Expert Answers

1. Presented below are the components in Waegelain Company’s income statement. Determine the missing amounts.

Sales

Cost of
Goods Sold

Gross
Profit

Operating
Expenses

Net
Income

(a)

$75,000

$

$30,000

$

$10,800

(b)

$108,000

$70,000

$

$

$29,500

(c)

$

$71,900

$79,600

$39,500

$

 

2. At year-end the perpetual inventory records of Garbo Company showed merchandise inventory of $98,000. The company determined, however, that its actual inventory on hand was $96,500. Record the necessary adjusting entry.

Bleeker Company has the following merchandise account balances: Sales $195,000, Sales Discounts $2,000, Cost of Goods Sold $105,000, and Merchandise Inventory $40,000. Prepare the entries to record the closing of these items to Income Summary. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.

4. On September 1, Howe Office Supply had an inventory of 30 pocket calculators at a cost of $18 each. The company uses a perpetual inventory system. During September, the following transactions occurred.

Sept. 6 Purchased 80 calculators at $20 each from De Vito Co. for cash.
9 Paid freight of $80 on calculators purchased from De Vito Co.
10 Returned 2 calculators to De Vito Co. for a $42 credit (including freight) because they did not meet specifications.
12 Sold 26 calculators costing $21 (including freight) for $31 each to Mega Book Store, terms n/30.
14 Granted credit of $31 Mega Book Store for the return of one calculator that was not ordered.
20 Sold 30 calculators costing $21 for $31 each to Barbara’s Card Shop, terms n/30.

Instructions

Journalize the September transactions.

5. Presented is information related to Rogers Co. for the month of January 2010.

Ending inventory per perpetual records

$21,600

Ending inventory actually on hand

21,000

Cost of goods sold

218,000

Freight out

7,000

Insurance expense

12,000

Rent expense

20,000

Salary expense

61,000

Sales discounts

10,000

Sales returns and allowances

13,000

Sales

350,000

Instructions

(a) Prepare the necessary adjusting entry for inventory.

(b) Prepare the necessary closing entries. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

6. Presented below is financial information for two different companies.

Instructions

(a) Determine the missing amounts. (Enter all amounts as positive and subtract where necessary.)

(b) Determine the gross profit rates. (Round answers to one decimal place, e.g. 10.5.)

7. Sansomite Co. distributes suitcases to retail stores and extends credit terms of 1/10, n/30 to all of its customers. At the end of June, Sansomite’s inventory consisted of suitcases costing $1,200. During the month of July the following merchandising transactions occurred.

July 1 Purchased suitcases on account for $1,800 from Trunk Manufacturers, FOB destination, terms 2/10, n/30. The appropriate party also made a cash payment of $100 for freight on this date.
3 Sold suitcases on account to Satchel World for $2,000. The cost of suitcases sold is $1,200.
9 Paid Trunk Manufacturers in full.
12 Received payment in full from Satchel World.
17 Sold suitcases on account to The Going Concern for $1,500. The cost of the suitcases sold was $900.
18 Purchased suitcases on account for $1,700 from Kingman Manufacturers, FOB shipping point, terms 1/10, n/30. The appropriate party also made a cash payment of $100 for freight on this date.
20 Received $300 credit (including freight) for suitcases returned to Kingman Manufacturers.
21 Received payment in full from The Going Concern.
22 Sold suitcases on account to Fly-By-Night for $2,250. The cost of suitcases sold was $1,350.
30 Paid Kingman Manufacturers in full.
31 Granted Fly-By-Night $200 credit for suitcases returned costing $120.

Sansomite’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Merchandise Inventory, No. 201 Accounts Payable, No. 401 Sales, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, No. 505 Cost of Goods Sold.

Instructions

Journalize the transactions for the month of July for Sansomite using a perpetual inventory system. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Chapter 8

1. While examining cash receipts information, the accounting department determined the following information: opening cash balance $150, cash on hand $1,125.74, and cash sales per register tape $990.83. Prepare the required journal entry based upon the cash count sheet. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

2.

On March 20, Terrell’s petty cash fund of $100 is replenished when the fund contains $7 in cash and receipts for postage $52, freight-out $26, and travel expense $10. Prepare the journal entry to record the replenishment of the petty cash fund. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

3.

Quirk Company has the following cash balances: Cash in Bank $15,742, Payroll Bank Account $6,000, and Plant Expansion Fund Cash $25,000. Explain how each balance should be reported on the balance sheet.

4.

Listed below are five procedures followed by Collins Company.

  1. Employees are required to take vacations.
  2. Any member of the sales department can approve credit sales.
  3. Jethro Bodine ships goods to customers, bills customers, and receives payment from customers.
  4. Total cash receipts are compared to bank deposits daily by someone who has no other cash responsibilities.
  5. Time clocks are used for recording time worked by employees.

Instructions

Indicate whether each procedure is an example of good internal control or of weak internal control. If it is an example of good internal control, indicate which internal control principle is being followed. If it is an example of weak internal control, indicate which internal control principle is violated. Use the table below.

5.

Lincolnville Company uses an imprest petty cash system. The fund was established on March 1 with a balance of $100. During March the following petty cash receipts were found in the petty cash box.

Date

Receipt
No.

For

Amount

3/5

1

   Stamp inventory

$39

3/7

2

   Freight-out

21

3/9

3

   Miscellaneous Expense

6

3/11

4

   Travel Expense

24

3/14

5

   Miscellaneous Expense

5

The fund was replenished on March 15 when the fund contained $3 in cash. On March 20, the amount in the fund was increased to $150.

Instructions

Journalize the entries in March that pertain to the operation of the petty cash fund. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

6.

On April 30, the bank reconciliation of Galena Company shows three outstanding checks: no. 254, $650, no. 255, $820, and no. 257, $410. The May bank statement and the May cash payments journal show the following.

Bank Statement

Cash Payments Journal

Checks Paid

Checks Issued

Date

Check No.

Amount

Date

Check No.

Amount

5/4

254

650

5/2

258

159

5/2

257

410

5/5

259

275

5/17

258

159

5/10

260

890

5/12

259

275

5/15

261

500

5/20

261

500

5/22

262

750

5/29

263

480

5/24

263

480

5/30

262

750

5/29

264

560

Instructions

Using step 2 in the reconciliation procedure, list the outstanding checks at May 31. (List check numbers from smallest to largest e.g. 3, 6, 10.)

7.

On May 31, 2010, James Logan Company had a cash balance per books of $6,781.50. The bank statement from Farmers State Bank on that date showed a balance of $6,404.60. A comparison of the statement with the cash account revealed the following facts.

  1. The statement included a debit memo of $40 for the printing of additional company checks.
  2. Cash sales of $836.15 on May 12 were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $886.15. The bank credited Logan Company for the correct amount.
  3. Outstanding checks at May 31 totaled $576.25. Deposits in transit were $1,916.15.
  4. On May 18, the company issued check No. 1181 for $685 to Barry Trest, on account. The check, which cleared the bank in May, was incorrectly journalized and posted by Logan Company for $658.
  5. A $2,500 note receivable was collected by the bank for Logan Company on May 31 plus $80 interest. The bank charged a collection fee of $20. No interest has been accrued on the note.
  6. Included with the cancelled checks was a check issued by Bridgetown Company to Tom Lujak for $800 that was incorrectly charged to Logan Company by the bank.
  7. On May 31, the bank statement showed an NSF charge of $680 for a check issued by Sandy Grifton, a customer, to Logan Company on account.

Prepare the bank reconciliation at May 31, 2010. (List amounts from largest to smallest eg 10, 5, 3, 2. Round answers to 2 decimal places, e.g. 10.50.)

Prepare the necessary adjusting entries for Logan Company at May 31, 2010. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2. Round answers to 2 decimal places, e.g. 10.50.)