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introductory financial accounting

Questions and Answers of Introductory Financial Accounting

INTERNAL CONTROL OF CASH Edward Thompson, a longtime employee of a small grocery wholesaler, is responsible for maintaining the company’s cash records and for opening the daily mail, through which
CASH OVER AND SHORT Miller Enterprises deposits the cash received during each day at the end of the day. Miller deposited $12,730 on October 3 and $15,610 on October
Cash register records and other documents supporting the deposits are summarized as follows:10/3 10/4 Cash sales $ 4,072 $ 5,405 Collections on account 8,650 10,212 Total receipts $12,722 $15,617
BANK RECONCILIATION Johnson Corporation’s bank statement for October reports an ending balance of$6,248, whereas Johnson’s cash account shows a balance of $5,680 on October
The following additional information is available:a. A $165 deposit made on October 31 was not recorded by the bank until November.b. At the end of October, outstanding checks total $792.c. The bank
BANK RECONCILIATION The cash account for Fleming Company contains the following information for April:Cash balance, 3/31 $ 3,500 Cash received during April 21,400$24,900 Cash disbursements during
BANK RECONCILIATION Valentine Investigations has the following information for its cash account:Balance, 1/31 $ 5,030 Deposits during February 93,160 Checks written during February 92,270
COMPONENTS OF CASH The office manager for Bullock Products had accumulated the following information at the end of a recent year:Item Amount Accounts receivable $16,450 Change for cash registers
OPERATING CYCLE A list of businesses is presented below:Business Operating-Cycle Description. Appliance store. Clothing store. Electric utility. Tree nursery. Fast food restauranta. Very
FINANCING AND OPERATING CYCLES Which of the following activities belong to the operating cycle, and which belong to the financial cycle?a. Collection of cash from customersb. Payment of dividends to
OPERATING CYCLE AND CURRENT RECEIVABLES For each of the businesses described below, indicate the length of the operating cycle and the duration of the longest receivable that can be classified as
(APPENDIX) ALLOWANCE FOR AVAILABLE-FOR-SALE SECURITIES McCarthy Corporation’s allowance to reduce available-for-sale securities to market is$7,200 on December 31 (i.e., it is a credit balance),
(APPENDIX) ADJUSTING THE ALLOWANCE TO ADJUST TRADING SECURITIES TO MARKET Perry Corporation has the following information for its portfolio of trading securities at the end of the past four
(APPENDIX) INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES Williams Corporation acquired the following equity securities during 2009:200 shares of Southwestern Company capital stock $14,600 500 shares
ROLE OF INTERNAL CONTROL Internal control systems include policies and procedures designed to provide reasonable assurance that the corporation’s objectives are being met in three areas:a.
INTERNAL CONTROL FOR CASH After comparing cash register tapes with inventory records, the accountant for Benning Convenience Stores is concerned that someone at one of the stores is not recording
BANK RECONCILIATION Shortly after July 31, Morse Corporation received a bank statement containing the following information:Date Checks Deposits Balance 6/30 Beg. balance $ 7,958 7/1 $ 1,200 9,158
BANK RECONCILIATION Raymond Corporation received the following bank statement for the month of October 2009:Date Checks Deposits Balance 9/30 Beg. balance $ 4,831.50 10/2 $1,204.50 $2,970.18 6,597.18
BANK RECONCILIATION The cash account of Dixon Products reveals the following information:Cash Balance, 4/30 11,800 Deposits during May 37,600 Checks written during May 41,620 The bank statement for
(APPENDIX) RECORDING AVAILABLE-FOR-SALE SECURITIES TRANSACTIONS INCLUDING A SALE AFTER ADJUSTMENT TO THE ALLOWANCE ACCOUNT Morton Products had no investment in available-for-sale securities at
(APPENDIX) INVESTMENTS IN TRADING SECURITIES Maxwell Company engaged in the following transactions involving short-term investments:a. Purchased 200 shares of Bartco stock for $12,800.b. Received a
ROLE OF INTERNAL CONTROL Internal control systems include policies and procedures designed to provide reasonable assurance that the corporation’s objectives are being met in three areas:a.
INTERNAL CONTROL PROCEDURES FOR CASH RECEIPTS Sean and Liz Kinsella are planning to open and operate a coffee shop on a university campus. Sean and Liz are concerned that part of the cash that
Measure net sales revenue.
Describe internal control procedures for merchandise sales.
Describe the principal types of receivables.
Measure and interpret bad debt expense and the allowance for doubtful accounts.
Describe the cash flow implications of accounts receivable.
Account for notes receivable from inception to maturity.
Analyze profitability and asset management using sales and receivables.
Have there been any significant changes in the quality of production?
Have there been any significant changes in the economic environment of the firm?
How much interest will be due at maturity for each of the following interest-bearing notes?Principal Months to Maturity Annual Interest Ratea. $10,000 2 12%b. 42,000 5 14c. 18,000 4 13d. 37,000 6 11
How may analyzing sales and receivables provide information about a firm’s asset management?Multiple-Choice Exercises
Which of the following is not one of the criteria for revenue recognition?a. Delivery has occurred or services have been provided.b. The seller’s price to the buyer is fixed and determinable.c.
Food To Go is a local catering service. Conceptually, when should Food To Go recognize revenue from its catering service?a. at the date the customer places the orderb. at the date the meals are
When is revenue from the sale of merchandise normally recognized?a. when the customer takes possession of the merchandiseb. when the customer pays for the merchandisec. either on the date the
What does the phrase, ‘‘Revenue is recognized at the point of sale’’ mean?a. Revenue is recorded in the accounting records when the cash is received from a customer, and reported on the
On August 31, 2009, Montana Corporation signed a four-year contract to provide services for Minefield Company at $30,000 per year. Minefield will pay for each year of services on the first day of
Under the gross method, the seller records discounts taken by the buyera. at the end of the period in questionb. never; discounts are irrelevant under the gross methodc. after the receivable is
On April 20, McLean Company sells merchandise on account to Tazwell Corporation for $3,000 with terms 1/10, n/30. On April 28, Tazwell pays for half of the merchandise and on May 19 it pays for the
All of the following are ways in which receivables are distinguished except:a. accounts or notes receivableb. collectible or uncollectiblec. trade or nontrade receivabled. current or noncurrent
Which one of the following best describes the allowance for doubtful accounts?a. contra accountb. liability accountc. income statement accountd. cash flow account
If a company uses the direct write-off method of accounting for bad debts,a. it is applying the matching principle.b. it will record bad debt expense only when an account is determined to be
Which of the following best describes the objective of estimating bad debt expense with the credit sales method?a. to determine the amount of actual bad debt during a given periodb. to estimate the
Which of the following best describes the concept of the aging method of receivables?a. An accurate estimate of bad debt expense may be arrived at by multiplying historical bad debt rates by the
The aging method is closely related to the:a. income statementb. balance sheetc. statement of cash flowsd. statement of retained earnings
The credit sales approach is closely related to the:a. income statementb. balance sheetc. statement of cash flowsd. statement of retained earnings
Which one of the following statements is true if a company’s collection period for accounts receivable is unacceptably long?a. The company may need to borrow to acquire operating cash.b. The
Zenephia Corp. accepted a nine-month note receivable from a customer on October 1, 2008. If Zenephia has an accounting period which ends on December 31, 2008, when would it most likely recognize
The ‘‘principal’’ of a note receivable refers to:a. the amount of interest dueb. the present value of the notec. the financing company that is lending the moneyd. the amount of cash borrowed
Net profit margin percentage is calculated by:a. dividing net income by (net) salesb. dividing operating income by (net) salesc. subtracting operating income from (net) salesd. subtracting net income
SERVICE REVENUE Kibitz Fitness received $12,000 from customers on September 30, 2009. These payments were advance payments of yearly membership dues.Required:At December 31, 2009, calculate what the
SERVICE REVENUE Softball Magazine Company received advance payments of $5,000 from customers during 2009. At December 31, 2009, $1,200 of the advance payments still had not been earned.Required:After
SALES DISCOUNTS TAKEN Bolton Garage Doors Corporation sold merchandise with a price of $22,500 to Sammy’s Wholesale Company. Bolton offered terms of 2/10, n/30.Required:Prepare the journal entry to
SALES DISCOUNTS NOT TAKEN Bolton Garage Doors Corporation sold merchandise with a gross price of $22,500 to Sammy’s Wholesale Company. Bolton offered terms of 2/10, n/30 and uses the gross
SALES DISCOUNTS Ramsden Manufacturing sold merchandise with a gross price of $25,000 to Garner’s Hardware Store. Ramsden offered terms of 3/10, n/30.Required:Prepare the necessary journal entries
PERCENTAGE OF CREDIT SALES Clarissa Company has credit sales of $400,000 during 2010 and estimates at the end of 2010 that 2 percent of these credit sales will eventually default. Also, during 2010 a
WRITE-OFF OF UNCOLLECTIBLE ACCOUNTS The Rock has credit sales of $650,000 during 2010 and estimates at the end of 2010 that 3 percent of these credit sales will eventually default. Also, during 2010
AGING METHOD On January 1, 2009, Hungryman, Inc., has the following balances for accounts receivable and allowance for doubtful accounts:Accounts Receivable $363,000 Allowance for Doubtful Accounts
AGING METHOD On January 1, 2010, Smith, Inc., has the following balances for accounts receivable and allowance for doubtful accounts:Accounts Receivable $273,000 Allowance for Doubtful Accounts (a
PERCENTAGE OF CREDIT SALES METHOD At December 31, 2009, Garner has a $1,000 credit balance in its allowance for doubtful accounts. Garner estimates that 1.5 percent of its 2010 credit sales will
COLLECTION OF AMOUNTS PREVIOUSLY WRITTEN OFF Customer A owes XYZ Corp. $524. XYZ determines that the total amount is uncollectible and writes off all of Customer A’s debt. Customer A later pays
FACTORING RECEIVABLES On July 1, Wilson, Inc., factors $200,000 of accounts receivable. The factor charges a 1.5 percent fee.Required:Prepare the journal entry to record the factoring of the accounts
ACCOUNTS RECEIVABLE BALANCE Beginning accounts receivable were $10,000. All sales were on account and totaled$700,000. Cash collected from customers totaled $650,000.Required:Calculate the ending
ACCOUNTS RECEIVABLE BALANCE Beginning accounts receivable were $50,000 and ending accounts receivable were$70,000. $300,000 cash was collected from customers’ credit sales.Required:Calculate the
ACCOUNTS RECEIVABLE BALANCE Beginning accounts receivable were $11,000 and ending accounts receivable were$14,000. All sales were on credit and totaled $559,000.Required:Determine how much cash was
ACCOUNTING FOR CREDIT CARD SALES Judy’s College Shirts sells sweatshirts with imprinted college logos in Honey Creek Mall.At the end of a recent day, Judy’s cash register included credit card
NOTES RECEIVABLE Portuguese, Inc., a truck dealership, sells a truck costing $18,000 to Undervalued Company on January 1, 2009, in exchange for a $40,000 note bearing 9 percent interest.Required:.
NOTES RECEIVABLE Frenchie, Inc., a truck dealership, sells a truck costing $15,000 to Overvalued Company on January 1, 2009, in exchange for a $30,000 note bearing 12 percent interest.Required:.
RATIO ANALYSIS The following information pertains to Cobb Corporation’s financial results for the past year.Net sales $100,000 CGS 35,000 Other expenses 12,000 Net income 53,000 Required:.
RATIO ANALYSIS ABC Corporation’s 2008 net sales and average net trade accounts receivable were$4,300,000 and $975,000, respectively.Required:Calculate ABC’s accounts receivable
RATIO ANALYSIS Bo Sports’ 2008 net sales, average net trade accounts receivable, and net income were$7,300,000, $1,655,000, and $745,000, respectively.Required:Calculate Bo’s:. accounts
CALCULATION OF REVENUE Wallace Motors, which began business on December 31, 2009, buys and sells used cars.All its sales are to other car dealers. Four cars were purchased during January and none
Russell paid Wallace $20,000 on January 18 and the remaining $55,000 on February 12.b. The fourth car purchased during January was sold to Hastings Classics for $28,000.The car was delivered to
Hastings paid Wallace on January 30.Required:Calculate the monthly revenue for Wallace Motors for January and February 2010.Exercise
REVENUE RECOGNITION Volume Electronics sold a television to Sarah Merrifield on December 15, 2009. Sarah paid $100 at the time of the purchase and agreed to pay $100 each month for five months
CALCULATION OF REVENUE FROM CASH COLLECTION Anderson Lawn Service provides mowing, weed control, and pest management services for a flat fee of $60 per lawn per month. During July, Anderson collected
EFFECTS OF SALES DISCOUNTS Citron Mechanical Systems makes all sales on credit, with terms 2/10, n/30. During 2009, the list price (prediscount) of goods sold was $498,500. Customers paid
SALES DISCOUNT RECORDED AT GROSS Nevada Company sold merchandise with a list price of $12,500 to Small Enterprises with terms 3/15, n/30. Nevada records sales at gross.Required:. Prepare the entries
SALES, SALES RETURNS, AND SALES ALLOWANCES Rubin Enterprises had the following sales-related transactions on a recent day:a. List price of goods sold on credit was $14,700; terms 3/15, n/45.b. Cash
SALES RETURNS Swan and Bloom, Inc., is a wholesaler of novelty items to small stores. All sales are on credit with no discount offered. During March, Swan and Bloom accepted the following sales
INTERNAL CONTROL FOR SALES Arrow Products is a mail-order computer software sales outlet. Most of Arrow’s customers call on its toll-free phone line and order software, paying with a credit
AVERAGE UNCOLLECTIBLE ACCOUNT LOSSES AND BAD DEBT EXPENSE The accountant for Porile Company prepared the following data for sales and losses from uncollectible accounts:Year Credit Sales Losses from
BAD DEBT EXPENSE: PERCENTAGE OF CREDIT SALES METHOD Gilmore Electronics had the following data for a recent year:Cash sales $ 26,700 Credit sales 428,600 Accounts receivable determined to be
BAD DEBT EXPENSE: PERCENTAGE OF CREDIT SALES METHOD Bradford Plumbing had the following data for a recent year:Credit sales $289,000 Allowance for doubtful accounts, 1/1 (a credit balance) 4,120
BAD DEBT EXPENSE: AGING METHOD Glencoe Supply had the following accounts receivable aging schedule at the end of a recent year.Accounts Receivable Age Amount Proportion Expected to Default Allowance
AGING RECEIVABLES AND BAD DEBT EXPENSE Perkinson Corporation sells paper products to a large number of retailers. Perkinson’s accountant has prepared the following aging schedule for its accounts
ALLOWANCE FOR DOUBTFUL ACCOUNTS At the beginning of the year, Kullerud Manufacturing had a credit balance in its allowance for doubtful accounts of $6,307. During the year Kullerud made credit sales
CORRECTING AN ERRONEOUS WRITE-OFF The new bookkeeper at Karlin Construction Company was asked to write off two accounts totaling $1,710 that had been determined to be uncollectible. Accordingly, he
FACTORING ACCOUNTS RECEIVABLE On February 1, Anderson, Inc., factors $1,200,000 of accounts receivable. The factor charges a 2 percent fee.Required:Prepare the journal entry to record the factoring
ACCOUNTING FOR NOTES RECEIVABLE Tucker Products sold inventory costing $20,000 to Thomas, Inc., in exchange for a fivemonth, $50,000, 12 percent note receivable. Thomas, Inc., paid Tucker the full
RECORDING NOTES RECEIVABLE: ISSUANCE, PAYMENT, AND DEFAULT Marydale Products permits its customers to defer payment by giving personal notes instead of cash. All the notes bear interest and require
RATIO ANALYSIS The following information was taken from Nash, Inc.’s trial balances as of December 31, 2008, and December 31, 2009.12/31/2009 12/31/2008 Accounts receivable $ 32,000 $ 39,000
RATIO ANALYSIS The following information was taken from Logsden Manufacturing’s trial balances as of December 31, 2008, and December 31, 2009.12/31/2009 12/31/2008 Accounts receivable $ 13,000 $
REVENUE RECOGNITION Katie Vote owns a small business that rents computers to students at the local university for the nine month school year. Katie’s typical rental contract requires the student to
DISCOUNT POLICY AND GROSS MARGIN Compton Audio sells MP3 players. During 2008, Compton sold 1,000 units at an average of $300 per unit. Each unit cost Compton $180. At present, Compton offers no
EFFECTS OF DISCOUNTS ON SALES AND PURCHASES Helmkamp Products sells golf clubs and accessories to pro shops. Gross sales in 2009 were $1,150,200 (Helmkamp’s list price) on terms 3/15, n/45.
RECORDING SALES Sullivan Company sells industrial cleaning supplies and equipment to other businesses.During the first quarter of 2009, the following transactions occurred:a. On January 10, Sullivan
Sullivan credited WMT’s account.Required:Prepare Sullivan’s journal entries to record each of these transactions.

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