Questions and Answers of Principles Of Financial Accounting

Why is preparing bank reconciliation an internal control procedure?
Smith Company establishes a petty cash fund. Explain the purposes of doing So.
At the beginning of this month, Friedman Company established a petty cash fund with the amount of $$10,000.$ At the end of this month, it was found that the balance of this fund was $$490,$ but
Shiller Company received a bank statement showing the account balance $268,500, which is different from the amount shown in Shiller's general ledger. The following events account for the discrepancy
Lucas Company had the following transactions in March:a. Purchasing inventory on accountb. Borrowing cash from a bankC. Cash sales of merchandised. Disposal of a trucke. Paying employees'
Sargent Company is a medium-sized merchandising firm. Below are the company's internal control procedures of cash. Indicate the weaknesses and how to improve, if any.a. The founder's sister serves
Listed below are five procedures followed by Alpha Corporation related with cash. 1. Payments are paid with checks numbered randomly.2. A bank reconciliation is prepared monthly.3. Anita writes
Assume that Kingston bookstore decided to buy 150 books at NT$350 per book on April 5. The credit terms were 2/10, n/30. Kingston paid half the price on April 10, the others were paid on April 20.
Referring to E 6-4, assume that Kingston found 10 books to have significant defects and decided to return these 10 books on April 8. It also found other 15 books to have small defects and asked for
Assume that HTC Corporation had the following transactions in July: paid one year insurance of NT$36,000 on July 1 for their managers; paid the rent of the office NT$100,000 for July on July 1;
Volvo Company established a petty cash fund on June 1, cashing a check for 100. During June, the petty cash receipts are as followed:The fund was replenished on June 30, and the fund contained 45. On
Libby Company established a petty cash fund on January 2 by cashing a check for NT$3,500. During January, the following expenditures were paid out of the fund. The cashier handling the fund found
Refer to E 6-8. Prepare the journal entries for replenishing petty cash funds when the cashier found that the amount left was NT\$345.E 6-8.Libby Company established a petty cash fund on January 2 by
Prepare a bank reconciliation for Bend Company at January 31, 2022, using the information shown.1. Cash per the accounting records at January 31 amounted to $\$ 228,909$; the bank statement on this
Below are six descriptions of internal control problems. In the space to the left of each description, enter the code letter of the internal control principle that is most related to the problem
Francis Company prepared the following journal entries for the transactions about petty cash funds.Required:1. What was the size of the petty cash fund?2. What was the amount left before replenishing
Shiller Company established a petty cash fund $\$ 5,000$ on February 1. During February, the company paid for the following expenditures out of the petty cash funds:On February 28, the clerk
According to the books of Alexander Company, the cash balance on October 31, 2022 was $\$ 50,000$, while the bank statement showed $\$ 66,185$. After inspection, the company found that the
Which one of the following steps is not a necessary step for revenue recognition?a. Identify the contract with the customer.b. Make sure that the seller should receive cash upon the transfer of goods
Johnnie International Company sold 200 boxes of Whiskey bottles, amounting to 8,500, to Party King Pub by accepting a 60-day, 10% note dated May 1, 2022. Make the entry necessary on May 1 for Johnnie
Referring to PE 7-9, make the entry necessary for Johnnie Co. if Party King Pub paid cash and interests after 60 days on June 30. Assume that there are 360 days in a year.PE 7-9,Johnnie International
Suppose Wal-Mart accepts from Apple Stores a \$15,000, 3-month, 9\% note dated September 30 in settlement of Apple's overdue account.(1) What is the maturity date of the note?(2) Assuming at the
Regarding periodic reporting, which of the following statements is not correct?a. Frequent periodic reporting is helpful for providing timely information;b. Typical fiscal year starts at January 1
Which of the following requires that expenses should be matched and recognized in the same period as the related revenue?a. Cost principleb. Going concern assumptionc. Matching
On August 1, the company paid $86,400 cash for a four-year insurance policy. The policy went into effect on August 1. Make the journal entry necessary on the company's books to record the payment for
For each type of adjustment listed, indicate whether it is an unrecorded receivable, an unrecorded liability, an unearned revenue, or a prepaid expense at December 31, 2022.1. Property taxes that are
Kearl Associates is a professional corporation providing management consulting services. The company initially debits assets in recording prepaid expenses and credits liabilities in recording
Masa Company provides computer network consulting services. The company initially debits assets in recording prepaid expenses and credits liabilities in recording unearned revenues. Give the
Wallin Enterprises disclosed the following information on December 31, 2022 (before any adjusting entries were made):1. In June, Wallin purchased an insurance premium for $\$ 54,000$ for the 18
Consider the following information related to Pendleton Consulting:1. On October 1, 2022, Pendleton Consulting entered into an agreement to provide consulting services for six months to Soelberg
Carmen Company used $90,000 in cash to purchase land. Make the journal entry necessary to record the transaction.
Carmen Company used $30,000 in cash to repay a portion of its bank loan (see PE 3-11). For simplicity, assume that there is no interest on the loan. Make the journal entry necessary to record the
Carmen Company received $180,000 in cash as an additional investment by the stockholders (owners) of the company. Make the journal entry necessary to record the transaction.
Make the journal entries necessary to record the following eight transactions for Carmen Company.a. Purchased equipment on account for $$260,000$.b. Provided services for $$200,000$
Mizubishi Motors, Inc., which provides auto rental services, entered into the following transactions during the month of June:a. Purchased a total of eight new cars and trucks from Jerry's Motors,
As of January 1, 2022, Gammon Corporation had the following balances in its general ledger:Gammon had the following transactions during 2022. All expenses were paid in cash, unless otherwise
What does IFRS stand for? Who sets up the IFRS and are there many countries adopting IFRS? What is the advantage to adopt IFRS?
What are the possible reasons for the SEC's waiver of the U.S. GAAP reconciliation for foreign registrants that followed IFRS to prepare financial statements?
Given that almost each country has its own generally accepted accounting principles, why do we need a set of internationally accepted accounting standards such as IFRS?
Lenders and investors both provide monetary resources to a company. What do they expect from the company? What are the potential conflicts of interest between lenders and investors?
Management runs the operation of a company with little or even no investment of money in the company, while investors (shareholders) invest their money in the company without paying attention to the
FASB, GAAP, SEC, CPA, AICPA, IRS, IASB, IFRS are all acronyms used in accounting. For the preceding list of acronyms, state what the acronym stands for and then give a definition of each acronym.
Briefly explain the evolutionary establishment of IASB.
According to the IASB, there have been more than 100 countries or jurisdictions adopting IFRS. What is the scope of IFRS when people mention this term?
Precision Corporation is a delivery services company. Following are the results of Precision's operations for 2022.Required:1. Prepare a statement of comprehensive income for the year ended December
Use the following information to prepare the statement of changes in equity for 2022 for Karen Company. All the amounts are in thousands of New Taiwan Dollars.In 2022, total revenue is $\$ 2,275$
Allendorf Company borrowed $\$ 200,000$ in cash from Eastern Bank.a. List the accounts impacted by the transaction.b. For each account, indicate whether the transaction increased or decreased the
Allendorf Company used $90,000 in cash to purchase land on the west side of Hatu Lake.a. List the accounts impacted by the transaction.b. For each account, indicate whether the transaction increased
Allendorf Company received $180,000 in cash as an additional investment by the stockholders (owners) of the company.a. List the accounts impacted by the transaction.b. For each account, indicate
Carmen Company borrowed $140,000 in cash from a bank. Make the journal entry necessary to record the transaction.
Indicate whether the following items would appear on the income statement (IS), statement of financial position (SFP), or retained earnings statement (RES).a. Dividends.b. Cash.c. Salaries and wages
Victoria has prepared the following list of statements about corporations.1. A corporation is an entity separate and distinct from its owners.2. As a legal entity, a corporation has most of the
Which of the following is true?a. In the United States, the primary corporate shareholders are financial institutions.b. Share capital means total assets under GAAP.c. Under both IFRS and GAAP, the
On May 10, Chen Co. issues 2,000 €6 par value ordinary shares for cash at €13 per share.Journalize the issuance of the shares.
Victoria has studied the information you gave her in that exercise and has come to you with more statements about corporations.1. Corporation management is both an advantage and a disadvantage of a
Under GAAP, the amount of capital received in excess of par value would be credited to:a. Retained Earnings.b. Paid-in Capital in Excess of Par.c. Share Premium.d. Par value is not used under GAAP.
The following terms pertain to the forming of a corporation: (1) charter, (2) by-laws, and (3)organization costs. Explain the terms.
During its first year of operations, Punjab Limited had the following transactions pertaining to its ordinary shares.Jan. 10 Issued 70,000 shares for cash at Rs50 per share.July 1 Issued 30,000
Which of the following is false?a. Under GAAP, companies cannot record gains on transactions involving their own shares.b. Under IFRS, companies cannot record gains on transactions involving their
ABC Industries issues 1,000 €10 par ordinary shares value at €12 per share. In recording the transaction, credits are made to:a. Share Capital—Ordinary €10,000 and Share Premium—Ordinary
What are the basic ownership rights of ordinary shareholders in the absence of restrictive provisions?
Lucroy AG issues 100 shares of €10 par value preference shares at €12 per share. In recording the transaction, credits are made to:a. Share Capital—Preference €1,200.b. Share
Chard Ltd. issues 5,000 £100 par value preference shares for cash at £118 per share.Journalize the issuance of the preference shares.
XYZ Ltd. sells 100 of its £5 par value treasury shares at £13 per share. If the cost of acquiring the shares was £10 per share, the entry for the sale should include credits to:a. Treasury Shares
Greenwood Enterprises has 80,000 ordinary shares outstanding. It declares a €1 per share cash dividend on November 1 to shareholders of record on December 1. The dividend is paid on December 31.
In the statement of financial position, the cost of treasury shares is deducted in:a. expenses.b. revenues.c. equity.d. liabilities.
M. Bot Ltd. has 10,000 shares of 8%, €100 par value, cumulative preference shares outstanding at December 31, 2025. No dividends were declared in 2023 or 2024. If M. Bot wants to pay€375,000 of
On January 1, 2025, the equity section of Bergin Stores shows share capital—ordinary (£5 par value) £1,500,000; share premium—ordinary £1,000,000; and retained earnings £1,200,000. During the
Langley Ltd. has 50,000 shares of £10 par value ordinary shares outstanding. It declares a 15% share dividend on December 1 when the market price per share is £16. The dividend shares are issued on
Preference shares may have priority over ordinary shares except in:a. dividends.b. assets in the event of liquidation.c. cumulative dividend features.d. voting.
Encore Ltd. declared an £80,000 cash dividend. It currently has 3,000 shares of 7%, £100 par value cumulative preference shares outstanding. It is one year in arrears on its preference shares.How
For the year ending December 31, 2025, Soto Ltd. reports net income ¥170,000 and dividends ¥85,000 (amounts in thousands). Prepare the retained earnings statement for the year assuming the balance
Knudsen Bakeries was organized on January 1, 2024. During its first year, the company issued 2,000 shares of HK$$50$ par value preference shares and 100,000 shares of HK$$10$ par value ordinary
Which of the following statements about small share dividends is true?a. A debit to Retained Earnings should be made for the par value of the shares issued.b. A small share dividend decreases total
The balance in retained earnings on January 1, 2025, for Palmer Cosmetic was €800,000.During the year, the company paid cash dividends of €90,000 and distributed a share dividend of €8,000.Net
On January 1, 2025, Lanie Limited had £1,000,000 of share capital—ordinary for shares issued at par. It also had retained earnings of £750,000. The company issued 40,000 ordinary shares at par on
Which of the following statements about a 3-for-1 share split is true?a. It will triple the market price of the share.b. It will triple the amount of total equity.c. It will have no effect on total
Raptor NV has retained earnings of €500,000 and total equity of €2,000,000. It has 100,000 shares of €8 par value ordinary shares outstanding, which is currently selling for €30 per share. If
Whetzel Imports reported net income of NT$$152,000,$ declared dividends on ordinary shares of NT$$50,000,$ and had an ending balance in retained earnings of NT$$360,000.$ Ordinary
On October 1, Little Bobby Company’s equity is as follows.On October 1, Little Bobby declares and distributes a 10% share dividend when the market price is €15 per share.Instructionsa. Determine
All but one of the following is reported in a retained earnings statement. The exception is:a. share dividends.b. net income and net loss.c. sales revenue.d. cash dividends.
The statement of financial position for Lauren Ltd. shows the following: total equity£817,000, ordinary shares issued 44,000 shares, and ordinary shares outstanding 35,000 shares.Compute the book
In the equity section, Ordinary Share Dividends Distributable is reported as a(n):a. deduction from share capital and retained earnings.b. addition to share premium.c. deduction from retained
On January 1, 2025, Eddy Industries had retained earnings of £650,000. During the year, Eddy had the following selected transactions.1. Declared cash dividends £120,000.2. Earned net income
The return on ordinary shareholders’ equity is defined as:a. net income divided by total assets.b. cash dividends divided by average ordinary shareholders’ equity.c. income available to ordinary
Bindra A.Ş. reported retained earnings at December 31, 2024, of ₺310,000. Bindra had 200,000 shares outstanding at the beginning of 2025.The following transactions occurred during 2025.1. A cash
Katie Ltd. reported net income of NT$$186,000$ during 2025 and paid dividends of NT$$26,000$ on ordinary shares. It also has 10,000 shares of 6%, NT$$100$ par value, non-cumulative preference
Dirk SA reported the following balances at December 31, 2024: share capital—ordinary€500,000, share premium—ordinary €100,000, and retained earnings €250,000. During 2025, the following
The following accounts appear in the ledger of Tiger Ltd. after the books are closed at December 31 (¥ in thousands).Instructions Prepare the equity section at December 31, assuming retained
Since a statement of changes in equity is required, it is not necessary to prepare a(n):a. retained earnings statement.b. statement of financial position.c. income statement.d. statement of cash
Farley Farms declares a €55,000 cash dividend on December 31, 2025. The required annual dividend on preference shares is €10,000. Determine the allocation of the dividend to preference and
The ledger of JFK, plc shows share capital—ordinary, treasury shares—ordinary, and no preference shares. For this company, the formula for computing book value per share is:a. total equity
Maribel Ortiz is puzzled. Her company had a profit margin of 10% in 2025. She feels that this is an indication that the company is doing well. Gordon Liddy, her accountant, says that more information
At December 31, 2025, the fair value of non-trading securities is €41,300 and the cost is €39,800. At January 1, 2025, there was a credit balance of €900 in the Fair Value
On January 1, 2025, Lennon Enterprises acquires 100% of Ono Ltd. for £220,000 in cash. The condensed statements of financial position of the two companies immediately following the acquisition are
Which of the following will not be reported in the statement of cash flows?a. The net change in plant assets during the year.b. Cash payments for plant assets during the year.c. Cash receipts from
The equity section of Atrio Ltd. showed the following: share premium €6,101, share capital—ordinary €925, share capital—preference €58, retained earnings €7,420, and treasury
The following equity accounts are in the ledger of Eudaley Group at December 31, 2025.Instructions Prepare the equity section of the statement of financial position at December 31, 2025. Share
Travis Mordica asks, “Since share dividends don’t change anything, why declare them?” What is your answer to Travis?
Gorton Ltd. has 30,000 shares of £10 par value ordinary shares outstanding when it announces a 2-for-1 share split. Before the split, the shares had a market price of £120 per share. After the

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