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14 Oct 2018

1/ The multiple-step format of the income statement reports aseries of intermediate subtotals such as gross profit, operatingincome, and income before taxes. TRUE OR FALSE

2/ An option for a customer to purchase additional goods at adiscount from list price is only a performance obligation if thediscount is a material right that the customer would not receiveotherwise. TRUE OR FALSE

3/ From a financial accounting perspective, the main purposes ofa system of internal control are to improve the accuracy andreliability of accounting information and to safeguard assets. TRUEOR FALSE

4/ In a good system of internal control, the person whoinitiates a transaction should be allowed to effectively controlthe processing of the transaction through its final inclusion inthe accounting records. TRUE OR FALSE

5/ The income statement approach to calculating bad debt expenseshould not be used if it results in a carrying value of accountsreceivable that is materially different from what would be obtainedunder a balance sheet approach. TRUE OR FALSE

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15 Oct 2018

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True or False:

An advantage of FIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.

A properly designed internal control system is a key part of systems design, analysis, and performance.

An internal control system consists of the policies and procedures companies use to protect assets, ensure reliable accounting, promote efficient operations, and uphold company policies.

Technologically advanced accounting systems rarely need monitoring for errors because computers always process transactions correctly.

Separation of duties involves dividing responsibility for a transaction or a series of related transactions between two or more individuals or departments.

The Sarbanes-Oxley Act (SOX) requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls.

A receivable is an amount due from another party.

Credit sales are recorded by crediting Accounts Receivable.

The accounts receivable turnover indicates how often accounts receivable are received and collected during the period.

A high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy.

The direct write-off method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible.

Solve the following QS and Exercises from your textbook in chapter 8.

QS 8-1

Internal control objectives

An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. Evaluate each of the following statements and indicate which are true and which are false regarding the objectives of an internal control system.

____

1.

Separation of recordkeeping for assets from the custody over assets is intended to reduce theft and fraud.

____

2.

The primary objective of internal control procedures is to safeguard the business against theft from government agencies.

____

3.

The main objective of internal control procedures is best accomplished by designing an operational system with managerial policies that protect the assets from waste, fraud, and theft.

____

4.

Separating the responsibility for a transaction between two or more individuals or departments will not help prevent someone from creating a fictitious invoice and paying the money to herself or himself.

QS 8-2

Cash and equivalents

Choose from the following list of terms/phrases to best complete the following statements.

a.

Cash

b.

Cash equivalents

c.

Outstanding check

d.

Liquidity

e.

Bank reconciliation

f.

Current assets

____

1.

The category includes currency and coins along with amounts on deposit in bank accounts, checking accounts, and savings accounts.

____

2.

The term __________ refers to a company’s ability to pay for its near-term obligations

____

3.

The __________ category includes short-term highly liquid investment assets that are readily convertible to a known cash amount and sufficiently close to their due dates so that their market value is not sensitive to interest rate changes.

QS 8-3

Internal control for cash

A good system of internal control for cash provides adequate procedures for protecting both cash receipts and cash disbursements. Identify each of the following statements as either true or false regarding this protection.

____

a.

A basic guideline for safeguarding cash is that all cash receipts be deposited weekly or monthly.

____

b.

A voucher system of control is a control system exclusively for cash receipts.

____

c.

A basic guideline for safeguarding cash is to separate the duties of those who have custody of cash from those who keep cash records.

____

d.

A petty cash system is not a control procedure for safeguarding cash.

QS 8-4

Petty cash accounting

1.

The petty cash fund of the Brooks Agency is established at $150. At the end of the current period, the fund contained $28 and had the following receipts: film rentals, $24; refreshments for meetings, $46 (both expenditures to be classified as Entertainment Expense); postage, $30; and printing, $22. Prepare journal entries to record (a) establishment of the fund and (b) reimbursement of the fund at the end of the current period.

2.

Identify the two events from the following that cause a Petty Cash account to be credited in a journal entry.

____

a.

Fund amount is being reduced

____

b.

Fund amount is being increased

____

c.

Fund is being eliminated

____

d.

Fund is being established

Exercise 8-13A

Documents in a voucher system

Match each document in a voucher system in column one with its description in column two.

Document

1.

Purchase requisition

2.

Purchase order

3.

Invoice

4.

Receiving report

5.

Invoice approval

6.

Voucher

Description

____

A.

An itemized statement of goods prepared by the vendor listing the customer’s name, items sold, sales prices, and terms of sale.

____

B.

An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.

____

B.

An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.

____

C.

A document used to place an order with a vendor that authorizes the vendor to ship ordered merchandise at the stated price and terms.

____

D.

A checklist of steps necessary for the approval of an invoice for recording and payment; also known as a check authorization.

____

E.

A document used by department managers to inform the purchasing department to place an order with a vendor.

____

F.

A document used to notify the appropriate persons that ordered goods have arrived, including a description of the quantities and condition of goods.

Exercise 8-14B

Record invoices at gross or net amounts

Piere Imports uses the perpetual system in accounting for merchandise inventory and had the following transactions during the month of October. Prepare entries to record these transactions assuming that Piere Imports records invoices (a) at gross amounts and (b) at net amounts.

Oct.

2

Purchased merchandise at a $3,000 price, invoice dated October 2, terms 2/10, n/30.

10

Received a $500 credit memorandum (at full invoice price) for the return of merchandise that it purchased on October 2.

17

Purchased merchandise at a $5,400 price, invoice dated October 17, terms 2/10, n/30.

27

Paid for the merchandise purchased on October 17, less the discount.

31Paid for the merchandise purchased on October 2. Payment was delayed because the invoice was mistakenly filed for payment today. This error caused the discount to be lost.

Please provide all the answer

thank you
QUESTION 1

Accounting is an information and measurement system thatidentifies, records, and communicates relevant, reliable, andcomparable information about an organization's businessactivities.
True
False

QUESTION 2

We use the accounting equation to identify what a company ownsand owes. The accounting equation is:
Assets = Liabilities + Equity
Assets = Liabilities – Equity
Assets = Liabilities + Revenues
Equity = Liabilities + Revenues
QUESTION 3

______ are beliefs that distinguish right from wrong. Thesebeliefs are accepted standards of gauging good and dishonestbehavior.
Accounting Standards
Ethics
Generally Accepted Accounting Principles
FASB
QUESTION 4

The _____ is a collection of all accounts within a company’saccounting system.
General Journal
Chart of Accounts
General Ledger
Balance Sheet
QUESTION 5

We use the accounting equation to identify what a company ownsand owes. _____ are resources a company owns or controls, _____ areclaims creditors have against a company’s assets, and _____ is theowner’s claim on a company’s assets.

QUESTION 6

In double entry accounting a credit to an asset account willrepresent an increase in the asset account balance; and a debitwill represent a decrease in the asset account balance.
True
False
QUESTION 7

The purchase of supplies on credit will ____ assets and ____liabilities.
Increase, decrease
Decrease, increase
Decrease, decrease
Increase, increase
QUESTION 8

During the accounting cycle, we analyze transactions toprepare statements.
True
False
QUESTION 9

The supplies account for a company has a $1,000 debit balanceat the beginning of the year. Supplies of $2,000 were purchasedduring the year and debited to the Supplies account. A December 31physical count shows $500 of supplies remaining at the end of theyear. Assume no other adjusting entries are made during the year.Using the 3-step process for creating adjusting entries, calculatethe adjustment amount for supplies (no journal entry isrequired).
$1,000 adjustment
$2,000 adjustment
$2,500 adjustment
$3,000 adjustment
QUESTION 10

During the accounting cycle, to complete step 7 youwould:
Prepare post-closing trial balance--Test clerical accuracy ofthe closing procedures.
Prepare adjusted trial balance--Summarize adjusted ledgeraccounts and amounts.
Prepare statements--Use adjusted trial balance to preparefinancial statements.
Close--Journalize and post entries to close temporaryaccounts.
QUESTION 11

The three financial statements that should be prepared duringthe accounting cycle are the:
Balance sheet, adjusted trial balance, income statement
Balance sheet, unadjusted trial balance, Statement of Owner’sEquity
Income statement, adjusted trial balance, Statement of Owner’sEquity
Balance sheet, Income statement, Statement of Owner’sEquity

QUESTION 12

An optional working paper, which is not a required report oran accounting record, but is used to prepare a company's unadjustedtrial balance, adjusting entries, adjusted trial balance, andfinancial statements is a(n):
Adjusted trial balance
Worksheet
Post-closing trial balance
Unadjusted trial balance
General ledger
QUESTION 13

The two goals for completing the closing process are:
To identify accounts for closing and record the closingentries
To journalize and post transactions
To post transactions and prepare post-closing trialbalance
To reset revenues, expenses, and withdrawal account balancesto zero at the end of each period, and help summarize an accountingperiod’s revenues and expenses.
QUESTION 14

Fill in the Blank: The _____ describes a company’s financialposition – by the types and amounts of assets, liabilities, andequity -- at a point in time.

QUESTION 15

Return on Assets is useful in evaluating management, analyzingand forecasting profits, and planning activities.
True
False

QUESTION 16

The Income Statement:
Identifies cash inflows (receipts) and cash outflows(payments) over a period-of-time.
Summarize adjusted ledger accounts and amounts
Describes a company’s revenues and expenses along with theresulting net income or net loss -- over a period-of-time due toearnings activities
Resets revenues, expenses, and withdrawal account balances tozero at the end of each period.
QUESTION 17

An internal control system consists of the policies andprocedures used to:
Protect assets and Ensure reliable accounting
Urge adherence to company policies and Promote efficientoperations
All of the above
None of the above.
QUESTION 18

The cost-benefit principle is the second limitation of_______.
Bank reconciliations
Petty cash controls
Voucher system of controls
Internal controls
QUESTION 19

The Unadjusted Trial Balance columns of a company's work sheetshows the Store Supplies account with a balance of $750. TheAdjustments columns shows a credit of $425 for supplies used duringthe period. The amount shown as Store Supplies in the Balance Sheetcolumns of the work sheet is:
$325 debit
$325 credit
$425 debit
$425 credit
QUESTION 20

A company shows a $600 balance in Prepaid Rent in theUnadjusted Trial Balance columns of the work sheet. The Adjustmentscolumns show expired rent of $200. This adjusting entry resultsin:
$200 decrease to net income
$200 increase to net income
$200 different between the debit and credit columns of theUnadjusted Trial Balance
An error in the Balance Sheet

QUESTION 21

This semester we have discussed four major financialstatements. List the 4 financial statements and describe them. Makesure to include how they flow together.

QUESTION 22

Explain the purpose of adjusting entries at the end of aperiod.

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