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College Accounting A Contemporary Approach 6th International Edition M. David Haddock, John Price, Michael Farina - Solutions
4. What is a purchase allowance?
3. What is a purchase return?
2. What is the purpose of a credit memorandum?
1. What major safeguards should be built into a system of internal control for purchases of goods?
5. What is the difference between a receiving report and an invoice?
4. What is the purpose of a purchase requisition? A purchase order?
3. What is the purpose of the Freight In account?
2. What type of account is Purchases Returns and Allowances?
periodic system is used?
1. What is the name of the account used to record purchases of merchandise inventory when the
5. Giovanni’s Pizza purchased merchandise on account from Restaurant Suppliers. The merchandise had a list price of$3,000, with trade discounts of 30 and 5 percent, terms n/30. What amount should Giovanni’s Pizza pay on the due date?a. $1,995b. $1,950c. $2,100d. $2,205
4. June’s Garden Supplies purchases merchandise on account from Lawn Supplies, Inc. The list price is $1,600, with a trade discount of 25 percent, terms 1/10, n/30.June’s Garden Supplies pays the amount due within the cash discount period. What amount should June’s Garden Supplies pay to Lawn
3. Which of the following is not evidence of effective internal controls of purchases?a. All purchases should be made only after proper authorization is given in writing.b. The computations on the purchase invoice should be checked for accuracy.c. Prenumbered forms should be used for purchase
2. In the accounts payable ledger, a supplier’s account has a beginning balance of $5,800. Subsequently, a purchase of$1,600 from this supplier is journalized and then posted.What is the balance of the supplier’s account?a. $4,200 debitb. $4,200 creditc. $7,400 debitd. $7,400 credit
1. The total of the schedule of accounts payable should equal the balance of which general ledger account(s)?a. Purchasesb. Accounts Payablec. Accounts Receivabled. The sum of the Purchases and Freight In accounts
4. Divide into groups of four individuals. Your company is named Cole’s Cooking Supplies. Assign one person as Cole’s sales associate; one as the company’s A/R clerk; one as the customer Louisa’s Cooking School; and one as Louisa’s A/P clerk. Record the transaction each individual would
3. Find the most recent consolidated statements of income on The Home Depot, Inc., website (www.homedepot.com). Click on Investor Relations, then Financial Reports, then Annual Reports, then select the link for the most recent annual report.3. What dollar amount is reported for net sales for the
2. An excerpt from the Consolidated Statements of Earnings for The Home Depot, Inc., is presented below. Review the financial data and answer the following analysis questions.(Amounts in millions except per share data)Fiscal Year 2021 2020 2019 Revenues:Net Sales $151,157 $132,110 $110,225
1. Credit memos are created when a product is returned. A debit to Sales Returns and Allowances and a credit to Accounts Receivable are recorded when a credit memo is created. A credit memo will reduce A/R and write off the invoice. You have noticed that the A/R clerk, Wes, has created an
8. Why should management insist that all sales on credit and other transactions affecting the firm’s accounts receivable be journalized and posted promptly?
7. How can efficient accounting records help management maintain sound credit and collection policies?
6. How can a firm’s credit policy affect its profitability?
5. Why is it usually worthwhile for a business to sell on credit even though it will have some losses from uncollectible accounts?
4. During the past year, Cravens Company has had a substantial increase in its losses from uncollectible accounts. Assume that you are the newly hired controller of this firm and that you have been asked to find the reason for the increase. What policies and procedures would you investigate?
3. Suppose a manager in your company has suggested that the firm not hire an accountant to advise it on tax matters and to file tax returns. He states that tax matters are merely procedural in nature and that anyone who can read the tax form instructions can do the necessary work.Comment on this
2. Suppose you are the accountant for a small chain of clothing stores. Up to now, the firm has offered open-account credit to qualified customers but has not allowed them to use bank credit cards. The president of the chain has asked your advice about changing the firm’s credit policy.What
31. How does the Sales Returns and Allowances account provide management with a measure of operating efficiency? What problems might be indicated by a high level of returns and allowances?
30. Bella Beauty Products is a retailer selling various hair, skin, and other beauty products. Bella Beauty Products is owned and operated by Vanessa Domingo. The company has three retail locations. Each retail location both sells products at the store and ships products through an online sales
29. Super Sports began operations March 1, 20X1. The firm sells its merchandise for cash; on open account; to customers using bank credit cards, such as MasterCard and Visa; and to customers using American Express. Merchandise sales are subject to an 8 percent sales tax. The bank credit cards
28. The Bentley China Shop sells china, stemware, and other gift items. Sales to retail customers are subject to an 8 percent sales tax. The firm sells its merchandise for cash; to customers using bank credit cards, such as MasterCard and Visa; and to customers using American Express. The bank
27. 1. Open the general ledger accounts and accounts receivable ledger accounts indicated below.Enter the balances as of May 1, 20X1.2. Post the entries from the general journal in Problem 7.4B to the appropriate accounts in the general ledger and in the accounts receivable ledger.3. Prepare a
26. Floral Masters is a wholesale shop that sells flowers, plants, and plant supplies. Transactions involving sales and cash receipts for the firm during May 20X1 follow. The firm sells its merchandise for cash and on open account. During May, Floral Masters engaged in the following
25. 1. Open the general ledger accounts and accounts receivable ledger accounts indicated below.2. Post the entries from the general journal in Problem 7.2B to the appropriate accounts in the general ledger and in the accounts receivable ledger.3. Prepare a schedule of accounts receivable. Compare
24. Appliance Solutions began operations November 1, 20X1. The firm sells its merchandise for cash and on open account. Sales are subject to a 6 percent sales tax. During November, Appliance Solutions engaged in the following transactions:DATE TRANSACTIONS 20X1 Nov. 1 Sold a dishwasher on credit to
23. Ultimate Office Supplies began operations October 1, 20X1. The firm sells its merchandise for cash and on open account. Sales are subject to a 5 percent sales tax. During October, Ultimate Office Supplies engaged in the following transactions:DATE TRANSACTIONS 20X1 Oct. 1 Sold merchandise on
22. The Aristocrat Gift Shop sells cards, supplies, and various holiday greeting cards. Sales to retail customers are subject to an 8 percent sales tax. The firm sells its merchandise for cash; to customers using bank credit cards, such as MasterCard and Visa; and to customers using American
21. 1. Open the general ledger accounts and accounts receivable ledger accounts shown below.Enter the balances as of April 1, 20X1.2. Post the entries from the general journal in Problem 7.4A to the appropriate accounts in the general ledger and in the accounts receivable ledger.3. Prepare a
20. Incredible Sounds is a wholesale business that sells musical instruments. Transactions involving sales and cash receipts for the firm during April 20X1 follow. The firm sells its merchandise for cash and on open account. During April, Incredible Sounds engaged in the following transactions:DATE
19. 1. Open the general ledger accounts and accounts receivable ledger accounts indicated below.2. Post the entries from the general journal in Problem 7.2A to the appropriate accounts in the general ledger and in the accounts receivable ledger.3. Prepare a schedule of accounts receivable. Compare
18. Precision Electronics began operations September 1, 20X1. The firm sells its merchandise for cash and on open account. Sales are subject to a 7 percent sales tax. The terms for all sales on credit are net 30. During September, Precision Electronics engaged in the following transactions:DATE
17. Creative Kitchens began operations March 1, 20X1. The firm sells its merchandise for cash and on open account. Sales are subject to a 6 percent sales tax. The terms for all sales on credit are net 30.During March, Creative Kitchens engaged in the following transactions:INSTRUCTIONS 1. Open the
16. Newport Sporting Goods reported Sales Tax Payable of $2,100 at November 30, 20X1.On December 5, 20X1, Newport Sporting Goods paid the sales tax owed.Required: Prepare the journal entry to record the payment of sales tax on December 5, 20X1.Use 25 as the journal page number.
15. Valentino Farms started business on August 1, 20X1. During August, Valentino Farms reported sales of $52,000 and sales returns and allowances of $900. Valentino Farms must charge 7% sales tax on all sales.Required: Compute the balance of the Sales Tax Payable account on August 31, 20X1.
14. 1. Use the final balances of the customer accounts after completing Exercise 7.9 to prepare a schedule of accounts receivable for Johnson Company at January 31, 20X1.2. Should the total of your accounts receivable schedule agree with the balance of the Accounts Receivable
13. Post the entries in the general journal below to the Accounts Receivable account in the general ledger and to the appropriate accounts in the accounts receivable ledger for Johnson Company.Assume the following account balances at January 1, 20X1:Accounts Receivable (control account) $11,840
12. On April 1, Moloney Meat Company sold merchandise on account to Fronke’s Franks for $6,500 on Invoice 1001, terms 2/10, n/30. Payment was received in full from Fronke’s Franks, less discount, on April 10.Required: Record the transactions on April 1 and April 10. Use 14 as the journal page
11. Wang Distributors, a wholesale firm, made sales using the following list prices and trade discounts.What amount should be recorded for each sale?1. List price of $8,000 and trade discounts of 30 percent and 5 percent.2. List price of $5,500 and trade discounts of 20 percent and 10 percent.3.
10. Tsang Company made sales using the following list prices and trade discounts. What amount should be recorded for each sale?1. List price of $1,000 and trade discount of 20 percent.2. List price of $1,500 and trade discount of 25 percent.3. List price of $1,800 and trade discount of 30 percent.
9. Record the following transactions of City Sporting Goods in a general journal. City Sporting Goods must charge 8 percent sales tax on all sales. DATE TRANSACTIONS 20X1 Feb. 2 Sold merchandise totaling $5,000 plus tax to customers using bank credit cards. Record the 2 percent discount on credit
8. Record the following transactions of Fashion Park in a general journal. Fashion Park must charge 9 percent sales tax on all sales. DATE 20X1 April 2 3 4 6 30 TRANSACTIONS Sold merchandise for cash, $4,000 plus sales tax. The customer purchasing merchandise for cash on April 2 returned $1,000 of
7. The following transactions took place at Wildlife Amusement Park during May. Wildlife Amusement Park must charge 8 percent sales tax on all sales. DATE 20X1 May 1 15 30 TRANSACTIONS Sold merchandise on account to Ronnie Salgado; issued Sales Slip 1015 for $500 plus 8 percent sales tax, terms
6. Aeryn Distributors operates in a state with no sales tax. Record the following transactions in a general journal: DATE 20X1 June 5 15 30 TRANSACTIONS Sold merchandise on account to Osaki Company; issued Sales Slip 1200 for $2,075, terms n/30. Recorded cash sales, $2,840. Received payment on
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. ACCOUNT NAME Accounts Receivable Sales Sales Returns and Allowances Sales Discounts Credit Card Expense Sales
15. What is a trade discount? Why do some firms offer trade discounts to their customers?
14. What is open-account credit?
13. What is the name of the account used to record the fees charged by the credit card company to the seller?
12. Why are bank credit card sales similar to cash sales for a business?
11. When a firm makes a sale involving a credit card issued by a credit card company, does the firm have an account receivable with the cardholder or with the credit card company?
10. What document does a business submit to a credit card company to collect amounts owed for purchases by customers using a credit card issued by a credit card company?
9. (a) When is the Credit Card Expense account debited when a customer uses a bank credit card to pay for a purchase? (b) When is the Credit Card Expense account debited when a customer uses an American Express card to pay for a purchase?
8. In a particular state, the sales tax rate is 5 percent of sales. The retailer is allowed to record both the selling price and the tax in the same account. Explain how to compute the sales tax due when this method is used.
7. The sales tax on a credit sale is not collected from the customer immediately. When is this tax usually entered in a firm’s accounting records? What account is used to record this tax?
6. What kind of account is Sales Returns and Allowances?
5. What kind of account is Sales Discounts?
4. Why is a sales return or allowance usually recorded in the Sales Returns and Allowances account rather than being debited to the Sales account?
3. What purposes does the schedule of accounts receivable serve?
2. How are the net sales for an accounting period determined?
4. How do retail and wholesale businesses differ?
5. Explain how service, merchandising, and manufacturing businesses differ from one another.
4. Why is it useful for a firm to have an accounts receivable ledger?
3. Why does a small merchandising business usually need a more complex set of financial records and statements than a small service business?
2. What is a control account?
1. A company offers a 2 percent discount if the customer pays within 10 days of the invoice.Otherwise, the amount is due in whole in 30 days. How would this company express these credit terms on its sales invoice?
4.7. A schedule of accounts receivable prepared at the end of the month should:a. match, in total, the balance of the Accounts Receivable account in the general ledger.b. match, in total, the balance of the Sales account in the general ledger.c. match, in total, the balance of the Sales account in
4.6. On April 1, Olympic Company made a sale of $500 on account with terms of 2/10, n/30 to Mendocino, Inc.Mendocino, Inc., returned $100 of product as defective on April 3. On April 9, Mendocino, Inc., paid the amount due, less the cash discount. What was the amount of payment made?a. $392b.
4.5. An account manager would like to know the balance of a certain customer’s account. That information can be found in thea. Sales account in the general ledger.b. accounts receivable ledger.c. Accounts Receivable account in the general ledger.d. sales ledger.
4. What is the account classification of the Sales Discounts account?a. expenseb. liabilityc. contra revenued. asset
3. A company that buys $5,000 of goods from a wholesaler offering trade discounts of 20 and 10 percent will pay what amount for the goods?a. $2,200b. $3,500c. $3,475d. $3,600
2. A wholesale business offers a trade discount of 35 percent on a list price of $7,200. At what amount should the wholesale business record the sale?a. $4,680b. $7,200c. $2,520d. $9,720
1. Sedona Company had sales of $100,000, sales returns and allowances of $4,000, and sales discounts of $500.What are net sales?a. $103,500b. $95,500c. $104,500d. $96,500
3. Assume that you are the chief accountant for Eli’s Consulting Services. During January, the business will use the same types of records and procedures that you learned about in Chapters 1 through 6.The chart of accounts for Eli’s Consulting Services has been expanded to include a few new
2. Understanding the steps in the accounting cycle is important to get accurate information about the financial condition of your company. In teams, make strips of paper with the nine steps of the accounting cycle. Give two or three strips to each member of the group. Each team member needs to put
1. In 2020, CSX Corporation, which operates under the name Surface Transportation, reported operating expenses of $6,221 billions. A list of the company’s operating expenses follows. CSX Corporation reported revenues of $10,583 billions for the year.Consolidated Income Statement (Dollars in
4. What kinds of operating and general policy decisions might be influenced by data on the financial statements?
3. Why is it important that a firm’s financial records be kept up-to-date and that management receive the financial statements promptly after the end of each accounting period?
2. The president of Brown Corporation is concerned about the firm’s ability to pay its debts on time. What items on the balance sheet would help her to assess the firm’s debt-paying ability?
1. An officer of Westway Corporation recently commented that when he receives the firm’s financial statements, he looks at just the bottom line of the income statement—the line that shows the net income or net loss for the period. He said that he does not bother with the rest of the income
31. Internal control and fraud prevention is an area tested on the Certified Bookkeeper’s exam.Certification in your field indicates you have a certain level of education and training. Go to the American Institute of Professional Bookkeepers’ website at www.aipb.org. From the certification
30. Alexis Wesson, the bookkeeper for Home Interiors, has just finished posting the closing entries for the year to the ledger. She is concerned about the following balances:Capital account balance in the general ledger: $97,100 Ending capital balance on the statement of owner’s equity: 55,600
29.The Trial Balance section of the worksheet for Fashion World for the period ended December 31, 20X1, appears below. Adjustments data are also given.ADJUSTMENTSa. Supplies used, $7,200b. Expired insurance, $4,800c. Depreciation expense for machinery, $2,400 INSTRUCTIONS 1. Complete the
28. A partially completed worksheet for Rissa Potter, CPA, for the month ending June 30, 20X1, is shown below.INSTRUCTIONS 1. Prepare the worksheet.2. Journalize (use 3 as the journal page number) and post the adjusting entries. Use account number 121 for Supplies; 142 for the Accumulated
27. On December 31, after adjustments, The Mitchell Family Farm’s ledger contains the following account balances.101 Cash $42,748 Dr.111 Accounts Receivable 10,800 Dr.121 Supplies 5,500 Dr.131 Prepaid Rent 34,650 Dr.141 Equipment 54,000 Dr.142 Accumulated Depreciation—Equip. 1,350 Cr.202
26. A completed worksheet for Cedar Canyon Nursery and Landscape is shown below.INSTRUCTIONS 1. Journalize (use 3 as the page number) and post the adjusting entries. Use account number 131 for Prepaid Advertising and the same account numbers for all other accounts as shown in Mini-Practice Set 1
25. Grabbit Cleaning and Maintenance, owned by Charles Grabbit, provides cleaning services to hotels, motels, and hospitals. On January 31, 20X1, the firm’s worksheet showed the following adjustment data. The balances of the revenue and expense accounts listed in the Income Statement section of
24. A partially completed worksheet for At Home Pet Care Service, a firm that grooms pets at the owner’s home, follows.INSTRUCTIONS 1. Complete the worksheet.2. Journalize (use 3 as the journal page number) and post the adjusting entries. Use account number 131 for Prepaid Advertising and the
23. On December 31, after adjustments, Thibodeaux’s Company’s ledger contains the following account balances:101 Cash $ 94,400 Dr.111 Accounts Receivable 75,600 Dr.121 Supplies 8,000 Dr.131 Prepaid Rent 81,200 Dr.141 Equipment 128,000 Dr.142 Accumulated Depreciation—Equip. 4,000 Cr.202
22. A completed worksheet for The Oxford Group is shown below.INSTRUCTIONS 1. Journalize (use 3 as the page number) and post the adjusting entries. Use account number 131 for Prepaid Advertising and the same account numbers for all other accounts shown in Mini-Practice Set 1 for Eli’s Consulting
21. Consumer Research, owned by Chandler Robertson, is retained by large companies to test consumer reaction to new products. On January 31, 20X1, the firm’s worksheet showed the following adjustments data: (a) supplies used, $4,680; (b) expired rent, $26,000; and (c) depreciation on office
20. Complete a chart of the accounting cycle by writing the steps of the cycle in their proper sequence.
19. On December 31, the Income Summary account of Johnson Company has a Credit balance of$226,000 after revenue of $519,000 and expenses of $293,000 were closed to the account. Gloria Johnson, Drawing has a debit balance of $18,000 and Gloria Johnson, Capital has a credit balance of $186,099.
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