revenue increases with a credit, and expense increases with a debit.

This reverses the account effects for both transactions.

The service has already been provided, so the receipt is revenue rather than a liability.

The wages are paid as the work is completed, so the payment records Wages Expense rather than settling an existing payable.

Answer: A

The service entry debits Cash and credits Service Revenue for $7,500. The wage entry debits Wages Expense and credits Cash for $2,500.

The $5,100 debit increases the asset, and the $3,000 credit reduces it: $2,400 + $5,100 - $3,000 = $4,500.

Accounts Receivable is a debit-normal asset, and its debit amounts exceed its credit amounts.

This adds the collection instead of subtracting the credit from the receivable.

This subtracts both the new service and the collection from the opening debit balance.

Answer: A

Accounts Receivable begins with a $2,400 debit balance. The $5,100 service on credit increases it with a debit, and the $3,000 collection reduces it with a credit. The ending balance is $4,500 debit.

The receipt increases the liability. The refund reduces both Cash and that liability. No revenue is recorded because the company has performed no service.

This treats the retained cash as earned even though the company has not performed any service.

This omits the $500 refund from both Cash and the customer obligation.

This reverses the normal sides of the asset and liability accounts.

Answer: A

The receipt debits Cash and credits Unearned Revenue for $6,000. The $500 refund debits Unearned Revenue and credits Cash. Ending Cash is a $5,500 debit balance, Unearned Revenue is a $5,500 credit balance, and Service Revenue remains zero.

Post the $5,000 receipt to the debit side and the $7,000 and $2,000 payments to the credit side: $18,000 + $5,000 - $7,000 - $2,000 = $14,000.

This adds the 2 cash payments instead of subtracting the credits from Cash.

This subtracts the payments but omits the $5,000 customer receipt.

This ignores the opening Cash balance and nets only the current transactions.

Answer: A

Cash begins with an $18,000 debit balance. The customer advance adds a $5,000 debit, while the insurance and wage payments add $9,000 of credits. The ending balance is $14,000 debit.

Posting the collection and supplier payment into their existing accounts produces $16,000 on each side of the ending trial balance.

This adds receipt and payment activity without reducing the receivable and payable accounts to their ending balances.

The $1,000 payment reduces but does not eliminate the $3,000 payable; forcing the other credit balances to absorb the difference is unsupported.

Posting reorganizes 4 balanced entries into 8 account lines; it does not create additional transactions or turn total activity into ending balances.

Answer: A

Cash is $9,000 opening plus $2,000 collection minus $1,000 supplier payment, or $10,000. Supplies are $3,000. Accounts Receivable are $5,000 minus the $2,000 collection, or $3,000. Accounts Payable are $3,000 minus the $1,000 payment, or $2,000 credit. Owner, Capital is $9,000 and Service Revenue is $5,000, producing $16,000 on each trial-balance side.

Ending debit balances are Cash $17,000, Accounts Receivable $6,000, and Wages Expense $9,000. Ending credit balances are Common Stock $20,000 and Service Revenue $12,000.

This adds the three entries' activity: $12,000 + $6,000 + $9,000 = $27,000. A trial balance instead lists ending balances, including the opening accounts.

Failing to reduce Accounts Receivable for the collection would leave $38,000 of debit balances, but only $32,000 of credit balances. It would not produce equal $38,000 totals.

This nets revenue and expense before preparing the unadjusted trial balance instead of listing their separate balances.

Answer: A

Cash is $17,000 ($20,000 + $6,000 - $9,000). Accounts Receivable is $6,000 ($12,000 - $6,000), and Wages Expense is $9,000. Debit balances total $32,000. Common Stock is $20,000 and Service Revenue is $12,000, so credit balances also total $32,000.

Omitting both equal sides leaves the trial balance equal, just as substituting one debit account for another does.

Trial-balance equality tests whether the debit and credit balances add to the same amount. It does not show that every transaction was recorded or that each account is correct.

The unadjusted trial balance is a deliberate pre-adjustment checkpoint where errors and missing period-end information should be investigated.

Debit-credit equality does not establish that the entries reflect the underlying events, dates, accounts, or amounts.

Answer: B

Both errors preserve equal debit and credit totals. The omitted entry requires a separate check for missing transactions. The wrong debit requires the account choice to be compared with what the company acquired or consumed. The unadjusted trial balance is one accounting-cycle checkpoint, not a final correctness conclusion.