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5–7 The total in the schedule above agrees with the T account balance for the accounts receivable controlling account in part c.. Once submitted, the transaction would be saved and aut

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CHAPTER 5 ACCOUNTING SYSTEMS DISCUSSION QUESTIONS

1 The individual accounts receivable ledger accounts provide business managers information on the

status of individual customer accounts, which is necessary for managing collections Managers need

to know which customers owe money, how much they owe, and how long the amount owed has been outstanding

2 The major advantages of the use of special journals are substantial savings in record-keeping

expenses and a reduction of record-keeping errors

3 a 400

b None

4 a 400

b 1

5 a Sometime following the end of the current month, one of two things may happen: (1) an overdue

notice will be received from Kelly Co., and/or (2) a letter will be received from Kelley Co., informing the buyer of the overpayment (It is also possible that the error will be discovered at the time of making payment if the original invoice is inspected at the time the check is being written.)

b The schedule of accounts payable would not agree with the balance of the accounts payable

account The error might also be discovered at the time the invoice is paid

c The creditor will call the attention of the debtor to the unpaid balance of $800.

d The error will become evident during the verification process at the end of the month The total

debits in the purchases journal will be less than the total credits by $3,600

6 a Purchases journal d Cash payments journal

b Cash payments journal e Cash payments journal

c Purchases journal

7 An electronic form is a software window that provides the inputs for a particular transaction For

example, a check form provides the inputs (payee, amount, date) for a cash payment transaction An electronic invoice provides the inputs (customer, amount sold, item sold) for recording revenues earned on account

8 The use of controlling accounts to verify the accuracy of subsidiary accounts is used in a manual

system In a computerized system, it is assumed that the computer will accurately sum the individual transactions in the subsidiary accounts in determining the aggregate balance

9 For automated systems that use electronic forms, the special journals are not used to record original

transactions Rather, electronic forms capture the original transaction detail from an invoice, for example, and automatically post the transaction details to the appropriate ledger accounts

10 E-commerce can be used by a business to conduct transactions directly with customers Thus, an

order can be received directly from the customer’s Internet input and cash can be received from the credit card Many times, the cash is received prior to actually shipping the product, resulting in a faster revenue/collection cycle Reducing paperwork throughout the cycle also improves the

efficiency of the process For example, all of the accounting transactions can be fed automatically from the initial Internet-based inputs

5-1

© 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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PE 5–2A

Amount posted from page 106 of the cash receipts journal.

27 Provided $90 of services on account to Matrix Communications Inc., itemized on Invoice No 579 Amount posted from page 92 of the revenue journal.

PE 5–2B

on Invoice No 119 Amount posted from page 24 of the revenue journal.

17 Collected cash of $610 from Moravian Products Inc (Invoice No 106) Amount posted from page 46 of the cash receipts journal.

CHAPTER 5 Accounting Systems

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CHAPTER 5 Accounting Systems

Office Supplies Dr.

Other Accounts Dr.

Post

5-3

© 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Post

Ref.

Accounts Payable Cr.

Party Supplies Dr.

Other Accounts Dr.

Post

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CHAPTER 5 Accounting Systems

PE 5–4A

Inc (Invoice No 75) Amount posted from page 8 of the purchases journal.

Amount posted from page 46 of the cash payments journal.

PE 5–4B

from page 71 of the cash payments journal.

Amount posted from page 55 of the purchases journal.

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CHAPTER 5 Accounting Systems

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CHAPTER 5 Accounting Systems

EXERCISES

Ex 5–1

Ex 5–2

a., b., and c.

Accounts Receivable Mar 1 Bal 480

ZETA SERVICES INC.

Accounts Receivable Customer Balances

Mar 31 Bal 1,720

d.

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Ex 5–3

Ex 5–4

k General journal

Ex 5–5

6 Granted an invoice adjustment or corrected an error related to sale of April 3; posted from general journal page 11 This does not represent

a collection of cash, since the credit was not posted from the cash receipts journal.

24 Received cash for balance due; posted from cash receipts journal page 81.

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Ex 5–6

a.

REVENUE JOURNAL Date

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Ex 5–7

The total in the schedule above agrees with the T account balance for the

accounts receivable controlling account in part (c).

for recording sales transactions, such as an electronic invoice form The

transaction details would be input into the form fields and submitted Once

submitted, the transaction would be saved and automatically posted as a debit

to the individual customer account receivable and a credit to the revenue

account There would be no control totals posted to a controlling account.

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Ex 5–8

FANTASY PRODUCTIONS INC

Accounts Receivable Customer Balances

July 31, 2014

Accounts Receivable (Controlling)

Trang 11

Date Account Credited Post

Ref.

Fees Earned Cr.

Accts

Rec Cr.

Cash Dr.

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AUTUMN COVE INC.

Accounts Receivable Customer Balances

December 31, 2014

The total of the customer accounts on December 31, 2014, $5,420, equals the

balance of the accounts receivable controlling account, shown as follows:

Accounts Receivable Dec 1 Bal.

31 Dec 31 Bal.

2,010 7,760 5,420

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Ex 5–10 (Concluded)

provided on account and customer collections Without the subsidiary ledger, it would not be possible for Autumn Cove Inc to know who owes how much for services rendered Furthermore, without the subsidiary ledger, it would be impossible to manage collections from individual customers.

Ex 5–11

Ex 5–12

1 General ledger account: (a), (c), (e), (f), (g), (i), (k), (l)

Ex 5–13

account; posted from purchases journal page 44.

purchase of May 6; posted from general journal page 12 (A payment would be recorded in the cash payments journal.)

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CHAPTER 5 Accounting Systems

Office Supplies Dr.

Other Accounts Dr.

Post

b $3,645 Credit to Accounts Payable [from purchases journal column total in (a)].

$855 Debit to Office Supplies [from purchases journal column total in (a)].

c $140 ($0 + $490 + $140 – $490)

5-13

© 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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CHAPTER 5 Accounting Systems

Ex 5–15

Jan 1 Bal 410 Jan 31 1,210

d.

WALLACE WINDOW CLEANERS INC.

Accounts Payable Creditor Balances

January 31, 2014

The total in the schedule above agrees with the T account balance for the

accounts payable control account in (c).

for recording purchase transactions The transaction details would be input

into the form fields and submitted Once submitted, the transaction would be saved and automatically posted as a debit to an appropriate asset account and

a credit to the individual creditor accounts payable account There would be

no control totals posted to a controlling account.

5-15

© 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Ex 5–16

OUT OF EDEN LANDSCAPING CO.

Accounts Payable Creditor Balances

April 30, 2014

Accounts Payable (Controlling)

Trang 17

Date Account Credited

Post

Ref.

Accounts Payable Cr.

Cleaning Supplies Dr.

Other Accounts Dr.

Post

2014

Accounts Payable Dr.

Cash Cr.

2014

Trang 18

Date Account Credited

Post

Ref.

Accounts Payable Cr.

Pet Supplies Dr.

Other Accounts Dr.

Post

2014

Accounts Payable Dr.

Cash Cr.

2014

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Ex 5–18 (Concluded)

b.

HAPPY TAILS INC

Accounts Payable Creditor Balances

June 30, 2014

The total of the creditor accounts on June 30, 2014, $3,780, equals the

balance of the accounts payable controlling account, shown as follows:

Accounts Payable

30 Bal.

600 4,035 3,780

c Happy Tails Inc uses a subsidiary ledger for accounts payable to track its credit purchases and payments to the individual supplier This is needed so that it

knows how much it owes to each individual supplier Without the subsidiary

ledger, it would be difficult for it to accurately pay suppliers for the amount

owed in a timely manner.

Ex 5–19

a Two errors were made in balancing the accounts in the subsidiary ledger:

(1) The Castle Chemical Supplies Inc transaction of March 9 should have

resulted in a balance of $14,300 instead of $14,000, and the account

balance at March 12 should have been $14,000 instead of $13,700 The

account balance at March 20 should have been $8,200 instead of $7,900.

(2) The Hudson Bay Minerals Co transaction of March 25 should have resulted

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Ex 5–19 (Concluded)

b.

KLONDIKE ASSAY SERVICES INC.

Accounts Payable Creditor Balances

March 31, 2014

Cash payments journal: (b)

General journal: (e)

Ex 5–21

to the left of the Fees Earned Cr column.

A recommended and corrected cash receipts journal is as follows:

Date

Account Credited

Post

Ref.

Other

Accounts Cr.

Fees

Earned Cr.

Accts

Rec

Cr.

Cash Dr.

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Ex 5–22

a In the electronic invoice form from QuickBooks® shown above, typical

fields for data input can be identified as follows:

1 Customer name and address

2 Date and invoice number

3 Description of item sold

4 Amount of revenue

b The customer Accounts Receivable is debited, and Fees Earned is credited.

A computerized accounting system does not require posting to a separate

accounts receivable control account In this case, the total accounts receivable reported on the balance sheet is merely the sum of the balances of the individual customer account balances That is, the accounts receivable account summarizes the customer accounts automatically.

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Ex 5–22 (Concluded)

accounting system In addition, special journals are not normally used to

accumulate transactions Transactions are recorded through data input

into electronic forms (or for infrequent transactions, by an electronic general

journal) Balances of affected accounts are automatically posted and updated from the information recorded on the form If desired, the computer can provide

a printout of the monthly transaction history for a particular account, which

provides the same information as a journal In addition, the controlling account

is not separately posted In a manual system, separate posting to the

controlling account provides additional control by reconciling the controlling

account balance against the sum of the individual customer account balances However, in a computerized accounting system, there are no separate

postings to a controlling account because the computer is not going to make posting or mathematical errors Therefore, there is no need for the additional control provided by posting a journal total to a controlling account.

Ex 5–23

application The B, or business, is Apple The C, or consumers, would mostly

be individuals who purchase digital products from the download store.

b.

collections on account.

illustrated in the chapter, or for cash sales The invoice form used for sales on account is different from the one used for cash sales The latter invoice form

makes a debit to Cash, rather than a debit to a customer account.

so a special journal is inappropriate On an e-commerce site, the consumer

inputs the transaction information on the Web page; thus, there is no need for

a separate electronic form for re-entering the same information to record the

sale Essentially, the e-commerce application is the form that originates the

sales transaction inside the accounting system Accounting transactions flow directly from the shopping cart information directly into the accounting

system.

Trang 23

individuals and corporations Its site separates individual and corporate sales.

Web application.

and businesses, since its products are divided this way.

supplies to manufacturing companies.

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Ex 5–25 (Concluded)

over 9% (9.4%) from the prior year to the recent year This increase is explained by improvements in consumer confidence experienced during this time Starbucks was positively impacted because its product is both premium priced and discretionary Thus, as economic times improved, consumers increased consumption and/or chose more expensive options Revenues increased by 19.6% internationally, versus 7.1% in the United States Higher international growth may be the result of more store openings internationally, than in the United States Global consumer products (segment that sells Starbucks-licensed products) had the lowest growth between the two years The vertical analysis indicates that the percent of U.S revenues to total revenues decreased from 73.2% in the prior year to 71.6% in the recent year

In this same period, the percent of international revenues to total revenues

increased from 19.8% in the prior year to 21.7% in the recent year Both analyses indicate that Starbucks’ international operations grew more than did the U.S

operations during the two-year period.

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Ex 5–26

a.

has the largest percent of revenues to total revenues at 23.3% This is a low percent for a single segment, suggesting little concentration In addition, four additional segments have a percent of revenues to total revenues in excess of 10% (Television, Cable Network Programming, Direct Broadcast Satellite Television, and Newspapers and Information Services) The three smallest segments total 12.2% (3.6% + 3.9% + 4.7%) of revenues to total revenues Overall, News Corporation is a highly diversified entertainment company, deriving significant revenues from multiple sources.

Major Product Segments

For a Recent Year

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Ex 5–27

a Horizontal analysis:

Year 2 (in millions)

Year 1 (in millions)

of growing from a smaller base of revenue The vertical analysis indicates

that the U.S and Europe declined from 34.9% to 33.7% of total revenues, and 40.8%

to 39.8% of total revenues, respectively, while APMEA increased from 19.1% to 21.0% of total revenues The vertical analysis is consistent with the horizontal analysis, showing modest revenue increases in the U.S and Europe and stronger increases in APMEA The growth in APMEA is likely due to restaurant unit growth

in this part of the world.

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Prob 5–1A (Continued)

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER

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Prob 5–1A (Concluded)

4 The computerized system is much more efficient Each sales transaction

would be entered into an electronic invoice form The postings to the accounts receivable subsidiary and fees earned ledgers would be automatic Also, all

sums and totals in the subsidiary ledgers are calculated automatically There

would be no separate postings to an accounts receivable control account,

because there would be no need to verify the accuracy of account totals There would not be a math or posting error The computerized system would also

provide management current customer account balance information, since the postings are automatic.

CHAPTER 5 Accounting Systems

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Prob 5–2A (Continued)

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Prob 5–2A (Continued)

Post

Ref.

Fees Earned Cr.

Accts

Rec

Cr.

Cash Dr.

The subsidiary account of Shilo Co must also be posted for a $2,500 credit.

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Prob 5–2A (Concluded)

have balances of $14,510 ($7,590 + $6,000 + $920).

to the general ledger at the time of the original transaction Thus, there is no

need to post summary totals to the general ledger accounts The accounts

receivable account reported on the balance sheet is often merely the sum of

the individual customer accounts.

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CHAPTER 5 Accounting Systems

Prob 5–3A (Continued)

2 and 3.

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3 and 4 PURCHASES JOURNAL Page 30

2014 Oct 2 Meade Co.

$8,620 + $3,980 +

$3,310)

b $18,110

6 Supply chain management e- commerce applications are used to plan and coordinate transactions with suppliers.

CHAPTER 5 Accounting Systems

Prob 5–3A (Concluded)

5-39

© 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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1., 2., and 3 PURCHASES JOURNAL Page 1

2014 June 16 Hydro Supply Co.

16 Pure Aqua Equipment

17 Best Office Supply

23 Best Office Supply

30 Hydro Supply Co.

30 Pure Aqua Equipment 30

CHAPTER 5 Accounting Systems

Prob 5–4A

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