Accounting 2 Multiple Choice Question

A partner's drawing account is located in the owners' equity division of a general ledger. This is because a drawing account represents the amount of money or assets that a partner withdraws from the business for personal use. It is considered a reduction in the partner's ownership interest in the business, which is reflected in the owners' equity section of the ledger.

The correct answer is $50.00. This can be calculated by multiplying the principal amount of $2,000.00 by the interest rate of 10% and then dividing it by the number of days in a year (365) and multiplying it by the number of days the note is held (90). The formula for calculating interest is: Interest = (Principal * Interest Rate * Time) / (365). In this case, the calculation would be: (2000 * 0.10 * 90) / 365 = $49.32. However, since the question asks for the interest amount on the note, it is rounded up to the nearest dollar, which is $50.00.

In a voucher system, vouchers payable is used as a liability account instead of accounts payable. This is because a voucher system involves the use of vouchers, which are documents that authorize the payment of a certain amount of money. These vouchers serve as a substitute for accounts payable, as they represent the amount owed to suppliers or creditors. Therefore, vouchers payable is the appropriate liability account to track these obligations in a voucher system.

When a business receives cash in advance for rent and initially records unearned revenue as revenue, the account credited would be "rent income." This is because the business has received the cash in advance but has not yet earned it as revenue. By crediting the "rent income" account, the business recognizes the obligation to provide the rental service in the future. This account will then be debited as the revenue is earned over time.

The source document for an entry in a voucher register is a voucher. A voucher is a document that provides evidence of a transaction or expense. It contains details such as the date, amount, purpose, and the parties involved in the transaction. Vouchers are used to support and verify the entries made in the voucher register, which is a record of all vouchers issued or received by an organization. Therefore, the correct answer is voucher.

Rent received in advance is considered a liability until the rented space is actually used. This is because the landlord has received payment for a service that has not yet been provided. Until the tenant occupies the rented space and the rental period begins, the rent received in advance is considered a liability on the landlord's balance sheet. Once the space is used, the liability is then converted into rental income.

The correct answer is matching expenses with revenue. Recording an adjusting entry for accrued interest income involves recognizing the revenue earned from interest in the same period as the related expense. This ensures that the financial statements accurately reflect the income earned and the expenses incurred during a specific accounting period, thereby matching expenses with revenue.

At the end of a fiscal period, a business must show how much rent received in advance has become a revenue. This is because rent received in advance is initially recorded as a liability, as the business has an obligation to provide the service (rent) in the future. However, as time passes and the service is provided, the liability decreases and the corresponding revenue is recognized. Therefore, the rent received in advance becomes a revenue for the business.

When an account has no special columns in the voucher register, information is recorded in the general columns. The general columns are used to record various types of transactions that do not have specific columns assigned to them. These columns provide a flexible and versatile way to record different types of transactions in the voucher register.

When a partnership wants to record the distribution of goodwill, it is typically done in the general journal. The general journal is a book of original entry where all non-routine transactions and adjustments are recorded. Since the distribution of goodwill is not a regular occurrence and does not involve cash receipts or cash payments, it would not be recorded in the cash receipts or cash payments journal. Therefore, the correct answer is the general journal.

The correct answer is "check" because a check is a written order from an account holder to their bank, instructing the bank to pay a specific amount of money to a designated recipient. In a check register, which is used to keep track of transactions and balances in a checking account, each entry corresponds to a check that has been issued. Therefore, the source document for an entry in a check register is the check itself.

The correct answer is $25.00. This can be calculated by using the formula for simple interest: Interest = Principal x Rate x Time. In this case, the principal is $1,000.00, the rate is 10% (or 0.10 as a decimal), and the time is 3 months (or 0.25 years). Plugging these values into the formula, we get: Interest = $1,000.00 x 0.10 x 0.25 = $25.00. Therefore, the interest on the note receivable is $25.00.

The correct answer is "date the voucher must be paid" because when vouchers are filed in the unpaid vouchers file, they are typically organized based on the date on which the voucher needs to be paid. This helps in ensuring that payments are made on time and allows for efficient management of accounts payable.

The maturity date of a 60-day note receivable issued on December 27 can be calculated by adding 60 days to the issue date. December has 31 days, so counting 60 days from December 27 would give us February 25 as the maturity date.

Goodwill is recorded on a partnership's records if the partners agree that a new partner's investment results in goodwill. This means that when a new partner joins the partnership and makes an investment, the existing partners believe that the investment will bring additional value and benefits to the partnership. As a result, they agree to record goodwill on the partnership's books to represent the intangible value of the new partner's contribution. This goodwill is an asset that reflects the reputation, customer base, and other intangible advantages that the new partner brings to the partnership.

When a dishonored note is paid, the additional interest is calculated on the maturity value of the note. The maturity value of a note refers to the total amount that is due at the end of the note's term, including both the principal amount and any interest that has accrued. Therefore, when the note is dishonored and later paid, any additional interest that needs to be calculated would be based on the maturity value of the note.

Goodwill refers to the intangible value of a business that exceeds the total investment made by its owners. It represents the reputation, customer loyalty, brand recognition, and other intangible assets that contribute to the business's value. Goodwill is an important aspect of a company's financial health and is typically recorded on the balance sheet as part of the owner's equity. It is not the same as long-term assets, which include tangible assets like property, plant, and equipment. Net income, on the other hand, refers to the profit earned by a business after deducting all expenses from its revenue.

When a business receives cash in advance for rent, it can be recorded as either a liability or a revenue. If the business has not yet provided the service or rented out the property, the cash received is considered a liability because the business owes the customer the service in the future. However, if the business has already provided the service or rented out the property, the cash received is considered revenue because it represents income earned by the business. Therefore, depending on the timing of the transaction, the cash received in advance for rent can be recorded as either a liability or a revenue.

When unearned revenue is initially recorded as a liability, it means that the company has received cash in advance for rent income that has not yet been earned. Therefore, the cash account is debited to increase its balance, while the rent income account is credited to record the increase in the liability. This reflects the fact that the company has received cash but has not yet earned the revenue, and it will recognize the revenue as it is earned in the future.

When a note is dishonored, it means that the debtor has failed to make the payment on the due date. In this case, the account that is debited is "accounts receivable." This is because the debtor's failure to pay results in a decrease in the amount of money owed to the company, which is reflected in the accounts receivable account.

A check register is similar to and replaces a cash payments journal because both are used to record and track outgoing payments. A check register specifically focuses on checks issued by the company, while a cash payments journal includes all forms of cash payments made by the company, including checks. Therefore, a check register can effectively replace a cash payments journal as it serves the same purpose of documenting and monitoring outgoing cash transactions.