ACCT1101 Lecture Notes - Lecture 4: Accounts Payable, Accounting Equation, Historical Cost

The following events occurredin August and September:

8/1 YOU filed a charter withthe State of Louisiana to form the YOUR Accounting Corporation. Thecharter authorizes you to issue 5000 shares of $2 par common stock.The state charged you a $75 fee to file the charter. Since yourbusiness is not yet approved, you had to pay this fee usingpersonal funds.

9/1 You received your charterfrom the State of Louisiana and officially opened yourbusiness. Your first order of business was to become ashareholder of YOUR Accounting Corp. To do this, you purchased 500shares of common stock by issuing a check to YOUR Accounting Corpfor $10,000. You used this money to open a checking account atFirst Funds Bank.

9/1 You rented an office forYOUR Accounting Corp. The monthly rent is $500, with the firstmonth’s rent due immediately. You issue check #100 to OfficeBuilders for the first month’s rent.

9/2 You then went to the Applestore and purchased a new computer system for your business. YourMac Pro cost $2700 and your new printer cost $450. You set up a30-day account with Apple to make this purchase.

9/3 You ordered business cardsand stationary from Marketing Media on account. The order totaled$250 and will be shipped FOB Destination. (Record all purchases ofsupplies in the Supplies on Hand account).

9/4 You decided to purchase anew vehicle for your business. Upon visiting Pro-Auto, you decideon a new SUV at a cost of $55,000. This vehicle will be used 100%for business purposes. You finance the vehicle with Pig E Bank at arate of 5% for 6 years. Your first monthly payment is due onOctober 4.

NOTE: You will need to create a loan amortization schedule todetermine the amount of the monthly note and the interest expensefor each month. You can use a website such as www.bankrate.com tocreate the schedule. When recording your journal entries, round allamounts to the nearest dollar.

9/5 You went to the KEM Supplyto purchase supplies for your business at a cost of $600. KEMopened a customer charge account for you. The payment terms on youraccount will be 2/10, net 30. The time period for determining thepayment amount begins on the purchase date.

9/6 You purchased a one-yearauto insurance policy from InsureMart for $1200. InsureMart willsend you a bill for the policy. YOUR Accounting Corporationcapitalizes all insurance policies on the date of purchase andrecords the necessary expense at year-end as an adjustingentry.

9/10 Your firstclient, Red Fische, came in today needing assistance with filingthe appropriate paperwork to start his new seafood restaurant. Youissued invoice #1 to Red Fische and he paid you an initial $2,000Engagement Fee. Red Fische also agreed to contract with you toprovide accounting services for $2,500 per month.

9/12 You issue check#101 to YOUR Accounting Corp to establish a $500 Petty Cash Fund.You will use this account to make small cash purchases.

9/12 You reimburseyourself for the filing fees associated with forming yourcorporation.

9/14 You paid KEM Supply by issuingcheck #102

9/15 You hire anadministrative assistant, Mandi Handi, she will be paid a monthlysalary of $1500. You have decided that all pay periods will end onthe last day of the month and that checks will be issued on the5^th of each month.

NOTE: Assume the following rates when preparing the payroll:federal income tax 15%, state income tax 5%, and FICA 7.65%.

YOUR Accounting Corp. has state and federal unemployment insurancerates of 1% (FUTA) and 2% (SUTA) on the first $7,700 of wages peremployee. The employer FICA rate is 7.65%.

9/16 Marketing Mediadelivered your business cards and stationary. Check #103 was issuedto pay for the supplies.

9/20 You visited anew client, Anita Cooke, to set up a Quickbooks accounting systemfor her new business, Cooking For You. You gave Anita and invoice#2 for the Engagement Fee and she paid you by issuing a check inthe amount of $2,000. Anita also agreed to a monthly fee of $1,500for you to handle her ongoing accounting needs.

9/22 You purchased$50 of fuel for your new SUV from Get ‘n Go. You charged this toyour Get ‘n Go account.

9/30 Mandi sentpro-rated invoices, #3 & #4 , to Red Fische and Cooking For Youfor Monthly Accounting Services. The payment terms are 1/10, net30.

9/30 You accruedinterest on the Pig E. Bank note. Accrue interest based on thenumber of days in the month.

9/30 You computedand accrued the payroll for September.

9/30 You receivedmonthly bills for the following:

Max Power Company - $100, terms n/30

WaterWorks #1 - $20, terms n/30.

Assignment #1: For the Monthof September

· In proper General Journal format, record the transactions for themonth; include descriptions of each transaction with your journalentry. Use only the accounts shown in the chart of accounts.

· Post the journal entries for the month to the general ledgeraccounts, use appropriate posting references.

· Prepare a trial balance for the period ending September 30.

o Using proper format,create your trial balance in Microsoft Excel. Do not use any trialbalance templates. Include all accounts from the chart of accounts.Even those with zero balances. Your accounts in the trial balanceshould be in the exact order shown in the chart of accounts.

Question 1

Identify the item below that is not one of the four different types of data processing activities.

Question 2

All of the following are advantages of an ERP system except

Question 3

Sam Jones has been the controller of Downtown Tires for 25 years. Ownership of the firm recently changed hands and the new owners are conducting an audit of the financial records. The audit has been unable to reproduce financial reports that were prepared by Sam. While there is no evidence of wrongdoing, the auditors are concerned that the discrepancies might contribute to poor decisions. Which of the following characteristics of useful information is absent in the situation described above?

Question 4

An ERP system might facilitate the purchase of direct materials by all of the following except

Question 5

Antia Carmie is the largest collector and retailer of Japanese fans in the St. Louis area. Antia uses computer technology to provide superior customer service. The store's database system was designed to make detailed information about each Japanese fan easily accessible to her customers. Accordingly, the fan price and condition are provided for each fan, along with many pictures of each fan. In Antia's database, the price of the Japanese fans is a(n)

Question 6

Which of the following is not considered a source document?

Question 7

In an ERP system, the module used to record data about transactions in the disbursement cycle is called

Question 8

Baggins Incorporated identifies new product development and product improvement as the top corporate goals. An employee developed an innovation that will correct a shortcoming in one of the company's products. Although Baggins current Return on Investment (ROI) is 12%, the product innovation is expected to generate ROI of only 10%. As a result, awarding bonuses to employees based on ROI resulted in

Question 9

________ are examples of activities that constitute inbound logistics.

Question 10

In which transaction cycle would information for inventory purchases be most likely to pass between internal and external accounting information systems?

Question 11

The collection of customer payment is part of which transaction cycle?

Question 12

Which of the following is an example of source data automation?

Question 13

All of the following are guidelines for developing a good coding system except

Question 14

What is a key decision that needs to be made with regards to borrowing money from lenders?

Question 15

Identify the false statement below.

Question 16

The chart of accounts of a fast-food restaurant would probably include

Question 17

Which statement below regarding the AIS is false?

Question 18

In Petaluma, California, electric power is provided to consumers by Pacific Power. Each month Pacific Power mails bills to 186,000 households and then processes payments as they are received. What is the best way for this business to ensure that payment data entry is efficient and accurate?

Question 19

Data must be converted into information to be considered useful and meaningful for decision making. There are seven characteristics that make information both useful and meaningful. If the same information can be reproduced by two independent and knowledgeable people, it is representative of the characteristic of

Question 20

Antia Carmie is the largest collector and retailer of Japanese fans in the St. Louis area. Antia uses computer technology to provide superior customer service. The store's database system was designed to make detailed information about each Japanese fan easily accessible to her customers. Accordingly, the fan price and condition are provided for each fan, along with many pictures of each fan. In Antia's database, the data about each Japanese fan represents a(n)