ACCTG311 Study Guide - Midterm Guide: General Ledger, Interest Rate, Internal Control

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blackcricket469

3 Nov 2015

School

University of Alberta

Department

Accounting

Course

ACCTG311

Professor

Kristie Dewald

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Document Summary

**note: this suggested solution does not include all possible answers, nor does it include all the judgments that are involved in evaluating responses. Sterling corp. owns the following assets at the financial statement date: Required: determine the amount that should be reported as cash and cash equivalents in the statement of financial position. 36,450: for any item that you did not include in a. , identify where it should be reported on the statements. Post dated cheques (0. 5) will still be in accounts receivable (0. 5) Olsen inc. gathered the following information from a review of the october bank statement and general ledger. Unadjusted balance per books as of october 31, ,600. Nsf cheque returned with october bank statement, . Deposits in transit as of october 31, . Cheque printing charges reported on the bank statement . The bank processed a transaction incorrectly during october. Olsen has correctly recorded this transaction is its records. Required: determine the adjusted cash balance per books.

Related Questions

1. As of December 31, 2000, DaltonCompany has $7,240 cash in its checking account, as well as severalother items listed below:

Bank credit card slips signed by customers $ 900

Money market fund balance 4,000

Investment in US Treasury bills 10,000

Checks received from customers, but not

yet deposited in the bank 700

Investment in ATT 10% bonds, maturing June2001 15,000

What amount should be shown in Dalton's December 31,2000, balance sheet as "Cash and cash equivalents"?

A) $15,600.

B) $22,840

C) $37,840

D) $30,600

The Cash account in the ledger of Townhouse Co. shows a balanceof $16,526 at September 30. The bank statement, however, shows abalance of $20,900 at the same date. The only reconciling itemsconsist of a bank service charge of $6, a large number ofoutstanding checks totaling $5,930, and a deposit in transit.

2. Refer to the abovedata. What is the adjusted cash balance in the September30 bank reconciliation?

Answer A) $10,590.

B) $16,520.

C) $14,970

D) $14,964

3. Silbey Inc. had accounts receivable of$200,000 and an allowance for doubtful accounts of $8,700 justbefore writing off as worthless an account receivable from WalleyCompany of $1,200. After writing off this receivable what would bethe balance in Silbey's Allowance for Doubtful Accounts?

Answer A) $8,700 creditbalance.

B) $9,900 credit balance.

C) $7,500 credit balance.

D) $7,500 debit balance.

4. At the start of the current year, AcquaCorporation had a credit balance in the Allowance for DoubtfulAccounts of $1,200. During the year a monthly provision of 2% ofsales was made for uncollectible accounts. Sales for the year were$400,000, and $7,400 of accounts receivable were written off asworthless. No recoveries of accounts previously written off weremade during the year. The year-end financial statements shouldshow:

A) Uncollectible accountsexpense of $15,400.

B) Allowance forDoubtful Accounts with a credit balance of $1,800.

C) Allowance forDoubtful Accounts with a credit balance of $8,600.

D) Uncollectibleaccounts expense of $7,400.

5. Vector Corporation invested $290,000cash in available-for-sale marketable securities in earlyDecember. On December 31, the quoted market price forthese securities is $307,000. Which of the followingstatements is correct?

Answer A) Vector'sDecember income statement includes a $17,000 gain oninvestments.

B) If Vector sellsthese investments on January 2 for $300,000, it will report a lossof $7,000.

C) Vector's December 31balance sheet reports marketable securities at $290,000 and anUnrealized Holding Gain on investments of $17,000.

D) Vector's December 31balance sheet reports marketable securities at $307,000 and anUnrealized Holding Gain on Investments of $17,000.

6. On June 1, 2001, Swift Company acquired a 10%, ten-month notereceivable from a customer in settlement of an existing accountreceivable of $120,000. Interest and principal are due atmaturity.

8. Refer to the abovedata. The proper adjusting entry at December 31, 2001,with regard to this note receivable includes a:

A) Debit to Cash of $7,000.

B) Debit to NotesReceivable of $12,000.

C) Credit to InterestRevenue of $12,000.

D) Debit to AccruedInterest Receivable of $7,000.

7. In order to achieve internal controlover cash receipts:

A) The employee who handleschecks received in the mail should not prepare the controllisting.

B) The cashier shouldnot deposit cash in the bank.

C) The salesclerkshould not count the cash in the register at the end of theday.

D) The checks receivedin the mail from customers should not be sent to the accountingdepartment to be recorded as cash receipts.

Use the following to answer questions 8 - 9:

On November 1, 2000, Raceway Corporation sold land priced at$700,000 in exchange for a 12%, six-month note receivable.

8 Refer to the above data. Raceway'sbalance sheet at December 31, 2000, includes which of the followingas a result of the sale of land on November 1?

A) Notes Receivable of$700,000 and Interest Receivable of $14,000.

B) Notes Receivable of$742,000 and Interest Receivable of $14,000.

C) Notes Receivable of$700,000 and Interest Receivable of $42,000.

D) Notes Receivable of$700,000 only.

9. Refer to the above data. OnMay 1, 2001 (maturity date), the note is collected in full byRaceway Corporation. Assuming a fiscal year-end of December 31,Raceway recognizes which of the following in its income statementfor 2001 with regard to this note?

A) $742,000 sales revenue

B) $28,000 interest revenue.

C) $14,000 interest revenue

D) $42,000 interest revenue

10. When there is an Allowance for Doubtful Accountsin use, the writing-off of an uncollectible accounts receivablewill:

A). Reduce income

B) Reduce an expense

C). Not change income or totalassets

D). Increase totalassets

11. At the end of January, the unadjusted trialbalance of Windsor, Inc. included the following accounts:

Debit Credit

Sales (80% represent credit sales) 500,000

Accounts Receivable 340,000

Allowance for Doubtful Accounts 800

Refer to the above data. Windsor uses the balance sheet approachin estimating uncollectible accounts expense, and aging theaccounts receivable indicates the estimated uncollectible portionto be $7,400. What is the amount of uncollectible accounts expenserecognized in Windsor's income statement for January?

A). $7,400

B). $6,600

C). $8,200

D). Some otheramount

12. Deegan Industries has an accounts receivableturnover rate of 8. Which of the following statements is nottrue?

A). Deegan's accounts receivableare more liquid than those of a business whose accounts receivableturnover rate is 5

B). Deegan waits approximately 46days to make collections of its credit sales. (Use 365 days in ayear.)

C). Deegan writes off accountsreceivable as uncollectible if they are over 45 daysold.

D). Deegan's net credit sales are about eighttimes the amount of its average accounts receivable

13. Randall, Inc. uses the allowance method supportedby an aging of its accounts receivable to recognize uncollectibleaccounts expense in its financial statements. What method ofrecognizing this expense does Randall use in its income taxreturn?

A). It must use the same method

B). The direct write-offmethod

C). Either the balance sheet or incomestatement approach is acceptable.

D). None, since uncollectible accounts expenseis not deductible for income tax purposes

14. If a 15%, 60-day note receivable is acquired froma customer in settlement of an existing account receivable of$5,000, the accounting entry for acquisition of the note will:

A). Include a debit to Notes Receivable for$5,750

B). Include a debit to Notes Receivable for$5,062.50

C). Include a credit to Interest Revenue for$62.50.

D). Include a debit to Notes Receivable for$5,000 and no entry for interest

15. On June 1, 2009, Jensen Company acquired an 8%,ten-month note receivable from a customer in settlement of anexisting account receivable of $130,000. Interest and principal aredue at maturity. The company has a December 31st year-end. Jensen'sentry to record the collection of this note at maturity includesa:

A). Credit to Accrued Interest Receivable of$6,067

B). Credit to Interest Revenue of$6,067

C). Credit to Interest Receivable of$2,600

D). Credit to Notes Receivable of$140,400

whitebutterfly400

Periodic inventory system. Each of the following four horizontal lines represents data taken from a separate multiple-step income statement. Insert the missing amounts in the space (empty box) provided. Indicate any net loss by placing brackets around the amount.

Hint: Not all parts of the income statement are shown, so be careful with your arithmetic.

	Beginning Inventory	Purchases	Cost of Goods Available for Sale	Ending Inventory	Cost of Goods Sold
a.	$180,000		$325,000	$80,000

	Sales (Revenue)	Cost of Goods Sold	Gross Profit	Operating Expenses	Net Income
b.	$240,000	$145,000			$32,000

	Revenue (Sales)	Cost of Goods Available for Sale	Ending Inventory	Cost of Goods Sold	Gross Profit	Operating Expenses	Net Income
c.	$515,000	$240,000		$145,000		$225,000	$145,000

. For each question below, circle the best answer from the choices given. (

1 : Under the periodic inventory system the purchases of merchandise are recorded at their selling prices.
a. True b. False

2 : Inventory shrinkage does not include the loss of merchandise through shoplifting.
a. True b. False

3 : Only under the periodic inventory system is a physical count of the inventory necessary.
a. True b. False

4 : It is not possible to have more inventory at the end of a period then at the beginning of a period.
a. True b. False

5) True and false. Indicate whether each of the following is True (T) or False (F). (5 POINTS)

T F 1. US Treasury bills that mature within 120 days are cash equivalents.

T F 2. Financial assets describe not just cash, but all assets that are easily and directly convertible into known amounts of cash.

T F 3. Good cash mgmt. dictates that any cash and checks received each day should be deposited the same day.

T F 4. The income statement approach to estimating Bad debts Expense emphasizes the aging of accounts receivable and the adjustment of the Allowance for Doubtful Accounts account to the level of the estimated uncollectible amount.

T F 5. When I use the allowance method for accounts receivable, I will recognize a Bad Debt Expense at the same time the account is taken off the Accounts Receivable Subsidiary Ledger.

. For each question below, circle the best answer from the choices given.

1. Which of the following items would cause the ending balance on the bank statement to be larger than the ending balance of cash shown in the accounting records (checkbook)?

A) Bank service charges.

B) Deposits in transit.

C) Outstanding checks.

D) NSF check from one of the depositor's customers.

2. When a bank reconciliation has been satisfactorily completed, the only related entries to be made in the companyâs records are:

A) To correct errors made by the bank in recording the dollar amounts of cash transactions during the period.

B) To reconcile items explaining the difference between the balance per books and the balance per bank stmt.

C) To record outstanding checks and bank service charges.

D) To record items explaining the difference between the balance per accounting records and the adj. cash bal.

3. The Allowance for Doubtful Accounts represents:

A) Cash set aside to make up for bad debt losses.

B) The amount of uncollectible accounts written off to date.

C) The difference between total credit sales and collections on credit sales.

D) The difference between the face value of A/R and the net realizable value of A/R.

4. In preparing a bank reconciliation, a service charge shown on the bank statement should be:

A) Added to the balance per the bank statement.

B) Deducted from the balance per the bank statement.

C) Added to the balance per the depositor's records.

D) Deducted from the balance per the depositor's records.

5. During preparation of a bank reconciliation, outstanding checks should be:

A) Added to the balance per the bank statement.

B) Deducted from the balance per the bank statement.

C) Added to the balance per the depositor's records.

D) Deducted from the balance per the depositor's records.

Bank reconciliation. Indicate what effect each situation will have on the bank reconciliation process (Match the situation with the bank reconciliation process below by placing the number of the process next to the situation). Note that there are more situations than processes, so some processes may be used more than once, but not all processes have to be used. Only one process is required for each situation. Hint: Determine if Cash is increasing or decreasing

Process

Deduct from bank balance 2. Add to bank balance

3. Deduct from checkbook balance 4. Add to checkbook balance

Situation

_______ Bank received $2,750 from one of your customers (Terms: Cash in advance)

_______ Bank collection (wire) fee was $15

_______ Check number 111 was outstanding for $55

_______ A $400 check was written, but recorded on the books as $40

_______ Interest received from your bank for the month was $16.55

ceriseraccoon894

1. Which statement is normally prepared first? (Points : 3) Income statement Balance sheet Statement of cash flows Retained earnings statement2. When a business borrows money, it incurs a(n) (Points : 3) tax. liability. cash payment. all of these.3. More than 70% of businesses are organized as what type of business? (Points : 3) Not-for-profit Corporation Partnership Sole proprietorship4. Brennan, Inc. had revenues of $234,000, expenses of $175,000, and dividends of $40,000 during 2009. Which of the following statements is correct? (Points : 3) Net income for 2009 totaled $19,000. Net income for 2009 totaled $59,000. Total retained earnings increased by $59,000 during 2009. Total retained earnings decreased by $40,000 during 2009.5. The statement of cash flows is integrated with the balance sheet because (Points : 3) the cash at the beginning of the period plus or minus the cash flows from operating, investing, and financing activities equals the end of period cash reported on the balance sheet. the cash at the beginning of the period plus or minus the net income equals the end of period cash reported on the balance sheet. the cash at the beginning of the period plus or minus assets and liabilities equals the end of period cash reported on the balance sheet. the cash at the beginning of the period plus or minus the cash flows from operating activities equals the end of period cash reported on the balance sheet.6. The basic financial statements do NOT include the (Points : 3) income statement. tax return balance sheet. statement of cash flows.7. A __________ is an economic event that under generally accepted accounting principles affects an element of the financial statements and must be recorded. (Points : 3) framework control set of rules transaction8. The payment of a liability (Points : 3) decreases assets and stockholders' equity. increases assets and decreases liabilities. decreases assets and increases liabilities. decreases assets and decreases liabilities. 9. Co. received $1,000 from Newbie as rent for the use of a building owned by UNI. How does this transaction affect UNI's accounts if UNI recognizes a liability? (Points : 3) Cash is increased and revenue is increased. Cash is increased and revenue is decreased. Cash is increased and unearned revenue is increased. It is not recorded.10. Depreciation Expense and Accumulated Depreciation are classified, respectively, as (Points : 3) expense and contra asset. asset and contra liability. revenue and asset. contra asset and expense.11. Deferred expenses (prepaid expenses) are items initially recorded as assets but are expected to become __________ over time. (Points : 3) Liabilities Assets stockholders%u2019 equity Expenses12. A&M Co. provided services of $1,000,000 to clients on account. How does this transaction affect A&M%u2019s accounts? (Points : 3) Increase accounts receivable and cash by $1,000,000 each Increase accounts receivable and revenues by $1,000,000 each Increase accounts receivable and unearned revenues by $1,000,000 each No effect at this time13. Multiple-step income statements show: (Points : 3) gross profit but not income from operations. neither gross profit nor income from operations. both gross profit and income from operations. income from operations but not gross profit.14. Since merchandise inventory is normally sold within a year, how is it reported on the balance sheet? (Points : 3) As a revenue As the cost of merchandise sold It does not appear on the Balance Sheet As a current asset15. The credit terms of a sale are normally indicated on a(n) (Points : 3) purchase order. invoice. bill of lading. account receivable.16. Inventory shortage is recorded when (Points : 3) merchandise is returned by a buyer. merchandise purchased from a seller is incomplete or short. merchandise is returned to a seller. there is a difference between a physical count of inventory and inventory records. 17. The bank reconciliation (Points : 3) should be prepared by an employee who records cash transactions. is part of the internal control system. is for information purposes only. is sent to the bank for verification.18. A special cash fund used to make small payments that occur frequently is called a(n) (Points : 3) operating expenses fund. change fund. market fund. petty cash fund.19. The objectives of internal control are to (Points : 3) control the internal organization of the accounting department personnel and equipment. provide reasonable assurance that assets are safeguarded, information is processed accurately, and laws and regulations are complied with. prevent fraud and promote the social interest of the company. provide control over %u201Cinternal-use only%u201D reports and employee internal conduct.20. When a firm uses internal auditors, it is adhering to which of the following internal control elements? (Points : 3) Risk assessment Proofs and security measures Monitoring Separating responsibilities for related operations21. What type of account is Allowance for Doubtful Accounts? (Points : 3) Contra asset Asset Revenue Expense22. Merchandise inventory is reported on the balance sheet in the section entitled (Points : 3) current assets. fixed assets. current liabilities. stockholders' equity.23. Receivables are usually a significant portion of (Points : 3) total current liabilities. total liabilities. total current assets. total assets.24. The inventory data for an item for November are: Nov.1 Inventory 25 units at $20 10 Purchased 30 units at $21 30 Purchased 10 units at $22 Sold 35 unitsUsing the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30? (Points : 3) $640 $605 $623 $66025. All amounts paid to get an asset in place and ready for use are referred to as (Points : 3) capital expenditures. revenue expenditures. residual value. cost of an asset.26. Fixed assets are ordinarily presented in the balance sheet (Points : 3) at current market values. at replacement costs. at cost less accumulated depreciation. in a separate section along with intangible assets.27. Goodwill is (Points : 3) amortized similar to other intangibles. only written down if an impairment in value occurs. charged to expense immediately. amortized over 40 years or its economic life, whichever is shorter.28. If a capital expenditure is treated as a revenue expenditure, then (Points : 3) expenses are overstated and owners' equity is understated. expenses are overstated and assets are overstated. expenses are understated and owners' equity is overstated. net income is overstated and owners' equity is understated.29. A bond indenture is (Points : 3) a contract between the corporation issuing the bonds and the underwriters selling the bonds. the amount due at the maturity date of the bonds. a contract between the corporation issuing the bonds and the bondholders. the amount for which the corporation can buy back the bonds prior to the maturity date.30. Gross earnings for a payroll period less payroll deductions are referred to as (Points : 3) overtime pay. bonus pay. gross pay. net pay.31. How is treasury stock shown on the balance sheet? (Points : 3) As an asset As a decrease in stockholders' equity As an increase in stockholders' equity Treasury stock is not shown on the balance sheet.32. Current liabilities are (Points : 3) due but not receivable for more than one year. due but not payable for more than one year. due and receivable within one year. due and payable within one year.33. The total earnings of an employee for a payroll period are referred to as (Points : 3) take-home pay. pay net of taxes. net pay. gross pay.34. Where is interest expense listed on the income statement? (Points : 3) Other expense section Cost of merchandise sold Operating expenses Interest expense is on the balance sheet, not the income statement.35. A corporation has 50,000 shares of $100 par value stock outstanding. If the corporation issues a 4-for-1 stock split, the number of shares outstanding after the split will be (Points : 3) 200,000 shares. 50,000 shares. 250,000 shares. 12,500 shares.

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ACCTG311 Study Guide - Midterm Guide: General Ledger, Interest Rate, Internal Control

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