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ACCY 201 Exam 2 Study Guide

ACCY 201 Exam 2 Study Guide

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Published by Kelly Williams
11. Income from operations is gross profit less a. administrative expenses. b. operating expenses. c. other expenses and losses. d. selling expenses. 12. An enterprise which sells goods to consumers is known as a a. proprietorship. b. corporation. c. retailer. d. service firm. 13. Which of the following would not be considered a merchandiser? a. house cleaning business b. drugstore c. book store d. grocery store 14. A merchandiser that sells directly to consumers is a a. retailer. b. wholesaler.
11. Income from operations is gross profit less a. administrative expenses. b. operating expenses. c. other expenses and losses. d. selling expenses. 12. An enterprise which sells goods to consumers is known as a a. proprietorship. b. corporation. c. retailer. d. service firm. 13. Which of the following would not be considered a merchandiser? a. house cleaning business b. drugstore c. book store d. grocery store 14. A merchandiser that sells directly to consumers is a a. retailer. b. wholesaler.

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11. Income from operations is gross profit less a. administrative expenses. b. operating expenses. c. other expenses and losses. d.

selling expenses. 12. An enterprise which sells goods to consumers is known as a a. proprietorship. b. corporation. c. retailer. d. service firm. 13. Which of the following would not be considered a merchandiser? a. house cleaning business b. drugstore c. book store d. grocery store 14. A merchandiser that sells directly to consumers is a a. retailer. b. wholesaler. c. broker. d. service enterprise. 15. Two categories of expenses for merchandisers are a. cost of goods sold and financing expenses. b. operating expenses and financing expenses. c. cost of goods sold and operating expenses. d. sales and cost of goods sold. Use the following information to answer questions 16-18. During 2006, California Salon Enterprises generated revenues of $60,000. Their expenses were as follows: cost of goods sold of $30,000, operating expenses of $12,000 and a loss on the sale of equipment of $2,000. 16. California Salon’s gross profit is a. $60,000 b. $30,000 c. $18,000 d. $16,000 17. California Salon’s operating income is a. $60,000 b. $30,000 c. $18,000 d. $12,000 18. California Salon’s net income is a. $60,000 b. $30,000 c. $18,000 d. $16,000

19. Flynn Flint Company purchased merchandise inventory with an invoice price of $3,000 and credit terms of 2/10, n/30.
What is the net cost of the goods if Flynn Company pays within the discount period? a. $3,000. b. $2,940. c. $2,700. d. $2,760.

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20. Sales revenues are usually considered earned when a. cash is received from credit sales. b. an order is received. c. goods have been transferred from the seller to the buyer. d. adjusting entries are made.

21. West Eaton Company sells merchandise on account for $1,000 to Little Tang Company with credit terms of 2/10,
n/30. Little Tang Company returns $300 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does West Eaton Company make upon receipt of the check? a. Cash............................................................................................... 700 Accounts Receivable............................................................ 700 b. Cash..........................................................................................686 Sales Returns and Allowances.......................................................314 Accounts Receivable............................................................ 1,000 c. Cash............................................................................................... 686 Sales Returns and Allowances...................................................... 300 Sales Discounts............................................................................ . 14 Accounts Receivable............................................................ 1,000 d. Cash............................................................................................. .. 980 Sales Discounts........................................................................... .. 20 Sales Returns and Allowances................................ ............ 300 Accounts Receivable................................................ ............700 Use the following information to answer questions 22-25. During August, 2006, Green Grocery Supply Store generated revenues of $30,000. Their operating expenses were as follows: cost of goods sold of $12,000 and operating expenses of $2,000. The company also had rent revenue of $500 and a gain on the sale of a delivery truck of $1,000. 22. Green Grocery’s gross profit for August, 2006 is: a. $30,000 b. $19,000 c. $18,000 d. $16,000 23. Green Grocery’s non-operating income (loss) for the month of August 2006 is a. $0 b. $500 c. $1,000 d. $1,500 24. Green Grocery’s operating income for the month of August 2006 is a. $30,000 b. $19,500 c. $18,500 d. $16,000 25. Green Grocery’s net income for August 2006 is a. $18,000 b. $17,500 c. $16,500 d. $16,000 26. Inventories affect a. only the balance sheet. b. only the income statement. c. both the balance sheet and the income statement. d. neither the balance sheet nor the income statement.

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27. Merchandise inventory is a. reported under the classification of Property, Plant, and Equipment on the balance sheet. b. often reported as a miscellaneous expense on the income statement. c. reported as a current asset on the balance sheet. d. generally valued at the price for which the goods can be sold. 28. If goods in transit are shipped FOB destination a. the seller has legal title to the goods until they are delivered. b. the buyer has legal title to the goods until they are delivered. c. the transportation company has legal title to the goods while the goods are in transit. d. no one has legal title to the goods until they are delivered.

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11. B 12. C 13. A 14. A 15. C 16. B 17. C 18. D 19. B 20. C 21. C 22. C 23. D 24. D 25. B 26. C 27. C 28. A

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Z12. Z2. Z11. Z3. Z14 Required: a) Assuming a perpetual system is in use. 2. Z7. 4. Z7. Z6. determine the cost of goods sold and the ending inventory using each of the following methods: 1.The ABC Company had the following inventory record for the month of January: Date 1/1 1/5 1/11 1/28 Description Beginning inventory Sale Purchase Sale # of Items 5 2 9 7 Unit Price $20 12 Item Z1. Z8. Z9. Z14 Z1. Z13. 3. FIFO LIFO Weighted average Specific identification b) If asked to calculate ending inventory and the cost of goods sold for each cost flow assumption. Z5 Z6. which method(s) would be used? 5 . Z10. Z8. Z3. Z9. Z5 Z2. Z4.

a) 1. LIFO Perpetual Date 1/1 Beginning Inventory 1/5 1/11 Purchases 3 @ $20 = $ 60 4 @ $12 = 48 $108 $ 40 + 108 = $148 3 @ $20 = $ 60 3 @ $20 = $ 60 9 @ $12 = 108 $168 5 @ $12 = $ 60 Ending Inventory Sales at Cost Inventory Balance 5 @ $ 20 = $100 2 @ $20 = $ 40 9 @ $12=$108 1/18 7 @ $12 = $ 84 3 @ $20 = 60 3 @ $20 = $ 60 9 @ $12 = 108 $168 3 @ $20 = $ 60 2 @ $12 = 24 $ 84 Ending Inventory Total CGS $40 + 84 = $124 6 . FIFO Perpetual Date 1/1 Beginning Inventory 1/5 1/11 Purchases Sales at Cost Inventory Balance 5 @ $20 = $100 2 @ $20 = $ 40 9 @ 12=$108 1/28 Total CGS 2.

Z9. Specific identification makes no assumptions about the flow of costs. Z8. Z4 9 @ $12=$108 3 @ $20 = $ 60 Z6-Z14 Z1. Z5 Z1. Z3 1 @ $20 = $ 20 2 @ $20 = $ 40 Z4 Z6. Z3. and weighted average (also called moving average and average –cost). 4 @ $12 = 48 Z14 Z10-13 5 @ $12 = $ 60 $ 68 $ 100 Ending Inventory $40 + 100 = $140 1/18 Total CGS b) FIFO.3. Specific Identification Perpetual Date Purchases 1/1 Beginning Inventory 1/5 1/11 7 @ $14 = $ 98 $ 40 + 94 = $138 3 @ $20 = $ 60 3 @ $20 = $ 60 9 @ $12 = 108 $168 $168/12 = $ 14 CPU 5 @ $14 = $ 70 Ending Inventory Sales at Cost Inventory Balance 5 @ $ 20 = $100 Z1-Z5 2 @ $20 = $ 40 3 @ $20 = $ 60 Z2. Z3. LIFO. Z7. Weighted Average Perpetual Date 1/1 Beginning Inventory 1/5 1/11 Purchases Sales at Cost Inventory Balance 5 @ $20 = $100 2 @ $20 = $ 40 9 @ 12=$108 1/18 Total CGS 4. Z4 9 @ $12 = 108 Z6-Z14 $168 Z1. 7 .

Lisa Beja is unable to reconcile the bank balance at January 31.00 Adjusted balance per bank $4225.875.275.20 Cash balance per books $3.00 Less: Bank service charge 25. 8 .00 Add: Outstanding Checks 930.20 A) Prepare a correct bank reconciliation.20 Less: Deposits in transit 530.660. B) Journalize the entries required by the reconciliation. Lisa’s reconciliation is as follows: Cash balance per bank $3.20 Add: NSF check 590.00 Adjusted balance per books $4.

........................660....................20 (b) Accounts Receivable.....20 Adjusted cash balance per books $3..... 25.............................260....260........00 Cash........................ 590.00 9 ...........00 NSF check Bank service charge 590.......00 25........... 590...............................20 Cash balance per books $3......875.................. 25.........00 Less: 930................20 530........00 Miscellaneous Expense................00 Adjusted cash balance per bank $3.............00 Cash …………………………………………………………………………………………………........(a) Cash balance per bank statement Add: Deposits in transit Less: Outstanding checks $3.......

00 and a bank service charge $20.620. Determine the adjusted cash balance per bank at July 31.00.420.At July 31. Chevron Company has the following bank information: cash balance per bank $7. deposits in transit $1.00. outstanding checks $762. 10 .00.

. 1.................................................................Cash balance per bank................. $8................620 Less: Outstanding checks.........................................................278 11 .................................................................................................... 762 Adjusted cash balance per bank.......................................................................................................................... $7.......................................420 Add: Deposits in transit......................

interest earned on checking account balance $40. Delta Company has a cash balance per books of $8.00. and outstanding checks $800.900 and the following additional data from the bank statement: charge for printing Delta Company checks $35.00. 12 .00. Determine the adjusted cash balance per books at May 31.At May 31.

.............................................................................. $8.......................................................................................900 Add: Interest earned......................................................................................... 40 Less: Charge for printing company checks........................................... 35 Adjusted cash balance per books......................Cash balance per books................905 13 ................................................... $8.......................

Inc.50 was not recorded in the journal. 7) Noted that a debit memo for an NSF check for $125 from M. is $8. after Little’s accountant has posted from the journal. Scott was not recorded. $119. 2001 for $523 payable to Davis. was recorded in the journal as $532. no. 5) Found that check no. 3) Noted outstanding checks: no.50. $67. $600 principle plus $6 interest. 2022. $827.030. Journalize the entries required by the reconciliation. The present balance of the cash account in the ledger. $461.966 as of October 31. 14 .003 made on Oct 31 was not recorded on the bank statement. 4) Noted that a credit memo for a note collected by the bank from Lee and Brock. was not recorded in the journal. 2024.D. no. (The correct amount is $523. on account. no.. 2) Discovered that a deposit of $1.The bank statement of Little’s Floral shows a final balance of $8. Prepare a correct bank reconciliation. 2023.) 6) Noted that a debit memo for a collection charge and service charge of $25. 1916. The accountant took the following steps: 1) Verified that canceled checks were recorded correctly on the bank statement.

00 125.00 Cash 606.00 Interest Revenue 6. 1916 No.00 Cash balance per books Add: Note Collected Check No. 2024 Adjusted cash balance per bank 461.00 A/P 9.495. 2001 Error Less: NSF check Collection & Bank svc charge $8. 2022 No.2023 No.00 25.003.00 N/R 600.50 15 .00 67.00 827.50 Cash 25.00 Cash 125.00 Misc exp 25.030.00 Cash 9.50 Adjusted cash balance per books $8.495.Cash balance per bank statement Add: Deposits in transit $8.00 119.00 Less: Outstanding checks: No.00 A/R 125.00 $8.00 606.00 9.50 1.966.

prepare a multiple-step income statement for Murray Department Store for the year ended December 31.000 45. Accounts Receivable Cost of Goods Sold Selling Expenses (includes depreciation) Interest Expense Accumulated Depreciation—Building Sales Discounts Merchandise Inventory Administrative Expenses (includes depreciation) Sales Accounts Payable Interest Revenue $ 19.000 10.000 22.000 1. 16 . 2012.000 330.000 15. 2012.000 800 Instructions Using whatever data you believe appropriate.000 35.000 255.000 14.Below is a partial listing of the adjusted account balances of Murray Department Store at year end on December 31.

.....000 3........................000 Less: Sales discounts .................................................................................................................................................................................... 2012 Sales revenues Sales ....................................000 Cost of goods sold ........ Income from operations ........... 800 Other expenses and losses Interest expense .....................................000 Net Income..................000 Total operating expenses ........................................................ $308............................................. 35..................................................................................000 50...MURRAY DEPARTMENT STORE Income Statement For Year Ended December 31..........................................................................................................................................................000 53.................................... Operating expenses Selling expenses ...................................... 255................. 1................................................ Gross profit ....................800 17 ................... 15............................ Other revenues and gains Interest revenue ....................................000 Net sales ... 22.....................................000 Administrative expenses ................................................000 (200) $ 2.... $330.....................................................................

Barkley Company has the following account balances: Beginning Inventory $50.000. Ending Inventory $70. and Purchase Discounts $6. Instructions Compute each of the following: (a) Net purchases (b) Cost of goods available for sale (c) Cost of goods sold 18 . Purchases $450. Freight-in $12.000.000.000. Purchase Returns and Allowances $8.000.000.

000 – $8.000 = $436.000 + $436.(a) Net purchases: $450.000 – $70.000 + $12.000 = $498.000 (b) Cost of goods available for sale: $50.000 = $428.000 (c) Cost of goods sold: $498.000 – $6.000 19 .

Purchased merchandise on credit for $2. terms 2/10. The items sold had a cost of $3. (FOB shipping point). d. terms 3/10. Issued a credit memorandum for $300 to a customer who returned merchandise purchased November 29.000.600. terms 1/20. Received payment for merchandise sold December 1. $720. Purchased merchandise for cash. Paid for the merchandise purchased December 4 less the portion that was returned. Required: Prepare the general journal entries to record these transactions using a perpetual inventory system. n/30.900. j. Received payment for merchandise sold on December 24. Received a credit memorandum for the return of faulty merchandise purchased on December 4 for $600. n/30.A company had the following transactions during December: a. Sold merchandise on credit for $7. Paid freight charges of $200 for merchandise ordered last month. e. b. c. The returned items had a cost of $210. g. Sold merchandise on credit for $5. The items had a cost of $4.000. n/30. h.500. i. 20 . f.

500 Merchandise Inventory Cash 720 720 Merchandise Inventory Accounts Payable 2.000 5.600 2.500 3.000 x .900 Cash Sales Discounts Accounts Receivable 6.980 Accounts Receivable Sales 7.900 4.000 21 .000 Accounts Payable Merchandise Inventory 600 600 Merchandise Inventory Cash 200 200 Accounts Payable Merchandise Inventory ($2.850 150 5.01) Cash 2.000 20 1.000 Cost of Goods Sold Merchandise Inventory 4.000 7.Accounts Receivable Sales 5.600 Sales Returns and Allowances Accounts Receivable 300 300 Merchandise Inventory Cost of Goods Sold 210 210 Cash Sales Discounts Accounts Receivable 4.000 Cost of Goods Sold Merchandise Inventory 3.860 140 7.

d. b. A merchandising company: a. 8. 7. Receives fees in exchange for services. 4. Is a long-term asset. Represent trade discounts Sales Returns and Allowances: 3. Earns profit from commissions only. Is an investment asset. with the balance due in 30 days.000). b. 30% discount if paid within 2 days. A company had sales of $695. 10% cash discount if the amount is paid within 2 days. with balance due in 30 days. c. Refer to merchandise that customers return to the seller after the sale. 2. Represent cash discounts. Earns net income by buying and selling merchandise. Is increasing in frequency in practice. All of the above. c. The credit terms 2/10. Is a current asset. Refer to reductions in the selling price of merchandise sold to customers. c. b. d. b. Is based on taking a physical count of inventory.000 d. $417. Merchandise inventory: a. Earns profit from fares only. n/30 are interpreted as: a. Sales returns: a. 30% discount if paid within 10 days. d. Includes supplies. ($417. c.000.000 c. Provides more timely information. 5. All of the above A perpetual inventory system: a. 9. d. Uses a purchases account for the cost of new inventory c. $278. $695. d. b. 22 . 2% cash discount if the amount is paid within 10 days. Requires updating inventory-related accounts only at the end of each period. b.1. A periodic inventory system: a. d. Its gross margin equals: a.000. b.000 and cost of goods sold of $278. Allows a company to determine inventory and cost of goods sold at any time. c.

A check: a. Involves the bookeeeper. A list of outstanding checks. Are recorded in separate contra-revenue accounts. Electronic funds transfer. Involves the maker. b. The proper entry for this excess includes a: a.a. b. Credit to Cash Over and Short for $62. Sales Returns and Allowances c. and the bank. A company had $62 in extra cash at the end of the day. Are usually not reported in published financial statements. Debit to Expense for $62. c. A closing entry would close any debit balance in: a. d. Debit to Cash Over and Short for $62. Bank deposits. d. Debit to Petty Cash for $62 10. the payee. the payee. the signers. Credit to Cash for $62. d. 14. The beginning and the ending balance of the depositor's checking account. Cost of Goods Sold d. 13. e. All of the above. A bank statement includes: a. c. d. e. Involves the signer. 12. Can provide useful information about dissatisfied customers and the possibility of lost future sales. the casher. Involves the writer. 23 . d. A listing of deposits in transit. Sales discounts b. c. Checking. c. All of the above Banking activities include: a. c. b. and the bank. and the bank. and the company. Bank accounts. A list of petty cash amounts. b. e. Involves the maker and the payee. the casher. e. All of the above. 11. All of the above. b.

1. d 3. d 10. a 8. b 13. c 14. a 2. a 9. b 4.c 24 . e 12. d 7. d 5. d 11.

During a period of steadily rising costs. Inventory system. e. c. Cost of goods sold to be overstated and net income to be understated. Management must confront which of the following considerations when accounting for inventory: a. Cost of goods sold to be overstated and net income to be overstated. the inventory valuation method that yields the lowest reported net income is: a. 5. All goods owned by a company and held for sale. All goods on consignment. Average cost method. 2. b. Merchandise inventory includes: a. 25 . Cost of goods sold to be overstated and net income to be correct. it can cause a misstatement in: a. 4. LIFO method. c. 7. Net income d. d. e. c. b. d. Damaged goods only. After the half-way point between the buyer and seller. If the goods are shipped FOB destination. c. All of the above The understatement of the ending inventory balance causes: a. Weighted-average method. Cost of goods sold to be understated and net income to be understated. e. Cost of goods sold to be understated and net income to be overstated. b. b. Gross profit c. Items to be included and their cost. If a period-end inventory amount is reported in error. Cost of goods sold b. All goods in transit. b. At any time in transit. d. Specification identification method.1. d. Current assets e. 3. Costing (valuation) method. When the purchaser is responsible for paying freight charges. All of the above Goods in transit are included in a purchaser's inventory: a. FIFO method. e. c. When the supplier is responsible for freight charges.

LIFO. a. On December 31. Using the specific identification method.960 d.d. $3. $3. which includes a profit margin of 25%.600 c. Specific identification method. $2.500 b. & Specific Identification 10 units @ $120 20 units @ $130 15 units @ $140 12 units @ $150 10 units @ $160 8. FIFO. 26 . 4 from February. $3. what is the cost of the ending inventory? January February May September November a. 4 from September. & Weighted-average d.550 b. 6 from May. $3. there were 26 units remaining in ending inventory. $2. b. & Specific Identification e.200 The cost flow assumptions are: a. Calculate the value of this company's inventory at the lower of cost or market. c.700 d. $3.000 e. Replacement cost has now fallen to $13 per unit. Weighted-average & Specific Identification c. $2. e. All of the above.280 e. Weighted-average. d. A company had the purchases shown below during the current year. First-out method. 10.640 A company normally sells its product for $20 per unit. $3. and 10 from November. Last-in. The inventory valuation method that identifies the invoice cost of each item in ending inventory to determine the cost assigned to that inventory is the: a. This company's current inventory consists of 200 units purchased at $16 per unit.800 c. LIFO. FIFO & LIFO b. Use of lower of cost or market. These 26 units consisted of 2 from January. the selling price has fallen to $15 per unit. First-out method. 9. 11. $3. First-in. FIFO. LIFO. Weighted-average inventory method. FIFO. However.

1. d 9. c 27 . a 7. e 5. b 11. e 8. b 10. b 3. e 4. a 2.

Evaluate each (separate) inventory error and determine whether it overstates or understates each item. Inventory Error Understates beginning inventory Understates ending inventory Overstates beginning inventory Overstates ending inventory Cost of Goods Sold Net Income 28 .

Inventory Error Understates beginning inventory Understates ending inventory Overstates beginning inventory Overstates ending inventory Cost of Goods Sold Understated Overstated Overstated Understated Net Income Overstated Understated Understated Overstated 29 .

and (b) Inventory applied separately to each product. 30 .A company reported the following data related to its ending inventory:: Product 849 842 847 860 Units 100 75 60 40 Cost $10 16 14 16 Market $11 14 13 20 Calculate the lower-of-cost-or-market on the: (a) Inventory as a whole.

100 1.050 780 800 $3.470 31 .000 1. 3.Product 849 842 847 860 Units on Hand Per Unit Cost Market Total Cost Total Market LCM by Product 100 75 60 40 $10 16 14 16 $11 14 13 20 $1.470 a. 3.680 b.730 $1.680 $1.000 1.050 780 640 $3.200 840 640 $3.

250 9. 1 Mar.000 5.500 Smith uses a perpetual inventory system.700 Units $33. Compute the gross margin for each method. 30 Oct. 15 Oct.000 17. 14 Jul.Smith Company reported the following current-year data for its only product: Jan. 10 Mar. 32 .750 $2. 26 Units Available Cost of Goods Available for Sale Smith resold its products at $40 per unit on the following dates: Jan. Determine the costs assigned to cost of goods sold and ending inventory using (a) FIFO and (b) LIFO. 5 Total Sales Sales Sales Sales 100 units 150 units 310 units 560 units Beginning Inventory Purchase Purchase Purchase 200 Units @ $10 350 Units @ $15 450 Units @ $20 700 Units @ $25 1.

Solution: 33 .

Bank debit memorandum Bank credit memorandum 10. 2. The company properly wrote the check for $95.58. 4. Bank service charges Outstanding Checks Deposits in transit NSF check Inerest on a checking account The bank incorrectly recorded a check for $9.000 note for the depositor. 5. 3.80. The bank collected a $1. 6. 34 .Identify whether each of the following items 1 through 10 affects the bank side or the book side of a bank reconciliation. 7. 8. The bank printed checks for the depositor for a fee. 9. _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ 1.

Book 7. 35 . Bank 2. Bank 3. Bank 6. Book 5. Book 9. Book 4. Book 8. Book 10.Book 1.

A company established a $1.000 petty cash fund by issuing a check to the custodian (petty cashier) on October 1. the petty cash fund was replenished and increased to $1.250 in total. 36 . The contents of the petty cash fund at the time of the October 15 replenishment were: Currency and coins Petty cash receipts for: Transportation-in for inventory Delivery expense Repairs to office equipment Postage Entertainment of customers Total $139 238 147 214 153 891 $1.003 $112 Prepare the general journal entry to record both the reimbursement and the increase of the petty cash fund on October 15. On October 15.

138 37 .Merchandise Inventory Delivery Expense Repairs Expense Postage Expense Entertainment Expense Petty Cash Cash Over and Short Cash 139 238 147 214 153 250 3 1.

$1. drawn on another company. A customer's check for $100 marked NSF was returned to Brown Company by the bank. Prepare a bank reconciliation as of September 30. Included with the canceled checks was a check for $275. 2.Brown Company's bank statement for September 30. d.145. A $15 debit memorandum for checks printed by the bank was included with the canceled checks. Required: 1. a collection fee of $25 was deducted by the bank. e. Inc. the company's Cash account in its general ledger showed a $995 debit balance. showed a cash balance of $1. Outstanding checks amounted to $1. b. c. The September 30 cash receipts.350. a. 38 . The following information was also available as of September 30. The bank charged the company's account a $25 processing fee. f. A customer's note for $900 was collected by the bank.250 were placed in the bank's night depository after banking hours on that date and this amount did not appear on the September 30 bank statement. Prepare any necessary adjusting journal entries necessary as a result of the bank reconciliation. Browne.

870 $1.350 Book Cash Balance Add: Proceeds of note less collection fee 875 $995 Solution .730 $1.Part 2: Cash Miscellaneous Expense Notes Receivable Accounts Receivable Cash Miscellaneous Expense Cash 15 15 125 125 875 25 900 39 .Solution .145 Deduct: NSF check processing fee Bank service charge Adjusted Bank Balance $1.875 Deduct: Outstanding checks 1.Part 1: BROWN COMPANY Bank Reconciliation September 30 Bank Statement Balance Add: Deposit of 9/30 Bank error 1.730 Adjusted Book Balance 125 15 $1.250 275 $2.

A company made the following merchandise purchases and sales during the month of July: July 1 July 5 July 9 July 14 July 20 July 30 Purchased Purchased Sold Purchased Sold Purchased 380 units @ 270 units @ 500 units @ 300 units @ 250 units @ 250 units @ $15 each $20 each $55 each $24 each $55 each $30 each There was no beginning inventory. If the company uses the first-in. what would be the cost of the ending inventory? 40 . first-out method and the perpetual method.

800 $4.000 $3.400 Units Sales Cost Total Units 380 380 270 650 380 120 $15 20 $5.700 5.500 $24 $24 30 41 .400 200 200 250 450 Balance Cost $15 $15 20 Total $5.700 $5.700 2.000 2.800 7.700 $5.200 $20 $20 24 07/20 07/30 250 $30 $7.500 $12.200 $4.300 07/09 07/14 300 $24 $7.400 150 150 300 450 150 100 $20 24 $3.100 $3.000 7.Purchases Date 07/01 07/05 Units 380 270 Cost $15 $20 Total $5.400 $11.200 $10.

......................... 20 Accounts Receivable ............................................................................................................................. Credit terms: 2/10........... Oct................025 Oct..... 12...................................000 Accounts Payable ... 8 Oct.................... 25 Issued Credit Memo No.000 Utilities Expense..................................................... 2......................................................................................... 1..................025 Cost of Goods Sold ....... 2.......................................................000 Salaries Expense........ 8 Purchased merchandise for $25.......................930 Cash ...................000 Notes Payable …….............................400 Cash ...........................................................................................000 Merchandise Inventory ...... 11% note for the remainder............. 4................................... 6.......................... n/30.................................................... 25......... 4............000 on account........ Stringer uses a perpetual inventory system. Oct............................000 to Adder Company on account.............000 Merchandise Inventory .............000...................................000 for merchandise returned by Adder from the sale on October 20.............. 21....................... 2..........000 Inventory .. 20..........................500 and paid balance due for merchandise purchased on October 8...... 22 Prepaid Insurance .................Prepare the necessary general journal entries for the month of May for Stringer Company for each situation given below....................... $500 Utilities Expense........ 1.. 12. The company takes all discounts to which it is entitled........000 in cash and signing a 3-month............. Credit terms: 2/10........................ 20............................................... n/30...............000 Accounts Receivable ................. 11........... 3811 to Adder Company for $2...... Oct.......................... $2.....................000 paying $4.................................. The cost of the merchandise returned was $1.. Oct................... 22 Purchased a 2-year insurance policy for $4......... Oct............................ Oct................. 4........................000 Oct........................................................... 5 Paid operating expenses as follows: $4. 500 Cash .....000 42 ............................................. 5 Salaries Expense................................... 25...... 15.......................070 Oct...000 Rent Expense....000 Rent Expense...................400 Oct..................... 20 Sold merchandise for $20...............................025... Oct...................500 Merchandise Inventory . 15 Accounts Payable ..... The cost of the merchandise sold was $12..........................000 Oct...... 4..........400 cash................................000 Cash ........000 Sales ... 29 Purchased office equipment for $15................ 25 Sales Returns and Allowances .................... 29 Office Equipment ............ 25............................................ Oct..................... 3.........000 Cost of Goods Sold ...................................... 15 Returned defective merchandise with a cost of $3.............................................

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