1. Joe Edmonds, CPA, was retained by Fox Cable to prepare financial statements for April 2012. Edmonds accumulated all the ledger balances per Fox's records and found the following.
FOX CABLE
Trial Balance
30 April 2012
Dr. Cr.
Cash $4,200
Accounts Receivable 3,300
Supplies 900
Equipment 10,700
Accumulated Depreciation $1,450
Accounts Payable 2,200
Salaries Payable 710
Unearned Revenue 990
A. Manion, Capital 13,000
Service Revenue 5,550
Salaries Expense 3,400
Advertising Expense 610
Miscellaneous Expense 290
Depreciation Expense
500
$23,900
$23,900
Joe Edmonds reviewed the records and found the following errors.
Cash received from a customer on account was recorded as $840 instead of $480.
A payment of $75 for advertising expense was entered as a debit to Miscellaneous Expense $75 and a credit to Cash $75.
The first salary payment this month was for $1,910, which included $710 of salaries payable on March 31.The payment was recorded as a debit to Salaries Expense $1,910 and a credit to Cash $1,910. (No reversing entries were made on April 1.)
The purchase on account of a printer costing $300 was recorded as a debit to Supplies and a credit to Accounts Payable for $300.
A cash payment of repair expense on equipment for $75 was recorded as a debit to Equipment $57 and a credit to Cash $57.
Prepare an analysis of each error showing (1) the incorrect entry, (2) the correct entry, and (3) the correcting entry. Items 4 and 5 occurred on 30 April 2012. (List multiple debit/credit entries in descending order of amount.)
Incorrect Entry
Description Debit Credit
1.
2.
3.
4.
5.
Correct Entry
Description Debit Credit
1.
2.
3.
4.
5.
Correcting Entry
Description Debit Credit
1.
2.
3.
4.
5.
Prepare a correct trial balance. (If answer is zero, please enter 0; do not leave any fields blank.)
FOX CABLE
Trial Balance
30 April 2012
Dr. Cr.
Cash $
$
Accounts Receivable
Supplies
Equipment
Accumulated Depreciation
Accounts Payable
Salaries Payable
Unearned Revenue
A. Manion, Capital
Service Revenue
Salaries Expense
Advertising Expense
Miscellaneous Expense
Repair Expense
Depreciation Expense
$
$
2. Solo Ltd began operations on 1 June 2012. The trial balance at 30 June before adjustments is as follows:
SOLO Ltd
Trial Balance
as at 30 June 2012
Debit Credit
Cash $9 300
Accounts Receivable 7 200
Prepaid Insurance 2 880
Supplies 2 400
Office Equipment 18 000
Accounts Payable $5 400
Unearned Service Revenue 4 800
Share Capital 26 100
Service Revenue 9 480
Salaries Expense 4 800
Rent Expense
1 200
$45 780
$45 780
Other data:
1 Supplies on hand at 30 June total $1 560.
2. An electricity bill for $180 has not been recorded and will not be paid until next month.
3. The insurance policy is for a year.
4. Services were performed during the period in relation to $3 000 of Unearned Revenue.
5. Salaries of $1 800 are owed at 30 June.
6. The office equipment has a 5-year life with no re-sale value and is being depreciated at $300 per month for 60 months.
7. Invoices representing $3 600 of services performed during the month have not been recorded as of 30 June.
Prepare the adjusting entries for the month of June.
Date Account / Description Debit Credit
1. June 30
$
$
2. June 30
$
$
3. June 30
$
$
4. June 30
$
$
5. June 30
$
$
6. June 30
$
$
7. June 30
$
$
Complete the following adjusted trial balance at 30 June 2012. (If an amount is 0 enter it in the appropriate box. Note that all boxes must be filled.)
SOLO Ltd
Adjusted Trial Balance
as at 30 June 2012
Debit Credit
Cash $
$
Accounts Receivable
Prepaid Insurance
Supplies
Office Equipment
Accumulated Depreciation - Office Equipment
Accounts Payable
Electricity Payable
Salaries Payable
Unearned Service Revenue
Share Capital
Service Revenue
Salaries Expense
Rent Expense
Depreciation Expense
Insurance Expense
Electricity Expense
Supplies Expense
Totals
$
$
3. The adjusted trial balance for Rego Bowling Alley at 31 December 2012 contains the following accounts.
Debits credits
Building $128,800 Ann Rego, Capital $115,000
Accounts Receivable 14,570 Accumulated Depreciation - Building 45,600
Prepaid Insurance 4,680 Accounts Payable 12,350
Cash 18,040 Mortgage Payable 94,780
Equipment 62,400 Accumulated Depreciation - Equipment 18,720
Land 64,000 Interest Payable 2,600
Insurance Expense 780 Bowling Revenues
14,180
Depreciation Expense 7,360 $303,230
Interest Expense
2,600
$303,230
Instructions
Prepared a classified balance sheet; assume that $13,600 of the mortgage payable will be paid in 2013.
REGO BOWLING ALLEY
Balance Sheet
31 December 2012
Assets
Current Assets
Cash $
Accounts receivable
Prepaid Insurance
Total current assets
Property, plant and equipment
Land $ 64,000
Building $ 128,800
Less: Acc. depr.-building
Equipment
Less: Acc. depr.-equipment
18,720
Total assets $
Liabilities and Equity
Current liabilities
Current portion of mortgage payable $
Accounts payable
Interest payable
2,600
Total current liabilities
Long-term liabilities
Mortgage payable
Total Liabilities
Equity
A. Rego, Capital
Total liabilities and equity $
4. Minor Advertising Agency was founded by Brandon Minor in January of 2011. Presented below are both the adjusted and unadjusted trial balances as of 31 December 2012.
MINOR ADVERTISING AGENCY
Trial Balance
as at 31 December 2012
Unadjusted
Adjusted
Dr.
Cr.
Dr.
Cr.
Cash $ 11,250 $ 11,250
Accounts Receivable 19,662 22,592
Supplies 8,747 5,085
Prepaid Insurance 3,301 2,662
Equipment 63,040 63,040
Accumulated Depreciation-Equipment $ 27,680 $ 33,984
Accounts Payable 5,027 5,027
Interest Payable 0 138
Notes Payable 4,600 4,600
Unearned Service Revenue 7,294 5,992
Salaries and Wages Payable 0 2,184
Capital 25,210 25,210
Drawings 12,450 12,450
Service Revenue 64,102 68,334
Salaries and Wages Expense 10,951 13,135
Insurance Expense 639
Interest Expense 322 460
Depreciation Expense 6,304
Supplies Expense 3,662
Rent Expense 4,190 4,190
$133,913 $133,913 $145,469 $145,469
Collapse question part
(a) Journalise the annual adjusting entries that were made. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
Date
Account Titles and Explanation
Debit
Credit
31 Dec.
(To record accrued revenue.)
31 Dec.
(To record revenue earned.)
31 Dec.
(To record supplies used.)
31 Dec.
(To record depreciation.)
31 Dec.
(To record interest.)
31 Dec.
(To record expired insurance.)
31 Dec.
(To record accrued salaries.)
5. 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 Reader's 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 110 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.)
Date Account/ Description Debit Credit
June 2 $
$
(To record the purchase.)
$
$
(To record the cost of freight.)
June 3 $
$
(To record the sale.)
$
$
(To record the cost of inventory.)
June 6 $
$
June 9 $
$
$
June 15 $
$
June 17 $
$
(To record the sale.)
$
$
(To record the cost of inventory.)
June 20 $
$
June 24 $
$
$
June 26 $
$
$
June 28 $
$
(To record the sale.)
$
$
(To record the cost of inventory.)
June 30 $
$
(To record the credit for returned inventory.)
$
$
(To record the inventory returned.)
6. 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) $14,800 $13,100 $16,500 $14,000
Accounts payable (ending) 20,600
Sales 227,200 229,100 221,000
Purchase of merchandise
inventory on account 147,600 146,600 130,600
Cash payments to suppliers 135,000 161,000 127,000
Calculate cost of sales for each of the 2010, 2011, and 2012 fiscal years.
2010 2011 2012
$
$
$
Plus:
Cost of goods available
Less:
Cost of sales $
$
$
Calculate the gross profit for each of the 2010, 2011, and 2012 fiscal years.
2010 2011 2012
$
$
$
Less:
Gross profit $
$
$
Calculate the ending balance of accounts payable for each of the 2010, 2011, and 2012 fiscal years.
2010 2011 2012
$
$
$
Plus:
Less:
Ending accounts payable $
$
$
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.)
2010 2011 2012
Gross profit rate
%
%
%
7. Brighteyes Lighting sells lamps for $120 plus 10% GST. The following transactions were completed by the business during January 2011:
January 3 Sold 44 lamps on credit with terms of 2/10, n/30.
7 The customer returned 5 of the lamps sold on 3 January.
12 Received payment from the customer for the amount due on the 3 January sale.
18 Sold 26 lamps for cash.
21 Seven of the lamps sold on 18 January were returned by the customer for a cash refund.
Required:
Record the above transactions in the general journal.
Instructions
Round answers to 2 decimal places.
For multiple debit/credit entries, list accounts in order of magnitude.
Date Account/Description Debit Credit
January 3:
GST Collections
January 7:
Accounts Receivable
January 12:
January 18:
January 21:
GST Collections
8. The following are selected transactions of TV Town:
June 4 Sold goods on credit to Smith Enterprises for $12,945 plus 10% GST. The cost of the goods sold was $5,476.
16 Sold goods for cash to Anything Goes for $8,273 plus 10% GST. The cost of the goods sold was $3,384.
24 Sold goods for cash to Cavalier Services for $3,487 plus 10% GST. The cost of the goods sold was $1,287.
30 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 system.
Instructions
Round answers to 2 decimal places.
For multiple debit/credit entries, list accounts in order of magnitude.
Date Account/Description Debit Credit
June 4
.
. . .
. . .
June 16
.
. . .
. . .
June 24
.
. . .
. . .
June 30
.
. . .
. . .
9. 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
|
Debit
|
Credit
|
|
Supplies
|
$ 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?
(a) Supplies balance = $
(b) Total premium = $
Purchase date =
1 Aug. 20111 Sept. 20111 July 2011
(c) Salaries payable = $
(d) Unearned revenue = $
10.On 1 September, the balance of the Accounts Receivable control account in the general ledger of Joss Whedon Company was $10,327. The customers' subsidiary ledger contained account balances as follows: Gareth $1,307, Gillum $2,209, Minear $1,903, Edlund $4,908. At the end of September, the various journals contained the following information.
Sales journal:
Sales to Edlund $755; to Gareth $1,214; to Molina $1,282; to Minear $1,096.
Cash receipts journal:
Cash received from Minear $1,213; from Edlund $2,438; from Molina $456; from Gillum $1,746; from Gareth $1,135.
General journal:
An allowance is granted to Edlund $335.
Collapse question part
(a)
(a) Set up control and subsidiary accounts and enter the beginning balances.
(b) Post the various journals. Post the items as individual items or as totals, whichever would be the appropriate procedure.
Accounts Receivable
Date
Explanation
Ref
Debit
Credit
Balance
1 Sept.
Balance
√
S
CR
G
Accounts Receivable
Subsidiary Ledger
Minear
Date
Explanation
Ref
Debit
Credit
Balance
1 Sept.
Balance
√
S
CR
Edlund
Date
Explanation
Ref
Debit
Credit
Balance
1 Sept.
Balance
√
S
CR
G
Molina
Date
Explanation
Ref
Debit
Credit
Balance
1 Sept.
J1
S
CR
Gillum
Date
Explanation
Ref
Debit
Credit
Balance
1 Sept.
Balance
√
CR
Gareth
Date
Explanation
Ref
Debit
Credit
Balance
1 Sept.
Balance
√
SR
CR
11. Ruz 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 $322,820; the Accounts Payable control account had a credit balance of $76,792.
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 $172,070
Purchases journal Total purchases $56,566
Cash receipts journal Accounts receivable column total $142,260
Cash payments journal Accounts payable column total $41,575
(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 $172,070 in the sales journal posted?
(d) To what account(s) is the accounts receivable column total of $142,260 in the cash receipts journal posted?
12. 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 register 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?