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Accounting 23rd Edition Carl S. Warren - Solutions
=+9. Issued Invoice No. 79 to Hitchcock Inc. for services provided on account, $240.
=+The following revenue transactions occurred during February:Feb. 6. Issued Invoice No. 78 to Howard Co. for services provided on account, $490.
=+11. How would e-commerce improve the revenue/collection cycle?
=+10. What happens to the special journal in a computerized accounting system that uses electronic forms?
=+9. Do computerized systems use controlling accounts to verify the accuracy of the subsidiary accounts?
=+8. What is an electronic form, and how is it used in a computerized accounting system?
=+7. Assuming the use of a two-column general journal, a purchases journal, and a cash payments journal as illustrated in this chapter, indicate the journal in which each of the following transactions should be recorded:a. Purchase of office supplies on account.b. Purchase of supplies for cash.c.
=+6. The Accounts Payable and Cash columns in the cash payments journal were unknowingly overstated by $900 at the end of the month. (a) Assuming no other errors in recording or posting, will the error cause the trial balance totals to be unequal? (b) Will the creditors ledger agree with the
=+How will each error come to the bookkeeper’s attention, other than by chance discovery?
=+d. The Accounts Payable column of the purchases journal was overstated by $3,600.
=+c. An invoice for equipment of $4,800 was recorded as $4,000.
=+b. A credit of $420to Blackstone Company was posted as $240in the subsidiary ledger.
=+a. An invoice for $1,875 of supplies from Kelly Co. was recorded as having been received from Kelley Co., another supplier.
=+5. During the current month, the following errors occurred in recording transactions in the purchases journal or in posting from it.
=+4. How many postings to Fees Earned for the month would be needed in Eye Opener 3 if the procedure described in (a) had been used; if the procedure described in (b)had been used?
=+3. In recording 400 fees earned on account during a single month, how many times will it be necessary to write Fees Earned (a) if each transaction, including fees earned, is recorded individually in a two-column general journal; (b) if each transaction for fees earned is recorded in a revenue
=+2. What are the major advantages of the use of special journals?
=+1. Why would a company maintain separate accounts receivable ledgers for each customer, as opposed to maintaining a single accounts receivable ledger for all customers?
=+5. Which of the following would be used in a computerized accounting system?A. Special journals B. Accounts receivable control accounts C. Electronic invoice form D. Month-end postings to the general ledger
=+4. When there are a large number of individual accounts with a common characteristic, it is common to place them in a separate ledger called a(n):A. subsidiary ledger.B. creditors ledger.C. accounts payable ledger.D. accounts receivable ledger.
=+3. A payment of cash for the purchase of services should be recorded in the:A. purchases journal.B. cash payments journal.C. revenue journal.D. cash receipts journal.
=+2. The policies and procedures used by management to protect assets from misuse, ensure accurate business information, and ensure compliance with laws and regulations are called:A. internal controls.B. systems analysis.C. systems design.D. systems implementation.
=+1. The initial step in the process of developing an accounting system is called:A. analysis. C. implementation.B. design. D. feedback.
=+3. Journalize transactions (b), (c), (d), (h), and (j) in the appropriate journals.
=+2. Indicate whether an account in the accounts receivable or accounts payable subsidiary ledgers would be affected for each of the preceding transactions.
=+1. Indicate the journal in which each of the preceding transactions, (a) through (p), would be recorded.
=+O’Malley Co. maintains a revenue journal, a cash receipts journal, a purchases journal, a cash payments journal, and a general journal. In addition, accounts receivable and accounts payable subsidiary ledgers are used.Illustrative Problem 226 Chapter 5 Accounting Systems Instructions
=+p. 31. Journalized adjusting entries from the work sheet prepared for the fiscal year ended May 31.
=+n. 30. Issued Check No. 1041 in payment of electricity and water invoices,$690.o. 30. Issued Check No. 1042 in payment of office and sales salaries for May,$15,800.
=+l. 25. Provided services for cash, $15,900.m. 30. Issued Check No. 1040 for withdrawal of cash for personal use, $1,000.
=+g. 11. Purchased office equipment on account from Fender Office Products,$15,000.h. 12. Issued Check No. 1010 in payment of the supplies purchased from McMillan Co. on May 2, $3,600.i. 16. Provided services on account to Riese Co., Invoice No. 58, $8,000.j. 18. Received $4,500 from Waller Co. in
=+e. 9. Issued Check No. 1005 for office supplies purchased, $450.f. 10. Received cash for office supplies sold to employees at cost, $120.
=+purchased on May 2, $320.d. 8. Provided services on account to Waller Co., Invoice No. 51, $4,500.
=+Selected transactions of O’Malley Co. for the month of May are as follows:a. May 1. Issued Check No. 1001 in payment of rent for May, $1,200.b. 2. Purchased office supplies on account from McMillan Co., $3,600.c. 4. Issued Check No. 1003 in payment of freight charges on the supplies
=+What happens if you decide to begin a small business?
=+5. If the equipment account has a balance of $22,500 and its accumulated depreciation account has a balance of $14,000, the book value of the equipment would be:A. $36,500. C. $14,000.B. $22,500. D. $8,500.
=+1. How are revenues and expenses reported on the income statement under (a) the
=+cash basis of accounting and (b) the accrual basis of accounting?
=+12. Does every adjusting entry have an effect on determining the amount of net income for a period? Explain.
=+14. On July 1 of the current year, a business paid the July rent on the building that it occupies.
=+(a) Do the rights acquired at July 1 represent an asset or an expense? (b)
=+What is the justification for debiting Rent Expense at the time of payment?
=+15. (a) Explain the purpose of the two accounts: Depreciation Expense and Accumulated Depreciation. (b) What is the normal balance of each account?
=+ (c) Is it customary for the balances of the two accounts to be equal in amount?
=+(d) In what financial statements, if any, will each account appear?
=+Indicate with a Yes or No whether or not each of the following accounts normally requires an adjusting entry.a. Buildingc. Interest Payablee. Nath Luken, Capitalb. Cashd. Miscellaneous Expensef. Prepaid Insurance
=+Indicate with a Yes or No whether or not each of the following accounts normally requires an adjusting entry.a. Accumulated Depreciationc. Lande. Suppliesb. Klaire Reid, Drawingd. Salaries Payablef. Unearned Rent
=+Classify the following items as (1) prepaid expense, (2) unearned revenue, (3) accrued revenue, or (4) accrued expense.a. Cash received for use of land next monthc. Rent expense owed but not yet paidb. Fees earned but not receivedd. Supplies on hand
=+Classify the following items as (1) prepaid expense, (2) unearned revenue, (3) accrued revenue, or (4) accrued expense.a. Cash received for services not yetc. Rent revenue earned but not rendered receivedb. Insurance paidd. Salaries owed but not yet paid
=+For the year ending February 28, 2009, Samaritan Medical Co. mistakenly omitted adjusting entries for (1) depreciation of $4,100, (2) fees earned that were not billed of$15,300, and (3) accrued wages of $3,750. Indicate the combined effect of the errors on
=+(a) revenues, (b) expenses, and (c) net income for the year ended February 28, 2009.
=+PE 3-9A Effect of errors on adjusted trial balance obj. 4 For each of the following errors, considered individually, indicate whether the error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance totals to be unequal, indicate whether
=+a. The adjustment for accrued wages of $4,150 was journalized as a debit to Wages Expense for $4,150 and a credit to Accounts Payable for $4,150.
=+b. The entry for $1,290 of supplies used during the period was journalized as a debit to Supplies Expense of $1,290 and a credit to Supplies of $1,920.
=+Classify the following items as (a) prepaid expense, (b) unearned revenue, (c) accrued revenue, or (d) accrued expense.1. A two-year premium paid on a fire insurance policy.2. Fees earned but not yet received.3. Fees received but not yet earned.4. Salary owed but not yet paid.5. Subscriptions
=+8. Utilities owed but not yet paid.
=+EX 3-1 Classifying types of adjustments obj. 1 The following accounts were taken from the unadjusted trial balance of Washington Co., a congressional lobbying firm. Indicate whether or not each account would normally require an adjusting entry. If the account normally requires an adjusting
=+Account Answer Accounts Receivable Normally requires adjustment (AR).Cash Interest Payable Interest Receivable Joyce Carns, Capital Land Office Equipment Prepaid Rent Supplies Unearned Fees Wages Expense
=+EX 3-2 Classifying adjusting entries obj. 1 The balance in the supplies account, before adjustment at the end of the year, is $1,736.Journalize the adjusting entry required if the amount of supplies on hand at the end of the year is $813.
=+EX 3-3 Adjusting entry for supplies obj. 2 The supplies and supplies expense accounts at December 31, after adjusting entries have been posted at the end of the first year of operations, are shown in the following T accounts:Supplies Supplies Expense Bal. 675 Bal. 2,718
=+Determine the amount of supplies purchased during the year.
=+EX 3-4 Determining supplies purchased obj. 2 At March 31, the end of the first month of operations, the usual adjusting entry transferring prepaid insurance expired to an expense account is omitted. Which items will be incorrectly stated, because of the error, on (a) the income statement for
=+EX 3-5 Effect of omitting adjusting entry objs. 2, 3 Chapter 3 The Adjusting Process 129 The balance in the prepaid insurance account, before adjustment at the end of the year, is $11,500. Journalize the adjusting entry required under each of the following alternatives for determining the amount
=+EX 3-6 Adjusting entries for prepaid insurance obj. 2 The prepaid insurance account had a balance of $5,400 at the beginning of the year. The account was debited for $6,000 for premiums on policies purchased during the year. Journalize the adjusting entry required at the end of the year for each
=+EX 3-7 Adjusting entries for prepaid insurance obj. 2 The balance in the unearned fees account, before adjustment at the end of the year, is$38,375. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $17,200.
=+EX 3-8 Adjusting entries for unearned fees obj. 2✔ Amount of entry:$21,175 At the end of February, the first month of the business year, the usual adjusting entry transferring rent earned to a revenue account from the unearned rent account was omitted. Indicate which items will be incorrectly
=+EX 3-9 Effect of omitting adjusting entry objs. 2, 3 At the end of the current year, $8,140 of fees have been earned but have not been billed to clients.
=+a. Journalize the adjusting entry to record the accrued fees.
=+b. If the cash basis rather than the accrual basis had been used, would an adjusting entry have been necessary? Explain.
=+EX 3-10 Adjusting entry for accrued fees obj. 2 The balance in the unearned fees account, before adjustment at the end of the year, is$112, 790. Of these fees, $69,735 have been earned. In addition, $13, 200 of fees have been earned but have not been billed. Journalize the adjusting entries (a)
=+EX 3-11 Adjusting entries for unearned and accrued fees obj. 2 The adjusting entry for accrued fees was omitted at March 31, the end of the current year. Indicate which items will be in error, because of the omission, on (a) the income statement for the current year and (b) the balance sheet as
=+EX 3-12 Effect of omitting adjusting entry objs. 2, 3 130 Chapter 3 The Adjusting Process Canyon Realty Co. pays weekly salaries of $3,700 on Friday for a five-day workweek ending on that day. Journalize the necessary adjusting entry at the end of the accounting period assuming that the period
=+EX 3-13 Adjusting entries for accrued salaries obj. 2✔a. Amount of entry: $2,220 The wages payable and wages expense accounts at October 31, after adjusting entries have been posted at the end of the first month of operations, are shown in the following T accounts:Wages Payable Wages Expense
=+Determine the amount of wages paid during the month.
=+EX 3-14 Determining wages paid obj. 2 Accrued salaries of $4,950 owed to employees for December 30 and 31 are not considered in preparing the financial statements for the year ended December 31. Indicate which items will be erroneously stated, because of the error, on (a) the income statement
=+EX 3-15 Effect of omitting adjusting entry objs. 2, 3 Assume that the error in Exercise 3-15 was not corrected and that the $4,950 of accrued salaries was included in the first salary payment in January. Indicate which items will be erroneously stated, because of failure to correct the initial
=+EX 3-16 Effect of omitting adjusting entry objs. 2, 3 Northwest Financial Services was organized on April 1 of the current year. On April 2, Northwest prepaid $4,500 to the city for taxes (license fees) for the next 12 months and debited the prepaid taxes account. Northwest is also required to
=+a. Journalize the two adjusting entries required to bring the accounts affected by the two taxes up to date as of December 31, the end of the current year.
=+b. What is the amount of tax expense for the current year?
=+EX 3-17 Adjusting entries for prepaid and accrued taxes obj. 2✔b. $24,750 The estimated amount of depreciation on equipment for the current year is $1,840.Journalize the adjusting entry to record the depreciation.
=+EX 3-18 Adjustment for depreciation obj. 2 The balance in the equipment account is $925,700, and the balance in the accumulated depreciation—equipment account is $311,100.
=+a. What is the book value of the equipment?
=+b. Does the balance in the accumulated depreciation account mean that the equipment’s loss of value is $311,100? Explain.
=+EX 3-19 Determining fixed asset’s book value obj. 2 In a recent balance sheet, Microsoft Corporation reported Property, Plant, and Equipment of $7,223 million and Accumulated Depreciation of $4,179 million.
=+a. What was the book value of the fixed assets?
=+b. Would the book value of Microsoft Corporation’s fixed assets normally approximate their fair market values?
=+EX 3-20 Book value of fixed assets obj. 2 Chapter 3 The Adjusting Process 131 For a recent period, the balance sheet for Circuit City Stores, Inc., reported accrued expenses of $464,511,000. For the same period, Circuit City reported income before income taxes of $151,112,000. Assume that the
=+What would have been the income (loss) before income taxes?
=+EX 3-21 Effects of errors on financial statements objs. 2, 3 For a recent year, the balance sheet for The Campbell Soup Company includes accrued expenses of $1,022,000,000. The income before taxes for The Campbell Soup Company for the year was $1,001,000,000.a. Assume the accruals apply to the
=+EX 3-22 Effects of errors on financial statements objs. 2, 3 The accountant for Mystic Medical Co., a medical services consulting firm, mistakenly omitted adjusting entries for (a) unearned revenue earned during the year ($21,950)and (b) accrued wages ($6,100). Indicate the effect of each error,
=+Insert a zero if the error does not affect the item.Error (a) Error (b)Over- Under- Over- Understated stated stated stated 1. Revenue for the year would be $ ____ $ ____ $ ____ $ ____ 2. Expenses for the year would be $ ____ $ ____ $ ____ $ ____ 3. Net income for the year would be $ ____ $ ____
=+EX 3-23 Effects of errors on financial statements objs. 2, 3✔ 1.a. Revenue understated,$21,950 If the net income for the current year had been $424,300 in Exercise 3-23, what would have been the correct net income if the proper adjusting entries had been made?
=+EX 3-24 Effects of errors on financial statements objs. 2, 3 On December 31, a business estimates depreciation on equipment used during the first year of operations to be $12,200.
=+a. Journalize the adjusting entry required as of December 31.
=+b. If the adjusting entry in (a) were omitted, which items would be erroneously stated on (1) the income statement for the year and (2) the balance sheet as of December 31?
=+EX 3-25 Adjusting entries for depreciation; effect of error objs. 2, 3 132 Chapter 3 The Adjusting Process The unadjusted and adjusted trial balances for Glockenspiel Services Co. on March 31, 2010, are shown below.Glockenspiel Services Co.Trial Balance
=+March 31, 2010 Unadjusted Adjusted Debit Credit Debit Credit Balances Balances Balances Balances Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 16 Accounts Receivable . . . . . . . . . . . . . . . . . . . 38 42 Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . .
=+Journalize the five entries that adjusted the accounts at March 31, 2010. None of the accounts were affected by more than one adjusting entry.
=+EX 3-26 Adjusting entries from trial balances obj. 4 The accountant for Rooster Laundry prepared the following unadjusted and adjusted trial balances. Assume that all balances in the unadjusted trial balance and the amounts of the adjustments are correct. Identify the errors in the accountant’s
=+Balances Balances Balances Balances Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 15,000 Accounts Receivable . . . . . . . . . . . . . . . . . . . 36,500 44,000 Laundry Supplies . . . . . . . . . . . . . . . . . . . . . . 7,500 11,000 Prepaid Insurance* . . . . . . . .
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