Discussion Questions

Q1. Define [a]assets, [b] liabilities, and [c] equity,

Q2. Which financial statement is sometimes called the statement of financial position

Quick study

Q1.Identify the financial statement[s] where each of the following items appears. Use I for income statement, E for statement of retained earnings, and B for balance sheet.

a.       Accounts payable  e. prepaid insurance

b.      Cash                                            f. Revenue

c.       Rent expense                               g. Office equipment

d.      Office supplies                             h. Unearned rent revenue.

Q2. Indicate whether a debit or credit decreases the normal balance of each of the following accounts.

a.       Land                                     e. Salaries expenses         i. Interest revenue  

b.      Service revenue                    f. Common stock            j. Dividends

c.       Interest payable                    g. Prepaid insurance    k. Unearned Revenue

d.      Accounts receivable              h. Building                      l. Accounts payable

Short answer questions

Q1. During the year, Able Co. purchased $39,600 worth of supplies, at the end of the year, the balance sheet showed a balance of $1,760 in the supplies account.  Prepare the necessary adjusting entry.

Q2.An asset that cost $50,000 was purchased on January 1.  The asset has an estimated useful life of three years and an estimated salvage value of $3,200.  Prepare the necessary adjusting journal entry for the end of the year.