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25. Seely Company receives a $4000, 3-month, 8% promissory note from Dodd Company in the settlement of an open accounts receivable. What entry will Seely Company make upon receiving the note? A) Notes Receivable 4,080 Accounts Receivable-Dodd Company 4,080 B) Notes Receivable 4,080 Accounts Receivable-Dodd Company 4,000 Interest Revenue 80 C) Notes Receivable 4,000 Interest Receivable 80 Accounts Receivable-Dodd Company 4,000 Interest Revenue 80 D) Notes Receivable 4,000 Accounts Receivable-Dodd Company 4,000

26. Choose the appropriate journal in which to record the transaction below. Mr. Dexter invested cash in the business. A) Sales journal B) Cash receipts journal C) Cash payments journal D) Single-column purchases journal E) General journal

27. Choose the appropriate journal in which to record the transaction below. Purchased store supplies on account. A) Sales journal B) Cash receipts journal C) Cash payments journal D) Single-column purchases journal E) General journal

28. Choose the appropriate journal in which to record the transaction below. Sold merchandise to customer on account. A) Sales journal B) Cash receipts journal C) Cash payments journal D) Single-column purchases journal E) General journal

29. Choose the appropriate journal in which to record the transaction below. Purchased a 2-year fire insurance policy for cash. A) Sales journal B) Cash receipts journal C) Cash payments journal D) Single-column purchases journal E) General journal

30. Choose the appropriate journal in which to record the transaction below. Received a check from a customer as payment on account. A) Sales journal B) Cash receipts journal C) Cash payments journal D) Single-column purchases journal E) General journal

31. Choose the appropriate journal in which to record the transaction below. Paid for store supplies purchased previously. A) Sales journal B) Cash receipts journal C) Cash payments journal D) Single-column purchases journal E) General journal

32. Choose the appropriate journal in which to record the transaction below. Purchased merchandise on account. A) Sales journal B) Cash receipts journal C) Cash payments journal D) Single-column purchases journal E) General journal

33. Choose the appropriate journal in which to record the transaction below. Issued a credit memorandum to a customer who returned defective merchandise previously sold on account. A) Sales journal B) Cash receipts journal C) Cash payments journal D) Single-column purchases journal E) General journal

34. Choose the appropriate journal in which to record the transaction below. Purchased office equipment for cash. A) Sales journal B) Cash receipts journal C) Cash payments journal D) Single-column purchases journal E) General journal

35. Choose the appropriate journal in which to record the transaction below. Made an adjusting entry for store supplies used during the period. A) Sales journal B) Cash receipts journal C) Cash payments journal D) Single-column purchases journal E) General journal

36. Which of the following internal control principles is related to the problem described below? Three people handle cash sales from the same cash register drawer. A) Establishment of responsibility B) Segregation of duties C) Physical, mechanical, and electronic control devices D) Documentation procedures E) Independent internal verification F) Other controls

37. Which of the following internal control principles is related to the problem described below? A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out of the store without paying for the merchandise. A) Establishment of responsibility B) Segregation of duties C) Physical, mechanical, and electronic control devices D) Documentation procedures E) Independent internal verification F) Other controls

38. Which of the following internal control principles is related to the problem described below? The person who is authorized to sign checks approves purchase orders for payment. A) Establishment of responsibility B) Segregation of duties C) Physical, mechanical, and electronic control devices D) Documentation procedures E) Independent internal verification F) Other controls

39. Which of the following internal control principles is related to the problem described below? Some cash payments are not recorded because checks are not pre-numbered. A) Establishment of responsibility B) Segregation of duties C) Physical, mechanical, and electronic control devices D) Documentation procedures E) Independent internal verification F) Other controls

40. Which of the following internal control principles is related to the problem described below? The treasurer of the company has not taken a vacation for over 20 years. A) Establishment of responsibility B) Segregation of duties C) Physical, mechanical, and electronic control devices D) Documentation procedures E) Independent internal verification F) Other controls

41. Listed below is an item that may be useful in preparing the March 2005, bank reconciliation for Morgan Machine Works. How should this item be treated in preparing the reconciliation? Included with the bank statement materials was a check from Joe Terrell for $40 stamped "account closed." A) Add to the cash balance per books B) Deduct from the cash balance per books C) Add to the cash balance per bank D) Deduct from the cash balance per bank E) Does not affect the bank reconciliation

42. Listed below is an item that may be useful in preparing the March 2005, bank reconciliation for Morgan Machine Works. How should this item be treated in preparing the reconciliation? The bank statement contains a credit memorandum for $24.75 interest on the average checking account balance. A) Add to the cash balance per books B) Deduct from the cash balance per books C) Add to the cash balance per bank D) Deduct from the cash balance per bank E) Does not affect the bank reconciliation

43. Listed below is an item that may be useful in preparing the March 2005, bank reconciliation for Morgan Machine Works. How should this item be treated in preparing the reconciliation? The daily deposits of March 30 and March 31, for $3,362 and $3,125 respectively, were not included in the bank statement postings. A) Add to the cash balance per books B) Deduct from the cash balance per books C) Add to the cash balance per bank D) Deduct from the cash balance per bank E) Does not affect the bank reconciliation

44. Listed below is an item that may be useful in preparing the March 2005, bank reconciliation for Morgan Machine Works. How should this item be treated in preparing the reconciliation? Four checks, #8712, #8716, #8718, #8719, totaling $5,369.65, did not clear the bank during March. A) Add to the cash balance per books B) Deduct from the cash balance per books C) Add to the cash balance per bank D) Deduct from the cash balance per bank E) Does not affect the bank reconciliation

45. Listed below is an item that may be useful in preparing the March 2005, bank reconciliation for Morgan Machine Works. How should this item be treated in preparing the reconciliation? On March 24, 2005, Morgan Machine Works delivered to the bank for collection a $4,500, 3-month note from Tom Jacobs. A credit memorandum dated March 29, 2005, indicated the collection of the note and $75.00 of interest. A) Add to the cash balance per books B) Deduct from the cash balance per books C) Add to the cash balance per bank D) Deduct from the cash balance per bank E) Does not affect the bank reconciliation

46. Kiley Company had a $900 credit balance in Allowance for Doubtful Accounts at December 31, 2005, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following: Estimated Percentage Uncollectible Current Accounts $120,000 1% 1-30 days past due 12,000 3% 31-60 days past due 10,000 6% 61-90 days past due 5,000 12% Over 90 days past due 8,000 30% Total Accounts Receivable $155,000 Instructions Please identify each of your answers with the letter of the transactions you are journalizing. (a)Prepare the adjusting entry on December 31, 2005, to recognize bad debts expense. (b)Assume the same facts as above except that the Allowance for Doubtful Accounts account had a $700 debit balance before the current year's provision for uncollectible accounts. Prepare the adjusting entry for the current year's provision for uncollectible accounts. (c)Assume that the company has a policy of providing for bad debts at the rate of 1% of sales, that sales for 2005 were $500,000, and that Allowance for Doubtful Accounts had a $550 credit balance before adjustment. Prepare the adjusting entry for the current year's provision for bad debts.

Bad Debts Expense 4,260

Allowance for Doubtful Accounts ($5,160 – $900) 4,260

(To adjust the allowance account to total estimated uncollectible)

47. Record the following transactions in general journal form for Klein Company. Please identify each answer by placing the letter of the transaction you are recording in front of it. July 1 Received a $5,000, 8%, 3-month note, dated July 1, from Amy Grant in payment of her open account. Oct 1 Received notification from Amy Grant that she was unable to honor her note at this time. It is expected that Grant will pay at a later date. Nov 15 Received full payment from Amy Grant for her note receivable previously dishonored.

July 1 Notes Receivable 5,000

Accounts Receivable—Amy Grant 5,000

(To record acceptance of Amy Grant note as

payment on account)

Oct. 1 Accounts Receivable—Amy Grant 5,100

Notes Receivable 5,000

Interest Revenue ($5,000 × 8% × 1/4) 100

(To record dishonored note, $5,000, plus interest)

Nov. 15 Cash 5,100

Accounts Receivable—Amy Grant 5,100

(To record payment on account)

48. Tom Rice operates a small business and uses a manual system of accounting. Transactions are entered in the general journal and posted to accounts in the general ledger at the end of the month. Although the volume of transactions has increased significantly in the past year, Mr. Rice does not feel that it would be cost-effective to install an electronic accounting system. He hires you as a consultant to make recommendations about how to record transactions more efficiently. Briefly describe the principles that you would consider in making recommendations to Mr. Rice. (Please use complete sentences in answering.)

In order for Mr. Rice to have a more efficient accounting system, three principles must be followed. These principles are cost effectiveness, usefulness, and flexibility. Cost effectiveness simply means that the benefits received must outweigh the costs. Usefulness refers to the fact that the system must provide the users with timely, accurate, and understandable information. And flexibility means that the system must be able to adapt to changing needs. Applying these principles to Mr. Rice's situation would lead to the recommendation for the use of special journals.

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