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College Accounting A Contemporary Approach 6th International Edition M. David Haddock, John Price, Michael Farina - Solutions
17. After returning from a three-day business trip, the accountant for Southeast Sales, Johanna Estrada, checked bank activity in the company’s checking account online. The activity for the last three days follows:After matching these transactions to the company’s Cash account in the general
16. Franco Company received a bank statement showing a balance of $14,400 on November 30, 20X1.During the bank reconciliation process, Franco Company’s accountant noted the following bank errors:1. A check for $123 issued by France, Inc., was mistakenly charged to Franco Company’s account.2.
15. Baxter Office Supplies received a bank statement showing a balance of $73,727 as of March 31, 20X1. The firm’s records showed a book balance of $72,628 on March 31. The difference between the two balances was caused by the following items. Prepare a bank reconciliation statement for the firm
15. At Livermore Delivery and Courier Service, the following items were found to cause a difference between the bank statement and the firm’s records. Indicate whether each item will affect the bank balance or the book balance when the bank reconciliation statement is prepared. Also indicate
14. Jordan Corporation received a bank statement showing a balance of $16,900 as of October 31, 20X1. The firm’s records showed a book balance of $16,778 on October 31. The difference between the two balances was caused by the following items. Prepare the adjusted bank balance section and the
13. On January 2, 20X1, Valentina’s Beauty Supplies Inc. issued Check 3100 for $400 to establish a petty cash fund. On January 31, Check 3159 was issued to replenish the petty cash fund.An analysis of payments from the fund showed these totals: Supplies, $82; Delivery Expense,$210; and
12. On January 2, 20X1, The Chelsea Legal Clinic issued Check 2108 for $250 to establish a petty cash fund. Indicate how this transaction would be recorded in a general journal. Use 1 as the journal page number.
11. Northwest Gift Shop, a retail business, started business on April 29, 20X1. It keeps a $300 change fund in its cash register. The cash receipts for the period from April 29 to April 30, 20X1, are shown below. Record the cash receipts on April 29 and April 30, 20X1, in a general journal. Start
18. Explain the meaning of the following terms:a. Canceled checkb. Outstanding checkc. Deposit in transitd. Debit memorandume. Credit memorandumf. Dishonored check g. Blank endorsement h. Deposit slip i. Drawee j. Restrictive endorsement k. Payee l. Drawer m. Service charge n. Electronic funds
17. Describe the major controls for cash payments.
16. Describe the major controls for cash receipts.
15. Explain what bonding means. How does bonding relate to safeguarding cash?
14. What is a promissory note? What entry is made to record the collection of a promissory note and interest?
13. When are petty cash expenditures entered in a firm’s accounting records?
12. Describe the major controls for petty cash.
11. How are cash shortages and overages recorded?
10. Which type of endorsement is most appropriate for a business to use?
9. Why are MICR numbers printed on deposit slips and checks?
8. What type of information is entered on a check stub? Why should a check stub be prepared before the check is written?
7. What is a check?
6. What procedures are used to achieve internal control over banking activities?
4. Give some reasons why the bank balance and the book balance of cash might differ.
3. What information is shown on the bank statement?
2. Why is a bank reconciliation prepared?
1. What is the book balance of cash?
5. What does the term cash mean in business?(Answers to Comprehensive Self Review are at the end of the chapter.)Discussion Questions
4. What is the classification of the Notes Payable account?
3. When is the petty cash fund replenished?
2. What is a petty cash voucher?
1. Describe a full endorsement.
8. Which of the following are features of online banking?a. A business can deposit checks using a dedicated scanner.b. A business can receive electronic funds transfers from customers.c. A business can receive alerts from the bank via text for unusual account activity.d. All of these are features
7. The following data were taken from a firm’s bank reconciliation statement: book balance, $7,910; deposit in transit,$150; NSF check from a customer, $200; outstanding checks, $5,000; bank service charge, $10. Its adjusted book balance is:a. $7,720.b. $8,120.c. $7,700.d. $8,100.
6. On the bank reconciliation statement, you would not find a list of:a. deposits in transit.b. canceled checks.c. outstanding checks.d. NSF checks.
5. Which of the following does not require an adjustment to the financial records?a. deposits in transitb. bank service chargec. check that was incorrectly recorded by the firm at $115 but was paid by the bank at its correct amount of $1,115d. NSF check from a customer
4. On the bank reconciliation, outstanding checks should be:a. added to the balance on bank statement.b. deducted from the balance on bank statement.c. added to the balance in books.d. deducted from the balance in books.
3. Which of these bank reconciliation items require journal entries?a. outstanding checksb. deposits in transitc. a check properly written by the company but paid at the wrong amount by the bankd. NSF check from a customer
2. Why does a payee endorse a check before depositing it?a. It is the legal process by which the payee transfers ownership of the check to the bank.b. It is a form of identification verification.c. The check will be paid faster by the bank if it is endorsed.d. All of these are correct.
1. What is the term for the person or firm issuing a check?a. draweeb. drawerc. payeed. bank
5. Which of the following is not an example of good internal control over cash payments?a. make all payments from petty cash instead of using checksb. use prenumbered checksc. issue checks only with an approved billd. have checks prepared and recorded in the accounting records by someone other than
4. Which journal entry could be used to record the replenishment of the petty cash fund?a. debit Petty Cash, credit Cashb. debit Supplies, debit Delivery Expense, credit Cashc. debit Supplies, debit Delivery Expense, credit Petty Cashd. debit Cash, credit Petty Cash
3. Which of the following is not an example of good internal control over cash receipts?a. Cash receipts should be deposited in the bank promptly.b. Cash receipts should be kept in a cash register, a locked cash drawer, or a safe while they are on the premises.c. The same individual who handles and
2. Which of the following is the journal entry to record the establishment of a petty cash fund?a. debit Cash, credit Petty Cashb. debit Petty Cash, credit Cashc. debit Petty Cash, credit Accounts Payabled. debit Accounts Payable, credit Petty Cash
1. Petty Cash is categorized as a(n):a. expense.b. revenue.c. liability.d. asset.
6. Which of the following would be considered a cash equivalent?a. a certificate of deposit with a maturity of six monthsb. a certificate of deposit with a maturity of three monthsc. a note receivable from a customer with a maturity of six monthsd. a note receivable from a customer with a maturity
5. Which items are considered cash?a. currencyb. funds on deposit in the bankc. money ordersd. all of these
4. Sara’s Beauty Salon keeps a $100 change fund. At the end of the day, sales per the register tape were $885, and the cash count was $992. What is the amount of the cash shortage or overage?a. $7 overb. $7 shortc. $107 overd. $107 short
3. How would the receipt of a $62 refund for supplies returned be recorded in a general journal? The supplies were paid for with cash.a. debit Cash, credit Accounts Payableb. debit Supplies, credit Cashc. debit Accounts Payable, credit Suppliesd. debit Cash, credit Supplies
2. Which of the following records the receipt of a promissory note from a customer with an overdue accounts receivable balance?a. debit Cash, credit Accounts Receivableb. debit Cash, credit Notes Receivablec. debit Notes Receivable, credit Accounts Receivabled. debit Accounts Receivable, credit
1. Which of the following is true for the Cash Short or Over account?a. Cash Short or Over is debited when there is a cash shortage.b. Cash Short or Over is debited when there is a cash overage.c. The Cash Short or Over account has a normal debit balance.d. The Cash Short or Over account has a
10. A company is developing objectives for paying bills on account. These objectives follow:■ Stretch cash flow as much as possible.■ Develop a good reputation as a company that always pays bills on time.■ Do not pay vendors until payment is received from our customers.In a group, discuss
9. The following financial statement excerpt is taken from the 2021 Annual Report (for the fiscal year ended January 30, 2022) for The Home Depot, Inc.:1. The Cost of Sales amount on The Home Depot, Inc., consolidated statements of earnings represents the net cost of the goods that were sold for
8. Anna Abraham is the accounts payable clerk for Jiffy Delivery Service. This company runs 10 branches in the San Diego area. The company pays for a variety of expenses.Anna writes the checks for each of the vendors and the controller signs the checks. Anna has decided she needs a raise and the
7. 1. Why should management be concerned about paying its invoices on a timely basis?2. Why is it important for a firm to maintain a satisfactory credit rating?3. Suppose you are the new controller of a small but growing company and you find that the firm has a policy of paying cash for all
6. Charles Robertson, owner of Quality Auto Parts, was preparing checks for payment of the current month’s purchase invoices when he realized that there were two invoices from Best Car Products Company, each for the purchase of 100 car batteries. Robertson thinks that Best Car Products Company
5. Bill Evans began Evans Distributors, a sporting goods distribution company, in January 20X1 and engaged in the transactions below. Assume Evans Distributors and its customers take advantage of all cash discounts.DATE TRANSACTIONS 20X1 Jan. 1 Bill Evans started Evans Distributors with an
4. The following transactions took place at Evergreen Nursery during June 20X1. Evergreen Nursery uses a perpetual inventory system. Record the transactions in a general journal. Use 10 as the page number for the general journal. Evergreen Nursery operates in a state with no sales tax.DATE
3. Blanchard Company (buyer) and Shin Corp. (seller) engaged in the following transactions during February 20X1:INSTRUCTIONS 1. Open the accounts payable ledger account and accounts receivable ledger account indicated below for both Blanchard Company and Shin Corp. Enter the balances as of February
2. 1. Open the general ledger accounts and accounts payable ledger accounts indicated below.Enter the balances as of August 1, 20X1.2. Post the entries in Problem 8.4B to the appropriate accounts in the general ledger and the accounts payable subsidiary ledger.3. Prepare a schedule of accounts
1. Maxillofacial Supplies, Inc., is a wholesale supplier of dental supplies and materials that commenced business on August 1, 20X1. The company purchases merchandise for cash and on open account. In August 20X1, Maxillofacial Supplies, Inc., engaged in the following purchasing and cash payment
31. 1. Open the general ledger accounts and accounts payable ledger accounts indicated below.Enter the balance of Cash as of April 1, 20X1.2. Post the entries in Problem 8.2B from the general journal to the appropriate accounts in the general ledger and in the accounts payable ledger.3. Prepare a
30. Sarah’s Card and Supplies Shop is a retail card, novelty, and business supply store. Sarah’s Card and Supplies Shop commenced business on April 1, 20X1. The firm purchases merchandise on open account. The firm’s purchases, purchase returns and allowances, and cash payments on account
29. Fantastic Florals is a retail store that sells garden equipment, furniture, and supplies. The company began operations June 1, 20X1. The firm purchases its merchandise for cash and on open account.During June, Fantastic Florals engaged in the following transactions:DATE TRANSACTIONS 20X1 June 1
28. The following transactions took place at Funky Fashions during July 20X1. Funky Fashions uses a perpetual inventory system. Record the transactions in a general journal. Use 8 as the page number for the general journal. Funky Fashions operates in a state with no sales tax.DATE TRANSACTIONS 20X1
27. Bailey Company (buyer) and Suarez, Inc. (seller), engaged in the following transactions during January 20X1:INSTRUCTIONS 1. Open the accounts payable ledger account and accounts receivable ledger account indicated below for both Bailey Company and Suarez, Inc. Enter the balances as of January
26. 1. Open the general ledger accounts and accounts payable ledger accounts indicated below.Enter the balances as of June 1, 20X1.2. Post the transactions in Problem 8.4A to the appropriate accounts in the general ledger and the accounts payable subsidiary ledger.3. Prepare a schedule of accounts
25. Innovative Medical Devices is a medical devices wholesaler that commenced business on June 1, 20X1. The company purchases merchandise for cash and on open account. In June 20X1, Innovative Medical Devices engaged in the following purchasing and cash payment activities:DATE TRANSACTIONS 20X1
24. 1. Open the general ledger accounts and accounts payable ledger accounts indicated below.Enter the balance of Cash as of September 1, 20X1.2. Post the entries in Problem 8.2A from the general journal to the appropriate accounts in the general ledger and in the accounts payable ledger.3. Prepare
23. High Country Ski Shop is a retail store that sells ski equipment and clothing. High Country Ski Shop commenced business on September 1, 20X1. The firm purchases merchandise on open account. The firm’s purchases, purchase returns and allowances, and cash payments on account during September
22. Lens King Photo Shop is a retail store that sells cameras and photography supplies. The company began operations April 1, 20X1. The firm purchases its merchandise for cash and on open account.During April, the company engaged in the following transactions:DATE TRANSACTIONS 20X1 April 1
21. Antonello Clothiers began operations on June 1, 20X1. During June, Antonello Clothiers reported the following:Purchases of merchandise inventory, at cost $100,000 Purchases returns, at cost 1,000 Freight-in on purchases of merchandise inventory 1,500 Sales (cost of merchandise sold was $82,000)
20. Bennington Company (buyer) and Sabatino, Inc. (seller), engaged in the following transactions during February 20X1:Both companies use the perpetual inventory system. Journalize the transactions above in a general journal for both Bennington Company and Sabatino, Inc. Use 20 as the journal page
19. On April 1, Midwest Meat Distributors sold merchandise on account to Boston Beef Products for$4,700 on Invoice 1001, terms 2/10, n/30. The cost of merchandise sold was $2,800. Payment was received in full from Boston Beef Products, less discount, on April 10.Record the transactions for Midwest
18. Record the following transactions of Dress Divas in a general journal. Dress Divas must charge 8 percent sales tax on all sales. The company uses the perpetual inventory system. Use 10 as the journal page number.DATE TRANSACTIONS 20X1 April 2 Sold merchandise for cash, $3,500 plus sales tax.
17. Brown Corporation operates in a state with no sales tax. The company uses the perpetual inventory system. Record the following transactions in a general journal:DATE TRANSACTIONS 20X1 June 5 Sold merchandise on account to Whiteside Company; issued Sales Slip 1200 for $2,025, terms n/30. The
16. Record the following transactions of Alina’s Designs in a general journal. The company uses the perpetual inventory system.DATE TRANSACTIONS 20X1 April 1 Purchased merchandise on credit from Global Fabricators, Invoice 885, $2,400, terms 1/10, n/30; freight of $150 was paid by Global
15. Aviles Corporation engaged in the following transactions during June. The company uses the perpetual inventory system. Record these transactions in a general journal.DATE TRANSACTIONS 20X1 June 4 Purchased merchandise on account from Eliassen Company; Invoice 100 for $1,185; terms n/30.15
14. Identify the normal balance and type of account for the following. In identifying the normal balance, use “Dr” for debit or “Cr” for credit. The first one is done as an example. Account Name Normal Balance Type of Account Merchandise Inventory Dr Asset Accounts Receivable Sales Tax
13. 1. Use the final balances of the vendor accounts after completing Exercise 8.8 to prepare a schedule of accounts payable for GeekAuto Supplies, Inc., as of January 31, 20X1.2. Does the total of your accounts payable schedule agree with the balance of the Accounts Payable account in the general
12. Post the entries in the general journal below to the Accounts Payable account in the general ledger and to the appropriate accounts in the accounts payable ledger.Assume the following account balances at January 1, 20X1, for GeekAuto Supplies, Inc.:Accounts Payable (control account) $7,600
11. On June 30 the general ledger of Osaki, Inc., had the following balances:Purchases $46,980 Dr.Freight In 3,396 Dr.Purchases Returns and Allowances 3,960 Cr.Purchases Discounts 651 Cr.Accounts Payable 16,200 Cr.Compute the net delivered cost of purchases for Osaki, Inc.
10. Brady Company (buyer) and Johnson, Inc. (seller), engaged in the following transactions during February 20X1:DATE TRANSACTIONS 20X1 Feb. 10 Purchased merchandise for $4,500 from Johnson, Inc., Invoice 1980, terms 1/10, n/30.13 Received Credit Memorandum 230 from Johnson, Inc., for damaged
9. Record the following transactions of Fabulous Fashions:DATE TRANSACTIONS 20X1 March 8 Purchased merchandise on credit from Aeryn Designs, Invoice 1091, list price $6,000, trade discounts of 20 and 10 percent; terms 3/10, n/30.17 Paid the amount owed on the purchase of March 8 from Aeryn Designs,
8. Record the following transactions of Alina’s Designs in a general journal:DATE TRANSACTIONS 20X1 April 1 Purchased merchandise on credit from Global Fabricators, Invoice 885, $2,400, terms 1/10, n/30; freight of $150 prepaid by Global Fabricators and added to the invoice.9 Paid amount due to
7. Record the following transactions of Beach Surf Store in a general journal:DATE TRANSACTIONS 20X1 April 1 Purchased merchandise for cash, $2,610.2 Returned merchandise for cash purchased on April 1; received a cash refund of $310.4 Purchased merchandise on credit from Breit Distributors, Invoice
6. Aviles Corporation engaged in the following transactions during June. Record these transactions in a general journal.DATE TRANSACTIONS 20X1 June 4 Purchased merchandise on account from Eliassen Company; Invoice 100 for $1,185; terms n/30.15 Recorded purchases for cash, $1,640.30 Paid amount due
5. Identify the normal balance and type of account for the following. In identifying the normal balance, use “Dr” for debit or “Cr” for credit. The first one is done as an example.
18. What account is debited for freight charges on merchandise inventory purchases when the perpetual inventory system is used?
17. What account is credited for the return of merchandise inventory when the perpetual inventory system is used?
16. What account is debited for the purchase of merchandise inventory when the perpetual inventory system is used?
15. What do the following credit terms mean?a. n/30b. 2/10, n/30c. n/10 EOMd. n/20e. 1/10, n/20f. 3/5, n/30 g. n/15 EOM
14. Why is using the Purchases Returns and Allowances account preferred to crediting these transactions to Purchases?
13. On what financial statement do the accounts related to purchases of merchandise appear?In which section of this statement are they reported?
12. What is the normal balance of the Purchases accounts?
11. What is the difference between a purchase invoice and a sales invoice?
10. What account should be debited for transportation charges related to equipment purchases?
9. How is the net delivered cost of purchases computed?
8. Why is it useful for a business to have an accounts payable ledger?
7. What type of accounts are kept in the accounts payable ledger?
6. What is a schedule of accounts payable? Why is it prepared?
5. What is the relationship of the Accounts Payable account in the general ledger to the accounts payable subsidiary ledger?
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