Chapter 2: Recording Business Transactions

2.4-34 Equipment is purchased for cash. Which of the following would be true?

A) There is an increase in total assets.

B) There is a decrease in both total assets and total liabilities.

C) There is an increase in total assets and a decrease in total liabilities.

D) There is no effect on total assets.

2.4-35 Services were performed on account. Which of the following would be true?

A) Total assets decrease, net income increases, and owner’s equity increases.

B) Net income decreases, owner’s equity increases, and total assets increase.

C) Total assets increase, net income increases, and owner’s equity increases.

D) Net income decreases, total assets decrease, and owner’s equity decreases.

2.4-36 A proprietor makes withdrawals. Which of the following would be true?

A) Net income would decrease.

B) Total assets would increase.

C) There would be no effect on total assets.

D) Owner’s equity would decrease.

2.4-37 A utility bill is received. It will be paid in the following accounting period. Which of the following would be true as a result of the receipt of the utility bill?

A) Net income will increase.

B) Stockholders’ equity will decrease.

C) Total liabilities will decrease.

D) There will be no effect on total liabilities.

2.4-38 A building is purchased by signing a mortgage note. Which of the following would be true?

A) Total liabilities decrease.

B) There is no effect on owner’s equity.

C) Owner’s equity is increased.

D) Total assets decrease.

2.4-39 For the following transactions, prepare journal entries in good form for the month ending December 31, 2010.

a. Caleb McKinney invested $4,000 cash in his new business, McKinney Consulting..

b. McKinney Consulting. paid the first month's rent with $500.

c. McKinney Consulting purchased equipment by paying $1,000 down and executing a note payable for $4,500.

d. McKinney Consulting purchased supplies for $500 cash.

e. McKinney Consulting. billed a client for $2,000 of architectural services completed.

f. McKinney Consulting received the $2,000 for the completed services.

2.4-40 __________ is the accounting process of copying a transaction from the journal to the ledger.

2.4-41 Prepare journal entries, in good form, for the following transactions:

a. Ellen Rutledge invested $3,000 cash in her new architectural services proprietorship.

b. Ellen paid the first month's rent with $800.

c. Ellen purchased equipment by paying $1,000 down and executing a note payable for $3,500.

d. Ellen purchased supplies for $350 cash.

e. Ellen billed a client for $2,300 of architectural services completed.

f. Ellen received the $2,300 for the completed services.

2.4-42 Selected entries from Vineyard's Equipment Repair are outlined below. Write an explanation for each of the entries.

a. Rent expense		400
	Cash		400
b. Equipment		6,300
	Cash		6,300
c. Supplies		680
	Cash		680
d. Accounts receivable		1,500
Cash		500
	Service revenue		2,00

2.4-43 Refer to the following transactions:

a. Ellen Rutledge invested $3,000 cash in her new architectural services company.

b. The company paid the first month's rent with $800.

c. The company purchased equipment by paying $1,000 down and executing a note payable for $3,500.

d. The company purchased supplies for $350 cash.

e. The company billed a client for $2,300 of architectural services completed

f. The company received the $2,300 for the completed services.

Post the transactions to the following T-accounts.

Accounts

Cash receivable Supplies Equipment

Notes payable Capital Service revenue Rent expense