Ch. 4: Adjusting Entries
Ch. 5: Fraud, Internal Control, and Cash
Ch. 6: Merchandising Operations and the Multistep Income Stmt.
Ch. 7: Inventory and Cost of Goods Sold
Concepts
100
Prepare the adjusting journal entry (as of December 31) for the following transaction:
a. On September 30, customer paid $3,000 in advance for services to be performed for the next four months, beginning in October.
Dr: Unearned Revenue 2,250
Cr: Rent Revenue 2,250
100
Which internal control concept does this example correspond to?
At the end of the day, all cash on hand is placed in a locked safe.
Restrict access
100
JK is an art dealer. At the beginning of the month, JK had inventory worth $49,000. During the month, JK purchased additional inventory, paying $27,300. Cost of Goods Sold is equal to $36,800.
What is the amount of ending inventory that should be on hand at the end of the month?
39,500
100
Which of the following items would be included in LBJ’s ending inventory? Answer yes or no to each.
a.) Goods held on consignment by Warrior, Inc.
b.) Goods in transit sent to a client FOB Shipping Point
c.) Goods in transit sent to a client FOB Destination
a.) Yes
b.) No
c.) Yes
100
Cash in the office designated for Friday morning cinnamon rolls would be what type of cash?
a.) Petty Cash
b.) Restricted Cash
c.) Party Cash
d.) Extra Cash
a.) Petty Cash
200
Prepare the adjusting journal entry (as of December 31) for the following transaction.
b. The company purchased $2,850 in supplies on December 1. At the end of the month, a physical count of supplies showed that $1,530 in supplies is on hand.
Dr: Supplies Expense 1,320
Cr: Supplies 1,320
200
Which of the following reconciling items does not require a journal entry?
a.) NSF check
b.) Bank service charge
c.) Deposit in transit
d.) Interest earned on bank account
c.) Deposit in transit
200
Based on this income statement, what is net income in 2019?
330,489
200
True or False: A perpetual inventory system continually updates accounting records for inventory transactions?
True
200
Which of the following is NOT an example of an internal control procedure?
a.) Background checks are done on job applicants
b.) A sound marketing plan
c.) Access to inventory items is limited
d.) Separation of duties
b.) A sound marketing plan
300
Prepare the adjusting journal entry (as of December 31) for the following transaction.
Depreciation expense for the company’s buildings is $700.
Dr: Depreciation Expense 700
Cr: Accumulated Depreciation 700
300
Which element in the fraud triangle does this statement correspond to?
The office manager feels she is underpaid.
Rationalization
300
If a company has Net Sales of 58,500, Cost of Goods Sold of 14,300, Operating Expenses of 27,000, and Income Tax Expense of 5,400, calculate their Gross Profit Percentage. Round to 2 decimal places. (Hint: Gross Profit Percentage = (Gross Profit / Net Sales) x100)
75.56
300
111,600
300
Using FOB shipping point, goods in transit belong to the __________
a.) Buyer
b.) Seller
c.) The trucking/shipping company
d.) No one
a.) Buyer
400
Prepare the adjusting journal entry (as of December 31) for the following transaction.
d. The company loaned $2,000 to KI, Inc. on November 1 with an annual interest rate of 6%. The loan balance plus interest will be repaid in one year.
Dr: Interest Receivable 20
Cr: Interest Revenue 20
400
Which internal control concept does this example correspond to?
Prenumbered checks are used for all transactions.
Document procedure
400
JK is an art dealer. At the beginning of the month, JK had inventory worth $49,000. During the month, JK purchased additional inventory, paying $27,300. Cost of Goods Sold is equal to $36,800. If the amount of inventory that SHOULD be on hand at the end of the month is 39,500 but a physical count showed inventory of 38,000, calculate the inventory shrinkage.
1,500
400
116,400
400
Inventory is _____________.
a.) A current asset
b.) A current liability
c.) A non-current asset
d.) A non-current liability
a.) a current asset
500
Below are two adjusting entries prepared at year-end:
Dr: Interest Receivable (A) 2,200
Cr: Interest Revenue (R) 2,200
Dr: Supplies Expense (E) 800
Cr: Supplies (A) 800
If these adjusting entries were NOT recorded at year-end, would net income have been overstated or understated and by what amount?
Net Income is UNDERstated by 1,400
500
Use the following information to prepare a bank reconciliation for Hook Company at April 30
a.) Ending balance per Cash account @ April 30, $4,980
b.)Ending balance per Bank @ April 30, $6,550
c.) Deposits not appearing on the bank statement, $600
d.) Outstanding checks, $1,450
e.) Bank service charge, $30
f.) NSF check from a customer, $250
g.) EFT deposit, $1,000
Ending Balance: 5,700
500
The income statement of XYZ Corp reported net income of $60,000, cost of goods sold of $85,000 and operating expenses of $21,000. There were no other revenues (expenses) reported for the period. The company has an income tax rate of 25%. Based on this information, what amount was reported for Sales?
186,000
500
113,400
500
Which inventory method results in the highest-valued ending inventory during a period of rising prices?
a.) Specific identification
b.) LIFO
c.) FIFO
d.) Weighted average
b.) FIFO