century 21 accounting 8e multicolumn journal chapter and

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AccountingS O U T H - W E S T E R NCentury 21

8E

C L A U D I A B I E N I A S G I L B E R T S O N , C PATeaching ProfessorNorth Hennepin Community CollegeBrooklyn Park, Minnesota

M A R K W . L E H M A N , C P AAssistant ProfessorSchool of AccountancyMississippi State UniversityStarkville, Mississippi

K E N T O N E . R O S S , C P AProfessor Emeritus of AccountingTexas A&M University—CommerceCommerce, Texas

Chapter and Part Tests · Teacher’s Edition

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Century 21 Accounting, Multicolumn Journal, Chapter and Part Tests, Eighth EditionTeacher’s Edition

Claudia Bienias Gilbertson, CPA; Mark W. Lehman, CPA; Kenton E. Ross, CPA

chapterTEST A

PerfectScore

YourScoreName

Defining Accounting Terms 22 Pts.Analyzing Accounting Practices 15 Pts.

Determining How Transactions Change an Accounting Equation 48 Pts.Determining How Transactions Change an Accounting Equation 40 Pts.

Total 125 Pts.

Chapter 1—Test A Copyright © South-Western Educational Publishing 1

1

Part One—Defining Accounting TermsDirections: Select the one term in Column I that best fits each definition inColumn II. Print the letter identifying your choice in the Answers column.

Co lumn I Co lumn I I Answers

A. account 1. The use of ethics in making business decisions. 1. I

B. account balance 2. Planning, recording, analyzing, and interpreting financial 2. Dinformation.

C. account title 3. An equation showing the relationship among assets, liabilities, 3. Eand owner’s equity.

D. accounting 4. A business activity that changes assets, liabilities, or 4. Uowner’s equity.

E. accounting equation 5. A planned process for providing financial information that 5. Gwill be useful to management.

F. accounting records 6. The amount in an account. 6. B

G. accounting system 7. The account used to summarize the owner’s equity 7. Jin the business.

H. asset 8. The amount remaining after the value of all liabilities is 8. Psubtracted from the value of all assets.

I. business ethics 9. A record summarizing all the information pertaining to a 9. Asingle item in the accounting equation.

J. capital 10. Organized summaries of a business’s financial activities. 10. F

K. equities 11. Anything of value that is owned. 11. H

L. ethics 12. A sale for which cash will be received at a later date. 12. S

M. expense 13. Assets taken out of a business for the owner’s personal use. 13. V

N. financial statements 14. An increase in owner’s equity resulting from the operation 14. Rof a business.

O. liability 15. A business owned by one person. 15. Q

P. owner’s equity 16. Financial rights to the assets of a business. 16. K

Q. proprietorship 17. A business that performs an activity for a fee. 17. T

R. revenue 18. The principles of right and wrong that guide an individual 18. Lin making decisions.

S. sale on account 19. Financial reports that summarize the financial conditions 19. Nand operations of a business.

T. service business 20. An amount owed by a business. 20. O

U. transaction 21. The name given to an account. 21. C

V. withdrawals 22. A decrease in owner’s equity resulting from the operation 22. Mof a business.

2 Century 21 Accounting, 8th Edition Chapter 1—Test A

Part Two—Analyzing Accounting PracticesDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. The accounting equation is most often stated as: Assets + Liabilities = Owner’s Equity. 1. F

2. After each transaction, the accounting equation must remain in balance. 2. T

3. Total assets are the amount the owner has invested in the business. 3. F

4. When two asset accounts are changed in a transaction, there must be an increase 4. Tand a decrease.

5. Detailed information about changes in owner’s equity is needed by owners and 5. Tmanagers to make sound business decisions.

6. When items are bought and paid for at a future date, another way to state this is to 6. Tsay these items are bought on account.

7. A transaction for the sale of goods or services results in a decrease in owner’s equity. 7. F

8. When financial records for a business and for its owner’s personal belongings are not 8. Tmixed, this is an application of the Business Entity accounting concept.

9. An expense is a decrease in owner’s equity resulting from the operation of a business. 9. T

10. The capital account is the owner’s liability account. 10. F

11. Payments for advertising, equipment repairs, utilities, and rent are expense transactions. 11. T

12. Withdrawals are assets taken out of a business for the owner’s personal use. 12. T

13. The most common type of withdrawal by an owner from a business is the 13. Twithdrawal of cash.

14. When an owner withdraws cash from the business, the transaction affects both 14. Tassets and owner’s equity.

15. A withdrawal is an expense. 15. F

Name


Part Three—Determining How Transactions Change anAccounting EquationClaudia Arellano is starting Arellano Consulting Services, a small servicebusiness. Arellano Consulting Services uses the accounts shown in the followingaccounting equation. Use the form below to record the following transactions.Use a plus sign (+) to indicate an increase and a minus sign (-) to indicate adecrease. Calculate new balances for all accounts after each transaction.

Transac t ions

Assets = Liabilities + Owner’s Equity

Transaction Accts. Rec. Prepaid Accts. Pay. ClaudiaNo. Cash + Jones + Supplies + Insurance = Lee’s + Arellano,

Computers Supplies Capital

Beg. Bal. $0 $0 $0 $0 $0 $01 +15,000 +15,000

New Bal. $15,000 $0 $0 $0 $0 $15,0002 –5,000 +5,000

New Bal. $10,000 $0 $0 $5,000 $0 $15,0003 +1,600 +1,600

New Bal. $10,000 $0 $1,600 $5,000 $1,600 $15,0004 –1,000 –1,000

New Bal. $9,000 $0 $1,600 $5,000 $600 $15,0005 +2,500 +2,500

New Bal. $11,500 $0 $1,600 $5,000 $600 $17,5006 +3,500 +3,500

New Bal. $11,500 $3,500 $1,600 $5,000 $600 $21,000

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1. Received cash from owner as an investment, $15,000.00.2. Paid cash for insurance, $5,000.00.3. Bought supplies on account from Lee’s Supplies, $1,600.00.4. Paid cash on account to Lee’s Supplies, 1,000.00.5. Received cash from sales, $2,500.00.6. Sold services on account to Jones Computers, $3,500.00.


Part Four—Determining How Transactions Change anAccounting EquationContinue to record transactions for Arellano Consulting Services, using theaccounts shown in the following accounting equation. Use the form below torecord the following transactions. Use a plus sign (+) to indicate an increaseand a minus sign (-) to indicate a decrease. Calculate new balances for allaccounts after each transaction.

Transac t ions7. Paid cash for supplies, $750.00.8. Paid cash for rent, $1,100.00.

9. Paid cash to owner for personal use, $1,500.00.

10. Paid cash for telephone bill, $250.00.

11. Received cash on account from Jones Computers, $2,000.00.


Transaction Accts. Rec. Prepaid Accts. Pay. ClaudiaNo. Cash + Jones + Supplies + Insurance = Lee’s + Arellano,

Computers Supplies Capital

Beg. Bal. $11,500 $3,500 $1,600 $5,000 $600 $21,0007 –750 +750

New Bal. $10,750 $3,500 $2,350 $5,000 $600 $21,0008 –1,100 –1,100

New Bal. $9,650 $3,500 $2,350 $5,000 $600 $19,9009 –1,500 –1,500

New Bal. $8,150 $3,500 $2,350 $5,000 $600 $18,40010 –250 –250

New Bal. $7,900 $3,500 $2,350 $5,000 $600 $18,15011 +2,000 –$2,000

New Bal. $9,900 $1,500 $2,350 $5,000 $600 $18,150

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chapterTEST B

PerfectScore

YourScoreName


Determining How Transactions Change an Accounting Equation 48 Pts.Determining How Transactions Change an Accounting Equation 40 Pts.

Total 125 Pts.

Chapter 1—Test B Copyright © South-Western Educational Publishing 1

1



A. account 1. Anything of value that is owned. 1. H

B. account balance 2. The amount remaining after the value of all liabilities is 2. Psubtracted from the value of all assets.

C. account title 3. A planned process for providing financial information that 3. Gwill be useful to management.

D. accounting 4. Organized summaries of a business’s financial activities. 4. F

E. accounting equation 5. Financial reports that summarize the financial conditions 5. Nand operations of a business.

F. accounting records 6. The use of ethics in making business decisions. 6. I

G. accounting system 7. A business that performs an activity for a fee. 7. T

H. asset 8. Financial rights to the assets of a business. 8. K

I. business ethics 9. A business owned by one person. 9. Q

J. capital 10. A record summarizing all the information pertaining to 10. Aa single item in the accounting equation.

K. equities 11. An increase in owner’s equity resulting from the operation 11. Rof a business.

L. ethics 12. Planning, recording, analyzing, and interpreting financial 12. Dinformation.

M. expense 13. An equation showing the relationship among assets, 13. Eliabilities, and owner’s equity.

N. financial statements 14. The principles of right and wrong that guide an individual 14. Lin making decisions.

O. liability 15. The account used to summarize the owner’s equity 15. Jin the business.

P. owner’s equity 16. An amount owed by a business. 16. O

Q. proprietorship 17. A decrease in owner’s equity resulting from the operation 17. Mof a business.

R. revenue 18. The name given to an account. 18. C

S. sale on account 19. A business activity that changes assets, liabilities, 19. Uor owner’s equity.

T. service business 20. Assets taken out of a business for the owner’s personal use. 20. V

U. transaction 21. A sale for which cash will be received at a later date. 21. S

V. withdrawals 22. The amount in an account. 22. B

2 Century 21 Accounting, 8th Edition Chapter 1—Test B


Answers

1. Payments for advertising, equipment repairs, utilities, and rent are expense transactions. 1. T

2. When an owner withdraws cash from the business, the transaction affects both assets and 2. Towner’s equity.

3. Withdrawals are assets taken out of a business for the owner’s personal use. 3. T

4. The most common type of withdrawal by an owner from a business is the 4. Twithdrawal of cash.

5. After each transaction, the accounting equation must remain in balance. 5. T

6. A transaction for the sale of goods or services results in a decrease in owner’s equity. 6. F

7. The accounting equation is most often stated as: Assets + Liabilities = Owner’s Equity. 7. F

8. When two asset accounts are changed in a transaction, there must be an increase 8. Tand a decrease.

9. When financial records for a business and for its owner’s personal belongings are not 9. Tmixed, this is an application of the Business Entity accounting concept.

10. When items are bought and paid for at a future date, another way to state this is to 10. Tsay these items are bought on account.

11. A withdrawal is an expense. 11. F

12. The capital account is the owner’s liability account. 12. F

13. Total assets are the amount the owner has invested in the business. 13. F

14. An expense is a decrease in owner’s equity resulting from the operation of a business. 14. T

15. Detailed information about changes in owner’s equity is needed by owners and managers 15. Tto make sound business decisions.

Name


Part Three—Determining How Transactions Change anAccounting EquationHarrison Smith is starting Smith Music, a small service business. Smith Musicuses the accounts shown in the following accounting equation. Use the formbelow to record the following transactions. Use a plus sign (+) to indicate anincrease and a minus sign (-) to indicate a decrease. Calculate new balances forall accounts after each transaction.

Transac t ions1. Paid cash for telephone bill, $210.00.

2. Received cash from owner as an investment, $500.00.

3. Paid cash for rent, $900.00.

4. Received cash on account from Clarksville Music, $1,900.00.

5. Paid cash for one month of insurance, $275.00.6. Received cash from sales, $700.00


Transaction Accts. Rec. Prepaid Accts. Pay. HarrisonNo. Cash + Clarksville + Supplies + Insurance = Guarantee + Smith,

Music Sound Capital

Beg. Bal. $1,000 $1,900 $500 $600 $2,100 $1,9001 –210 –210

New Bal. $790 $1,900 $500 $600 $2,100 $1,6902 +500 +500

New Bal. $1,290 $1,900 $500 $600 $2,100 $2,1903 –900 –900

New Bal. $390 $1,900 $500 $600 $2,100 $1,2904 +1,900 –1,900

New Bal. $2,290 $0 $500 $600 $2,100 $1,2905 –275 +275

New Bal. $2,015 $0 $500 $875 $2,100 $1,2906 +700 +700

New Bal. $2,715 $0 $500 $875 $2,100 $1,990

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Part Four—Determining How Transactions Change anAccounting EquationContinue to record transactions for Smith Music. Smith Music uses the accountsshown in the following accounting equation. Use the form below to record thefollowing transactions. Use a plus sign (+) to indicate an increase and a minussign (-) to indicate a decrease. Calculate new balances for all accounts after eachtransaction.

Transac t ions7. Bought supplies on account from Guarantee Sound, $1,500.00.8. Paid cash on account to Guarantee Sound, $2,000.00.9. Paid cash to owner for personal use, $600.00.

10. Sold services on account to Clarksville Music, $200.00.11. Paid cash for supplies, $50.00.


Transaction Accts. Rec. Prepaid Accts. Pay. HarrisonNo. Cash + Clarksville + Supplies + Insurance = Guarantee + Smith

Music Sound Capital

Beg. Bal. $2,715 $0 $500 $875 $2,100 $1,9907 +1,500 +1,500

New Bal. $2,715 $0 $2,000 $875 $3,600 $1,9908 –2,000 –2,000

New Bal. $715 $0 $2,000 $875 $1,600 $1,9909 –600 –600

New Bal. $115 $0 $2,000 $875 $1,600 $1,39010 +200 +200

New Bal. $115 $200 $2,000 $875 $1,600 $1,59011 –50 +50

New Bal. $65 $200 $2,050 $875 $1,600 $1,590

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chapterTEST A

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Practices 20 Pts.Analyzing the Effect of Transactions 9 Pts.

Determining the Normal Balance, Increase, and Decrease Sides for Accounts 36 Pts.Analyzing Transactions into Debit and Credit Parts 20 Pts.

Total 85 Pts.


2

Part One—Analyzing Accounting Concepts and Practices Directions: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. An accounting device used to analyze transactions is a T account. 1. T

2. An amount recorded on the left side of a T account is a credit. 2. F

3. Each asset account has a normal debit balance. 3. T

4. Each liability account has a normal credit balance. 4. T

5. The balance of an account increases on the same side as the normal balance side. 5. T

6. Asset accounts increase on the credit side. 6. F

7. Each transaction changes the balances in at least two accounts. 7. T

8. A list of accounts used by a business is a chart of accounts. 8. T

9. When cash is paid for supplies, the supplies account is increased by a debit. 9. T

10. Common accounting practice is to record withdrawals as debits directly in the 10. Fowner’s capital account.

11. The left side of an asset account is the credit side because asset accounts are on 11. Fthe left side of the accounting equation.

12. A drawing account is decreased by debits and increased by credits. 12. F

13. Increases in expense accounts are recorded as debits because they decrease 13. Tthe owner’s capital account.

14. The normal balance side of an accounts receivable account is a credit. 14. F

15. Accounts payable accounts are increased with a debit. 15. F

16. Advertising Expense is increased with a debit. 16. T

17. Cash is increased with a credit. 17. F

18. Prepaid Insurance is decreased with a credit. 18. T

19. To summarize withdrawal information separately from the other records, 19. Fowner withdrawal transactions are recorded in the owner’s capital account.

20. Increases to accounts are recorded on the debit side. 20. F


Part Two—Analyzing the Effect of TransactionsDirections: For each of the following items, select the one choice that bestcompletes the statement. Print the letter identifying your choice in theAnswers column.

Answers

1. The right side of a T account is the 1. ba. debit side.b. credit side.c. normal balance side.d. equity side.

2. If an amount is recorded on the side of a T account opposite the normal balance side, 2. ba. the account balance is increased.b. the account balance is decreased.c. the account balance is unaffected.d. the account balance is correct.

3. The normal balance side of an asset account is the 3. aa. debit side.b. credit side.c. decrease side.d. right side.

4. When the owner invests cash in a business, the owner’s capital account is 4. ba. increased by a debit.b. increased by a credit.c. decreased by a debit.d. decreased by a credit.

5. When a business pays cash on account, a liability account is 5. ca. increased by a debit.b. increased by a credit.c. decreased by a debit.d. decreased by a credit.

6. When cash is received from sales, the change in the owner’s equity is usually 6. aa. recorded in a separate revenue account.b. recorded directly in the owner’s capital account.c. recorded as interest revenue.d. always recorded on the debit side.

7. Increases in a revenue account are shown on a T account’s 7. ba. debit side.b. credit side.c. left side.d. none of these.

8. When $1,500.00 cash is received on account. 8. ca. Sales is increased with a credit and Cash is increased with a credit.b. Accounts Receivable is increased with a debit and Cash is increased with a credit.c. Accounts Receivable is decreased with a credit and Cash is increased with a debit.d. Accounts Receivable is decreased with a debit and Cash is increased with a debit.

9. The normal balance side of any expense account is the 9. aa. debit side.b. credit side.c. right side.d. none of these.

Name


Part Three—Determining the Normal Balance, Increase,and Decrease Sides for AccountsDirections: For each of the accounts in the table below,1. Write the classification of the account in the Classification column (Asset, Liability, or Owner’s Equity).2. Place a check mark in the Normal Balance Debit or Credit column to show the normal balance side of the

account.3. Place a check mark in the Increase Side Debit or Credit column to show the side of the account on which

increases are recorded.4. Place a check mark in the Decrease Side Debit or Credit column to show the side of the account on which

decreases are recorded.

Account ClassificationNormal Balance Increase Side Decrease Side

Debit Credit Debit Credit Debit Credit

Sales Owner’s Equity � � �

Accts. Rec.—Lopez Sports Asset � � �

Prepaid Insurance Asset � � �

Matt Cooper, Capital Owner’s Equity � � �

Cash Asset � � �

Matt Cooper, Drawing Owner’s Equity � � �

Supplies Asset � � �

Accts. Payable—Hunter Golf Liability � � �

Rent Expense Owner’s Equity � � �

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Part Four—Analyzing Transactions into Debit andCredit Parts Matt Cooper owns a business called Cooper’s Sports Outlet. Cooper’s SportsOutlet completed the following transactions.

March 1. Received cash from owner as an investment, $4,500.00.2. Paid cash for supplies, $700.00.3. Bought supplies on account from Hunter Golf Supplies, $185.00.4. Received cash from sales, $900.00.5. Paid cash on account to Hunter Golf Supplies, $75.00.6. Paid cash to owner for personal use, $300.00.7. Sold services on account to Lopez Sports, $150.00.8. Paid cash for insurance, $300.00.9. Received cash on account from Lopez Sports, $425.00.

10. Paid cash for rent, $950.00.

Directions: Analyze each transaction into its debit and credit parts. Write the debit orcredit amounts in the proper T accounts to show how each transaction changesaccount balances. Write the date of the transaction in parentheses before each amount.

Cash

(1) 4,500.00(4) 900.00(7) 425.00

(2) 700.00(3) 75.00(6) 300.00(8) 300.00(10) 950.00

Accts. Pay.—Hunter Golf Supplies

(5) 75.00 (3) 185.00

Matt Cooper, Capital

(1) 4,500.00

Accts. Rec.—Lopez Sports

(7) 150.00 (9) 425.00

Matt Cooper, Drawing

(6) 300.00

Supplies

(2) 700.00(5) 185.00

Sales

(4) 900.00(9) 150.00

Prepaid Insurance

(8) 300.00

Rent Expense

(10) 950.00

8

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chapterTEST B

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Practices 20 Pts.Analyzing the Effect of Transactions 9 Pts.

Determining the Normal Balance, Increase, and Decrease Sides for Accounts 36 Pts.Analyzing Transactions into Debit and Credit Parts 20 Pts.

Total 85 Pts.


2

Part One—Analyzing Accounting Concepts and Practices Directions: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. Businesses use accounts to summarize all the information pertaining to a single item. 1. T

2. A drawing account is decreased by debits and increased by credits. 2. F

3. A list of accounts used by a business is a chart of accounts. 3. T

4. Accounts payable accounts are increased with a debit. 4. F

5. Accounts receivable accounts are increased with a debit. 5. T

6. All owner’s equity accounts are increased on the credit side because the owner’s capital 6. Faccount has a normal balance on the credit side.

7. An amount recorded on the left side of a T account is a credit. 7. F

8. Asset accounts increase on the credit side. 8. F

9. Before a transaction is recorded in the records of a business, it is analyzed to determine 9. Twhich accounts are changed and how.

10. Cash is an asset account with a normal credit balance. 10. F

11. Common accounting practice is to record withdrawals as debits directly in the owner’s 11. Fcapital account.

12. Each liability account has a normal credit balance. 12. T

13. Increases in expense accounts are recorded as debits because they decrease the owner’s 13. Tcapital account.

14. Increases in revenue accounts are recorded as debits because they increase the owner’s 14. Fcapital account.

15. Sandra Stern, Capital is decreased with a credit. 15. F

16. Sandra Stern, Drawing is decreased with a credit. 16. T

17. The balance of an account decreases on the side opposite the normal balance side. 17. T

18. The left side of a liability account is the normal balance side because liabilities are on 18. Fthe left side of the accounting equation.

19. The normal balance side of an accounts payable account is a credit. 19. T

20. Increases in revenue accounts are recorded as debits because they increase the owner’s 20. Fcapital account.


Part Two—Analyzing the Effect of TransactionsDirections: For each of the following items, select the one choice that bestcompletes the statement. Print the letter identifying your choice in theAnswers column.

Answers

1. The right side of a T account is the 1. ba. debit side.b. credit side.c. normal balance side.d. equity side.

2. When a business pays for insurance, Prepaid Insurance is 2. aa. increased by a debit.b. increased by a credit.c. decreased by a debit.d. decreased by a credit.

3. When a business receives revenue, Sales is 3. ba. increased by a debit.b. increased by a credit.c. decreased by a debit.d. decreased by a credit.

4. When cash is paid for rent, Rent Expense is 4. aa. increased by a debit.b. increased by a credit.c. decreased by a debit.d. decreased by a credit.

5. When the owner withdraws cash, the owner’s drawing account is 5. aa. increased by a debit.b. increased by a credit.c. decreased by a debit.d. decreased by a credit.

6. The normal balance side of an owner’s capital account is the 6. ba. debit side.b. credit side.c. left side.d. none of these.

7. The normal balance side of any revenue account is the 7. ba. debit side.b. credit side.c. left side.d. none of these.

8. When services are sold on account for $500.00, 8. ca. Sales is decreased with a debit and an accounts receivable account is

increased with a credit.b. Sales is increased with a debit and Cash is increased with a credit.c. Sales is increased with a credit and an accounts receivable account is

increased with a debit.d. Sales is increased with a credit and Cash is increased with a debit.

9. When $1,500.00 cash is received on account, 9. ca. Sales is increased with a credit and Cash is increased with a credit.b. Accounts Receivable is increased with a debit and Cash is increased with a credit.c. Accounts Receivable is decreased with a credit and Cash is increased with a debit.d. Accounts Receivable is decreased with a debit and Cash is increased with a debit.

Name


Part Three—Determining the Normal Balance, Increase,and Decrease Sides for AccountsDirections: For each of the accounts in the table below,1. Write the classification of the account in the Classification column (Asset, Liability, or Owner’s Equity).2. Place a check mark in the Normal Balance Debit or Credit column to show the normal balance side of the

account.3. Place a check mark in the Increase Side Debit or Credit column to show the side of the account on which

increases are recorded.4. Place a check mark in the Decrease Side Debit or Credit column to show the side of the account on which

decreases are recorded.

Account ClassificationNormal Balance Increase Side Decrease Side

Debit Credit Debit Credit Debit Credit

Rent Expense Owner’s Equity � � �

Sales Owner’s Equity � � �

Prepaid Insurance Asset � � �

Cash Asset � � �

Thomas Kukonu, Drawing Owner’s Equity � � �

Supplies Asset � � �

Accts. Rec.—Land Supplies Asset � � �

Accts. Payable—BachmanSupplies Liability � � �

Thomas Kukonu, Capital Owner’s Equity � � �

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Part Four—Analyzing Transactions into Debit andCredit Parts Thomas Kukonu owns a business called Kauai Music Productions. KauaiMusic Productions completed the following transactions.

April 2. Received cash from owner as an investment, $3,000.00.3. Paid cash for insurance, $800.00.4. Paid cash for rent, $500.00.5. Bought supplies on account from Bachman Supplies, $200.00.6. Received cash from sales, $1,200.00.

12. Paid cash to owner for personal use, $500.00.17. Paid cash on account to Bachman Supplies, $150.00.20. Paid cash for supplies, $210.00.22. Sold services on account to Land Supplies, $500.00.30. Received cash on account from Land Supplies, $500.00.

Directions: Analyze each transaction into its debit and credit parts. Write the debit orcredit amounts in the proper T accounts to show how each transaction changesaccount balances. Write the date of the transaction in parentheses before each amount.

Cash

(2) 3,000.00(6) 1,200.00(30) 500.00

(3) 800.00(4) 500.00(5) 150.00(12) 500.00(20) 210.00

Accts. Pay.—Bachman Supplies

(17) 150.00 (5) 200.00

Thomas Kukonu, Capital

(2) 3,000.00

Accts. Rec.—Land Supplies

(22) 500.00 (30) 500.00

Thomas Kukonu, Drawing

(12) 500.00

Supplies

(17) 200.00(20) 210.00

Sales

(6) 1,200.00(22) 500.00

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Rent Expense

(4) 500.00

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chapterTEST A

PerfectScore

YourScoreName

Defining Accounting Terms 13 Pts.Analyzing Accounting Concepts and Practices 12 Pts.

Journalizing Transactions 100 Pts.Analyzing Journalizing Transactions 10 Pts.

Total 135 Pts.


3



A. check 1. Information for each transaction recorded in a journal. 1. CB. double-entry accounting 2. A form for recording transactions in chronological order. 2. FC. entry 3. A journal amount column headed with an account title. 3. MD. general amount column 4. A business paper from which information is obtained for 4. L

a journal entry.E. invoice 5. A journal amount column that is not headed with an 5. D

account title. F. journal 6. The recording of debit and credit parts of a transaction. 6. BG. journalizing 7. A form describing the goods or services sold, the quantity, 7. E

and the price. H. memorandum 8. Recording transactions in a journal. 8. GI. proving cash 9. Determining that the amount of cash agrees with the 9. I

accounting records.J. receipt 10. A business form ordering a bank to pay cash from a 10. A

bank account.K. sales invoice 11. An invoice used as a source document for recording a 11. K

sale on account. L. source document 12. A business form giving written acknowledgment for cash 12. J

received.M. special amount column 13. A form on which a brief message is written describing a 13. H

transaction.

Part Two—Analyzing Accounting Concepts and PracticesDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. The source document for all cash payments is a sales invoice. 1. F2. A receipt is the source document for cash received from transactions other than sales. 2. T3. A calculator tape is the source document for daily sales. 3. T4. The source document used when supplies are bought on account is a memorandum. 4. T5. The journal columns used to record receiving cash from sales are Cash Debit and Sales Credit. 5. T6. To correct an error in a journal, simply erase the incorrect item and write the correct item 6. F7. A transaction recorded in a journal is not considered a permanent record. 7. F8. Transactions are recorded in a journal in chronological order. 8. T9. A complete entry consists of the date, the debit amount, and the credit amount. 9. F

10. The day of the month is written on each journal page only for the first entry. 10. F11. Double lines are ruled across a journal’s amount columns to indicate that the totals have 11. T

been verified as correct.12. Cash is always proved at the end of a month. 12. T


Part Three—Journalizing TransactionsVeronica Belough owns a service business called Belough Dance Concepts.Belough Dance Concepts uses the following accounts:

Cash Veronica Belough, DrawingAccounts Receivable—Tomas Company SalesSupplies Miscellaneous ExpensePrepaid Insurance Rent ExpenseAccounts Payable—-Slippers Supplies Utilities ExpenseVeronica Belough, Capital

Transac t ionsMay 1. Received cash from owner as an investment, $15,000.00. R1.

6. Paid cash for insurance, $900.00. C1.10. Bought supplies on account from Slippers Supplies, $2,350.00. M1.15. Paid cash for one month’s rent, $1,300.00. C2.

Directions:

1. Journalize the transactions given above, completed during May of thecurrent year. Use page l of the journal given. Source documents areabbreviated as follows: check, C; memorandum, M; receipt, R; salesinvoice, S; calculator tape, T.

2. Prove and rule page 1 of the journal. Carry the column totals forward topage 2 of the journal.

3. Use page 2 of the journal to journalize the transactions given below.4. After all the transactions are recorded, prove page 2 of the journal.5. Prove cash. The beginning cash balance on May 1 is zero. The balance on

the next unused check stub is $11,775.00.6. Rule page 2 of the journal.

Transac t ionsMay 18. Paid cash on account to Slippers Supplies, $450.00. C3.

19. Paid cash on account to Slippers Supplies, $850.00. C4.20. Received cash from sales, $1,200.00. T20.21. Sold services on account to Tomas Company, $900.00. S1.23. Paid cash to owner for personal use, $2,000.00. C5.24. Paid cash for postage (Miscellaneous Expense), $65.00. C6.25. Received cash on account from Tomas Company, $850.00. R2.26. Paid cash for heating and air conditioning bill, $210.00. C7.27. Received cash from sales, $2,500.00. T27.31. Paid cash to owner for personal use, $2,000.00. C8.

Use the space below for the cash proof:

POIN

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Cash on hand at beginning of the month $11,770.00 1Plus total cash received during month 19,550.00 1Equals total 19,550.00 1Less total cash paid during the month 7,775.00 1Equals cash balance at the end of the month 11,775.00 1Checkbook balance on the next unused check stub $11,775.00 5

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Part Four—Analyzing Journalizing TransactionsDirections: For each of the following items, select the one choice that bestcompletes the statement. Print the letter identifying your choice in theAnswers column.

Answers

1. On each journal page, the month is written 1. ca. for each entry. c. only for the first entry.b. on the first line of each column. d. none of these.

2. The entry to record receipt of cash from the owner as an investment is 2. ba. debit Capital, credit Cash.b. debit Cash, credit Capital.c. debit Cash, credit Accounts Payable.d. none of these.

3. When cash is paid for insurance, the 3. ca. prepaid insurance account is decreased.b. prepaid insurance account is credited.c. balance of prepaid insurance account is increased.d. none of these.

4. A single line ruled across the journal’s amount columns indicates 4. da. the date is the last day of the month.b. the totals have been verified as correct.c. a cash sales transaction is to be recorded.d. none of these.

5. If an error is recorded in a journal entry, 5. da. cancel the error by drawing a neat line through the error.b. correct the entry by writing the correct item above the canceled error.c. do not erase the incorrect item.d. all of these.

6. When cash is paid on account, the amount is recorded in the 6. ba. Sales Credit column and Cash Debit column.b. General Debit column and Cash Credit column.c. General Credit column and Cash Debit column.d. General Debit column and Accounts Payable Debit column.

7. When cash is received from sales, the amount is recorded in the 7. aa. Sales Credit column and Cash Debit column.b. Sales Debit column and Cash Credit column.c. General Credit column and Cash Debit column.d. General Debit column and Cash Credit column.

8. When services are sold on account, the amount is recorded in the 8. ca. General Debit column and Cash Credit column.b. General Credit column and Cash Debit column.c. General Debit column and Sales Credit column.d. General Debit column and Accounts Payable Debit column.

9. When cash is paid for utilities, the amount is recorded in the 9. aa. Cash Credit column and General Debit column.b. Sales Credit column and General Debit column.c. General Credit column and Cash Debit column.d. General Credit column and Sales Credit column.

10. When cash is received on account, the amount is recorded in the 10. da. Accounts Receivable Debit column and Cash Credit column.b. Sales Credit column and Cash Debit column.c. General Debit column and Cash Credit column.d. Cash Debit column and General Credit column.

chapterTEST B

PerfectScore

YourScoreName

Defining Accounting Terms 13 Pts.Analyzing Accounting Concepts and Practices 12 Pts.

Journalizing Transactions 100 Pts.Analyzing Journalizing Transactions 10 Pts.

Total 135 Pts.


3



A. check 1. A business form giving written acknowledgment for cash 1. Jreceived.

B. double-entry accounting 2. A form on which a brief message is written describing a 2. Htransaction.

C. entry 3. Information for each transaction recorded in a journal. 3. CD. general amount column 4. Recording transactions in a journal. 4. GE. invoice 5. A business paper from which information is obtained for 5. L

a journal entry.F. journal 6. The recording of debit and credit parts of a transaction. 6. BG. journalizing 7. A journal amount column that is not headed with an 7. D

account title.H. memorandum 8. A form describing the goods or services sold, the quantity, 8. E

and the price. I. proving cash 9. A form for recording transactions in chronological order. 9. FJ. receipt 10. Determining that the amount of cash agrees with the 10. I

accounting records. K. sales invoice 11. A business form ordering a bank to pay cash from a 11. A

bank account. L. source document 12. An invoice used as a source document for recording a 12. K

sale on account. M. special amount column 13. A journal amount column headed with an account title. 13. M

Part Two—Analyzing Accounting Concepts and PracticesDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. The Objective Evidence accounting concept requires that there be proof that a transaction 1. Tdid occur.

2. A receipt is the source document for cash received from transactions other than sales. 2. T3. The journal columns used to record receiving cash from sales are Cash Debit and Sales Credit. 3. T4. The journal columns used to record paying cash for rent are General Debit and Cash Credit. 4. T5. To correct an error in a journal, simply erase the incorrect item and write the correct item in 5. F

the same place.6. Transactions are recorded in a journal in chronological order. 6. T7. The source document for cash payment transactions is a check. 7. T8. A complete entry consists of the date, the debit amount, and the credit amount. 8. F9. The year and the month are written only once on a journal page. 9. T

10. The day of the month is written on each journal page only for the first entry. 10. F11. Double lines are ruled across a journal’s amount columns to indicate that the totals have 11. T

been verified as correct.12. Cash is always proved at the end of a month. 12. T


Part Three—Journalizing TransactionsJason Lee owns a service business called CompAction. CompAction uses thefollowing accounts:

Cash Jason Lee, DrawingAccounts Receivable—Sellman Supplies SalesSupplies Miscellaneous ExpensePrepaid Insurance Rent ExpenseAccounts Payable—Disks Unlimited UtilitiesJason Lee, Capital

Transac t ionsAug. 1. Received cash from owner as an investment, $12,000.00. R1.

3. Paid cash for rent, $1,200.00. C1.4. Bought supplies on account from Disks Unlimited, $1,450.00. M1.5. Paid cash for insurance, $1,100.00. C2.9. Paid cash for supplies, $1,655.00. C3.

11. Paid cash on account to Disks Unlimited, $450.00. C4.12. Received cash from sales, $525.00. T12.

Directions:

1. Journalize the transactions given above, completed during August of thecurrent year. Use page l of the journal given. Source documents areabbreviated as follows: check, C; memorandum, M; receipt, R; salesinvoice, S; calculator tape, T.

2. Prove and rule page 1 of the journal. Carry the column totals forward topage 2 of the journal.

3. Use page 2 of the journal to journalize the transactions given below.4. After all the transactions are recorded, prove page 2 of the journal.5. Prove cash. The beginning cash balance on August 1 is zero. The balance

on the next unused check stub is $6,970.00.6. Rule page 2 of the journal.

Transac t ionsAug. 14. Paid cash on account to Disks Unlimited, $450.00. C5.

16. Received cash from sales, $525.00. T16.18. Received cash from sales, $875.00. T18.22. Sold services on account to Sellman Supplies, $900.00. S1.25. Received cash on account from Sellman Supplies, $500.00. R2.28. Paid cash on account to Disks Unlimited, $600.00. C6.31. Paid cash to owner for personal use, $2,000.00. C7.

Use the space below for the cash proof:

POIN

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Cash on hand at beginning of the month $0,0000.00 1Plus total cash received during month 14,425.00 1Equals total 14,425.00 1Less total cash paid during the month 7,455.00 1Equals cash balance at the end of the month 6,970.00 1Checkbook balance on the next unused check stub $06,970.00 5

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Part Four—Analyzing Journalizing TransactionsDirections: For each of the following items, select the one choice that bestcompletes the statement. Print the letter identifying your choice in theAnswers column.

Answers

1. Preparing source documents for each transaction is an example of the accounting concept 1. ca. Business Entity. c. Objective Evidence.b. Unit of Measurement. d. Going Concern.

2. A journal entry includes 2. ba. the debit part of a transaction recorded under one date and credit part recorded under

a later date.b. the debit and credit parts of a transaction recorded in one place.c. more debits than credits.d. none of these.

3. On each journal page, the year is written 3. ca. for each entry. c. only for the first entry.b. on the first line of each column. d. none of these.

4. On each journal page, the month is written 4. ca. for each entry.b. on the first line of each column.c. only for the first entry.d. none of these.

5. The entry to record receipt of cash from the owner as an investment is 5. ba. debit Capital, credit Cash.b. debit Cash, credit Capital.c. debit Cash, credit Accounts Payable.d. none of these.

6. When cash is paid for insurance, the 6. ca. prepaid insurance account is decreased.b. prepaid insurance account is credited.c. balance of prepaid insurance account is increased.d. none of these.

7. If an error is recorded in a journal entry, 7. da. cancel the error by drawing a neat line through the error.b. correct the entry by writing the correct item above the canceled error.c. do not erase the incorrect item.d. all of these.

8. When services are sold on account, the amount is recorded in the 8. ca. General Debit column and Cash Credit column.b. General Credit column and Cash Debit column.c. General Debit column and Sales Credit column.d. General Debit column and Accounts Payable Debit column.

9. When cash is paid for utilities, the amount is recorded in the 9. aa. Cash Credit column and General Debit column.b. Sales Credit column and General Debit column.c. General Credit column and Cash Debit column.d. General Credit column and Sales Credit column.

10. When cash is received on account, the amount is recorded in the 10. da. Accounts Receivable Debit column and Cash Credit column.b. Sales Credit column and Cash Debit column.c. General Debit column and Cash Credit column.d. Cash Debit column and General Credit column.

chapterTEST A

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Procedures 20 Pts.Preparing a Chart of Accounts 37 Pts.

Posting to a General Ledger 47 Pts.Analyzing Posting Procedures 10 Pts.

Total 114 Pts.


4

Part One—Analyzing Accounting Concepts and ProceduresDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. A journal shows in one place all the changes in a single account. 1. F

2. Account numbers may be assigned by 10s so that new accounts can be added easily. 2. T

3. The procedure of arranging accounts in a general ledger, assigning account numbers, 3. Fand keeping records current is posting.

4. If a business has only two asset accounts, Cash and Supplies, the two accounts are 4. Tnumbered 110 and 120.

5. A group of accounts is called a ledger. 5. T

6. A journal page number is written in the Post. Ref. column of an account to show that 6. Fposting of the entry is completed.

7. The account number is placed in the Post. Ref. column of the journal as the last step in 7. Tthe posting procedure.

8. If the previous account balance and the current entry posted to an account are both debits, 8. Tthe new account balance is a debit.

9. The column total of the General Debit column is posted. 9. F

10. Only the column totals for special amount columns in a journal are posted. 10. T

11. The cash account is the first asset account and is numbered 100. 11. F

12. When adding a new expense account between accounts numbered 510 and 520, the new 12. Taccount is assigned the account number 515.

13. The two steps for opening an account are writing the account title and recording the 13. Fbalance.

14. Separate amounts in special amount columns are posted individually. 14. F

15. Separate amounts in general amount columns are not posted individually. 15. F

16. The posting reference should always be recorded in the journal’s Post. Ref. column 16. Fbefore amounts are recorded in the ledger.

17. The only reason for the Post. Ref. columns of the journal and general ledger is to 17. Findicate which entries in the journal still need to be posted if posting is interrupted.

18. The steps for posting are to write the date, journal page number, amount, and balance. 18. F

19. A check mark in parentheses below a General Debit column total indicates that the total 19. Tis not posted.

20. With the exception of the totals lines, the Post. Ref. column is completely filled in with 20. Teither an account number or a check mark.


Part Two—Preparing a Chart of AccountsWilliam James owns a service business called James Catering, which uses thefollowing accounts:

Accounts Receivable—Chocolates Divine Prepaid InsuranceAccounts Receivable—Sweet-tooth Bakery Advertising ExpenseCash Accounts Payable—Downey ElectronicsRent Expense William James, CapitalAccounts Payable—Georgia Wainwright Accounts Payable—Malcolm SmithSupplies SalesWilliam James, Drawing Miscellaneous Expense

Directions:

1. Prepare a chart of accounts. Arrange expense accounts in alphabetical order.Use 3-digit account numbers and number the accounts within a division by10s. Include general ledger division titles in the chart of accounts.

2. After the chart of accounts has been completed, two new accounts,Delivery Expense and Accounts Payable—Falcon Bakeries, are to be added.Assign account numbers to the two new accounts.

Part Three—Posting to a General LedgerDirections:

1. Open a general ledger account on the next page for each of the followingaccounts:110 Cash 410 Sales310 William James, Capital 540 Utilities Expense320 William James, Drawing

2. Post the separate amounts on each line of the journals on the next pagethat need to be posted individually.

3. Post the journal’s special amount column totals.

(100) Assets (400) Revenue

110 Cash 410 Sales

120 Accounts Receivable—Chocolates Divine (500) Expenses

130 Accounts Receivable—Sweet-tooth Bakery 510 Advertising Expense

140 Supplies 520 Miscellaneous Expense

150 Prepaid Insurance 530 Rent Expense

(200) Liabilities

210 Accounts Payable—Downey Electronics

220 Accounts Payable—Malcolm Smith

230 Accounts Payable—Georgia Wainwright

(300) Owner’s Equity

310 William James, Capital

320 William James, Drawing

New Accounts

Account Number Account Title

215 Accounts Payable—Falcon Bakeries

515 Delivery Expense

James Cate r ingChar t o f Accounts

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C32

T30

C33

T31

320

�

540

�

2 0 0 00

1 5 0 00

6 1 0 0 00

(�)

8 0 0 0 00

(�)

1 0 0 00

2 0 0 00

7 6 0 0 00

(410)

1 0 0 00

2 0 0 00

12 6 0 0 00

(110)

2 0 0 00

1 5 0 00

3 1 0 0 00

(110)

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Dec. 2

2

110

12 6 0 0 00

Cash

3 1 0 0 0012 6 0 0 00

9 5 0 0 004

4

2

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

120--Dec. 1

310William James, Capital

8 0 0 0 00 4

2

8 0 0 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3020--Dec. 2

320William James, Drawing

2 0 0 00 4

2

2 0 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3120--Dec. 2

410Sales

7 6 0 0 00 4

2

7 6 0 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

331

20--Dec. 1

2

540

3 0 001 5 0 00

Utilities Expense

3 0 001 8 0 00

4

4

38

2

GENERAL LEDGER


Part Four—Analyzing Posting ProceduresDirections: For each of the following items, select the choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. The first digit in the account number 120 means that the account is in the 1. da. expense division of the general ledger.b. revenue division of the general ledger.c. liability division of the general ledger.d. asset division of the general ledger.

2. When accounts are arranged in a general ledger, account numbers are assigned, and the 2. bchart of accounts is kept up to date, the accounting personnel area. posting.b. doing file maintenance.c. journalizing.d. none of these.

3. The procedure for transferring information from a journal entry to a ledger account is 3. aa. posting.b. journalizing.c. file maintenance.d. none of these.

4. The first step in the posting procedure is writing the 4. aa. entry date in the Date column of the account.b. journal page number in the Post. Ref. column of the account.c. entry amount in the Debit or Credit column of the account.d. none of these.

5. The last step in the posting procedure is writing the 5. da. entry date in the Date column of the account.b. journal page number in the Post. Ref. column of the account.c. entry amount in the Debit or Credit column of the account.d. none of these.

6. An account number in the journal’s Post. Ref. column shows 6. aa. the account to which an amount is posted.b. the date of the entry.c. that work on that journal page is completed.d. none of these.

7. Posting references in a journal are 7. da. not necessary.b. the first item recorded when posting.c. always placed in an account’s Post. Ref. column.d. none of these.

8. If posting is interrupted, the accounting personnel know to resume posting 8. aa. on the line with a blank Post. Ref. column in the journal.b. at the beginning of the journal page.c. the next day.d. all of these.

9. If all separate amounts on a journal line are recorded in special amount columns, 9. ca. all amounts are posted individually.b. only one of the amounts is posted individually.c. neither amount is posted individually.d. all of these.

10. Separate amounts in the Sales Credit column of a journal are 10. da. rounded to the nearest dollar. c. posted frequently.b. posted individually. d. none of these.

chapterTEST B

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Procedures 20 Pts.Preparing a Chart of Accounts 37 Pts.

Posting to a General Ledger 47 Pts.Analyzing Posting Procedures 10 Pts.

Total 114 Pts.


4

Part One—Analyzing Accounting Concepts and ProceduresDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. The column total of the General Debit column is posted. 1. F

2. Only the column totals for special amount columns in a journal are posted. 2. T

3. The cash account is the first asset account and is numbered 100. 3. F

4. When adding a new expense account between accounts numbered 510 and 520, the new 4. Taccount is assigned the account number 515.

5. A journal shows in one place all the changes in a single account. 5. F

6. Account numbers may be assigned by 10s so that new accounts can be added easily. 6. T

7. The posting reference should always be recorded in the journal’s Post. Ref. column 7. Fbefore amounts are recorded in the ledger.

8. The only reason for the Post. Ref. columns of the journal and general ledger is to 8. Findicate which entries in the journal still need to be posted if posting is interrupted.

9. The procedure of arranging accounts in a general ledger, assigning account numbers, 9. Fand keeping records current is posting.

10. If a business has only two asset accounts, Cash and Supplies, the two accounts are 10. Tnumbered 110 and 120.

11. The account number is placed in the Post. Ref. column of the journal as the last step in 11. Tthe posting procedure.

12. If the previous account balance and the current entry posted to an account are both debits, 12. Tthe new account balance is a debit.

13. The two steps for opening an account are writing the account title and recording the 13. Fbalance.

14. Separate amounts in special amount columns are posted individually. 14. F

15. Separate amounts in general amount columns are not posted individually. 15. F

16. The steps for posting are to write the date, journal page number, amount, and balance. 16. F

17. A check mark in parentheses below a General Debit column total indicates that the total 17. Tis not posted.

18. With the exception of the totals lines, the Post. Ref. column is completely filled in with 18. Teither an account number or a check mark.

19. A group of accounts is called a ledger. 19. T

20. A journal page number is written in the Post. Ref. column of an account to show that 20. Fposting of the entry is completed.


Part Two—Preparing a Chart of AccountsThomas Bass owns a service business called Municipal Investments, whichuses the following accounts:

Advertising Expense Thomas Bass, DrawingAccounts Payable—Venture Supplies SuppliesAccounts Payable—Phillips Supplies SalesCash Thomas Bass, CapitalRent Expense Delivery ExpenseMiscellaneous Expense Accounts Receivable—Marcia ChanningPrepaid Insurance Accounts Receivable—Mark Rowe

Directions:

1. Prepare a chart of accounts. Arrange expense accounts in alphabetical order.Use 3-digit account numbers and number the accounts within a division by10s. Include general ledger division titles in the chart of accounts.

2. After the chart of accounts has been completed, two new accounts, UtilitiesExpense and Accounts Receivable—Profit Works, are to be added. Assignaccount numbers to the two new accounts.

Part Three—Posting to a General LedgerDirections:

1. Open a general ledger account on the next page for each of the followingaccounts:110 Cash 410 Sales130 Accounts Receivable—Mark Rowe 510 Advertising Expense310 Thomas Bass, Capital

2. Post the separate amounts on each line of the journals on the next pagethat need to be posted individually.

3. Post the journal’s special amount column totals.

(100) Assets (400) Revenue

110 Cash 410 Sales

120 Accounts Receivable—Marcia Channing (500) Expenses

130 Accounts Receivable—Mark Rowe 510 Advertising Expense

140 Supplies 520 Delivery Expense

150 Prepaid Insurance 530 Miscellaneous Expense

540 Rent Expense

(200) Liabilities

210 Accounts Payable—Phillips Supplies

220 Accounts Payable—Venture Supplies

(300) Owner’s Equity

310 Thomas Bass, Capital

320 Thomas Bass, Drawing

New Accounts

Account Number Account Title

125 Accounts Receivable—Profit Works

550 Utilities Expense

Munic ipa l I nves tmentsChar t o f Accounts

POIN

TS �

2

4

3

4

4

4

2

1

2

2

1

2

2

2

2

37

Name


GENERAL LEDGER

JOURNAL PAGE

1 2 3 4

1

2

25

1

2

25


POST.REF.

GENERAL

DEBIT CREDIT

SALESCREDIT

CASH

DEBIT CREDIT

5

1

3

16

20--Oct. Thomas Bass, Capital

Advertising Expense

Carried Forward

R1

C1

310

510

�

2 3 0 00

3 9 0 0 00

6 0 0 0 00

6 0 0 0 00 4 9 0 0 00

6 0 0 0 00

8 9 0 0 00

2 3 0 00

1 9 0 0 00

1

1

1

POIN

TS �

JOURNAL PAGE

1 2 3 4

19

20

21

22

23

24

19

20

21

22

23

24


POST.REF.

GENERAL

DEBIT CREDIT

SALESCREDIT

CASH

DEBIT CREDIT

5

30

30

31

31

31

2

1

1

5

9

Accts. Rec.—Mark Rowe

�

Advertising Expense

�

Totals

C32

T30

C33

T31

130

�

510

�

5 0 0 00

1 5 0 00

8 7 0 0 00

(�)

8 5 0 0 00

(�)

1 0 0 00

1 2 0 0 00

9 6 0 0 00

(410)

1 0 0 00

1 2 0 0 00

13 0 0 0 00

(110)

5 0 0 00

1 5 0 00

2 0 0 00

3 6 0 0 00

(110)

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. 2

2

110

13 0 0 0 00

Cash

3 6 0 0 0013 0 0 0 00

9 4 0 0 004

4

2

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3020--Oct. 2

130Accounts Receivble—Mark Rowe

5 0 0 00 4

2

5 0 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

120--Oct. 1

310Thomas Bass—Capital

6 0 0 0 00 4

2

6 0 0 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3120--Oct. 2

410Sales

9 6 0 0 00 4

2

9 6 0 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

331

20--Oct. 1

2

510

2 3 0 001 5 0 00

Advertising Expense

2 3 0 003 8 0 00

4

4

38

2


Part Four—Analyzing Posting ProceduresDirections: For each of the following items, select the choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers



3. If all separate amounts on a journal line are recorded in special amount columns, 3. ca. all amounts are posted individually.b. only one of the amounts is posted individually.c. neither amount is posted individually.d. all of these.

4. Separate amounts in the Sales Credit column of a journal are 4. da. rounded to the nearest dollar.b. posted individually.c. posted frequently.d. none of these.

5. The first digit in the account number 120 means that the account is in the 5. da. expense division of the general ledger.b. revenue division of the general ledger.c. liability division of the general ledger.d. asset division of the general ledger.

6. When accounts are arranged in a general ledger, account numbers are assigned, and the 6. bchart of accounts is kept up to date, the accounting personnel area. posting. c. journalizing.b. doing file maintenance. d. none of these.

7. The procedure for transferring information from a journal entry to a ledger account is 7. aa. posting.b. journalizing.c. file maintenance.d. none of these.

8. The first step in the posting procedure is writing the 8. aa. entry date in the Date column of the account.b. journal page number in the Post. Ref. column of the account.c. entry amount in the Debit or Credit column of the account.d. none of these.

9. The last step in the posting procedure is writing the 9. da. entry date in the Date column of the account.b. journal page number in the Post. Ref. column of the account.c. entry amount in the Debit or Credit column of the account.d. none of these.

10. If posting is interrupted, the accounting personnel know to resume posting 10. aa. on the line with a blank Post. Ref. column in the journal.b. at the beginning of the journal page.c. the next day.d. all of these.

chapterTEST A

PerfectScore

YourScoreName


Identifying Accounting Concepts 9 Pts.Reconciling a Bank Statement 20 Pts.

Preparing a Check Stub and Check 19 Pts.Recording Bank and Petty Cash Transactions 34 Pts.

Total 105 Pts.


5



A. bank statement 1. An endorsement restricting further transfer of a check’s ownership. 1. LB. blank endorsement 2. A bank account from which payments can be ordered by a depositor. 2. CC. checking account 3. A check that a bank refuses to pay. 3. FD. code of conduct 4. An amount of cash kept on hand and used for making small payments. 4. IE. debit card 5. An endorsement consisting only of the endorser’s signature. 5. BF. dishonored check 6. A report of deposits, withdrawals, and bank balances sent to a 6. A

depositor by a bank.G. electronic funds 7. A bank card that, when making purchases, automatically deducts 7. E

transfer the amount of the purchase from the checking account of the cardholder.

H. endorsement 8. A form showing proof of a petty cash payment. 8. JI. petty cash 9. A signature or stamp on the back of a check transferring ownership. 9. HJ. petty cash slip 10. A check with a future date on it. 10. KK. postdated check 11. An endorsement indicating a new owner of a check. 11. ML. restrictive 12. A computerized cash payments system that transfers funds without 12. G

endorsement the use of checks, currency, or other paper documents.M. special 13. A statement that guides the ethical behavior of a company and its 13. D

endorsement employees.


Answers

1. Ownership of a check cannot be transferred. 1. F2. Voided checks should be recorded in the journal. 2. T3. Using a memorandum as the source document for a dishonored check is an application 3. T

of the accounting concept Objective Evidence.4. The petty cash fund is a liability with a normal debit balance. 4. F5. When petty cash is replenished, Petty Cash is debited and Cash is credited. 5. F6. A check with a blank endorsement can be cashed by anyone who has the check. 6. T7. An outstanding check is one that has been issued but not yet reported on a bank statement 7. T

by the bank.8. A bank requires that the signature of the person authorized to sign checks be on the 8. T

signature card.9. The source document for an electronic funds transfer is a memorandum. 9. T

10. The source document for a debit card purchase is a memorandum. 10. T


Part Three—Identifying Accounting ConceptsDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Each time cash or checks are placed in a bank account, the customer prepares a 1. ba. signature card.b. deposit slip.c. check.d. none of these.

2. An endorsement on the back of a check consisting only of a signature is 2. aa. a blank endorsement.b. a special endorsement.c. a restrictive endorsement.d. an incorrect endorsement.

3. A lost check with a blank endorsement on it can be cashed by 3. aa. anyone who has the check.b. only the person whose name follows the words “Pay to the order of.”c. only the person who endorsed the check.d. no one.

4. An endorsement on the back of a check consisting of the words “Pay to the order of” and 4. ba new check owner’s name is aa. blank endorsement.b. special endorsement.c. restrictive endorsement.d. signature endorsement.

5. An endorsement on the back of a check indicating that the check is to be accepted for 5. cdeposit only is aa. blank endorsement.b. special endorsement.c. restrictive endorsement.d. deposit endorsement.

6. If any kind of error is made in preparing a check, 6. da. a new check should be prepared.b. VOID should be written on the check stub.c. VOID should be written on the check.d. all of the above.

7. The entry to establish a $200.00 petty cash fund is 7. ca. debit Cash, $200.00; credit Petty Cash, $200.00.b. debit Miscellaneous Expense, $200.00; credit Cash, $200.00.c. debit Petty Cash, $200.00; credit Cash, $200.00.d. debit Petty Cash, $200.00; credit Miscellaneous Expense, $200.00.

8. A petty cash fund is always replenished 8. ca. daily.b. weekly.c. at the end of the month.d. none of these.

9. The bank statement shows a checking account balance of $5,500.00. There are outstanding 9. achecks totaling $600.00, an outstanding deposit of $400.00, and a bank service charge of$15.00. The Cash account balance should bea. $5,300.00.b. $5,700.00.c. $5,285.00.d. none of these.

Name


Part Four—Reconciling a Bank StatementOn September 30 of the current year, SoundBlast Music received a bankstatement dated September 29.

Directions: Prepare a bank statement reconciliation.Bank statement balance ................................................................................................ $8,923.00Service charge ................................................................................................................ 8.00Outstanding deposit, September 30 ............................................................................ 896.00Outstanding checks:

No. 220 .................................................................................................................. 75.00No. 221 .................................................................................................................. 150.00No. 224 .................................................................................................................. 1,173.00

Check stub balance on Check Stub No. 225 .............................................................. 8,429.00

RECONCILIATION OF BANK STATEMENT(Date)

Description Amount

$

DEDUCT BANK CHARGES:

Balance On Check Stub No. ___ . . . . . . . . . . . . $

Adjusted Check Stub Balance . . . . . . . . . . . . . . . $

Total bank charges�

Date Amount

$

ADD OUTSTANDING DEPOSITS:

Balance On Bank Statement . . . . . . . . . . . . . . . . $

Adjusted Bank Balance . . . . . . . . . . . . . . . . . . . . $

Total outstanding deposits �

TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Amount

DEDUCT OUTSTANDING CHECKS:

Total outstanding checks �

Ck.No.Amount

Ck.No.

September 30, 20--

8,923 00

896 009,819 00

1,398 00

8,421 008,421 00

8 00

8,429 00

Service charge 8 00 9/30/-- 896 00

220 75 00221 150 00224 1,173 00

225

1,398 00

POIN

TS �

1

3

4

111

222

1

2

20


Part Five—Preparing a Check Stub and CheckDirections: Prepare a check stub and check using the following information.1. The balance brought forward to check stub No. 106 is $5,530.00.2. A deposit of $1,742.00 is made on November 5 of the current year.3. Notice is received from the bank of a dishonored check for $150.00, plus fee, $25.00; total, $175.00.4. Check #106 is issued to Melody’s Cleaning Supplies, $80.00, on November 5 of the current year.5. Sign the check using your name.

Part Six—Recording Bank and Petty Cash TransactionsDirections: Journalize the following transactions completed during April ofthe current year.

Transac t ionsApril 2. Received notice from the bank of a dishonored check from Jackson Group, $535.00, plus $25.00 fee;

total, $560.00. Memorandum No. 120.2. Paid cash on account to Delite Drums, $675.00, using EFT. Memorandum 121.3. Purchased supplies, $165.00, using debit card. Memorandum 122.3. Paid cash to establish a petty cash fund, $100.00. Check No. 159.

29. Recorded bank service charge, $7.50. Memorandum 130.30. Paid cash to replenish the petty cash fund, $58.50: supplies, $16.00; miscellaneous expense, $25.00;

postage expense, $17.50. Check No. 160.

TADWELLP.O. Box 9432Tampa, FL 33603-1027

63-109631

NO. 106

20

$PAY TO THEORDER OF

FOR

DOLLARSFOR CLASSROOM USE ONLY

�063101098� �43� 452119

Tampa, FL 33602

NO. 106Date 20

$

To

For

Date

BAL. BRO’T FOR’D . . . . . . . . . . . .

AMT. DEPOSITED

SUBTOTAL . . . . . . . . . . . . . . . . . . .

OTHER:

_____________________

_____________________

_____________________

SUBTOTAL . . . . . . . . . . . . . . . . . . .

AMT. THIS CHECK . . . . . . . . . . . .

BAL. CAR’D FOR’D . . . . . . . . . . . .

80.00--November 5

Melody’s Cleaning Supplies

Supplies

5,530 0011 5 -- 1,742 00

7,272 00

175 007,097 00

80 007,017 00

November 5 --

80.00Melody’s Cleaning Supplies

Eighty and no ⁄100

Supplies Student Name

Dis. check

November 5

�

111

1

121

1

1111

13

�

1

2

1

26

JOURNAL PAGE

1 2 3 4

1

2

3

4

5

6

7

8

9

1

2

3

4

5

6

7

8

9


POST.REF.

GENERAL

DEBIT CREDIT

SALESCREDIT

CASH

DEBIT CREDIT

5

2

2

3

3

29

30

20--Apr. Accts. Rec.—Jackson Grp.

Accts. Pay.—Delite Drums

Supplies

Petty Cash

Miscellaneous Expense

Supplies


Postage Expense

M120

M121

M122

C159

M130

C160

5 6 0 00

6 7 5 00

1 6 5 00

1 0 0 00

7 50

1 6 00

2 5 00

1 7 50

22

5

5

5

5

5

5

2

2

34

POIN

TS �

5 6 0 00

6 7 5 00

1 6 5 00

1 0 0 00

7 50

5 8 50

chapterTEST B


5



A. bank statement 1. A bank card that, when making purchases, automatically deducts the 1. Eamount of the purchase from the checking account of the cardholder.

B. blank endorsement 2. A bank account from which payments can be ordered by a depositor. 2. CC. checking account 3. A check that a bank refuses to pay. 3. FD. code of conduct 4. A computerized cash payments system that transfers funds without 4. G

the use of checks, currency, or other paper documents.E. debit card 5. An endorsement restricting further transfer of a check’s ownership. 5. LF. dishonored check 6. A check with a future date on it. 6. KG. electronic funds 7. An amount of cash kept on hand and used for making small 7. I

transfer purchases.H. endorsement 8. A form showing proof of a petty cash payment. 8. JI. petty cash 9. A signature or stamp on the back of a check transferring ownership. 9. HJ. petty cash slip 10. An endorsement consisting only of the endorser’s signature. 10. BK. postdated check 11. An endorsement indicating a new owner of a check. 11. ML. restrictive 12. A report of deposits, withdrawals, and bank balances sent to a 12. A

endorsement depositor by a bank.M. special 13. A statement that guides the ethical behavior of a company and 13. D

endorsement its employees.


Answers

1. In order to control cash, one common method is to ensure that cash payments are paid 1. Tby pre-numbered checks.

2. Ownership of a check cannot be transferred. 2. F3. Voided checks should be recorded in the journal. 3. T4. The petty cash fund is a liability with a normal debit balance. 4. F5. When petty cash is replenished, Petty Cash is debited and Cash is credited. 5. F6. When the petty cash fund is replenished, the balance of the petty cash account increases. 6. F7. As petty cash is paid out, the balance of the petty cash account decreases. 7. F8. A check with a blank endorsement can be cashed by anyone who has the check. 8. T9. An outstanding check is one that has been issued but not yet reported on a bank statement 9. T

by the bank.10. The source document for an electronic funds transfer is a memorandum. 10. T

PerfectScore

YourScoreName


Identifying Accounting Concepts 9 Pts.Reconciling a Bank Statement 20 Pts.

Preparing a Check Stub and Check 19 Pts.Recording Bank and Petty Cash Transactions 34 Pts.

Total 105 Pts.


Part Three—Identifying Accounting ConceptsDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers


2. If any kind of error is made in preparing a check, 2. da. a new check should be prepared.b. VOID should be written on the check stub.c. VOID should be written on the check.d. all of these.

3. Each time cash or checks are placed in a bank account, the customer prepares a 3. ba. signature card. b. deposit slip.c. check.d. none of these.

4. An endorsement on the back of a check consisting only of a signature is 4. aa. a blank endorsement.b. a special endorsement.c. a restrictive endorsement.d. an incorrect endorsement.



7. An endorsement on the back of a check consisting of the words “Pay to the order of” and 7. ba new check owner’s name is aa. blank endorsement.b. special endorsement.c. restrictive endorsement.d. signature endorsement.


9. The bank statement shows a checking account balance of $5,500.00. There are outstanding 9. achecks totaling $600.00, an outstanding deposit of $400.00, and a bank service charge of$15.00. The Cash account balance should bea. $5,300.00.b. $5,700.00.c. $5,285.00.d. none of these.

Name


Part Four—Reconciling a Bank StatementOn September 30 of the current year, SoundBlast Music received a bankstatement dated September 29.

Directions: Prepare a bank statement reconciliation.Bank statement balance ................................................................................................ $1,528.00Service charge ................................................................................................................ 8.00Outstanding deposit, September 30 ............................................................................ 150.00Outstanding checks:

No. 220 .................................................................................................................. 70.00No. 221 .................................................................................................................. 35.00No. 224 .................................................................................................................. 25.00

Check stub balance on Check Stub No. 225 .............................................................. 1,556.00

RECONCILIATION OF BANK STATEMENT(Date)

Description Amount

$

DEDUCT BANK CHARGES:

Balance On Check Stub No. ___ . . . . . . . . . . . . $

Adjusted Check Stub Balance . . . . . . . . . . . . . . . $

Total bank charges�

Date Amount

$

ADD OUTSTANDING DEPOSITS:

Balance On Bank Statement . . . . . . . . . . . . . . . . $

Adjusted Bank Balance . . . . . . . . . . . . . . . . . . . . $

Total outstanding deposits �

TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Amount

DEDUCT OUTSTANDING CHECKS:

Total outstanding checks �

Ck.No.Amount

Ck.No.

September 30, 20--

1,528 00

150 001,678 00

130 00

1,548 001,548 00

8 00

1,556 00

Service charge 8 00 9/30/-- 150 00

220 70 00221 35 00224 25 00

225

POIN

TS �

1

3

4

111

222

1

2

20


Part Five—Preparing a Check Stub and CheckDirections: Prepare a check stub and check using the following information.1. The balance brought forward to check stub No. 156 is $4,130.00.2. A deposit of $1,502.00 is made on February 9 of the current year.3. An $8.00 bank service charge is recorded.4. Check #156 is issued to Transco Supplies, $60.00 on February 9 of the current year.5. Sign the check using your name.

Part Six—Recording Bank and Petty Cash TransactionsDirections: Journalize the following transactions completed during April ofthe current year.

Transac t ionsApril 2. Received notice from the bank of a dishonored check from Jackson Group, $295.00, plus $15.00 fee;

total, $310.00. Memorandum No. 223.2. Purchased supplies, $75.00, using debit card. Memorandum 224.3. Paid cash to establish a petty cash fund, $150.00. Check No. 159.3. Paid cash on account to Delite Drums, $225.00, using EFT. Memorandum 225.

30. Paid cash to replenish the petty cash fund, $63.50: supplies, $16.00; miscellaneous expense, $30.00;postage expense, $17.50. Check No. 183.

30. Recorded bank service charge, $12.00. Memorandum 241.

TADWELLP.O. Box 9432Tampa, FL 33603-1027

63-109631

NO. 156

20

$PAY TO THEORDER OF

FOR

DOLLARSFOR CLASSROOM USE ONLY

�063101098� �43� 452119

Tampa, FL 33602

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BAL. BRO’T FOR’D . . . . . . . . . . . .

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OTHER:

_____________________

_____________________

_____________________

SUBTOTAL . . . . . . . . . . . . . . . . . . .

AMT. THIS CHECK . . . . . . . . . . . .

BAL. CAR’D FOR’D . . . . . . . . . . . .

60.00--February 9

Transco Supplies

Supplies

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JOURNAL PAGE

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POST.REF.

GENERAL

DEBIT CREDIT

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CASH

DEBIT CREDIT

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20--Apr. Accts. Rec.—Jackson Grp.

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chapterTEST A

PerfectScore

YourScoreName

Defining Accounting Terms 8 Pts.Analyzing Completing a Work Sheet 11 Pts.

Completing a Work Sheet 73 Pts.Analyzing Accounting Procedures 8 Pts.

Total 100 Pts.


6



A. adjustments 1. A columnar accounting form used to summarize the general 1. Hledger information needed to prepare financial statements.

B. balance sheet 2. Changes recorded on a work sheet to update general ledger 2. Aaccounts at the end of a fiscal period.

C. fiscal period 3. The length of time for which a business summarizes and reports 3. Cfinancial information.

D. income statement 4. The difference between total revenue and total expenses when 4. Ftotal expenses is greater.

E. net income 5. A financial statement showing the revenue and expenses for a 5. Dfiscal period.

F. net loss 6. A proof of the equality of debits and credits in a general ledger. 6. GG. trial balance 7. The difference between total revenue and total expenses when 7. E

total revenue is greater.H. work sheet 8. A financial statement that reports assets, liabilities, and owner’s 8. B

equity on a specific date.

Part Two—Analyzing Completing a Work SheetDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. Many businesses choose a one-year fiscal period that ends during a period of high 1. Fbusiness activity.

2. Making adjustments to general ledger accounts is an application of the Matching Expenses 2. Twith Revenue accounting concept.

3. The balance of the supplies account plus the value of the supplies on hand equals the 3. Fup-to-date balance of the supplies account.

4. The value of the prepaid insurance coverage used during a fiscal period is an expense. 4. T5. When the Income Statement Credit column total is greater than the Income Statement Debit 5. T

column total on a work sheet, the business has a net income.6. If an amount is written in an incorrect column on a work sheet, the error should be erased 6. T

and the amount should be written in the correct column.7. If the Trial Balance columns are not equal and the difference is $50.00, the error most likely 7. T

is a $25.00 amount written in the wrong column.8. The accounting concept Consistent Reporting is being applied when a word processing 8. F

service business reports revenue per page one year and revenue per hour the next year.9. Two financial statements are prepared from the information on the work sheet. 9. T

10. Net income on a work sheet is calculated by subtracting the Income Statement Credit 10. Fcolumn total from the Income Statement Debit column total.

11. If there are errors in the work sheet’s Trial Balance columns, it might be because not all 11. Tgeneral ledger account balances were copied in the Trial Balance column correctly.


Part Three—Completing a Work SheetThe general ledger accounts and balances for Ingram Health Systems on December 31of the current year are given below. The business uses a monthly fiscal period.

Account BalancesAccount Titles Debit Credit

Cash ................................................................................................ 7,200.00Petty Cash ...................................................................................... 200.00Accts. Rec.—Healthy Bodies ...................................................... 100.00Accts. Rec.—Fremin’s Accounting Services ............................ 150.00Supplies.......................................................................................... 4,500.00Prepaid Insurance ........................................................................ 2,500.00Accts. Pay.—David’s Supplies .................................................... 1,260.00Accts. Pay.—Smith’s Office Supplies ........................................ 180.00Martha Ingram, Capital .............................................................. 10,500.00Martha Ingram, Drawing ............................................................ 500.00Income Summary.......................................................................... -------------- --------------Sales ................................................................................................ 5,000.00Advertising Expense .................................................................... 240.00Insurance Expense........................................................................ -------------- --------------Miscellaneous Expense ................................................................ 50.00Rent Expense ................................................................................ 900.00Supplies Expense .......................................................................... -------------- --------------Utilities Expense .......................................................................... 600.00

Directions:

1. Prepare the heading and trial balance on the work sheet. Total and rule theTrial Balance columns. Use the work sheet on the next page.

2. Analyze the following adjustment information into debit and credit parts.Record the adjustments on the work sheet.

Adjustment Information, December 31

Supplies on hand ...................................................................................... $2,230.00Value of prepaid insurance .................................................................... 2,000.00

3. Complete the work sheet.

Name


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Part Four—Analyzing Accounting ProceduresDirections: For each of the following items, select the one choice that bestcompletes the statement. Print the letter identifying your choice in theAnswers column.

Answers

1. Following the same accounting procedures in the same way in each accounting period is 1. can application of the accounting concepta. Matching Expenses with Revenue.b. Accounting Period Cycle.c. Consistent Reporting.d. Going Concern.

2. Reporting changes in financial information for a specific period of time in the form of 2. bfinancial statements is an application of the accounting concepta. Matching Expenses with Revenue.b. Accounting Period Cycle.c. Consistent Reporting.d. Going Concern.

3. On a trial balance, 3. aa. all general ledger account titles are listed.b. only general ledger accounts that have balances are listed.c. only accounts with debit balances are listed.d. only accounts with credit balances are listed.

4. Recording revenue from business activities and expenses associated with earning that 4. arevenue in the same accounting period is an application of the accounting concepta. Matching Expenses with Revenue.b. Accounting Period Cycle.c. Consistent Reporting.d. Going Concern.

5. On a work sheet, the balance of the owner’s capital account is extended to the 5. ba. Balance Sheet Debit column.b. Balance Sheet Credit column.c. Income Statement Debit column.d. Income Statement Credit column.

6. A net loss is entered in the work sheet’s 6. ba. Income Statement Debit and Balance Sheet Credit columns.b. Income Statement Credit and Balance Sheet Debit columns.c. Balance Sheet Debit and Trial Balance Credit columns.d. Income Statement Debit and Trial Balance Credit columns.

7. If a pair of work sheet columns do not balance and the difference between the totals is an 7. camount that appears elsewhere on the work sheet, the error is probablya. an error in addition.b. an amount that has been written in the wrong column.c. an amount that has not been extended.d. a slide.

8. If the Trial Balance columns are not equal and the difference is 1, the error often is 8. da. transposed numbers or a “slide.”b. in writing an amount in the wrong column.c. in posting.d. in addition.

chapterTEST B

PerfectScore

YourScoreName

Defining Accounting Terms 8 Pts.Analyzing Completing a Work Sheet 11 Pts.

Completing a Work Sheet 73 Pts.Analyzing Accounting Procedures 8 Pts.

Total 100 Pts.


6



A. adjustments 1. A proof of the equality of debits and credits in a general ledger. 1. GB. balance sheet 2. The difference between total revenue and total expenses when 2. E

total revenue is greater.C. fiscal period 3. Changes recorded on a work sheet to update general ledger 3. A

accounts at the end of a fiscal period.D. income statement 4. A columnar accounting form used to summarize the general 4. H

ledger information needed to prepare financial statements.E. net income 5. The length of time for which a business summarizes and reports 5. C

financial information.F. net loss 6. The difference between total revenue and total expenses when 6. F

total expenses is greater.G. trial balance 7. A financial statement showing the revenue and expenses for a 7. D

fiscal period.H. work sheet 8. A financial statement that reports assets, liabilities, and owner’s 8. B

equity on a specific date.

Part Two—Analyzing Completing a Work SheetDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. Financial information may be reported any time a business needs it. 1. T2. Making adjustments to general ledger accounts is an application of the Matching Expenses 2. T

with Revenue accounting concept.3. The balance of the supplies account plus the value of the supplies on hand equals the 3. F

up-to-date balance of the supplies account.4. If an amount is written in an incorrect column on a work sheet, the error should be erased 4. T

and the amount should be written in the correct column. 5. If the Trial Balance columns are not equal and the difference is $50.00, the error most likely 5. T

is a $25.00 amount written in the wrong column.6. The accounting concept Consistent Reporting is being applied when a word processing 6. F

service business reports revenue per page one year and revenue per hour the next year. 7. Journals, ledgers, and work sheets are considered permanent records. 7. F8. The two accounts affected by the adjustment for insurance are Prepaid Insurance Expense 8. F

and Insurance. 9. Two financial statements are prepared from the information on the work sheet. 9. T


11. If the difference between the totals of Debit and Credit columns on a work sheet can be 11. Fevenly divided by 9, then the error is most likely in addition.


Part Three—Completing a Work SheetThe general ledger accounts and balances for Ford Consultants on December 31 of thecurrent year are given below. The business uses a monthly fiscal period.

Account BalancesAccount Titles Debit Credit

Cash ................................................................................................ 8,500.00Petty Cash ...................................................................................... 100.00Accts. Rec.—Gray Co. .................................................................. 650.00Accts. Rec.—Markin Co............................................................... 325.00Supplies.......................................................................................... 925.00Prepaid Insurance ........................................................................ 600.00Accts. Pay.—Insta Supplies ........................................................ 325.00Accts. Pay.—Sula Supplies .......................................................... 650.00Debra Ford, Capital ...................................................................... 6,000.00Debra Ford, Drawing .................................................................. 1,000.00Income Summary.......................................................................... -------------- --------------Sales ................................................................................................ 7,000.00Advertising Expense .................................................................... 250.00Insurance Expense........................................................................ -------------- --------------Miscellaneous Expense ................................................................ 125.00Rent Expense ................................................................................ 1,200.00Supplies Expense .......................................................................... -------------- --------------Utilities Expense .......................................................................... 300.00

Directions:

1. Prepare the heading and trial balance on the work sheet. Total and rule theTrial Balance columns. Use the work sheet on the next page.

2. Analyze the following adjustment information into debit and credit parts.Record the adjustments on the work sheet.


Supplies on hand ...................................................................................... $800.00Value of prepaid insurance .................................................................... 350.00


Name


12

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Part Four—Analyzing Accounting Procedures Directions: For each of the following items, select the one choice that bestcompletes the statement. Print the letter identifying your choice in theAnswers column.

Answers

1. Reporting changes in financial information for a specific period of time in the form of 1. bfinancial statements is an application of the accounting concepta. Matching Expenses with Revenue.b. Accounting Period Cycle.c. Consistent Reporting.d. Going Concern.

2. On a trial balance, 2. aa. all general ledger account titles are listed.b. only general ledger accounts that have balances are listed.c. only accounts with debit balances are listed.d. only accounts with credit balances are listed.

3. If a pair of work sheet columns do not balance and the difference between the totals is an 3. camount that appears elsewhere on the work sheet, the error is probablya. an error in addition.b. an amount that has been written in the wrong column.c. an amount that has not been extended.d. a slide.


5. On a work sheet, the balance of an expense account is extended to the 5. ca. Balance Sheet Debit column.b. Balance Sheet Credit column.c. Income Statement Debit column.d. Income Statement Credit column.

6. Recording revenue from business activities and expenses associated with earning that 6. arevenue in the same accounting period is an application of the accounting concepta. Matching Expenses with Revenue.b. Accounting Period Cycle.c. Consistent Reporting.d. Going Concern.


8. If the Trial Balance columns are not equal and the difference is 1, the error often is 8. da. transposed numbers or a “slide.”b. in writing an amount in the wrong column.c. in posting.d. in addition.

chapterTEST A

PerfectScore

YourScoreName

Identifying Accounting Concepts and Practices 20 Pts.Preparing an Income Statement and a Balance Sheet 54 Pts.

Identifying Financial Statement Procedures 9 Pts.

Total 83 Pts.


7

Part One—Identifying Accounting Concepts and PracticesDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. A balance sheet has three sections: heading, assets, and liabilities. 1. F2. The owner’s capital amount reported on a balance sheet is calculated as: capital account 2. F

balance plus drawing account balance less net income.3. The formula for calculating net income is: total revenue minus total expenses equals 3. T

net income.4. The net income calculated for the income statement and the net income on the work sheet 4. T

must be the same.5. The Adequate Disclosure accounting concept is applied when financial statements contain 5. T

all information necessary to understand a business’s financial condition.6. On an income statement, double lines are ruled across both amount columns to indicate 6. F

that debits equal credits.7. For a service business, the revenue reported on an income statement includes components 7. T

for total expenses and net income.8. The formula for calculating the total expenses component percentage is: total expenses 8. T

divided by total sales equals total expenses component percentage.9. The financial condition of a business refers to its financial strength. 9. T

10. The current capital to be reported on a balance sheet is calculated as: the capital account 10. Fbalance plus net income equals current capital.

11. The owner’s equity section of a balance sheet may report different kinds of details about 11. Towner’s equity, depending on the need of the business.

12. Component percentages on an income statement are calculated by dividing sales and total 12. Fexpenses by net income.

13. A component percentage is the percentage relationship between one financial statement 13. Titem and the total that includes that item.

14. An income statement reports information over a period of time, indicating the financial 14. Tprogress of a business in earning a net income or a net loss.

15. The Matching Expenses with Revenue accounting concept is applied when the revenue 15. Tearned and the expenses incurred to earn that revenue are reported in the same fiscalperiod.

16. Information needed to prepare an income statement comes from the trial balance columns 16. Fand the income statement columns of a work sheet.

17. An amount written in parentheses on a financial statement indicates an estimate. 17. F18. A balance sheet reports financial information over a specific period of time. 18. F19. A balance sheet reports financial information on a specific date and includes the assets, 19. T

liabilities, and owner’s equity.20. When a business has two different sources of revenue, a separate income statement 20. F

should be prepared for each kind of revenue.


Part Two—Preparing an Income Statement and aBalance SheetThe following information is obtained from the partial work sheet forRodriguez Accounting for the month ended March 31 of the current year.

Directions:

1. Prepare an income statement for the month ended March 31 of the currentyear. Figure and record the component percentages for total expenses andnet income. Round percentage calculations to the nearest 0.1%.

2. Prepare a balance sheet for March 31 of the current year.

ACCOUNT TITLEINCOME STATEMENT

DEBIT CREDIT

BALANCE SHEET

DEBIT CREDIT

5 6 7 8

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

Cash

Petty Cash

Accounts Receivable—Mills

Supplies

Prepaid Insurance

Accounts Payable—Zimmer

J. Rodriguez, Capital

J. Rodriguez, Drawing

Income Summary

Sales

Advertising Expense

Insurance Expense


Rent Expense

Supplies Expense

Utilities Expense

Net Income

1 5 0 00

3 5 0 00

7 5 00

4 5 0 00

2 0 0 0 00

6 1 5 00

3 6 4 0 00

1 2 3 5 00

4 8 7 5 00

4 8 7 5 00

4 8 7 5 00

4 8 7 5 00

9 5 0 0 00

6 5 00

6 0 0 00

2 6 0 0 00

2 7 5 00

1 2 0 0 00

14 2 4 0 00

14 2 4 0 00

2 5 8 0 00

10 4 2 5 00

13 0 0 5 00

1 2 3 5 00

14 2 4 0 00

Rodriguez Accounting

Work Sheet

For Month Ended March 31, 20--

Name


% OFSALES

Revenue:

Sales

Expenses:

Advertising Expense

Insurance Expense


Rent Expense

Supplies Expense

Utilities Expense

Total Expenses

Net Income

1 5 0 00

3 5 0 00

7 5 00

4 5 0 00

2 0 0 0 00

6 1 5 00


Income Statement

For Month Ended March 31, 20--

4 8 7 5 00

3 6 4 0 00

1 2 3 5 00

100.0

74.7

25.3

1

3

1

2

2

2

2

2

2

3

3

26

+1

27

1

1

1

(Correct Rulings)

Assets

Cash

Petty Cash

Accounts Receivable—Mills

Supplies

Prepaid Insurance

Total Assets

9 5 0 0 00

6 5 00

6 0 0 00

2 6 0 0 00

2 7 5 00

13 0 4 0 00


Balance Sheet

March 31, 20--

Liabilities

Accounts Payable—Zimmer

Total Liabilities

Owner’s Equity

J. Rodriguez, Capital

Total Liabilities and Owner’s Equity

2 5 8 0 00

2 5 8 0 00

10 4 6 0 00

13 0 4 0 00

2

4

4

3

4

2

4

26

+1

27

1

1

1

(Correct Rulings)


Part Three—Identifying Financial Statement ProceduresDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. The date on a monthly income statement prepared on July 31 is written as 1. aa. For Month Ended July 31, 20—.b. July 31, 20—.c. 20—, July 31.d. none of these.

2. The amount of net income calculated on an income statement is correct if 2. aa. it is the same as net income shown on the work sheet.b. debits equal credits.c. it is the same as the balance sheet.d. none of these.

3. Preparing financial statements at the end of each monthly fiscal period is an application 3. dof the accounting concepta. Adequate Disclosure.b. Going Concern.c. Objective Evidence.d. Accounting Period Cycle.

4. Information needed to prepare an income statement’s revenue section is obtained from a 4. bwork sheet’s Account Title column anda. Income Statement Debit column.b. Income Statement Credit column.c. Balance Sheet Debit column.d. Balance Sheet Credit column.

5. A balance sheet reports a business’s financial 5. ca. condition over a specific period of time.b. progress over a specific period of time.c. condition on a specific date.d. progress on a specific date.

6. When preparing a balance sheet, the amount of owner’s capital is obtained from 6. da. the general ledger.b. the income statement.c. the work sheet’s Balance Sheet Credit column.d. none of these.

7. The formula for calculating the net income component percentage is 7. aa. net income divided by total sales equals net income component percentage.b. total sales divided by total expenses equals net income component percentage.c. total sales minus total expenses divided by net income equals total net income percentage.d. none of these.

8. Information needed to prepare a balance sheet liabilities section is obtained from a work 8. dsheet’s Account Title column anda. Income Statement Debit column.b. Income Statement Credit column.c. Balance Sheet Debit column.d. Balance Sheet Credit column.

9. Assuring that financial statements contain all information necessary to understand a 9. abusiness’s financial condition is an application of the accounting concepta. Adequate Disclosure.b. Going Concern.c. Objective Evidence.d. Accounting Period Cycle.

chapterTEST B

PerfectScore

YourScoreName

Identifying Accounting Concepts and Practices 20 Pts.Preparing an Income Statement and a Balance Sheet 54 Pts.

Identifying Financial Statement Procedures 9 Pts.

Total 83 Pts.


7


Answers

1. A balance sheet reports financial information over a specific period of time. 1. F2. The financial condition of a business refers to its financial strength. 2. T3. A balance sheet has three sections: heading, assets, and liabilities. 3. F4. The formula for calculating net income is total revenue minus total expenses equals 4. T

net income.5. The net income calculated for the income statement and the net income on the work sheet 5. T

must be the same.6. On an income statement, double lines are ruled across both amount columns to indicate 6. F

that debits equal credits.7. For a service business, the revenue reported on an income statement includes components 7. T

for total expenses and net income.8. The formula for calculating the total expenses component percentage is: total expenses 8. T

divided by total sales equals total expenses component percentage.9. The current capital to be reported on a balance sheet is calculated as: the capital account 9. F

balance plus net income equals current capital.10. Component percentages on an income statement are calculated by dividing sales and 10. F

total expenses by net income.11. A component percentage is the percentage relationship between one financial statement 11. T

item and the total that includes that item.12. The Adequate Disclosure accounting concept is applied when financial statements 12. T

contain all information necessary to understand a business’s financial condition.13. An income statement reports information over a period of time, indicating the financial 13. T

progress of a business in earning a net income or a net loss.14. The Matching Expenses with Revenue accounting concept is applied when the revenue 14. T

earned and the expenses incurred to earn that revenue are reported in the same fiscalperiod.

15. Information needed to prepare an income statement comes from the trial balance columns 15. Fand the income statement columns of a work sheet.

16. An amount written in parentheses on a financial statement indicates an estimate. 16. F17. A balance sheet reports financial information on a specific date and includes the assets, 17. T

liabilities, and owner’s equity.18. When a business has two different sources of revenue, a separate income statement should 18. F

be prepared for each kind of revenue.19. The owner’s capital amount reported on a balance sheet is calculated as: capital account 19. F

balance plus drawing account balance less net income.20. The owner’s equity section of a balance sheet may report different kinds of details about 20. T

owner’s equity, depending on the need of the business.


Part Two—Preparing an Income Statement and aBalance SheetThe following information is obtained from the partial work sheet for MerryMartha’s Catering Service for the month ended January 31 of the current year.

Directions:

1. Prepare an income statement for the month ended January 31 of the currentyear. Figure and record the component percentages for total expenses andnet income. Round percentage calculations to the nearest 0.1%.

2. Prepare a balance sheet for January 31 of the current year.

ACCOUNT TITLEINCOME STATEMENT

DEBIT CREDIT

BALANCE SHEET

DEBIT CREDIT

5 6 7 8

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

Cash

Petty Cash

Accounts Receivable—Jan’s Cakes

Supplies

Prepaid Insurance

Accounts Payable—Ken’s

Martha Free, Capital

Martha Free, Drawing

Income Summary

Sales

Advertising Expense

Insurance Expense


Rent Expense

Supplies Expense

Utilities Expense

Net Income

1 0 0 00

1 0 0 00

5 0 00

7 0 0 00

2 1 0 0 00

3 0 0 00

3 3 5 0 00

1 1 5 0 00

4 5 0 0 00

4 5 0 0 00

4 5 0 0 00

4 5 0 0 00

7 0 0 0 00

7 5 00

7 5 0 00

1 1 2 5 00

4 0 0 00

1 0 0 00

9 4 5 0 00

9 4 5 0 00

1 5 0 0 00

6 8 0 0 00

8 3 0 0 00

1 1 5 0 00

9 4 5 0 00

Merry Martha’s Catering Service

Work Sheet

For Month Ended January 31, 20--

Name


% OFSALES

Revenue:

Sales

Expenses:

Advertising Expense

Insurance Expense


Rent Expense

Supplies Expense

Utilities Expense

Total Expenses

Net Income

1 0 0 00

1 0 0 00

5 0 00

7 0 0 00

2 1 0 0 00

3 0 0 00


Income Statement

For Month Ended January 31, 20--

4 5 0 0 00

3 3 5 0 00

1 1 5 0 00

100.0

74.4

25.6

1

3

1

2

2

2

2

2

2

3

3

26

+1

27

1

1

1

(Correct Rulings)

Assets

Cash

Petty Cash

Accounts Receivable—Jan’s Cakes

Supplies

Prepaid Insurance

Total Assets

7 0 0 0 00

7 5 00

7 5 0 00

1 1 2 5 00

4 0 0 00

9 3 5 0 00


Balance Sheet

January 31, 20--

Liabilities

Accounts Payable—Ken's

Total Liabilities

Owner’s Equity

Martha Free, Capital

Total Liabilities and Owner’s Equity

1 5 0 0 00

1 5 0 0 00

7 8 5 0 00

9 3 5 0 00

2

4

4

3

4

2

4

26

+1

27

1

1

1

(Correct Rulings)


Part Three—Identifying Financial Statement ProceduresDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Assuring that financial statements contain all information necessary to understand a 1. abusiness’s financial condition is an application of the accounting concepta. Adequate Disclosure.b. Going Concern.c. Objective Evidence.d. Accounting Period Cycle.


3. A balance sheet reports a business’s financial 3. ca. condition over a specific period of time.b. progress over a specific period of time.c. condition on a specific date.d. progress on a specific date.

4. The date on a monthly income statement prepared on July 31 is written as 4. aa. For Month Ended July 31, 20—.b. July 31, 20—.c. 20—, July 31.d. none of these.

5. Information needed to prepare an income statement’s revenue section is obtained from a 5. bwork sheet’s Account Title column anda. Income Statement Debit column.b. Income Statement Credit column.c. Balance Sheet Debit column.d. Balance Sheet Credit column.

6. The amount of net income calculated on an income statement is correct if 6. aa. it is the same as net income shown on the work sheet.b. debits equal credits.c. it is the same as the balance sheet.d. none of these.


8. Information needed to prepare a balance sheet liabilities section is obtained from a 8. dwork sheet’s Account Title column anda. Income Statement Debit column.b. Income Statement Credit column.c. Balance Sheet Debit column.d. Balance Sheet Credit column.

9. When preparing a balance sheet, the amount of owner’s capital is obtained from 9. da. the general ledger.b. the income statement.c. the work sheet’s Balance Sheet Credit column.d. none of these.

chapterTEST A

PerfectScore

YourScoreName

Identifying Accounting Concepts and Practices 12 Pts.Journalizing and Posting Adjusting and Closing Entries 112 Pts.

Preparing a Post-Closing Trial Balance 17 Pts.Analyzing Adjusting and Closing Entries 9 Pts.

Total 150 Pts.


8

Part One—Identifying Accounting Concepts andPracticesDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. Preparing a work sheet at the end of each fiscal period to summarize the general ledger 1. Tinformation needed to prepare financial statements is an application of the accountingconcept Accounting Period Cycle.

2. A source document is prepared for adjusting entries. 2. F

3. The ending account balances of permanent accounts for one fiscal period are the beginning 3. Taccount balances for the next fiscal period.

4. At the end of a fiscal period, the balances of temporary accounts are summarized and 4. Ttransferred to the owner’s capital account.

5. Temporary accounts must start each fiscal period with a zero balance. 5. T

6. Journal entries used to prepare temporary accounts for a new fiscal period are closing 6. Tentries.

7. To close a temporary account, an amount equal to its balance is recorded in the account 7. Ton the side opposite to its balance.

8. The income summary account has a normal debit balance. 8. F

9. The balances of the expense accounts must be reduced to zero to prepare the accounts 9. Tfor the next fiscal period.

10. The drawing account is a permanent account. 10. F

11. The capital account’s new balance after all closing entries are posted is verified by 11. Tchecking it with the amount of capital shown on the balance sheet at the end of thefiscal period.

12. A post-closing trial balance verifies the equality of debits and credits in a general ledger 12. Tafter the closing entries are posted.


JOU

RNA

LP

AG

E

12

34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

DAT

EA

CC

OU

NT

TIT

LE

DO

C.

NO

.P

OS

T.

RE

F.

GE

NE

RA

L

DE

BIT

CR

ED

IT

SA

LE

SC

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CA

SH

DE

BIT

CR

ED

IT

5

31 31 31 31 31 31

20--

Ma

r.

Ad

just

ing

En

trie

s

Supp

lies

Exp

ense

Supp

lies

Insu

ran

ce E

xpen

se

Pre

paid

In

sura

nce

Clo

sin

g E

ntr

ies

Sale

s

Inco

me

Sum

ma

ry

Inco

me

Sum

ma

ry

Insu

ran

ce E

xpen

se

Mis

cell

an

eou

s E

xpen

se

Supp

lies

Exp

ense

Inco

me

Sum

ma

ry

Ma

rtin

Jen

kin

s, C

api

tal

Ma

rtin

Jen

kin

s, C

api

tal

Ma

rtin

Jen

kin

s, D

raw

ing

530

120

510

130

410

330

330

510

520

530

330

310

310

320

60

000

30

000

32

00

00

12

85

00

19

15

00

20

00

00

60

000

30

000

32

00

00

30

000

38

500

60

000

19

15

00

20

00

00

3

1 4 3 4 3 1 4 3 4 3 3 3 4 3 4 3 50POINTS �

Name


Part Two—Journalizing and Posting Adjusting andClosing EntriesJenkins Company’s partial work sheet for the month ended October 31 of thecurrent year is given below.

Directions:

1. Use page 3 of the journal on page 2 of this test. Journalize and post the adjustingentries. The general ledger accounts are on pages 4 and 5.

2. Continue using page 3 of the journal and journalize and post the closing entries.

Part Three—Preparing a Post-Closing Trial BalanceDirections: Use the form on page 5 of this test to prepare a post-closing trialbalance for Jenkins Company.

ACCOUNT TITLEADJUSTMENTS

DEBIT CREDIT

BALANCE SHEET

DEBIT CREDIT

3 4 7 8

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

INCOME STATEMENT

DEBIT CREDIT

5 6

Cash

Supplies

Prepaid Insurance

Accts. Pay.—Tech Supply Co.

Martin Jenkins, Capital

Martin Jenkins, Drawing

Income Summary

Sales

Insurance Expense


Supplies Expense

Net Income

(b) 3 0 0 00

(a) 6 0 0 00

9 0 0 00

(a) 6 0 0 00

(b) 3 0 0 00

9 0 0 00

3 0 0 00

3 8 5 00

6 0 0 00

1 2 8 5 00

1 9 1 5 00

3 2 0 0 00

3 2 0 0 00

3 2 0 0 00

3 2 0 0 00

10 2 0 0 00

9 5 0 00

5 6 0 00

2 0 0 0 00

13 7 1 0 00

13 7 1 0 00

1 2 0 0 00

10 5 9 5 00

11 7 9 5 00

1 9 1 5 00

13 7 1 0 00

Jenkins Company

Work Sheet

For Month Ended October 31, 20--


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3120--Oct. �

110Cash

10 2 0 0 00Balance

POIN

TS �

GENERAL LEDGER

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. �

3

120Supplies

1 5 5 0 009 5 0 00

Balance

46 0 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. �

3

130Prepaid Insurance

8 6 0 005 6 0 00

Balance

43 0 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3120--Oct. �

210Accts. Pay.—Tech Supply Co.

1 2 0 0 00Balance

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

313131

20--Oct. �

33

310Martin Jenkins, Capital

10 5 9 5 0012 5 1 0 0010 5 1 0 00

Balance44

1 9 1 5 002 0 0 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. �

3

320Martin Jenkins, Drawing

—————Balance

52 0 0 0 002 0 0 0 00

—————

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

313131

20--Oct. 3

33

330Income Summary

3 2 0 0 001 9 1 5 00

—————

445

34

3 2 0 0 00

—————1 2 8 5 001 9 1 5 00


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. �

3

410Sales

3 2 0 0 00—————

Balance

POIN

TS �

53 2 0 0 00 —————

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. 3

3

510Insurance Expense

—————45

3 0 0 00 3 0 0 00—————3 0 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. �

3

520Miscellaneous Expense

————— 53 8 5 00

—————3 8 5 00Balance

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. 3

3

530Supplies Expense

—————45

28

6 0 0 00 6 0 0 00—————6 0 0 00

CREDITDEBITACCOUNT TITLE

Cash

Supplies

Prepaid Insurance

Accounts Payable—Tech Supply Co.

Martin Jenkins, Capital

Totals

10 2 0 0 00

9 5 0 00

5 6 0 00

11 7 1 0 00

Jenkins Company

Post-Closing Trial Balance

October 31, 20--

1 2 0 0 00

10 5 1 0 00

11 7 1 0 00

2

2

2

2

2

3

16

+1

17

1

1

1

(Correct Rulings)

�Name


Part Four—Analyzing Adjusting and Closing EntriesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. The journal entry to adjust Supplies is 1. ba. debit Supplies; credit Supplies Expense.b. debit Supplies Expense; credit Supplies.c. debit Income Summary; credit Supplies.d. debit Supplies Expense; credit Income Summary.

2. After the adjusting entry for Supplies has been posted, Supplies Expense has an up-to-date 2. dbalance, which is thea. same as the beginning balance for Supplies.b. same as the ending balance for Supplies.c. value of supplies bought during the fiscal period.d. value of supplies used during the fiscal period.

3. Accounts used to accumulate information from one fiscal period to the next are 3. ba. revenue accounts.b. permanent accounts.c. temporary accounts.d. expense accounts.

4. Temporary accounts begin each new fiscal period with a 4. ca. debit balance.b. credit balance.c. zero balance.d. balance equal to the net income.

5. When the total expenses are greater than the total revenue, 5. ba. the income summary account has a credit balance.b. the income summary account has a debit balance.c. debits equal credits.d. none of these.

6. The journal entry to close Income Summary when there is a net income is 6. da. debit Sales; credit Income Summary.b. debit owner’s capital; credit Income Summary.c. debit owner’s capital account; credit Sales.d. debit Income Summary; credit owner’s capital.

7. Which accounting concept applies when a work sheet is prepared at the end of each fiscal 7. bcycle to summarize the general ledger information needed to prepare financial statements?a. Business Entityb. Accounting Period Cyclec. Adequate Disclosured. Consistent Reporting

8. Income Summary is 8. ca. an asset account.b. a liability account.c. a temporary account.d. a permanent account.

9. After the closing entries are posted, the owner’s capital account balance should be the 9. asame asa. shown on the balance sheet for the fiscal period.b. shown in the work sheet’s Balance Sheet Debit column.c. shown in the work sheet’s Balance Sheet Credit column.d. shown in the work sheet’s Income Statement Debit column.

chapterTEST B

PerfectScore

YourScoreName

Identifying Accounting Concepts and Practices 12 Pts.Journalizing and Posting Adjusting and Closing Entries 112 Pts.

Preparing a Post-Closing Trial Balance 17 Pts.Analyzing Adjusting and Closing Entries 9 Pts.

Total 150 Pts.


8

Part One—Identifying Accounting Concepts andPracticesDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. The capital account’s new balance after all closing entries are posted is verified by 1. Tchecking it with the amount of capital shown on the balance sheet at the end of thefiscal period.

2. All accounts in a general ledger are listed on a post-closing trial balance. 2. F

3. Adjusting entries are recorded on the next journal page following the page on which 3. Tthe last daily transactions for the month are recorded.

4. Permanent accounts are also referred to as temporary accounts. 4. F

5. Preparing a work sheet at the end of each fiscal period to summarize the general ledger 5. Tinformation needed to prepare financial statements is an application of the accountingconcept Accounting Period Cycle.

6. The ending account balances of permanent accounts for one fiscal period are the beginning 6. Taccount balances for the next fiscal period.

7. At the end of a fiscal period, the balances of temporary accounts are summarized and 7. Ttransferred to the owner’s capital account.


9. Journal entries used to prepare temporary accounts for a new fiscal period are closing 9. Tentries.

10. To close a temporary account, an amount equal to its balance is recorded in the account 10. Ton the side opposite to its balance.

11. A source document is prepared for closing entries. 11. F

12. The income summary account balance must be reduced to zero to prepare the account 12. Tfor the next fiscal period.


JOU

RNA

LP

AG

E

12

34

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

DAT

EA

CC

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NT

TIT

LE

DO

C.

NO

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T.

RE

F.

GE

NE

RA

L

DE

BIT

CR

ED

IT

SA

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SC

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CA

SH

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BIT

CR

ED

IT

5

31 31 31 31 31 31

20--

Oct

.

Ad

just

ing

En

trie

s

Supp

lies

Exp

ense

Supp

lies

Insu

ran

ce E

xpen

se

Pre

paid

In

sura

nce

Clo

sin

g E

ntr

ies

Sale

s

Inco

me

Sum

ma

ry

Inco

me

Sum

ma

ry

Insu

ran

ce E

xpen

se

Mis

cell

an

eou

s E

xpen

se

Supp

lies

Exp

ense

Inco

me

Sum

ma

ry

Ros

s L

evin

, Ca

pita

l

Ros

s L

evin

, Ca

pita

l

Ros

s L

evin

, Dra

win

g

530

120

510

130

410

330

330

510

520

530

330

310

310

320

25

000

12

000

30

55

00

55

500

25

00

00

12

50

00

25

000

12

000

30

55

00

12

000

18

500

25

000

25

00

00

12

50

00

3

1 4 3 4 3 1 4 3 4 3 3 3 4 3 4 3 50POINTS �

Name


Part Two—Journalizing and Posting Adjusting andClosing EntriesAgency Services’ partial work sheet for the month ended October 31 of thecurrent year is given below.

Directions:

1. Use page 3 of the journal on page 2 of this test. Journalize and post the adjustingentries. The general ledger accounts are on pages 4 and 5.

2. Continue using page 3 of the journal and journalize and post the closing entries.

Part Three—Preparing a Post-Closing Trial BalanceDirections: Use the form on page 5 of this test to prepare a post-closing trialbalance for Agency Services.

ACCOUNT TITLEADJUSTMENTS

DEBIT CREDIT

BALANCE SHEET

DEBIT CREDIT

3 4 7 8

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

INCOME STATEMENT

DEBIT CREDIT

5 6

Cash

Supplies

Prepaid Insurance

Accts. Pay.—Turner Co.

Ross Levin, Capital

Ross Levin, Drawing

Income Summary

Sales

Insurance Expense


Supplies Expense

Net Income

(b) 1 2 0 00

(a) 2 5 0 00

3 7 0 00

(a) 2 5 0 00

(b) 1 2 0 00

3 7 0 00

1 2 0 00

1 8 5 00

2 5 0 00

5 5 5 00

2 5 0 0 00

3 0 5 5 00

3 0 5 5 00

3 0 5 5 00

3 0 5 5 00

12 0 4 0 00

9 5 0 00

3 6 0 00

1 2 5 0 00

14 6 0 0 00

14 6 0 0 00

5 0 0 00

11 6 0 0 00

12 1 0 0 00

2 5 0 0 00

14 6 0 0 00

Agency Services

Work Sheet

For Month Ended October 31, 20--


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3120--Oct. �

110Cash

12 0 4 0 00Balance

POIN

TS �

GENERAL LEDGER

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. �

3

120Supplies

1 2 0 0 009 5 0 00

Balance

42 5 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. �

3


4 8 0 003 6 0 00

Balance

41 2 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3120--Oct. �

210Accts. Pay.—Turner Co.

5 0 0 00Balance

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

313131

20--Oct. �

33

310Ross Levin, Capital

11 6 0 0 0014 1 0 0 0012 8 5 0 00

Balance44

2 5 0 0 001 2 5 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. �

3

320Ross Levin, Drawing

—————Balance

51 2 5 0 001 2 5 0 00

—————

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

313131

20--Oct. 3

33

330Income Summary

3 0 5 5 002 5 0 0 00

—————

445

34

3 0 5 5 00

—————5 5 5 00

2 5 0 0 00


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. �

3

410Sales

3 0 5 5 00—————

Balance

POIN

TS �

53 0 5 5 00 —————

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. 3

3


—————45

1 2 0 00 1 2 0 00—————1 2 0 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. �

3


————— 51 8 5 00

—————1 8 5 00Balance

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3131

20--Oct. 3

3

530Supplies Expense

—————45

28

2 5 0 00 2 5 0 00—————2 5 0 00


Cash

Supplies

Prepaid Insurance

Accounts Payable—Turner Co.

Ross Levin, Capital

Totals

12 0 4 0 00

9 5 0 00

3 6 0 00

13 3 5 0 00

Agency Services


October 31, 20--

5 0 0 00

12 8 5 0 00

13 3 5 0 00

2

2

2

2

2

3

16

+1

17

1

1

1

(Correct Rulings)

�Name


Part Four—Analyzing Adjusting and Closing EntriesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Adjustments are analyzed and planned 1. ca. in the ledgers.b. on the financial statements.c. on a work sheet.d. none of these.

2. After the adjusting entry for Supplies has been posted, Supplies Expense has an up-to-date 2. dbalance, which is thea. same as the beginning balance for Supplies.b. same as the ending balance for Supplies.c. value of supplies bought during the fiscal period.d. value of supplies used during the fiscal period.

3. The journal entry to adjust Prepaid Insurance is 3. ba. debit Prepaid Insurance; credit Insurance Expense.b. debit Insurance Expense; credit Prepaid Insurance.c. debit Income Summary; credit Prepaid Insurance.d. debit Insurance Expense; credit Income Summary.

4. Temporary accounts begin each new fiscal period with a 4. ca. debit balance.b. credit balance.c. zero balance.d. balance equal to the net income.

5. When the total expenses are greater than the total revenue, 5. ba. the income summary account has a credit balance.b. the income summary account has a debit balance.c. debits equal credits.d. none of these.

6. Information needed for closing entries is found in the 6. aa. Income Statement and Balance Sheet columns of the work sheet.b. Income Statement and Adjustments columns of the work sheet.c. Trial Balance and Adjustments columns of the work sheet.d. Trial Balance and Balance Sheet columns of the work sheet.

7. The journal entry to close the expense accounts is 7. ba. debit Income Summary; credit owner’s capital.b. debit Income Summary for the total expenses; credit each expense account.c. debit each expense account; credit Income Summary.d. none of these.

8. Which accounting concept applies when expenses are reported in the same fiscal 8. cperiod that they are used to produce revenue?a. Business Entityb. Going Concernc. Matching Expenses with Revenued. Adequate Disclosure

9. The last step in the accounting cycle is to 9. da. journalize and post the closing entries.b. prepare a work sheet and financial statements.c. analyze transactions and journalize and post them.d. none of these.

TEST A

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YourScoreName


Journalizing Transactions 119 Pts.Identifying Accounting Concepts and Practices 16 Pts.

Total 160 Pts.

Part 1—Test A Copyright © South-Western Educational Publishing 1



A. accounting equation 1. An equation showing the relationship among assets, liabilities, 1. Aand owner’s equity.

B. adjusting entries 2. A business paper from which information is obtained for a 2. Kjournal entry.

C. balance sheet 3. A business that performs an activity for a fee. 3. J

D. chart of accounts 4. A columnar accounting form used to summarize the general 4. Oledger information needed to prepare financial statements.

E. closing entries 5. Journal entries used to prepare temporary accounts for a new 5. Efiscal period.

F. post-closing trial 6. Transferring information from a journal entry to a ledger 6. Gbalance account.

G. posting 7. A proof of the equality of debits and credits in a general ledger. 7. N

H. proprietorship 8. A business owned by one person. 8. H

I. revenue 9. A trial balance prepared after the closing entries are posted. 9. F

J. service business 10. Accounts used to accumulate information until it is transferred 10. Mto the owner’s capital account.

K. source document 11. An accounting device used to analyze transactions. 11. L

L. T account 12. A financial statement that reports assets, liabilities, and 12. Cowner’s equity on a specific date.

M. temporary accounts 13. A list of accounts used by a business. 13. D

N. trial balance 14. An increase in owner’s equity resulting from the operation 14. Iof a business.

O. work sheet 15. Journal entries recorded to update general ledger accounts 15. Bat the end of a fiscal period.

2 Century 21 Accounting, 8th Edition Part 1—Test A


Answers

1. The posting reference should always be recorded in the journal’s Post. Ref. column before 1. Famounts are recorded in the ledger.

2. Blank endorsements should be used when sending checks through the mail. 2. F

3. When the petty cash fund is replenished, the balance of the petty cash account increases. 3. F


5. The value of the prepaid insurance coverage used during a fiscal period is an expense. 5. T


7. The formula for calculating the total expenses component percentage is total expenses 7. Tdivided by total sales equals total expenses component percentage.

8. The current capital to be reported on a balance sheet is calculated as the capital account 8. Fbalance plus net income equals current capital.


10. The balances of the expense accounts must be reduced to zero to prepare the accounts 10. Tfor the next fiscal period.

Name


Part Three—Journalizing TransactionsMarcus Spano owns a service business called Spano’s Advisory Service.Spano’s uses the following accounts:

Cash Marcus Spano, CapitalPetty Cash Marcus Spano, DrawingAccounts Receivable—Priority Company SalesAccounts Receivable—Sonata Company Advertising ExpenseSupplies Miscellaneous ExpensePrepaid Insurance Rent ExpenseAccounts Payable—Abbott Company Utilities ExpenseAccounts Payable—Supplies Warehouse

Directions:

1. Journalize the following selected transactions completed by Spano’s Advisory Service during August of thecurrent year. Use page l of the journal given on page 4 of this test. Source documents are abbreviated asfollows: check, C; memorandum, M; receipt, R; sales invoice, S; calculator tape, T.

Transac t ionsAug. 1. Received cash from owner as an investment, $12,000.00. R1.

2. Bought supplies, $165.00, using debit card. M1.2. Paid cash to establish a petty cash fund, $100.00. C1.3. Paid cash for insurance, $900.00. C2.4. Bought supplies on account from Supplies Warehouse, $350.00. M2.4. Paid cash for one month’s rent, $1,300.00. C3.5. Sold services on account to Sonata Company, $1,900.00. S1.6. Received cash from sales, $2,500.00. T6.9. Sold services on account to Priority Company, $780.00. S2.

10. Bought supplies on account from Abbott Company, $695.00. M3.13. Paid cash for heating and air conditioning bill, $210.00. C4.14. Paid cash on account to Supplies Warehouse, $350.00. C5.17. Paid cash for advertising in the local newspaper, $150.00. C6.20. Paid cash for postage (Miscellaneous Expense), $40.00. C7.22. Paid cash on account to Abbott Company, $695.00, using EFT. M4.24. Received cash on account from Priority Company, $500.00. R2.28. Paid cash to owner for personal use, $2,000.00. C8.29. Recorded bank service charge, $6.00. M5.29. Received notice from the bank of a dishonored check from Priority Company, $500.00, plus $25.00 fee;

total, $525.00. M6.31. Received cash from sales, $3,200.00. T31.31. Paid cash to replenish the petty cash fund, $28.00: supplies, $12.00; miscellaneous expense, $16.00. C9.

2. Prove and rule the journal.


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Name

Part Four—Identifying Accounting Concepts andPracticesDirections: For each of the following items, select the one choice that bestcompletes the statement. Print the letter identifying your choice in theAnswers column.

Answers

1. The last step in the posting procedure is writing 1. da. the entry date in the Date column of the account.b. the journal page number in the Post. Ref. column of the account.c. the entry amount in the Debit or Credit column of the account.d. none of these.




5. The bank statement shows an account balance of $5,500.00. There are outstanding checks 5. atotaling $600.00 and an outstanding deposit of $400.00. The adjusted bank balance should bea. $5,300.00.b. $5,700.00.c. $5,285.00.d. none of these.

6. On a work sheet, the balance of the Sales account is extended to the 6. da. Balance Sheet Debit column.b. Balance Sheet Credit column.c. Income Statement Debit column.d. Income Statement Credit column.




Answers


10. After the adjusting entry for Supplies has been posted, Supplies Expense has an 10. dup-to-date balance that is thea. same as the beginning balance for Supplies.b. same as the ending balance for Supplies.c. value of supplies bought during the fiscal period.d. value of supplies used during the fiscal period.

11. After the adjusting entry for Prepaid Insurance has been posted, Insurance Expense 11. chas an up-to-date balance that is thea. same as the beginning balance for Prepaid Insurance.b. same as the ending balance for Prepaid Insurance.c. value of insurance premiums used during the fiscal period.d. value of insurance premiums bought during the fiscal period.

12. The journal entry to close Sales is 12. ba. debit Income Summary; credit Sales.b. debit Sales; credit Income Summary.c. debit Income Summary; credit owner’s capital.d. none of these.


14. An endorsement on the back of a check indicating that the check is to be accepted 14. cfor deposit only is aa. blank endorsement.b. special endorsement.c. restrictive endorsement.d. deposit endorsement.



TEST B

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Total 160 Pts.

Part 1—Test B Copyright © South-Western Educational Publishing 1



A. accounting equation 1. A list of accounts used by a business. 1. D

B. adjusting entries 2. Accounts used to accumulate information until it is transferred 2. Mto the owner’s capital account.

C. balance sheet 3. A business that performs an activity for a fee. 3. J

D. chart of accounts 4. A columnar accounting form used to summarize the general 4. Oledger information needed to prepare financial statements.

E. closing entries 5. An equation showing the relationship among assets, liabilities, 5. Aand owner’s equity.

F. post-closing trial 6. Transferring information from a journal entry to a ledger 6. Gbalance account.

G. posting 7. A business paper from which information is obtained for a 7. Kjournal entry.

H. proprietorship 8. An accounting device used to analyze transactions. 8. L

I. revenue 9. A financial statement that reports assets, liabilities, and 9. Cowner’s equity on a specific date.

J. service business 10. A proof of the equality of debits and credits in a general ledger. 10. N

K. source document 11. An increase in owner’s equity resulting from the operation 11. Iof a business.

L. T account 12. Journal entries recorded to update general ledger accounts 12. Bat the end of a fiscal period.

M. temporary accounts 13. Journal entries used to prepare temporary accounts for a 13. Enew fiscal period.

N. trial balance 14. A business owned by one person. 14. H

O. work sheet 15. A trial balance prepared after the closing entries are posted. 15. F

2 Century 21 Accounting, 8th Edition Part 1—Test B


Answers

1. The only reason for the Post. Ref. columns of the journal and general ledger is to indicate 1. Fwhich entries in the journal still need to be posted if posting is interrupted.

2. The current capital to be reported on a balance sheet is calculated as the capital account 2. Fbalance plus net income equals current capital.

3. The account number is placed in the Post. Ref. column of the journal as the last step in the 3. Tposting procedure.

4. The balance of the supplies account plus the value of the supplies on hand equals the 4. Fup-to-date balance of the supplies account.


6. When the petty cash fund is replenished, the balance of the petty cash account increases. 6. F

7. A double line ruled across both Trial Balance columns shows that the two columns are 7. Fto be totaled.



10. The formula for calculating the total expenses component percentage is total expenses 10. Tdivided by total sales equals total expenses component percentage.

Name


Part Three—Journalizing TransactionsJane Osgood owns a service business called Team Builders. Team Buildersuses the following accounts:

Cash Jane Osgood, CapitalPetty Cash Jane Osgood, DrawingAccounts Receivable—Catalyst Company SalesAccounts Receivable—Mercury Company Advertising ExpenseSupplies Miscellaneous ExpensePrepaid Insurance Rent ExpenseAccounts Payable—Garth Company Utilities ExpenseAccounts Payable—Northside Supplies

Directions:

1. Journalize the following selected transactions completed by Team Buildersduring March of the current year. Use page l of the journal given on page 4of this test. Source documents are abbreviated as follows: check, C;memorandum, M; receipt, R; sales invoice, S; calculator tape, T.

Transac t ionsMar. 1. Received cash from owner as an investment, $9,000.00. R1.

2. Paid cash for one month’s rent, $850.00. C1.4. Paid cash to establish a petty cash fund, $50.00. C2.6. Sold services on account to Catalyst Company, $800.00. S1.7. Paid cash for insurance, $500.00. C3.9. Bought supplies on account from Northside Supplies, $550.00. M1.

10. Sold services on account to Mercury Company, $1,200.00. S2.12. Bought supplies on account from Garth Company, $975.00. M2.13. Paid cash for heating and air conditioning bill, $130.00. C4.16. Received cash from sales, $2,500.00. T16.18. Paid cash on account to Northside Supplies, $275.00. C5.20. Received cash on account from Catalyst Company, $800.00. R2.22. Bought supplies, $370.00, using debit card. M3.22. Paid cash for postage (Miscellaneous Expense), $28.00. C6.23. Received notice from the bank of a dishonored check from Catalyst Company, $800.00, plus $25.00

fee; total, $825.00. M4.24. Paid cash on account to Garth Company, $975.00, using EFT. M5.24. Paid cash to owner for personal use, $1,500.00. C7.27. Paid cash for advertising in the local newspaper, $260.00. C8.31. Received cash from sales, $3,300.00. T31.31. Recorded bank service charge, $6.00. M6.31. Paid cash to replenish the petty cash fund, $27.00: supplies, $10.00; miscellaneous expense, $17.00. C9.

2. Prove and rule the journal.


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Name

Part Four—Identifying Accounting Concepts andPracticesDirections: For each of the following items, select the one choice that bestcompletes the statement. Print the letter identifying your choice in theAnswers column.

Answers


2. Preparing financial statements at the end of each monthly fiscal period is an application of 2. dthe accounting concepta. Adequate Disclosure.b. Going Concern.c. Objective Evidence.d. Accounting Period Cycle.




6. The bank statement shows an account balance of $5,500.00. There are outstanding checks 6. atotaling $600.00 and an outstanding deposit of $400.00. The adjusted bank balance should bea. $5,300.00.b. $5,700.00.c. $5,285.00.d. none of these.

7. On a work sheet, the balance of the Sales account is extended to the 7. da. Balance Sheet Debit column.b. Balance Sheet Credit column.c. Income Statement Debit column.d. Income Statement Credit column.



Answers

9. After the adjusting entry for Supplies has been posted, Supplies Expense has an 9. dup-to-date balance that is thea. same as the beginning balance for Supplies.b. same as the ending balance for Supplies.c. value of supplies bought during the fiscal period.d. value of supplies used during the fiscal period.

10. The last step in the posting procedure is writing 10. da. the entry date in the Date column of the account.b. the journal page number in the Post. Ref. column of the account.c. the entry amount in the Debit or Credit column of the account.d. none of these.

11. After the adjusting entry for Prepaid Insurance has been posted, Insurance Expense has 11. can up-to-date balance that is thea. same as the beginning balance for Prepaid Insurance.b. same as the ending balance for Prepaid Insurance.c. value of insurance premiums used during the fiscal period.d. value of insurance premiums bought during the fiscal period.




15. The journal entry to close Sales is 15. ba. debit Income Summary; credit Sales.b. debit Sales; credit Income Summary.c. debit Income Summary; credit owner’s capital.d. none of these.



chapterTEST A

PerfectScore

YourScoreName

Defining Accounting Terms 10 Pts.Identifying Accounting Concepts and Practices 8 Pts.

Journalizing Purchases, Cash Payments, and Other Transactions 78 Pts.Analyzing Accounting Concepts and Practices 8 Pts.

Total 104 Pts.


9



A. capital stock 1. An organization with the legal rights of a person and which 1. Cmay be owned by many persons.

B. cash discount 2. A form prepared by the customer showing the price deduction 2. Dtaken by the customer for returns and allowances.

C. corporation 3. Total shares of ownership in a corporation. 3. A

D. debit memorandum 4. Credit allowed for the purchase price of returned merchandise, 4. Gresulting in a decrease in the customer’s accounts payable.

E. purchase invoice 5. A deduction that a vendor allows on the invoice amount to 5. Bencourage prompt payment.

F. purchases discount 6. A cash discount on purchases taken by a customer. 6. F

G. purchases return 7. A journal used to record only one kind of transaction. 7. J

H. retail merchandising 8. Each unit of ownership in a corporation. 8. Ibusiness

I. share of stock 9. A merchandising business that sells to those who use or 9. Hconsume the goods.

J. special journal 10. An invoice used as a source document for recording a 10. Epurchase on account transaction.

Part Two—Identifying Accounting Concepts and PracticesDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. The purchases account is increased by a credit and decreased by a debit. 1. F2. When several journals are used, an abbreviation is used in the Post. Ref. column 2. T

of a ledger to show the journal from which the posting is made.3. Trade discounts normally are recorded in the purchases discount account. 3. F4. Purchases Discount is increased by a credit entry. 4. T5. If the actual petty cash on hand is $53.00 but the records show that $55.00 should 5. F

be on hand, the petty cash fund is said to be over.6. Purchases Returns and Allowances is a contra account to Cost of Merchandise. 6. F7. When purchases are recorded at their cost, including any related shipping costs 7. T

and taxes, the Historical Cost accounting concept is being applied.8. The terms of sale l/10, n/30 mean that the customer may deduct 1% of the invoice 8. F

amount if payment is made within 30 days of the invoice date.


Part Three—Journalizing Purchases, Cash Payments,and Other TransactionsSelected transactions completed by Edwards Company during March of thecurrent year are listed below.

Directions:

1. Journalize the following transactions affecting purchases and cash paymentscompleted during March of the current year. Use page 3 of a purchases journal, ageneral journal, and a cash payments journal. The journals are shown below andon page 3 of this test. Source documents are abbreviated as follows: check, C;debit memorandum, DM; memorandum, M; purchase invoice, P.

Transac t ionsMar. 1. Paid cash for rent, $1,600.00. C68.

5. Returned merchandise to Country Fare, $42.00, from P80. DM41.9. Paid cash to Jenson Company for merchandise with a list price of $325.00, less a 40% trade

discount. C69.10. Paid cash for telephone bill, $135.00. C70.12. Purchased merchandise on account from Brite Lights, $3,200.00. P81.15. Bought supplies on account from Lincoln Supplies, $78.00. M37.17. Paid cash on account to Country Fare, $1,228.00, covering P80 for $1,270.00, less DM41, $42.00;

no discount. C71.19. Paid cash on account to Lincoln Supplies, $78.00, covering M37; no discount. C72.24. Purchased merchandise on account from Country Fare, $750.00. P82.25. Paid cash on account to Brite Lights, $3,136.00, covering P81 for $3,200.00, less 2% discount, $64.00.

C73.31. Paid cash to replenish the petty cash fund, $174.00: supplies, $71.25; advertising, $89.50;

miscellaneous, $15.75; cash over, $2.50. C74.2. Total and rule the purchases journal. 3. Prove and rule the cash payments journal.

GENERAL JOURNAL PAGE

1

2

3

4

5

6

7

8

1

2

3

4

5

6

7

8

DATE ACCOUNT TITLE DEBIT CREDITDOC.NO.

POST.REF.

5

15

20--Mar. Accounts Payable/Country Fare

Purchases Returns and Allowances

Supplies

Accounts Payable/Lincoln Supplies

DM41

M37

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7 8 00

3

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7 8 00

6

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PURCHASES JOURNAL PAGE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

DATE ACCOUNT CREDITED PURCHASES DR.ACCTS. PAY. CR.

PURCH.NO.

POST.REF.

12

24

31

20--Mar. Brite Lights

Country Fare

Total

81

82

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7 5 0 00

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CASH PAYMENTS JOURNAL PAGE

1 2 3 4

1

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4

5

6

7

8

9

10

11

12

13

14

15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

DATE ACCOUNT TITLEPURCHASESDISCOUNT

CREDIT

CASHCREDIT

CK.NO.

POST.REF.

GENERAL

DEBIT CREDIT

5

ACCOUNTSPAYABLE

DEBIT

1

9

10

17

19

25

31

31

20--Mar. Rent Expense

Purchases

Utilities Expense

Country Fare

Lincoln Supplies

Brite Lights

Supplies

Advertising Expense


Cash Short and Over

Totals

68

69

70

71

72

73

74

2 50

2 50

3

1 2 2 8 00

7 8 00

3 2 0 0 00

4 5 0 6 00

6 4 00

6 4 00

1 6 0 0 00

1 9 5 00

1 3 5 00

7 1 25

8 9 50

1 5 75

2 1 0 6 50

1 6 0 0 00

1 9 5 00

1 3 5 00

1 2 2 8 00

7 8 00

3 1 3 6 00

1 7 4 00

6 5 4 6 00

5

5

5

5

5

6

5

2

2

2

7

49

+1

50

POIN

TS �

(Correct Rulings)


Part Four—Analyzing Accounting Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. The purchases account is classified as 1. da. an expense account.b. an asset account.c. a liability account.d. a cost account.

2. The source document for a cash purchase is 2. da. a memorandum.b. an invoice.c. a receipt.d. a check.

3. Supplies bought for use in a business are recorded in the 3. ca. supplies expense account.b. purchases account.c. supplies account.d. cash account.

4. If merchandise is purchased for $1,000.00 on August 1, with terms of sale of 2/10, n/30, 4. cthe amount due to the vendor on August 9 isa. $1,000.00.b. $990.00.c. $980.00.d. $20.00.

5. Since contra accounts are offsets to their related accounts, contra account normal 5. cbalances area. debits.b. credits.c. opposite the normal balances of their related accounts.d. the same as the normal balances of their related accounts.

6. To replenish a $300.00 petty cash fund, if the petty cash custodian had receipts totaling 6. a$224.00 and cash of $74.00 in the petty cash box, one part of the journal entry is aa. debit to Cash Short and Over for $2.00.b. credit to Cash for $224.00.c. debit to Petty Cash for $224.00.d. credit to Cash Short and Over for $2.00.

7. Purchases returns and allowances 7. ba. increase the amount of purchases.b. decrease the amount of purchases.c. do not affect the amount of purchases.d. affect the cash flow.

8. Merchandise with a list price of $1,500.00 is purchased on account for $900.00 on August 1. 8. bTerms of sale are 2/10, n/30. Payment is made on August 17. The amount paid should bea. $1,500.00.b. $900.00.c. $600.00.d. $882.00.

chapterTEST B

PerfectScore

YourScoreName


Journalizing Purchases, Cash Payments, and Other Transactions 78 Pts.Analyzing Accounting Concepts and Practices 8 Pts.

Total 104 Pts.


9



A. capital stock 1. An organization with the legal rights of a person and which 1. Cmay be owned by many persons.

B. cash discount 2. A form prepared by the customer showing the price deduction 2. Dtaken by the customer for returns and allowances.

C. corporation 3. Total shares of ownership in a corporation. 3. A

D. debit memorandum 4. Credit allowed for the purchase price of returned merchandise, 4. Gresulting in a decrease in the customer’s accounts payable.

E. purchase invoice 5. A deduction that a vendor allows on the invoice amount to 5. Bencourage prompt payment.

F. purchases discount 6. A cash discount on purchases taken by a customer. 6. F

G. purchases return 7. A journal used to record only one kind of transaction. 7. J

H. retail merchandising 8. Each unit of ownership in a corporation. 8. Ibusiness

I. share of stock 9. A merchandising business that sells to those who use or 9. Hconsume the goods.

J. special journal 10. An invoice used as a source document for recording a 10. Epurchase on account transaction.


Answers

1. If the actual petty cash on hand is $53.00 but the records show that $55.00 should be 1. Fon hand, the petty cash fund is said to be over.

2. Purchases Returns and Allowances is a contra account to Cost of Merchandise. 2. F3. When purchases are recorded at their cost, including any related shipping costs and 3. T

taxes, the Historical Cost accounting concept is being applied.4. The terms of sale l/10, n/30 mean that the customer may deduct 1% of the invoice 4. F

amount if payment is made within 30 days of the invoice date.5. The purchases account is increased by a credit and decreased by a debit. 5. F6. When several journals are used, an abbreviation is used in the Post. Ref. column of a 6. T

ledger to show the journal from which the posting is made.7. Trade discounts normally are recorded in the purchases discount account. 7. F8. Purchases Discount is increased by a credit entry. 8. T


Part Three—Journalizing Purchases, Cash Payments,and Other TransactionsSelected transactions completed by Bates Company during October of thecurrent year are listed below.

Directions:

1. Journalize the following transactions affecting purchases and cash paymentscompleted during October of the current year. Use page 10 of a purchasesjournal, a general journal, and a cash payments journal. The journals are shownbelow and on page 3 of this test. Source documents are abbreviated as follows:check, C; debit memorandum, DM; memorandum, M; purchase invoice, P.

Transac t ionsOct. 1. Returned merchandise to Exploration, Inc., $55.00, from P280. DM87.

5. Paid cash for rent, $1,600.00. C115.9. Purchased merchandise on account from Creativity Co., $1,552.00. P281.

10. Paid cash for telephone bill, $218.00. C116.12. Paid cash to Nelson Company for merchandise with a list price of $600.00, less a 42.5% trade

discount. C117.15. Paid cash on account to Exploration, Inc., $2,095.00, covering P280 for $2,150.00, less DM87, $55.00;

no discount. C118.17. Bought supplies on account from Foremost Goods, $487.00. M129.19. Paid cash on account to Creativity Co., $1,520.96, covering P281 for $1,552.00, less 2% discount,

$31.04. C119.23. Paid cash on account to Foremost Goods, $487.00, covering M129; no discount. C120.26. Purchased merchandise on account from Exploration, Inc., $1,650.00. P282.31. Paid cash to replenish the petty cash fund, $116.00: supplies, $39.25; advertising, $66.50;

miscellaneous, $13.75; cash over, $3.50. C121.2. Total and rule the purchases journal. 3. Prove and rule the cash payments journal.


1

2

3

4

5

6

7

8

1

2

3

4

5

6

7

8


POST.REF.

1

17

20--Oct. Accounts Payable/Exploration, Inc.


Supplies

Accounts Payable/Foremost Goods

DM87

M129

5 5 00

4 8 7 00

10

5 5 00

4 8 7 00

6

2

4

4

16

POIN

TS �

Name



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15


PURCH.NO.

POST.REF.

9

26

31

20--Oct. Creativity Co.

Exploration, Inc.

Total

281

282

1 5 5 2 00

1 6 5 0 00

3 2 0 2 00

10

4

4

3

11

+1

12

POIN

TS �

(Correct Rulings)


1 2 3 4

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15


CREDIT

CASHCREDIT

CK.NO.

POST.REF.

GENERAL

DEBIT CREDIT

5

ACCOUNTSPAYABLE

DEBIT

5

10

12

15

19

23

31

31

20--Oct. Rent Expense

Utilities Expense

Purchases

Exploration, Inc.

Creativity Co.

Foremost Goods

Supplies

Advertising Expense


Cash Short and Over

Totals

115

116

117

118

119

120

121

3 50

3 50

10

2 0 9 5 00

1 5 5 2 00

4 8 7 00

4 1 3 4 00

3 1 04

3 1 04

1 6 0 0 00

2 1 8 00

3 4 5 00

3 9 25

6 6 50

1 3 75

2 2 8 2 50

1 6 0 0 00

2 1 8 00

3 4 5 00

2 0 9 5 00

1 5 2 0 96

4 8 7 00

1 1 6 00

6 3 8 1 96

5

5

5

5

5

6

5

2

2

2

7

49

+1

50

POIN

TS �

(Correct Rulings)


Part Four—Analyzing Accounting Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Purchases returns and allowances 1. ba. increase the amount of purchases.b. decrease the amount of purchases.c. do not affect the amount of purchases.d. affect the cash flow.

2. Merchandise with a list price of $1,500.00 is purchased on account for $900.00 on August 1. 2. bTerms of sale are 2/10, n/30. Payment is made on August 17. The amount paid should bea. $1,500.00.b. $900.00.c. $600.00.d. $882.00.

3. The purchases account is classified as 3. da. an expense account.b. an asset account.c. a liability account.d. a cost account.

4. The source document for a cash purchase is 4. da. a memorandum.b. an invoice.c. a receipt.d. a check.

5. Supplies bought for use in a business are recorded in the 5. ca. supplies expense account.b. purchases account.c. supplies account.d. cash account.

6. If merchandise is purchased for $1,000.00 on August 1, with terms of sale of 2/10, n/30, 6. cthe amount due to the vendor on August 9 isa. $1,000.00.b. $990.00.c. $980.00.d. $20.00.

7. Since contra accounts are offsets to their related accounts, contra account normal balances are 7. ca. debits.b. credits.c. opposite the normal balances of their related accounts.d. the same as the normal balances of their related accounts.

8. To replenish a $300.00 petty cash fund, if the petty cash custodian had receipts totaling 8. a$224.00 and cash of $74.00 in the petty cash box, one part of the journal entry is aa. debit to Cash Short and Over for $2.00.b. credit to Cash for $224.00.c. debit to Petty Cash for $224.00.d. credit to Cash Short and Over for $2.00.

chapterTEST A

PerfectScore

YourScoreName


Recording Sales and Cash Receipts Transactions 64 Pts.Analyzing Sales and Cash Receipts 8 Pts.

Total 91 Pts.


10



A. batch report 1. A cash discount on sales taken by a customer. 1. HB. batching out 2. Credit allowed a customer for part of the sales price of 2. G

merchandise that is not returned, resulting in a decrease inthe vendor’s accounts receivable.

C. cash receipts journal 3. A sale in which a credit card is used for the total amount of the 3. Dsale at the time of the transaction.

D. credit card sale 4. A computer used to collect, store, and report all the information 4. Fof a sales transaction.

E. credit memorandum 5. A special journal used to record only cash receipt transactions. 5. CF. point-of-sale terminal 6. A report of credit card sales produced by a point-of-sale terminal. 6. AG. sales allowance 7. A form prepared by the vendor showing the amount 7. E

deducted for returns and allowances. H. sales discount 8. The report that summarizes the cash and credit card sales of a 8. J

point-of-sale terminal.I. sales journal 9. A special journal used to record only sales of merchandise 9. I

on account. J. terminal summary 10. The process of preparing a batch report of credit card sales 10. B

from a point-of-sale terminal.


Answers

1. Purchases and sales of merchandise are the two major activities of a merchandising business. 1. T2. The amount of sales tax collected is an asset of the business until paid to the state 2. F

government.3. Cash is proved when the total of the Cash Debit column of a cash receipts journal equals 3. F

the next unused check stub.4. When cash is received for a sale on account within the discount period, the amount 4. F

credited to Accounts Receivable is reduced by the amount of discount.5. When a customer is granted credit for merchandise returned, Accounts Receivable is debited. 5. F6. A terminal summary reports total cash and credit card sales of a point-of-sale terminal. 6. T7. Regardless of when merchandise is sold, revenue should be recorded when cash is received. 7. F8. Because Sales Discount is a contra account to Sales, it has a normal credit balance. 8. F9. Point-of-sale terminals use UPC symbols to obtain the description and price of 9. T

merchandise sold.


Part Three—Recording Sales and Cash Receipts TransactionsSelected transactions completed by Clearwater Company during Novemberof the current year are listed below.

Directions:1. Journalize the following transactions completed during November of the

current year on page 11 of a sales journal, a general journal, and a cashreceipts journal. Clearwater Company offers terms of 2/10, n/30. The salestax rate is 8%. Source documents are abbreviated as follows: creditmemorandum, CM; receipt, R; sales invoice, S; terminal summary, TS.

Transac t ionsNov. 1. Received cash on account from Harbor, Inc., $210.00, covering S110; no discount. R131.

4. Sold merchandise on account to William Coburn, $650.00, plus sales tax, $52.00; total, $702.00. S113.8. Granted credit to William Coburn for merchandise returned, $125.00, plus sales tax, $10.00, from

S113; total, $135.00. CM15.10. Sold merchandise on account to Harbor, Inc., $1,900.00, plus sales tax, $152.00; total, $2,052.00. S114.18. Sold merchandise on account to Lakeland University, $680.00. Lakeland University is exempt from

sales. S115.20. Received cash on account from Harbor, Inc., $2,010.96, covering S114 for $2,052.00, less 2% sales

discount, $41.04. R132.25. Received cash on account from William Coburn, $567.00, covering S113, less CM15; no discount.

R133.30. Recorded cash and credit card sales for the week, $6,000.00, plus sales tax, $480.00; total, $6,480.00.

TS45.2. Prove and rule the sales journal.3. Prove and rule the cash receipts journal.


1

2

3

4

5

6

7

8

1

2

3

4

5

6

7

8


POST.REF.

820--Nov. Sales Returns and Allowances

Sales Tax Payable

Accounts Receivable/William Coburn

CM15 1 2 5 00

1 0 00

11

1 3 5 00

4

2

4

10

POIN

TS �

Name


SALE

S JO

URN

AL

PA

GE

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9

10

DAT

EA

CC

OU

NT

DE

BIT

ED

AC

CO

UN

TS

RE

CE

IVA

BL

ED

EB

IT

SA

LE

SC

RE

DIT

SA

LE

NO

.P

OS

T.

RE

F.

SA

LE

S T

AX

PA

YA

BL

EC

RE

DIT

12

3

4 10 18 30

20--

Nov

.W

illi

am

Cob

urn

Ha

rbor

, In

c.

La

kela

nd

Un

iver

sity

Tot

als

113

114

115

70

200

20

52

00

68

000

34

34

00

11

65

000

19

00

00

68

000

32

30

00

52

00

15

200

20

400

6 6 5 5 22 +1 23POINTS �

(Cor

rect

Ru

lin

gs)

POINTS � 5 6 5 7 7 30 +1 31

CA

SH R

ECEI

PTS

JOU

RNA

LP

AG

E

12

34

5

1 2 3 4 5 6 7 8 9

10 11 12 13

1 2 3 4 5 6 7 8 9

10 11 12 13

DAT

EA

CC

OU

NT

TIT

LE

GE

NE

RA

L

DE

BIT

CR

ED

IT

6

DO

C.

NO

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OS

T.

RE

F.

AC

CO

UN

TS

RE

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BL

EC

RE

DIT

SA

LE

SC

RE

DIT

SA

LE

S T

AX

PA

YA

BL

EC

RE

DIT

1 20 25 30 30

20--

Nov

.H

arb

or, I

nc.

Ha

rbor

, In

c.

Wil

lia

m C

obu

rn

� Tot

als

R13

1

R13

2

R13

3

TS4

5

11

21

000

20

52

00

56

700

28

29

00

60

00

00

60

00

00

48

000

48

000

41

04

41

04

CA

SH

DE

BIT

21

000

20

10

96

56

700

64

80

00

92

67

96

7

SA

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SD

ISC

OU

NT

DE

BIT

(Cor

rect

Ru

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�


Part Four—Analyzing Sales and Cash ReceiptsDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Using a terminal summary as a source document for weekly cash and credit card sales is 1. ban application of the accounting concepta. Matching Expenses with Revenue.b. Objective Evidence.c. Realization of Revenue.d. Business Entity.

2. Sales invoices should be 2. da. numbered in sequence.b. prepared in triplicate.c. used as source documents for sales on account.d. all of these.

3. When merchandise is sold on account and sales tax is also collected, 3. ba. Accounts Receivable is credited for the total sale and sales tax.b. the accounts receivable account balance is increased.c. Sales is debited for the price of the goods.d. the sales tax is not reported.

4. For a sale on account of $1,000.00 with sales tax of $80.00, the amount recorded in the 4. aAccounts Receivable Debit column of a sales journal isa. $1,080.00.b. $1,000.00.c. $920.00.d. $80.00.

5. Sales discounts are recorded in a 5. ba. sales journal.b. cash receipts journal.c. general journal.d. batch report.

6. The amount of cash received for a sale on account of $1,000.00 with sales tax of $80.00 6. cwhen the cash is received within the 2 percent discount period isa. $1,080.00.b. $1,062.00.c. $1,058.40.d. $1,053.60.

7. Sales Returns and Allowances is 7. da. an expense account.b. a revenue account.c. a contra expense accountd. a contra revenue account.

8. The amount of sales tax on a sale is calculated as the price of goods 8. ba. plus the sales tax rate.b. times the sales tax rate.c. minus the sales tax rate.d. divided by the sales tax rate.

chapterTEST B

PerfectScore

YourScoreName


Recording Sales and Cash Receipts Transactions 64 Pts.Analyzing Sales and Cash Receipts 8 Pts.

Total 91 Pts.


10



A. batch report 1. A cash discount on sales taken by a customer. 1. HB. batching out 2. Credit allowed a customer for part of the sales price of 2. G

merchandise that is not returned, resulting in a decrease inthe vendor’s accounts receivable.

C. cash receipts journal 3. A sale in which a credit card is used for the total amount of the 3. Dsale at the time of the transaction.

D. credit card sale 4. A computer used to collect, store, and report all the information 4. Fof a sales transaction.

E. credit memorandum 5. A special journal used to record only cash receipt transactions. 5. CF. point-of-sale terminal 6. A report of credit card sales produced by a point-of-sale terminal. 6. AG. sales allowance 7. A form prepared by the vendor showing the amount 7. E

deducted for returns and allowances. H. sales discount 8. The report that summarizes the cash and credit card sales of a 8. J

point-of-sale terminal.I. sales journal 9. A special journal used to record only sales of merchandise 9. I

on account. J. terminal summary 10. The process of preparing a batch report of credit card sales 10. B

from a point-of-sale terminal.


Answers

1. Sales for cash and credit cards are recorded as a single cash sales transaction. 1. T2. The amount of sales tax collected is an asset of the business until paid to the state 2. F

government.3. When cash is proved, it must always equal the amount on the next unused check stub. 3. T4. For weekly cash and credit card sales, the asset account Cash is debited for the total of 4. T

sales and sales tax, but the revenue account Sales is credited only for the total of sales. 5. Regardless of when merchandise is sold, revenue should be recorded when cash is received. 5. F6. Even though a company offers a sales discount, the customer is invoiced for the full sales 6. T

amount plus sales tax on that amount. 7. Because Sales Discount is a contra account to Sales, it has a normal credit balance. 7. F8. All sales of merchandise are recorded in a sales journal. 8. F9. When cash is received for a sale on account within the discount period, the amount 9. F

credited to Accounts Receivable is reduced by the amount of discount.


Part Three—Recording Sales and Cash Receipts TransactionsSelected transactions completed by Uptown Corporation during November ofthe current year are listed below.

Directions:

1. Journalize the following transactions completed during November of thecurrent year on page 5 of a sales journal, a general journal, and a cashreceipts journal. Uptown Corporation offers terms of 2/10, n/30. The salestax rate is 8%. Source documents are abbreviated as follows: creditmemorandum, CM; receipt, R; sales invoice, S; terminal summary, TS.

Transac t ionsMay 3. Sold merchandise on account to Henning, Inc., $650.00, plus sales tax, $52.00; total, $702.00. S229.

4. Received cash on account from Braxton Co., $987.00, covering S225; no discount. R213.6. Sold merchandise on account to Braxton Co., $1,650.00, plus sales tax, $132.00; total, $1,782.00. S230.8. Granted credit to Henning, Inc., for merchandise returned, $90.00, plus sales tax, $7.20, from S229;

total, $97.20. CM25.16. Received cash on account from Braxton Co., $1,746.36, covering S230 for $1,782.00, less 2% sales

discount, $35.64. R214.18. Sold merchandise on account to Central University, $815.00. Central University is exempt from

sales tax. S231.24. Received cash on account from Henning, Inc., $604.80, covering S229, less CM25; no discount. R216.31. Recorded cash and credit card sales for the week, $4,500.00, plus sales tax, $360.00; total, $4,860.00.

TS22.2. Prove and rule the sales journal.3. Prove and rule the cash receipts journal.


1

2

3

4

5

6

7

8

1

2

3

4

5

6

7

8


POST.REF.

820--May Sales Returns and Allowances

Sales Tax Payable

Accounts Receivable/Henning, Inc.

CM25 9 0 00

7 20

5

9 7 20

4

2

4

10

POIN

TS �

Name


SALE

S JO

URN

AL

PA

GE

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9

10

DAT

EA

CC

OU

NT

DE

BIT

ED

AC

CO

UN

TS

RE

CE

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BL

ED

EB

IT

SA

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SA

LE

NO

.P

OS

T.

RE

F.

SA

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S T

AX

PA

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12

3

3 6 18 31

20--

Ma

yH

enn

ing,

In

c.

Bra

xton

Co.

Cen

tra

l U

niv

ersi

ty

Tot

als

229

230

231

70

200

17

82

00

81

500

32

99

00

5

65

000

16

50

00

81

500

31

15

00

52

00

13

200

18

400

6 6 5 5 22 +1 23POINTS �

(Cor

rect

Ru

lin

gs)

CA

SH R

ECEI

PTS

JOU

RNA

LP

AG

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12

34

5

1 2 3 4 5 6 7 8 9

10 11 12 13

1 2 3 4 5 6 7 8 9

10 11 12 13

DAT

EA

CC

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NT

TIT

LE

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6

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4 16 24 31 31

20--

Ma

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Hen

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g, I

nc.

� Tot

als

R21

3

R21

4

R21

6

TS2

2

5

98

700

17

82

00

60

480

33

73

80

45

00

00

45

00

00

36

000

36

000

35

64

35

64

CA

SH

DE

BIT

98

700

17

46

36

60

480

48

60

00

81

98

16

7

SA

LE

SD

ISC

OU

NT

DE

BIT

(Cor

rect

Ru

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POINTS � 5 6 5 7 7 30 +1 31

�


Part Four—Analyzing Sales and Cash ReceiptsDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Recording revenue from transactions at the time goods or services are sold is an 1. capplication of the accounting concepta. Matching Expenses with Revenue.b. Objective Evidence.c. Realization of Revenue.d. Business Entity.

2. Using a terminal summary as a source document for weekly cash and credit card sales is 2. ban application of the accounting concept a. Matching Expenses with Revenue.b. Objective Evidence.c. Realization of Revenue.d. Business Entity.

3. When merchandise is sold on account and sales tax is also collected, 3. ba. Accounts Receivable is credited for the total sale and sales tax.b. the accounts receivable account balance is increased.c. Sales is debited for the price of the goods.d. the sales tax is not reported.

4. Sales Returns and Allowances is 4. da. an expense account.b. a revenue account.c. a contra expense account.d. a contra revenue account.

5. Credit terms of 2/10, n/30 mean that if the account is paid in 5. ba. 2 days, a 10% discount will be allowed.b. 10 days, a 2% discount will be allowed.c. 10 days, a 30% discount will be allowed.d. 30 days, a 2% discount will be allowed.

6. The amount of cash received for a sale on account of $1,000.00 with sales tax of $80.00 6. cwhen the cash is received within the 2 percent discount period is a. $1,080.00.b. $1,062.00.c. $1,058.40.d. $1,053.60.

7. The amount of sales tax on a sale is calculated as the price of goods 7. ba. plus the sales tax rate.b. times the sales tax rate.c. minus the sales tax rate.d. divided by the sales tax rate.

8. For a sale on account of $1,000.00 with sales tax of $80.00, the amount recorded in the 8. aAccounts Receivable amount column of a sales journal is a. $1,080.00.b. $1,000.00.c. $920.00.d. $80.00.

chapterTEST A

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Practices 15 Pts.Posting to Ledgers from Journals 134 Pts.

Preparing Subsidiary Schedules 24 Pts.Identifying Posting Concepts and Practices 9 Pts.

Total 182 Pts.


11

Part One—Analyzing Accounting Concepts and PracticesDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. The amount of money a business has to spend on accounting determines the number of 1. Fledgers used in an accounting system.

2. A general ledger sorts and summarizes all information affecting income statement and 2. Tbalance sheet accounts.

3. Accounts Payable is a single general ledger account that summarizes the total amount 3. Towed to all vendors.

4. An account in a general ledger that summarizes all accounts in a subsidiary ledger is a 4. Tcontrolling account.

5. The balance of the controlling account Accounts Payable equals the total of all vendor 5. Taccount balances in the accounts payable subsidiary ledger.

6. Daily general ledger account balances are necessary for a business. 6. F

7. The number of transactions determines how often to post to a general ledger. 7. T

8. When the balance of a vendor account in an accounts payable ledger is changed, the 8. Fbalance of the controlling account is unaffected.

9. A vendor account is opened by writing the vendor name and vendor number on the 9. Theading of the ledger account.

10. Each entry in the Accounts Payable columns of a cash payments journal affects the 10. Tvendor named in the Account Title column.

11. At the end of the week, the cash payment journal’s Accounts Payable Credit column 11. Ftotal is posted to the controlling account.

12. An error in posting may cause income to be understated or overstated on the 12. Tincome statement.

13. When using an accounts receivable ledger, the total amount due from all customers is 13. Tsummarized in a single general ledger account.

14. Amounts recorded in general amount columns of a cash receipts journal are posted 14. Tindividually to the general ledger account named in the Account Title column.

15. The account form for a vendor has a Debit Balance column because accounts payable 15. Fis a liability and liabilities have normal debit balances.


Part Two—Posting to Ledgers from JournalsTransactions recorded on the last day of May of the current year are shown onthe journals of CD Mania on the next page. Selected general ledger accountsand their May 29 balances are on page 4 of this test. The subsidiary ledgersare provided on page 5 of this test.

Directions:

1. Open a new page in the accounts payable ledger for Number One Sales,account 220. Record the balance of $215.00 as of May 29 of the current year.

2. Open a new page in the accounts receivable ledger for Sally Mason,account 130. Record the balance of $451.00 as of May 29 of the current year.

3. Post the separate items recorded in the journals. 4. Post the totals of the special amount columns of each journal.

Part Three—Preparing Subsidiary SchedulesDirections: Prepare a schedule of accounts payable and a schedule ofaccounts receivable using the forms provided below. Prove the accuracy ofthe subsidiary ledgers by comparing the schedule totals with the balances ofthe controlling accounts in the general ledger. If the totals are not the same,find and correct the errors.

POIN

TS �

Gebel Industries

Number One Sales

Pacific Company

Total Accounts Payable

5 8 0 00

2 1 5 00

2 5 2 0 00

3 3 1 5 00

CD Mania

Schedule of Accounts Payable

May 31, 20--

2

2

2

2

11

+1

12

1

1

1

(Correct Rulings)

Martin Bailey

Jon Hinton

Sally Mason

Total Accounts Receivable

2 2 4 00

1 6 7 48

4 5 1 00

8 4 2 48

CD Mania

Schedule of Accounts Receivable

May 31, 20--

2

2

2

2

11

+1

12

1

1

1

(Correct Rulings)

Name


SALES JOURNAL PAGE

24

25

26

24

25

26

DATE ACCOUNT DEBITEDACCOUNTS

RECEIVABLEDEBIT

SALESCREDIT

SALENO.

POST.REF.

SALES TAXPAYABLECREDIT

1 2 3

31

31

Jon Hilton

Totals

57 120 1 6 7 48

4 2 7 0 00

(1130)

5

1 5 8 00

4 0 2 8 30

(4110)

9 48

2 4 1 70

(2140)

1

3

POIN

TS �


18

19

20

18

19

20


PURCH.NO.

POST.REF.

31

31

Pacific Company

Total

94 230 2 5 2 0 00

4 9 6 5 00

(5110)(2110)

5

1

2


21

22

23

24

25

21

22

23

24

25


POST.REF.

30

30

Sales Returns and Allowances

Sales Tax Payable

Accounts Receivable/Martin Bailey

Martin Bailey

Jon Hinton

CM34

M25

4130

21401130

110

110

120

2 5 0 00

2 0 00

2 2 4 00

5

2 7 0 00

2 2 4 00

1

1

2

1

1


1 2 3 4

25

26

27

28

25

26

27

28


CREDIT

CASHCREDIT

CK.NO.

POST.REF.

GENERAL

DEBIT CREDIT

5

ACCOUNTSPAYABLE

DEBIT

31

31

31


Gebel Industries

Totals

266

267

6140

210

9 6 5 00

(�)

5

2 1 6 0 00

12 2 3 5 00

(2110)

4 5 00

(5120)

7 5 00

4 3 9 2 00

(�)

7 5 00

2 1 6 0 00

15 6 1 7 00

(1110)

1

1

5

26

CASH RECEIPTS JOURNAL

1

5

PAGE

1 2 3 4 5

18

19

20

21

18

19

20

21

DATEGENERAL

DEBIT CREDIT

6

DOC.NO.

POST.REF.

ACCOUNTSRECEIVABLE

CREDIT

SALESCREDIT


31

30

31

Martin Bailey

�

Totals

R63

TS22

110

�

5

1 8 5 50

3 8 4 0 00

(1130)

6 0 0 0 00

12 5 7 6 40

(4110)

4 8 0 00

7 5 4 58

(2140)

1 2 40

(4120)

CASHDEBIT

1 8 5 50

6 4 8 0 00

16 8 8 4 00

(1110)

7

SALESDISCOUNT

DEBIT


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

31

31

20--May Balance �

CR5

CP5

1110

16 8 8 4 00

Cash

15 6 1 7 00

12 6 4 0 00

29 5 2 4 00

13 9 0 7 00

4

4

GENERAL LEDGER

POIN

TS �

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

30

31

31

20--May Balance �

G5

S5

CR5

1130

4 2 7 0 00

Accounts Receivable

2 7 0 00

3 8 4 0 00

6 8 2 48

4 1 2 48

4 6 8 2 48

8 4 2 48

4

4

4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

31

31

20--May Balance �

P5

CP5

2110

12 2 3 5 00

Accounts Payable

10 5 8 5 00

15 5 5 0 00

3 3 1 5 00

4

4

4 9 6 5 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

30

31

31

20--May Balance �

G5

S5

CR5

2140

2 0 00

Sales Tax Payable

2 4 1 70

7 5 4 58

2 4 3 00

2 2 3 00

4 6 4 70

1 2 1 9 28

4

4

4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

31

31

20--May Balance �

S5

CR5

4110Sales

4 0 2 8 30

12 5 7 6 40

88 8 2 0 00

92 8 4 8 30

80 2 7 1 90

4

4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

31

20--May Balance �

CR5

4120

1 2 40

Sales Discount

6 7 50

7 9 90 4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

30

20--May Balance �

G5

4130

2 5 0 00


2 3 5 6 00

2 6 0 6 00 4

56


POIN

TS �

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

31

20--May Balance �

P5

5110

4 9 6 5 00

Purchases

61 4 0 0 00

66 3 6 5 00 4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

31

20--May Balance �

CP5

5120

4 5 00

Purchases Discount

1 5 6 00

2 0 1 00 4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

31

20--May Balance �

CP5

6140

7 5 00


1 3 8 0 00

1 4 5 5 00 4

VENDOR NO.

DATE ITEM DEBIT CREDITPOST.REF.

CREDITBALANCE

VENDOR

29

31

20--May Balance �

CP5

2 7 4 0 00

5 8 0 00

210

2 1 6 0 00

Gebel Industries

4

ACCOUNTS PAYABLE LEDGER

VENDOR NO.


CREDITBALANCE

VENDOR

3120--May P5

230

2 5 2 0 00

Pacific Company

42 5 2 0 00

VENDOR NO.


CREDITBALANCE

VENDOR

2920--May Balance � 2 1 5 00

220Number One Sales

4

2

CUSTOMER NO.


DEBITBALANCE

CUSTOMER

29

30

30

31

20--May Balance �

G5

G5

CR5

4 5 5 50

1 8 5 50

4 0 9 50

2 2 4 00

110

2 2 4 00

Martin Bailey

4

4

4

ACCOUNTS RECEIVABLE LEDGER

2 7 0 00

1 8 5 50

CUSTOMER NO.


DEBITBALANCE

CUSTOMER

29

31

30

20--May Balance �

S5

G5

2 2 4 00

3 9 1 48

1 6 7 48

120Jon Hinton

4

42 2 4 00

1 6 7 48

CUSTOMER NO.


DEBITBALANCE

CUSTOMER

2920--May �

130Sally Mason

4

52

4 5 1 00

2

Balance

Name


Part Four—Identifying Posting Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Journal entries are sorted and summarized by transferring information to 1. ca. accounts payable ledger accounts.b. accounts receivable ledger accounts.c. ledger accounts.d. all of these.

2. An account in a general ledger that summarizes all accounts in a subsidiary ledger is 2. ba. an expense account.b. a controlling account.c. a capital account.d. none of these.

3. A check mark in parentheses below the General Debit column of a journal indicates 3. cthat the totala. has been posted.b. will be posted later.c. is not posted.d. none of these.

4. When a credit is posted to the accounts payable ledger, 4. aa. the previous balance is added to the new amount posted in the Credit column.b. the source document number and page number of the journal are written in the

Post. Ref. column of the account.c. the credit amount is written in the Debit column of the account.d. Balance is written in the Item column.

5. When a debit is posted to the accounts payable ledger, 5. aa. the debit amount is written in the Debit column of the account.b. the cash account increases.c. the controlling account is increased by the entry.d. all of these.

6. The Accounts Receivable Debit column total of the sales journal is 6. ba. posted monthly to a customer account.b. posted to the general ledger controlling account at the end of each month.c. not posted.d. posted often.

7. A listing of vendor accounts, account balances, and total amount due all vendors is a 7. ba. schedule of accounts receivable.b. schedule of accounts payable.c. trial balance.d. cash proof.

8. The total of the schedule of accounts receivable should equal 8. aa. the accounts receivable account balance in the general ledger.b. the cash account.c. the debit and credit proof.d. none of these.

9. An error in posting may cause 9. da. income to be overstated or understated on the income statement.b. a business to pay too much to a vendor.c. cash on hand to be less than the balance in the cash account.d. all of these.

chapterTEST B

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Practices 15 Pts.Posting to Ledgers from Journals 134 Pts.

Preparing Subsidiary Schedules 24 Pts.Identifying Posting Concepts and Practices 9 Pts.

Total 182 Pts.


11


Answers

1. A general ledger sorts and summarizes all information affecting income statement 1. Tand balance sheet accounts.

2. When a sale causes the balance of a customer account in an accounts receivable ledger 2. Fto change, the balance of the controlling account, Accounts Receivable, remains the same.

3. When using an accounts receivable ledger, the total amount due from all customers 3. Tis summarized in a single general ledger account.

4. Amounts recorded in general amount columns of a cash payments journal are posted 4. Tindividually to the general ledger account named in the Account Title column.

5. A business with transactions involving mostly the receipt and payment of cash generally 5. Fdoes not use any ledgers.

6. Accounts Payable is a single general ledger account that summarizes the total amount 6. Towed to all vendors.

7. An account in a general ledger that summarizes all accounts in a subsidiary ledger is a 7. Tcontrolling account.

8. The balance of the controlling account, Accounts Payable, equals the total of all vendor 8. Taccount balances in the accounts payable subsidiary ledger.

9. At the end of the month, the Accounts Payable Credit column total of a purchases 9. Tjournal is posted to the controlling account.

10. The number of entries that may be recorded on each account form depends on the 10. Tnumber of lines provided.

11. The account form for a vendor has a Credit Balance column because accounts payable 11. Tis a liability, and liabilities have normal credit balances.

12. Each amount in a cash receipts journal’s Accounts Receivable columns is posted 12. Tindividually to an account in the accounts receivable ledger.

13. Daily general ledger account balances are necessary for a business. 13. F

14. The heading of the balance column of an account in the accounts payable ledger is 14. Ftitled Debit Balance.

15. A vendor account is opened by writing the vendor name and vendor number on the 15. Theading of the ledger account.


Part Two—Posting to Ledgers from a JournalTransactions recorded on the last day of November of the current year areshown in the journals of Hampton Company on the next page. Selectedgeneral ledger accounts and their November 1 balances are on page 4 of thistest. The subsidiary ledgers are provided on page 5 of this test.

Directions:

1. Open a new page in the accounts payable ledger for Movott Supplies,account 230. Record the balance of $515.00 as of November 29 of thecurrent year.

2. Open a new page in the accounts receivable ledger for Kevin Payne,account 130. Record the balance of $225.00 as of November 29 of thecurrent year.

3. Post the separate items recorded in the journals. 4. Post the totals of the special amount columns of each journal.

Part Three—Preparing Subsidiary SchedulesDirections: Prepare a schedule of accounts payable and a schedule ofaccounts receivable using the forms provided below. Prove the accuracy ofthe subsidiary ledgers by comparing the schedule totals with the balances ofthe controlling accounts in the general ledger. If the totals are not the same,find and correct the errors.

POIN

TS �

Block Company

Galt Group

Movott Supplies

Total Accounts Payable

1 7 4 0 00

1 9 0 5 00

5 1 5 00

4 1 6 0 00

Hampton Company

Schedule of Accounts Payable

November 30, 20--

2

2

2

2

11

+1

12

1

1

1

(Correct Rulings)

Phillip Connell

Iona Hawkins

Kevin Payne

Total Accounts Receivable

3 4 0 00

4 7 7 00

2 2 5 00

1 0 4 2 00

Hampton Company

Schedule of Accounts Receivable

November 30, 20--

2

2

2

2

11

+1

12

1

1

1

(Correct Rulings)

Name


SALES JOURNAL PAGE

24

25

26

24

25

26


RECEIVABLEDEBIT

SALESCREDIT

SALENO.

POST.REF.


1 2 3

30

30

Iona Hawkins

Totals

57 120 4 7 7 00

4 6 9 7 00

(1130)

11

4 5 0 00

4 4 3 1 00

(4110)

2 7 00

2 6 6 00

(2140)

1

3

POIN

TS �


18

19

20

18

19

20


PURCH.NO.

POST.REF.

30

30

Galt Group

Total

111 220 1 6 9 0 00

4 4 2 3 00

(5110)(2115)

11

1

2


21

22

23

24

25

21

22

23

24

25


POST.REF.

30

30


Sales Tax Payable

Accounts Receivable/Phillip Connell

Phillip Connell

Iona Hawkins

CM41

M32

4130

21401130

110

110

120

5 0 00

6 00

3 4 0 00

11

5 6 00

3 4 0 00

1

1

2

1

1


1 2 3 4

25

26

27

28

25

26

27

28


CREDIT

CASHCREDIT

CK.NO.

POST.REF.

GENERAL

DEBIT CREDIT

5

ACCOUNTSPAYABLE

DEBIT

30

30

30

Advertising Expense

Block Company

Totals

162

163

6110

210

4 5 00

(�)

11

1 0 0 0 00

3 7 3 3 00

(2115)

2 10

(5120)

2 2 5 00

2 5 2 3 00

(�)

2 2 5 00

1 0 0 0 00

6 2 0 8 90

(1105)

1

1

5

26

CASH RECEIPTS JOURNAL

1

5

PAGE

1 2 3 4 5

18

19

20

21

18

19

20

21

DATEGENERAL

DEBIT CREDIT

6

DOC.NO.

POST.REF.

ACCOUNTSRECEIVABLE

CREDIT

SALESCREDIT


30

30

30

Phillip Connell

�

Totals

R89

TS45

120

�

10

4 5 0 00

4 6 9 7 00

(1130)

2 2 0 0 00

4 4 3 1 00

(4110)

1 3 2 00

2 6 6 00

(2140)

2 2 80

(4115)

CASHDEBIT

4 5 0 00

2 3 3 2 00

12 1 8 1 68

(1110)

7

SALESDISCOUNT

DEBIT


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

30

30

20--Nov. Balance �

CR11

CP11

1110

12 1 8 1 68

Cash

6 2 0 8 90

12 6 4 0 00

24 8 2 1 68

18 6 1 2 78

4

4

GENERAL LEDGER

POIN

TS �

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

30

30

30


G11

S11

CR11

1130

4 6 9 7 00

Accounts Receivable

5 6 00

4 6 7 0 00

1 0 7 1 00

1 0 1 5 00

5 7 1 2 00

1 0 4 2 00

4

4

4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

30

30


P11

CP11

2115

3 7 3 3 00

Accounts Payable

3 4 7 0 00

7 8 9 3 00

4 1 6 0 00

4

4

4 4 2 3 00

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

30

30

30


G11

S11

CR11

2140

6 00

Sales Tax Payable

2 6 6 00

4 2 6 48

2 4 3 00

2 3 7 00

5 0 3 00

9 2 9 48

4

4

4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

30

30


S11

CR11

4110Sales

4 4 3 1 00

7 1 0 8 00

88 8 2 0 00

93 2 5 1 00

100 3 5 9 00

4

4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

30


CR11

4120

2 2 80

Sales Discount

6 7 50

9 0 30 4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

29

30


G11

4130

5 0 00


2 3 5 6 00

2 4 0 6 00 4

56


POIN

TS �

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

2930


P11

5110

4 4 2 3 00

Purchases

61 4 0 0 0065 8 2 3 00 4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

2930


CP11

5120

2 10

Purchases Discount

1 5 6 001 5 8 10 4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

2930


CP11

6110

2 2 5 00

Advertising Expense

1 3 8 0 001 6 0 5 00 4

VENDOR NO.


CREDITBALANCE

VENDOR

2930


CP112 7 4 0 001 7 4 0 00

210

1 0 0 0 00

Block Company

4

ACCOUNTS PAYABLE LEDGER

VENDOR NO.


CREDITBALANCE

VENDOR

2920--Nov. �

230Movott Supplies

45 1 5 00

CUSTOMER NO.


DEBITBALANCE

CUSTOMER

29

30

30

30


G11

G11

CR11

5 0 6 00

4 5 0 00

7 9 0 00

3 4 0 00

110

3 4 0 00

Phillip Connell

4

4

4


5 6 00

4 5 0 00

CUSTOMER NO.


DEBITBALANCE

CUSTOMER

29

30

30


S11

G11

3 4 0 00

8 1 7 00

4 7 7 00

120Iona Hawkins

4

43 4 0 00

4 7 7 00

CUSTOMER NO.


DEBITBALANCE

CUSTOMER

2920--Nov. �

130Kevin Payne

4

52

2 2 5 00

2

Balance

VENDOR NO.


CREDITBALANCE

VENDOR

2930


P112 1 5 00

1 9 0 5 00

220Galt Group

4

2

1 6 9 0 00

Balance

Name


Part Four—Identifying Posting Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. A check mark is placed in parentheses below the General Debit and General Credit 1. ccolumn totals in the cash payments journal to indicate that the two column totals area. posted individually.b. posted only as part of the column total.c. not posted.d. none of these.

2. The accounts receivable ledger contains only accounts of 2. ca. vendors.b. cash customers.c. charge customers.d. none of these.

3. Daily general ledger account balances are 3. aa. usually not necessary.b. necessary to do monthly financial statements.c. posted to the accounts receivable ledger daily.d. needed if the dollar amounts are large.

4. When a credit is posted to the accounts payable ledger, 4. aa. the previous balance is added to the new amount posted in the Credit column.b. the source document number and page number of the journal are written in the

Post. Ref. column of the account.c. the credit amount is written in the Debit column of the account.d. Balance is written in the Item column.

5. A general ledger sorts and summarizes all information affecting 5. aa. income statement and balance sheet accounts.b. accounts receivable accounts.c. accounts payable accounts.d. none of these.

6. The separate amounts in the Accounts Receivable Debit column of a sales journal are 6. ba. posted individually to the general ledger.b. posted to the general ledger only as a part of the column total.c. not posted to the general ledger.d. none of these.

7. An error in posting may cause 7. da. income to be overstated or understated on the income statement.b. a business to pay too much to a vendor.c. cash on hand to be less than the balance in the cash account.d. all of these.

8. When opening a new page in an accounts receivable ledger, 8. aa. Balance is written in the Item column.b. the Item column is left blank.c. a number is written in the Post. Ref. column.d. none of these.

9. A schedule of accounts payable is prepared 9. ca. before all journal entries are posted.b. in the middle of the month.c. after all journal entries are posted.d. frequently.

chapterTEST A

PerfectScore

YourScoreName

Defining Accounting Terms 12 Pts.Identifying Payroll Concepts and Practices 12 Pts.

Preparing a Semimonthly Payroll 136 Pts.Analyzing Payroll Concepts and Practices 9 Pts.

Total 169 Pts.


12



A. employee earnings 1. The money paid for employee services. 1. Hrecord

B. Medicare tax 2. The period covered by a salary payment. 2. DC. net pay 3. The total amount earned by all employees for a pay period. 3. ED. pay period 4. The total pay due for a pay period before deductions. 4. KE. payroll 5. Taxes based on the payroll of a business. 5. GF. payroll register 6. A deduction from total earnings for each person legally 6. L

supported by a taxpayer, including the employee.G. payroll taxes 7. A federal tax paid for old-age, survivors, and disability insurance. 7. IH. salary 8. A federal tax paid for hospital insurance. 8. BI. social security tax 9. The maximum amount of earnings on which a tax is calculated. 9. JJ. tax base 10. A business form used to record payroll information. 10. FK. total earnings 11. The total earnings paid to an employee after payroll taxes 11. C

and other deductions.L. withholding 12. A business form used to record details affecting payments 12. A

allowance made to an employee.

Part Two—Identifying Payroll Concepts and PracticesDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. Businesses use payroll records to inform employees of their annual earnings and to 1. Tprepare payroll reports for the government.

2. All deductions from employee wages are recorded in a payroll register. 2. T3. The first task in preparing a payroll is to determine the number of days worked 3. F

by each employee.4. Total earnings are sometimes referred to as net pay or net earnings. 4. F5. Payroll taxes withheld represent a liability for an employer until payment is made. 5. T6. When an employee’s earnings exceed the tax base, no more social security tax is deducted. 6. T7. The amount of income tax withheld from each employee’s total earnings is determined 7. T

from the number of withholding allowances and by the employee’s marital status.8. Employee total earnings are calculated as regular hours x regular rate, plus overtime 8. T

hours x overtime rate.9. A business is required by law to withhold certain payroll taxes from employee salaries. 9. T

10. A single person will have less income tax withheld than a married employee. 10. F11. Social security tax is paid by the employer only. 11. F12. The information used to prepare payroll checks is taken from a payroll register. 12. T


SINGLE Persons—SEMIMONTHLY Payroll PeriodIf the wages are–

109876543210But lessthanAt least

740 760 81 62 43 25 12 0 0 0 0 0 0760 780 84 65 46 27 14 1 0 0 0 0 0780 800 87 68 49 29 16 3 0 0 0 0 0800 820 90 71 52 32 18 5 0 0 0 0 0820 840 93 74 55 35 20 7 0 0 0 0 0840 860 96 77 58 38 22 9 0 0 0 0 0860 880 99 80 61 41 24 11 0 0 0880 900 102 83 64 44 26 13 0900 920 105 86 67 47 28 15 0920 940 108 89 70 50 31 17 0940 960 111 92 73 53 34 19 0960 980 114 95 76 56 37 21 0980 1,000 117 98 79 59 40 23 10 0 0

1,000 1,020 120 101 82 62 43 25 12 0 01,020 1,040 123 104 85 65 46 27 14 2 01,040 1,060 126 107 88 68 49 29 16 4 01,060 1,080 129 110 91 71 52 32 18 6 01,080 1,100 132 113 94 74 55 35 20 8 01,100 1,120 135 116 97 77 58 38 22 10 0 0 01,120 1,140 138 119 100 80 61 41 24 12 0 0 01,140 1,160 141 122 103 83 64 44 26 14 1 0 01,160 1,180 144 125 106 86 67 47 28 16 3 0 01,180 1,200 147 128 109 89 70 50 31 18 5 0 01,200 1,220 150 131 112 92 73 53 34 20 7 0 01,220 1,240 153 134 115 95 76 56 37 22 9 0 01,240 1,260 156 137 118 98 79 59 40 24 11 0 01,260 1,280 159 140 121 101 82 62 43 26 13 0 01,280 1,300 163 143 124 104 85 65 46 28 15 2 01,300 1,320 168 146 127 107 88 68 49 30 17 4 01,320 1,340 173 149 130 110 91 71 52 33 19 6 0

MARRIED Persons—SEMIMONTHLY Payroll PeriodAnd the number of withholding allowances claimed is—If the wages are–


The amount of income tax to be withheld is—

0720 740 40 27 14 1 0 0 0 0 0 0 0740 760 42 29 16 3 0 0 0 0 0 0 0760 780 44 31 18 5 0 0 0 0 0 0 0780 800 46 33 20 7 0 0 0 0 0 0 0800 820 48 35 22 9 0 0 0 0 0 0 0820 840 50 37 24 11 0 0 0 0 0 0 0840 860 52 39 26 13 0 0 0 0 0 0 0860 880 54 41 28 15 2 0 0 0 0 0 0880 900 56 43 30 17 4 0 0 0 0 0 0900 920 58 45 32 19 6 0 0 0 0 0 0920 940 60 47 34 21 8 0 0 0 0 0 0940 960 63 49 36 23 10 0 0 0 0 0 0960 980 66 51 38 25 12 0 0 0 0 0 0980 1,000 69 53 40 27 14 1 0 0 0 0 0

1,000 1,020 72 55 42 29 16 3 0 0 0 0 01,020 1,040 75 57 44 31 18 5 0 0 0 0 01,040 1,060 78 59 46 33 20 7 0 0 0 0 01,060 1,080 81 61 48 35 22 9 0 0 0 0 01,080 1,100 84 64 50 37 24 11 0 0 0 0 01,100 1,120 87 67 52 39 26 13 0 0 0 0 01,120 1,140 90 70 54 41 28 15 2 0 0 0 01,140 1,160 93 73 56 43 30 17 4 0 0 0 01,160 1,180 96 76 58 45 32 19 6 0 0 0 01,180 1,200 99 79 60 47 34 21 8 0 0 0 01,200 1,220 102 82 63 49 36 23 10 0 0 0 01,220 1,240 105 85 66 51 38 25 12 0 0 0 01,240 1,260 108 88 69 53 40 27 14 1 0 0 01,260 1,280 111 91 72 55 42 29 16 3 0 0 01,280 1,300 114 94 75 57 44 31 18 5 0 0 01,300 1,320 117 97 78 59 46 33 20 7 0 0 0

000000000000000

000000000000000

00024

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68

And the number of withholding allowances claimed is—


Name


Part Three—Preparing a Semimonthly PayrollThe time cards for Absolute Sporting Goods’ semimonthly pay period April1-15 are shown below.

Directions:

1. Complete the three time cards. Overtime is paid for each employee whoworks more than 8 hours in one day. Overtime hours are paid at one andone-half times the regular pay rate.

2. Complete the payroll register on page 5 of this test for the three time cardsabove. The date of payment is April 16. Use the income tax withholdingtables on page 2 of this test to find the income tax withholding for eachemployee. Calculate the social security tax at 6.2% and the Medicare tax at1.45%. None of the employee’s accumulated earnings has exceeded thesocial security tax base.

3. Prepare a payroll check for Frank Williams, Check No. 501. Sign your nameas partner of Absolute Sporting Goods. Record the payroll check number inthe payroll register.

4. Record the April 1-15 payroll information on Frank Williams’s employeeearnings record on page 4 of this test. Accumulated earnings as of March 31for Mr. Williams are $6,720.00. Mr. Williams is a manager. His social securitynumber is 555-34-9876. The quarter ends June 30.

EMPLOYEE NO. _________________________________

NAME ___________________________________________

PERIOD ENDING ________________________________

MARITAL STATUS ____ NO. OF ALLOWANCES ____

MORNING AFTERNOON OVERTIME HOURS

IN OUT IN OUT IN OUT REG OT

REGULAR

OVERTIME

TOTAL HOURSTOTAL

EARNINGS

HOURS RATE AMOUNT

1312

1110

96

54

32

14.00

21.00

758 1202 1259 1703 8757 1203 1300 1700 1902 2032 8 1.5800 1200 1259 1700 8759 1201 1258 1704 8759 1202 1255 1703 8

758 1201 1256 1702 8756 1200 1257 1701 8757 1202 1257 1658 8758 1200 1259 1701 8759 1204 1259 1700 8

80.0

01.5

81.5

1,120.00

31.50

1,151.50

18

Frank W. Williams

April 15, 20--

M 3

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6

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EMPLOYEE NO. _________________________________

NAME ___________________________________________

PERIOD ENDING ________________________________




REGULAR

OVERTIME

TOTAL HOURSTOTAL

EARNINGS

HOURS RATE AMOUNT

1312

1110

96

54

32

9.00

13.50

757 1201 1259 1702 8757 1202 1258 1701 8756 1204 1300 1701 1756 1859 8 1757 1205 1259 1700 8759 1205 1300 1702 8

757 1204 1259 1705 8758 1205 1256 1704 1800 1931 8 1.5756 1202 1257 1702 8756 1201 1259 1701 1900 2132 8 2.5757 1200 1300 1700 8

80

05

85

720.00

67.50

787.50

16

Davis F. Nelson

April 15, 20--

S 1

EMPLOYEE NO. _________________________________

NAME ___________________________________________

PERIOD ENDING ________________________________




REGULAR

OVERTIME

TOTAL HOURSTOTAL

EARNINGS

HOURS RATE AMOUNT

1312

1110

96

54

32

12.00

18.00

759 1201 1256 1701 8757 1202 1257 1702 8756 1201 1258 1704 1901 2002 8 1802 1204 1301 1706 8756 1203 1259 1700 8

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80

04

84

960.00

72.00

1,032.00

12

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April 15, 20--

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Name


Part Four—Analyzing Payroll Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Employee regular earnings are calculated as 1. aa. regular hours times regular rate.b. total hours divided by regular rate.c. total hours plus overtime rate.d. overtime hours minus overtime rate.

2. Federal income tax is withheld from employee earnings 2. da. only in those states electing to do so.b. in all states with over 10,000,000 population.c. only in states where a state income tax is levied.d. in all 50 states.

3. The withholding allowances of an employee affect 3. ba. social security tax withheld.b. federal income tax withheld.c. federal unemployment tax owed.d. state unemployment tax owed.

4. Each employee name is listed in a payroll register along with 4. da. employee number.b. marital status.c. withholding allowances.d. all of these.

5. The total earnings paid to an employee after payroll taxes and other deductions is 5. crecorded in the payroll register’sa. Gross Pay column.b. Total Earnings column.c. Net Pay column.d. Total Deductions column.

6. Individual payroll checks are usually written on 6. ba. a company’s regular checking account.b. a special payroll checking account.c. a special purposes account.d. an employee earnings account.

7. A business form used to record details affecting payments made to an employee is 7. aa. an employee earnings record.b. a payroll journal.c. an employee accounts payable record.d. a tax withholding form.

8. The Accumulated Earnings column of the employee earnings record 8. ba. shows net pay for the year.b. is the total earnings since the first of the year.c. shows net pay for one quarter.d. is the gross earnings for one quarter.

9. The amount on the employee earnings record used to determine if certain payroll 9. btaxes apply to an employee’s earnings isa. net pay.b. accumulated earnings.c. gross earnings.d. social security taxes.

chapterTEST B

PerfectScore

YourScoreName

Defining Accounting Terms 12 Pts.Identifying Payroll Concepts and Practices 12 Pts.

Preparing a Semimonthly Payroll 136 Pts.Analyzing Payroll Concepts and Practices 9 Pts.

Total 169 Pts.


12



A. employee earnings 1. The total amount earned by all employees for a pay period. 1. Erecord

B. Medicare tax 2. Taxes based on the payroll of a business. 2. GC. net pay 3. The money paid for employee services. 3. HD. pay period 4. A business form used to record details affecting payments 4. A

made to an employee.E. payroll 5. A federal tax paid for hospital insurance. 5. BF. payroll register 6. The maximum amount of earnings on which a tax is calculated. 6. JG. payroll taxes 7. A business form used to record payroll information. 7. FH. salary 8. The period covered by a salary payment. 8. DI. social security tax 9. The total earnings paid to an employee after payroll taxes 9. C

and other deductions.J. tax base 10. A deduction from total earnings for each person legally 10. L

supported by a taxpayer, including the employee.K. total earnings 11. A federal tax paid for old-age, survivors, and disability 11. I

insurance. L. withholding allowance 12. The total pay due for a pay period before deductions. 12. K

Part Two—Identifying Payroll Concepts and PracticesDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. A single person will have less income tax withheld than a married employee. 1. F2. All deductions from employee wages are recorded in a payroll register. 2. T3. Employee total earnings are calculated as regular hours x regular rate, plus overtime 3. T

hours x overtime rate.4. Payroll taxes are based on employee total earnings. 4. T5. Businesses must withhold federal income tax from employee total earnings. 5. T6. Payroll taxes withheld represent a liability for an employer until payment is made. 6. T7. Social security tax is paid by the employer only. 7. F8. The amount of income tax withheld from each employee’s total earnings is determined 8. T

from the number of withholding allowances and by the employee’s marital status.9. The first task in preparing a payroll is to determine the number of days worked by 9. F

each employee.10. The information used to prepare payroll checks is taken from a payroll register. 10. T11. When an employee’s earnings exceed the tax base, no more Medicare tax is deducted. 11. F12. A separate checking account for payroll checks helps to protect and control 12. T

payroll payments.


SINGLE Persons—SEMIMONTHLY Payroll PeriodIf the wages are–


740 760 81 62 43 25 12 0 0 0 0 0 0760 780 84 65 46 27 14 1 0 0 0 0 0780 800 87 68 49 29 16 3 0 0 0 0 0800 820 90 71 52 32 18 5 0 0 0 0 0820 840 93 74 55 35 20 7 0 0 0 0 0840 860 96 77 58 38 22 9 0 0 0 0 0860 880 99 80 61 41 24 11 0 0 0880 900 102 83 64 44 26 13 0900 920 105 86 67 47 28 15 0920 940 108 89 70 50 31 17 0940 960 111 92 73 53 34 19 0960 980 114 95 76 56 37 21 0980 1,000 117 98 79 59 40 23 10 0 0

1,000 1,020 120 101 82 62 43 25 12 0 01,020 1,040 123 104 85 65 46 27 14 2 01,040 1,060 126 107 88 68 49 29 16 4 01,060 1,080 129 110 91 71 52 32 18 6 01,080 1,100 132 113 94 74 55 35 20 8 01,100 1,120 135 116 97 77 58 38 22 10 0 0 01,120 1,140 138 119 100 80 61 41 24 12 0 0 01,140 1,160 141 122 103 83 64 44 26 14 1 0 01,160 1,180 144 125 106 86 67 47 28 16 3 0 01,180 1,200 147 128 109 89 70 50 31 18 5 0 01,200 1,220 150 131 112 92 73 53 34 20 7 0 01,220 1,240 153 134 115 95 76 56 37 22 9 0 01,240 1,260 156 137 118 98 79 59 40 24 11 0 01,260 1,280 159 140 121 101 82 62 43 26 13 0 01,280 1,300 163 143 124 104 85 65 46 28 15 2 01,300 1,320 168 146 127 107 88 68 49 30 17 4 01,320 1,340 173 149 130 110 91 71 52 33 19 6 0

MARRIED Persons—SEMIMONTHLY Payroll PeriodAnd the number of withholding allowances claimed is—If the wages are–



0720 740 40 27 14 1 0 0 0 0 0 0 0740 760 42 29 16 3 0 0 0 0 0 0 0760 780 44 31 18 5 0 0 0 0 0 0 0780 800 46 33 20 7 0 0 0 0 0 0 0800 820 48 35 22 9 0 0 0 0 0 0 0820 840 50 37 24 11 0 0 0 0 0 0 0840 860 52 39 26 13 0 0 0 0 0 0 0860 880 54 41 28 15 2 0 0 0 0 0 0880 900 56 43 30 17 4 0 0 0 0 0 0900 920 58 45 32 19 6 0 0 0 0 0 0920 940 60 47 34 21 8 0 0 0 0 0 0940 960 63 49 36 23 10 0 0 0 0 0 0960 980 66 51 38 25 12 0 0 0 0 0 0980 1,000 69 53 40 27 14 1 0 0 0 0 0

1,000 1,020 72 55 42 29 16 3 0 0 0 0 01,020 1,040 75 57 44 31 18 5 0 0 0 0 01,040 1,060 78 59 46 33 20 7 0 0 0 0 01,060 1,080 81 61 48 35 22 9 0 0 0 0 01,080 1,100 84 64 50 37 24 11 0 0 0 0 01,100 1,120 87 67 52 39 26 13 0 0 0 0 01,120 1,140 90 70 54 41 28 15 2 0 0 0 01,140 1,160 93 73 56 43 30 17 4 0 0 0 01,160 1,180 96 76 58 45 32 19 6 0 0 0 01,180 1,200 99 79 60 47 34 21 8 0 0 0 01,200 1,220 102 82 63 49 36 23 10 0 0 0 01,220 1,240 105 85 66 51 38 25 12 0 0 0 01,240 1,260 108 88 69 53 40 27 14 1 0 0 01,260 1,280 111 91 72 55 42 29 16 3 0 0 01,280 1,300 114 94 75 57 44 31 18 5 0 0 01,300 1,320 117 97 78 59 46 33 20 7 0 0 0

000000000000000

000000000000000

00024

0000000

68

And the number of withholding allowances claimed is—


Name


Part Three—Preparing a Semimonthly PayrollThe time cards for Prima Video Store’s semimonthly pay period April 1-15 areshown below.

Directions:

1. Complete the three time cards. Overtime is paid for each employee whoworks more than 8 hours in one day. Overtime hours are paid at one andone-half times the regular pay rate.

2. Complete the payroll register on page 5 of this test for the three time cardsabove. The date of payment is April 16. Use the income tax withholdingtables on page 2 of this test to find the income tax withholding for eachemployee. Calculate the social security tax at 6.2% and the Medicare tax at1.45%. None of the employee accumulated earnings has exceeded the socialsecurity tax base.

3. Prepare a payroll check for Charles K. Wright, Check No. 501. Sign yourname as partner of Prime Video Store. Record the payroll check number inthe payroll register.

4. Record the April 1-15 payroll information on Charles K. Wright’s employeeearnings record on page 4 of this test. Accumulated earnings as of March 31for Mr. Wright are $4,360.00. Mr. Wright is a clerk. His social securitynumber is 555-43-9876. The quarter ends June 30.

EMPLOYEE NO. _________________________________

NAME ___________________________________________

PERIOD ENDING ________________________________




REGULAR

OVERTIME

TOTAL HOURSTOTAL

EARNINGS

HOURS RATE AMOUNT

1312

1110

96

54

32

11.00

16.50

758 1202 1259 1703 8757 1203 1300 1700 1902 2032 8 11⁄2800 1200 1259 1700 8759 1201 1258 1704 8759 1202 1255 1703 8

758 1201 1256 1702 8756 1200 1257 1701 8757 1202 1257 1658 8758 1200 1259 1701 8759 1204 1259 1700 8

80.0

01.5

81.5

880.00

24.75

904.75

16

Faye M. Little

April 15, 20--

M 4

POIN

TS �

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44353

6

6

655

EMPLOYEE NO. _________________________________

NAME ___________________________________________

PERIOD ENDING ________________________________




REGULAR

OVERTIME

TOTAL HOURSTOTAL

EARNINGS

HOURS RATE AMOUNT

1312

1110

96

54

32

9.00

13.50

757 1201 1259 1702 8757 1202 1258 1701 8756 1204 1300 1701 1756 1859 8 11⁄2757 1205 1259 1700 8759 1205 1300 1702 8

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80

05

85

720.00

67.50

787.50

11

Charles K. Wright

April 15, 20--

M 3

EMPLOYEE NO. _________________________________

NAME ___________________________________________

PERIOD ENDING ________________________________




REGULAR

OVERTIME

TOTAL HOURSTOTAL

EARNINGS

HOURS RATE AMOUNT

1312

1110

96

54

32

12.00

18.00

759 1201 1256 1701 8757 1202 1257 1702 8756 1201 1258 1704 1901 2131 8 21⁄2802 1204 1301 1706 8756 1203 1259 1700 8

759 1200 1259 1659 1759 1931 8 11⁄2800 1200 1258 1701 8759 1202 1257 1706 8756 1159 1256 1702 1758 1932 8 11⁄2757 1203 1257 1701 8

80.0

05.5

85.5

960.00

99.00

1,059.00

14

Marilyn A. Reaver

April 15, 20--

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Part Four—Analyzing Payroll Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. All employees must report their withholding allowances on a 1. ca. payroll register.b. memorandum.c. Form W-4.d. Form W-2.

2. Each employee name is listed in a payroll register along with 2. da. employee number.b. marital status.c. withholding allowances.d. all of these.

3. Employee regular earnings are calculated as 3. aa. regular hours times regular rate.b. total hours divided by regular rate.c. total hours plus overtime rate.d. overtime hours minus overtime rate.

4. Federal income tax is withheld from employee earnings 4. da. only in those states electing to do so.b. in all states with over 10,000,000 population.c. only in states where a state income tax is levied.d. in all 50 states.


6. The amount on the employee earnings record used to determine if certain payroll taxes 6. bapply to an employee’s earnings isa. net pay.b. accumulated earnings.c. gross earnings.d. social security taxes.

7. The social security tax is calculated by 7. aa. multiplying total earnings by the tax rate.b. multiplying net earnings by the tax rate.c. using a tax table.d. none of these.


9. Some businesses deposit employee net pay directly to each employee bank account by using 9. ca. payroll checks.b. payroll registers.c. EFT.d. none of these.

chapterTEST A

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Practices 15 Pts.Journalizing and Posting Payroll Transactions 119 Pts.

Identifying Accounting Concepts and Practices 9 Pts.

Total 143 Pts.


13


Answers

1. In each pay period the payroll information for each employee is recorded on each 1. Temployee earnings record.

2. The payroll register and employee earnings records provide all the payroll information 2. Tneeded to prepare a payroll.

3. The source document for payment of a payroll is the time card. 3. F

4. Employer payroll taxes are business expenses. 4. T

5. The employer social security tax rate is not the same as the employee social security tax rate. 5. F

6. Federal unemployment insurance laws require that employers and employees pay taxes 6. Ffor unemployment compensation.

7. The transaction to record employer payroll taxes expense is journalized at the end 7. Fof the quarter.

8. Each employer is required by law to periodically report the payroll taxes withheld 8. Tfrom employee salaries.

9. The timing of payment of tax payments is based on the amount owed. 9. T

10. Federal unemployment tax is usually paid each month. 10. F

11. In the journal entry for a payroll, the amount debited to Salary Expense is the total of 11. Fthe Net Pay column of the payroll register.

12. The tax base for Medicare tax is usually the same as the tax base for social security tax. 12. F

13. If an employee’s accumulated earnings are $6,500.00, and the employee earns another 13. F$1,500.00, the amount of new earnings subject to unemployment tax is $1,500.00.

14. Some employers must deposit payments for withheld employees’ federal income tax 14. Tand social security and Medicare taxes on the next banking day.

15. Each employer who withholds income tax and social security and Medicare tax from 15. Femployee salaries must furnish each employee with a quarterly statement.


Part Two—Journalizing and Posting Payroll TransactionsLawrence Company completed payroll transactions during the periodJanuary 1 to April 30 of the current year. Payroll tax rates are as follows: socialsecurity tax, 6.2%; Medicare tax, 1.45%; federal unemployment tax, 0.8%; stateunemployment tax, 5.4%. No total earnings have exceeded the tax base forcalculating unemployment taxes.

Directions: Journalize the following transactions on page 7 of a generaljournal and cash payments journal. Source documents are abbreviated asfollows: check, C; and memorandum, M.

Transac t ionsApr. 15. Paid cash for liability for employee income tax, $460.00; social security tax, $757.90;

Medicare tax, $177.25; total, $1,395.15. C45.15. Paid cash for semimonthly payroll, $2,565.72 (total payroll, $2,971.00, less deductions:

employee income tax, $178.00; social security tax, $184.20; Medicare tax, $43.08). C46.15. Recorded employer payroll tax expense for the semimonthly pay period ended April 15. M26.30. Paid cash for federal unemployment tax liability for quarter ended March 31, $121.20. C47.30. Paid cash for state unemployment tax liability for quarter ended March 31, $818.10. C48.

2. Post the items that are to be posted individually.3. Prove and rule the cash payments journal.

Name



1 2 3 4

1

2

3

4

5

6

7

8

9

10

11

12

13

14

1

2

3

4

5

6

7

8

9

10

11

12

13

14

DATE ACCOUNT TITLEGENERAL

DEBIT CREDIT

ACCOUNTSPAYABLE

DEBIT

CASHCREDIT

CK.NO.

POST.REF.

15

15

30

30

30

20--Apr. Employee Income Tax Payable

Social Security Tax Payable

Medicare Tax Payable

Salary Expense

Employee Income Tax Payable



Unemployment Tax Payable--Federal

Unemployment Tax Payable--State

Totals

45

46

47

48

2120

2130

2135

6170

2120

2130

2135

2150

2160

1 7 8 00

1 8 4 20

4 3 08

4 0 5 28

7

1 3 9 5 15

2 5 6 5 72

1 2 1 20

8 1 8 10

4 9 0 0 17

4 6 0 00

7 5 7 90

1 7 7 25

2 9 7 1 00

1 2 1 20

8 1 8 10

5 3 0 5 45

6

3

3

6

3

3

3

6

6

5

44

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POIN

TS �

(Correct Rulings)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

1

2

3

4

5

6

7

8

9

10

11

12

13

14


POST.REF.

1520--Apr. Payroll Taxes Expense





M26 6150

2130

2135

2150

2160

4 1 1 48

7

1 8 4 20

4 3 08

2 3 77

1 6 0 43

5

3

3

3

3

17

POIN

TS �


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15

15

20--Apr. Balance �

CP7

CP7

2120

4 6 0 00


1 7 8 00

—————

4 6 0 00

—————

1 7 8 00

5

4

POIN

TS �

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15

15

15


G7

CP7

CP7

2130

7 5 7 90


1 8 4 20

1 8 4 20

7 5 7 90

9 4 2 10

1 8 4 20

3 6 8 40

4

4

4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15

15

15


G7

CP7

CP7

2135

1 7 7 25


4 3 08

4 3 08

1 7 7 25

2 2 0 33

4 3 08

8 6 16

4

4

4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15

30


G7

CP7

2150

1 2 1 20

Unemployment Tax Payable—Federal

2 3 77

1 2 1 20

1 4 4 97

2 3 77

4

4

41


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15

30


G7

CP7

2160

8 1 8 10

Unemployment Tax Payable—State

1 6 0 43

8 1 8 10

9 7 8 53

1 6 0 43

4

4

POIN

TS �

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15


G7

6150

4 1 1 48

Payroll Taxes Expense

2 1 5 1 30

2 5 6 2 78 4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15


CP7

6170

2 9 7 1 00

Salary Expense

15 1 5 0 00

18 1 2 1 00 4

16

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

Name


Part Three—Identifying Accounting Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Until the amounts withheld from employee salaries are paid by the employer, 1. bthey are recorded asa. assets.b. liabilities.c. salary expense.d. revenue.

2. The entry to journalize paying a semimonthly payroll less deductions for employee 2. aincome tax, social security and Medicare tax, and U.S. Savings Bonds is a credit toCash and the liability accounts and a debit toa. Salary Expense.b. Unemployment Tax Payable—Federal.c. Payroll Taxes Expense.d. Cash.

3. The total earnings subject to federal unemployment tax is referred to as 3. aa. unemployment taxable earnings.b. taxable earnings.c. gross earnings.d. total earnings.

4. Each employer must file a federal tax return showing the federal income tax and 4. bsocial security and Medicare taxes due the governmenta. monthly.b. quarterly.c. yearly.d. semiannually.

5. Employers are required to furnish each employee with an annual statement of 5. dearnings and withholdings beforea. December 31 of the current year.b. January 1 of the following year.c. January 15 of the following year.d. January 31 of the following year.

6. The source document for paying employee income tax and social security and 6. aMedicare tax isa. a check.b. a receipt.c. a memorandum.d. none of these.

7. In general, employers are required to pay state unemployment taxes 7. ba. monthly.b. during the month following each calendar quarter.c. annually.d. none of these.

8. The source document for paying state unemployment tax is 8. aa. a check.b. a receipt.c. a memorandum.d. none of these.

9. A state tax used to pay benefits to unemployed workers is 9. da. Social Security tax. c. unemployment tax.b. Medicare tax. d. state unemployment tax.

chapterTEST B

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Practices 15 Pts.Journalizing and Posting Payroll Transactions 119 Pts.


Total 143 Pts.


13


Answers

1. The source document for payment of a payroll is the time card. 1. F

2. Employee withheld income tax, employee social security and Medicare tax, and 2. Temployer social security and Medicare tax are paid periodically to the federalgovernment in a combined payment.

3. Some employers must deposit payments for withheld employees’ federal income tax 3. Tand social security and Medicare taxes on the next banking day.

4. Employer payroll taxes are business expenses. 4. T

5. Employer payroll taxes expense is based on a percentage of employee earnings. 5. T

6. The employer social security tax rate is not the same as the employee social 6. Fsecurity tax rate.

7. An employer is not required to pay federal unemployment taxes on an employee who 7. Thas already earned $7,000.00 during the calendar year.

8. All employers must deposit payments for withheld employees’ federal income tax 8. Fand social security and Medicare taxes using the Electronic Federal Tax PaymentSystem (EFTPS).

9. The source document for journalizing employer payroll taxes is a check. 9. F

10. Each employer is required by law to periodically report the payroll taxes withheld 10. Tfrom employee salaries.

11. The payroll register and employee earnings records provide all the payroll information 11. Tneeded to prepare a payroll.

12. Each employer who withholds income tax and social security and Medicare tax from 12. Femployee salaries must furnish each employee with a quarterly statement.

13. In the journal entry for a payroll, the amount debited to Salary Expense is the total of 13. Fthe Net Pay column of the payroll register.

14. If an employee’s accumulated earnings are $6,500.00, and the employee earns another 14. F$1,500.00, the amount of new earnings subject to unemployment tax is $1,500.00.

15. The transaction to record employer payroll taxes expense is journalized at the end 15. Fof the quarter.


Part Two—Journalizing and Posting Payroll TransactionsLawrence Company completed payroll transactions during the periodJanuary 1 to April 30 of the current year. Payroll tax rates are as follows: socialsecurity tax, 6.2%; Medicare tax, 1.45%; federal unemployment tax, 0.8%; stateunemployment tax, 5.4%. No total earnings have exceeded the tax base forcalculating unemployment taxes.

Directions: Journalize the following transactions on page 7 of a generaljournal and cash payments journal. Source documents are abbreviated asfollows: check, C, and memorandum, M.

Transac t ionsApr. 15. Paid cash for liability for employee income tax, $420.00; social security tax, $832.00;

Medicare tax, $194.58; total, $1,446.58. C301.15. Paid cash for semimonthly payroll $2,810.92, (total payroll, $3,256.00, less deductions:

employee income tax, $196.00; social security tax, $201.87; Medicare tax, $47.21). C302.15. Recorded employer payroll taxes expense for the semimonthly pay period ended April 15. M30.30. Paid cash for federal unemployment tax liability for quarter ended March 31, $147.75. C303.30. Paid cash for state unemployment tax liability for quarter ended March 31, $997.30. C304.

2. Post the items that are to be posted individually.3. Prove and rule the cash payments journal.

Name



1

2

3

4

5

6

7

8

9

10

11

12

13

14

1

2

3

4

5

6

7

8

9

10

11

12

13

14


POST.REF.

1520--Apr. Payroll Taxes Expense





M30 6150

2130

2135

2150

2160

4 5 0 95

7

2 0 1 87

4 7 21

2 6 05

1 7 5 82

5

3

3

3

3

17

POIN

TS �


1 2 3 4

1

2

3

4

5

6

7

8

9

10

11

12

13

14

1

2

3

4

5

6

7

8

9

10

11

12

13

14

DATE ACCOUNT TITLEGENERAL

DEBIT CREDIT

ACCOUNTSPAYABLE

DEBIT

CASHCREDIT

CK.NO.

POST.REF.

15

15

30

30

30

20--Apr. Employee Income Tax Payable



Salary Expense






Totals

301

302

303

304

2120

2130

2135

6170

2120

2130

2135

2150

2160

1 9 6 00

2 0 1 87

4 7 21

4 4 5 08

7

1 4 4 6 58

2 8 1 0 92

1 4 7 75

9 9 7 30

5 4 0 2 55

4 2 0 00

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1 9 4 58

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1 4 7 75

9 9 7 30

5 8 4 7 63

6

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3

6

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3

3

6

6

5

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+1

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POIN

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(Correct Rulings)


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15

15


CP7

CP7

2120

4 2 0 00


1 9 6 00

—————

4 2 0 00

—————

1 9 6 00

5

4

POIN

TS �

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15

15

15


G7

CP7

CP7

2130

8 3 2 00


2 0 1 87

2 0 1 87

8 3 2 00

1 0 3 3 87

2 0 1 87

4 0 3 74

4

4

4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15

15

15


G7

CP7

CP7

2135

1 9 4 58


4 7 21

4 7 21

1 9 4 58

2 4 1 79

47.21

9 4 42

4

4

4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15

30


G7

CP7

2150

1 4 7 75


2 6 05

1 4 7 75

1 7 3 80

2 6 05

4

4

41


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15

30


G7

CP7

2160

9 9 7 30


1 7 5 82

9 9 7 30

1 1 7 3 12

1 7 5 82

4

4

POIN

TS �

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15


G7

6150

4 5 0 95

Payroll Taxes Expense

2 6 2 2 53

3 0 7 3 48 4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

1

15


CP7

6170

3 2 5 6 00

Salary Expense

18 4 6 8 50

21 7 2 4 50 4

16

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

Name



Answers

1. Employers must pay payroll taxes for 1. ba. social security and Medicare.b. social security and Medicare, federal unemployment, and state unemployment taxes.c. federal income and social security and Medicare taxes.d. none of these.

2. Employers are required to furnish each employee with an annual statement of earnings 2. dand withholdings beforea. December 31 of the current year.b. January 1 of the following year.c. January 15 of the following year.d. January 31 of the following year.

3. In the entry to journalize paying the liability for the first quarter federal unemployment 3. dtax, the account credited would bea. Salary Expense.b. Unemployment Tax Payable—Federal.c. Payroll Taxes Expense.d. Cash.

4. The source document for paying state unemployment tax is 4. aa. a check. c. a memorandum.b. a receipt. d. none of these.

5. When a semimonthly payroll is paid, the credit to Cash is equal to the 5. da. total earnings of all employees.b. total deductions for income tax and social security and Medicare tax.c. total deductions. d. net pay of all employees.

6. The total of the Federal Income Tax column of a payroll register is credited to 6. ca. a revenue account.b. an expense account.c. a liability account.d. an asset account.

7. A federal tax used for state and federal administrative expenses of the unemployment 7. cprogram isa. Social Security tax.b. Medicare tax.c. federal unemployment tax.d. state unemployment tax.

8. The source document for payment of a payroll is 8. ba. a receipt.b. a check.c. a memorandum.d. none of these.

9. To record the employer payroll taxes expense, the following accounts are credited: 9. ca. Payroll Taxes Expense and Employee Income Tax Payable.b. Employee Income Tax Payable, Social Security Tax Payable, Medicare Tax Payable,

Unemployment Tax Payable—Federal, and Unemployment Tax Payable—State.c. Social Security Tax Payable, Medicare Tax Payable, Unemployment Tax Payable—Federal,

and Unemployment Tax Payable—State.d. none of these.

chapterTEST A

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Practices 16 Pts.Completing a Work Sheet 58 Pts.


Total 83 Pts.


14


Answers

1. Generally accepted account principles require that corporations charge 1% of credit 1. Fsales as an adjustment for uncollectible accounts.

2. Annual straight-line depreciation expense of a plant asset is calculated as the original 2. Fcost of the plant asset divided by the years of estimated useful life.

3. Estimated income tax must be paid in monthly installments. 3. F

4. All accounts are listed on the work sheet regardless of whether there is a balance or not. 4. T

5. Functional depreciation should be considered in estimating the useful life of 5. Tcomputer equipment.

6. Purchases are recorded in the merchandise inventory account. 6. F

7. The income summary account is one of the accounts used to adjust the merchandise 7. Tinventory account at the end of the fiscal period.

8. Two accounts used in adjusting office supplies are Supplies—Office and 8. FSupplies— Inventory.

9. The value of the insurance coverage used is recorded as a debit to Insurance Expense. 9. T

10. The amount recorded in Income Summary is extended to the Balance Sheet Debit or 10. FCredit column.

11. The balance of Merchandise Inventory in the Trial Balance columns represents the 11. Fbeginning balance plus all purchases of merchandise made in the fiscal period.

12. The difference between an asset’s account balance and its related contra account is 12. Tcalled book value.

13. The federal income tax rate increases as the net income before federal income tax 13. Tincreases.

14. The prepaid insurance account must be adjusted at the end of a fiscal period because 14. Tthe account balance does not reflect the value of the insurance that expired during theperiod.

15. There will be a net loss if the Income Statement Debit column total is larger than the 15. TIncome Statement Credit column total.

16. A net income amount is extended to the Balance Sheet Debit column. 16. F


Part Two—Completing a Work SheetOn December 31 of the current year, Raintree Enterprises has the generalledger accounts and balances shown on the work sheet on page 3 of this test.

Directions:

1. Use the adjustment information below to record adjustments on Raintree’swork sheet.


Uncollectible accounts are 1.0% of credit sales of: . . . . . . . . . . . $321,000.00Merchandise inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,462.00Office supplies inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,372.00Value of prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,100.00Estimate of office equipment depreciation . . . . . . . . . . . . . . . . . 4,600.00

2. Use the following tax table to calculate federal income tax expense andrecord the adjustment on the work sheet.15% of net income before taxes, zero to $50,000.00Plus 25% of net income before taxes, $50,000.00 to $75,000.00Plus 34% of net income before taxes, $75,000.00 to $100,000.00Plus 39% of net income before taxes, $100,000.00 to $335,000.00Plus 34% of net income before taxes over $335,000.00


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1 1 2 2 2 2 1 2 1 2 1 1 1 1 1 1 1 1 2 1 1 1 2 2 1 1 1 1 2 2 1 2 6 3 4 57 +1 58POINTS �

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(b)

(e)

(d)

(c)

(a)

(f)

(a)

(b)

(c)

(d)

(e)

(f)



Answers

1. A work sheet is 1. aa. used to plan adjustments and sort financial statement information.b. prepared only once a year.c. prepared to aid in the analysis of financial statements.d. not necessary for small businesses.

2. Preparing a work sheet at the end of each fiscal period is an application of the 2. aaccounting concepta. Accounting Period Cycle.b. Adequate Disclosure.c. Matching Expenses with Revenue.d. Historical Cost.

3. The book value of accounts receivable 3. ba. is equal to the balance in the Accounts Receivable controlling account.b. reflects the amount the business expects to collect in the future.c. is calculated as Accounts Receivable less Uncollectible Accounts Expense.d. can be obtained from a single general ledger account.

4. The entry to journalize the adjustment for merchandise inventory when beginning 4. bMerchandise Inventory is $125,000.00 and ending Merchandise Inventory is $115,000.00 isa. debit Merchandise Inventory, $10,000.00; credit Income Summary, $10,000.00.b. debit Income Summary, $10,000.00; credit Merchandise Inventory, $10,000.00.c. debit Merchandise Inventory $115,000.00; credit Income Summary, $115,000.00.d. debit Income Summary, $115,000.00; credit Merchandise Inventory, $115,000.00.

5. Recording expenses in the fiscal period in which the expenses contribute to earning 5. crevenue is an application of the accounting concepta. Accounting Period Cycle.b. Adequate Disclosure.c. Matching Expenses with Revenue.d. Historical Cost.

6. Depreciation expense is calculated using all of the following amounts except 6. aa. fair market value.b. estimated salvage value.c. estimated useful life.d. original cost.

7. The total amount of depreciation expense that has been recorded since the purchase of a 7. bplant asset is calleda. book value.b. accumulated depreciation.c. salvage value.d. net realizable value.

8. The adjustment for federal income tax includes 8. aa. an expense and a liability account.b. an expense account only.c. an expense account and an temporary equity account.d. a liability account only.

9. When a work sheet is completed, a net loss will appear in the 9. ba. Income Statement Debit and Balance Sheet Credit columns.b. Income Statement Credit and Balance Sheet Debit columns.c. Income Statement Debit and Income Statement Credit columns.d. Balance Sheet Debit and Balance Sheet Credit columns.

chapterTEST B

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Practices 16 Pts.Completing a Work Sheet 58 Pts.


Total 83 Pts.


14


Answers

1. A net income amount is extended to the Balance Sheet Debit column. 1. F

2. Estimated income tax must be paid in monthly installments. 2. F

3. All accounts are listed on the work sheet regardless of whether there is a balance or not. 3. T

4. Purchases are recorded in the merchandise inventory account. 4. F

5. Generally accepted account principles require that corporations charge 1% of credit sales 5. Fas an adjustment for uncollectible accounts.

6. Annual straight-line depreciation expense of a plant asset is calculated as the original cost 6. Fof the plant asset divided by the years of estimated useful life.

7. The difference between an asset’s account balance and its related contra account is called 7. Tbook value.

8. A work sheet should be prepared only once a year. 8. F

9. The amount recorded in Income Summary is extended to the Balance Sheet Debit or 9. FCredit column.

10. Recording adjustments on a work sheet brings the general ledger accounts up to date. 10. F


12. Income Summary is a temporary account. 12. T

13. The federal income tax rate increases as the net income before federal income tax increases. 13. T

14. The value of prepaid insurance not expired during a fiscal period is an asset. 14. T

15. General ledger accounts are listed in the work sheet’s Account Title column in the 15. Tsame order in which they appear in the general ledger.

16. The totals of a work sheet’s Balance Sheet columns should equal the totals of the 16. FIncome Statement columns.


Part Two—Completing a Work SheetOn December 31 of the current year, Telephone City has the general ledgeraccounts and balances shown on the work sheet on page 3.

Directions:

1. Use the adjustment information below to record adjustments on TelephoneCity’s work sheet.


Uncollectible accounts are 1.0% of credit sales of: . . . . . . . . . . . $348,000.00Merchandise inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205,370.00Office supplies inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,160.00Value of prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,320.00Estimate of office equipment depreciation . . . . . . . . . . . . . . . . . 3,800.00

2. Use the following tax table to calculate federal income tax expense andrecord the adjustment on the work sheet.15% of net income before taxes, zero to $50,000.00Plus 25% of net income before taxes, $50,000.00 to $75,000.00Plus 34% of net income before taxes, $75,000.00 to $100,000.00Plus 39% of net income before taxes, $100,000.00 to $335,000.00Plus 34% of net income before taxes over $335,000.00


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1 1 2 2 2 2 1 2 1 2 1 1 1 1 1 1 1 1 2 1 1 1 2 2 1 1 1 1 2 2 1 2 6 3 4 57 +1 58POINTS �

(Cor

rect

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lin

gs)

(b)

(e)

(d)

(c)

(a)

(f)

(a)

(b)

(c)

(d)

(e)

(f)



Answers

1. A business prepares a summary of financial information at least once each fiscal period 1. dbecause financial informationa. is needed to make management decisions.b. shows whether a profit is being made or a loss is being incurred.c. is needed to prepare tax reports.d. all of these.

2. The entry to journalize the adjustment for merchandise inventory when beginning 2. bMerchandise Inventory is $125,000.00 and ending Merchandise Inventory is $115,000.00 isa. debit Merchandise Inventory, $10,000.00; credit Income Summary, $10,000.00.b. debit Income Summary, $10,000.00; credit Merchandise Inventory, $10,000.00.c. debit Merchandise Inventory $115,000.00; credit Income Summary, $115,000.00.d. debit Income Summary, $115,000.00; credit Merchandise Inventory, $115,000.00.

3. The general ledger account in which goods on hand for sale to customers are recorded is titled 3. aa. Merchandise Inventory.b. Inventory.c. Purchases.d. Purchases Inventory.

4. The adjustment for federal income tax includes 4. aa. an expense and a liability account.b. an expense account only.c. an expense account and an temporary equity account.d. a liability account only.

5. The total amount of depreciation expense that has been recorded since the purchase of a 5. bplant asset is calleda. book value.b. accumulated depreciation.c. salvage value.d. net realizable value.


7. Depreciation expense is calculated using all of the following amounts except 7. aa. fair market value.b. estimated salvage value.c. estimated useful life.d. original cost.

8. The book value of accounts receivable 8. ba. is equal to the balance in the Accounts Receivable controlling account.b. reflects the amount the business expects to collect in the future.c. is calculated as Accounts Receivable less Uncollectible Accounts Expense.d. can be obtained from a single general ledger account.

9. When a work sheet is completed, a net loss will appear in the 9. ba. Income Statement Debit and Balance Sheet Credit columns.b. Income Statement Credit and Balance Sheet Debit columns.c. Income Statement Debit and Income Statement Credit columns.d. Balance Sheet Debit and Balance Sheet Credit columns.

chapterTEST A

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Practices 20 Pts.Completing Financial Statements 102 Pts.


Total 129 Pts.


15


Answers

1. In the preparation of financial statements, accounting principles are applied differently 1. Ffrom one fiscal period to the next.

2. Beginning merchandise inventory less purchases made during the fiscal period plus 2. Fending inventory equals cost of merchandise sold.

3. On an income statement, component percentages are calculated by dividing the amount 3. Fof each component by the amount of expenses.

4. One way a business determines acceptable component percentages is by making 4. Tcomparisons with prior fiscal periods.

5. Data needed to prepare the liabilities section of a balance sheet are obtained from a 5. Fwork sheet’s Balance Sheet Debit column.

6. When more detailed information about an item on a financial statement is needed, a 6. Tsupporting schedule may be prepared.

7. A statement of stockholders’ equity summarizes the changes in owners’ equity during 7. Ta fiscal period.

8. Some management decisions can best be made after the amount of assets, liabilities, 8. Tand stockholders’ equity in the business is determined.

9. If a company has determined that the acceptable component percentage for cost of 9. Fmerchandise sold is not more than 51.1%, the current year’s actual component percentageof 48.9% is unacceptable.

10. Reporting financial information the same way from one fiscal period to the next is 10. Fan application of the accounting concept Adequate Disclosure.

11. Revenue less cost of merchandise sold equals net income. 11. F12. Total expenses on an income statement are deducted from the gross profit on sales to 12. T

find net income.13. When a business’s expenses are less than the gross profit on sales, the difference is 13. F

known as a net loss.14. Increasing sales revenue while keeping cost of merchandise sold the same will 14. T

increase gross profit on sales.15. Most businesses correct an unacceptable component percentage for gross profit by 15. F

simply increasing the markup on merchandise purchased for sale because an increasedselling price will always increase profit.

16. Earnings per share is calculated by dividing net income after federal income taxes 16. Tby the number of shares outstanding.

17. Low price-earnings ratios are typically associated with high growth companies. 17. F18. A value assigned to a share of stock and printed on a stock certificate is called par value. 18. T19. Dividends Payable is a long-term liability. 19. F20. Every amount on a financial statement is accompanied by a related description. 20. F


Part Two—Completing Financial StatementsA partial work sheet for Special Sound Systems for the year endedDecember 31 of the current year is show below.

Directions:

1. On page 3 of this test, prepare an income statement through thepresentation of gross profit on sales. Calculate and record the componentpercentages for (a) cost of merchandise sold and (b) gross profit on sales.Round percentage calculations to the nearest 0.1%.

2. Prepare a statement of stockholders’ equity on page 4 of this test. Thecompany has 10,000 shares of $10.00 common stock outstanding and didnot issue any shares of stock during the year.

3. Prepare the asset portion of the balance sheet in report form on page 5 ofthis test.

1 2 3 4

ACCOUNT TITLETRIAL BALANCE

DEBIT CREDIT

ADJUSTMENTS

DEBIT CREDIT

INCOME STATEMENT

DEBIT CREDIT

BALANCE SHEET

DEBIT CREDIT

5 6 7 8

1

2

3

4

5

6

7

8

9

10

11

12

25

26

27

28

29

30

31

32

33

34

52

53

54

55

56

1

2

3

4

5

6

7

8

9

10

11

12

25

26

27

28

29

30

31

32

33

34

52

53

54

55

56

Cash

Petty Cash

Accounts Receivable

Allowance for Uncollectible Accounts

Merchandise Inventory

Supplies—Office

Supplies—Store

Prepaid Insurance

Office Equipment

Accum. Depreciation--Office Equipment

Store Equipment

Accum. Depreciation--Store Equipment

Capital Stock

Retained Earnings

Dividends

Income Summary

Sales

Sales Discount


Purchases

Purchases Discount


Federal Income Tax Expense

Net Income

53 1 0 0 00

5 0 0 00

25 2 0 0 00

334 5 0 0 00

6 2 0 0 00

6 8 0 0 00

5 9 0 0 00

48 2 0 0 00

38 4 0 0 00

40 0 0 0 00

3 5 0 0 00

9 4 0 0 00

164 8 0 0 00

32 0 0 0 00

597 6 0 0 00

8 0 0 00

24 6 0 0 00

18 9 0 0 00

100 0 0 0 00

124 6 0 0 00

321 0 0 0 00

2 8 0 0 00

4 9 0 0 00

597 6 0 0 00

18 6 0 0 00

4 6 0 0 00

51 2 0 0 00

3 2 0 0 00

18 6 0 0 00

3 8 0 0 00

4 2 0 0 00

4 9 0 0 00

6 2 0 0 00

5 7 0 0 00

51 2 0 0 00

18 6 0 0 00

3 5 0 0 00

9 4 0 0 00

164 8 0 0 00

36 6 0 0 00

228 6 0 0 00

100 1 0 0 00

328 7 0 0 00

321 0 0 0 00

2 8 0 0 00

4 9 0 0 00

328 7 0 0 00

328 7 0 0 00

53 1 0 0 00

5 0 0 00

25 2 0 0 00

315 9 0 0 00

2 4 0 0 00

2 6 0 0 00

1 0 0 0 00

48 2 0 0 00

38 4 0 0 00

40 0 0 0 00

527 3 0 0 00

527 3 0 0 00

4 0 0 0 00

30 8 0 0 00

24 6 0 0 00

100 0 0 0 00

124 6 0 0 00

427 2 0 0 00

100 1 0 0 00

527 3 0 0 00

Special Sound Systems

Work Sheet

For Year Ended December 31, 20--

(e)

(d)

(a)

(b)

(c)

(f)

(g)

(d)

(h)

Name


% OFSALES

Revenue:

Sales

Less: Sales Discount


Net Sales

Cost of Merchandise Sold:

Merchandise Inventory, January 1, 20--

Purchases

Less: Purchases Discount


Net Purchases

Cost of Merchandise Available for Sale

Less Merchandise Inventory December 31, 20--

Cost of Merchandise Sold

Gross Profit on Sales

321 0 0 0 00

12 9 0 0 00

334 5 0 0 00

157 1 0 0 00

491 6 0 0 00

315 9 0 0 00


Income Statement


308 1 0 0 00

175 7 0 0 00

132 4 0 0 00

100.0

57.0

43.0

1

2

2

3

3

1

2

2

2

3

2

2

2

3

3

36

1

1

1

2 8 0 0 00

4 9 0 0 00

3 5 0 0 00

9 4 0 0 00

164 8 0 0 00

7 7 0 0 00


Assets

Capital Stock:

$10.00 Par Value

January 1, 20--, 10,000 Shares Issued

Issued during Current Year, none

Balance, December 31, 20--, 10,000 Shares Issued

Retained Earnings:

Balance, January 1, 20--

Net Income after Federal Income Tax for 20--

Less Dividends Declared during 20--

Net Increase during 20--

Balance, December 31, 20--

Total Stockholders’ Equity, December 31, 20--

100 1 0 0 00

40 0 0 0 00


Statement of Stockholders' Equity


100 0 0 0 00

— 0 —

124 6 0 0 00

60 1 0 0 00

100 0 0 0 00

184 7 0 0 00

284 7 0 0 00

1

1

1

2

2

2

1

2

2

2

2

2

2

25

+1

26

1

1

1

(Correct Rulings)


Name

Assets

Current Assets:

Cash

Petty Cash

Accounts Receivable

Less Allowance for Uncollectible Accounts


Supplies—Office

Supplies—Store

Prepaid Insurance

Total Current Assets

Plant Assets:

Office Equipment

Less Accumulated Depreciation--Office Equipment

Store Equipment

Less Accumulated Depreciation--Store Equipment

Total Plant Assets

Total Assets

25 2 0 0 00

4 0 0 0 00

48 2 0 0 00

30 8 0 0 00

38 4 0 0 00

24 6 0 0 00


Balance Sheet

December 31, 20--

53 1 0 0 00

5 0 0 00

21 2 0 0 00

315 9 0 0 00

2 4 0 0 00

2 6 0 0 00

1 0 0 0 00

17 4 0 0 00

13 8 0 0 00

396 7 0 0 00

31 2 0 0 00

427 9 0 0 00

1

1

2

2

2

3

2

2

2

2

2

1

2

3

2

3

2

2

39

+1

40

1

1

1

(Correct Rulings)



Answers

1. One way to increase gross profit on sales is to 1. ca. decrease expenses.b. decrease sales revenue.c. increase sales revenue.d. increase cost of merchandise sold.

2. The total original price of all merchandise sold during a fiscal period is called 2. da. the cost of merchandise sold.b. the cost of goods sold.c. the cost of sales.d. all of these.

3. The revenue remaining after cost of merchandise sold has been deducted is 3. aa. gross profit on sales.b. cost of merchandise sold.c. net sales.d. total sales.

4. The earnings per share of a corporation cannot be compared to 4. aa. industry standards.b. last year’s earnings per share.c. the market price of the stock.d. management’s estimate of earnings per share.

5. Preparing financial statements that provide information about a business’s financial 5. bcondition, changes in this financial condition, and the progress of operations is anapplication of the accounting concepta. Consistent Reporting.b. Adequate Disclosure.c. Historical Cost.d. Matching Expenses with Revenue.

6. One way to improve an unacceptable component percentage for cost of merchandise sold is 6. ca. to sell more merchandise.b. to increase selling prices.c. to purchase from different vendors who offer better pricesd. none of these.

7. A financial statement that reports the amount of dividends is 7. ca. an income statement.b. a balance sheet.c. a statement of stockholders’ equityd. none of the above.

chapterTEST B

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Practices 20 Pts.Completing Financial Statements 102 Pts.


Total 129 Pts.


15


Answers


2. Revenue less cost of merchandise sold equals net income. 2. F

3. On an income statement, component percentages are calculated by dividing the amount 3. Fof each component by the amount of expenses.

4. Gross profit must be less than total expenses in order to provide for a desirable net income. 4. F

5. An income statement is used to report a business’s financial progress. 5. T

6. The owners’ equity of a business is affected when a business earns an income or 6. Tincurs a loss.

7. When more detailed information about an item on a financial statement is needed, a 7. Tsupporting schedule may be prepared.

8. An income statement for a merchandising business has three main sections: revenue 8. Tsection, cost of merchandise sold section, and expenses section.

9. Total expenses on an income statement are deducted from the gross profit on sales to 9. Tfind net income.

10. Increasing sales revenue while keeping cost of merchandise sold the same will 10. Tincrease gross profit on sales.

11. Most businesses correct an unacceptable component percentage for gross profit by 11. Fsimply increasing the markup on merchandise purchased for sale because an increasedselling price will always increase profit.

12. A balance sheet reports the financial condition of a business on a specific date. 12. T

13. If a company has determined that the acceptable component percentage for cost of 13. Fmerchandise sold is not more than 51.1%, the current year’s actual component percentageof 48.9% is unacceptable.

14. Reporting financial information the same way from one fiscal period to the next 14. Fis an application of the accounting concept Adequate Disclosure.

15. Dividends are reported on the statement of stockholders’ equity and the balance sheet. 15. F

16. Earnings per share is calculated by dividing net income after federal income taxes 16. Tby the number of shares outstanding.

17. Low price-earnings ratios are typically associated with high growth companies. 17. F

18. A value assigned to a share of stock and printed on a stock certificate is called par value. 18. T

19. Dividends Payable is a long-term liability. 19. F

20. Every amount on a financial statement is accompanied by a related description. 20. F


Part Two—Completing Financial StatementsGriffin Sales prepared the following work sheet for the year endedDecember 31 of the current year.

Directions:

1. On page 3 of this test, prepare an income statement through thepresentation of gross profit on sales. Calculate and record the componentpercentages for (a) cost of merchandise sold and (b) gross profit on sales.Round percentage calculations to the nearest 0.1%.

2. Prepare a statement of stockholders’ equity on page 4 of this test. Thecompany has 10,000 shares of $10.00 common stock outstanding and didnot issue any shares of stock during the year.

3. Prepare the asset portion of the balance sheet in report form on page 5 ofthis test.

1 2 3 4


DEBIT CREDIT

ADJUSTMENTS

DEBIT CREDIT

INCOME STATEMENT

DEBIT CREDIT

BALANCE SHEET

DEBIT CREDIT

5 6 7 8

1

2

3

4

5

6

7

8

9

10

11

12

25

26

27

28

29

30

31

32

33

34

52

53

54

55

56

1

2

3

4

5

6

7

8

9

10

11

12

25

26

27

28

29

30

31

32

33

34

52

53

54

55

56

Cash

Petty Cash

Accounts Receivable



Supplies—Office

Supplies—Store

Prepaid Insurance

Office Equipment

Accum. Depreciation--Office Equipment

Store Equipment

Accum. Depreciation--Store Equipment

Capital Stock

Retained Earnings

Dividends

Income Summary

Sales

Sales Discount


Purchases

Purchases Discount



Net Income

24 3 0 0 00

5 0 0 00

26 1 0 0 00

234 5 0 0 00

7 2 0 0 00

7 8 0 0 00

6 9 0 0 00

49 3 0 0 00

36 4 0 0 00

50 0 0 0 00

4 5 0 0 00

8 5 0 0 00

176 4 0 0 00

45 0 0 0 00

610 5 0 0 00

7 0 0 00

25 4 0 0 00

17 6 0 0 00

100 0 0 0 00

124 8 0 0 00

332 0 0 0 00

3 8 0 0 00

6 2 0 0 00

610 5 0 0 00

16 2 0 0 00

4 8 0 0 00

51 7 0 0 00

2 8 0 0 00

16 2 0 0 00

4 9 0 0 00

5 3 0 0 00

5 5 0 0 00

6 8 0 0 00

5 4 0 0 00

51 7 0 0 00

16 2 0 0 00

4 5 0 0 00

8 5 0 0 00

176 4 0 0 00

49 8 0 0 00

221 2 0 0 00

120 8 0 0 00

342 0 0 0 00

332 0 0 0 00

3 8 0 0 00

6 2 0 0 00

342 0 0 0 00

342 0 0 0 00

24 3 0 0 00

5 0 0 00

26 1 0 0 00

218 3 0 0 00

2 3 0 0 00

2 5 0 0 00

1 4 0 0 00

49 3 0 0 00

36 4 0 0 00

50 0 0 0 00

411 1 0 0 00

411 1 0 0 00

3 5 0 0 00

32 2 0 0 00

23 0 0 0 00

100 0 0 0 00

124 8 0 0 00

290 3 0 0 00

120 8 0 0 00

411 1 0 0 00

Griffin Sales

Work Sheet


(e)

(d)

(a)

(b)

(c)

(f)

(g)

(d)

(h)

Name


% OFSALES

Revenue:

Sales



Net Sales


Merchandise Inventory, January 1, 20--

Purchases



Net Purchases

Cost of Merchandise Available for Sale

Less Merchandise Inventory December 31, 20--


Gross Profit on Sales

332 0 0 0 00

13 0 0 0 00

234 5 0 0 00

166 4 0 0 00

400 9 0 0 00

218 3 0 0 00

Griffin Sales

Income Statement


319 0 0 0 00

182 6 0 0 00

136 4 0 0 00

100.0

57.2

42.8

1

2

2

3

3

1

2

2

2

3

2

2

2

3

3

36

1

1

1

3 8 0 0 00

6 2 0 0 00

4 5 0 0 00

8 5 0 0 00

176 4 0 0 00

10 0 0 0 00


Assets

Capital Stock:

$10.00 Par Value


Issued during Current Year, none


Retained Earnings:






Total Stockholders' Equity, December 31, 20--

120 8 0 0 00

50 0 0 0 00

Griffin Sales

Statement of Stockholders' Equity


100 0 0 0 00

— 0 —

124 8 0 0 00

70 8 0 0 00

100 0 0 0 00

195 6 0 0 00

295 6 0 0 00

1

1

1

2

2

2

1

2

2

2

2

2

2

25

+1

26

1

1

1

(Correct Rulings)


Assets

Current Assets:

Cash

Petty Cash

Accounts Receivable



Supplies—Office

Supplies—Store

Prepaid Insurance


Plant Assets:

Office Equipment

Less Accumulated Depreciation--Office Equipment

Store Equipment

Less Accumulated Depreciation--Store Equipment

Total Plant Assets

Total Assets

26 1 0 0 00

3 5 0 0 00

49 3 0 0 00

32 2 0 0 00

36 4 0 0 00

23 0 0 0 00

Griffin Sales

Balance Sheet

December 31, 20--

24 3 0 0 00

5 0 0 00

22 6 0 0 00

218 3 0 0 00

2 3 0 0 00

2 5 0 0 00

1 4 0 0 00

17 1 0 0 00

13 4 0 0 00

271 9 0 0 00

30 5 0 0 00

302 4 0 0 00

1

1

2

2

2

3

2

2

2

2

2

1

2

3

2

3

2

2

39

+1

40

1

1

1

(Correct Rulings)

Name



Answers


2. A financial statement that reports the amount of dividends is 2. ca. an income statement.b. a balance sheet.c. a statement of stockholders’ equityd. none of the above.

3. The earnings per share of a corporation cannot be compared to 3. aa. industry standards.b. last year’s earnings per share.c. the market price of the stock.d. management’s estimate of earnings per share.

4. The revenue remaining after cost of merchandise sold has been deducted is 4. aa. gross profit on sales.b. cost of merchandise sold.c. net sales.d. total sales.

5. A report prepared to give details about an item on a principal financial statement is 5. ca. an income statement.b. a balance sheet.c. a supporting schedule.d. none of these.

6. The primary difference between the income statement of a service business organized 6. das a proprietorship and a merchandising business organized as a corporation isa. the number of owners.b. the expense accounts.c. the component percentages.d. the cost of merchandise sold section.

7. If the component percentage for gross profit on sales is 35.3%, 7. ba. the business is not earning enough profit.b. 35.3 cents out of every dollar of sales is gross profit.c. 35.3 cents out of every dollar of sales is shared by the stockholders.d. none of these.

chapterTEST A

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Practices 18 Pts.Journalizing and Posting Adjusting and Closing Entries;

Preparing a Post-Closing Trial Balance225 Pts.

Identifying Accounting Concepts and Practices 6 Pts.Total 249 Pts.


16


Answers

1. General ledger account balances are changed only by posting journal entries. 1. T

2. Information needed for journalizing adjusting entries is taken from the Income Statement 2. Fand Balance Sheet columns of a work sheet.

3. Information needed for journalizing closing entries is taken from the Adjustment columns 3. Fof a work sheet.

4. At the end of a fiscal period, the temporary accounts are closed to prepare the general 4. Tledger for the next fiscal period.

5. Income Summary is a temporary account and is used only at the beginning of 5. Fa fiscal period.

6. Amounts needed for the closing entries are obtained from the Trial Balance columns of 6. Fa work sheet.

7. The amount of the journal entry to close the income summary account can be obtained 7. Tfrom the statement of stockholders’ equity.

8. The entry to close Income Summary transfers the amount of net income or net loss to 8. Fthe capital stock account.

9. The balance of the dividends account is closed to Retained Earnings. 9. T

10. The dividends account is a temporary account and must begin each fiscal period with 10. Ta zero balance.

11. All general ledger accounts that have balances are listed on a post-closing trial balance. 11. T

12. Adjusting entries bring subsidiary ledger accounts up to date. 12. F

13. A prepaid insurance adjustment includes a debit to Insurance Expense and a credit 13. Tto Prepaid Insurance.

14. Revenue accounts are transferred to the credit side of the income summary account. 14. T

15. Expense accounts are closed by debiting the expense accounts and crediting 15. FIncome Summary.

16. The income summary account is closed into Retained Earnings. 16. T

17. A corporation having a net loss would record a credit to Income Summary to 17. Tclose the account.

18. After all closing entries are posted, the temporary accounts have zero balances. 18. T


Part Two—Journalizing and Posting Adjusting andClosing Entries; Preparing a Post-Closing Trial BalanceUse the following work sheet of Bush Discount Store for the year endedDecember 31 of the current year.

Directions:1. Use page 24 of the journal on page 3 of this test. Journalize the adjusting entries.2. Post the adjusting entries to the general ledger accounts on pages 4-6 of this test.3. Use page 25 of the journal on page 3 of this test. Journalize the closing entries.4. Post the closing entries.5. Prepare a post-closing trial balance on the form on page 7 of this test.

1 2 3 4


DEBIT CREDIT

ADJUSTMENTS

DEBIT CREDIT

INCOME STATEMENT

DEBIT CREDIT

BALANCE SHEET

DEBIT CREDIT

5 6 7 8

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

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

Cash

Accounts Receivable



Supplies—Office

Prepaid Insurance

Office Equipment

Accumulated Depreciation--Office Equip.

Federal Income Tax Payable

Capital Stock

Retained Earnings

Dividends

Income Summary

Sales

Purchases

Advertising Expense

Depreciation Expense--Office Equipment

Insurance Expense


Supplies Expense--Office

Uncollectible Accounts Expense


Net Income

53 6 0 0 00

43 5 6 0 00

349 1 9 0 00

4 9 0 0 00

5 9 2 0 00

42 5 6 0 00

40 0 0 0 00

221 6 7 0 00

34 0 8 0 00

3 0 4 0 00

4 0 0 0 00

802 5 2 0 00

2 3 0 00

14 3 2 0 00

300 0 0 0 00

168 8 4 0 00

319 1 3 0 00

802 5 2 0 00

12 4 0 0 00

7 5 0 0 00

5 6 0 0 00

4 2 0 0 00

1 6 0 0 00

3 6 0 00

31 6 6 0 00

1 6 0 0 00

12 4 0 0 00

4 2 0 0 00

5 6 0 0 00

7 5 0 0 00

3 6 0 00

31 6 6 0 00

12 4 0 0 00

221 6 7 0 00

34 0 8 0 00

7 5 0 0 00

5 6 0 0 00

3 0 4 0 00

4 2 0 0 00

1 6 0 0 00

4 3 6 0 00

294 4 5 0 00

24 6 8 0 00

319 1 3 0 00

319 1 3 0 00

319 1 3 0 00

319 1 3 0 00

53 6 0 0 00

43 5 6 0 00

336 7 9 0 00

7 0 0 00

3 2 0 00

42 5 6 0 00

40 0 0 0 00

517 5 3 0 00

517 5 3 0 00

1 8 3 0 00

21 8 2 0 00

3 6 0 00

300 0 0 0 00

168 8 4 0 00

492 8 5 0 00

24 6 8 0 00

517 5 3 0 00

Bush Discount Store

Work Sheet


Name



1

2

3

4

5

6

7

8

9

10

11

12

13

14

1

2

3

4

5

6

7

8

9

10

11

12

13

14


POST.REF.

3120--Dec.

Adjusting Entries



Income Summary



Supplies--Office

Insurance Expense

Prepaid Insurance


Accumulated Depreciation--Office Equipment



6160

1130

3150

1140

6150

1150

6130

1160

6120

1220

7110

2110

1 6 0 0 00

12 4 0 0 00

4 2 0 0 00

5 6 0 0 00

7 5 0 0 00

3 6 0 00

24

1 6 0 0 00

12 4 0 0 00

4 2 0 0 00

5 6 0 0 00

7 5 0 0 00

3 6 0 00

1

4

3

3

3

3

3

3

3

3

3

3

3

38

POIN

TS �


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17


POST.REF.

3120--Dec.

Closing Entries

Sales

Income Summary

Income Summary

Purchases

Advertising Expense


Insurance Expense





Income Summary

Retained Earnings

Retained Earnings

Dividends

4110

3150

3150

5110

6110

6120

6130

6140

6150

6160

7110

3150

3120

3120

3130

319 1 3 0 00

282 0 5 0 00

24 6 8 0 00

40 0 0 0 00

25

319 1 3 0 00

221 6 7 0 00

34 0 8 0 00

7 5 0 0 00

5 6 0 0 00

3 0 4 0 00

4 2 0 0 00

1 6 0 0 00

4 3 6 0 00

24 6 8 0 00

40 0 0 0 00

1

4

3

3

3

3

3

3

3

3

3

3

3

3

3

3

47

POIN

TS �


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3120--Dec. Balance �

1110Cash

53 6 0 0 00

POIN

TS �

GENERAL LEDGER

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT


1120Accounts Receivable

43 5 6 0 00

BALANCE

DEBIT CREDITDEBIT CREDIT

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G24

1130Allowance for Uncollectable Accounts

1 6 0 0 00

2 3 0 00

1 8 3 0 00 4

BALANCE


ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G24

1140Merchandise Inventory

12 4 0 0 00

349 1 9 0 00

336 7 9 0 00 4

BALANCE


ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G24

1150Supplies—Office

4 2 0 0 00

4 9 0 0 00

7 0 0 00 4

BALANCE


ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G24


4

BALANCE


5 6 0 0 00

5 9 2 0 00

3 2 0 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT


1210Office Equipment

BALANCE


42 5 6 0 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G24

1220Accumulated Depreciation—Office Equipment

4

20

BALANCE


7 5 0 0 00

14 3 2 0 00

21 8 2 0 00


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT


3110Capital Stock

300 0 0 0 00

POIN

TS �

GENERAL LEDGER

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

31


G25

G25

3120Retained Earnings

168 8 4 0 00

193 5 2 0 00

153 5 2 0 00

4

4

BALANCE


40 0 0 0 00

24 6 8 0 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G25

3130Dividends

40 0 0 0 00 ————— 5

BALANCE


40 0 0 0 00

—————

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

31

31

20--Dec. G24

G25

G25

G25

3150Income Summary

319 1 3 0 00

12 4 0 0 00

—————

4

4

4

5

BALANCE


12 4 0 0 00

282 0 5 0 00

24 6 8 0 00

306 7 3 0 00

24 6 8 0 00

—————

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G25

4110Sales

319 1 3 0 00

319 1 3 0 00

————— 5

BALANCE


—————

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G25

5110Purchases

5

44

BALANCE


221 6 7 0 00

221 6 7 0 00

————— —————

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

3120--Dec. G24

2110Federal Income Tax Payable

4

BALANCE


3 6 0 00 3 6 0 00

Name


POIN

TS �

GENERAL LEDGER

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

20--Dec. G24

G25

6160Uncollectable Accounts Expense

1 6 0 0 00

1 6 0 0 00

—————

4

5

BALANCE


1 6 0 0 00

—————

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

31

20--Dec. G24

G25


—————

4

5

5 6 0 0 00

—————5 6 0 0 00

5 6 0 0 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G25


3 0 4 0 00

————— 5

BALANCE


3 0 4 0 00 —————

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

20--Dec. G24

G25

6150Supplies Expense—Office

4 2 0 0 00 —————

4

5

BALANCE


4 2 0 0 00

—————

4 2 0 0 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

31


G24

G25

7110Federal Income Tax Expense

3 6 0 00

4 0 0 0 00

4 3 6 0 00

—————

4

5

55

BALANCE


—————4 3 6 0 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G25

6110Advertising Expense

5

BALANCE


34 0 8 0 00

————— —————34 0 8 0 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

20--Dec. G25

G25

6120Depreciation Expense—Office Equipment

4

5

BALANCE


7 5 0 0 00

7 5 0 0 00 7 5 0 0 00

——————————



Cash

Accounts Receivable



Supplies—Office

Prepaid Insurance

Office Equipment



Capital Stock

Retained Earnings

Totals

53 6 0 0 00

43 5 6 0 00

336 7 9 0 00

7 0 0 00

3 2 0 00

42 5 6 0 00

477 5 3 0 00

Bush Discount Store


December 31, 20--

1 8 3 0 00

21 8 2 0 00

3 6 0 00

300 0 0 0 00

153 5 2 0 00

477 5 3 0 00

2

2

2

2

2

2

2

2

2

2

2

3

28

+1

29

1

1

1

(Correct Rulings)

Name



Answers

1. The two types of journal entries needed to change general ledger account balances at 1. cthe end of the fiscal period area. adjusting and correcting entries.b. closing and correcting entries.c. adjusting and closing entries.d. none of these.

2. Recording closing entries to prepare temporary accounts for the next fiscal period is 2. aan application of the accounting concepta. Matching Expenses with Revenue.b. Adequate Disclosure.c. Accounting Period Cycle.d. Consistent Reporting.

3. The amounts needed for closing entries are obtained from the work sheet’s 3. ca. Trial Balance and Balance Sheet columns.b. Adjustments and Balance Sheet columns.c. Income Statement and Balance Sheet columns.d. Balance Sheet columns.

4. To close the revenue account, the revenue account balance for the fiscal period is 4. atransferred intoa. the income summary account.b. the retained earnings account.c. the cash account.d. none of these.

5. To close the sales account, 5. ba. debit Sales; credit Cash.b. debit Sales; credit Income Summary.c. debit Income Summary; credit Sales.d. debit Cash; credit Sales.

6. To close the income summary account when there is a net income, 6. ca. debit Cash; credit Income Summary.b. debit Retained Earnings; credit Income Summary.c. debit Income Summary; credit Retained Earnings.d. debit Capital Stock; credit Retained Earnings.

chapterTEST B

PerfectScore

YourScoreName

Analyzing Accounting Concepts and Practices 18 Pts.Journalizing and Posting Adjusting and Closing Entries;

Preparing a Post-Closing Trial Balance225 Pts.

Identifying Accounting Concepts and Practices 6 Pts.Total 249 Pts.


16


Answers

1. General ledger account balances are changed only by posting journal entries. 1. T

2. Information needed for journalizing closing entries is taken from the Adjustment 2. Fcolumns of a work sheet.

3. After all closing entries are posted, the temporary accounts have zero balances. 3. T

4. A temporary account is closed by transferring its balance out of the account. 4. T

5. A prepaid insurance adjustment includes a debit to Insurance Expense and a credit 5. Tto Prepaid Insurance.

6. The closing entry for income statement accounts with debit balances closes only the 6. Fexpense accounts.

7. Amounts needed for the closing entries are obtained from the Trial Balance columns 7. Fof a work sheet.

8. The amount of the journal entry to close the income summary account can be obtained 8. Tfrom the statement of stockholders’ equity.

9. Information needed for journalizing adjusting entries is taken from the Income 9. FStatement and Balance Sheet columns of a work sheet.

10. The entry to close Income Summary transfers the amount of net income or net loss 10. Fto the capital stock account.

11. Dividends are closed through the income summary account. 11. F

12. No general ledger account shows its up-to-date balance until the end of 12. Fthe fiscal period.

13. Preparing the general ledger for the next fiscal period is an application of the 13. FBusiness Entity accounting concept.

14. Accounts with a zero balance are listed on a post-closing trial balance. 14. F

15. At the end of a fiscal period, the temporary accounts are closed to prepare the 15. Tgeneral ledger for the next fiscal period.

16. Closing the revenue account at the end of a fiscal period is an application of the 16. Taccounting concept Matching Expenses with Revenue.

17. Expense accounts are closed by debiting the expense accounts and crediting 17. FIncome Summary.

18. A closing entry is made to close Retained Earnings into Income Summary. 18. F


Part Two—Journalizing and Posting Adjusting and ClosingEntries; Preparing a Post-Closing Trial BalanceUse the following work sheet of Bravo Sales for the year ended December 31of the current year.

Directions:

1. Use page 24 of the journal on page 3 of this test. Journalize the adjusting entries.2. Post the adjusting entries to the general ledger accounts on pages 4-6 of this test.3. Use page 25 of the journal on page 3 of this test. Journalize the closing entries.4. Post the closing entries.5. Prepare a post-closing trial balance on the form on page 7 of this test.

Cash

Accounts Receivable



Supplies—Office

Prepaid Insurance

Office Equipment

Accumulated Depreciation--Office Equip.


Capital Stock

Retained Earnings

Dividends

Income Summary

Sales

Purchases

Advertising Expense


Insurance Expense





Net Income

1 2 3 4


DEBIT CREDIT

ADJUSTMENTS

DEBIT CREDIT

INCOME STATEMENT

DEBIT CREDIT

BALANCE SHEET

DEBIT CREDIT

5 6 7 8

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

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

52 8 0 0 00

44 6 0 0 00

348 2 0 0 00

5 2 0 0 00

6 4 5 0 00

42 6 6 0 00

30 0 0 0 00

220 9 0 0 00

35 1 0 0 00

4 4 2 0 00

5 0 0 0 00

795 3 3 0 00

2 3 0 00

15 4 2 0 00

300 0 0 0 00

158 2 0 0 00

321 4 8 0 00

795 3 3 0 00

6 6 0 0 00

7 2 0 0 00

6 0 0 0 00

4 6 0 0 00

1 8 0 0 00

2 2 9 00

26 4 2 9 00

1 8 0 0 00

6 6 0 0 00

4 6 0 0 00

6 0 0 0 00

7 2 0 0 00

2 2 9 00

26 4 2 9 00

6 6 0 0 00

220 9 0 0 00

35 1 0 0 00

7 2 0 0 00

6 0 0 0 00

4 4 2 0 00

4 6 0 0 00

1 8 0 0 00

5 2 2 9 00

291 8 4 9 00

29 6 3 1 00

321 4 8 0 00

321 4 8 0 00

321 4 8 0 00

321 4 8 0 00

52 8 0 0 00

44 6 0 0 00

341 6 0 0 00

6 0 0 00

4 5 0 00

42 6 6 0 00

30 0 0 0 00

512 7 1 0 00

512 7 1 0 00

2 0 3 0 00

22 6 2 0 00

2 2 9 00

300 0 0 0 00

158 2 0 0 00

483 0 7 9 00

29 6 3 1 00

512 7 1 0 00

Bravo Sales

Work Sheet


Name



1

2

3

4

5

6

7

8

9

10

11

12

13

14

1

2

3

4

5

6

7

8

9

10

11

12

13

14


POST.REF.

3120--Dec.

Adjusting Entries



Income Summary



Supplies--Office

Insurance Expense

Prepaid Insurance





6160

1130

3150

1140

6150

1150

6130

1160

6120

1220

7110

2110

1 8 0 0 00

6 6 0 0 00

4 6 0 0 00

6 0 0 0 00

7 2 0 0 00

2 2 9 00

24

1 8 0 0 00

6 6 0 0 00

4 6 0 0 00

6 0 0 0 00

7 2 0 0 00

2 2 9 00

1

4

3

3

3

3

3

3

3

3

3

3

3

38

POIN

TS �


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17


POST.REF.

3120--Dec.

Closing Entries

Sales

Income Summary

Income Summary

Purchases

Advertising Expense


Insurance Expense





Income Summary

Retained Earnings

Retained Earnings

Dividends

4110

3150

3150

5110

6110

6120

6130

6140

6150

6160

7110

3150

3120

3120

3130

321 4 8 0 00

285 2 4 9 00

29 6 3 1 00

30 0 0 0 00

3 2 1 4 8 0 00

2 2 0 9 0 0 00

3 5 1 0 0 00

7 2 0 0 00

6 0 0 0 00

4 4 2 0 00

4 6 0 0 00

1 8 0 0 00

5 2 2 9 00

2 9 6 3 1 00

3 0 0 0 0 00

25

1

4

3

3

3

3

3

3

3

3

3

3

3

3

3

3

47

POIN

TS �


ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT


1110Cash

52 8 0 0 00

POIN

TS �

GENERAL LEDGER

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT


1120Accounts Receivable

44 6 0 0 00

BALANCE


ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G24

1130Allowance for Uncollectable Accounts

1 8 0 0 00

2 3 0 00

2 0 3 0 00 4

BALANCE


ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G24

1140Merchandise Inventory

6 6 0 0 00

348 2 0 0 00

341 6 0 0 00 4

BALANCE


ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G24

1150Supplies—Office

4 6 0 0 00

5 2 0 0 00

6 0 0 00 4

BALANCE


ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G24


4

BALANCE


6 0 0 0 00

6 4 5 0 00

4 5 0 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT


1210Office Equipment

BALANCE


42 6 6 0 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G24

1220Accumulated Depreciation—Office Equipment

4

20

BALANCE


7 2 0 0 00

15 4 2 0 00

22 6 2 0 00


Name

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT


3110Capital Stock

300 0 0 0 00

POIN

TS �

GENERAL LEDGER

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

31


G25

G25

3120Retained Earnings

158 2 0 0 00

187 8 3 1 00

157 8 3 1 00

4

4

BALANCE


30 0 0 0 00

29 6 3 1 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G25

3130Dividends

30 0 0 0 00 ————— 5

BALANCE


30 0 0 0 00

—————

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

31

31

20--Dec. G24

G25

G25

G25

3150Income Summary

321 4 8 0 00

6 6 0 0 00

—————

4

4

4

5

BALANCE


6 6 0 0 00

285 2 4 9 00

29 6 3 1 00

314 8 8 0 00

29 6 3 1 00

—————

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G25

4110Sales

321 4 8 0 00

321 4 8 0 00

————— 5

BALANCE


—————

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G25

5110Purchases

5

44

BALANCE


220 9 0 0 00

220 9 0 0 00

————— —————

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

3120--Dec. G24

2110Federal Income Tax Payable

4

BALANCE


2 2 9 00 2 2 9 00


POIN

TS �

GENERAL LEDGER

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

20--Dec. G24

G25

6160Uncollectable Accounts Expense

1 8 0 0 00

1 8 0 0 00

—————

4

5

BALANCE


1 8 0 0 00

—————

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

3120--Dec. G24

G25


—————

4

5

6 0 0 0 00

—————6 0 0 0 00

6 0 0 0 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31


G25


4 4 2 0 00

————— 5

BALANCE


4 4 2 0 00 —————

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

20--Dec. G24

G25

6150Supplies Expense—Office

4 6 0 0 00 —————

4

5

BALANCE


4 6 0 0 00

—————

4 6 0 0 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

31


G24

G25

7110Federal Income Tax Expense

2 2 9 00

5 0 0 0 00

5 2 2 9 00

—————

4

5

55

BALANCE


—————5 2 2 9 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

20--Dec. Balance

G25

6110Advertising Expense

5

BALANCE


35 1 0 0 00

————— —————35 1 0 0 00

ACCOUNT NO.

DATE ITEM POST.REF.

ACCOUNT

31

31

20--Dec. G25

G25

6120Depreciation Expense—Office Equipment

4

5

BALANCE


7 2 0 0 00

7 2 0 0 00 7 2 0 0 00

——————————


Name


Cash

Accounts Receivable



Supplies—Office

Prepaid Insurance

Office Equipment



Capital Stock

Retained Earnings

Totals

52 8 0 0 00

44 6 0 0 00

341 6 0 0 00

6 0 0 00

4 5 0 00

42 6 6 0 00

482 7 1 0 00

Bravo Sales


December 31, 20--

2 0 3 0 00

22 6 2 0 00

2 2 9 00

300 0 0 0 00

157 8 3 1 00

482 7 1 0 00

2

2

2

2

2

2

2

2

2

2

2

3

28

+1

29

1

1

1

(Correct Rulings)



Answers

1. The amounts needed for closing entries are obtained from the work sheet’s 1. ca. Trial Balance and Balance Sheet columns.b. Adjustments and Balance Sheet columns.c. Income Statement and Balance Sheet columns.d. Balance Sheet columns.

2. To close the revenue account, the revenue account balance for the fiscal period is 2. atransferred intoa. the income summary account.b. the retained earnings account.c. the cash account.d. none of these.

3. To close the expense and cost accounts, 3. ca. debit the expense and cost accounts; credit Income Summary.b. debit the expense accounts; credit the capital accounts.c. debit Income Summary; credit the expense and cost accounts.d. debit Income Summary; credit the capital accounts.

4. To close the income summary account when there is a net loss, 4. ba. debit Cash; credit Income Summary.b. debit Retained Earnings; credit Income Summary.c. debit Income Summary; credit Retained Earnings.d. debit the Capital Stock; credit Income Summary.

5. To close the dividends account, 5. da. debit Dividends; credit Income Summary.b. debit Income Summary; credit Dividends.c. debit Dividends; credit Capital Stock.d. debit Retained Earnings; credit Dividends.

6. After closing entries have been posted, the accounts that remain open are the asset, 6. aliability, and a. capital accounts.b. cost accounts.c. dividend account.d. expense accounts.

TEST A

par ttwo

PerfectScore

YourScoreName

Identifying Accounting Terms 15 Pts.Analyzing Accounting Practices 15 Pts.


Total 206 Pts.


Part One—Identifying Accounting TermsDirections: Select the one term in Column I that best fits each definition inColumn II. Print the letter identifying your choice in the Answers column.


A. accounts payable ledger 1. The report that summarizes the cash and credit card sales of a 1. Npoint-of-sales terminal.

B. capital stock 2. A federal tax paid for hospital insurance. 2. H

C. controlling account 3. A subsidiary ledger containing only accounts for vendors 3. Afrom whom items are purchased or bought on account.

D. cost of merchandise sold 4. The revenue remaining after cost of merchandise sold has 4. Fbeen deducted.

E. employee earnings 5. An account in a general ledger that summarizes all accounts 5. Crecord in a subsidiary ledger.

F. gross profit on sales 6. A listing of customer accounts, account balances, and total 6. Kamount due from all customers.

G. markup 7. The amount added to the cost of merchandise to establish 7. Gthe selling price.

H. Medicare tax 8. A business form used to record payroll information. 8. I

I. payroll register 9. A business form used to record details affecting payments 9. Emade to an employee.

J. purchases allowance 10. The total original price of all merchandise sold during 10. Da fiscal period.

K. schedule of 11. Credit allowed for part of the purchase price of merchandise 11. Jaccounts receivable that is not returned, resulting in a decrease in the customer’s

accounts payable.L. subsidiary ledger 12. A deduction from total earnings for each person legally 12. O

supported by a taxpayer, including the employee.M. supporting schedule 13. Total shares of ownership in a corporation. 13. B

N. terminal summary 14. A ledger that is summarized in a single general ledger account. 14. L

O. withholding allowance 15. A report prepared to give details about an item on a 15. Mprincipal financial statement.



Answers

1. The purpose of the post-closing trial balance is to prove the general ledger equality 1. Tof debits and credits.

2. Preparing the general ledger for the next fiscal period is an application of the Business 2. FEntity accounting concept.

3. The closing entry for income statement accounts with debit balances closes only 3. Fthe expense accounts.

4. A temporary account is closed by transferring its balance out of the account. 4. T

5. Information needed for journalizing closing entries is taken from the Adjustments 5. Fcolumns of a work sheet.

6. The amount recorded in Income Summary is extended to the Balance Sheet Debit 6. For Credit column.

7. When a business’s expenses are less than the gross profit on sales, the difference is 7. Fknown as a net loss.

8. Increasing sales revenue while keeping cost of merchandise sold the same will 8. Tincrease gross profit on sales.

9. A work sheet is used to plan adjustments and sort financial statement information. 9. T

10. The column totals of an employee earnings record provide the debit and credit 10. Famounts needed to journalize a payroll.

11. A corporation having a net income before federal income tax of $90,000.00 will pay a 11. Thigher rate of tax than a company having $40,000.00 of net income before federal income tax.

12. A company having earnings per share of $14.50 is always more profitable than a 12. Fcompany having earnings per share of $3.25.

13. Assets that will be used for a number of years in the operation of a business are 13. Tcalled plant assets.

14. A customer must ship damaged merchandise back to the vendor to obtain a 14. Fpurchase allowance.

15. A corporation has the legal rights of a person. 15. T

Name


Part Three—Journalizing TransactionsDirections:

1. Journalize the following selected transactions completed during April of the current year bySweeney Camera Shop. Use page 7 of a sales, purchases, general, cash receipts, and cashpayments journal. Sales tax rate is 6%. Payroll tax rates are as follows: social security tax, 6.2%;Medicare tax, 1.45%; federal unemployment tax, 0.8%; state unemployment tax, 5.4%. No totalearnings have exceeded the tax base for calculating unemployment taxes. Source documentsare abbreviated as follows: check, C; credit memorandum, CM; debit memorandum, DM;memorandum, M; purchase invoice, P; receipt, R; sales invoice, S; terminal summary, TS.

Transac t ionsApr. 1. Purchased merchandise for cash, $700.00. C83.

4. Purchased merchandise on account from Chapman Lenses, $575.00. P63.7. Sold merchandise on account to Centex Magazine, $650.00, plus sales tax, $39.00;

total, $689.00. S101.8. Paid cash to Lancing Company for merchandise with a list price of $400.00, less a

40% trade discount. C84.9. Returned merchandise to Chapman Lenses, $75.00, from P63. DM14.

10. Granted credit to Wesley Adams for merchandise returned, $320.00, plus sales tax, $19.20,from S73; total, $339.20. CM12.

11. Bought office supplies on account from Liao Materials, $230.00. M39.13. Paid cash for store supplies, $85.00. C85.14. Received cash on account from Centex Magazine, $675.22, covering S101 for $689.00,

less 2% sales discount, $13.78. R52.15. Paid cash for monthly payroll, $4,232.09 (total payroll, $4,940.00, less deductions:

employee income tax, $330.00; social security tax, $306.28; Medicare tax, $71.63). C86.15. Recorded employer payroll tax expense for the monthly pay period ended April 15. M40.17. Paid cash on account to Chapman Lenses, $500.00, covering P63 for $575.00, less DM14,

$75.00; no discount. C87.18. Sold merchandise on account to Washington School, $550.00. Washington School is

exempt from sales tax. S102.19. Paid cash for utilities, $750.00. C88.23. Discovered that a sale for $236.00 on account to Davis Manchue on March 30 was

incorrectly charged to the account of Daniel Marchase. M41.24. Purchased merchandise on account from Atlantic Company, $1,273.00. P64.28. Paid cash on account to Liao Materials, $220.80, covering P61 for $230.00, less a 4% cash

discount. C89.29. Received cash on account from Lea Studios, $400.00, covering S88. R53.30. Paid cash to replenish the petty cash fund, $65.55: store supplies, $25.36;

advertising, $22.05; miscellaneous, $16.89; cash short, $1.25. C90.30. Recorded cash and credit card sales, $4,200.00, plus sales tax, $252.00; total, $4,452.00. TS20.

2. Total and rule the sales journal.3. Total and rule the purchases journal.4. Total and rule the cash receipts journal.5. Total and rule the cash payments journal.



1

2

3

4

5

6

1

2

3

4

5

6


PURCH.NO.

POST.REF.

4

24

30

20--Apr. Chapman Lenses

Atlantic Company

Total

63

64

5 7 5 00

1 2 7 3 00

1 8 4 8 00

7

4

4

2

10

+1

11

POIN

TS �

(Correct Rulings)

SALES JOURNAL PAGE

1

2

3

4

5

6

1

2

3

4

5

6


RECEIVABLEDEBIT

SALESCREDIT

SALENO.

POST.REF.


1 2 3

7

18

30

20--Apr. Centex Magazine

Washington School

Totals

101

102

6 8 9 00

5 5 0 00

1 2 3 9 00

7

6 5 0 00

5 5 0 00

1 2 0 0 00

3 9 00

3 9 00

6

5

5

16

+1

17

POIN

TS �

(Correct Rulings)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15


POST.REF.

9

10

11

15

23

20--Apr. Accounts Payable/Chapman Lenses



Sales Tax Payable

Accounts Receivable/Wesley Adams

Supplies--Office

Accounts Payable/Liao Materials

Payroll Tax Expense





Davis Manchue

Daniel Marchase

DM14

CM12

M39

M40

M41

7 5 00

3 2 0 00

1 9 20

2 3 0 00

6 8 4 19

2 3 6 00

7

7 5 00

3 3 9 20

2 3 0 00

3 0 6 28

7 1 63

3 9 52

2 6 6 76

2 3 6 00

5

2

4

2

3

4

3

4

2

2

2

2

4

3

42

POIN

TS �


CA

SH R

ECEI

PTS

JOU

RNA

LP

AG

E

12

34

5

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

DAT

EA

CC

OU

NT

TIT

LE

GE

NE

RA

L

DE

BIT

CR

ED

IT

6

DO

C.

NO

.P

OS

T.

RE

F.

AC

CO

UN

TS

RE

CE

IVA

BL

EC

RE

DIT

SA

LE

SC

RE

DIT

SA

LE

S T

AX

PA

YA

BL

EC

RE

DIT

14 29 30 30

20--

Apr

.C

ente

x M

aga

zin

e

Lea

Stu

dio

s

� Tot

als

R52

R53

TS2

0�

7

68

900

40

000

10

89

00

42

00

00

42

00

00

25

200

25

200

13

78

13

78

6 5 7 7 25 +1 26POINTS �C

AS

HD

EB

IT

67

522

40

000

44

52

00

55

27

22

7

SA

LE

SD

ISC

OU

NT

DE

BIT

(Cor

rect

Ru

lin

gs)

Name


CA

SH P

AYM

ENTS

JOU

RNA

LP

AG

E

12

34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

DAT

EA

CC

OU

NT

TIT

LE

PU

RC

HA

SE

SD

ISC

OU

NT

CR

ED

IT

CA

SH

CR

ED

ITC

K.

NO

.P

OS

T.

RE

F.

GE

NE

RA

L

DE

BIT

CR

ED

IT

5

AC

CO

UN

TS

PA

YA

BL

ED

EB

IT

1 8 13 15 17 19 28 30 30

20--

Apr

.P

urc

ha

ses

Pu

rch

ase

s

Supp

lies

--St

ore

Sala

ry E

xpen

se

Fed

era

l In

com

e T

ax

Pa

yabl

e

Soci

al

Secu

rity

Ta

x P

aya

ble

Med

ica

re T

ax

Pa

yabl

e

Ch

apm

an

Len

ses

Uti

liti

es E

xpen

se

Lia

o M

ate

ria

ls

Supp

lies

--St

ore

Ad

vert

isin

g E

xpen

se

Mis

cell

an

eou

s E

xpen

se

Ca

sh S

hor

t a

nd

Ove

r

Tot

als

83 84 85 86 87 88 89 90

50

000

23

000

73

000

7

920

920

70

000

24

000

85

00

42

32

09

50

000

75

000

22

080

65

55

60

93

44

33

000

30

628

71

63

70

791

70

000

24

000

85

00

49

40

00

75

000

25

36

22

05

16

89

125

60

80

55

5 5 5 5 2 2 2 5 5 5 5 2 2 2 7 59 +1 60POINTS �

(Cor

rect

Ru

lin

gs)


Name

Part Four—Identifying Accounting Concepts and PracticesDirections: For each of the following items, select the choice that best completes thestatement. Print the letter identifying your choice in the Answers column.

Answers

1. An error in posting to a ledger 1. aa. may cause the trial balance to be out of balance.b. will not affect the trial balance.c. will cause the cash to prove.d. none of these.

2. The total of the schedule of accounts receivable should equal 2. aa. the accounts receivable account balance in the general ledger.b. the cash account.c. the debit and credit proof.d. none of these.



5. In the entry to journalize paying the liability for the first quarter federal unemployment 5. btax, an account debited would bea. Salary Expense.b. Unemployment Tax Payable—Federal.c. Payroll Taxes Expense.d. Cash.

6. A company purchases office equipment for $1,300.00 having a 3-year useful life and a 6. c$100.00 salvage value. Using the straight-line method of depreciation, depreciation expensein year 2 of the asset’s useful life will bea. $250.00.b. $300.00.c. $400.00.d. $433.33.


8. The amount of prepaid insurance not expired during a fiscal period represents 8. aa. an asset.b. a liability.c. revenue.d. an expense.



Answers

10. The par value of common stock is reported on the 10. ca. income statement. c. statement of stockholders’ equity.b. balance sheet. d. none of the financial statements.

11. To record the declaring of a dividend, 11. ca. debit Dividends Expense; credit Dividends Payable.b. debit Dividends; credit Cash.c. debit Dividends; credit Dividends Payable.d. debit Retained Earnings; credit Dividends Payable.

12. A company has revenue of $250,000, gross profit of $175,000, and expenses of $55,000. 12. cThe component percentage for net income isa. $120,000. c. 48.0%.b. 78.0%. d. none of these.

13. The two types of journal entries needed to change general ledger account balances at 13. cthe end of the fiscal period area. adjusting and correcting entries. c. adjusting and closing entries.b. closing and correcting entries. d. none of these.

14. The depreciation adjustment includes a debit to Depreciation Expense—Office Equipment 14. dand a credit toa. Income Summary.b. Office Equipment.c. Retained Earnings.d. Accumulated Depreciation—Office Equipment.

15. Each revenue account must begin each fiscal period with a 15. ca. debit balance.b. credit balance.c. zero balance.d. balance reflecting net income from the previous period.



18. Uncollectible accounts receivable 18. ba. are different from bad debts.b. should be estimated and recorded as an expense in the fiscal period in which the

related sales are recorded.c. must be estimated using a percentage of total sales.d. does not result in a work sheet adjustment.

19. After closing entries have been posted, the accounts that remain open are the 19. aa. asset, liability, capital stock, and retained earnings accounts.b. asset, liability, and cost accounts.c. asset, liability, and dividends accounts.d. asset, liability, and expense accounts.

20. After adjusting and closing entries have been posted, a 20. da. balance sheet is prepared.b. trial balance is prepared.c. post-closing balance sheet is prepared.d. post-closing trial balance is prepared.

TEST B

par ttwo

PerfectScore

YourScoreName

Identifying Accounting Terms 15 Pts.Analyzing Accounting Practices 15 Pts.


Total 206 Pts.




A. accounts receivable 1. The amount added to the cost of merchandise to establish 1. Eledger the selling price.

B. capital stock 2. Credit allowed for part of the purchase price of merchandise 2. Hthat is not returned, resulting in a decrease in the customer’saccounts payable.

C. employee earnings 3. The report that summarizes the cash and credit card sales of 3. Mrecord a point-of-sales terminal.

D. gross profit on sales 4. A business from which merchandise is purchased or supplies 4. Nor other assets are bought.

E. markup 5. A ledger that is summarized in a single general ledger account. 5. J

F. net pay 6. A subsidiary ledger containing only accounts for charge 6. Acustomers.

G. payroll register 7. Total shares of ownership in a corporation. 7. B

H. purchases allowance 8. The money paid for employee services. 8. I

I. salary 9. A deduction from total earnings for each person legally 9. Osupported by a taxpayer, including the employee.

J. subsidiary ledger 10. The maximum amount of earnings on which a tax is calculated. 10. L

K. supporting schedule 11. A business form used to record payroll information. 11. G

L. tax base 12. The total earnings paid to an employee after payroll taxes 12. Fand other deductions.

M. terminal summary 13. A business form used to record details affecting payments 13. Cmade to an employee.

N. vendor 14. The revenue remaining after cost of merchandise sold has 14. Dbeen deducted.

O. withholding allowance 15. A report prepared to give details about an item on a 15. Kprincipal financial statement.



Answers

1. When a business keeps its accounting records on the assumption that it will make 1. Fmoney and continue in business indefinitely, it is applying the Consistent Reportingaccounting concept.

2. An error in posting may cause the income to be understated or overstated on 2. Tthe income statement.

3. Payroll taxes withheld represent a liability for an employer until payment is made. 3. T

4. The marital status and withholding allowances of an employee affect the amount 4. Tof federal income tax withheld.

5. Employee total earnings are calculated as regular hours x regular rate, plus overtime 5. Thours x overtime rate.

6. The amount recorded in Income Summary is extended to the Balance Sheet Debit 6. For Credit column.


8. There will be a net loss if the Income Statement Debit column total is larger than 8. Tthe Income Statement Credit column total.


10. If a company has determined that the acceptable component percentage for cost 10. Fof merchandise sold is not more than 51.1%, the current year’s actual componentpercentage of 48.9% is unacceptable.

11. A corporation having a net income before federal income tax of $90,000.00 will pay a 11. Thigher rate of tax than a company having $40,000.00 of net income before federalincome tax.

12. A company having earnings per share of $14.50 is always more profitable than a 12. Fcompany having earnings per share of $3.25.

13. Assets that will be used for a number of years in the operation of a business are 13. Tcalled plant assets.

14. A customer must ship damaged merchandise back to the vendor to obtain 14. Ta purchase return.

15. A corporation has the legal rights of a person. 15. T

Name


Part Three—Journalizing TransactionsDirections:

1. Journalize the following selected transactions completed during April of the current year bySanders Builders Center. Use page 7 of a sales, purchases, general, cash receipts, and cashpayments journal. Sales tax rate is 6%. Payroll tax rates are as follows: social security tax, 6.2%;Medicare tax, 1.45%; federal unemployment tax, 0.8%; state unemployment tax, 5.4%. No totalearnings have exceeded the tax base for calculating unemployment taxes. Source documentsare abbreviated as follows: check, C; credit memorandum, CM; debit memorandum, DM;memorandum, M; purchase invoice, P; receipt, R; sales invoice, S; terminal summary, TS.

Transac t ionsApr. 4. Purchased merchandise on account from Hanna Lumber, $1,480.00. P63.

5. Purchased merchandise for cash, $450.00. C83.7. Paid cash to Gillian Industries for merchandise with a list price of $900.00, less a

40% trade discount. C84.8. Sold merchandise on account to Amazon Construction, $1,200.00, plus sales tax, $72.00;

total, $1,278.00. S101.9. Returned merchandise to Hanna Lumber, $220.00, from P63. DM14.

10. Granted credit to Harris Builders for merchandise returned, $640.00, plus sales tax,$38.40, from S73; total, $678.40. CM12.

11. Bought store supplies on account from Lancing Supply, $156.00. M39.13. Paid cash for store supplies, $95.00. C85.14. Received cash on account from Amazon Construction, $1,252.44, covering S101 for

$1,278.00, less 2% sales discount, $25.56. R52.15. Paid cash for monthly payroll, $3,861.75 (total payroll, $4,500.00, less deductions:

employee income tax, $294.00; social security tax, $279.00; Medicare tax, $65.25). C86.15. Recorded employer payroll tax expense for the monthly pay period ended April 15. M40.17. Paid cash on account to Hanna Lumber, $1,260.00, covering P63 for $1,480.00, less

DM14, $220.00; no discount. C87.18. Sold merchandise on account to the City of Columbus, $2,460.00. The City of Columbus

is exempt from sales tax. S102.19. Paid cash for utilities, $330.00. C88.23. Discovered that a sale for $620.00 on account to Jenkins Construction on March 30 was

incorrectly charged to the account of Jennings Builders. M41.24. Purchased merchandise on account from Farris Designs, $982.00. P64.28. Paid cash on account to Coastal Supply, $441.60, covering P61 for $460.00, less a 4% cash

discount. C89.29. Received cash on account from Kelsay, Inc. $600.00, covering S88. R53.30. Paid cash to replenish the petty cash fund, $65.55: store supplies, $24.36;

advertising, $23.05; miscellaneous, $16.89; cash short, $1.25. C90.30. Recorded cash and credit card sales, $5,200.00, plus sales tax, $312.00; total, $5,512.00. TS20.

2. Total and rule the sales journal.3. Total and rule the purchases journal.4. Total and rule the cash receipts journal.5. Total and rule the cash payments journal.



1

2

3

4

5

6

1

2

3

4

5

6


PURCH.NO.

POST.REF.

4

24

30

20--Apr. Hanna Lumber

Farris Designs

Total

63

64

1 4 8 0 00

9 8 2 00

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7

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11

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SALES JOURNAL PAGE

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POST.REF.


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8

18

30

20--Apr. Amazon Construction

City of Columbus

Totals

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POST.REF.

9

10

11

15

23

20--Apr. Accounts Payable/Hanna Lumber



Sales Tax Payable

Accounts Receivable/Harris Builders

Supplies--Store

Accounts Payable/Lancing Supply

Payroll Tax Expense





Jenkins Construction

Jennings Builders

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CM12

M39

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Part Four—Identifying Accounting Concepts and PracticesDirections: For each of the following items, select the choice that best completes thestatement. Print the letter identifying your choice in the Answers column.

Answers


2. An error in posting to a ledger 2. aa. may cause the trial balance to be out of balance.b. will not affect the trial balance.c. will cause the cash to prove.d. none of these.

3. Which of the following statements is not an advantage of using a point-of-sale terminal? 3. dA POS terminala. enables management to prepare a report of merchandise inventory to be recorded.b. reports sales by time of day to assist management to effectively schedule employeesc. uses UPC symbols to increase the efficiency and accuracy of entering sales.d. is required for a business to accept and process credit cards.



6. The Accumulated Earnings column of the employee earnings record 6. da. shows net pay for the year.b. is the gross earnings for one quarter.c. shows net pay for one quarter.d. none of these.

7. Preparing a work sheet at the end of each fiscal period is an application of the 7. aaccounting concepta. Accounting Period Cycle.b. Adequate Disclosure.c. Matching Expenses with Revenue.d. Historical Cost.


9. On a work sheet, Purchases is extended to the 9. aa. Income Statement Debit column.b. Income Statement Credit column.c. Balance Sheet Debit column.d. Balance Sheet Credit column.


Answers

10. One way to improve an unacceptable component percentage for cost of merchandise 10. csold is to a. sell more merchandise.b. increase selling prices.c. purchase from different vendors who offer better prices.d. none of these.

11. The par value of common stock is reported on the 11. aa. statement of stockholders’ equity. c. income statement.b. balance sheet. d. none of the financial statements.

12. To record the declaring of a dividend, 12. ba. debit Dividends Expense; credit Dividends Payable.b. debit Dividends; credit Dividends Payable.c. debit Dividends; credit Cash.d. debit Retained Earnings; credit Dividends Payable.

13. A company has revenue of $250,000, gross profit of $175,000, and expenses of $55,000. 13. cThe component percentage for net income is a. $120,000. c. 48.0%.b. 78.0%. d. none of these.

14. The two types of journal entries needed to change general ledger account balances at 14. cthe end of the fiscal period are a. adjusting and correcting entries.b. closing and correcting entries.c. adjusting and closing entries.d. none of these.

15. Each revenue account must begin each fiscal period with a 15. ca. debit balance.b. credit balance.c. zero balance.d. balance reflecting net income from the previous period.



18. A company purchases office equipment for $1,300.00 having a 3-year useful life and 18. c$100.00 salvage value. Using the straight-line method of depreciation, depreciation

expense in year 2 of the asset’s useful life will bea. $250.00.b. $300.00.c. $400.00.d. $433.33.

19. After closing entries have been posted, the accounts that remain open are the 19. aa. asset, liability, capital stock, and retained earnings accounts.b. asset, liability, and cost accounts.c. asset, liability, and dividends accounts.d. asset, liability, and expense accounts.

20. After adjusting and closing entries have been posted, a 20. da. balance sheet is prepared.b. trial balance is prepared.c. post-closing balance sheet is prepared.d. post-closing trial balance is prepared.

chapterTEST A

PerfectScore

YourScoreName

Identifying Accounting Concepts and Practices 10 Pts.Recording Entries for Uncollectible Accounts 91 Pts.

Analyzing Uncollectible Accounts 9 Pts.

Total 110 Pts.


17


Answers

1. The loss from an uncollectible amount is a regular expense of doing business. 1. T2. Crediting the estimated value of uncollectible accounts to a contra account is the 2. T

allowance method of recording losses from uncollectible accounts.3. The account Allowance for Uncollectible Accounts is increased by a debit. 3. F4. When the allowance account has a previous credit balance, this previous balance 4. F

is subtracted from the amount of the adjustment for uncollectible accounts expense.5. Accounts receivable that cannot be collected are called uncollectible accounts. 5. T6. The book value of accounts receivable is an estimate of the amount of accounts 6. T

receivable the business expects to collect during the next fiscal year.7. Using the percentage of total sales on account to estimate uncollectible accounts 7. T

expense assumes that a portion of every sale on account dollar will become uncollectible.8. Canceling the balance of a customer account because the customer does not pay is 8. T

called writing off an account.9. Allowance for Uncollectible Accounts is debited to write off a customer account. 9. T

10. When a previously written-off account is collected, Accounts Receivable is debited 10. Tand credited for the amount collected.

Part Two—Recording Entries for Uncollectible AccountsSouthlake Corporation completed the following transactions relating touncollectible accounts receivable during December of the current year.

Directions:

1. Journalize the following transactions completed during December of the current year. Usepage 12 of the general journal and cash receipts journal shown on page 3 of this test. Sourcedocuments are abbreviated as follows: memorandum, M; receipt, R.

Transac t ionsDec. 7. Wrote off Kingston Corporation’s past-due account as uncollectible, $247.60. M203.

17. Received cash in full payment of Kingston Corporation’s account, previously written off asuncollectible, $247.60. M215 and R461.

18. Wrote off Goddard Co.’s past-due account as uncollectible, $482.50. M222.23. Wrote off Freer, Inc.’s past-due account as uncollectible, $829.35. M229.28. Received cash in full payment of Goddard Co.’s account, previously written off as uncollectible,

$482.50. M232 and R463.2. Posting. Post each entry to the customer accounts in the accounts receivable ledger on page 2 of this test.

3. Continue to use page 12 of the general journal. Journalize the December 31 adjusting entry for estimateduncollectible accounts expense for the year. Uncollectible accounts expense is estimated as l.0% of total saleson account. Total sales on account for the year were $1,051,080.00.


CUSTOMER NO.


DEBITBALANCE

CUSTOMER

7

23

20--May

Written Off

S5

G12

8 2 9 35

—————

110

8 2 9 35

8 2 9 35

Freer, Inc.

5

POIN

TS �


CUSTOMER NO.


DEBITBALANCE

CUSTOMER

15

18

28

28

20--Apr.

Written Off

Reopen

S4

G12

G12

CR12

4 8 2 50

—————

4 8 2 50

—————

120

4 8 2 50

4 8 2 50

4 8 2 50

4 8 2 50

Goddard Company

5

5

4

CUSTOMER NO.


DEBITBALANCE

CUSTOMER

9

7

17

17

20--Feb.

Written Off

Reopen

S2

G12

G12

CR12

2 4 7 60

—————

2 4 7 60

—————

130

2 4 7 60

2 4 7 60

2 4 7 60

2 4 7 60

Kingston Corporation

5

5

4

33

Dec.

Dec.

Dec.

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GEN

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Part Three—Analyzing Uncollectible AccountsDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. The loss from an uncollectible account is 1. ba. a liability.b. a regular expense of doing business.c. an asset.d. a reduction in revenue.

2. The balance of accounts receivable less the allowance for uncollectible accounts is 2. bthe formula for calculatinga. uncollectible accounts expense.b. book value of accounts receivable.c. the contra account balance to accounts receivable.d. total collections of previously written-off accounts.

3. When the allowance account in the Trial Balance column of a work sheet has a credit 3. dbalance, the amount of the adjustment isa. deducted from the trial balance amount.b. not recorded.c. multiplied by two.d. added to the trial balance amount.

4. Information used to journalize an uncollectible expense adjusting entry is obtained 4. cfrom a work sheet’sa. Balance Sheet columns.b. Income Statement columns.c. Adjustments columns.d. Trial Balance column.

5. The entry to journalize the uncollectible accounts expense adjusting entry is debit 5. cUncollectible Accounts Expense and credita. Accounts Receivable.b. Cash.c. Allowance for Uncollectible Accounts.d. none of these.

6. Writing off an account 6. aa. decreases the balance of Accounts Receivable.b. decreases the balance of Uncollectible Accounts Expense.c. increases the balance of Allowance for Uncollectible Accounts.d. increases the balance of Cash.

7. When uncollectible accounts are estimated, writing off an account 7. ca. increases revenue.b. increases expenses.c. does not change the book value of accounts receivable.d. may increase expenses or decrease revenue.

8. The entry to write off an account receivable is recorded in the 8. da. sales journal.b. cash receipts journal.c. cash payments journal.d. general journal.

9. The journal entry to write off an account receivable account is debit Allowance for 9. bUncollectible Accounts and credit a. Cash.b. Accounts Receivable.c. Uncollectible Accounts Expense.d. none of these.

chapterTEST B

PerfectScore

YourScoreName

Identifying Accounting Concepts and Practices 10 Pts.Recording Entries for Uncollectible Accounts 91 Pts.

Analyzing Uncollectible Accounts 9 Pts.

Total 110 Pts..


17


Answers

1. Using the percentage of total sales on account to estimate uncollectible accounts expense 1. Tassumes that a portion of every sale on account dollar will become uncollectible.

2. Canceling the balance of a customer account because the customer does not pay is 2. Tcalled writing off an account.

3. When an account is collected that was previously written off, the account receivable 3. Tmust be reopened.

4. Accounts receivable that cannot be collected are called uncollectible accounts. 4. T5. The book value of accounts receivable is an estimate of the amount of accounts 5. T

receivable the business expects to collect during the next fiscal year. 6. An Allowance for Uncollectible Accounts balance in the Trial Balance Credit column 6. T

of the work sheet means previous fiscal period estimates have not yet been identifiedas uncollectible.

7. Estimating the percentage of uncollectible accounts expense in the same period as the 7. Fsales revenue is an application of the Realization of Revenue accounting concept.

8. Crediting the estimated value of uncollectible accounts to a contra account is the 8. Tallowance method of recording losses from uncollectible accounts.

9. The book value of accounts receivable is decreased after writing off an 9. Funcollectible account.

10. Accounts Receivable is debited to write off a customer account. 10. F

Part Two—Recording Entries for Uncollectible AccountsWarren Company completed the following transactions relating touncollectible accounts receivable during December of the current year.

Directions: 1. Journalize the following transactions completed during December of the current year. Use page 12 of the

general journal and cash receipts journal shown on page 3 of this test. Source documents are abbreviated asfollows: memorandum, M; receipt, R.

Transac t ionsDec. 7. Wrote off Utmost Corporation’s past-due account as uncollectible, $248.00. M88.

17. Received cash in full payment of Utmost Corporation’s account, previously written off asuncollectible, $248.00. M92 and R211.

18. Wrote off Dirr, Inc.’s past-due account as uncollectible, $193.00. M98.22. Wrote off Holtz Co.’s past-due account as uncollectible, $605.50. M104.28. Received cash in full payment of Holtz Co.’s account, previously written off as uncollectible,

$605.50. M111 and R224.2. Posting. Post each entry to the customer accounts in the accounts receivable ledger on page 2 of this test.3. Continue to use page 12 of the general journal. Journalize the December 31 adjusting entry for estimated

uncollectible accounts expense for the year. Uncollectible accounts expense is estimated as l.0% of total saleson account. Total sales on account for the year were $188,662.00.


CUSTOMER NO.


DEBITBALANCE

CUSTOMER

8

18

20--Feb.

Written Off

S2

G12

1 9 3 00

—————

120

1 9 3 00

1 9 3 00

Dirr, Inc.

5

POIN

TS �


CUSTOMER NO.


DEBITBALANCE

CUSTOMER

15

22

28

28

20--Jan.

Written Off

Reopen

S1

G12

G12

CR12

6 0 5 50

—————

6 0 5 50

—————

150

6 0 5 50

6 0 5 50

6 0 5 50

6 0 5 50

Holtz Company

5

5

4

CUSTOMER NO.


DEBITBALANCE

CUSTOMER

30

7

17

17

20--Jan.

Written Off

Reopen

S1

G12

G12

CR12

2 4 8 00

—————

2 4 8 00

—————

190

2 4 8 00

2 4 8 00

2 4 8 00

2 4 8 00

Utmost Corporation

5

5

4

33

Dec.

Dec.

Dec.

Name


GEN

ERA

L JO

URN

AL

PA

GE

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16

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Part Three—Analyzing Uncollectible AccountsDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. The loss from an uncollectible account is 1. ba. a liability.b. a regular expense of doing business.c. an asset.d. a reduction in revenue.

2. When the allowance account in the Trial Balance column of a work sheet has a credit 2. dbalance, the amount of the adjustment isa. deducted from the trial balance amount.b. not recorded.c. multiplied by two.d. added to the trial balance amount.

3. Information used to journalize an uncollectible expense adjusting entry is obtained 3. cfrom a work sheet’sa. Balance Sheet columns.b. Income Statement columns.c. Adjustments columns.d. Trial Balance column.

4. The balance of accounts receivable less the allowance for uncollectible accounts is 4. bthe formula for calculatinga. uncollectible accounts expense.b. book value of accounts receivable.c. the contra account balance to accounts receivable.d. total collections of previously written-off accounts.

5. When the percentage of total sales on account method is used, the estimated 5. auncollectible accounts expense is calculated bya. multiplying total sales on account times the percentage.b. dividing total sales on account by the percentage.c. multiplying total sales times the percentage.d. dividing total sales by the percentage.

6. When an account is determined to be uncollectible, 6. aa. a journal entry is made to cancel the uncollectible account.b. the account is removed from the general ledger.c. the amount is deducted from sales.d. the customer subsidiary ledger account is removed.

7. When uncollectible accounts are estimated, writing off an account 7. ca. increases revenue.b. increases expenses.c. does not change the book value of accounts receivable.d. may increase expenses or decrease revenue.

8. The entry to write off an account receivable is recorded in the 8. da. sales journal.b. cash receipts journal.c. cash payments journal.d. general journal.

9. After the entries are made to reopen a customer account and record collection of 9. cthe account, the customer account balance isa. a debit.b. a credit.c. zero.d. none of these.

chapterTEST A

PerfectScore

YourScoreName

Identifying Accounting Concepts and Practices 10 Pts.Calculating Depreciation and Book Value;

Journalizing Entries for Plant Assets and Property Tax81 Pts.

Analyzing Plant Assets and Depreciation 9 Pts.Total 100 Pts.


18


Answers1. Assets expected to be exchanged for cash or consumed within a year are known 1. F

as plant assets.2. Recording a plant asset for the amount paid for the asset is an application of the 2. F

Matching Expenses with Revenue accounting concept.3. Plant assets decrease in value because of use and the passage of time. 3. T4. A factor that affects the useful life of a plant asset is the asset’s cost. 4. F5. The original cost of a plant asset includes only the amount paid the vendor for 5. F

the plant asset.6. Estimated total depreciation expense is calculated as original cost less estimated 6. T

salvage value.7. To record depreciation expense for a fiscal period, the accumulated depreciation 7. F

account is debited.8. The portion of a plant asset’s cost that is transferred to an expense account in each 8. F

fiscal period during a plant asset’s useful life is accumulated depreciation.9. Loss on plant assets is revenue that results when a plant asset is sold for more than 9. F

book value.10. Personal property includes buildings but not land. 10. F

Part Two—Calculating Depreciation and Book Value;Journalizing Entries for Plant Assets and Property TaxDirections: Use the following plant asset record with the instructions that beginon page 3 of this test.

4

4

4

4

4

4

36

YEAR ANNUAL DEPRECIATIONEXPENSE

ACCUMULATEDDEPRECIATION

ENDINGBOOK VALUE

Continue record on back of card

PLANT ASSET RECORD General Ledger Account No.

General Ledger AccountDescription

DateBought

SerialNumber

OriginalCost

EstimatedUseful Life

EstimatedSalvage Value

DepreciationMethod

Disposed of:

Disposal AmountDate

Discarded Sold Traded

Printer

1205

Office Equipment

Jan. 1. 20X1 TX6789 $4,100.00

Straight-Line$500.006 years

Jan. 1, 20X7 $650.00

X

20X1

20X2

20X3

20X4

20X5

20X6

$600.00

$600.00

$600.00

$600.00

$600.00

$600.00

$600.00

$1,200.00

$1,800.00

$2,400.00

$3,000.00

$3,600.00

$3,500.00

$2,900.00

$2,300.00

$1,700.00

$1,100.00

$500.00

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Directions:

1. Complete a plant asset record for Plant Asset No. 1 through December 31, 20X6.Additional information follows: Asset is a printer, serial number TX6789; theaccount number for Office Equipment is 1205. Use the plant asset record on page1 of this test. Also record the depreciation expense and ending book value for theyear 20X6 on the first line of the table above.

2. Use the table above. Calculate the annual depreciation expense for each plantasset for the year ended December 31, 20X6. Use the straight-line method ofcalculating depreciation.

3. Continue using the table above. Calculate the book value of each plant asset as ofDecember 31, 20X6.

4. Journalize the following transactions using the journals on page 2 of this test.

Transac t ions20X6July 1. Paid cash for Plant Asset No. 3. C190.Dec. 30. Paid cash for property tax expense, $2,800.00. C325.

31. Journalize the adjusting entry for depreciation expense on officeequipment for the year.

20X7Jan. 1. Received cash, $650.00, from the sale of Plant Asset No. l. Receipt No. 6.

Also record the sale on the plant asset record.5. Calculate the depreciation rate, beginning book value, annual depreciation

expense, and ending book value for a truck, using the declining-balance method.The truck was bought on January 1, 20X6, for $10,000.00. Estimated salvage valueis $800.00. Estimated useful life is 5 years. Use twice the straight-line rate.

Plant Asset Date Original Estimated Estimated Depreciation Ending Book

Asset Account Bought Cost Salvage Useful Expense ValueValue Value Life 20X6 12/31/X6

1 Office Equipment Jan. l, 20X1 $4,100.00 $500.00 6 years $600.00 $500.00

2 Office Equipment Jan. l, 20X3 $1,250.00 $250.00 5 years $200.00 $450.00

3 Office Equipment July 1, 20X6 $4,400.00 $800.00 4 years $450.00 $3,950.00

POIN

TS �

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2

2

6

Plant Beginning Annual EndingBook Value Depreciation Book Value

20X6 $10,000.00 $4,000.00 $6,000.00

20X7 $6,000.00 $2,400.00 $3,600.00

20X8 $3,600.00 $1,440.00 $2,160.00

20X9 $2,160.00 $864.00 $1,296.00

20X0 $1,296.00 $496.00 $800.00

POIN

TS �

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14


Part Three—Analyzing Plant Assets and DepreciationDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Some examples of plant assets are 1. ca. prepaid insurance, computers, and supplies.b. cash, supplies, and furniture.c. computers, POS terminals, and display cases.d. none of these.

2. Transferring a portion of a plant asset’s cost to an expense in each fiscal period that a 2. aplant asset is used to earn revenue is an application of the accounting concepta. Matching Expenses with Revenue.b. Going Concern.c. Objective Evidence.d. Historical Cost.

3. The purpose of recording depreciation is to 3. ca. earn revenue.b. recover the cash spent on plant assets.c. record an expense in the periods in which the asset is used to earn revenue.d. earn money to replace the asset.

4. The original cost of a plant asset includes the 4. ca. cost of power to run the equipment.b. disposal costs.c. installation costs.d. interest cost.

5. Generally, a business removes a plant asset from use and disposes of it 5. ba. when a profit can be made on the disposal.b. when the asset is no longer usable.c. when the asset is three years old.d. at the end of each fiscal year.

6. Book value of a plant asset is original cost 6. ba. plus accumulated depreciation.b. minus accumulated depreciation.c. plus salvage value.d. minus salvage value.

7. When a plant asset is disposed of, a journal entry is recorded that 7. da. recognizes the annual depreciation.b. removes the amount owed on the plant asset from Accounts Payable.c. closes the depreciation expense account to Income Summary.d. removes the original cost of the plant asset and its related accumulated depreciation.

8. If a plant asset costs $1,200.00, has accumulated depreciation of $1,000.00, and is sold 8. cfor $200.00, the gain or loss on disposal isa. $200.00 gain.b. $200.00 loss.c. no gain or loss.d. $1,000.00 loss.

9. If a plant asset costs $4,000.00, has accumulated depreciation of $3,200.00, and is sold 9. dfor $900.00, the gain or loss on disposal isa. $900.00 gain.b. $800.00 loss.c. $100.00 loss.d. $100.00 gain.

chapterTEST B

PerfectScore

YourScoreName

Identifying Accounting Concepts and Practices 10 Pts.Calculating Depreciation and Book Value;

Journalizing Entries for Plant Assets and Property Tax81 Pts.

Analyzing Plant Assets and Depreciation 9 Pts.Total 100 Pts.


18


Answers1. Allocating a plant asset’s cost to an expense over the plant asset’s useful life is an 1. T

application of the Matching Expenses with Revenue accounting concept.2. Estimated total depreciation expense is calculated as original cost less estimated salvage value. 2. T3. The original cost of a plant asset minus accumulated depreciation is known as the 3. T

book value of a plant asset.4. To record depreciation expense for a fiscal period, the accumulated depreciation 4. F

account is debited.5. The straight-line method of depreciation results in a different amount of depreciation 5. F

expense each year.6. The portion of a plant asset’s cost that is transferred to an expense account in each 6. F

fiscal period during a plant asset’s useful life is accumulated depreciation.7. Assessed value is the value of an asset determined by tax authorities for the purpose 7. T

of calculating taxes.8. Revenue that results when a plant asset is sold for more than book value is known as 8. F

loss on plant assets.9. Declining-balance depreciation is calculated by multiplying the book value by a 9. T

constant depreciation rate at the end of each fiscal period.10. Personal property includes buildings but not land. 10. F

Part Two—Calculating Depreciation and Book Value;Journalizing Entries for Plant Assets and Property TaxDirections: Use the following plant asset record with the instructions that beginon page 3 of this test.

YEAR ANNUAL DEPRECIATIONEXPENSE

ACCUMULATEDDEPRECIATION

ENDINGBOOK VALUE

Continue record on back of card

PLANT ASSET RECORD General Ledger Account No.

General Ledger AccountDescription

DateBought

SerialNumber

OriginalCost

EstimatedUseful Life

EstimatedSalvage Value

DepreciationMethod

Disposed of:

Disposal AmountDate

Discarded Sold Traded

Computer

1205

Office Equipment

Jan. 1. 20X1 XT4698 $7,300.00

Straight-Line$700.006 years

Jan. 1, 20X7 $500.00

X

20X1

20X2

20X3

20X4

20X5

20X6

$1,100.00

$1,100.00

$1,100.00

$1,100.00

$1,100.00

$1,100.00

$1,100.00

$2,200.00

$3,300.00

$4,400.00

$5,500.00

$6,600.00

$6,200.00

$5,100.00

$4,000.00

$2,900.00

$1,800.00

$700.00

4

4

4

4

4

4

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Dec

.

Name


Directions:

1. Complete a plant asset record for Plant Asset No. 1 through December 31, 20X6.Additional information follows: Asset is a computer, serial number XT4698; theaccount number for Office Equipment is 1205. Use the plant asset record on page1 of this test. Also record the depreciation expense and ending book value for theyear 20X6 on the first line of the table above.

2. Use the table above. Calculate the annual depreciation expense for each plantasset for the year ended December 31, 20X6. Use the straight-line method ofcalculating depreciation.

3. Continue using the table above. Calculate the book value of each plant asset as ofDecember 31, 20X6.

4. Journalize the following transactions using the journals on page 2 of this test.

Transac t ions20X6July 1. Paid cash for Plant Asset No. 3. C190.Dec. 30. Paid cash for property tax expense, $3,600.00. C325.

31. Journalize the adjusting entry for depreciation expense on office equipment for the year.20X7Jan. 1. Received cash, $500.00, from the sale of Plant Asset No. 1. Receipt No. 115. Also record the

sale on the plant asset record.5. Calculate the depreciation rate, beginning book value, annual depreciation

expense, and ending book value for a truck, using the declining-balance method.The truck was bought on January 1, 20X1, for $20,000.00. Estimated salvage valueis $2,000.00. Estimated useful life is 5 years. Use twice the straight-line rate.

Plant Asset Date Original Estimated Estimated Depreciation Ending Book

Asset Account Bought Cost Salvage Useful Expense ValueValue Value Life 20X6 12/31/X6

1 Office Equipment Jan. l, 20X1 $7,300.00 $700.00 6 years $1,100.00 $700.00

2 Office Equipment Jan. l, 20X1 $6,900.00 $600.00 9 years $700.00 $3,050.00

3 Office Equipment July 1, 20X6 $4,400.00 $800.00 4 years $450.00 $3,950.00

POIN

TS �

2

2

2

6

Plant Beginning Annual EndingBook Value Depreciation Book Value

20X1 $20,000.00 $8,000.00 $12,000.00

20X2 $12,000.00 $4,800.00 $7,200.00

20X3 $7,200.00 $2,880.00 $4,320.00

20X4 $4,320.00 $1,728.00 $2,592.00

20X5 $2,592.00 $592.00 $2,000.00

POIN

TS �

2

3

3

3

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14


Part Three—Analyzing Plant Assets and DepreciationDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Some examples of current assets are 1. ba. cash, accounts receivable, and POS terminals.b. cash, accounts receivable, and merchandise inventory.c. cash, merchandise inventory, and furniture.d. none of these.

2. Some examples of plant assets are 2. ca. prepaid insurance, computers, and supplies.b. cash, supplies, and furniture.c. computers, POS terminals, and display cases.d. none of these.


4. When a plant asset is disposed of, a journal entry is recorded that 4. da. recognizes the annual depreciation.b. removes the amount owed on the plant asset from Accounts Payable.c. closes the depreciation expense account to Income Summary.d. removes the original cost of the plant asset and its related accumulated depreciation.

5. If plant asset costs $4,000.00, has accumulated depreciation of $3,200.00, and is sold for 5. d$900.00, the gain or loss on disposal isa. $900.00 gain.b. $800.00 loss.c. $100.00 loss.d. $100.00 gain.

6. The amount by which a plant asset depreciates is classified as 6. ca. a revenue.b. a liability.c. an expense.d. an asset.

7. The accumulated depreciation account should show 7. ba. total depreciation for plant assets since the business was formed.b. total depreciation for plant assets still in use.c. only total depreciation expense for plant assets for the current year.d. next year’s estimated depreciation for plant assets.

8. When a plant asset is sold for more than the asset’s book value, 8. ba. cash received plus accumulated depreciation plus gain on disposal equals original

cost plus gain on disposal.b. cash received plus accumulated depreciation equals original cost plus gain on disposal.c. cash received plus accumulated depreciation plus loss on disposal equals original cost.d. cash received plus accumulated depreciation equals original cost plus loss on disposal.

9. The plant asset land is classified as real property and 9. da. is depreciated using the declining-balance method of depreciation.b. is depreciated using the same method used for other plant assets.c. is depreciated without considering estimated salvage value because of its permanent nature.d. is generally not depreciated.

Name Identifying Accounting Terms 9 Pts.Analyzing Inventory Systems 10 Pts.

Using the Fifo, Lifo, and Weighted-Average Methods 33 Pts.Estimating Cost of Ending Inventory 12 Pts.

Identifying Inventory Concepts and Practices 9 Pts.Total 73 Pts.

chapterTEST A

PerfectScore

YourScore


19


Co lumn I Co lumn I I AnswersA. first-in, first-out 1. Using the price of merchandise purchased last to calculate 1. D

inventory costing method the cost of merchandise sold first.B. gross profit method of 2. A form used to show the kind of merchandise, quantity 2. H

estimating inventory received, quantity sold, and balance on hand.C. inventory record 3. Estimating inventory by using the previous year’s percentage 3. B

of gross profit on operations.D. last-in, first-out 4. Using the average cost of beginning inventory plus 4. I

inventory costing method merchandise purchased during a fiscal period to calculatethe cost of merchandise sold.

E. periodic inventory 5. A file of stock records for all merchandise on hand. 5. GF. perpetual inventory 6. Using the price of merchandise purchased first to calculate 6. A

the cost of merchandise sold first.G. stock ledger 7. A form used during a periodic inventory to record information 7. C

about each item of merchandise on hand.H. stock record 8. A merchandise inventory determined by counting, weighing, 8. E

or measuring items of merchandise on hand.I. weighted-average 9. A merchandise inventory determined by keeping a continuous 9. F

inventory costing method record of increases, decreases, and balance on hand.

Part Two—Analyzing Inventory SystemsDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers1. A perpetual inventory system provides day-to-day information about the quality of 1. F

merchandise on hand.2. Merchandise inventory that is smaller than needed may decrease net income. 2. T3. The cost of merchandise sold can be calculated by subtracting the cost of merchandise 3. F

available for sale from the cost of ending inventory.4. When a business frequently orders small quantities of an item, the price paid is often 4. T

more per unit than when merchandise is ordered in large quantities.5. The unit price of an item is included in the UPC code of an inventory item. 5. F6. The cost of merchandise inventory is reported on both the income statement and the 6. T

balance sheet.7. The ending inventory and cost of merchandise sold are calculated using the same unit 7. T

price under the weighted-average inventory method.8. Businesses that need an ending inventory amount for preparing monthly income 8. F

statements should take a physical inventory to obtain the amount for each month.9. The primary reason for using the same inventory costing method each fiscal period is 9. T

to provide financial statements that can be compared with statements of other fiscal periods.10. First in, first-out is a method used to determine the quantity of each type of 10. F

merchandise on hand.

Part Three—Using the Fifo, Lifo, and Weighted-Average MethodsAccounting records at Marks Company show the following purchases andperiodic inventory counts.

Directions:

1. Calculate the total cost of ending inventory on December 31 using the fifomethod.

2. Calculate the total cost of ending inventory on December 31 using the lifomethod.

3. Calculate the total cost of ending inventory on December 31 using theweighted-average method.

Model Beginning First Second Third Periodic

Number Inventory Purchase Purchase Purchase Inventory CountJanuary 1 December 31

M-40 12 @ $10.00 20 @ $11.00 25 @ $12.00 15 @ $15.00 28

Y-35 42 @ 0$6.00 20 @ 0$5.95 40 @ 0$5.75 30 @ 0$6.00 72


Model Number No. of Units on Hand Unit Price Cost of Ending Inventory

M-40 28 15 @ $15.00 = $225.00

13 @ $12.00 = $156.00 $381.00

Y-35 72 30 @ 0$6.00 = $180.00

40 @ 0$5.75 = $230.00

02 @ 0$5.90 = 0$11.80 $421.80

TOTAL fifo COST $802.80

POIN

TS �

1

2

1

1

2

1


M-40 28 12 @ $10.00 = $120.00

16 @ $11.00 = $176.00 $296.00

Y-35 72 42 @ 0$6.00 = $252.00

20 @ 0$5.90 = $118.00

10 @ 0$5.75 = 0$57.50 $427.50

TOTAL lifo COST $723.50

1

2

1

1

2

1


M-40 28 12 @ $10.00 = $120.00

20 @ $11.00 = $220.00

25 @ $12.00 = $300.00

15 @ $15.00 = $225.00

72 @ $00.00 = $865.00

/$865.00/72 = $12.010 $12.01 × 28 = $336.28

Y-35 72 042 @ $6.00 = $252.00

020 @ $5.90 = $118.00

040 @ $5.75 = $230.00

030 @ $6.00 = $180.00

132 @ 00.00 = $780.00

$780.00/132 = $5.91 $5.91 × 72 = $425.52

TOTAL weighted-average COST $761.80

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33

Name


Part Four—Estimating Cost of Ending InventoryThe following information is from the accounting records of DenbyCorporation for July 31 of the current year.

Beginning inventory, July 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,500.00Net purchases for July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000.00Net sales for July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,200.00Gross profit on operations as a percent of sales . . . . . . . . . . . . . . . . . . 60.0%

Directions: Estimate the ending inventory for July of the current year usingthe gross profit method of estimating inventory.

1. Determine the cost of merchandise available for sale.

Beginning inventory, July 1.............................................................................. $12,500.00

Plus net purchases, July 1 to July 31................................................................. � 35,000.00

Equals cost of merchandise available for sale. .................................................. $47,500.00

2. Estimate the gross profit on operations.

Net sales for July 1 to July 31............................................................................ $70,200.00

Times previous year’s gross profit percentage................................................... � 60.0%

Equals estimated gross profit on operations ..................................................... $42,120.00

3. Estimate the value of cost of merchandise sold.


Less estimated gross profit on operations......................................................... � 42,120.00

Equals estimated cost of merchandise sold....................................................... $28,080.00

4. Estimate the cost of ending merchandise inventory.

Cost of merchandise available for sale ............................................................. $47,500.00

Less estimated cost of merchandise sold .......................................................... � 28,080.00

Equals estimated ending merchandise inventory............................................. $19,420.00

POIN

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12


Part Five—Identifying Inventory Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Calculating an accurate inventory cost to assure that gross profit and net income are 1. creported correctly on the income statement is an application of the accounting concepta. Consistent Reporting.b. Perpetual Inventory.c. Adequate Disclosure.d. none of these.

2. When the fifo method is used, cost of merchandise sold is valued at 2. ca. the average price.b. the most recent price.c. the earliest price.d. none of these.

3. When the fifo method is used, ending inventory units are priced at 3. ca. the average price.b. the earliest price.c. the most recent price.d. none of these.

4. A separate stock record is prepared 4. ca. for each shipment received.b. for each sale of merchandise.c. for each kind of merchandise on hand.d. when prices increase or decrease.

5. Stock records do not reflect 5. aa. the cost of the merchandise.b. increases in quantity on hand.c. decreases in quantity on hand.d. the balance on hand after each increase or decrease is recorded.

6. When using the perpetual inventory method, 6. da. periodic inventories are never taken.b. day-to-day information about the quantity of merchandise on hand is not available.c. it is not necessary to show the minimum balance on stock records.d. it is customary to take a periodic inventory at least once a fiscal period.

7. “Taking an inventory” is characteristic of the 7. aa. periodic method.b. perpetual method.c. gross profit method.d. weighted-average method.

8. When the lifo method is used, cost of merchandise sold is priced at 8. ca. the average price.b. the earliest price.c. the most recent price.d. none of these.

9. A periodic inventory normally is taken 9. ca. at the end of every month.b. quarterly.c. at the end of a fiscal period.d. only when a stock shortage is suspected.

chapterTEST B


19



A. first-in, first-out 1. A merchandise inventory determined by counting, weighing, 1. Einventory costing method or measuring items of merchandise on hand.

B. gross profit method of 2. Estimating inventory by using the previous year’s percentage 2. Bestimating inventory of gross profit on operations.

C. inventory record 3. A form used during a periodic inventory to record information 3. Cabout each item of merchandise on hand.

D. last-in, first-out 4. Using the average cost of beginning inventory plus 4. Iinventory costing method merchandise purchased during a fiscal period to calculate the

cost of merchandise sold.E. periodic inventory 5. A file of stock records for all merchandise on hand. 5. GF. perpetual inventory 6. Using the price of merchandise purchased first to calculate 6. A

the cost of merchandise sold first.G. stock ledger 7. Using the price of merchandise purchased last to calculate 7. D

the cost of merchandise sold first.H. stock record 8. A form used to show the kind of merchandise, quantity 8. H

received, quantity sold, and balance on hand.I. weighted-average 9. A merchandise inventory determined by keeping a continuous 9. F

inventory costing method record of increases, decreases, and balance on hand.

Part Two—Analyzing Inventory SystemsDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. The cost of merchandise inventory is reported only on the income statement. 1. F2. Merchandise inventory that is smaller than needed may decrease net income. 2. T3. When a business frequently orders small quantities of an item, the price paid is often 3. T

more per unit than when merchandise is ordered in large quantities.4. A periodic inventory is usually taken each week. 4. F5. Businesses frequently establish their fiscal period to end when inventory is at a minimum 5. T

because it takes less time to count a smaller inventory.6. A perpetual inventory system provides only fiscal period information about the quantity 6. F

of merchandise on hand.7. The ending inventory and cost of merchandise sold are calculated using the same unit 7. T

price under the weighted-average inventory method.8. The cost of merchandise sold can be calculated by subtracting the cost of merchandise 8. F

available for sale from the cost of ending inventory.9. Businesses that need an ending inventory amount for preparing monthly income statements 9. F

should take a physical inventory to obtain the amount for each month.10. A perpetual inventory system provides day-to-day information about the quality of 10. F

merchandise on hand.

Name Identifying Accounting Terms 9 Pts.Analyzing Inventory Systems 10 Pts.

Using the Fifo, Lifo, and Weighted-Average Methods 33 Pts.Estimating Cost of Ending Inventory 12 Pts.

Identifying Inventory Concepts and Practices 9 Pts.Total 73 Pts.

PerfectScore

YourScore


Part Three—Using the Fifo, Lifo, and Weighted-Average MethodsAccounting records at Marks Company show the following purchases andperiodic inventory counts.

Directions:

1. Calculate the total cost of ending inventory on December 31 using the fifomethod.

2. Calculate the total cost of ending inventory on December 31 using the lifomethod.

3. Calculate the total cost of ending inventory on December 31 using theweighted-average method.

Model Beginning First Second Third Periodic

Number Inventory Purchase Purchase Purchase Inventory CountJanuary 1 December 31

M-25 4 @ $4.00 12 @ $4.25 8 @ $4.50 15 @ $5.20 22

Z-70 3 @ $3.50 06 @ $3.30 2 @ $3.20 05 @ $3.10 8


M-25 22 15 @ $5.20 = $78.00

07 @ $4.50 = $31.50 $109.50

Z-70 8 05 @ $3.10 = $15.50

02 @ $3.20 = 0$6.40

01 @ $3.30 = 0$3.30 $25.20

TOTAL fifo COST $134.70

POIN

TS �

1

2

1

1

2

1


M-25 22 04 @ $4.00 = $16.00

12 @ $4.25 = $51.00

06 @ $4.50 = $27.00 $94.00

Z-70 8 03 @ $3.50 = $10.50

05 @ $3.30 = $16.50 $27.00

TOTAL lifo COST $121.00

1

1

2

1

2

1


M-25 22 04 @ $4.00 = $16.00

12 @ $4.25 = $51.00

08 @ $4.50 = $36.00

15 @ $5.20 = $78.00

39 @ $0.0 = $181.00

$181.00/39 = $4.64 $4.64 × 22 = $102.08

Z-70 8 03 @ $3.50 = $10.50

06 @ $3.30 = $19.80

02 @ $3.20 = 0$6.40

05 @ $3.10 = $15.50

16 @ 00.00 = $52.20

$52.20/16 = $3.26 $3.26 × 8 = $26.08

TOTAL weighted-average COST $128.16

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33

Name


Part Four—Estimating Cost of Ending InventoryThe following information is from the accounting records of ClarkCorporation for July 31 of the current year.

Beginning inventory, July 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $79,610.00Net purchases for July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,190.00Net sales for July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,790.00Gross profit on operations as a percent of sales . . . . . . . . . . . . . . . . . . 62.0%

Directions: Estimate the ending inventory for July of the current year usingthe gross profit method of estimating inventory.

1. Determine the cost of merchandise available for sale.

Beginning inventory, July 1.............................................................................. $79,610.00

Plus net purchases, July 1 to July 31................................................................. � 70,190.00

Equals cost of merchandise available for sale. .................................................. $149,800.00

2. Estimate the gross profit on operations.


Times previous year’s gross profit percentage................................................... � 62.0%

Equals estimated gross profit on operations ..................................................... $100,929.80

3. Estimate the value of cost of merchandise sold.


Less estimated gross profit on operations......................................................... � 100,929.80

Equals estimated cost of merchandise sold....................................................... $61,860.20

4. Estimate the cost of ending merchandise inventory.

Cost of merchandise available for sale ............................................................. $149,800.00

Less estimated cost of merchandise sold .......................................................... � 61,860.20

Equals estimated ending merchandise inventory............................................. $87,939.80

POIN

TS �

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12


Part Five—Identifying Inventory Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. “Taking an inventory” is characteristic of the 1. aa. periodic method.b. perpetual method.c. gross profit method.d. weighted-average method.

2. A periodic inventory normally is taken 2. ca. at the end of every month.b. quarterly.c. at the end of a fiscal period.d. only when a stock shortage is suspected.

3. A separate stock record is prepared 3. ca. for each shipment received.b. for each sale of merchandise.c. for each kind of merchandise on hand.d. when prices increase or decrease.

4. Stock records do not reflect 4. aa. the cost of the merchandise.b. increases in quantity on hand.c. decreases in quantity on hand.d. the balance on hand after each increase or decrease is recorded.


6. Calculating an accurate inventory cost to assure that gross profit and net income are 6. creported correctly on the income statement is an application of the accounting concepta. Consistent Reporting.b. Perpetual Inventory.c. Adequate Disclosure.d. none of these.

7. When the fifo method is used, cost of merchandise sold is valued at 7. ca. the average price.b. the most recent price.c. the earliest price.d. none of these.

8. When the fifo method is used, ending inventory units are priced at 8. ca. the average price.b. the earliest price.c. the most recent price.d. none of these.

9. When the lifo method is used, cost of merchandise sold is priced at 9. ca. the average price.b. the earliest price.c. the most recent price.d. none of these.

chapterTEST A


20



A. current liabilities 1. The interest earned on money loaned. 1. DB. dishonored note 2. Liabilities due within a short time, usually within a year. 2. AC. interest expense 3. The person or business to whom the amount of a note is payable. 3. HD. interest income 4. The original amount of a note. 4. IE. maturity value 5. The amount that is due on the maturity date of a note. 5. EF. notes payable 6. A note that is not paid when due. 6. BG. notes receivable 7. Promissory notes that a business accepts from customers. 7. GH. payee of a note 8. The interest accrued on money borrowed. 8. CI. principal of a note 9. Promissory notes signed by a business and given to a creditor. 9. F

Part Two—Identifying Accounting Concepts andPracticesDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. The journal entry for paying a note payable includes a debit to Accounts Payable to 1. Fremove the balance owed.

2. When a business receives payment for a note receivable, Accounts Receivable is credited. 2. F3. Interest expense on notes payable is a normal operating expense. 3. F4. In interest calculations, time can be expressed in whole years or as a fraction of a year. 4. T5. When the timing of cash receipts and required cash payments do not match, businesses 5. T

usually deposit extra cash or borrow cash or make arrangements to delay payments.6. When a business issues a note payable, the principal of the note is credited to a 6. T

liability account.7. The interest accrued on a note payable is credited to an expense account. 7. F8. The journal entry for signing a note payable includes a debit to Interest Expense. 8. F9. When a note receivable is dishonored, the company should immediately write off the 9. F

account receivable for that customer.10. The interest earned on money loaned is interest income. 10. T

Name Identifying Accounting Terms 9 Pts.

Identifying Accounting Concepts and Practices 10 Pts.Calculating Maturity Dates and Interest 8 Pts.

Journalizing Notes Payable and Notes Receivable Transactions 66 Pts.Analyzing Notes Payable and Notes Receivable Concepts and Practices 7 Pts.

Total 100 Pts.

PerfectScore

YourScore


Part Three—Calculating Maturity Dates and InterestDirections: For each note below, calculate and record the (a) maturity date and (b) interest.

Part Four—Journalizing Notes Payable and Notes Receivable TransactionsThe following transactions related to notes payable and notes receivable were completed byBarnett Company during the current year.

Directions: Journalize the following transactions. Use page 3 of a general journal, page 6 of acash receipts journal, and page 5 of a cash payments journal; the journals are provided belowand on page 3 of this test. Source documents are abbreviated as follows: check, C;memorandum, M; note payable, NP; note receivable, NR; receipt, R.

Transac t ionsFeb. 1. Signed a 60-day, 10% note, $5,000.00. R80.Apr. 2. Paid cash for the maturity value of the Feb. 1 note: principal, $5,000.00, plus interest,

$83.33; total, $5,083.33. C215.Apr. 20. Received cash for the maturity value of NR21: principal, $500.00, plus interest, $45.00;

total, $545.00. R93.May 10. Paid cash for the maturity value of NP5: principal, $8,000.00, plus interest, $160.00;

total, $8,160.00. C259.June 1. Signed a 90-day, 18% note to Lao Supply for an extension of time on this account

payable, $2,500.00. M40.Aug. 30. Paid cash for the maturity value of the note payable to Lao Supply: principal,

$2,500.00, plus interest, $112.50; total, $2,612.50. C291.Sep. 15. Accepted a 90-day, 18% note from Justin Saunders for an extension of time on his

account, $1,200.00. NR10.Dec. 14. Received cash for the maturity value of NR10, a 90-day, 18% note: principal,

$1,200.00, plus interest, $54.00; total, $1,254.00. R214.Dec. 15. Rochester Corporation dishonored NR9, a 60-day, 18% note, maturity value due

today: principal, $800.00, plus interest, $24.00; total $824.00. M111.

No. of Note Date of Note Principal of Note Interest Rate Time of Note Maturity Date Interest

1 Feb. 5 $700.00 14% 180 days Aug. 4 $49.002 Mar. 16 $1,500.00 10% 120 days July 14 $50.003 Apr. 12 $650.00 11% 090 days July 11 $17.884 May 9 $1,800.00 12% 060 days July 8 $36.00

POIN

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9

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POST.REF.

1

15

15

20--Jun.

Sep.

Dec.

Accounts Payable/Lao Supply

Notes Payable

Notes Receivable

Accounts Receivable/Justin Saunders

Accounts Receivable/Rochester Corp.

Notes Receivable

Interest Income

M40

NR10

M111

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Part Five—Analyzing Notes Payable and NotesReceivable Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Interest on a promissory note is stated as 1. ba. the total of the principal plus the interest.b. a percentage of the principal.c. a number of cents on the dollar.d. a given amount of money.

2. The most useful evidence of a debt in a court of law is 2. da. an oral promise to pay.b. an account receivable.c. an account payable.d. a signed note.

3. The time of a note issued for less than one year is typically stated in 3. aa. days.b. months.c. fraction of a year.d. none of these.

4. The source document for recording cash received from signing a note payable is a 4. aa. receipt.b. check.c. memorandum.d. copy of the note.

5. Interest expense of a business is 5. ca. an additional cost of merchandise.b. a normal operations expense.c. a financial expense.d. a contra revenue account.

6. When a business accepts a note from a customer for an extension of time on account, 6. bthe customer’s accounts receivable account isa. not affected.b. changed to a zero balance.c. equal to the principal plus interest of the note.d. debited for the amount of the note.

7. When a customer dishonors a note, 7. ca. interest is earned but not recorded.b. no interest is earned.c. interest is both earned and recorded.d. none of these.

chapterTEST B


20



A. current liabilities 1. The amount that is due on the maturity date of a note. 1. EB. dishonored note 2. Liabilities due within a short time, usually within a year. 2. AC. interest expense 3. The person or business to whom the amount of a note is payable. 3. HD. interest income 4. The interest accrued on money borrowed. 4. CE. maturity value 5. The original amount of a note. 5. IF. notes payable 6. The interest earned on money loaned. 6. DG. notes receivable 7. Promissory notes signed by a business and given to a creditor. 7. FH. payee of a note 8. A note that is not paid when due. 8. BI. principal of a note 9. Promissory notes that a business accepts from customers. 9. G

Part Two—Identifying Accounting Concepts andPracticesDirections: Place a T for True or an F for False in the Answers column toshow whether each of the following statements is true or false.

Answers

1. When a business issues a note payable, the principal of the note is credited to a 1. Tliability account.

2. The interest accrued on a note payable is credited to an expense account. 2. F

3. Issuing a note payable for an extension of time if unable to pay an account when 3. Fdue eliminates the liability of the business issuing the note.

4. When a business issues a note payable for an extension of time on its account payable, 4. Fthe vendor account is credited.

5. A note is recorded as a note receivable by the person or business to whom the amount 5. Tof a note is payable.

6. Using a receipt as the source document for recording cash received for a note receivable 6. Tis an application of the Objective Evidence accounting concept.

7. When a business receives payment for a note receivable, Accounts Receivable is credited. 7. F

8. “Interest at 12%” means that 12 cents will be paid for the use of each dollar borrowed 8. Ffor the time of a note.

9. An individual with a car loan usually pays the note in partial payments that include 9. Tpart of the principal and part of the interest on the note.

10. In interest calculations, time can be expressed in whole years or as a fraction of a year. 10. T

Name Identifying Accounting Terms 9 Pts.

Identifying Accounting Concepts and Practices 10 Pts.Calculating Maturity Dates and Interest 8 Pts.

Journalizing Notes Payable and Notes Receivable Transactions 66 Pts.Analyzing Notes Payable and Notes Receivable Concepts and Practices 7 Pts.

Total 100 Pts.

PerfectScore

YourScore


Part Three—Calculating Maturity Dates and InterestDirections: For each note below, calculate and record the (a) maturity date and (b) interest.

Part Four—Journalizing Notes Payable and Notes Receivable TransactionsThe following transactions related to notes payable and notes receivable were completed byBarnett Company during the current year.

Directions: Journalize the following transactions. Use page 3 of a general journal, page 6 of acash receipts journal, and page 5 of a cash payments journal; the journals are provided belowand on page 3 of this test. Source documents are abbreviated as follows: check, C;memorandum, M; note payable, NP; note receivable, NR; receipt, R.

Transac t ionsFeb. 1. Signed a 60-day, 10% note, $6,000.00. R300.Apr. 2. Paid cash for the maturity value of the Feb. 1 note: principal, $6,000.00, plus interest,

$100.00; total, $6,100.00. C675.Apr. 6. Received cash for the maturity value of NR21: principal, $750.00, plus interest, $37.50;

total, $787.50. R46.May 10. Paid cash for the maturity value of NP5: principal, $2,000.00, plus interest, $80.00;

total, $2,080.00. C680.June 1. Signed a 90-day, 18% note to Rodriguez Supply for an extension of time on this

account payable, $3,500.00. M50.Aug. 30. Paid cash for the maturity value of the note payable to Rodriguez Supply: principal,

$3,500.00, plus interest, $157.50; total, $3,657.50. C690.Sep. 15. Accepted a 90-day, 18% note from Mary Sampson for an extension of time on her

account, $1,000.00. NR10.Dec. 14. Received cash for the maturity value of NR10, a 90-day, 18% note: principal,

$1,000.00, plus interest, $45.00; total, $1,045.00. R500.Dec. 15. Rachel Clark dishonored NR9, a 90-day, 18% note, maturity value due today:

principal, $400.00, plus interest, $18.00; total $418.00. M55.

No. of Note Date of Note Principal of Note Interest Rate Time of Note Maturity Date Interest

1 Jan. 5 $700.00 14% 60 days Mar. 6 $16.332 Mar. 30 $1,500.00 10% 90 days Jun. 28 $37.503 Apr. 4 $650.00 11% 120 days Aug. 2 $23.834 May 22 $1,800.00 12% 180 days Nov. 18 $108.00

POIN

TS �

22228


1

2

3

4

5

6

7

8

9

1

2

3

4

5

6

7

8

9


POST.REF.

1

15

15

20--Jun.

Sep.

Dec.

Accounts Payable/Rodriguez Supply

Notes Payable

Notes Receivable

Accounts Receivable/Mary Sampson

Accounts Receivable/Rachel Clark

Notes Receivable

Interest Income

M50

NR10

M55

3 5 0 0 00

1 0 0 0 00

4 1 8 00

3

3 5 0 0 00

1 0 0 0 00

4 0 0 00

1 8 00

6

2

4

4

6

2

2

26

POIN

TS �

Name


CA

SH R

ECEI

PTS

JOU

RNA

LP

AG

E

12

34

5

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9 10

DAT

EA

CC

OU

NT

TIT

LE

GE

NE

RA

L

DE

BIT

CR

ED

IT

6

DO

C.

NO

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OS

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RE

F.

AC

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TS

RE

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LE

SC

RE

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SA

LE

S T

AX

PA

YA

BL

EC

RE

DIT

1 6 14

20--

Feb

.N

otes

Pa

yabl

e

Not

es R

ecei

vabl

e

Inte

rest

In

com

e

Not

es R

ecei

vabl

e

Inte

rest

In

com

e

R30

0

R46

R50

0

6

60

00

00

75

000

37

50

10

00

00

45

00

5 5 2 5 2 19POINTS �

CA

SH

DE

BIT

60

00

00

78

750

10

45

00

7

SA

LE

SD

ISC

OU

NT

DE

BIT

Apr

.

Dec

.

CA

SH P

AYM

ENTS

JOU

RNA

LP

AG

E

12

34

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9

10

DAT

EA

CC

OU

NT

TIT

LE

PU

RC

HA

SE

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NT

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ED

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CA

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K.

NO

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5

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2 10 30

20--

Apr

.N

otes

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e

Inte

rest

Exp

ense

Not

es P

aya

ble

Inte

rest

Exp

ense

Not

es P

aya

ble

Inte

rest

Exp

ense

675

680

690

5

61

00

00

20

80

00

36

57

50

60

00

00

10

000

20

00

00

80

00

35

00

00

15

750

5 2 5 2 5 2 21POINTS �

Ma

y

Au

g.


Part Five—Analyzing Notes Payable and NotesReceivable Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. Interest on a promissory note is stated as 1. ba. the total of the principal plus the interest.b. a percentage of the principal.c. a number of cents on the dollar.d. a given amount of money.

2. When a note payable is issued for cash, 2. da. Notes Payable is debited.b. Cash is credited.c. Interest Expense is debited.d. none of these.

3. The most useful evidence of a debt in a court of law is 3. da. an oral promise to pay.b. an account receivable.c. an account payable.d. a signed note.

4. When a business accepts a note from a customer for an extension of time on account, 4. bthe customer’s accounts receivable account isa. not affected.b. changed to a zero balance.c. equal to the principal plus interest of the note.d. debited for the amount of the note.

5. When a customer dishonors a note, 5. ca. interest is earned but not recorded.b. no interest is earned.c. interest is both earned and recorded.d. none of these.

6. When a customer dishonors a note, the customer’s account receivable is 6. ba. written off.b. debited for the amount of the note and interest.c. credited for the amount of the note and interest.d. debited for the amount of the note.

7. Accepting a note receivable from a customer for an extension of time on account 7. ba. is not a good business practice.b. will always earn interest income for a business.c. will not earn interest income if the customer does not pay the note when it is due.d. changes the customer’s account from a debit balance to a credit balance.

chapterTEST A

PerfectScore

YourScoreName

Identifying Accounting Concepts and Practices 18 Pts.Journalizing and Posting Entries for Accrued Revenue and Expenses 133 Pts.

Analyzing Accrued Revenue and Expenses 8 Pts.

Total 159 Pts.


21


Answers

1. Accounting procedures require that revenue and expenses be recorded in the accounting 1. Tperiod in which revenue is earned and expenses are incurred.

2. To record revenue that has been earned but not yet received, an adjusting entry is made 2. Fat the beginning of the new fiscal period.

3. Making an adjusting entry to record revenue that has been earned but not yet received 3. Fis an application of the accounting concept Historical Cost.

4. The adjusting entry for accrued interest income results in a debit to Interest Income. 4. F

5. Information to journalize an adjustment for accrued interest income is obtained from 5. Fthe Income Statement columns of the work sheet.

6. The interest receivable account balance appears on a company’s balance sheet as a 6. Tcurrent asset.

7. Information needed to record closing entries for interest income is obtained from the 7. TIncome Statement columns of a work sheet.

8. The journal entry to close Interest Income results in a debit entry to Income Summary. 8. F

9. The reversing entry for accrued interest income results in a debit balance in the interest 9. Tincome account.

10. Accrued expenses are recorded by an adjusting entry at the beginning of the fiscal period. 10. F

11. The adjusting entry for accrued interest expense increases the balance in the liability 11. Faccount Accounts Payable.

12. Interest incurred but not yet paid is accrued interest expense. 12. T

13. The reversing entry for accrued interest expense results in a debit entry to Interest Payable. 13. T

14. The adjustment for accrued interest income is planned on a work sheet. 14. T

15. The reversing entry for interest income reduces the balance of Interest Receivable. 15. T

16. Reversing entries are made on the last day of the fiscal period. 16. F

17. At the end of a fiscal period, the Interest Expense balance after adjustments shows 17. Tthe amount of interest expense that has been incurred in that fiscal period.

18. An Interest Payable credit balance is accrued interest expense incurred in the current 18. Tyear but to be paid in the next year.


Part Two—Journalizing and Posting Entries forAccrued Revenue and ExpensesRaster Company completed the following transactions related to notes receivableand notes payable during the current year and the following year. The first twotransactions have already been journalized and posted. Note Receivable 6 andNote Payable 8 are the only notes on hand at the end of the fiscal period. Sourcedocuments are abbreviated as follows: check, C; note receivable, NR; receipt, R.

Transac t ions20X1Oct. 2. Accepted a 120-day, 18% note from Mitchell Tate for an extension of time on his account, $1,500.00. NR6.Nov. 1. Signed a 180-day, 12% note, $8,000.00. R8.20X2Jan. 30. Received cash for maturity value of NR6: principal, $1,500.00, plus interest, $90.00;

total, $1,590.00. R256.Apr. 30. Paid cash for the maturity value of the Nov. 1 note: principal, $8,000.00, plus interest, $480.00;

total, $8,480.00. C309.

Directions:

1. Use page 12 of the general journal on page 3 of this test. Journalize the adjusting entries foraccrued interest income and accrued interest expense on December 31. The general ledgeraccounts and balances for Raster Company on December 31 of the current year are givenbelow and on page 5 of this test. Post these entries.

2. Continue using page 12 of the general journal. Journalize the closing entries for interestincome and interest expense. Post these entries.

3. Use page 13 of the general journal on page 3 of this test. Journalize the reversing entries foraccrued interest income and accrued interest expense. Post these entries.

4. Use page 14 of a cash receipts journal given on page 4 of this test. Journalize the receipt ofcash for the maturity value of NR6. Post this entry.

5. Use page 25 of the cash payments journal on page 4 of this test. Journalize the cash paymentfor the maturity value of the Nov. 1 note. Post this entry.

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

1

20X1Dec. Balance �

CR14

1115Notes Receivable

1 5 0 0 00

1 5 0 0 00

————— ————— 5

POIN

TS �

GENERAL LEDGER

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

1

20X1Dec. G12

G13

1120

6 7 50

Interest Receivable

6 7 50

6 7 50

————— —————

4

5

14

20X2Jan.

20X2Jan.

Name



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15


POST.REF.

31

31

31

31

20X1Dec.

Adjusting Entries

Interest Receivable

Interest Income

Interest Expense

Interest Payable

Closing Entries

Interest Income

Income Summary

Income Summary

Interest Expense

1120

7110

8110

2110

7110

3120

3120

8110

6 7 50

1 6 0 00

1 6 9 50

4 8 5 00

12

6 7 50

1 6 0 00

1 6 9 50

4 8 5 00

1

4

3

4

3

1

4

3

4

3

30

POIN

TS �


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15


POST.REF.

1

1

20X2Jan.

Reversing Entries

Interest Income

Interest Receivable

Interest Payable

Interest Expense

7110

1120

2110

8110

6 7 50

1 6 0 00

13

6 7 50

1 6 0 00

1

4

3

4

3

15

POIN

TS �


CA

SH R

ECEI

PTS

JOU

RNA

LP

AG

E

12

34

5

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9 10

DAT

EA

CC

OU

NT

TIT

LE

GE

NE

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L

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BIT

CR

ED

IT

6

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C.

NO

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RE

F.

AC

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BL

EC

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DIT

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RE

DIT

SA

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S T

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PA

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BL

EC

RE

DIT

3020

X2

Jan

.N

otes

Rec

eiva

ble

Inte

rest

In

com

e

R25

6

14

15

00

00

90

00

6 3 9POINTS �C

AS

HD

EB

IT

15

90

00

7

SA

LE

SD

ISC

OU

NT

DE

BIT

1115

7110

CA

SH P

AYM

ENTS

JOU

RNA

LP

AG

E

12

34

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9

10

DAT

EA

CC

OU

NT

TIT

LE

PU

RC

HA

SE

SD

ISC

OU

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CR

ED

IT

CA

SH

CR

ED

ITC

K.

NO

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OS

T.

RE

F.

GE

NE

RA

L

DE

BIT

CR

ED

IT

5

AC

CO

UN

TS

PA

YA

BL

ED

EB

IT

3020

X2

Apr

.N

otes

Pa

yabl

e

Inte

rest

Exp

ense

309

25

84

80

008

00

000

48

000

6 3 9POINTS �

2105

8110


Name

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

30


CP25

2105Notes Payable

8 0 0 0 00—————

8 0 0 0 00

————— 5

POIN

TS �

GENERAL LEDGER

20X2Apr.

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

1

20X1Dec. G12

G13

2110

1 6 0 00

Interest Payable

1 6 0 00

—————

1 6 0 00

—————

4

520X2Jan.

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

31

20X1Dec. G12

G12

3120

4 8 5 00

Income Summary

1 6 9 50

3 1 5 50

1 6 9 50 4

4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

31

31

1

30


G12

G12

G13

CR14

7110

1 6 9 50

6 7 50

Interest Income

6 7 50

9 0 00

—————

6 7 50

1 0 2 00

1 6 9 50

—————

2 2 50

4

5

4

4

20X2Jan.

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

31

31

1

30


G12

G12

G13

CP25

8110

1 6 0 00

4 8 0 00

Interest Expense

4 8 5 00

1 6 0 00

3 2 5 00

4 8 5 00

—————

3 2 0 00

—————

1 6 0 00

4

5

4

4

56

20X2Jan.

Apr.


Part Three—Analyzing Accrued Revenue and ExpensesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. The entry to journalize the closing entry for interest income is 1. ba. debit Income Summary; credit Interest Income.b. debit Interest Income; credit Income Summary.c. debit Interest Income; credit Interest Receivable.d. debit Interest Receivable; credit Interest Income.

2. The entry to journalize the reversing entry for accrued interest income is 2. ca. debit Income Summary; credit Interest Income.b. debit Interest Income; credit Income Summary.c. debit Interest Income; credit Interest Receivable.d. debit Interest Receivable; credit Interest Income.

3. When reversing entries are used and a note receivable is collected that was accepted 3. din a previous fiscal period,a. Interest Receivable is debited for the amount of interest earned in the current

fiscal year.b. Interest Receivable is debited for the total amount of interest earned during the

full term of the note.c. Interest Income is credited for the amount of interest earned in the current

fiscal year.d. Interest Income is credited for the total amount of interest earned during the full

term of the note.4. After the entries are made to record the receipt of principal and interest for a note 4. b

receivable accepted in a previous fiscal period, Interest Incomea. has a debit balance.b. has a credit balance.c. has a zero balance.d. is unaffected.

5. The adjusting entry for accrued interest expense is 5. da. debit Income Summary; credit Interest Expense.b. debit Interest Income; credit Income Summary.c. debit Interest Income; credit Interest Receivable.d. debit Interest Expense; credit Interest Payable.

6. The reversing entry for accrued interest expense is 6. da. debit Income Summary; credit Interest Expense.b. debit Interest Expense; credit Income Summary.c. debit Interest Expense; credit Interest Payable.d. debit Interest Payable; credit Interest Expense.

7. An adjusting entry normally is reversed if the adjusting entry creates a balance in 7. da. a revenue or expense account.b. a revenue and liability account.c. an expense and asset account.d. an asset or liability account.

8. The closing entry for interest expense is 8. aa. debit Income Summary; credit Interest Expense.b. debit Interest Expense; credit Income Summary.c. debit Interest Expense; credit Interest Payable.d. debit Interest Expense; credit Interest Expense.

chapterTEST B

PerfectScore

YourScoreName

Identifying Accounting Concepts and Practices 18 Pts.Journalizing and Posting Entries for Accrued Revenue and Expenses 133 Pts.

Analyzing Accrued Revenue and Expenses 8 Pts.

Total 159 Pts.


21


Answers

1. Accrued expenses are recorded by an adjusting entry at the beginning of the fiscal period. 1. F

2. The adjusting entry for accrued interest expense increases the balance in the liability 2. Faccount Accounts Payable.

3. The adjusting entry for accrued interest income results in a debit to Interest Income. 3. F

4. The interest receivable account balance appears on a company’s balance sheet as a 4. Tcurrent asset.

5. Information needed to record closing entries for interest income is obtained from the 5. TIncome Statement columns of a work sheet.

6. The journal entry to close Interest Income results in a debit entry to Income Summary. 6. F

7. To record revenue that has been earned but not yet received, an adjusting entry is made 7. Fat the beginning of the new fiscal period.

8. The reversing entry for accrued interest income results in a debit balance in the interest 8. Tincome account.

9. Accrued expense is a payable that is classified as a liability. 9. T

10. An Interest Payable credit balance is accrued interest expense incurred in the current 10. Tyear but to be paid in the next year.

11. Accounting procedures require that revenue and expenses be recorded in the accounting 11. Tperiod in which revenue is earned and expenses are incurred.

12. Making an adjusting entry to record revenue that has been earned but not yet received 12. Fis an application of the accounting concept Historical Cost.

13. Accrued interest income is credited to the Interest Income account. 13. T

14. The reversing entry for interest income reduces the balance of Interest Receivable. 14. T

15. Interest incurred but not yet paid is accrued interest expense. 15. T

16. The adjustment for accrued interest income is planned on a work sheet. 16. T

17. At the end of a fiscal period, the Interest Expense balance after adjustments shows 17. Tthe amount of interest expense that has been incurred in that fiscal period.

18. Accrued revenue is a receivable that is classified as an asset. 18. T


Part Two—Journalizing and Posting Entries forAccrued Revenue and ExpensesMesa Company completed the following transactions related to notes receivable andnotes payable during the current year and the following year. The first two transactionshave already been journalized and posted. Note Receivable 6 and Note Payable 8 arethe only notes on hand at the end of the fiscal period. Source documents areabbreviated as follows: check, C; note receivable, NR; receipt, R.

Transac t ions20X1Oct. 2. Accepted a 120-day, 10% note from Susan Jefferson for an extension of

time on her account, $900.00. NR6. Nov. 1. Signed a 180-day, 12% note, $4,000.00. R8.20X2Jan. 30. Received cash for maturity value of NR6: principal, $900.00, plus

interest, $30.00; total, $930.00. R256.Apr. 30. Paid cash for the maturity value of the Nov. 1 note: principal, $4,000.00,

plus interest, $240.00; total, $4,240.00. C309.

Directions:

1. Use page 12 of the general journal on page 3 of this test. Journalize the adjusting entriesfor accrued interest income and accrued interest expense on December 31. The generalledger accounts and balances for Mesa Company on December 31 of the current yearare given below and on page 5 of this test. Post these entries.

2. Continue using page 12 of the general journal. Journalize the closing entries for interestincome and interest expense. Post these entries.

3. Use page 13 of the general journal on page 3 of this test. Journalize the reversingentries for accrued interest income and accrued interest expense. Post these entries.

4. Use page 14 of a cash receipts journal given on page 4 of this test. Journalize the receiptof cash for the maturity value of NR6. Post this entry.

5. Use page 25 of the cash payments journal on page 4 of this test. Journalize the cashpayment for the maturity value of the Nov. 1 note. Post this entry.

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

30


CR14

1115Notes Receivable

9 0 0 00

9 0 0 00

————— ————— 5

POIN

TS �

GENERAL LEDGER

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

1

20X1Dec. G12

G13

1120

2 2 50

Interest Receivable

2 2 50

2 2 50

————— —————

4

5

14

20X2Jan.

20X2Jan.

Name



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15


POST.REF.

31

31

31

31

20X1Dec.

Adjusting Entries

Interest Receivable

Interest Income

Interest Expense

Interest Payable

Closing Entries

Interest Income

Income Summary

Income Summary

Interest Expense

1120

7110

8110

2110

7110

3120

3120

8110

2 2 50

8 0 00

1 2 4 50

4 0 5 00

12

2 2 50

8 0 00

1 2 4 50

4 0 5 00

1

4

3

4

3

1

4

3

4

3

30

POIN

TS �


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15


POST.REF.

1

1

20X2Jan.

Reversing Entries

Interest Income

Interest Receivable

Interest Payable

Interest Expense

7110

1120

2110

8110

2 2 50

8 0 00

13

2 2 50

8 0 00

1

4

3

4

3

15

POIN

TS �


CA

SH R

ECEI

PTS

JOU

RNA

LP

AG

E

12

34

5

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9 10

DAT

EA

CC

OU

NT

TIT

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CR

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IT

6

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NO

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PA

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BL

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RE

DIT

3020

X2

Jan

.N

otes

Rec

eiva

ble

Inte

rest

In

com

e

R25

6

14

90

000

30

00

6 3 9POINTS �C

AS

HD

EB

IT

93

000

7

SA

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SD

ISC

OU

NT

DE

BIT

1115

7110

CA

SH P

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ENTS

JOU

RNA

LP

AG

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12

34

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9

10

DAT

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K.

NO

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DE

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CR

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IT

5

AC

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UN

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PA

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BL

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IT

3020

X2

Apr

.N

otes

Pa

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e

Inte

rest

Exp

ense

309

25

42

40

004

00

000

24

000

6 3 9POINTS �

2105

8110


Name

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

30


CP25

2105Notes Payable

4 0 0 0 00—————

4 0 0 0 00

————— 5

POIN

TS �

GENERAL LEDGER

20X2Apr.

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

1

20X1Dec. G12

G13

2110

8 0 00

Interest Payable

8 0 00

—————

8 0 00

—————

4

520X2Jan.

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

31

20X1Dec. G12

G12

3120

4 0 5 00

Income Summary

1 2 4 50

2 8 0 50

1 2 4 50 4

4

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

ACCOUNT

DEBIT CREDIT

31

31

31

1

30


G12

G12

G13

CR14

7110

1 2 4 50

2 2 50

Interest Income

2 2 50

3 0 00

—————

2 2 50

1 0 2 00

1 2 4 50

—————

7 50

4

5

4

4

20X2Jan.

ACCOUNT NO.

DATE ITEMBALANCE

DEBIT CREDIT

POST.REF.

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31

31

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—————

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20X2Jan.

Apr.


Part Three—Analyzing Accrued Revenue and ExpensesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. The entry to journalize the adjusting entry for accrued interest income is 1. da. debit Income Summary; credit Interest Income.b. debit Interest Income; credit Income Summary.c. debit Interest Income; credit Interest Receivable.d. debit Interest Receivable; credit Interest Income.

2. The closing entry for interest expense is 2. aa. debit Income Summary; credit Interest Expense. b. debit Interest Expense; credit Income Summary. c. debit Interest Expense; credit Interest Payable.d. debit Interest Payable; credit Interest Expense.


4. An adjusting entry normally is reversed if the adjusting entry creates a balance in 4. da. a revenue or expense account.b. a revenue and liability account.c. an expense and asset account.d. an asset or liability account.

5. When reversing entries are used and a note receivable is collected that was accepted 5. din a previous fiscal period, a. Interest Receivable is debited for the amount of interest earned in the

current fiscal year.b. Interest Receivable is debited for the total amount of interest earned during

the full term of the note.c. Interest Income is credited for the amount of interest earned in the current

fiscal year.d. Interest Income is credited for the total amount of interest earned during

the full term of the note.6. The entry to journalize the closing entry for interest income is 6. b

a. debit Income Summary; credit Interest Income.b. debit Interest Income; credit Income Summary.c. debit Interest Income; credit Interest Receivable.d. debit Interest Receivable; credit Interest Income.

7. The adjusting entry for accrued interest expense is 7. da. debit Income Summary; credit Interest Expense.b. debit Interest Income; credit Income Summary.c. debit Interest Income; credit Interest Receivable.d. debit Interest Expense; credit Interest Payable.

8. The reversing entry for accrued interest expense is 8. da. debit Income Summary; credit Interest Expense. b. debit Interest Expense; credit Income Summary.c. debit Interest Expense; credit Interest Payable.d. debit Interest Payable; credit Interest Expense.

chapterTEST A

PerfectScore

YourScoreName

Identifying Accounting Terms 16 Pts.Completing a Work Sheet 62 Pts.

Preparing Financial Statements for a Corporation 81 Pts.Analyzing End-of-Fiscal-Period Work for a Corporation 8 Pts.

Total 167 Pts.


22


Answers

1. Net sales is calculated by subtracting Purchases Discount and Purchases Returns and 1. FAllowances from Sales.

2. For a business to determine whether it is progressing satisfactorily, results of operations 2. Tare compared with industry standards and/or previous fiscal periods.

3. The cost of merchandise sold component percentage is calculated by dividing net sales 3. Fby cost of merchandise sold.

4. Retained Earnings represents previous years’ earnings that have been distributed 4. Fto stockholders.

5. Net income increases a corporation’s capital stock. 5. F

6. Capital stock plus retained earnings equals total stockholders’ equity. 6. T

7. Working capital is the same as cash. 7. F

8. Dividends decrease the earnings retained by a corporation. 8. T

9. A reversing entry is desirable if an adjusting entry creates a balance in an asset 9. Tor liability account.

10. At the end of each fiscal period, the balance in the dividends account is closed to 10. Fthe capital stock account.

11. Corporations with less than $50,000 net income pay taxes at lower tax rates than 11. Tcorporations with larger net incomes.

12. The balance of Federal Income Tax Expense in the Trial Balance columns of the work 12. Tsheet is the amount of income tax paid in quarterly installments.

13. The first step in calculating federal income tax is to extend all work sheet amounts 13. Fto the Income Statement and Balance Sheet columns.

14. The amount extended to the Federal Income Tax Payable Balance Sheet column is 14. Tthe amount of federal income tax still to be paid by the corporation.

15. Federal income tax is calculated by multiplying net sales by the tax rate. 15. F

16. Federal Income Tax Expense is an account that appears under the major division of 16. Fa chart of accounts titled Operating Expenses.


Part Two—Preparing a Work SheetOn December 31 of the current year, Progressive Center has the following trial balance.

Directions: Complete the work sheet for the current year ended December 31. Use the form onpage 3 of this test. Record the adjustments on the work sheet using the following information.

Accrued interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40.00Uncollectible accounts expense estimated at 1.0% of sales on account.

Sales on account for the year, $123,000.00.Merchandise inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,500.00Supplies inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400.00Annual depreciation expense—store equipment . . . . . . . . . . . . . . . . . 6,920.00Accrued interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140.00Federal income tax expense for the year . . . . . . . . . . . . . . . . . . . . . . . . 7,254.00

Part Three—Preparing Financial Statements for a CorporationProgressive Center’s work sheet was completed in Part Two of this test.

Directions:1. Prepare an income statement. Use the form on page 4 of this test. Calculate the following component

percentages: (a) cost of merchandise sold; (b) gross profit on operations; (c) total operating expenses;(d) income from operations; (e) net addition or deduction resulting from other revenue and expenses;and (f) net income before federal income taxes. Round percentage calculations to the nearest 0.1%.

2. Prepare a statement of stockholders’ equity. Use the form provided below. Use the following additionalinformation.

January 1 balance of capital stock account(9,000 shares issued at $6.00 per share) . . . . . . . . . . . . . . . .$54,000.00January l balance of retained earnings account. . . . . . . . . .$29,250.00

3. Prepare a balance sheet. Use the form on page 5 of this test.4. Calculate Progressive Center’s (a) working capital and (b) current ratio.

Capital Stock:

$6.00 Par Value


Issued during Current Year, None


Retained Earnings:







41 1 0 6 00

19 2 0 0 00

Progressive Center

Statement of Stockholders’ Equity


54 0 0 0 00

— 0 —

29 2 5 0 00

21 9 0 6 00

54 0 0 0 00

51 1 5 6 00

105 1 5 6 00

1

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POINTS �


% OF NETSALES

Operating Revenue:

Sales


Less: Sales Returns and Allowances

Net Sales


Merchandise Inventory, Jan 1, 20--

Purchases


Less: Purchases Returns and Allowances

Net Purchases

Total Cost of Merchandise Available for Sale

Less Merchandise Inventory, Dec. 31, 20--


Gross Profit on Operations

Operating Expenses:

Cash Over and Short

Depreciation Expense—Store Equipment

Rent Expense

Supplies Expense


Total Operating Expense

Income from Operations

Other Revenue:

Gain on Plant Assets

Interest Income

Total Other Revenue

Other Expenses:

Interest Expense

Loss on Plant Assets

Total Other Expenses

Net Addition

Net Income before Federal Income Tax

Less: Less Federal Income Tax Expense

Net Income after Federal Income Tax

2 0 2 0 00

1 0 8 0 00

Progressive Center

Income Statement


100.0%

76.5%

23.5%

8.4%

15.1%

0.1%

15.1%

4 6 2 0 00

1 6 2 0 00

250 7 0 0 00

3 1 0 0 00

7 0 0 00

4 4 0 00

8 5 0 00

1 0 4 00

325 5 7 0 00

6 2 4 0 00

46 2 0 0 00

247 6 0 0 00

293 8 0 0 00

49 5 0 0 00

6 00

6 9 2 0 00

17 0 0 0 00

1 7 0 0 00

1 2 3 0 00

1 1 4 0 00

9 5 4 00

319 3 3 0 00

244 3 0 0 00

75 0 3 0 00

26 8 5 6 00

48 1 7 4 00

1 8 6 00

48 3 6 0 00

7 2 5 4 00

41 1 0 6 00

1

1

2

2

1

1

1

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1

1

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2

1

1

1

1

1

2

2

1

1

1

1

1

1

2

2

1

1

39

+1

40

POIN

TS �

(Correct Rulings)


Name

ASSETS

Current Assets:

Cash

Notes Receivable

Interest Receivable

Accounts Receivable



Supplies


Plant Assets:

Store Equipment

Less Accumulated Depreciation—Store Equipment

Total Plant Assets

Total Assets

LIABILITIES

Current Liabilities:

Notes Payable

Interest Payable

Accounts Payable


Dividends Payable

Total Liabilities

STOCKHOLDERS’ EQUITY

Capital Stock

Retained Earnings

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

13 1 4 0 00

1 3 0 0 00

Progressive Center

Balance Sheet

December 31, 20--

32 5 5 0 00

6 0 0 0 00

4 0 00

11 8 4 0 00

49 5 0 0 00

4 0 0 00

53 1 2 0 00

12 7 0 0 00

14 0 0 0 00

1 4 0 00

16 0 0 0 00

6 5 4 00

4 8 0 0 00

54 0 0 0 00

51 1 5 6 00

100 3 3 0 00

40 4 2 0 00

140 7 5 0 00

35 5 9 4 00

105 1 5 6 00

140 7 5 0 00

1

1

1

1

2

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

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1

3

3

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Working Capital:

Current Ratio:

$64,736

2.82 to 1

($100,330 – $35,594)

($100,330 ÷ $35,594)

(Correct Rulings)


Part Four—Analyzing End-of-Fiscal-Period Work for a CorporationDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. If net sales is $100,000.00 and total operating expenses are $20,000.00, the component 1. apercentage for total operating expenses is a. 20.0%.b. 80.0%.c. 50.0%.d. 500.0%.

2. If the cost of merchandise sold component percentage for the current year is 63.4% 2. band the acceptable component percentage is 62.0%, a comparison indicates thata. cost of merchandise sold component percentage is at an acceptable level.b. cost of merchandise sold component percentage is at an unacceptable level.c. more information is needed to determine if current cost of merchandise sold is

at an acceptable level.d. net income earned is 63.4% of sales.

3. An asset account that would not be included in the calculation of working capital is 3. da. Notes Receivable.b. Merchandise Inventory.c. Prepaid Insurance.d. Store Equipment.

4. A liability account that would not be included in the calculation of the current ratio is 4. ba. Notes Payable.b. Mortgage Payable.c. Accounts Payable.d. Federal Income Tax Payable.

5. An amount earned by a corporation and not yet distributed to stockholders is 5. aa. retained earnings.b. net income.c. capital stock.d. stockholders’ equity.

6. After the federal income tax adjustment is recorded on the work sheet, the federal 6. cincome tax expense is extended into the a. Balance Sheet Debit column.b. Balance Sheet Credit column.c. Income Statement Debit column.d. Income Statement Credit column.

7. A corporation’s total stockholders’ equity is increased by 7. aa. net income.b. declaring dividends.c. paying dividends.d. receiving payment on account.

8. Actual federal income tax expense is calculated on the amount of 8. da. net sales.b. net sales less total expenses.c. net sales less cost of goods sold.d. net income before federal income tax.

chapterTEST B

PerfectScore

YourScoreName

Identifying Accounting Terms 16 Pts.Completing a Work Sheet 62 Pts.

Preparing Financial Statements for a Corporation 81 Pts.Analyzing End-of-Fiscal-Period Work for a Corporation 8 Pts.

Total 167 Pts.


22


Answers

1. Corporations with less than $50,000 net income pay taxes at lower tax rates than 1. Tcorporations with larger net incomes.

2. The balance of Federal Income Tax Expense in the Trial Balance columns of the work 2. Tsheet is the amount of income tax paid in quarterly installments.

3. The first step in calculating federal income tax is to extend all work sheet amounts 3. Fto the Income Statement and Balance Sheet columns.

4. The amount extended to the Federal Income Tax Payable Balance Sheet column is the 4. Tamount of federal income tax still to be paid by the corporation.

5. Federal income tax is calculated by multiplying net sales by the tax rate. 5. F

6. Federal Income Tax Expense is an account that appears under the major division of a 6. Fchart of accounts titled Operating Expenses.

7. Net sales is calculated by subtracting Purchases Discount and Purchases Returns and 7. FAllowances from Sales.

8. For a business to determine whether it is progressing satisfactorily, results of operations 8. Tare compared with industry standards and/or previous fiscal periods.

9. The cost of merchandise sold component percentage is calculated by dividing net sales 9. Fby cost of merchandise sold.

10. Retained Earnings represents previous years’ earnings that have been distributed 10. Fto stockholders.

11. Net income increases a corporation’s capital stock. 11. F

12. Capital stock plus retained earnings equals total stockholders’ equity. 12. T

13. Working capital is the same as cash. 13. F

14. Dividends decrease the earnings retained by a corporation. 14. T

15. A reversing entry is desirable if an adjusting entry creates a balance in an asset 15. Tor liability account.

16. At the end of each fiscal period, the balance in the dividends account is closed 16. Fto the capital stock account.


Part Two—Preparing a Work SheetOn December 31 of the current year, Worthington Center has the following trial balance.

Directions: Complete the work sheet for the current year ended December 31. Use the form on page 3 of thistest. Record the adjustments on the work sheet using the following information.

Accrued interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $340.00Uncollectible accounts expense estimated at 1.0% of sales on account.

Sales on account for the year, $123,000.00.Merchandise inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,500.00Supplies inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700.00Annual depreciation expense—store equipment . . . . . . . . . . . . . . . . . 6,920.00Accrued interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240.00Federal income tax expense for the year . . . . . . . . . . . . . . . . . . . . . . . . 21,604.00

Part Three—Preparing Financial Statements for a CorporationWorthington Center’s work sheet was completed in Part Two of this test.

Directions:1. Prepare an income statement. Use the form on page 4 of this test. Calculate the following component

percentages: (a) cost of merchandise sold; (b) gross profit on operations; (c) total operating expenses;(d) income from operations; (e) net addition or deduction resulting from other revenue and expenses;and (f) net income before federal income taxes. Round percentage calculations to the nearest 0.1%.

2. Prepare a statement of stockholders’ equity. Use the form below. Use the following additional information.January 1 balance of capital stock account

(12,000 shares issued at $7.00 per share) . . . . . . . . . . . .$84,000.00January l balance of retained earnings account. . . . . . . . . .$38,460.00

3. Prepare a balance sheet. Use the form on page 5 of this test.4. Calculate Worthington Center’s (a) working capital and (b) current ratio.

Capital Stock:

$7.00 Par Value


Issued during Current Year, None


Retained Earnings:







76 4 9 6 00

24 0 0 0 00

Worthington Center

Statement of Stockholders’ Equity


84 0 0 0 00

— 0 —

38 4 6 0 00

52 4 9 6 00

84 0 0 0 00

90 9 5 6 00

174 9 5 6 00

1

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000

74

000

459

41

000

459

41

000

225

00

004

00

000

34

000

351

40

00

161

50

000

70

000

481

20

00

240

00

00

296

30

000

296

30

000

13

00

00

177

00

0012

00

000

24

000

580

00

002

10

400

60

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0084

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000

384

60

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219

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orre

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POINTS �


% OF NETSALES

Operating Revenue:

Sales


Less: Sales Returns and Allowances

Net Sales


Merchandise Inventory, Jan 1, 20--

Purchases


Less: Purchases Returns and Allowances

Net Purchases

Total Cost of Merchandise Available for Sale

Less Merchandise Inventory, Dec. 31, 20--


Gross Profit on Operations

Operating Expenses:

Cash Over and Short

Depreciation Expense—Store Equipment

Rent Expense

Supplies Expense


Total Operating Expense

Income from Operations

Other Revenue:

Gain on Plant Assets

Interest Income

Total Other Revenue

Other Expenses:

Interest Expense

Loss on Plant Assets

Total Other Expenses

Net Addition

Net Income before Federal Income Tax

Less: Less Federal Income Tax Expense

Net Income after Federal Income Tax

2 0 2 0 00

4 0 8 0 00

Worthington Center

Income Statement


100.0%

67.2%

32.8%

8.7%

24.0%

0.1%

24.1%

2 3 8 0 00

11 6 2 0 00

310 7 0 0 00

6 1 0 0 00

7 0 0 00

7 4 0 00

9 5 0 00

1 0 4 00

420 5 7 0 00

14 0 0 0 00

130 2 0 0 00

304 6 0 0 00

434 8 0 0 00

161 5 0 0 00

6 00

6 9 2 0 00

26 0 0 0 00

1 4 0 0 00

1 2 3 0 00

1 4 4 0 00

1 0 5 4 00

406 5 7 0 00

273 3 0 0 00

133 2 7 0 00

35 5 5 6 00

97 7 1 4 00

3 8 6 00

98 1 0 0 00

21 6 0 4 00

76 4 9 6 00

1

1

2

2

1

1

1

2

1

1

1

2

2

1

1

1

1

1

2

2

1

1

1

1

1

1

2

2

1

1

39

+1

40

POIN

TS �

(Correct Rulings)


Name

ASSETS

Current Assets:

Cash

Notes Receivable

Interest Receivable

Accounts Receivable



Supplies


Plant Assets:

Store Equipment

Less Accumulated Depreciation—Store Equipment

Total Plant Assets

Total Assets

LIABILITIES

Current Liabilities:

Notes Payable

Interest Payable

Accounts Payable


Dividends Payable

Total Liabilities

STOCKHOLDERS’ EQUITY

Capital Stock

Retained Earnings

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

35 1 4 0 00

1 3 0 0 00

Worthington Center

Balance Sheet

December 31, 20--

22 5 0 0 00

4 0 0 0 00

3 4 0 00

33 8 4 0 00

161 5 0 0 00

7 0 0 00

48 1 2 0 00

17 7 0 0 00

12 0 0 0 00

2 4 0 00

58 0 0 0 00

2 1 0 4 00

6 0 0 0 00

84 0 0 0 00

90 9 5 6 00

222 8 8 0 00

30 4 2 0 00

253 3 0 0 00

78 3 4 4 00

174 9 5 6 00

253 3 0 0 00

1

1

1

1

2

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

3

3

30

POIN

TS �

Working Capital:

Current Ratio:

$144,536

2.84 to 1

($222,880 – $78,344)

($222,880 ÷ $78,344)

(Correct Rulings)


Part Four—Analyzing End-of-Fiscal-Period Work for a CorporationDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. After the federal income tax adjustment is recorded on the work sheet, the federal 1. cincome tax expense is extended into thea. Balance Sheet Debit column.b. Balance Sheet Credit column.c. Income Statement Debit column.d. Income Statement Credit column.

2. A corporation’s total stockholders’ equity is increased by 2. aa. net income.b. declaring dividends.c. paying dividends.d. receiving payment on account.

3. Actual federal income tax expense is calculated on the amount of 3. da. net sales.b. net sales less total expenses.c. net sales less cost of goods sold.d. net income before federal income tax.

4. If net sales is $100,000.00 and total operating expenses are $20,000.00, the component 4. apercentage for total operating expenses isa. 20.0%.b. 80.0%.c. 50.0%.d. 500.0%.



6. An asset account that would not be included in the calculation of working capital is 6. da. Notes Receivable.b. Merchandise Inventory.c. Prepaid Insurance.d. Store Equipment.

7. A liability account that would not be included in the calculation of the current ratio is 7. ba. Notes Payable.b. Mortgage Payable.c. Accounts Payable.d. Federal Income Tax Payable.

8. An amount earned by a corporation and not yet distributed to stockholders is 8. aa. retained earnings.b. net income.c. capital stock.d. stockholders’ equity.

TEST A

par tthree

PerfectScore

YourScoreName



Total 107 Pts.




A. accrued revenue 1. The amount of total current assets less total current liabilities. 1. JB. assessed value 2. A ratio that shows the numeric relationship of current 2. C

assets to current liabilities.C. current ratio 3. An amount paid for the use of money for a period of time. 3. GD. dishonored note 4. Using the price of merchandise purchased first to calculate 4. E

the cost of merchandise sold first.E. first-in, first-out 5. Using the price of merchandise purchased last to calculate 5. H

inventory costing method the cost of merchandise sold first.F. gross profit method of 6. A note that is not paid when due. 6. D

estimating inventoryG. interest 7. Estimating inventory by using the previous year’s 7. F

percentage of gross profit on operations.H. last-in, first-out 8. Land and anything attached to land. 8. I

inventory costing methodI. real property 9. The value of an asset determined by tax authorities for 9. B

the purpose of calculating taxes.J. working capital 10. Revenue earned in one fiscal period but not received until 10. A

a later fiscal period.


Answers

1. The cost of merchandise sold component percentage is calculated by dividing net 1. Fsales by cost of merchandise sold.

2. Dividends are reported on the income statement as an expense. 2. F3. Writing off an account does not change the book value of accounts receivable. 3. T4. Making an adjusting entry to record revenue that has been earned but not yet received 4. F

is an application of the accounting concept Historical Cost.5. The reversing entry for accrued interest expense results in a debit entry to Interest Payable. 5. T6. The interest accrued on a note payable is credited to an expense account. 6. F7. Interest expense on notes payable is a normal operating expense. 7. F8. The cost of merchandise inventory is reported only on the income statement. 8. F9. Interest income is recorded when a note receivable is dishonored. 9. T

10. Net income of a business can be decreased by maintaining a merchandise inventory 10. Tthat is larger than needed.

11. Recording a plant asset for the amount paid for the asset is an application of the 11. FMatching Expenses with Revenue concept.

12. Two of the factors that affect the amount of depreciation expense for a plant asset are 12. Tthe estimated salvage value and estimated useful life of the plant asset.


Part Three—Journalizing TransactionsSelected transactions completed by HiTek, Inc., during December of thecurrent year and January of the following year are listed below.

Directions:

1. Journalize the following transactions. Use page 12 of a general journal, a cash payments journal, and a cashreceipts journal. The journals are on pages 3 and 4 of this test. Source documents are abbreviated as follows:check, C; memorandum, M; note receivable, NR; receipt, R.

Transac t ions20X1Dec. 2. Paid cash for the maturity value of a 90-day, 9% note payable: principal, $5,000.00. C825.

4. Signed a 90-day, 15% note to National Supply for an extension of time on this account payable,$3,500.00. M317.

7. Wrote off Gentry Corporation’s past-due account as uncollectible, $315.00. M318.12. Manning Corporation dishonored NR9, a 60-day, 18% note, maturity value due today:

principal, $2,000.00, plus interest. M319.17. Received cash in full payment of Gentry Corporation’s account, previously written off as

uncollectible, $315.00. M320 and R126.20. Received cash for the maturity value of a 120-day, 12% note receivable: principal, $1,500.00, plus

interest. R128.26. Accepted a 90-day, 18% note from Anthony Marino for an extension of time on his account, $900.00.

NR10.31. Paid cash for property tax expense, $3,200.00. C832.

2. Skip a line in the cash receipts journal and record the following transaction.20X2Jan. 2. Received cash, $650.00, from the sale of office equipment (original cost, $4,000.00; accumulated

depreciation recorded to date, $3,500.00). R130.


1

2

3

4

5

6

7

8

9

10

11

12

1

2

3

4

5

6

7

8

9

10

11

12


POST.REF.

4

7

12

17

26

20X1Dec. Accounts Payable/National Supply

Notes Payable


Accounts Receivable/Gentry Corp.

Accounts Receivable/Manning Corp.

Notes Receivable

Interest Income

Accounts Receivable/Gentry Corp.


Notes Receivable

Accounts Receivable/Anthony Marino

M317

M318

M319

M320

NR10

3 5 0 0 00

3 1 5 00

2 0 6 0 00

3 1 5 00

9 0 0 00

12

3 5 0 0 00

3 1 5 00

2 0 0 0 00

6 0 00

3 1 5 00

9 0 0 00

6

2

4

4

6

2

6

2

2

4

4

42

POIN

TS �

Name


CA

SH P

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JOU

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AG

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12

34

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9

10

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825

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12

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11

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32

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R12

6

R12

8

R13

03

50

000

12

15

00

00

60

00

40

00

00

15

000

31

500

5 5 2 5 2 2 21POINTS �

CA

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BIT

31

500

15

60

00

65

000

7

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Part Four—Identifying Accounting Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. During a period of rising prices, the highest cost of merchandise sold will result 1. bfrom using the a. first-in, first-out inventory costing method.b. last-in, first-out inventory costing method.c. weighted average inventory costing method.d. none of the above.



3. A corporation’s total stockholders’ equity is increased by 3. aa. net income. c. paying dividends.b. declaring dividends. d. receiving payment on account.

4. The entry to journalize the closing entry for interest income is 4. ba. debit Income Summary; credit Interest Income.b. debit Interest Income; credit Income Summary.c. debit Interest Income; credit Interest Receivable.d. debit Interest Receivable; credit Interest Income.

5. Maturity value for a note is calculated as 5. aa. principal plus interest equals maturity value.b. principal times interest equals maturity value.c. principal times interest rate equals maturity value.d. principal plus interest rate equals maturity value.

6. A partial payment made on a note includes 6. da. all interest until the total interest is paid.b. all principal until the total amount of principal is paid.c. an amount rounded to the nearest dollar.d. part of the principal and part of the interest to be paid.

7. When a customer dishonors a note, 7. ca. interest is earned but not recorded. c. interest is both earned and recorded.b. no interest is earned. d. none of these.

8. Using the same inventory method for all fiscal periods is an application of the 8. caccounting concepta. Historical Cost. c. Consistent Reporting.b. Accounting Cycle. d. Objective Evidence.

9. The weighted-average method is based on the assumption that the cost of merchandise 9. csold should be calculated using thea. average cost per unit of beginning inventory.b. average cost of ending inventory.c. average cost of beginning inventory plus purchases during the fiscal period.d. average cost of ending inventory plus purchases during the fiscal period.

10. Three general ledger accounts used to record information about each kind of plant asset are 10. ba. a contra asset account, liability account, and expense account.b. an asset account, contra asset account, and expense account.c. an asset account, contra asset account, and liability account.d. none of these.

TEST B

par tthree

PerfectScore

YourScoreName



Total 107 Pts.




A. accrued revenue 1. The amount of total current assets less total current liabilities. 1. JB. assessed value 2. Using the price of merchandise purchased last to calculate 2. H

the cost of merchandise sold first.C. current ratio 3. A ratio that shows the numeric relationship of current 3. C

assets to current liabilities.D. dishonored note 4. An amount paid for the use of money for a period of time. 4. GE. first-in, first-out 5. Using the price of merchandise purchased first to calculate 5. E

inventory costing method the cost of merchandise sold first.F. gross profit method 6. Estimating inventory by using the previous year’s percentage 6. F

of estimating inventory of gross profit on operations.G. interest 7. A note that is not paid when due. 7. DH. last-in, first-out 8. The value of an asset determined by tax authorities for 8. B

inventory costing method the purpose of calculating taxes.I. real property 9. Land and anything attached to land. 9. IJ. working capital 10. Revenue earned in one fiscal period but not received until 10. A

a later fiscal period.


Answers

1. Current ratio is a measure of a company’s ability to earn a profit. 1. F2. Writing off an account does not change the book value of accounts receivable. 2. T3. Retained earnings are earnings distributed to stockholders. 3. F4. The interest receivable account balance appears on a company’s balance sheet as 4. T

a current asset.5. When a business issues a note payable, the principal of the note is credited to 5. T

a liability account.6. Notes receivable paid within one year generally are classified as non-current assets. 6. F7. The difference between an asset’s account balance and its related contra account balance 7. T

is its book value.8. When a note receivable is dishonored, the company should immediately write off the 8. F

account receivable for that customer.9. Many businesses fail because too much or too little merchandise inventory is kept on hand. 9. T

10. The cost of merchandise sold can be calculated by subtracting the cost of merchandise 10. Favailable for sale from the cost of ending inventory.

11. A minimum inventory balance is the amount of merchandise that will typically last 11. Tuntil ordered merchandise can be received from vendors.

12. Allocating a plant asset’s cost to an expense over the plant asset’s useful life is an 12. Tapplication of the Matching Expenses with Revenue concept.


Part Three—Journalizing TransactionsSelected transactions completed by TechnoSpec, Inc., during December of thecurrent year and January of the following year are listed below.

Directions:

1. Journalize the following transactions. Use page 12 of a general journal, a cash payments journal, and a cashreceipts journal. The journals are on pages 3 and 4 of this test. Source documents are abbreviated as follows:check, C; memorandum, M; note receivable, NR; receipt, R.

Transac t ions20X1Dec. 9. Wrote off Mertz Corporation’s past-due account as uncollectible, $347.00. M125.

18. Paid cash for the maturity value of a 90-day, 10% note payable: principal, $4,000.00. C673.19. Signed a 90-day, 16% note to Esquire Supply for an extension of time on this account payable,

$7,200.00. M126.20. Received cash in full payment of Mertz Corporation’s account, previously written off as

uncollectible, $347.00. M127 and R304.20. Paid cash for property tax expense, $2,200.00. C674.21. Levan Corporation dishonored NR9, a 90-day, 18% note, maturity value due today:

principal, $2,500.00, plus interest. M128.26. Accepted a 90-day, 16% note from James Myers for an extension of time on his account, $1,300.00.

NR10.28. Received cash for the maturity value of a 60-day, 12% note receivable: principal, $2,600.00, plus

interest. R305.2. Skip a line in the cash receipts journal and record the following transaction.20X2Jan. 2. Received cash, $425.00, from the sale of office equipment (original cost, $3,000.00; accumulated

depreciation recorded to date, $2,500.00). R306.


1

2

3

4

5

6

7

8

9

10

11

12

1

2

3

4

5

6

7

8

9

10

11

12


POST.REF.

9

19

20

21

26

20X1Dec. Allowance for Uncollectible Accounts

Accounts Receivable/Mertz Corp.

Accounts Payable/Esquire Supply

Notes Payable

Accounts Receivable/Mertz Corp.


Accounts Receivable/Levan Corp.

Notes Receivable

Interest Income

Notes Receivable

Accounts Receivable/James Myers

M125

M126

M127

M128

NR10

3 4 7 00

7 2 0 0 00

3 4 7 00

2 6 1 2 50

1 3 0 0 00

12

3 4 7 00

7 2 0 0 00

3 4 7 00

2 5 0 0 00

1 1 2 50

1 3 0 0 00

4

4

6

2

6

2

6

2

2

4

4

42

POIN

TS �

Name


CA

SH P

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ENTS

JOU

RNA

LP

AG

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12

34

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9

10

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22

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10

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22

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R30

4

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5

R30

62

50

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75

00

12

26

00

00

52

00

30

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00

34

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34

700

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Part Four—Identifying Accounting Concepts and PracticesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. If net sales are $100,000.00 and total operating expenses are $20,000.00, the component 1. apercentage for total operating expenses isa. 20.0%b. 80.0%c. 50.0%.d. 500.0%.

2. Book value of a plant asset is original cost 2. ba. plus accumulated depreciation.b. minus accumulated depreciation.c. plus salvage value.d. minus salvage value.

3. Making an adjusting entry at the end of the fiscal period to record revenue earned but 3. dnot received is an application of the accounting concepta. Adequate Disclosure.b. Matching Expenses with Revenue.c. Objective Evidence.d. Realization of Revenue.


5. A reversing entry for accrued interest expense will result in an account balance of 5. da. Interest Payable Debit.b. Interest Payable Credit.c. Interest Expense Debit.d. Interest Expense Credit.

6. Interest income of a business is 6. ba. a normal operating revenue. c. an investment.b. an other revenue. d. an account receivable.


8. When the fifo method is used, cost of merchandise sold is valued at 8. ca. the average price. c. the earliest price.b. the most recent price. d. none of these.

9. Some examples of current assets are 9. ba. cash, accounts receivable, and cash register.b. cash, accounts receivable, merchandise inventory.c. cash, merchandise inventory, furniture.d. none of these.


chapterTEST A

PerfectScore

YourScoreName

Identifying Accounting Terms 8 Pts.Identifying Accounting Concepts and Practices 15 Pts.

Completing Partnership Financial Statements 40 Pts.Journalizing Transactions to Liquidate a Partnership 37 Pts.

Total 100 Pts.


23



A. distribution of net 1. A written agreement setting forth the conditions under 1. Gincome statement which a partnership is to operate.

B. limited liability 2. The process of paying a partnership’s liabilities and 2. Cpartnership distributing remaining assets to the partners.

C. liquidation of a 3. Cash received from the sale of assets during liquidation 3. Hpartnership of a partnership.

D. owners’ equity 4. A partnership that combines the advantages of the partnership 4. Bstatement and the corporation, while avoiding their disadvantages.

E. partner 5. A business in which two or more persons combine their 5. Fassets and skills.

F. partnership 6. Each member of a partnership. 6. E

G. partnership 7. A partnership financial statement showing net income or 7. Aagreement loss distribution to partners

H. realization 8. A financial statement that summarizes the changes in 8. Downers’ equity during a fiscal period.



Answers

1. When a business requires the skills of more than one person and needs more capital 1. Fthan one owner can provide, it should be organized as a proprietorship.

2. A partnership distribution of net income or net loss is usually shown on the trial balance. 2. F

3. Regardless of how earnings are shared, the steps in preparing a distribution of net 3. Tincome statement are the same.

4. An owners’ equity statement summarizes the changes in owner’s equity during 4. Ta fiscal period.

5. A separate financial statement may be prepared to show the distribution of net income 5. Tor loss to partners.

6. A distribution of net income statement summarizes how owners’ equity has changed 6. Fduring a fiscal period.

7. Owners’ equity can be changed only when a partner withdraws cash or other assets 7. Ffrom the business or makes an additional investment in the business.

8. The income statement for a partnership is prepared in the same way as an income 8. Tstatement for proprietorship.

9. The process of paying a partnership’s liabilities and distributing remaining assets to 9. Tthe partners is called liquidation of a partnership.

10. Partnership earnings are divided as agreed to in the partnership agreement. 10. T

11. In a partnership liquidation, all liabilities must be paid before partners can receive 11. Tany cash.

12. If there is a gain on realization, it is divided equally among the partners. If there is a 12. Floss on realization, it is divided according to the partnership agreement for the divisionof net income or loss.

13. When noncash assets are liquidated and the amount received exceeds the book value of 13. Fthe assets, there is a loss on realization.

14. Earnings of a business must be withdrawn in cash. 14. F

15. A partner may invest cash or any other asset in the partnership. 15. T

Name


Part Three—Completing Partnership Financial StatementsSuperior Systems prepared the following work sheet for the year endedDecember 31 of the current year.

Directions:

1. Prepare a distribution of net income statement on page 4 of this test. Netincome or loss is to be shared equally.

2. Prepare an owners’ equity statement on page 4 of this test. No additionalinvestments were made.

1 2 3 4


DEBIT CREDIT

ADJUSTMENTS

DEBIT CREDIT

INCOME STATEMENT

DEBIT CREDIT

BALANCE SHEET

DEBIT CREDIT

5 6 7 8

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

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

Cash

Petty Cash

Accounts Receivable


Supplies—Office

Supplies—Store

Prepaid Insurance

Accounts Payable

Sales Tax Payable

Jacob Green, Capital

Jacob Green, Drawing

Laura Green, Capital

Laura Green, Drawing

Income Summary

Sales

Purchases

Advertising Expense

Credit Card Fee Expense

Insurance Expense


Rent Expense

Supplies Expense—Office

Supplies Expense—Store

Utilities Expense

Net Income

26 5 5 0 00

2 5 0 00

7 5 0 0 00

167 0 9 5 00

3 0 9 0 00

3 3 6 0 00

2 9 6 0 00

10 8 7 5 00

10 5 5 0 00

75 8 3 5 00

3 2 1 0 00

1 3 5 7 00

1 5 2 0 00

11 0 4 0 00

1 4 3 3 00

326 6 2 5 00

5 2 5 0 00

6 1 5 00

82 2 0 0 00

78 9 9 5 00

159 5 6 5 00

326 6 2 5 00

9 3 4 3 00

1 6 9 0 00

1 9 3 2 00

2 1 4 0 00

15 1 0 5 00

9 3 4 3 00

1 9 3 2 00

2 1 4 0 00

1 6 9 0 00

15 1 0 5 00

9 3 4 3 00

75 8 3 5 00

3 2 1 0 00

1 3 5 7 00

1 6 9 0 00

1 5 2 0 00

11 0 4 0 00

1 9 3 2 00

2 1 4 0 00

1 4 3 3 00

109 5 0 0 00

50 0 6 5 00

159 5 6 5 00

159 5 6 5 00

159 5 6 5 00

159 5 6 5 00

26 5 5 0 00

2 5 0 00

7 5 0 0 00

157 7 5 2 00

1 1 5 8 00

1 2 2 0 00

1 2 7 0 00

10 8 7 5 00

10 5 5 0 00

217 1 2 5 00

217 1 2 5 00

5 2 5 0 00

6 1 5 00

82 2 0 0 00

78 9 9 5 00

167 0 6 0 00

50 0 6 5 00

217 1 2 5 00

Superior Systems

Work Sheet



Jacob Green

50% of Net Income

Laura Green

50% of Net Income

Net Income

25 0 3 2 50

25 0 3 2 50

50 0 6 5 00

Superior Systems

Distribution of Net Income Statement


1

2

1

2

2

11

+1

12

1

1

1

(Correct Rulings)

Jacob Green

Capital, January 1, 20--

Share of Net income

Less Withdrawals

Net Increase in Capital

Capital, December 31, 20--

Laura Green


Share of Net income

Less Withdrawals



Total Owners’ Equity, December 31, 20--

25 0 3 2 50

10 8 7 5 00

25 0 3 2 50

10 5 5 0 00

Superior Systems

Owners’ Equity Statement


82 2 0 0 00

14 1 5 7 50

78 9 9 5 00

14 4 8 2 50

96 3 5 7 50

93 4 7 7 50

189 8 3 5 00

1

2

2

2

2

2

1

2

2

2

2

2

2

27

+1

28

1

1

1

(Correct Rulings)


Name

Part Four—Journalizing Transactions to Liquidate a PartnershipBud Harned and Marge O’Brien agree to liquidate their partnership on July30 of the current year. On that date, after financial statements were preparedand closing entries were posted, the general ledger accounts had thefollowing balances.

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$10,525.00Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .275.00Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8,000.00Acc. Dep.—Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,500.00Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .650.00Bud Harned, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,350.00Marge O’Brien, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,300.00

Directions: Journalize the following transactions. Journals are provided onpage 6 of this test. Source documents are abbreviated as follows: check, C;memorandum, M; receipt, R.

Transac t ionsJul. 1. Received cash from the sale of office equipment, $3,500.00. R110.

1. Received cash from the sale of supplies, $175.00. R111.3. Paid cash to all creditors for amounts owed. C354.4. Distributed balance of Losses and Gains on Realization to Bud Harned, 55%;

to Marge O’Brien, 45%. M89.4. Distributed remaining cash to partners. C355 and C356.


1

2

3

4

5

1

2

3

4

5


POST.REF.

420--Jul. Loss and Gain on Realization

Bud Harned, Capital

Marge O'Brien, Capital

M89 9 0 0 00

12

4 9 5 00

4 0 5 00

4

2

2

8

POIN

TS �


CA

SH R

ECEI

PTS

JOU

RNA

LP

AG

E

12

34

5

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9 10

DAT

EA

CC

OU

NT

TIT

LE

GE

NE

RA

L

DE

BIT

CR

ED

IT

6

DO

C.

NO

.P

OS

T.

RE

F.

AC

CO

UN

TS

RE

CE

IVA

BL

EC

RE

DIT

SA

LE

SC

RE

DIT

SA

LE

S T

AX

PA

YA

BL

EC

RE

DIT

1 1

20--

Jul.

Acc

um

. Dep

.—O

ffic

e E

quip

men

t

Off

ice

Equ

ipm

ent

Los

s a

nd

Ga

in o

n R

eali

zati

on

Los

s a

nd

Ga

in o

n R

eali

zati

on

Supp

lies

R11

0

R11

1

55

00

00

10

000

1

80

00

00

10

00

00

27

500

5 2 2 5 2 16POINTS �C

AS

HD

EB

IT

35

00

00

17

500

7

SA

LE

SD

ISC

OU

NT

DE

BIT

CA

SH P

AYM

ENTS

JOU

RNA

LP

AG

E

12

34

1 2 3 4 5 6 7 8 9

10

1 2 3 4 5 6 7 8 9

10

DAT

EA

CC

OU

NT

TIT

LE

GE

NE

RA

L

DE

BIT

CR

ED

IT

AC

CO

UN

TS

PA

YA

BL

ED

EB

IT

CA

SH

CR

ED

ITC

K.

NO

.P

OS

T.

RE

F.

3 4

20--

Jul.

Acc

oun

ts P

aya

ble

Bu

d H

arn

ed, C

api

tal

Ma

rge

O'B

rien

, Ca

pita

l

354

355

356

1

65

000

135

50

00

65

000

78

45

00

57

05

00

5 5 3 13POINTS �

chapterTEST B

PerfectScore

YourScoreName


Completing Partnership Financial Statements 40 Pts.Journalizing Transactions to Liquidate a Partnership 37 Pts.

Total 100 Pts.


23



A. distribution of net 1. A business in which two or more persons combine their 1. Fincome statement assets and skills.

B. limited liability 2. A financial statement that summarizes the changes in 2. Dpartnership owners’ equity during a fiscal period.

C. liquidation of a 3. A written agreement setting forth the conditions under 3. Gpartnership which a partnership is to operate.

D. owners’ equity 4. The process of paying a partnership’s liabilities and 4. Cstatement distributing remaining assets to the partners.

E. partner 5. A partnership financial statement showing net income or 5. Aloss distribution to partners.

F. partnership 6. Cash received from the sale of assets during liquidation 6. Hof a partnership.

G. partnership 7. A partnership that combines the advantages of the partnership 7. Bagreement and the corporation, while avoiding their disadvantages.

H. realization 8. Each member of a partnership. 8. E



Answers

1. The process of paying a partnership’s liabilities and distributing remaining assets to 1. Tthe partners is called liquidation of a partnership.

2. A separate financial statement may be prepared to show the distribution of net income 2. Tor loss to partners.

3. A distribution of net income statement summarizes how owners’ equity has changed 3. Fduring a fiscal period.

4. When a business requires the skills of more than one person and needs more capital 4. Fthan one owner can provide, it should be organized as a proprietorship.

5. A partnership distribution of net income or net loss is usually shown on the trial balance. 5. F

6. Regardless of how earnings are shared, the steps in preparing a distribution of net 6. Tincome statement are the same.

7. An owners’ equity statement summarizes the changes in owner’s equity during 7. Ta fiscal period.

8. When noncash assets are liquidated and the amount received exceeds the book value 8. Fof the assets, there is a loss on realization.

9. If there is a gain on realization, it is divided equally among the partners. If there is a loss 9. Fon realization, it is divided according to the partnership agreement for the division of netincome or loss.

10. In a partnership liquidation, all liabilities must be paid before partners can receive 10. Tany cash.

11. Owners’ equity can be changed only when a partner withdraws cash or other assets 11. Ffrom the business or makes an additional investment in the business.

12. Partnership earnings are divided as agreed to in the partnership agreement. 12. T

13. A partner may invest cash or any other asset in the partnership. 13. T

14. The income statement for a partnership is prepared in the same way as an income 14. Tstatement for proprietorship.

15. Earnings of a business must be withdrawn in cash. 15. F

Name


Part Three—Completing Partnership Financial StatementsFort Lauderdale Marine prepared the following work sheet for the year endedDecember 31 of the current year.

Directions:

1. Prepare a distribution of net income statement on page 4 of this test. Netincome or loss is to be shared equally.

2. Prepare an owners’ equity statement on page 4 of this test. No additionalinvestments were made.

1 2 3 4


DEBIT CREDIT

ADJUSTMENTS

DEBIT CREDIT

INCOME STATEMENT

DEBIT CREDIT

BALANCE SHEET

DEBIT CREDIT

5 6 7 8

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

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

Cash

Petty Cash

Accounts Receivable


Supplies—Office

Supplies—Store

Prepaid Insurance

Accounts Payable

Sales Tax Payable

Lara Loss, Capital

Lara Loss, Drawing

Raelyn MacLean, Capital

Raelyn MacLean, Drawing

Income Summary

Sales

Purchases

Advertising Expense

Credit Card Fee Expense

Insurance Expense


Rent Expense

Supplies Expense—Office

Supplies Expense—Store

Utilities Expense

Net Income

27 0 0 0 00

2 0 0 00

8 5 0 0 00

167 0 9 5 00

3 0 9 0 00

2 2 6 0 00

2 9 6 0 00

10 3 7 5 00

11 0 5 0 00

75 8 3 5 00

4 3 1 0 00

1 3 5 7 00

1 9 5 5 00

11 0 4 0 00

1 4 3 3 00

328 4 6 0 00

5 7 0 0 00

5 6 5 00

82 2 0 0 00

79 9 9 5 00

160 0 0 0 00

328 4 6 0 00

9 3 4 3 00

1 6 9 0 00

1 9 3 2 00

2 1 4 0 00

15 1 0 5 00

9 3 4 3 00

1 9 3 2 00

2 1 4 0 00

1 6 9 0 00

15 1 0 5 00

9 3 4 3 00

75 8 3 5 00

4 3 1 0 00

1 3 5 7 00

1 6 9 0 00

1 9 5 5 00

11 0 4 0 00

1 9 3 2 00

2 1 4 0 00

1 4 3 3 00

111 0 3 5 00

48 9 6 5 00

160 0 0 0 00

160 0 0 0 00

160 0 0 0 00

160 0 0 0 00

27 0 0 0 00

2 0 0 00

8 5 0 0 00

157 7 5 2 00

1 1 5 8 00

1 2 0 00

1 2 7 0 00

10 3 7 5 00

11 0 5 0 00

217 4 2 5 00

217 4 2 5 00

5 7 0 0 00

5 6 5 00

82 2 0 0 00

79 9 9 5 00

168 4 6 0 00

48 9 6 5 00

217 4 2 5 00

Fort Lauderdale Marine

Work Sheet



Lara Loss

50% of Net Income

Raelyn MacLean

50% of Net Income

Net Income

24 4 8 2 50

24 4 8 2 50

48 9 6 5 00


Distribution of Net Income Statement


1

2

1

2

2

11

+1

12

1

1

1

(Correct Rulings)

Lara Loss


Share of Net income

Less Withdrawals



Raelyn MacLean


Share of Net income

Less Withdrawals



Total Owners’ Equity, December 31, 20--

24 4 8 2 50

10 3 7 5 00

24 4 8 2 50

11 0 5 0 00


Owners’ Equity Statement


82 2 0 0 00

14 1 0 7 50

79 9 9 5 00

13 4 3 2 50

96 3 0 7 50

93 4 2 7 50

189 7 3 5 00

1

2

2

2

2

2

1

2

2

2

2

2

2

27

+1

28

1

1

1

(Correct Rulings)


Name

Part Four—Journalizing Transactions to Liquidate a PartnershipLynn Hayner and Gladys Lyons agree to liquidate their partnership on July 30of the current year. On that date, after financial statements were preparedand closing entries were posted, the general ledger accounts had thefollowing balances.

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$11,000.00Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .350.00Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,000.00Acc. Dep.—Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,525.00Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .800.00Lynn Hayner, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,200.00Gladys Lyons, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,825.00


Transac t ionsJul. 1. Received cash from the sale of office equipment, $3,275.00. R156

1. Received cash from the sale of supplies, $300.00. R157.3. Paid cash to all creditors for amounts owed. C2254. Distributed balance of Losses and Gains on Realization to Lynn Hayner, 55%;

to Gladys Lyons, 45%. M78.4. Distributed remaining cash to partners. C226 and C227.


1

2

3

4

5

1

2

3

4

5


POST.REF.


Lynn Hayner, Capital

Gladys Lyons, Capital

M78 7 5 0 00

12

4 1 2 50

3 3 7 50

4

2

2

8

POIN

TS �


CA

SH R

ECEI

PTS

JOU

RNA

LP

AG

E

12

34

5

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9 10

DAT

EA

CC

OU

NT

TIT

LE

GE

NE

RA

L

DE

BIT

CR

ED

IT

6

DO

C.

NO

.P

OS

T.

RE

F.

AC

CO

UN

TS

RE

CE

IVA

BL

EC

RE

DIT

SA

LE

SC

RE

DIT

SA

LE

S T

AX

PA

YA

BL

EC

RE

DIT

1 1

20--

Jul.

Acc

. Dep

.--O

ffic

e E

quip

men

t

Off

ice

Equ

ipm

ent

Los

s a

nd

Ga

in o

n R

eali

zati

on

Los

s a

nd

Ga

in o

n R

eali

zati

on

Supp

lies

R15

6

R15

7

45

25

00

50

00

1

70

00

00

80

000

35

000

5 2 2 5 2 16POINTS �C

AS

HD

EB

IT

32

75

00

30

000

7

SA

LE

SD

ISC

OU

NT

DE

BIT

CA

SH P

AYM

ENTS

JOU

RNA

LP

AG

E

12

34

1 2 3 4 5 6 7 8 9

10

1 2 3 4 5 6 7 8 9

10

DAT

EA

CC

OU

NT

TIT

LE

GE

NE

RA

L

DE

BIT

CR

ED

IT

AC

CO

UN

TS

PA

YA

BL

ED

EB

IT

CA

SH

CR

ED

ITC

K.

NO

.P

OS

T.

RE

F.

3 4

20--

Jul.

Acc

oun

ts P

aya

ble

Lyn

n H

ayn

er, C

api

tal

Gla

dys

Lyo

ns,

Ca

pita

l

225

226

227

1

80

000

13

77

500

80

000

76

12

50

61

62

50

5 5 3 13POINTS �

chapterTEST A

PerfectScore

YourScoreName


Recording International and Internet Sales 53 Pts.Analyzing International and Internet Sales 7 Pts.

Total 80 Pts.


24



A. bill of lading 1. A form signed by a buyer at the time of a sale of merchandise 1. Jin which the buyer promises to pay the seller a specified sumof money, usually at a stated time in the future.

B. commercial invoice 2. A letter issued by a bank guaranteeing that a named individual 2. Gor business will be paid a specified amount, provided statedconditions are met.

C. contract of sale 3. A draft payable on sight when the holder presents it for payment. 3. H

D. draft 4. Goods or services shipped out of a seller’s home country to 4. Ea foreign country.

E. exports 5. Goods or services bought from a foreign country and brought 5. Finto a buyer’s home country.

F. imports 6. A document that details all the terms agreed to by seller and 6. Cbuyer for a sales transaction.

G. letter of credit 7. A receipt signed by the authorized agent of a transportation 7. Acompany for merchandise received that also serves as acontract for the delivery of the merchandise.

H. sight draft 8. A written, signed, and dated order from one party ordering 8. Danother party, usually a bank, to pay money to a third party.

I. time draft 9. A draft that is payable at a fixed or determinable future time 9. Iafter it is accepted.

J. trade acceptance 10. A statement prepared by the seller of merchandise addressed 10. Bto the buyer, showing a detailed listing and description ofmerchandise sold, including prices and terms.


Part Two—Identifying Accounting Concepts and PracticesDirections: Write a T or an F in the Answers column to show whether each ofthe following statements is true or false.

Answers

1. International sales are not a very important source of revenue for businesses 1. Fthroughout the world.

2. Internet sales must be done in cash rather than by using a credit card. 2. F3. Selling merchandise to individuals or other businesses within one’s own country is 3. T

generally referred to as domestic sales.4. With international customers it is easy to determine a customer’s financial condition 4. F

or to take legal action if an international customer does not pay.5. International transactions are all covered by the same universal commercial laws and 5. F

the same accounting standards.6. Credit card sales on the Internet are handled differently than other credit card sales. 6. F7. A company’s website must be easy to navigate and safe to use. 7. T8. Domestic sales are much simpler than international sales. 8. T9. More and more companies are using the Internet as an additional way of selling goods 9. T

and services.10. International sales often specify a letter of credit as the method of payment. 10. T

Part Three—Recording International and Internet SalesSelected transactions completed by Clearwater Company during Novemberof the current year are listed below.

Directions: Journalize the following transactions completed duringNovember of the current year on page 11of a general journal, and a cashreceipts journal. Source documents are abbreviated as follows:memorandum, M; receipt, R; terminal summary, TS; time draft, TD.

Transac t ionsNov. 1 Recorded international cash sale, $3,000.00. M47.

4. Recorded Internet credit card sales, $5,500.00. TS84.8. Received a 60-day time draft from Boretski Company for an international sale, $1,400.00. TD15.

10. Received cash for the value of Time Draft No. 11, $10,000.00. R112.15. Recorded Internet credit card sales, $950.00. TS85.23. Received a 60-day time draft from Goldstein Co. for an international sale, $8,000.00. TD16.25. Received cash for the value of Time Draft No. 13, $1,200.00. R113.25. Recorded international cash sale, $4,000.00. M51.


1

2

3

4

5

6

1

2

3

4

5

6


POST.REF.

8

23

20--Nov. Time Drafts Receivable

Sales

Time Drafts Receivable

Sales

TD15

TD16

1 4 0 0 00

8 0 0 0 00

11

1 4 0 0 00

8 0 0 0 00

5

2

4

2

13

POIN

TS �

Name


CA

SH R

ECEI

PTS

JOU

RNA

LPA

GE

12

34

5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

DAT

EAC

CO

UN

T TI

TLE

SALE

SC

RED

IT

GEN

ERAL

DEB

ITC

RED

IT

6

DO

C.

NO

.PO

ST.

REF

.

ACC

OU

NTS

REC

EIVA

BLE

CR

EDIT

SALE

SD

ISC

OU

NT

DEB

IT

CAS

HD

EBIT

78

SALE

S TA

X PA

YAB

LE

DEB

ITC

RED

IT

1 4 10 15 25 25 30

20--

Nov

.� � T

ime

Dra

fts

Rec

eiva

ble

� Tim

e D

raft

s R

ecei

vabl

e

� Tot

als

M47

TS8

4

R11

2

TS8

5

R11

3

M51

� � � �

11

100

00

00

12

00

00

112

00

00

30

00

00

55

00

00

95

000

40

00

00

134

50

00

30

00

00

55

00

00

100

00

00

95

000

12

00

00

40

00

00

246

50

00

6 6 5 6 5 6 5 39 +1 40POINTS �

(Cor

rect

Ru

lin

gs)


Part Four—Analyzing International and Internet SalesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. The entry to journalize an Internet cash sale, is a debit to Cash and a credit to 1. ca. International Sales.b. Time Drafts Receivable.c. Sales.d. Internet Sales.

2. The entry to journalize an international cash sale is a debit to Cash and a credit to 2. ca. International Sales.b. Time Drafts Receivable.c. Sales.d. Internet Sales.

3. The entry to journalize the receipt of a time draft for an international sale would be 3. ba. debit Time Draft Receivable and credit Cash.b. debit Time Draft Receivable and credit Sales.c. debit Sales and credit Time Draft Receivable.d. debit Cash and credit Time Draft Receivable..

4. The entry to journalize the receipt of cash for the value of a time draft would be 4. da. debit Time Draft Receivable and credit Cash.b. debit Time Draft Receivable and credit Sales.c. debit Sales and credit Time Draft Receivable.d. debit Cash and credit Time Draft Receivable..

5. The entry to journalize the receipt of a time draft for an international sale would be 5. crecorded in aa. cash payments journal.b. cash receipts journal.c. general journal.d. sales journal.

6. The entry to journalize an international cash sale would be recorded in a 6. ba. cash payments journal.b. cash receipts journal.c. general journal.d. sales journal.

7. The entry to journalize the receipt of cash for the value of a time draft would be 7. brecorded in a a. cash payments journal.b. cash receipts journal.c. general journal.d. sales journal.

chapterTEST B

PerfectScore

YourScoreName


Recording International and Internet Sales 53 Pts.Analyzing International and Internet Sales 7 Pts.

Total 80 Pts.


24



A. bill of lading 1. Goods or services bought from a foreign country and brought 1. Finto a buyer’s home country.

B. commercial invoice 2. Goods or services shipped out of a seller’s home country to 2. Ea foreign country.

C. contract of sale 3. A statement prepared by the seller of merchandise addressed 3. Bto the buyer, showing a detailed listing and description ofmerchandise sold, including prices and terms.

D. draft 4. A form signed by a buyer at the time of a sale of merchandise 4. Jin which the buyer promises to pay the seller a specified sumof money, usually at a stated time in the future.

E. exports 5. A receipt signed by the authorized agent of a transportation 5. Acompany for merchandise received that also serves as a contractfor the delivery of the merchandise.

F. imports 6. A draft payable on sight when the holder presents it 6. Hfor payment.

G. letter of credit 7. A draft that is payable at a fixed or determinable future time 7. Iafter it is accepted.

H. sight draft 8. A written, signed, and dated order from one party ordering 8. Danother party, usually a bank, to pay money to a third party.

I. time draft 9. A document that details all the terms agreed to by seller and 9. Cbuyer for a sales transaction.

J. trade acceptance 10. A letter issued by a bank guaranteeing that a named individual 10. Gor business will be paid a specified amount, provided statedconditions are met.


Part Two—Identifying Accounting Concepts and PracticesDirections: Write a T or an F in the Answers column to show whether each ofthe following statements is true or false.

Answers

1. International sales are a very important source of revenue for businesses throughout 1. Tthe world.

2. A company’s website must be easy to navigate and safe to use. 2. T3. Domestic sales are much simpler than international sales. 3. T4. International transactions are all covered by the same universal commercial laws and the 4. F

same accounting standards.5. Credit card sales on the Internet are handled differently than other credit card sales. 5. F6. Internet sales must be done in cash rather than by using a credit card. 6. F7. Selling merchandise to individuals or other businesses within one’s own country is 7. T

generally referred to as domestic sales.8. International sales often specify a letter of credit as the method of payment. 8. T9. More and more companies are using the Internet as an additional way of selling goods 9. T

and services.10. With international customers it is easy to determine a customer’s financial condition or 10. F

to take legal action if an international customer does not pay.

Part Three—Recording International and Internet SalesSelected transactions completed by Clearwater Company during December ofthe current year are listed below.

Directions: Journalize the following transactions completed during Decemberof the current year on page 11of a general journal, and a cash receipts journal.Source documents are abbreviated as follows: memorandum, M; receipt, R;terminal summary, TS; time draft, TD.

Transac t ionsDec. 1 Recorded international cash sale, $6,000.00. M94.

4. Recorded Internet credit card sales, $11,00.00. TS168.8. Received a 60-day time draft from Xiong Company for an international sale, $2,800.00. TD30.

10. Received cash for the value of Time Draft No. 22, $20,000.00. R224.15. Recorded Internet credit card sales, $1,900.00. TS169.23. Received a 60-day time draft from Svenson Co. for an international sale, $16,000.00. TD31.25. Received cash for the value of Time Draft No. 26, $2,400.00. R225.25. Recorded international cash sale, $8,000.00. M102.


1

2

3

4

5

6

1

2

3

4

5

6


POST.REF.

8

23

20--Dec. Time Drafts Receivable

Sales


Sales

TD30

TD31

2 8 0 0 00

16 0 0 0 00

11

2 8 0 0 00

16 0 0 0 00

5

2

4

2

13

POIN

TS �

Name


CA

SH R

ECEI

PTS

JOU

RNA

LPA

GE

12

34

5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

DAT

EAC

CO

UN

T TI

TLE

SALE

SC

RED

IT

GEN

ERAL

DEB

ITC

RED

IT

6

DO

C.

NO

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ST.

REF

.

ACC

OU

NTS

REC

EIVA

BLE

CR

EDIT

SALE

SD

ISC

OU

NT

DEB

IT

CAS

HD

EBIT

78

SALE

S TA

X PA

YAB

LE

DEB

ITC

RED

IT

1 4 10 15 25 25 31

20--

Dec

.� � T

ime

Dra

fts

Rec

eiva

ble

� Tim

e D

raft

s R

ecei

vabl

e

� Tot

als

M94

TS1

68

R22

4

TS1

69

R22

5

M10

2

� � � �

11

200

00

00

24

00

00

224

00

00

60

00

00

110

00

00

19

00

00

80

00

00

269

00

00

60

00

00

110

00

00

200

00

00

19

00

00

24

00

00

80

00

00

493

00

00

6 6 5 6 5 6 5 39 +1 40POINTS �

(Cor

rect

Ru

lin

gs)


Part Four—Analyzing International and Internet SalesDirections: For each of the following items, select the one choice that best completesthe statement. Print the letter identifying your choice in the Answers column.

Answers

1. The entry to journalize an international cash sale is a debit to Cash and a credit to 1. ca. International Sales.b. Time Drafts Receivable.c. Sales.d. Internet Sales.

2. The entry to journalize an Internet cash sale, is a debit to Cash and a credit to 2. ca. International Sales.b. Time Drafts Receivable.c. Sales.d. Internet Sales.

3. The entry to journalize the receipt of cash for the value of a time draft would be 3. da. debit Time Draft Receivable and credit Cash.b. debit Time Draft Receivable and credit Sales.c. debit Sales and credit Time Draft Receivable.d. debit Cash and credit Time Draft Receivable..

4. The entry to journalize the receipt of a time draft for an international sale would be 4. ba. debit Time Draft Receivable and credit Cash.b. debit Time Draft Receivable and credit Sales.c. debit Sales and credit Time Draft Receivable.d. debit Cash and credit Time Draft Receivable..

5. The entry to journalize an international cash sale would be recorded in a 5. ba. cash payments journal.b. cash receipts journal.c. general journal.d. sales journal.

6. The entry to journalize the receipt of cash for the value of a time draft would be 6. brecorded in aa. cash payments journal.b. cash receipts journal.c. general journal.d. sales journal.

7. The entry to journalize the receipt of a time draft for an international sale would be 7. crecorded in aa. cash payments journal.b. cash receipts journal.c. general journal.d. sales journal.

TEST A

par tfour

PerfectScore

YourScoreName


Recording International and Internet Sales 52 Pts.Journalizing Transactions to Liquidate a Partnership 37 Pts.

Total 127Pts.




A. bill of lading 1. The process of paying a partnership’s liabilities and 1. Jdistributing remaining assets to the partners.

B. commercial invoice 2. A form signed by a buyer at the time of a sale of merchandise 2. Rin which the buyer promises to pay the seller a specified sumof money, usually at a stated time in the future.

C. contract of sale 3. Cash received from the sale of assets during liquidation 3. Oof a partnership.

D. draft 4. A statement prepared by the seller of merchandise addressed 4. Bto the buyer, showing a detailed listing and description ofmerchandise sold, including prices and terms.

E. distribution of 5. A business in which two or more persons combine their 5. Mnet income assets and skills.

F. exports 6. A document that details all the terms agreed to by seller and 6. Cbuyer for a sales transaction.

G. imports 7. A partnership financial statement showing net income or 7. Eloss distribution to partners.

H. letter of credit 8. A financial statement that summarizes the changes in owners’ 8. Kequity during a fiscal period.

I. limited liability 9. A draft that is payable at a fixed or determinable future time 9. Qpartnership after it is accepted.

J. liquidation of a 10. A written agreement setting forth the conditions under which 10. Npartnership a partnership is to operate.

K. owners’ equity 11. A letter issued by a bank guaranteeing that a named individual 11. Hstatement or business will be paid a specified amount, provided stated

conditions are met.L. partner 12. Goods or services bought from a foreign country and brought 12. G

into a buyer’s home country.M. partnership 13. A draft payable on sight when the holder presents 13. P

it for payment.N. partnership agreement 14. Goods or services shipped out of a seller’s home country to 14. F

a foreign country.O. realization 15. A partnership that combines the advantages of the partnership 15. I

and the corporation, while avoiding their disadvantages.P. sight draft 16. A receipt signed by the authorized agent of a transportation 16. A

company for merchandise received that also serves as a contractfor the delivery of the merchandise.

Q. time draft 17. A written, signed, and dated order from one party ordering 17. Danother party, usually a bank, to pay money to a third party.

R. trade acceptance 18. Each member of a partnership. 18. L



Answers

1. Legally, a partnership agreement may be either written or oral. 1. T

2. When liquidating a partnership, after all noncash assets are sold and all creditors are 2. Fpaid, any remaining cash is distributed to the partners in the same proportions as theearnings are shared.

3. Selling merchandise to individuals or other businesses within one’s own country, is 3. Fgenerally referred to as international sales.

4. A trade acceptance is similar to a draft except a draft is generally paid by a bank and a 4. Ttrade acceptance is paid by the buyer.

5. Noncash assets might be sold for more than the recorded book value. 5. T

6. A partner may take assets out of the partnership only at the end of the fiscal period. 6. F

7. Customers want a secure web site that uses up-to-date security procedures to protect 7. Tpersonal information during transmission.

8. The lack of uniform commercial laws among countries makes international sales simpler 8. Fthan domestic sales.

9. The steps in preparing a distribution of net income statement are different depending on 9. Fhow earnings are shared.

10. Sales taxes are normally paid only on sales to the final consumer. 10. T

11. Sales in the international market have become a major source of revenue for small 11. Tand large businesses.

12. A web site can be set up to accept credit card sales 12. T

13. Withdrawals could be recorded as debits to the partners’ capital accounts, but are 13. Tnormally recorded in separate accounts so that the total amounts are easily determined.

14. The transportation company sends the signed bill of lading to the buyer, so the seller 14. Fdoes not know when the merchandise has been shipped.

15. A partnership financial statement showing net income or loss distribution to partners is 15. Fcalled a balance sheet.

16. Three factors can change owners’ equity: additional investments, withdrawals, and net 16. Tincome or net loss.

17. In the Loss and Gain on Realization account, a debit balance indicates a gain. 17. F

18. The terminal summary is used as the source document for recording online sales. 18. T

19. The asset and liability sections of a balance sheet for a partnership are prepared in the 19. Tsame way as the asset and liability sections of a balance sheet for a proprietorship.

20. A seller generally has much more assurance of receiving payment from a buyer than 20. Ffrom a bank.

Name


Part Three—Recording International and Internet SalesSelected transactions completed by Fort Myers Company during October ofthe current year are listed below.

Directions: Journalize the following transactions completed during Octoberof the current year on page 11 of a general journal, and a cash receipts journal.Source documents are abbreviated as follows: memorandum, M; receipt, R;terminal summary, TS; time draft, TD.

Transac t ionsOct. 1 Recorded international cash sale, $2,200.00. M92.

4. Recorded Internet credit card sales, $3,400.00. TS148.8. Received a 60-day time draft from Melnikov Company for an international sale, $2,700.00. TD22.

10. Received cash for the value of Time Draft No. 17 $5,000.00. R76.15. Recorded Internet credit card sales, $620.00. TS149.23. Received a 60-day time draft from Slater Company for an international sale, $6,000.00. TD23.25. Received cash for the value of Time Draft No. 19, $900.00. R77.25. Recorded international cash sale, $570.00. M98.


1

2

3

4

5

6

1

2

3

4

5

6


POST.REF.

8

23

20--Oct. Time Drafts Receivable

Sales


Sales

TD22

TD23

2 7 0 0 00

6 0 0 0 00

11

2 7 0 0 00

6 0 0 0 00

4

2

4

2

12

POIN

TS �


CA

SH R

ECEI

PTS

JOU

RNA

LPA

GE

12

34

5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

DAT

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UN

T TI

TLE

SALE

SC

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IT

GEN

ERAL

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RED

IT

6

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C.

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ST.

REF

.

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BLE

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SD

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IT

CAS

HD

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78

SALE

S TA

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1 4 10 15 25 25 30

20--

Oct

.� � T

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M92

TS1

48

R76

TS1

49

R77

M98

� � � �

11

50

00

00

90

000

59

00

00

22

00

00

34

00

00

62

000

57

000

67

90

00

22

00

00

34

00

00

50

00

00

62

000

90

000

57

000

126

90

00

6 6 5 6 5 6 5 39 +1 40POINTS �

(Cor

rect

Ru

lin

gs)


Name

Part Four—Journalizing Transactions to Liquidate a PartnershipDavis Castore and Elena Heindl agree to liquidate their partnership onJanuary 1 of the current year. On that date, after financial statements wereprepared and closing entries were posted, the general ledger accounts had thefollowing balances.

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$7,600.00Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100.00Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,000.00Acc. Dep.—Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,600.00Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .200.00Davis Castore, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,400.00Elena Heindl, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,500.00


Transac t ionsJan. 1. Received cash from the sale of office equipment, $5,000.00. R330.

1. Received cash from the sale of supplies, $50.00. R331.3. Paid cash to all creditors for amounts owed. C402.4. Distributed balance of Losses and Gains on Realization to Davis Castore, 60%;

to Elena Heindl, 40%. M156.4. Distributed remaining cash to partners. C403 and C404.


1

2

3

4

5

6

1

2

3

4

5

6


POST.REF.

420--Jan. Loss and Gain on Realization

Davis Castore, Capital

Elena Heindl, Capital

M156 5 5 0 00

12

3 3 0 00

2 2 0 00

4

2

2

8

POIN

TS �


CA

SH P

AYM

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12

34

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10

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vis

Ca

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e, C

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tal

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na

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l, C

api

tal

402

403

404

1

20

000

124

50

00

20

000

77

30

00

47

20

00

5 5 3 13POINTS �C

ASH

REC

EIPT

S JO

URN

AL

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12

34

5

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9 10

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lies

R33

0

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1

16

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1

60

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10

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5 2 2 5 2 16POINTS �C

AS

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IT

50

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7

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SD

ISC

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DE

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TEST B

par tfour

PerfectScore

YourScoreName


Recording International and Internet Sales 52 Pts.Journalizing Transactions to Liquidate a Partnership 37 Pts.

Total 127Pts.




A. bill of lading 1. A written agreement setting forth the conditions under 1. Nwhich a partnership is to operate.

B. commercial invoice 2. A written, signed, and dated order from one party ordering 2. Danother party, usually a bank, to pay money to a third party.

C. contract of sale 3. Each member of a partnership. 3. LD. draft 4. A draft that is payable at a fixed or determinable future time 4. Q

after it is accepted.E. distribution of 5. A letter issued by a bank guaranteeing that a named individual 5. H

net income or business will be paid a specified amount, provided statedconditions are met.

F. exports 6. Goods or services shipped out of a seller’s home country to 6. Fa foreign country.

G. imports 7. A financial statement that summarizes the changes in owners’ 7. Kequity during a fiscal period.

H. letter of credit 8. A document that details all the terms agreed to by seller and 8. Cbuyer for a sales transaction.

I. limited liability 9. A form signed by a buyer at the time of a sale of merchandise 9. Rpartnership in which the buyer promises to pay the seller a specified sum

of money, usually at a stated time in the future.J. liquidation of a 10. A statement prepared by the seller of merchandise addressed 10. B

partnership to the buyer, showing a detailed listing and description ofmerchandise sold, including prices and terms.

K. owners’ equity 11. Goods or services bought from a foreign country and brought 11. Gstatement into a buyer’s home country.

L. partner 12. A partnership financial statement showing net income or 12. Eloss distribution to partners.

M. partnership 13. A partnership that combines the advantages of the partnership 13. Iand the corporation, while avoiding their disadvantages.

N. partnership agreement 14. A receipt signed by the authorized agent of a transportation 14. Acompany for merchandise received that also serves as a contractfor the delivery of the merchandise.

O. realization 15. The process of paying a partnership’s liabilities and 15. Jdistributing remaining assets to the partners.

P. sight draft 16. A draft payable on sight when the holder presents it 16. Pfor payment.

Q. time draft 17. Cash received from the sale of assets during liquidation 17. Oof a partnership.

R. trade acceptance 18. A business in which two or more persons combine their 18. Massets and skills.



Answers

1. Sales taxes are normally paid only on sales to the final consumer. 1. T

2. The asset and liability sections of a balance sheet for a partnership are prepared in the 2. Tsame way as the asset and liability sections of a balance sheet for a proprietorship.

3. Legally, a partnership agreement may be either written or oral. 3. T

4. When liquidating a partnership, after all noncash assets are sold and all creditors are paid, 4. Fany remaining cash is distributed to the partners in the same proportions as the earningsare shared.

5. A web site can be set up to accept credit card sales 5. T

6. The steps in preparing a distribution of net income statement are different depending on 6. Fhow earnings are shared.

7. A trade acceptance is similar to a draft except a draft is generally paid by a bank and a 7. Ttrade acceptance is paid by the buyer.

8. In the Loss and Gain on Realization account, a debit balance indicates a gain. 8. F

9. Customers want a secure web site that uses up-to-date security procedures to protect 9. Tpersonal information during transmission.

10. Sales in the international market have become a major source of revenue for small and 10. Tlarge businesses.

11. Three factors can change owners’ equity: additional investments, withdrawals, and net 11. Tincome or net loss.

12. The transportation company sends the signed bill of lading to the buyer, so the seller 12. Fdoes not know when the merchandise has been shipped.

13. A partner may take assets out of the partnership only at the end of the fiscal period. 13. F

14. The lack of uniform commercial laws among countries makes international sales 14. Fsimpler than domestic sales.

15. A seller generally has much more assurance of receiving payment from a buyer than 15. Ffrom a bank.

16. Noncash assets might be sold for more than the recorded book value. 16. T

17. The terminal summary is used as the source document for recording online sales. 17. T

18. Withdrawals could be recorded as debits to the partners’ capital accounts, but are 18. Tnormally recorded in separate accounts so that the total amounts are easily determined.

19. A partnership financial statement showing net income or loss distribution to partners 19. Fis called a balance sheet.

20. Selling merchandise to individuals or other businesses within one’s own country, is 20. Fgenerally referred to as international sales.

Name


Part Three—Recording International and Internet SalesSelected transactions completed by Tampa Company during May of thecurrent year are listed below.

Directions: Journalize the following transactions completed during May ofthe current year on page 11 of a general journal, and a cash receipts journal.Source documents are abbreviated as follows: memorandum, M; receipt, R;terminal summary, TS; time draft, TD.

Transac t ionsMay 1 Recorded international cash sale, $3,500.00. M81.

4. Recorded Internet credit card sales, $1,200.00. TS97.8. Received a 60-day time draft from Stidinger Company for an international sale, $4,500.00. TD31.

10. Received cash for the value of Time Draft No. 25 $6,000.00. R55.15. Recorded Internet credit card sales, $2,800.00. TS98.23. Received a 60-day time draft from Szabo Company for an international sale, $4,000.00. TD32.25. Received cash for the value of Time Draft No. 28, $3,100.00. R56.25. Recorded international cash sale, $880.00. M87.


1

2

3

4

5

6

1

2

3

4

5

6


POST.REF.

8

23

20--May. Time Drafts Receivable

Sales


Sales

TD31

TD32

4 5 0 0 00

4 0 0 0 00

11

4 5 0 0 00

4 0 0 0 00

4

2

4

2

12

POIN

TS �


CA

SH R

ECEI

PTS

JOU

RNA

LPA

GE

12

34

5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

DAT

EAC

CO

UN

T TI

TLE

SALE

SC

RED

IT

GEN

ERAL

DEB

ITC

RED

IT

6

DO

C.

NO

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ST.

REF

.

ACC

OU

NTS

REC

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BLE

CR

EDIT

SALE

SD

ISC

OU

NT

DEB

IT

CAS

HD

EBIT

78

SALE

S TA

X PA

YAB

LE

DEB

ITC

RED

IT

1 4 10 15 25 25 30

20--

Ma

y.� � T

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Dra

fts

Rec

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ble

� Tim

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raft

s R

ecei

vabl

e

� Tot

als

M81

TS9

7

R55

TS9

8

R56

M87

� � � �

11

60

00

00

31

00

00

91

00

00

35

00

00

12

00

00

28

00

00

88

000

83

80

00

35

00

00

12

00

00

60

00

00

28

00

00

31

00

00

88

000

174

80

00

6 6 5 6 5 6 5 39 +1 40POINTS �

(Cor

rect

Ru

lin

gs)


Name

Part Four—Journalizing Transactions to Liquidate a PartnershipWilma Dupre and William Wehling agree to liquidate their partnership onJuly 1 of the current year. On that date, after financial statements wereprepared and closing entries were posted, the general ledger accounts had thefollowing balances.

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$9,000.00Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .150.00Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,000.00Acc. Dep.—Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .800.00Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .300.00Wilma Dupre, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,050.00William Wehling, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,000.00


Transac t ionsJul. 1. Received cash from the sale of office equipment, $3,000.00. R288.

1. Received cash from the sale of supplies, $50.00. R289.3. Paid cash to all creditors for amounts owed. C510.4. Distributed balance of Losses and Gains on Realization to Wilma Dupre, 70%;

to William Wehling, 30%. M248.4. Distributed remaining cash to partners. C511 and C512.


1

2

3

4

5

6

1

2

3

4

5

6


POST.REF.


Wilma Dupre, Capital

William Wehling, Capital

M248 7 0 0 00

12

4 9 0 00

2 1 0 00

4

2

2

8

POIN

TS �


CA

SH P

AYM

ENTS

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