Description Finsh the test in 2 hoursI. PROBLEMS (USE THE JOURNAL PAPER PROVIDED)II. ANSWER THE FILL IN QUESTIONS ON THE TEST PAPER III. MULTIPLE CHOICE QUESTIONS. IV. SHORT ESSAY QUESTION 1 attachmentsSlide 1 of 1attachment_1attachment_1.slider-slide > img { width: 100%; display: block; } .slider-slide > img:focus { margin: auto; } Unformatted Attachment Preview Page 1 of 17 FINANCIAL ACCOUNTING 1A COMPREHENSIVE FINAL TEST Prof. Richard S. Claire I. PROBLEMS (USE THE JOURNAL PAPER PROVIDED) 1. On 12/31/XX (EFY) you have been given the following adjusted ledger balances. CASH ACCOUNT RECEIVABLE PREPAID EXPENSES TRUCK ACCUMULATED DEPR. ACCTS. PAYABLE S.T. NOTES PAYABLE CAPITAL DRAWING REVENUE WAGE EXPENSE FUEL EXPENSE INSR. EXPENSE RENT EXPENSE DEPR EXPENSE UTILITY EXP. 150,000 375,000 60,000 75,000 10,000 175,000 200,000 70,000 30,000 581,000 103,000 185,000 10,000 25,000 5,000 18,000 26 pts. Required: Assume that all the ledger balances are normal. Prepare all required Closing entries. DO NOT DO A TRIAL BALANCE, IT IS NOT REQUIRED. 2. KellCo is a sole proprietorship that provides cleaning services to office buildings. It is the end of KellCo’s fiscal year (12/31X1 and you have been provided the following information to make the appropriate journal entries to bring the accounting system up to date. A. On 10/15 the company entered into a one year contract with the SkyWay property management company to provide cleaning services for one of its large office buildings. The total contract was for $120,000 per year. KellCo required the SkyWay property management company to pay a 10% deposit of the total contract. On 10/15/X1 KellCo received a check for $12,000 as a deposit on the contract. On that date, the bookkeeper debited Cash and credited Unearned Revenue to record the transaction. At the end of the fiscal year, KellCo had provided 15% of the services called for in the contract. At the end of the fiscal year, 12/31/X1, no journal entries had been made to the accounting system concerning the contract except for the initial receipt of the deposit. B. When KellCo started the business on 8/1/X1 the company purchased a one-milliondollar liability insurance policy from their insurance broker. The cost of the policy for one full year was $36,000 which the company paid by check on that date. The bookkeeper debited Prepaid Insurance Expense and credited Cash for the amount paid. ©Copyright by Richard S. Claire 11/29/2019 Page 2 of 17 No other journal entries had been made concerning this transaction at the end of the fiscal year. C. At the end of the fiscal year, KellCo owed its employees four days of wages in the amount of $50,000 which would be paid next year. No entry has been made to record this fact. D. KellCo’s CPA has calculated that the depreciation on the company’s assets amounted to $15,000 for the fiscal year. No entry had been made to record this fact. E. On 4/1/X1, KellCo secured a line of credit for $75,000 with their bank. The terms of the loan required that the loan principal and interest at a rate of 10% will be paid in the next fiscal year on 3/31/X2. At the end of the current fiscal year, 12/31/X1, the company owed interest of $3,500 to its bank. No journal entry had been made in the current year to record this fact. 22 pts. Required: from the information provided above make the required journal entries on 12/31/X1. In addition, as a description of the journal entry, site the principle that would have been violated if the adjusting entry had not been made. 3. Fontanaco uses the Allowance Method for recognizing bad debt expense. At the end of its’ fiscal year (12-31-XX) there was a $150,000 credit balance in the Allowance For Bad Debts account. Fontanaco’s credit department has prepared an aged accounts receivable and has estimated the $750,000 of its current accounts receivable will be uncollectable. In addition, it is estimated that 1% of Fontanaco’s credit sales of $90,000,000 will be uncollectable. 16 pts. Required: Make the required adjusting entry on 12/31/XX assuming: a. The balance sheet method is used (aged accounts receivable). b. The income statement method is used (historical % of credit sales). 4. AliCO Inc. is a wholesale company that buys production-grade molasses in large quantities directly from the distiller. It stores molasses in a large tank farm and then resells the molasses to rum distillers to make high-grade rum. It uses the perpetual inventory system to keep track of the units of each part it buys and re-sells. During the month of November, the following transactions took place: 11/1 11/2 11/11 11/12 11/15 11/18 11/19 11/22 Balance: 8,000 gallons. @ $4.00/ut Purchased: 10,000 gallons. @ $4.75/ut Purchased: 6,000 gallons. @ $5.00/ut Purchased: 3,000 gallons. @ $5.25/ut Sold 23,000 gallons for a total sales price of $322,000. Sold 2,000 gallons. for $11.00 ea. Purchased: 5,000 gallons. @ $5.75/gallon Sold 3,000 gallons. for $10.00 ea. ©Copyright by Richard S. Claire 11/29/2019 Page 3 of 17 Required:. 32 pts A. Using the FIFO method of costing inventory, complete the inventory record provided. 10 pts B. Make the journal entries to record the purchase on 11/2 and the sale on 11/15. Assume the purchase and sale are made on credit. 5. On 3/1/xx Mr. Steven Richardson started a sole proprietorship accounting consulting business. During the month of March, the following transactions took place: 3/1 Mr. Richardson opened a bank account at his bank in the business’s name “Richardson and Associates” and transferred $55,000 from his personal account into the business account. In addition, he obtained a credit card from his bank in the company’s name. 3/1 Mr. Richardson signed a one-year lease for office space for the business. He paid one month’s rent in advance of $2,500 and a security deposit in the same amount using his business checking account. 3/2 The business paid by business check $200 for a deposit to have the utilities in the office turned on. 3/3 Mr. Jones purchased a desktop computer, a printer and a wireless router using the company’s credit card in the amount of $2,250. The amount will be paid at the end of the month when the credit card bill is received. 3/4 Purchased office supplies for $325 and charged it using the company’s business card. The amount will be paid when the credit card bill is received. 3/4 Had a telephone system installed by the telephone company. The total cost to install the telephone system was $350. He received an invoice in that amount from the installer with terms of “DEM” (Due at the end of the month). 3/8 Received a bill from his attorney in the amount of $150 for reviewing the lease agreement. He wrote a business check in full payment of the bill and send it to his attorney. 3/8 Purchased office furniture for the office and received a bill in the amount of $2,400 with terms of “Due on receipt”. 3/10 Billed a client $2,360 for setting up an accounting system with terms of Due on receipt. ©Copyright by Richard S. Claire 11/29/2019 Page 4 of 17 3/15 Mr. Richardson signed a one-year consulting contract to provide accounting services with an architectural firm. The contract called for a $1, 000 retainer fee which Mr. Richardson received and deposited it into the business checking account. 3/16 Mr. Richardson wrote a business check for the purchase made on 3/8 and set it to the office furniture company. 3/18 Received payment for the 3/10 transaction. 3/26 Mr. Richardson wrote a check from the business checking account in the amount of $1,000 for his personal living expenses 3/31 The company received a credit card bill in the amount for the purchases made during the month. The company paid for the bill by a business check. 3/31 Mr. Richardson wrote a business check for the phone instalation on 3/4 and sent it to the telephone company. 31 pts Required: From the information given above, make the appropriate journal entries. If no entry is required on a specific date indicate that by entering “No entry required”. II. ANSWER THE FILL IN QUESTIONS ON THE TEST PAPER (14 pts): Give the assumption or principle that would have been violated if the following entries or information had not been given: 1. An expense incurred in the accounting period but not paid until the next FY is not adjusted in the current accounting period because it is a small amount. 2. An Adjustment is made for payroll expense at the EFY eventhough it had not been paid: 3. Changing the method of recognizing depreciation is not allowed from one accounting period to another. 4. When reporting publicly operations from foreign operations the results must be converted into U.S. currency. ©Copyright by Richard S. Claire 11/29/2019 Page 5 of 17 5. Assets are recorded at the value of the economic resources that are used to acquire them. 7. A pending lawsuit is noted in the footnotes to the Financial Statements Statements. III. MULTIPLE CHOICE QUESTIONS. (3 pts each for a total of 30 pts.) Choose the most correct answer and circle it. 1. An accounting system that records expenses and revenue in the accounting period in which they are incurred or earned is referred to as: a. a cash accounting system b. an accounting system where you determine what accounts are affected, what classification the accounts are and how their balance has changed up or down. c. an accrual accounting system. d. a system that violates GAAP. 2 Adjusting entries are: a. made because of the Accrual Accounting system. b. made most of the time because of the Revenue and Matching principles. c. are made to bring your accounting system up to date. d. All of the above. 3. 4. Accounting is a process that: a. Reports the profit and loss a firm makes b. Reports the financial history of the firm c. Reports information to external users of the financial statements. d. Reports to the S.E.C. There are four basic financial statements required by GAAP. They are: a. Balance Sheet, Income Statement, Cash Flow Statement and a Trial Balance. b. Balance Sheet, Income Statement, Cash Flow Statement and a Work Sheet. c. Balance Sheet, Income Statement, Cash Flow Statement and a Statement of Change to Retained Earnings. d. Balance Sheet, Income Statement, Cash Flow Statement and a Post Close Trial Balance. ©Copyright by Richard S. Claire 11/29/2019 Page 6 of 17 5. Why do we make Closing entries? a. To bring the accounting system up to date. b. To transfer the profit or loss to the owner of the company and to zero out the beginning balances so we can start measuring the profit or loss in the new accounting period. c. To transfer the permanent balance sheet accounts to the owner’s equity. d. None of the above. 6. What are the two inventory methods used to determine the number of units is in inventory. a. Current and long-term assets. b. The current inventory method and the historic inventory method. c. The periodic and perpetual inventory methods. d. Any inventory method that accounts for inventories over 12 months 7. What is a current asset? a. An asset that will be turned in cash within 12 months. b. An asset that has a life of more than one year and will be used to generate revenues in the future. c. Is the same as an intangible asset. d. An asset that is owed to someone else. 8. The net method of recording the sale with the discount violates the: a. Revenue recognition principle. b. Expense recognition principle. c. Cost principle. d. None of the above. 9. If you were a CEO of a publicly held corporation and wanted to increase your company’s profitability in times of rising prices which inventory valuation method would you use? a. LIFO b. Weighted average. c. FIFO d. Specific identification. 10. What is the LCM rule concerning the valuation of inventories? a. Because of the lower cost markup principle. b. Consistency principle. c. It requires you to value inventories at their market value if it is below the cost of the inventory. d. All of the above ©Copyright by Richard S. Claire 11/29/2019 Page 7 of 17 IV. SHORT ESSAY QUESTION: 1. There are two allowance methods used to account for bad debts. What are they and which external users of financial statement whould be most interested in each of them? 4 pts. 2. Why is the perpetual inventory system superior to the periodic system for business purposes? 2 pts. 3. What are the three steps in transaction analysis to determine the Debit and Credit rules of a financial transaction? 3 pts. 4. What are Generally Accepted Accounting Principles( GAAP). 4 pts. 5. Why is accounting important to the business world? 4 pts. ©Copyright by Richard S. Claire 11/29/2019 Page 8 of 17 A. FIFO UNTS PURCHASED COST TOTAL UNTS SOLD COST TOTAL UNTS BALANCE COST TOTAL B. DR ACCOUNT ©Copyright by Richard S. Claire 11/29/2019 DR CR Page 9 of 17 DATE ACCOUNT ©Copyright by Richard S. Claire 11/29/2019 DR CR Page 10 of 17 DATE ACCOUNT ©Copyright by Richard S. Claire 11/29/2019 DR CR Page 11 of 17 DATE ACCOUNT ©Copyright by Richard S. Claire 11/29/2019 DR CR Page 12 of 17 DATE ACCOUNT ©Copyright by Richard S. Claire 11/29/2019 DR CR Page 13 of 17 DATE ACCOUNT ©Copyright by Richard S. Claire 11/29/2019 DR CR Page 14 of 17 FINANCIAL ACCOUNTING CHART OF ACCOUNTS Prof. R.S. Claire BALANCE SHEET ACCOUNTS ASSETS Current Assets Cash/Checking S.T. Investments Available for sale Investments Fair Market Value Adjustment S.T. Notes Rec. Interest Rec. Accounts Receivable Less: Allowance for Bad Debts Inventory Pre-paid expense (Insr., Rent,) Assets Under Construction Deposits (Security, Equipment, Rent etc.) Operating Assets (Plant & Equip.-Fixed Assets) Land Buildings Less: Accumulated Depreciation-Build. Plant & Equipment Less: Accumulated Depreciation-Plant & Equipment Funiture & Fixtures Less: Accumulated Depreciation-F&F Office Equipment Less: Accumulated Depreciation-Office Equipment Communication Systems (Phone, Fax, etc. Less: Accumulated Depreciation-Communication Systems Computer Systems Less: Accumulated Depreciation-Computer Systems Transportation Equip. Less: Accumulated Depreciation-Transp. Equip. Leasehold improvements NORMAL BALANCE Debit Debit Debit Debit/Credit Debit Debit Debit Credit Debit Debit Debit Debit Debit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Other Assets (Intangible Assets) Goodwill Patents Copyrights Trademarks Water Rights Debit Debit Debit Debit Debit Natural Resources Mineral Rights Timber Rights Oil Rights Debit Debit Debit LIABILITIES ©Copyright by Richard S. Claire 11/29/2019 Page 15 of 17 Current Liabilities S.T. Notes Payable Accounts Payable Credit Card Payable Accrued Payables Payroll Payable Interest Payable Un-earned Revenue Cash Dividend Payable Common Stock Dividends to be Distributed Current Por. Of L.T. Debt Credit Credit Credit Credit Credit Credit Credit Credit Credit Credit Long Term Liabilities L.T. Notes Payable Bond Payable Less: Bond Discount Add: Bond Premium Credit Credit Debit Credit OWNERS EQUITY Sole Proprietorship Capital Less: Drawing Credit Debit Partnership/LLP/LLC Capital (for each partner) Less: Drawing (for each partner) Credit Debit Corporation (“C” Corp. & “S” Corp.) Stockholders Equity Preferred Stock Paid in excess of Par-Pref. Stock Common Stock Paid in excess of Par-Common Stock Retained Earnings Cash Dividend Stock Dividend Treasury Stock Paid in capital from T. S. Transaction Accumulated Other Comprehensive Income Unrealized Holding Gain/loss on S.T. Investments Foreign currency translation gains or losses Pension plan gains or losses Non-controlling Interest ©Copyright by Richard S. Claire 11/29/2019 Credit Credit Credit Credit Credit Debit Debit Debit Credit Debit/Credit Debit/Credit Debit/Credit Debit Page 16 of 17 FINANCIAL ACCOUNTING CHART OF ACCOUNTS Prof. R.S. Claire INCOME STATEMENT STATEMENT, (P&L STATEMENT) NORMAL BALANC SERVICE INDUSTRY E MERCHANDISING INDUSTRY REVENUE REVENUE Maint. Service Rev. Credit Sales Contracting Serv. Rev. Credit Less: Sales Returns & Allow. Software Devel. Rev Credit Cash (Sales) Discounts Consulting Rev. Credit Quantity Discounts Interest Revenue Credit Repair Revenue Credit EXPENSES Advertising Auto expense Bad Debt Expense Bank charges Consulting Depreciation exp. Dues & Subscriptions Freight in Fuel exp. Insurance. exp. Interest exp. Bond Interest exp. IT-Computer Exp. Licenses and Fees Maint. exp Marketing exp. Meals exp. Misc. exp. Office supplies exp. Phone exp. Payroll exp. Gross Payroll Exp. Payroll Tax exp. Professional Services Rent exp. Repair parts Shipping exp Software exp Tax exp. Travel exp Uniforms Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit COST OF GOODS SOLD PERIODIC INVENTORY SYSTEM Purchases Less: Purchase Returns and Allow. Purchase Discounts PERPETUAL INVENTORY SYSTEM Cost of Goods Sold EXPENSES Advertising Bad Debt Expense Bank charges Consulting Depreciation exp. Dues & Subscriptions Freight in Fuel exp. Insurance. exp. Interest exp. Bond Interest exp. IT-Computer exp. Licenses and Fees Maint. exp Marketing exp. Meals exp. Misc. exp. Office supplies exp. Payroll exp. Gross Payroll exp. Payroll Tax exp. Phone exp. Professional Services Rent exp. ©Copyright by Richard S. Claire 11/29/2019 NORMAL BALANCE Credit Debit Debit Debit Debit Credit Credit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Debit Page 17 of 17 Utilities Debit Repair parts Shipping exp Tax exp. Travel exp Uniforms Utilities Debit Debit Debit Debit Debit Debit OTHER REVENUE/GAINS Realized Gains from Sale of Investments Unrealized Holding Gains on S.T. Investments Interest Income. Investment Income Gain on the Disposal of Assets Credit Credit Credit Credit Credit OTHER EXPENSES/LOSSES Unrealized Holding Loss from sale of investments Loss on Disposal of Assets Debit Debit ACCOUNTING EQUATION AND DEBIT/CREDIT RULES CLOSED TO OWNERS EQUITY AT EFY ASSETS DR CR + – = LIABILITIES DR CR – + + OWNERS EQUITY DR CR – + ©Copyright by Richard S. Claire 11/29/2019 + REVENUES DR CR – + – EXPENSES DR CR + – Purchase answer to see full attachment Tags: account receivable Prepaid Expenses Wage Expense balance sheet method costing inventory User generated content is uploaded by users for the purposes of learning and should be used following Studypool’s honor code & terms of service.
Description
Finsh the test in 2 hoursI. PROBLEMS (USE THE JOURNAL PAPER PROVIDED)II. ANSWER THE FILL IN QUESTIONS ON THE TEST PAPER III. MULTIPLE CHOICE QUESTIONS. IV. SHORT ESSAY QUESTION
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FINANCIAL ACCOUNTING 1A
COMPREHENSIVE FINAL TEST
Prof. Richard S. Claire
I. PROBLEMS (USE THE JOURNAL PAPER PROVIDED)
1.
On 12/31/XX (EFY) you have been given the following adjusted ledger balances.
CASH
ACCOUNT RECEIVABLE
PREPAID EXPENSES
TRUCK
ACCUMULATED DEPR.
ACCTS. PAYABLE
S.T. NOTES PAYABLE
CAPITAL
DRAWING
REVENUE
WAGE EXPENSE
FUEL EXPENSE
INSR. EXPENSE
RENT EXPENSE
DEPR EXPENSE
UTILITY EXP.
150,000
375,000
60,000
75,000
10,000
175,000
200,000
70,000
30,000
581,000
103,000
185,000
10,000
25,000
5,000
18,000
26 pts. Required: Assume that all the ledger balances are normal. Prepare all required
Closing entries. DO NOT DO A TRIAL BALANCE, IT IS NOT REQUIRED.
2. KellCo is a sole proprietorship that provides cleaning services to office buildings. It is
the end of KellCo’s fiscal year (12/31X1 and you have been provided the following
information to make the appropriate journal entries to bring the accounting system up
to date.
A. On 10/15 the company entered into a one year contract with the SkyWay property
management company to provide cleaning services for one of its large office buildings.
The total contract was for $120,000 per year. KellCo required the SkyWay property
management company to pay a 10% deposit of the total contract. On 10/15/X1 KellCo
received a check for $12,000 as a deposit on the contract. On that date, the bookkeeper
debited Cash and credited Unearned Revenue to record the transaction. At the end of
the fiscal year, KellCo had provided 15% of the services called for in the contract. At the
end of the fiscal year, 12/31/X1, no journal entries had been made to the accounting
system concerning the contract except for the initial receipt of the deposit.
B. When KellCo started the business on 8/1/X1 the company purchased a one-milliondollar liability insurance policy from their insurance broker. The cost of the policy for
one full year was $36,000 which the company paid by check on that date. The
bookkeeper debited Prepaid Insurance Expense and credited Cash for the amount paid.
©Copyright by Richard S. Claire 11/29/2019
Page 2 of 17
No other journal entries had been made concerning this transaction at the end of the
fiscal year.
C. At the end of the fiscal year, KellCo owed its employees four days of wages in the
amount of $50,000 which would be paid next year. No entry has been made to record
this fact.
D. KellCo’s CPA has calculated that the depreciation on the company’s assets amounted
to $15,000 for the fiscal year. No entry had been made to record this fact.
E. On 4/1/X1, KellCo secured a line of credit for $75,000 with their bank. The terms of
the loan required that the loan principal and interest at a rate of 10% will be paid in the
next fiscal year on 3/31/X2. At the end of the current fiscal year, 12/31/X1, the company
owed interest of $3,500 to its bank. No journal entry had been made in the current year
to record this fact.
22 pts. Required: from the information provided above make the required journal
entries on 12/31/X1. In addition, as a description of the journal entry, site the principle
that would have been violated if the adjusting entry had not been made.
3. Fontanaco uses the Allowance Method for recognizing bad debt expense. At the end
of its’ fiscal year (12-31-XX) there was a $150,000 credit balance in the Allowance For
Bad Debts account. Fontanaco’s credit department has prepared an aged accounts
receivable and has estimated the $750,000 of its current accounts receivable will be uncollectable. In addition, it is estimated that 1% of Fontanaco’s credit sales of
$90,000,000 will be uncollectable.
16 pts. Required: Make the required adjusting entry on 12/31/XX assuming:
a.
The balance sheet method is used (aged accounts receivable).
b.
The income statement method is used (historical % of credit sales).
4. AliCO Inc. is a wholesale company that buys production-grade molasses in large
quantities directly from the distiller. It stores molasses in a large tank farm and then
resells the molasses to rum distillers to make high-grade rum. It uses the perpetual
inventory system to keep track of the units of each part it buys and re-sells. During the
month of November, the following transactions took place:
11/1
11/2
11/11
11/12
11/15
11/18
11/19
11/22
Balance:
8,000 gallons. @ $4.00/ut
Purchased:
10,000 gallons. @ $4.75/ut
Purchased:
6,000 gallons. @ $5.00/ut
Purchased:
3,000 gallons. @ $5.25/ut
Sold 23,000 gallons for a total sales price of $322,000.
Sold 2,000 gallons. for $11.00 ea.
Purchased:
5,000 gallons. @ $5.75/gallon
Sold 3,000 gallons. for $10.00 ea.
©Copyright by Richard S. Claire 11/29/2019
Page 3 of 17
Required:.
32 pts A. Using the FIFO method of costing inventory, complete the inventory record
provided.
10 pts B. Make the journal entries to record the purchase on 11/2 and the sale on
11/15. Assume the purchase and sale are made on credit.
5. On 3/1/xx Mr. Steven Richardson started a sole proprietorship accounting
consulting business. During the month of March, the following transactions took place:
3/1 Mr. Richardson opened a bank account at his bank in the business’s name
“Richardson and Associates” and transferred $55,000 from his personal account into the
business account. In addition, he obtained a credit card from his bank in the company’s
name.
3/1 Mr. Richardson signed a one-year lease for office space for the business. He paid
one month’s rent in advance of $2,500 and a security deposit in the same amount using
his business checking account.
3/2 The business paid by business check $200 for a deposit to have the utilities in the
office turned on.
3/3 Mr. Jones purchased a desktop computer, a printer and a wireless router using the
company’s credit card in the amount of $2,250. The amount will be paid at the end of
the month when the credit card bill is received.
3/4 Purchased office supplies for $325 and charged it using the company’s business
card. The amount will be paid when the credit card bill is received.
3/4 Had a telephone system installed by the telephone company. The total cost to install
the telephone system was $350. He received an invoice in that amount from the
installer with terms of “DEM” (Due at the end of the month).
3/8 Received a bill from his attorney in the amount of $150 for reviewing the lease
agreement. He wrote a business check in full payment of the bill and send it to his
attorney.
3/8 Purchased office furniture for the office and received a bill in the amount of $2,400
with terms of “Due on receipt”.
3/10 Billed a client $2,360 for setting up an accounting system with terms of Due on
receipt.
©Copyright by Richard S. Claire 11/29/2019
Page 4 of 17
3/15 Mr. Richardson signed a one-year consulting contract to provide accounting
services with an architectural firm. The contract called for a $1, 000 retainer fee which
Mr. Richardson received and deposited it into the business checking account.
3/16 Mr. Richardson wrote a business check for the purchase made on 3/8 and set it to
the office furniture company.
3/18 Received payment for the 3/10 transaction.
3/26 Mr. Richardson wrote a check from the business checking account in the amount
of $1,000 for his personal living expenses
3/31 The company received a credit card bill in the amount for the purchases made
during the month. The company paid for the bill by a business check.
3/31 Mr. Richardson wrote a business check for the phone instalation on 3/4 and sent it
to the telephone company.
31 pts Required: From the information given above, make the appropriate journal
entries. If no entry is required on a specific date indicate that by entering “No entry
required”.
II. ANSWER THE FILL IN QUESTIONS ON THE TEST PAPER (14 pts):
Give the assumption or principle that would have been violated if the following
entries or information had not been given:
1.
An expense incurred in the accounting period but not paid until the
next FY is not adjusted in the current accounting period because it
is a small amount.
2.
An Adjustment is made for payroll expense at the EFY eventhough it had not been paid:
3.
Changing the method of recognizing depreciation is not allowed
from one accounting period to another.
4.
When reporting publicly operations from foreign operations the results
must be converted into U.S. currency.
©Copyright by Richard S. Claire 11/29/2019
Page 5 of 17
5.
Assets are recorded at the value of the economic resources that are used
to acquire them.
7.
A pending lawsuit is noted in the footnotes to the Financial
Statements Statements.
III. MULTIPLE CHOICE QUESTIONS. (3 pts each for a total of 30 pts.)
Choose the most correct answer and circle it.
1.
An accounting system that records expenses and revenue in the
accounting period in which they are incurred or earned is referred to as:
a.
a cash accounting system
b.
an accounting system where you determine what accounts are
affected, what classification the accounts are and how their balance
has changed up or down.
c.
an accrual accounting system.
d.
a system that violates GAAP.
2
Adjusting entries are:
a.
made because of the Accrual Accounting system.
b.
made most of the time because of the Revenue and Matching
principles.
c.
are made to bring your accounting system up to date.
d.
All of the above.
3.
4.
Accounting is a process that:
a.
Reports the profit and loss a firm makes
b.
Reports the financial history of the firm
c.
Reports information to external users of the financial statements.
d.
Reports to the S.E.C.
There are four basic financial statements required by GAAP. They are:
a.
Balance Sheet, Income Statement, Cash Flow Statement and
a Trial Balance.
b.
Balance Sheet, Income Statement, Cash Flow Statement and
a Work Sheet.
c.
Balance Sheet, Income Statement, Cash Flow Statement and
a Statement of Change to Retained Earnings.
d.
Balance Sheet, Income Statement, Cash Flow Statement and
a Post Close Trial Balance.
©Copyright by Richard S. Claire 11/29/2019
Page 6 of 17
5.
Why do we make Closing entries?
a.
To bring the accounting system up to date.
b.
To transfer the profit or loss to the owner of the company and to
zero out the beginning balances so we can start measuring the
profit or loss in the new accounting period.
c.
To transfer the permanent balance sheet accounts to the owner’s
equity.
d.
None of the above.
6.
What are the two inventory methods used to determine the number of
units is in inventory.
a.
Current and long-term assets.
b.
The current inventory method and the historic inventory method.
c.
The periodic and perpetual inventory methods.
d.
Any inventory method that accounts for inventories over 12 months
7.
What is a current asset?
a.
An asset that will be turned in cash within 12 months.
b.
An asset that has a life of more than one year and will be used to
generate revenues in the future.
c.
Is the same as an intangible asset.
d.
An asset that is owed to someone else.
8.
The net method of recording the sale with the discount violates the:
a.
Revenue recognition principle.
b.
Expense recognition principle.
c.
Cost principle.
d.
None of the above.
9.
If you were a CEO of a publicly held corporation and wanted to increase
your company’s profitability in times of rising prices which inventory
valuation method would you use?
a.
LIFO
b.
Weighted average.
c.
FIFO
d.
Specific identification.
10.
What is the LCM rule concerning the valuation of inventories?
a.
Because of the lower cost markup principle.
b.
Consistency principle.
c.
It requires you to value inventories at their market value if it is
below the cost of the inventory.
d.
All of the above
©Copyright by Richard S. Claire 11/29/2019
Page 7 of 17
IV. SHORT ESSAY QUESTION:
1.
There are two allowance methods used to account for bad debts. What
are they and which external users of financial statement whould be most
interested in each of them? 4 pts.
2.
Why is the perpetual inventory system superior to the periodic system for
business purposes? 2 pts.
3.
What are the three steps in transaction analysis to determine the Debit
and Credit rules of a financial transaction? 3 pts.
4.
What are Generally Accepted Accounting Principles( GAAP). 4 pts.
5.
Why is accounting important to the business world? 4 pts.
©Copyright by Richard S. Claire 11/29/2019
Page 8 of 17
A.
FIFO
UNTS
PURCHASED
COST
TOTAL
UNTS
SOLD
COST
TOTAL
UNTS
BALANCE
COST
TOTAL
B.
DR
ACCOUNT
©Copyright by Richard S. Claire 11/29/2019
DR
CR
Page 9 of 17
DATE
ACCOUNT
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DR
CR
Page 10 of 17
DATE
ACCOUNT
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DR
CR
Page 11 of 17
DATE
ACCOUNT
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DR
CR
Page 12 of 17
DATE
ACCOUNT
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DR
CR
Page 13 of 17
DATE
ACCOUNT
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DR
CR
Page 14 of 17
FINANCIAL ACCOUNTING
CHART OF ACCOUNTS
Prof. R.S. Claire
BALANCE SHEET ACCOUNTS
ASSETS
Current Assets
Cash/Checking
S.T. Investments
Available for sale Investments
Fair Market Value Adjustment
S.T. Notes Rec.
Interest Rec.
Accounts Receivable
Less: Allowance for Bad Debts
Inventory
Pre-paid expense (Insr., Rent,)
Assets Under Construction
Deposits (Security, Equipment, Rent etc.)
Operating Assets (Plant & Equip.-Fixed Assets)
Land
Buildings
Less: Accumulated Depreciation-Build.
Plant & Equipment
Less: Accumulated Depreciation-Plant & Equipment
Funiture & Fixtures
Less: Accumulated Depreciation-F&F
Office Equipment
Less: Accumulated Depreciation-Office Equipment
Communication Systems (Phone, Fax, etc.
Less: Accumulated Depreciation-Communication Systems
Computer Systems
Less: Accumulated Depreciation-Computer Systems
Transportation Equip.
Less: Accumulated Depreciation-Transp. Equip.
Leasehold improvements
NORMAL
BALANCE
Debit
Debit
Debit
Debit/Credit
Debit
Debit
Debit
Credit
Debit
Debit
Debit
Debit
Debit
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Other Assets (Intangible Assets)
Goodwill
Patents
Copyrights
Trademarks
Water Rights
Debit
Debit
Debit
Debit
Debit
Natural Resources
Mineral Rights
Timber Rights
Oil Rights
Debit
Debit
Debit
LIABILITIES
©Copyright by Richard S. Claire 11/29/2019
Page 15 of 17
Current Liabilities
S.T. Notes Payable
Accounts Payable
Credit Card Payable
Accrued Payables
Payroll Payable
Interest Payable
Un-earned Revenue
Cash Dividend Payable
Common Stock Dividends to be Distributed
Current Por. Of L.T. Debt
Credit
Credit
Credit
Credit
Credit
Credit
Credit
Credit
Credit
Credit
Long Term Liabilities
L.T. Notes Payable
Bond Payable
Less: Bond Discount
Add: Bond Premium
Credit
Credit
Debit
Credit
OWNERS EQUITY
Sole Proprietorship
Capital
Less: Drawing
Credit
Debit
Partnership/LLP/LLC
Capital (for each partner)
Less: Drawing (for each partner)
Credit
Debit
Corporation (“C” Corp. & “S” Corp.)
Stockholders Equity
Preferred Stock
Paid in excess of Par-Pref. Stock
Common Stock
Paid in excess of Par-Common Stock
Retained Earnings
Cash Dividend
Stock Dividend
Treasury Stock
Paid in capital from T. S. Transaction
Accumulated Other Comprehensive Income
Unrealized Holding Gain/loss on S.T. Investments
Foreign currency translation gains or losses
Pension plan gains or losses
Non-controlling Interest
©Copyright by Richard S. Claire 11/29/2019
Credit
Credit
Credit
Credit
Credit
Debit
Debit
Debit
Credit
Debit/Credit
Debit/Credit
Debit/Credit
Debit
Page 16 of 17
FINANCIAL
ACCOUNTING
CHART OF ACCOUNTS
Prof. R.S. Claire
INCOME STATEMENT STATEMENT, (P&L STATEMENT)
NORMAL
BALANC
SERVICE INDUSTRY
E
MERCHANDISING INDUSTRY
REVENUE
REVENUE
Maint. Service Rev.
Credit
Sales
Contracting Serv. Rev.
Credit
Less: Sales Returns & Allow.
Software Devel. Rev
Credit
Cash (Sales) Discounts
Consulting Rev.
Credit
Quantity Discounts
Interest Revenue
Credit
Repair Revenue
Credit
EXPENSES
Advertising
Auto expense
Bad Debt Expense
Bank charges
Consulting
Depreciation exp.
Dues & Subscriptions
Freight in
Fuel exp.
Insurance. exp.
Interest exp.
Bond Interest exp.
IT-Computer Exp.
Licenses and Fees
Maint. exp
Marketing exp.
Meals exp.
Misc. exp.
Office supplies exp.
Phone exp.
Payroll exp.
Gross Payroll Exp.
Payroll Tax exp.
Professional Services
Rent exp.
Repair parts
Shipping exp
Software exp
Tax exp.
Travel exp
Uniforms
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
COST OF GOODS SOLD
PERIODIC INVENTORY SYSTEM
Purchases
Less: Purchase Returns and
Allow.
Purchase Discounts
PERPETUAL INVENTORY SYSTEM
Cost of Goods Sold
EXPENSES
Advertising
Bad Debt Expense
Bank charges
Consulting
Depreciation exp.
Dues & Subscriptions
Freight in
Fuel exp.
Insurance. exp.
Interest exp.
Bond Interest exp.
IT-Computer exp.
Licenses and Fees
Maint. exp
Marketing exp.
Meals exp.
Misc. exp.
Office supplies exp.
Payroll exp.
Gross Payroll exp.
Payroll Tax exp.
Phone exp.
Professional Services
Rent exp.
©Copyright by Richard S. Claire 11/29/2019
NORMAL
BALANCE
Credit
Debit
Debit
Debit
Debit
Credit
Credit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Debit
Page 17 of 17
Utilities
Debit
Repair parts
Shipping exp
Tax exp.
Travel exp
Uniforms
Utilities
Debit
Debit
Debit
Debit
Debit
Debit
OTHER REVENUE/GAINS
Realized Gains from Sale of
Investments
Unrealized Holding Gains on S.T.
Investments
Interest Income.
Investment Income
Gain on the Disposal of Assets
Credit
Credit
Credit
Credit
Credit
OTHER EXPENSES/LOSSES
Unrealized Holding Loss from sale
of investments
Loss on Disposal of Assets
Debit
Debit
ACCOUNTING EQUATION AND DEBIT/CREDIT RULES
CLOSED TO OWNERS EQUITY AT EFY
ASSETS
DR
CR
+
–
=
LIABILITIES
DR
CR
–
+
+
OWNERS EQUITY
DR
CR
–
+
©Copyright by Richard S. Claire 11/29/2019
+
REVENUES
DR
CR
–
+
–
EXPENSES
DR
CR
+
–
Purchase answer to see full
attachment
Tags:
account receivable
Prepaid Expenses
Wage Expense
balance sheet method
costing inventory
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