Chapter 2: Quick Study

QS 2-1: Identifying Source Documents Identify the items likely to serve as source documents from the following list: • • • • Sales receipt Invoice from supplier Bank statement Telephone bill QS 2-2: Identifying Financial Statement Accounts Classify each of the following accounts as Asset, Liability, or Equity: • • • • • • • • • Cash - Asset Prepaid Rent - Asset Office Supplies - Asset Prepaid Insurance - Asset Office Equipment - Asset Notes Payable - Liability Accounts Payable - Liability Unearned Rent Revenue - Liability Notes Receivable - Asset QS 2-3: Reading a Chart of Accounts Using the chart of accounts: • • • • • • • • • Advertising Expense - Expense Rent Revenue - Revenue Rent Receivable - Asset Machinery - Asset Accounts Payable - Liability Furniture - Asset Notes Payable - Liability Prepaid Insurance - Asset Utilities Expense - Expense QS 2-4: Identifying Normal Balance (Debit or Credit) Identify the normal balance (debit or credit) for the following accounts: • • • • • Rideshare Revenue - Credit Office Supplies - Debit Cash - Debit Wages Expense - Debit Accounts Receivable - Debit • • • • Prepaid Rent - Debit Wages Payable - Credit Building - Debit Unearned Revenue - Credit QS 2-5: Linking Debit or Credit with Normal Balance Indicate whether a debit or credit decreases the normal balance for each account: • • • • • • Interest Payable - Debit decreases Accounts Receivable - Credit decreases Prepaid Insurance - Credit decreases Buildings - Credit decreases Accounts Payable - Debit decreases Land - Credit decreases QS 2-6: Analyzing Debit or Credit by Account Indicate whether a debit or credit results in the specified change for each account: • • • • • • • • • • Increase Land - Debit Decrease Cash - Credit Increase Consulting Revenue - Credit Increase Salaries Expense - Debit Decrease Unearned Revenue - Debit Decrease Prepaid Rent - Credit Increase Notes Payable - Credit Decrease Accounts Receivable - Credit Increase Accounts Payable - Credit Increase Store Equipment - Debit QS 2-7: Computing T-account Balance Determine the ending balance of specified T-accounts. QS 2-8: Analyzing Transactions and Preparing Journal Entries For each transaction, analyze it using the accounting equation, prepare the journal entry, and post to T-accounts. Example transactions include: • • • • May 15: DeShawn Tyler invests $7,000 cash and $3,000 equipment for common stock. May 21: Elegant Lawns purchases office supplies on credit for $500. May 25: Elegant Lawns receives $4,000 cash for landscaping services. May 30: Elegant Lawns receives $1,000 cash in advance for future services. QS 2-9: Preparing Journal Entries Prepare general journal entries for transactions like: • • • • • Providing consulting services on credit. Purchasing supplies on credit. Collecting cash payment for consulting services. Paying cash towards payable for supplies. Paying cash for utility expenses. QS 2-10: Analyzing Transactions Using the Accounting Equation Analyze the effect of each transaction on the accounting equation. QS 2-11: Preparing Compound Journal Entries Prepare compound journal entries for: • • Investment of cash and equipment in exchange for common stock. Acquisition of supplies by paying cash and putting part on credit. QS 2-12: Identifying a Posting Error Identify which error creates an imbalance in a trial balance with $20,000 in debits and $24,500 in credits. QS 2-13: Classifying Accounts in Financial Statements Indicate which financial statement each item appears on (income statement, statement of retained earnings, or balance sheet): • • • • • • • • • • Services Revenue - Income statement Interest Payable - Balance sheet Accounts Receivable - Balance sheet Salaries Expense - Income statement Equipment - Balance sheet Prepaid Insurance - Balance sheet Buildings - Balance sheet Rental Revenue - Income statement Unearned Revenue - Balance sheet Office Supplies - Balance sheet QS 2-14: Preparing a Trial Balance Prepare a December 31 trial balance for Lawson Consulting based on provided account data. QS 2-15: Preparing an Income Statement Prepare a December income statement for Lawson Consulting based on account balances. QS 2-16: Preparing a Statement of Retained Earnings Prepare a December statement of retained earnings for Lawson Consulting, noting that the beginning balance is $0 and the net income for the month is $4,000. QS 2-17: Preparing a Balance Sheet Prepare a December 31 balance sheet for Lawson Consulting, with ending retained earnings of $2,500. QS 2-18: Interpreting Debt Ratio Evaluate whether Deutsche Auto’s risk from financial leverage increased or decreased over three years. QS 2-19: Computing and Using the Debt Ratio Compute Home Demo's debt ratio and compare it with Lows Hardware to determine which has higher financial leverage risk.