AC 210 Lecture Notes - Lecture 41: Financial Statement, Internal Revenue Service, Weighted Arithmetic Mean

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silvercicada472

5 Jun 2018

School

University of Alabama

Department

Accountancy

Course

AC 210

Professor

Lisa Mc Kinney

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Inventory Subsidiary Ledger Accounts

Companies that use the perpetual system maintain an inventory control account and an

inventory subsidiary ledger with separate accounts for each type of item the business

sells. Whenever a transaction affects inventory, the specific item's subsidiary ledger

account is also updated. Inventory subsidiary ledger accounts usually contain separate

sets of columns for purchases, sales, and the account balance. Each set has three

columns, which are used to record the number of units, the cost of each unit, and the

total cost. The inventory‐tires account from the previous example appears below.

The numbers in the maximum and minimum fields near the upper left corner of the

account are optional control fields designed to prevent the company from having too

many or too few of the items in stock. In this example, the company purchases new tires

whenever the overall number of units in stock drops to seven or less, and the number

purchased should never cause the company's stock to exceed fifteen units.

If you study the journal entries on the subsidiary ledger account immediately previous,

you will notice that the cost of the tires sold on April 22 changes from $100 in the journal

entries to $99 in the inventory account. These examples illustrate two different cost flow

methods, so they are intended to be used for illustration purposes only. A company

must use one cost flow method consistently.

Cost Flow Methods

The cost of items remaining in inventory and the cost of goods sold are easy to

determine if purchase prices and other inventory costs never change, but price

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fluctuations may force a company to make certain assumptions about which items have

sold and which items remain in inventory. There are four generally accepted methods

for assigning costs to ending inventory and cost of goods sold: specific cost; average

cost; first‐in, first‐out (FIFO); and last‐in, first‐out (LIFO). Each method is applied to the

information in the following illustrations, summarizing the activity in one inventory

subsidiary ledger account at a company named Zapp Electronics.

January 1

Beginning inventory–100 units

@ $ 14/unit

March 20

Sale of 50 units

April 10

Purchase of 150 units @

$16/unit

July 15

Sale of 100 units

September

Sale of 50 units

October 10

Purchase of 200 units @ $

17/unit

December

Sale of 150 units

December

Ending Inventory–100 units

The cost of goods available for sale equals the beginning value of inventory plus the

cost of goods purchased. Two purchases occurred during the year, so the cost of goods

available for sale is $ 7,200.

Units

Per

Unit

Cost

Total

Cost

Beginning

Inventory

100

$ 14

1,400

+ Purchase–

April 10

150

$ 16

2,400

+ Purchase–

October 10

200

$ 17

3,400

= Cost of Goods

Available for

Sale

450

7,200

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Specific cost. Companies can use the specific cost method only when the purchase

date and cost of each unit in inventory is identifiable. For the most part, companies that

use this method sell a small number of expensive items, such as automobiles or

appliances.

If specially coded price tags or some other technique enables Zapp Electronics to

determine that 15 units in ending inventory were purchased on April 10 and the

remaining 85 units were purchased on October 10, then the ending value of inventory

and the cost of goods sold can be determined precisely.

Units

Per

Unit

Cost

Total

Cost

+ Purchase–

April 10

$16

240

Purchase–

October 10

$17

1,445

Ending

Inventory

100

1,685

7,200

Cost of Goods Available for Sale

$ 7,200

- Ending Inventory

(1,685)

= Cost of Goods Sold

$ 5,515

Since the specific cost of each unit is known, the resulting values for ending inventory

and cost of goods sold are not affected by whether the company uses a periodic or

perpetual system to account for inventory. The only difference between the systems is

that the value of inventory and the cost of goods sold is determined every time a sale

occurs under the perpetual system, and these amounts are calculated at the end of the

accounting period under the periodic system. Check the value found for cost of goods

sold by multiplying the 350 units that sold by their per unit cost.

Units

Per

Unit

Cost

Total

Cost

Beginning

Inventory

100

$ 14

$ 1,400

Purchase–April

135

$ 16

2,160

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Related Questions

Narrative andInstructions

Rockford Corporation is awholesale plumbing supply distributor. The corporation wasorganized
in 1981, under the laws of theState of Illinois, with an authorized capitalization of 10,000shares
of no-par common stock with astated value of $18 per share. The common stock is sold overthe
the counter in the local area.You have been hired as of Thursday, December 25, 2014, to replacethe
controller, who has resigned.As controller, you are responsible for the corporation'saccounting
recrods, preparation of thefinancial statements, safeguarding the corporate assets, andproviding
management with financialinformation to set prices and to monitor and controloperations.

Rockford Corporation closesits books annually on December 31 but prepares financialstatements
quarterly. Adjusting entriesare posted to the general ledger only at year-end; at the end ofthe
first, second, and thirdquarter the adjustments are entered only on a work sheet, not inthe general
ledger. Therefore, theadjusting entries to be recorded on December 31 are annualadjustments that
you must journalize and thepost to the general ledger accounts before preparing thefinancial
statements.

Rockford Corporation maintainsa perpetual inventory system and takes a physical count eachyear
to adjust the inventorycarrying amount. Purchases are recorded at the gross amount(discounts
taken are recognized at thedate of payment) of the supplier's invoice, and the terms varywith
each supplier. Sales onaccount are subject to terms of 1/10, n/30. Discounts are taken andgranted
only when the terms are met.The cost of all inventory sold in December was 65% of the salesprice.
The corporation uses thefollowing journals and ledgers:

Journals
1. A sales journal (S) - torecord sales of merchandise on account.
2. A purchase journal (P)- torecord purchases of merchandise on account.
3. A cash receipts journal(CR) - to record all cash receipts.
4. A cash disbursementsjournal (CD) - to record all cash payments.
5. A general journal (J) - torecord all transacitons that cannot be recorded in the otherjournals.

Ledgers
1. A general ledger
2. An accounts receivablesubsidiary ledger.
3. An accounts payablesubsidiary ledger.

In recording salestransactions, each sale should be posted on the day of the saledirectly to the
customer's account in thesubsidiary ledger, using the invoice number as the postingreference
number in the subsidiaryaccount. Also, cash receipts from customers should be posted tothe
subsidiary ledger on the daythey are received. The purchase order number should be used as
the posting reference numberin the subsidiary ledger for purchases on account fromsuppliers.
Purchases from suppliers andpayments to them should be posted daily. All other individualposting
may be made weekly or at themonth-end. Account numbers should be used as posting reference
numbers in the journals.Officers and office personnel are salaried employees and are paidmonthly
on the last day of each month.The delivery truck drivers and warehouse employees are hourlywage
employees and are paidbiweekly. Each biweekly pay period ends Friday. On the followingMonday
you assistants provide youwith a payroll summary from which you prepare general journalentries
to record the biweekly payrolland the employer's taxes on the payroll. The biweeklyemployees'
paychecks are distributed onthe following day (Tuesday).

The January 1, 2014, balancesappear in the general ledger accounts as well as the Noverber 30,2014,
balances, for those accountswhose balances have changed. All transacitons affecting thenon-
current accounts from January1, 2014, through Noverber 30, 2014, with explanations, appearin
these accounts to facilitatethe preparation of the statement of cash flows.

Subsidiary ledger accountbalances as of Noverber 30, 2014, are as follows:

Accounts Receivable			Acct No	Amount
Boecker Builders			117	62,920
The Potts Company			122	46,300
Swanson BrothersContruction			133	22,590
A & B Hardware			143	-
Trudy's Plumbing			155	15,500
Coconino Contractors Inc			160	28,700
Rankin Plumbing Corp			166	74,350
Beverly's BuildingProducts			175	13,600
Bilder Construction Co			180	48,900
Iwanaga Plumbing andHeating			190	5,800
Total				318,660

Accounts Payable			Acct No	Amount
Phoenix Plastics			14	19,280
Business Basics Inc			16	-
Edward's PlumbingSuppliers			18	20,050
DeKalb Transport			20	-
Oxenford Copperworks			35	28,700
Smith Pipe Co			39	37,700
Ron & Rod's PlumbingProducts			44	14,850
Khatan Steel Corp			57	12,000
Total				132,580

The transactions throughDecember 23 have already been recorded by the former controller.You
are to begin your work byentering the transaction of December 25 for the payment of cashto
repurchase stock.

			Dec-14
S	M	T	W	T	F	S
	1	2	3	4	5	6
7	8	9	10	11	12	13
14	15	16	17	18	19	20
21	22	23	24	25	26	27
28	29	30	31


December Transactions
December
1	Received a check in the amount of $22,364 fromSwanson Brothers Contruction in full
	payment of invoice No. 1120 dated Novermber 26 inthe amount of $22,590.
1	Sold sewer and drainage pipe to Beverly's BuildingProducts on account, invoice No. 1201
	for $28850.
2	Purchased copper tubing and fittings from Edward'sPlumbing Supplies Inc. on account,
	purchase order No. 315 for $32660, terms n/60.
2	Issued check No. 1580 for $28,700 to OxenfordCopperworks in settlement of the
	balance owned on purchase order No. 280.
3	A court notice indicates that Iwanaga Plumbing andHeating is bankrupt and payment
	of its account improbable; the president orders theaccount to be written off as a
	bad debt (invoice No. 780).
3	Sold bathroom fixtures to Bilder Construction Co onaccount, invoice No. 1202 for
	$47,700.00
4	Received a check in the amount of $45,374 from thePotts Co in full payment of invoice
	No. 1128 dated November 27 for $46,300.
4	Sold plumbing supplies and plastic pipe to CoconinoContractors Inc. on account, invoice
	No. 1203 for $12,300.
4	Issued check No. 1581 for $720 to Standard Oil Co,in payment of gas, oil, and truck repair
	from Tierney's Standard Service.
5	Issued check No. 1582 for $11,880 to Khatan SteelCorp. in full settlement of purchase order
	No. 312 for $12,000.
5	Issued check No. 1583 for $12,054 to PhoenixPlastics in full payment of Phoenix's invoice
	dated November 28 in the amount of $12,300, forpurchase order No. 313, terms 2/10, n/30.
5	Received a check in the amount of $72,863 fromRankin Plumbing Corp. in full payment
	of invoice No. 1129 dated November 28 for$74,350.
8	Sold cast pipe to Trudy's Plumbing on account,invoice No. 1204 for $26,300.
8	Received a check in the amount of $28,700 fromCoconion Contractors, Inc. in full payment
	of invoice No. 1091 dated October 20.
8	Purchased bathroom fixtures from Phoenix Plastics,on account, purchcase order No. 316
	for $56,800 terms 1/10, n/30.
8	Received a check in the amount of $29,600 fromBoecker Builders in partial payment of
	balance outstanding covering invoice Nos. 1050 and1071.
9	The payroll summary for the biweekly pay periodended Friday, December 5 contained the
	follwing information:
	Delivery and warehouse wages				4,860
	FICA taxes withheld				410
	Federal income taxes withheld				900
	State income taxes withheld				190
		Net pay			3,360
	Employer's payroll taxes:
	FICA tax				410
	Federal unemployment tax				-
	State unemployment tax				-
	Issued check No. 1584 for the amount of the net payand deposited it in the payroll bank
	account. Individual payroll checks were thenpreppared for distributions to the biweekly
	emplyees on Tuesday, December 9, 2014.
9	Issued check No. 1585 for $650 to Scooter Gordonfor lettering and sign painting on some
	delivery trucks.
9	Issued check No. 1586 for $6,980 to PhoenixPlastics, in payment of Phoenix's invoice dated
	November 12 in the amount of $6,980, our purchaseorder No. 299.
10	Issued check No. 1587 for $37,323 to Smith Pipe Coin full payment of their invoice dated
	November 28, terms 1/15, n/30, our purchase orderNo. 314.
10	Received a check in the amount of $15,500 fromTrudy's Plumbing in full settlement of
	invoice No. 1106 dated November 7.
10	Sold pipe, fixtures, and accessories to Trudy'sPlumbing on account, invoice No. 1205 for
	$26,850.00
11	Sold pumbing supplies and copper tubing to ThePotts Company on account, invoice No.
	1206 for $31,450.
11	Received a check in the amount of $33,320 fromBoecker Builders in full payment of invoice
	No. 1071.
11	Cash sales to date totaled $10,232.
12	Received a check in the amount of $25,774 fromTrudy's Plumbing in payment of inoivce
	No. 1204.
12	Sold plumbing fixtures and supplies to BoeckerBuilders, on account, invoice No. 1207
	for $24,730.
15	The Potts Co returned defective copper tubing thatis purchased on December 11. A credit
	memo in the amount of $5680 is issued relative toinvoice No. 1206. The copper tubing
	had a cost of $3692.
15	The defective copper tubing is returned to Edward'sPlumbing supplies, Inc. along with
	a debit memo in the amount of $3692 in reduction ofpurchase order No. 315.
15	Issud check No. 1588 for $599 in payment ofNovember telephone bill to Northern
	Illinois Communications.
16	Issued check No. 1589 in the amount of $12,360 inpayment of federal withholding taxes,
	$10,573, and FICA taxes, $1787, payable on Novembersalaries and wages; The check is
	remitted to the Winnebago County Bank as thedepository.
16	Issued check No. 1590 for $56,232 to PhoenixPlastics, Inc, in payment of purchase order
	No. 316.
17	The president informs you that Bilder ConstructionCo agrees to convert the $48900
	overdue account receivable (invoice No. 1120) to a8% note due six months from today.
17	Purchased plumbing materials from Smith PipeCompany on account, purcase order No.
	317 for $,51,120 terms 1/15, n/60.
17	Sold drain tile, plastic pipe, and copper tubing toA & B Hardware on account, invoice No.
	1208 for $7,340.
18	Sold fixtures and materials to CoconinoContractors, Inc. on account, invoice No. 1209 for
	$44,530.
18	An invoice in the amount of $1,021 was receivedfrom S. White Trucking Company for
	freight on purchase order No. 317 and paid byissuing check No. 1591.
18	Received a check in the amount of $26,582 fromTrudy's Plumbing in payment of invoice
	No. 1205.
19	Purchased office supplies from the Pen & Pad,issuing check No. 1592 in the amount of
	$1,460. (Note: Debit asset account).
19	Purchased a new Faith computer for $5600 fromBusiness Basics, Inc, purchase order
	No, 318, paying $600 down through check No. 1593with the balance due in thirty days
	(n/30). The computer has an estmated life of 4years with a salvage value of $2200.
22	Purchased bathroom and kitchen fixtures fromPhoenix Plastics, on account, purchase
	order No. 319 for $48,330, terms 1/10, n/30.
22	Received a bill from DeKalb Transport for $2580 forfreight costs incurred during the last 30
	days, terms n/30.
23	The payroll summary for the biweekly pay periodended Friday, December 19 contained the
	follwing information:
	Delivery and warehouse wages				5,770
	FICA taxes withheld				415
	Federal income taxes withheld				1,067
	State income taxes withheld				225
		Net pay			4,063
	Employer's payroll taxes:
	FICA tax				415
	Federal unemployment tax				-
	State unemployment tax				-
	Issued check No. 1594 for the amount of the net payand deposited it in the payroll bank
	account. Individual payroll checks were thenprepared for distributions to the biweekly
	emplyees on Tuesday, December 23.

	NOTE: Transactions up to this point have beenrecorded. At this point you became
	controller and are responsible for recordign allfurther transactions.

25	The board of directors voted to purchase 2,500shares of its own stock from stockholder
	Dionne Schivone at $76 per share and issued checkNo. 1595 in payment. Stock repurchases
	are recorded at cost. Rockford is purchasing theseshares because Ms. Schivone had been
	a valuable employee.
26	The baord of directors declared a $1.25 per sharecash dividend payable on January 14 to
	shareholders of record by the end of the day ofDecember 26.
26	The president informs you that Beverly's BuildingProducts agrees to convert the $13,600
	overdue accounts receivable (invoice No. 1119)balance to a 10% note due six months from
	today.
29	A half-acre parcel of land adjacent to the buildingis acquired in exchange for 750 shares
	of unissued common stock. The land has a fair valueof $58,400 and will be used
	immediately as an outside storage lot and parkinglot.
29	An invoice in the amount of $1,860 is received fromWayne McManus, lawyer, for legal
	services involved in the acquisition of theadjacent parcel of land; check No. 1596 is issued.
29	Sold pipe and plumbing materials to BoeckerBuilders on account, invoice No. 1210 for
	$44,280
30	Issued check No. 1597 in the amount of $3,500 tothe Northern Star for adverstisement run in
	the home building supplement of December 13.
30	Issued check No. 1598 in the amount of $830 toStandard Oil Co. in payment of gas, oil,
	and truck repairs from Standard Oil Co. (useFreight-out).
30	Purchased copper and cast iron pipe from OxenfordCopperworks on account, purchase
	order No. 320 for $55,240, terms 1/10, n/30.
30	Check No. 1599 for $9,400 is issued to the bondsinking fund trustee, Chicago Trust Co.,
	for deposit in the sinking fund. (Use OtherAssets).
30	Sold plumbing supplies to Swanson BrothersConstruction on account, invoice No. 1211
	for $24,150.
31	Received a check for $24,730 from Boecker Buildersin payment of invoice No. 1207.
31	Issued check No. 1600 for $50,609 to Smith PipeCompany in payment of purchase order
	No. 317.
31	The custodian of the petty cash fund submits thefollowing receipts for reimbursement
	and reports a cash-on-hand count of $8.
	Postage stampls used (supplies)			$38
	United Parcel (freight-out)			23
	C.O.D postage (freight costs)			51
	Christmas office decorations (Misc exp)			30
	Check No. 1601 is issued and cashed to reimbursethe fund.
31	Sold an electric truck-lift to Leila Stierman Co.for $2600 cash. The original cost was
	$7900 with salvage value of $900, a life of 10years, and accumulated depreciation
	recorded through 12/31/13 is $4,550. Thestraight-line method is used. (Note: the
	company follows the practice of recording a halfyear's depreciation in the year of
	acquisition and a half year in the year ofdisposal.) First, bring the depreciation expense
	up to date in the general journal. Then journalizethe entire entry for the sale in the cash
	receipts journal.
31	Sold bathroom fixtures and plumbing supplies toTrudy's Plumbing on account, invoice
	No. 1212 for $56370.
31	Because for some time the petty cash fund has beensmaller than required for monthly
	expenditures, the fund is increased by $95 bycashing check No. 1602 and placing the
	money in the petty cash fund.
31	The payroll summary for the monthly paid employeesin submitted so that December
	checks can be distributed before the year-end; thedetails are as follows:
	Office and administrative salaries				$43,900
	Federal income taxes withheld				7,696
	State income taxes withheld				1,517
	FICA taxes withheld				3,120
		Net pay			$31,567
	Issued check No, 1603 for the amount of the net payand deposited it in the payroll bank
	account. Individual payroll checks were preparedfor distribution to all monthly employees
	by the end of the day.
	Employer's payroll taxes:
	FICA tax (all office and administrative)				$3,120
	Federal unemployment tax				0
	State unemployment tax				0
31	Cash sale since December 12 total $42150.




Instructions
1	Make the entries in the appropriate journal forDecember 25 through December 31.
	(adjusting entries are recorded in generaljournal)
2	Post any amounts to be posted as individual amountsfrom journals to the general ledger
	and update the receivable and payable subsidiaryledger accounts.
	(only a few entries are posted for Dec, e.g.,account receivable. Please post all other entries)
3	Foot and cross-foot the columnar journals andcomplete the month-end postings of all
	books of orginal entry.

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(f) Prepare a post-closing trial balance, and determine whether the subsidiary ledgers agree with the control accounts in the general ledger.

Check figures:

Cash Receipts Journal, total Cash DR: $ 70,348

Cash Payments Journal, total Cash CR: 62,060

Net Income: 25,218 Total Assets: 149,568

Total Post Closing Trial Balance: 151,193

Sun & Surf Company uses a perpetual inventory system and both an accounts receivable and an accounts payable subsidiary ledger. Balances related to both the general ledger and the subsidiary ledger for Sun & Surf are indicated in the working papers. Below are a series of transactions for Sun & Surf Co. for the month of January. Credit sales terms are 2/10, n/30. The cost of all merchandise sold was 55% of the sales price.

Jan.3 Sell merchandise on account to M. Knast $5,100, invoice no. 825, and to C. Ryder $1,900, invoice no. 826.

5 Purchase merchandise from R. Drifter $5,000 and N. Sova $2,200, terms n/30.

7 Receive checks from V. Arnold $4,000 and I. Tan $2,000 after discount period has lapsed.

8 Pay freight on merchandise purchased $235.

9 Send checks to K. Xerxes for $9,000 less 2% cash discount, and to T. Caper for $11,000 less 1% cash discount.

9 Issue credit of $300 to C. Ryder for merchandise returned.

10 Summary daily cash sales total $15,500.

11 Sell merchandise on account to D. Gallagher $1,600, invoice no. 827, and to V. Arnold $900, invoice no. 828.

12 Pay rent of $1,000 for January.

13 Receive payment in full from M. Knast and C. Ryder less cash discounts.

15 Withdrawal of $800 cash by J. Sandy for personal use.

15 Post all entries to the subsidiary ledgers.

16 Purchase merchandise from T. Caper $18,000, terms 1/10, n/30; K. Xerxes $14,200, terms 2/10, n/30; and R. Drifter $1,500, terms n/30.

17 Pay $400 cash for office supplies.

18 Return $200 of merchandise to K. Xerxes and receive credit.

20 Summary daily cash sales total $20,100.

21 Issue $15,000 note, maturing in 90 days, to M. Griffen in payment of balance due.

21 Receive payment in full from V. Arnold less cash discount.

22 Sell merchandise on account to M. Knast $2,700, invoice no. 829, and to D. Gallagher $1,300, invoice no. 830.

22 Post all entries to the subsidiary ledgers.

23 Send checks to T. Caper and K. Xerxes in full payment less cash discounts.

25 Sell merchandise on account to I. Tan $3,500, invoice no. 831, and to C. Ryder $6,100, invoice no. 832.

27 Purchase merchandise from T. Caper $14,500, terms 1/10, n/30; N. Sova $1,200, terms n/30; and R. Drifter $5,400, terms n/30.

27 Post all entries to the subsidiary ledgers.

28 Pay $275 cash for office supplies.

31 Summary daily cash sales total $21,300.

31 Pay salaries and wages of $8,100. (continued)

Page 2 of 2

Instructions

(a) Record the January transactions in a sales journal, a single-column purchases journal, a cash receipts journal, a cash payments journal, and a two-column general journal.

(b) Post the journals to the general ledger.

(c) Prepare a trial balance at January 31, 2017, in the trial balance columns of the worksheet. Complete the worksheet using the following additional information.

1. Office supplies at January 31 total $900.

2. Insurance coverage expires on September 30, 2017.

3. Annual depreciation on the equipment is $1,500.

4. Interest of $50 has accrued on the note payable.

(f) Prepare a post-closing trial balance, and determine whether the subsidiary ledgers agree with the control accounts in the general ledger.

General Ledger
Cash					No. 101
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance	â			$ 37,150


Accounts Receivable					No. 112
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance	â			$ 13,000



Notes Receivable					No. 115
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance	â			$ 39,000
Inventory					No. 120
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance	â			$ 17,795







Office Supplies					No. 125
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance	â			$ 1,200


Prepaid Insurance					No. 130
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance	â			$ 2,205

Equipment					No. 157
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance	â			$ 6,450
Accumulated Depreciation - Equipment					No. 158
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance	â			$ 1,500

Notes Payable					No. 200
Date	Explanation	Ref.	Debit	Credit	Balance

Accounts Payable					No. 201
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance	â			$ 35,000




Interest Payable
Date	Explanation	Ref.	Debit	Credit	Balance

J. Sandy, Capital					No. 301
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance	â			$ 80,300


J. Sandy, Drawing					No. 306
Date	Explanation	Ref.	Debit	Credit	Balance

Income Summary					No. 350
Date	Explanation	Ref.	Debit	Credit	Balance



Sales					No. 401
Date	Explanation	Ref.	Debit	Credit	Balance



Sales Returns and Allowances					No. 412
Date	Explanation	Ref.	Debit	Credit	Balance


Sales Discounts					No. 414
Date	Explanation	Ref.	Debit	Credit	Balance


Cost of Goods Sold					No. 505
Date	Explanation	Ref.	Debit	Credit	Balance




Salaries and Wages Expense					No. 627
Date	Explanation	Ref.	Debit	Credit	Balance


Depreciation Expense					No. 711
Date	Explanation	Ref.	Debit	Credit	Balance

Interest Expense					No. 718
Date	Explanation	Ref.	Debit	Credit	Balance


Insurance Expense					No. 722
Date	Explanation	Ref.	Debit	Credit	Balance


Office Supplies Expense					No. 728
Date	Explanation	Ref.	Debit	Credit	Balance


Rent Expense					No. 729
Date	Explanation	Ref.	Debit	Credit	Balance

peachgerbil35

Use the following information forquestions 1â3.

At May 1, 2008, Treeline Company had beginning inventoryconsisting of 200 units with a unit cost of $7. During May, thecompany purchased inventory as follows:

200 units at $7

300 units at $8

The company sold 500 units during the month for $12 per unit.Treeline uses the average cost method.

1. The average cost per unit for May is

2. The value ofTreelineâs inventory at May 31, 2008 is

3. Treelineâs gross profit for the month ofMay is

Pembrook Company had beginning inventory on May 1 of $12,000.During the month, the company made purchases of $30,000 butreturned $2,000 of goods because they were defective. At the end ofthe month, the inventory on hand was valued at $9,500.

Calculate cost of goods available for sale and cost of goodssold for the month.

5. Principles of an efficient and effectiveaccounting information system include all of the followingexcept

a. cost effectiveness.

b. flexibility.

c. useful output.

d. All of these options are principles.

6. Which of the following statements isincorrect?

a. A major consideration in developing an accountingsystem is cost effectiveness.

b. When an accounting system is designed, noconsideration needs to be given to the needs and knowledge of thevarious users.

c. The accounting system should be able toaccommodate a variety of users and changing information needs.

d. To be useful, information must be understandable,relevant, reliable, timely, and accurate.

7. All of the following are advantages ofusing subsidiary ledgers except they

a. eliminate errors in individual accounts.

b. free the general ledger of excessive details.

c. show, in a single account, transactions affectingone customer or one creditor.

d. make possible a division of labor.

8. Which of the following is notan advantage of a subsidiary ledger?

a. Shows transactions affecting one customer or onecreditor in a single account.

b. Helps locate errors in individual accounts.

c. Puts greater detail in the general ledger.

d. Makes possible a division of labor.

9. Credit sales of assets other thanmerchandise are recorded in the

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. sales journal.

10. When the totals of the sales journal are posted at the end of themonth, there will be credits to

a. Sales and Merchandise Inventory and debits toAccounts Receivable and Cost of Goods Sold.

b. Accounts Receivable and Cost of Goods Sold anddebits to Sales and Merchandise Inventory.

c. Sales and debits to each individual customeraccount.

d. the Sales account only, and no debits.

11. TheOther Accounts column of a multi-column journal is often referredto as the

a. Sundry Accounts column.

b. Controlling Account column.

c. Credit Account column.

d. Debit Account column.

12. Companies record credit purchases of equipment or supplies inthe

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. one-column purchases journal.

13. Inthe expanded purchases journal, debits are made in whichcolumns?

a. Accounts Payable, Merchandise Inventory, andOffice Supplies

b. Merchandise Inventory, Office Supplies, and StoreSupplies

c. Cash, Office Supplies, and Store Supplies

d. Accounts Payable, Cash, and MerchandiseInventory

14. Ifa customer takes a sales discount, an entry is made in the

a. cash receipts journal.

b. sales journal.

c. cash payments journal.

d. general journal.

15. Claimsfor which formal instruments of credit are issued as proof of thedebt are

a. accounts receivable.

b. interest receivable.

c. notes receivable.

d. other receivables.

16. Interestis usually associated with

a. accounts receivable.

b. notes receivable.

c. doubtful accounts.

d. bad debts.

17. Thereceivable that is usually evidenced by a formal instrument ofcredit is a(n)

a. trade receivable.

b. note receivable.

c. accounts receivable.

d. income tax receivable.

18. Which ofthe following receivables would not be classified as an"other receivable"?

a. Advance to an employee

b. Refundable income tax

c. Notes receivable

d. Interest receivable

19. Notes oraccounts receivables that result from sales transactions are oftencalled

a. sales receivables.

b. non-trade receivables.

c. trade receivables.

d. merchandise receivables.

20. LarsonCompany on July 15 sells merchandise on account to Stuart Co. for$1,000, terms 2/10, n/30. On July 20 Stuart Co. returns merchandiseworth $400 to Larson Company. On July 24 payment is received fromStuart Co. for the balance due. What is the amount of cashreceived?

a. $600

b. $588

c. $580

d. $1,000

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AC 210 Lecture Notes - Lecture 41: Financial Statement, Internal Revenue Service, Weighted Arithmetic Mean

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