Question 1:
Adjusting Entries
At Concord Company, prepayments are debited to expense when paid, and unearned revenues are credited to revenue when received.
During January of the current year, the following transactions occurred.
Jan. 2 Paid $2 400 for fire insurance protection for the year. Jan. 10 Paid $1 700 for supplies.
Jan. 15 Received $6 100 for services to be performed in the future.
On 31 January, it is determined that $1 500 of the services fees have been earned and that there are $800 of supplies on hand.
Instructions
(a) Journalise and post the January transactions. (Use T accounts.)
(b) Journalise and post the adjusting entries at 31 January.
(c) Determine the ending balance in each of the accounts. Adjusted Trial Balance Exercise P2
Question 2:
Marcia Grifin started her own consulting firm, Vektek Consulting, on 1 May 2012. The trial balance at 31 May is as follows.
Account Number
|
|
VEKTEK CONSULTING Trial Balance as at 31 May 2012
Debit
|
Credit
|
101
|
Cash
|
$ 7 700
|
|
110
|
Accounts Receivable
|
4 000
|
|
120
|
Prepaid Insurance
|
2 400
|
|
130
|
Supplies
|
1 500
|
|
135
|
Office Furniture
|
12 000
|
|
200
|
Accounts Payable
|
|
$ 3 500
|
230
|
Unearned Service Revenue
|
|
3 000
|
300
|
M. Grifin, Capital
|
|
19 100
|
400
|
Service Revenue
|
|
6 000
|
510
|
Salaries Expense
|
3 000
|
|
520
|
Rent Expense
|
1 000
|
|
|
|
|
$31 600
|
$31 600
|
In addition to those accounts listed on the trial balance, the chart of accounts for Vektek Consulting also contains the following accounts and account numbers: No. 136 Accumulated Depreciation - Office Furniture, No. 210 Travel Payable, No. 220 Salaries Payable, No. 530 Depreciation Expense, No. 540 Insurance Expense, No. 550 Travel Expense, and No. 560 Supplies Expense.
Other data:
1. $500 of supplies have been used during the month.
2. Travel expense incurred but not paid on 31 May 2012, $200.
3. The insurance policy is for 2 years.
4. $1 000 of the balance in the unearned service revenue account remains unearned at the end of the month.
5. 31 May is a Wednesday, and employees are paid on Fridays. Vektek Consulting has two employees, who are paid $500 each for a 5-day work week.
6. The office furniture has a 5-year life with no salvage value. It is being depreciated at $200 per month for 60 months.
7. Invoices representing $1 000 of services performed during the month have not been recorded as of 31 May.
Instructions
(a) Prepare the adjusting entries for the month of May. Use 34 as the page number for your journal.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances.
(c) Prepare an adjusted trial balance at 31 May 2012.
Question 3:
Prepare Financial Statements
Fit Equip was registered on 1 April 2012. Semi-annual financial statements are prepared. The unadjusted and adjusted trial balances as at 30 September are shown below.
Cash
Accounts Receivable Prepaid Rent
Supplies
Equipment
|
as at 30 September Dr.
|
FIT EQUIP
Trial Balance
2012
Unadjusted
|
Dr.
|
Adjusted
|
Cr.
|
Cr.
|
$ 6 700 400 1 500 1 200 15 000
|
|
$ 6 700 600 900 1 000 15 000
|
|
Accumulated Depreciation - Equipment
|
|
|
|
$ 850
|
Notes Payable
|
|
$ 5 000
|
|
5 000
|
Accounts Payable
|
|
1 510
|
|
1 510
|
Salaries Payable
|
|
|
|
400
|
Interest Payable
|
|
|
|
50
|
Unearned Rent
|
|
900
|
|
500
|
P. Fit, Capital
|
|
14 000
|
|
14 000
|
P. Fit, Drawing
|
600
|
|
600
|
|
Commission Revenue
|
|
14 000
|
|
14 200
|
Rent Revenue
|
|
400
|
|
800
|
Salaries Expense
|
9 000
|
|
9 400
|
|
Rent Expense
|
900
|
|
1 500
|
|
Depreciation Expense
|
|
|
850
|
|
Supplies Expense
|
|
|
200
|
|
Utilities Expense
|
510
|
|
510
|
|
Interest Expense
|
|
|
50
|
|
|
|
|
|
|
$35 810
|
$35 810
|
$37 310
|
$37 310
|
Instructions
(a) Journalise the adjusting entries that were made.
(b) Prepare an income statement and a statement of changes in equity for the 6 months ending 30 September and a balance sheet as at 30 September.
(c) If the note bears interest at 12%, how many months has it been outstanding?
Question 4:
Sales Transactions
Kristen Montana operates a retail clothing operation. She purchases all merchandise inventory on credit and uses a periodic inventory system. The accounts payable account is used for recording inventory purchases only; all other current liabilities are accrued in separate accounts. You are provided with the following selected information for the fiscal years 2009, 2010, 2011, and 2012.
|
2009
|
2010
|
2011
|
2012
|
Inventory (ending)
|
$14,600
|
$12,900
|
$16,300
|
$13,800
|
Accounts payable (ending)
|
20,200
|
|
|
|
Sales
|
|
225,800
|
227,700
|
219,600
|
Purchase of merchandise inventory on account
|
|
147,700
|
146,700
|
130,700
|
Cash payments to suppliers
|
|
135,200
|
161,200
|
127,200
|
Calculate cost of sales for each of the 2010, 2011, and 2012 fiscal years.
Calculate the gross profit for each of the 2010, 2011, and 2012 fiscal years.
Calculate the ending balance of accounts payable for each of the 2010, 2011, and 2012 fiscal years.
Sales declined in fiscal 2012. Does that mean that profitability, as measured by the gross profit rate, necessarily also declined?
Calculate the gross profit rate for each fiscal year. (Round answer to one decimal place.)
Question 5:
Subsidiary Ledgers Exercise
On 1 September the balance of the Accounts Receivable control account in the general ledger of Whelan Company was $11 960. The customer's subsidiary ledger contained account balances as follows: Jana $2 440, Kingston $2 640, Johnson $2 060, Phillips $4 820. At the end of September the various journals contained the following information.
Sales journal: Sales to Phillips $800; to Jana $1 260; to Simons $1 030; to Johnson $1 100.
Cash receipts journal: Cash received from Johnson $1 310; from Phillips $2 300; from Simons $380; from Kingston $1 800; from Jana $1 240. General journal: An allowance is granted to Phillips $220.
Instructions
(a) Set up control and subsidiary accounts and enter the beginning balances. Do not construct the journals.
(b) Post the various journals. Post the items as individual items or as totals, whichever would be the appropriate procedure. (No sales discounts given.) Leave the cells blank if no amount is to be debited or credited.
(c) Prepare a list of customers/debtors and prove the agreement of the controlling account with the subsidiary ledger as at 30
Question 6:
September 2012 Subsidiary Ledgers Exercise P1
Lewis Company's chart of accounts includes the following selected accounts.
101 Cash
112 Accounts Receivable
120 Inventory
301 J. Lewis, Capital
|
401 Sales
414 Discount Allowed
505 Cost of Sales
|
On 1 June the accounts receivable ledger of Lewis Company showed the following balances: Bernard & Son $3 500, Festa Company $1
900, Grima Bros. $1 600, and Massis Company $1 300. The June transactions involving the receipt of cash were as follows.
June 1 The owner, J. Lewis, invested additional cash in the business $10 000.
3 Received cheque in full from Massis Company less 2% cash discount.
6 Received cheque in full from Festa Company less 2% cash discount.
7 Made cash sales of inventory totalling $6 135. The cost of the inventory sold was $4 090.
9 Received cheque in full from Bernard & Son less 2% cash discount.
11 Received cash refund from a supplier for damaged merchandise $320.
15 Made cash sales of inventory totalling $4 800. The cost of the inventory sold was $3 200.
20 Received cheque in full from Grima Bros. $1 600.
Instructions
(a) Journalise the transactions above in a six-column cash receipts journal with columns for Cash Dr., Discounts Allowed Dr., Accounts Receivable Cr., Sales Cr., Other Accounts Cr., and Cost of Sales Dr./Inventory Cr. Foot and crossfoot the journal.
(b) Insert the beginning balances in the Accounts Receivable control and subsidiary accounts, and post the June transactions to these accounts.
Question 7:
Adjusting Entries Exercise B6
Profile Advertising Company's trial balance as at 31 December shows Advertising Supplies $6,700 and Advertising Supplies Expense $0. On December 31, there are $1,700 of supplies on hand. Prepare the adjusting entry at 31 December.
Dec. 31
Debit: Advertising Supplies Expense
Credit: Advertising Supplies
Using T-accounts, enter the balances in the accounts, post the adjusting entry and indicate the adjusted balance in each account.
Question 8:
Adjusting Entries Exercise E8
The trial balance for Pioneer Advertising Agency shows the following:
PIONEER ADVERTISING AGENCY
Trial Balance
as at 31 October 2012
Cash
Advertising Supplies Prepaid Insurance Office Equipment
|
Debit
|
Credit
|
$15
2
5
|
200 500 600 000
|
|
|
Notes Payable
|
|
|
$ 5
|
000
|
Accounts Payable
|
|
|
2
|
500
|
Unearned Income
|
|
|
1
|
200
|
C.R. Byrd, Capital
|
|
|
10
|
000
|
C.R. Byrd, Drawing
|
|
500
|
|
|
Service Revenue
|
|
|
10
|
000
|
Salaries Expense
|
4
|
000
|
|
|
Rent Expense
|
|
900
|
|
|
|
|
|
|
|
$28
|
700
|
$28
|
700
|
Assume the following adjustment data:
1. Advertising supplies on hand at 31 October total $1 000.
2. Expired insurance for the month is $100.
3. Depreciation for the month is $50.
4. Unearned income earned in October totals $600.
5. Services provided but not recorded at 31 October are $300.
6. Interest accrued at 31 October is $70.
7. Accrued salaries at 31 October are $1 200.
Instructions
Prepare the adjusting entries for the items above.
Question 9:
Adjusting Entries Exercise E12
Selected worksheet data for Jane Freeman Company are presented below.
Instructions
(a) Fill in the missing amounts
(b) Prepare the adjusting entries that were made.
Question 10:
Adjusted Trial Balance Exercise El
Speedy Carpet Cleaners Pty Ltd.
as at 31 July 2012
Supplies
Prepaid Insurance
|
Debit
|
Credit
|
$1
3
|
050 600
|
|
|
Salaries Payable
|
|
|
$1
|
200
|
Unearned Service Revenue
|
|
|
1
|
125
|
Service Revenue
|
|
|
3
|
000
|
Salaries Expense
|
2
|
700
|
|
|
Supplies Expense
|
1
|
425
|
|
|
Insurance Expense
|
|
600
|
|
|
Answer these questions, assuming the year begins 1 July.
(a) If the amount in Supplies Expense is the 31 July adjusting entry, and $1 275 of supplies was purchased in July, what was the balance in Supplies on 1 July?
(b) If the amount in Insurance Expense is the 31 July adjusting entry, and the original insurance premium was for 1 year, what was the total premium?
(c) If $3750 of salaries was paid in july, What was the balance in salaries payable at 30 June 2012?
(d) There were no additional amounts of unearned revenue received during July. An amount of $2 400 was received for services performed in July. What was the amount of Unearned Service Revenue at 1 July 2012/30 June 2012?
Question 11:
Adjusted Trial Balance Exercise E2
A partial adjusted trial balance of Rio Company as at 31 January 2012, shows the following.
RIO COMPANY
Adjusted Trial Balance
as at 31 January 2012
Supplies
|
Debit
|
Credit
|
$ 850
|
|
Prepaid Insurance
|
2 400
|
|
Salaries Payable
|
|
$ 800
|
Unearned Revenue
|
|
750
|
Supplies Expense
|
950
|
|
Insurance Expense
|
400
|
|
Salaries Expense
|
1 800
|
|
Service Revenue
|
|
2 000
|
Instructions
Answer the following questions, assuming the year begins January 1.
(a) If the amount in Supplies Expense is the 31 January adjusting entry, and $650 of supplies was purchased in January, what was the balance in Supplies on 1 January?
(b) If the amount in Insurance Expense is the 31 January adjusting entry, and the original insurance premium was for one year, what was the total premium and when was the policy purchased?
(c) If $3 000 of salaries was paid in January, what was the balance in Salaries Payable at 31 December 2011?
(d) If $1 600 was received in January for services performed in January, what was the balance in Unearned Revenue at 31 December 2011?
Question 12:
Adjusting Entries Exercise E6
The ledger of Welch Rental Agency on 31 March of the current year includes the following selected accounts before adjusting entries have been prepared.
|
Debit
|
Credit
|
Prepaid Insurance
|
$ 3,600
|
|
Supplies
|
2,800
|
|
Equipment
|
25,000
|
|
Accumulated
Depreciation - Equipment
|
|
$ 8,400
|
Notes Payable
|
|
20,000
|
Unearned Rent
|
|
9,900
|
Rent Revenue
|
|
60,000
|
Interest Expense
|
-0-
|
|
Wage Expense
|
14,000
|
|
An analysis of the accounts shows the following:
1. The equipment depreciates $350 per month.
2. One-third of the unearned rent was earned during the quarter.
3. Interest of $500 is accrued on the notes payable.
4. Supplies on hand total $900.
5. Insurance expense at the rate of $300 per month.
Instructions
Prepare the adjusting entries at 31 March, assuming that adjusting entries are made quarterly. Additional accounts are: Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense.
Question 13:
Record Sales: Perpetual Exercise P2
The Reading Warehouse distributes hardback books to retail stores and extends credit terms of 2/7, n/30 to all of its customers. During the month of June the following inventory transactions occurred
June 2 Purchased 130 books on account for $6 each (including freight) from Reader's World Publishers, terms 1/7, n/30. Also made a cash payment to Classic Couriers of $60 for the freight on this date.
3 Sold 140 books on account to the Book Nook for $12 each.
6 10 books returned to Reader's World Publishers. Received $60 credit.
9 Paid Readers World Publishers the amount owning.
15 Received payment in full from the Book Nook.
17 Sold 120 books on account to Read-A-Lot Bookstore for $12 each.
20 Purchased 120 books on account for $6 each from Read More Publishers, terms 2/7, n/30. 24 Received payment of account from Read-A-Lot Bookstore.
26 Paid Read More Publishers the amount owning.
28 Sold no books on account to Readers Bookstore for $12 each.
30 Granted Readers Bookstore $180 credit for 15 books returned costing $90. The books were returned to inventory.
Journalise the transactions for the month of June for Readings Warehouse, using a perpetual inventory system. Assume the cost of each book sold was $6. (For multiple debit/credit entries, list accounts in order of magnitude. Round all answers to 0 decimal places.)
Question 14:
Record Sales: Periodic Exercise B2
Assume that Roshek Ltd uses a periodic inventory system and has these account balances: Purchases $361,000; Purchase Returns and Allowances $10,300; Discount Recieved $6,700; and Freight-in $16,500. Determine the following:
Net purchases $
Cost of goods purchased $
Question 15:
Concept Basics Question 06-06
The following are selected transactions of TV Town:
Sold goods on credit to Smith Enterprises for $12,945 plus 10% GST. The cost of the goods sold was $5,476.
Sold goods for cash to Anything Goes for $8,273 plus 10% GST. The cost of the goods sold was $3,384.
Sold goods for cash to Cavalier Services for $3,487 plus 10% GST. The cost of the goods sold was $1,287.
Sold goods on credit to Lockyer Enterprises for $23,567 plus 10% GST. The cost of the goods sold was $11,370.
Required:
Record the above transactions in the general journal of TV Town assuming that the business uses the periodic inventory
Question 16:
Toni Ernesto is the owner of Ernesto's Pizza. Ernesto's is operated strictly on a takeaway basis. Customers pick up their orders at a counter where a sales assistant exchanges the pizza for cash. While at the counter, the customer can see other employees making the pizzas and the large ovens in which the pizzas are baked.
Instructions
Identify the six principles of internal control for each example given below. (Note: It may not be possible to observe all the principles.)
1. The counter staff is responsible for handling cash. Other employees are responsible for making the pizzas.
2. Employees who make the pizzas do not handle cash.
3. The counter staff uses your order invoice (ticket) in registering the sale on the cash register. The cash register produces a tape of all sales.
4. A cash reaister is used to record the sale.
5. The counter staff, while handling the pizza, checks the size of the pizza against the size requested on the order.
6. No visible application possible.
Question 17:
Special Journals Exercise E2
Sing Tao Company uses special journals and a general journal.The following transactions occurred during September 2012.
Sept. 2 Sold merchandise on account to T. Mephisto, invoice no. 101, $520, terms n/30.
The cost of the merchandise sold was $285.
10 Purchased merchandise on account from L. Fantasia $645, terms 2/10, n/30.
12 Purchased office equipment on account from R. Press $6,500.
21 Sold merchandise on account to P. Shinhan, invoice no. 102 for $800, terms 2/10, n/30.
The cost of the merchandise sold was $480.
25 Purchased merchandise on account from W. Manion $810, terms n/30.
27 Sold merchandise to S. Miller for $700 cash. The cost of the merchandise sold was $400.
Instructions
(a) Record the transaction(s) for September that should be journalised in the sales journal and the purchases journal.
Question 18:
Special Journals Exercise El
Maureen Company uses both special journals and a general journal as described in this chapter. On 30 June, after all monthly postings had been completed, the Accounts Receivable control account in the general ledger had a debit balance of $320 000; the Accounts Payable control account had a credit balance of $87 000.
The July transactions recorded in the special journals are summarised below. No entries affecting accounts receivable and accounts payable were recorded in the general journal for July.
Sales journal Total sales $161 400
Purchases journal Total purchases $56 400
Cash receipts journal Accounts receivable column totals $141 000
Cash payments journal Accounts payable column total $47 500
Instructions
(a) What is the balance of the Accounts Receivable control account after the monthly postings on 31 July?
(b) What is the balance of the Accounts Payable control account after the monthly postings on 31 July?
(c) To what account(s) is the column total of $161 400 in the sales journal posted?
(d) To what account(s) is the accounts receivable column total of $141 000 in the cash receipts journal posted?
Question 19:
Costing Methods Comparison Exercise B1
In its first month of operations, Minh Lo Ltd made three purchases of inventory in the following sequence: (1) 300 units at $15, (2) 400 units at $19.500, and (3) 500 units at $22.500.
Assuming there are 400 units on hand compute the cost of the ending inventory under the average cost method. (Round average cost to 2 decimal places before calculating ending inventory.)
Question 20:
Costing Methods Comparison Exercise E3
In June, Zambia Ltd reports the following for the month of June:
Date
|
Explanation
|
Units
|
Unit Cost
|
Total Cost
|
June 1
|
Inventory
|
200
|
$6
|
$1,200
|
June 12
|
Purchases
|
300
|
10
|
3,000
|
June 23
|
Purchases
|
540
|
12
|
6,480
|
June 30
|
Inventory
|
164
|
|
|
Instructions
For the following questions, round the weighted average unit cost to the nearest cent, i.e. 2 decimal places, and the answers to the nearest dollar.
(a) Compute the cost of ending inventory using average cost.
(b) Compute the cost of sales using average cost.
Question 21:
Inventory Errors Exercise B1
Alpha Company reports profit of $90 000 in 2012. However ending inventory was understated by $5 000. What effect will this error have on the total assets as reported in the balance sheet at 31 December 2012?
no effect on total assets
overstate total assets
understate total assets
Question 22:
Perpetual System Exercise B1
Spain Department Store uses a perpetual inventory system. Data for product E2-D2 include the following purchases.
Date
|
Number of
Unit Price
Units
50 $10
30 15
|
May 7 July 28
|
On 1 June Spain sold 30 units, and on 27 August, 33 more units. Calculate the cost of sales using:
(for the average cost computation, round the per unit cost to 0 decimal places. Hint: Calculate a new average cost after each purchase.)
(1) FIFO
(2) UFO
(3) Average cost
Question 23:
Perpetual System Exercise El
Humphries Company reports the following for the month of June.
Date
|
Explanation
|
Units
|
Unit Cost
|
Total Cost
|
June 1
|
Inventory
|
200
|
$5
|
$1 000
|
12
|
Purchase
|
300
|
6
|
1 800
|
23
|
Purchase
|
500
|
7
|
3 500
|
30
|
Inventory
|
160
|
|
|
Instructions
Assume a sale of 400 units occurred on 15 June for a selling price of $8 and a sale of 440 units on 27 June for $9. Assume that a perpetual inventory system is used. Using FIFO, calculate:
(a) the cost of the ending inventory $
(b) the cost of sales $
(c) the cost of the ending inventory $
(d) the cost of sales $
calculate: (round your answer to the nearest dollar)*
(e) the cost of the ending inventory $
(f) the cost of sales $
In your computation, round average per unit cost to the nearest tenth of a cent (three digits after the decimal).
Question 24:
Perpetual System Exercise P1
Marinello Company began operations on 1 July. It uses a perpetual inventory system. During July the company had the following purchases and sales.
Date
|
Units
|
Unit Cost
|
Sales Units
|
July 1
|
4
|
$ 90
|
|
July 6
|
|
|
3
|
July 11
|
5
|
$ 99
|
|
July 14
|
|
|
2
|
July 21
|
3
|
$106
|
|
July 27
|
|
|
3
|
Instructions
|
|
|
|
Instructions
Determine the ending inventory, rounded to the nearest dollar, under a perpetual inventory system using:
(1) FIFO $
(2) Average cost $
(3) UFO $Perpetual System Exercise B1