When is cost of goods sold determined in a perpetual inventory system?
> What is the basic accounting equation?
> What are the basic steps in the recording process?
> Selected transactions for the Finney Company are presented in journal form below. Post the transactions to T accounts. Make one T account for each item and determine each account’ sending balance. J1 Account Titles and Explanation R
> What are the three basic forms of business organizations for profit-oriented enterprises?
> What is the economic entity assumption?
> What is the monetary unit assumption?
> What is the normal balance for each of the following accounts? (a) Accounts Receivable. (b) Cash. (c) Owner’s Drawing. (d) Accounts Payable. (e) Service Revenue. (f) Salaries Expense. (g) Owner’s Capital.
> “Bookkeeping and accounting are the same.” Do you agree? Explain.
> What uses of financial accounting information are made by (a) investors and (b) creditors?
> Jeff Hiller, a fellow student, contends that the double entry system means each transaction must be recorded twice. Is Jeff correct? Explain.
> “The terms debit and credit mean increase and decrease, respectively.” Do you agree? Explain.
> “Accounting is ingrained in our society and it is vital to our economic system.” Do you agree? Explain.
> What internal control objectives are met by physical controls?
> Rowand Enterprises had the following selected transactions. 1. Aaron Rowand invested $4,000 cash in the business. 2. Paid office rent of $1,100. 3. Performed consulting services and billed a client $5,200. 4. Aaron Rowand withdrew $700 cash for personal
> At the corner grocery store, all sales clerks make change out of one cash register drawer. Is this a violation of internal control? Why?
> “Internal control is concerned only with enhancing the accuracy of the accounting records.” Do you agree? Explain.
> Identify and describe the five components of a good internal control system.
> Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify the three factors and explain what is meant by each.
> Jacobs Department Stores has just installed new electronic cash registers in its stores. How do cash registers improve internal control over cash receipts?
> What principle(s) of internal control is (are) involved in making daily cash counts of over-the-counter receipts?
> McCartney Fertilizer Co. owns the following assets at the balance sheet date. Cash in bank savings account…………………. $ 8,000 Cash on hand…………………………………………….…850 Cash refund due from the IRS……………………. 1,000 Checking account balance…………………………12,000 Postdated c
> The management of Sewell Company asks you, as the company accountant, to explain (a) the concept of reasonable assurance in internal control and (b) the importance of the human factor in internal control.
> (a) Explain the control principle of independent internal verification. (b) What practices are important in applying this principle?
> A local bank reported that it lost $150,000 as the result of an employee fraud. Randal Smith is not clear on what is meant by an “employee fraud.” Explain the meaning of fraud to Randal and give an example of frauds that might occur at a bank.
> Konerko Industries had the following transactions. 1. Borrowed $5,000 from the bank by signing a note. 2. Paid $2,500 cash for a computer. 3. Purchased $700 of supplies on account. Instructions (a) Indicate what accounts are increased and decreased by e
> How does an enterprise resource planning (ERP) system differ from an entry-level computerized accounting system?
> What are common features of computerized accounting packages beyond recording transactions and preparing financial statements?
> What transactions might be included in a multiple-column purchases journal that would not be included in a single column purchases journal?
> In what journal would the following transactions be recorded? (Assume that a two-column sales journal and a single-column purchases journal are used.) (a) Cash received from signing a note payable. (b) Investment of cash by the owner of the business. (c)
> In what journal would the following transactions be recorded? (Assume that a two-column sales journal and a single-column purchases journal are used.) (a) Recording of depreciation expense for the year. (b) Credit given to a customer for merchandise purc
> One column total of a special journal is posted at month end to only two general ledger accounts. One of these two accounts is Accounts Receivable. What is the name of this special journal? What is the other general ledger account to which that same mont
> The cash and the accounts receivable columns in the cash receipts journal were mistakenly over added by $4,000 at the end of the month. (a) Will the customers’ ledger agree with the Accounts Receivable control account? (b) Assuming no other errors, will
> (a) What is an accounting information system? (b) “An accounting information system applies only to a manual system.” Do you agree? Explain.
> “The selection of an inventory cost flow method is a decision made by accountants.” Do you agree? Explain. Once a method has been selected, what accounting requirement applies?
> What is a major advantage and a major disadvantage of the specific identification method of inventory costing?
> T. J. Carlin has the following transactions during August of the current year. Indicate (a) the effect on the accounting equation and (b) the debit-credit analysis illustrated on pages 61–66 of the text. Aug. 1 Opens an office as a financial advisor, i
> David Shannon believes that the allocation of inventoriable costs should be based on the actual physical flow of the goods. Explain to David why this may be both impractical and inappropriate.
> Explain the difference between the terms FOB shipping point and FOB destination.
> Your friend Tom Witt has been hired to help take the physical inventory in Hawkeye Hardware Store. Explain to Tom Witt what this job will entail.
> An item must possess two characteristics to be classified as inventory by a merchandiser. What are these two characteristics?
> Under what circumstances might inventory turnover be too high? That is, what possible negative consequences might occur?
> Willingham Company’s balance sheet shows Inventories $162,800. What additional disclosures should be made?
> Mintz Company discovers in 2010 that it’s ending inventory at December 31, 2009, was $7,000 understated. What effect will this error have on (a) 2009 net income, (b) 2010 net income, and (c) the combined net income for the 2 years?
> Ruthie Stores has 20 toasters on hand at the balance sheet data. Each cost $27.The current replacement cost is $30 per unit. Under the lower-of-cost-or-market basis of accounting for inventories, what value should Ruthie report for the toasters on the ba
> Which assumed inventory cost flow method: (a) usually parallels the actual physical flow of merchandise? (b) assumes that goods available for sale during an accounting period are identical? (c) assumes that the latest units purchased are the first to
> “The key to successful business operations is effective inventory management.” Do you agree? Explain.
> Transaction data for Hanshew Real Estate Agency are presented in E2-4. Reference Data from E 2-4: Presented below is information related to Hanshew Real Estate Agency. Oct. 1 Pete Hanshew begins business as a real estate agent with a cash investment of
> Joan Roland believes revenues from credit sales may be earned before they are collected in cash. Do you agree? Explain.
> Explain the meaning of the credit terms 2/10, n/30.
> How does income measurement differ between a merchandising and a service company?
> Why is the normal operating cycle for a merchandising company likely to be longer than for a service company?
> Identify the sections of a multiple-step income statement that relate to (a) operating activities, and (b) non-operating activities.
> Identify the distinguishing features of an income statement for a merchandising company.
> Ann Fort Company reports net sales of $800,000, gross profit of $370,000, and net income of $240,000. What are its operating expenses?
> What merchandising account(s) will appear in the post-closing trial balance?
> Explain why the Merchandise Inventory account will usually require adjustment at year-end.
> Tom Oslow, a fellow student, is unclear about the basic steps in the recording process. Identify and briefly explain the steps in the order in which they occur.
> Urlacher Company performs the following accounting tasks during the year. ______Analyzing and interpreting information. ______Classifying economic events. ______Explaining uses, meaning, and limitations of data. ______Keeping a systematic chronological d
> (a) “The steps in the accounting cycle for a merchandising company are different from the accounting cycle for a service company.” Do you agree or disagree? (b) Is the measurement of net income for a merchandising company conceptually the same as for a s
> Which of the following accounts would not appear in the post-closing trial balance? Interest Payable; Equipment; Depreciation Expense; Jennifer Shaeffer, Drawing; Unearned Revenue; Accumulated Depreciation— Equipment; and Service Revenue.
> What are the content and purpose of a post-closing trial balance?
> Describe the nature of the Income Summary account and identify the types of summary data that may be posted to this account.
> Identify the account(s) debited and credited in each of the four closing entries, assuming the company has net income for the year.
> Why is it necessary to prepare formal financial statements if all of the data are in the statement columns of the worksheet?
> If a company’s revenues are $125,000 and its expenses are $113,000, in which financial statement columns of the worksheet will the net income of $12,000 appear? When expenses exceed revenues, in which columns will the difference appear?
> What is the relationship, if any, between the amount shown in the adjusted trial balance column for an account and that account’s ledger balance?
> Explain the purpose of the worksheet.
> Using PepsiCo’s annual report, determine its current liabilities at December 29, 2007, and December 30, 2006. Were current liabilities higher or lower than current assets in these two years?
> Presented below is information related to Hanshew Real Estate Agency. Oct. 1 Pete Hanshew begins business as a real estate agent with a cash investment of $15,000. 2 Hires an administrative assistant. 3 Purchases office furniture for $1,900, on account.
> Distinguish between long-term investments and property, plant, and equipment.
> What is meant by the term “operating cycle?”
> What standard classifications are used in preparing a classified balance sheet?
> How do correcting entries differ from adjusting entries?
> Identify, in the sequence in which they are prepared, the three trial balances that are often used to report financial information about a company.
> Indicate, in the sequence in which they are made, the three required steps in the accounting cycle that involve journalizing.
> Distinguish between a reversing entry and an adjusting entry. Are reversing entries required?
> “A worksheet is a permanent accounting record and its use is required in the accounting cycle.” Do you agree? Explain.
> What is the debit/credit effect of a prepaid expense adjusting entry?
> Distinguish between the two categories of adjusting entries, and identify the types of adjustments applicable to each category.
> Data for D. Reyes, interior decorator, are presented in E2-2. Instructions Journalize the transactions using journal page J1. (You may omit explanations.) Reference Data for E 2-2: Selected transactions for D. Reyes, an interior decorator, in her first
> “Adjusting entries are required by the cost principle of accounting.” Do you agree? Explain.
> In completing the engagement in question 3, Marsh pays no costs in March, $2,000 in April, and $2,500 in May (incurred in April). How much expense should the firm deduct from revenues in the month when it recognizes the revenue? Why?
> How do documentation procedures contribute to good internal control?
> Meg Lucas is reviewing the principle of segregation of duties. What are the two common applications of this principle?
> What principles of internal control apply to most organizations?
> At Hummel Wholesale Company, two mail clerks open all mail receipts. How does this strengthen internal control?
> A $500 purchase of merchandise on account from Lore Company was properly recorded in the purchases journal. When posted, however, the amount recorded in the subsidiary ledger was $50. How might this error be discovered?
> Thogmartin Company uses special journals. It recorded in a sales journal a sale made on account to R. Peters for $435.A few days later, R. Peters returns $70 worth of merchandise for credit. Where should Thogmartin Company record the sales return? Why?
> Identify and explain the four special journals discussed in the chapter. List an advantage of using each of these journals rather than using only a general journal.
> (a) When do companies normally post to (1) the subsidiary accounts and (2) the general ledger control accounts? (b) Describe the relationship between a control account and a subsidiary ledger.
> Selected transactions for D. Reyes, an interior decorator, in her first month of business, are as follows. Jan. 2 Invested $10,000 cash in business. 3 Purchased used car for $4,000 cash for use in business. 9 Purchased supplies on account for $500. 11 Bi
> What are the advantages of using subsidiary ledgers?
> Certain principles should be followed in the development of an accounting information system. Identify and explain each of the principles.
> Why would special journals used in different businesses not be identical in format? What type of business would maintain a cash receipts journal but not include a column for accounts receivable?
> Jim’s Hat Shop received a shipment of hats for which it paid the wholesaler $2,970. The price of the hats was $3,000 but Jim’s was given a $30 cash discount and required to pay freight charges of $50. In addition, Jim’s paid $130 to cover the travel expe
> Garitson Music Center has 5 CD players on hand at the balance sheet date. Each cost $400. The current replacement cost is $380 per unit. Under the lower-of-cost-or market basis of accounting for inventories, what value should be reported for the CD playe
> Peter Lunde is studying for the next accounting mid-term examination. What should Peter know about (a) departing from the cost basis of accounting for inventories and (b) the meaning of “market” in the lower-of-cost-or market method?
> Casey Company has been using the FIFO cost flow method during a prolonged period of rising prices. During the same time period, Casey has been paying out all of its net income as dividends. What adverse effects may result from this policy?
> In a period of rising prices, the inventory reported in Plato Company’s balance sheet is close to the current cost of the inventory. Cecil Company’s inventory is considerably below its current cost. Identify the inventory cost flow method being used by e
> Sanchez Company prepares reversing entries. If the adjusting entry for interest payable is reversed, what type of an account balance, if any, will there be in Interest Payable and Interest Expense after the reversing entry is posted?
