Question

In the first month of operations for Pocket Industries, the total of the debit entries to the cash account amounted to $9,000 ($5,000 investment by the owner and revenues of $4,000). The total of the credit entries to the cash account amounted to $4,000 (purchase of equipment $2,000 and payment of accoubts payable $2,000). At the end of the month, the cash account has a(n)

a.   $2,000 credit balance.

b.   $4,000 debit balance.

c.   $2,000 credit balance.

d.   $4,000 debit balance.

Grayton Industries purchased supplies for $1,200. They agreed to pay the balance of $700 in 30 days. The journal entry to record this transaction would include a debit to an asset account for $1,200, a credit to a liability account for $700. Which of the following would be the correct way to complete the recording of the transaction?

a.   Credit an asset account for $500.

b.   Credit the Grayton, Capital account for $500.

c.   Debit the Grayton, Capital account for $500.

d.   Credit another liability account for $500.

On June 1, 2008, Delbert Inc. reported a cash balance of $12,000. During June, Delbert made deposits of $3,000 and made disbursements totalling $14,000. What is the cash balance at the end of June?

a.   $1,000 debit balance

b.   $15,000 debit balance

c.   $1,000 credit balance

d.   $4,000 credit balance

   At January 1, 2008, Burton Industries reported owner’s equity of $130,000. During 2008, Burton had a net income of $30,000 and owner drawings of $10,000. At December 31, 2008, the amount of owner’s equity is

a.   $130,000.

b.   $140,000.

c.   $10,000.

d.   $80,000.

Answer 1

• Answer #1
  End balance = Total Debits – Total Credits
  = 9000 – 4000
  = $ 5000
  Correct Answer = $ 5000 Debit Balance [None of the option matches this answer]
• Answer #2
  Correct Answer = Option ‘a’ Credit an asset account for $ 500
  $ 1200 Supplies (Asset) will be debited,
  $ 700 Accounts payable (Liability) will be credited,
  Balance $ 500 (1200 – 700) is paid in Cash (Asset) and will be credited.
• Answer #3
  Cash balance at end = Beginning balance + Deposits – Disbursements
  = 12000 + 3000 – 14000
  = $ 1000 Debit Balance
  Correct Answer = Option ‘a’ $ 1000 Debit balance
• Answer #4
  Owner’s Equity at end = Beginning balance+ Net Income - Net Loss – Drawings
  = 130000 + 30000 – 10000
  = $ 150,000
  Again, none of the options matches the Correct Answer which is $ 150,000