Appendix E
ACCOUNTING WITH SPECIAL JOURNALS
True / False Questions
1. Accounting information systems collect and process data from transactions and events,
organize them in useful reports, and communicate results to decision makers.
2. Decision makers in practice do not need a basic knowledge of how accounting information
systems work because they can be relied upon to be accurate..
3. Control, competency, compatibility, flexibility and cost-benefit are the five basic principles
of accounting information systems.
4. Internal controls include policies to direct operations toward common goals, procedures to
ensure reliable financial reports, safeguards to protect company assets, and methods to
achieve compliance with laws and regulations.
5. The flexibility principle prescribes that an accounting information system be able to adapt
to changes in the company, business environment, and needs of decision makers.
6. The compatibility principle requires that an accounting system report useful,
understandable, timely, and pertinent information for effective decision making.
7. The cost-benefit principle prescribes that the benefits from an activity in an accounting
information system should outweigh the costs of that activity.
8. Accounting information systems are designed to capture information about a company’s
transactions and events and to provide output including financial, managerial, and tax reports.
9. Due to electronic files and Web communications, source documents are no longer required.
10. Information processors capture information and enable its transfer to the system’s
information processing component.
11. With advanced technology there is no need to trace information that has been entered into
an accounting information system to its source.
12. Input devices involve converting data on source documents from written or electronic
form to a form usable for the system.
13. Accounting information processes are structured to eliminate the need for professional
judgment.
14. When auditors audit financial statements and a company’s controls they rely on
accounting system databases.
15. Input devices are the means to make accounting information available to users.
16. Output devices include journal entries, keyboards, scanners, and modems.
17. A special journal is used to record and post transactions of a similar type.
18. A sales journal is used to record cash sales.
19. The purchases journal is used to record purchases of merchandise on credit.
20. The general journal is used for transactions not covered by special journals and for
adjusting, closing, and correcting entries.
21. Special journals allow an efficient division of labor, which is also an effective control
procedure.
22. When posting from special journals each individual debit and credit entry of similar
transactions is entered in the general ledger.
23. Most transactions for merchandising businesses fall into four groups: sales, purchases,
cash receipts, and cash disbursements.
24. Because special journals are designed to suit businesses, good systems design for a
business could include collapsing the sales and cash disbursements journal into one journal.
25. A subsidiary ledger is a listing of individual accounts that contains detailed information on
specific accounts in the general ledger.
26. Two common subsidiary ledgers are cash receipts and cash disbursements.
27. The accounts receivable ledger is used for storing transactions data regarding individual
customers.
28. The controlling account Accounts Payable in the general ledger has a separate subsidiary
account for each creditor in the accounts payable ledger.
29. Equipment, inventory, and investments are other accounts that can include detailed
information in a subsidiary ledger.
30. Subsidiary ledgers are not needed in perpetual inventory systems because the accounting
system captures sufficient details to support analyses that decision makers need.
31. An advantage of online processing is that databases are updated in batches.
32. Off-the-shelf accounting software is not adequate to meet the needs of small businesses.
33. Enterprise resource planning software packages include the programs that manage a
company’s vital operations such as accounting, order taking, and manufacturing.
34. Computer networks are links among computers giving different users and different
computers access to common databases, programs, and hardware.
35. Enterprise resource planning software is primarily used for recording journal entries.
36. Most companies use online processing instead of batch processing because online
processing immediately updates databases.
37. The SAP enterprise-resource planning software is being used to help direct the operations
of many of the world’s largest companies.
38. A business segment is a part of a company that is separately identified by its products or
services, or by the geographic market it serves.
39. Segment return on assets is calculated by dividing segment average assets by segment
operating income.
40. External users of financial statements are generally interested in segment information to
understand a company’s business activities.
41. Segment information is not helpful to investors for evaluating a company’s profitability,
risk, or growth.
42. A columnar journal is any journal with only one column.
43. Individual transactions in the purchases journal are regularly posted to customer accounts
in the accounts payable ledger.
44. Three transactions that would be recorded in the sales journal are: (1) recording sales
taxes (2) recording sales returns and allowances and (3) recording purchases discounts.
45. Each transaction recorded in the sales journal yields a debit to Accounts Receivable and a
credit to Sales.
46. Posting debits from the Sales journal to Accounts Receivable twice—once to the general
ledger account Accounts Receivable and once to the customer’s subsidiary account—violates
the accounting equation of debits equal credits.
47. A procedure called direct posting of sales invoices involves posting sales directly to the
customer accounts in the accounts receivable ledger, making a period end journal entry, and
avoiding the use of the sales journal.
48. Account balances in the general ledger and the subsidiary ledgers should be proved for
accuracy after posting is complete.
49. A schedule of accounts receivable is a listing of all customer accounts and account
balances.
50. If the total balance of the accounts payable ledger equals the total of the controlling
Accounts Payable account, then the accounts are presumed to be correct.
51. A trial balance is completed after posting but before proving the subsidiary ledger by
preparing a schedule of the controlling account.
52. A company using the perpetual inventory system records the increase in cost of goods sold
and decrease in inventory at the time of each sale in the sales journal.
53. The purchases journal is typically used to record only purchases of inventory.
54. The sales journals of companies using the perpetual and periodic inventory systems differ
in that under the perpetual system a column is used to record cost of goods sold and inventory
amounts for each sale but not the periodic system.
55. Which of the following statements regarding accounting information systems are not
true?
A. Accounting information systems collect and process data from transactions and events.
B. Accounting information systems organize data in useful forms.
C. Accounting information systems are not subject to internal control policies.
D. Accounting information systems are useful to effective decision making.
E. Accounting information systems communicate information to business decision makers.
56. Which of the following statements are not true regarding internal control procedures?
A. Internal control procedures are designed to ensure reliable financial reports.
B. Internal control procedures are designed to safeguards company assets.
C. Internal control procedures direct operations toward common goals.
D. Internal control procedures include methods to achieve compliance with laws and
regulation.
E. Internal control procedures are not affected by the cost-benefit principle.
57. The control principle for accounting information systems requires that the:
A. Benefits from an activity outweigh the costs of the activity.
B. System report useful, understandable, timely, and pertinent information for effective
decision making.
C. System must have methods and procedures allowing managers to control and monitor
business activities.
D. System be able to adjust to changes in the company, business environment, and needs of
decision makers.
E. System conforms to a company’s activities, personnel, and structure.
58. The flexibility principle of accounting information systems prescribes that the:
A. Benefits from an activity in the system outweigh the costs of the activity.
B. System report useful, understandable, timely, and pertinent information for effective
decision making.
C. System aid managers in controlling and monitoring business activities.
D. System be able to adapt to changes in the company, business environment, and needs of
decision makers.
E. System conforms to a company’s activities, personnel, and structure.
59. Which of the following accounting principles prescribes that an accounting information
system report useful, understandable, timely, and pertinent information for effective decision-
making?
A. Control principle.
B. Compatibility principle.
C. Relevance principle.
D. Flexibility principle.
E. Cost-Benefit principle.
60. The five fundamental principles of accounting information systems are:
A. Control, accountability, relevance, compatibility, and flexibility.
B. Historical cost, relevance, compatibility, flexibility, and cost-benefit.
C. Control, relevance, compatibility, flexibility, and safety.
D. Historical cost, relevance, compatibility, timeliness, and cost-benefit.
E. Control, relevance, compatibility, flexibility, and cost-benefit.
61. Which of the following statements regarding accounting information systems are not
true?
A. Accounting information systems consist of people, records, methods, and equipment.
B. Accounting information systems are more important than ever to decision makers.
C. Accounting information systems cannot improve on a company’s competitive edge.
D. Accounting information systems are designed to provide output including financial,
managerial, and tax reports.
E. Accounting information systems are designed to capture information about a company’s
transactions.
62. The basic components of an accounting information system include all of the following
except:
A. Source documents.
B. Warehouses.
C. Information processors.
D. Information storage.
E. Output devices.
63. Source documents:
A. Are input devices.
B. Provide the basic information processed by an accounting system.
C. Cannot be electronic files or web communications.
D. Store processed information for future use.
E. Convert information to the system’s processing component.
64. Input devices include:
A. Scanners.
B. Printers.
C. Software.
D. Ledgers.
E. Information processors.
65. Information storage databases:
A. Eliminate the need for professional judgment.
B. Are relied on by auditors of the financial statements
C. Should not be cloud based.
D. Capture information from source documents.
E. Need not be accessible once data is processed.
66. Which of the following is not an output device?
A. Printers.
B. Monitors.
C. Projectors.
D. Web communications.
E. Bar code readers.
67. Information processors are systems that:
A. Keep data in an accessible form.
B. Interpret, transform, and summarize information for use in analysis and reporting.
C. Eliminate the need for professional judgment due to their accuracy.
D. Are the means to make information available to users.
E. Capture information from source documents.
68. Which of the following is not a special journal:
A. Sales journal.
B. Purchases journal.
C. Cash receipts journal.
D. Cash disbursements journal.
E. General journal.
69. The sales journal is used for recording:
A. Credit purchases.
B. Credit sales.
C. Cash sales.
D. Cash purchases.
E. Cash receipts.
70. The purchases journal is used for recording:
A. Credit purchases.
B. Credit sales.
C. Cash sales.
D. Cash purchases.
E. Cash disbursements.
71. A journal that is used to record and post transactions of a similar type is a(n):
A. Perpetual journal.
B. Columnar journal.
C. Special journal.
D. General journal.
E. All-purpose journal.
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72. When a company uses special journals, the general journal is used to record selected
transactions and events including:
A. Closing entries.
B. Sales on credit.
C. Cash payments.
D. Credit purchases.
E. Credit sales.
73. Which of the following is not a feature of special journals?
A. They are efficient tools in helping journalize and post transactions.
B. They allow posting of amounts as column totals rather than as individual amounts.
C. Good system design could collapse sales and cash receipts into one journal to better suit a
business.
D. They eliminate the need for a general journal.
E. They produce an efficient division of labor.
74. A record that contains detailed information on specific accounts with a common
characteristic and is support for a controlling account is a(n):
A. Subsidiary ledger.
B. General ledger.
C. Special ledger.
D. All-purpose ledger.
E. Column balance ledger.
75. A subsidiary ledger:
A. Includes transactions not covered by special journals.
B. Is a listing of all of the accounts of a business.
C. Is a listing of individual accounts and amounts with a common characteristic.
D. Is also called a general ledger.
E. Is also called a special journal.
76. A subsidiary ledger that contains a separate account for each supplier (creditor) to the
company is a(n):
A. Controlling account.
B. Accounts receivable ledger.
C. Accounts payable ledger.
D. General ledger.
E. Special journal.
77. An accounts receivable ledger is a:
A. Subsidiary ledger that contains an account for each supplier (creditor).
B. List of the separate accounts that show the balances outstanding from credit customers.
C. Book of original entry that is designed and used for recording only sales on credit.
D. Ledger that contains all financial statement accounts of a business.
E. Subsidiary ledger that contains a separate account for each party that grants both short-term
and long-term credit on account to the company.
78. Assume that a company uses special journals for sales, purchases, cash receipts, and cash
disbursements. A sales return for credit on account would be recorded in the:
A. Sales journal.
B. General journal.
C. Cash receipts journal.
D. Direct posting journal.
E. Cash disbursements journal.
79. An accounts payable ledger:
A. Contains an account for each credit customer.
B. Lists the balances of selected accounts that are added to show the total amount of the
significant long-term creditors outstanding.
C. Is a book of original entry designed and used for recording only a specified type of
transaction.
D. Contains the financial statement accounts of a business.
E. Contains a separate account for each creditor (supplier) to the company.
80. The Accounts Payable controlling account:
A. Is not included in a company’s chart of accounts.
B. Stores the transaction data of individual supplies.
C. Reduces the number of entries in the general journals.
D. Equals the sum of all balances of supplier accounts.
E. Increases the number of columns in the journals.
81. Subsidiary ledgers do all of the following except:
A. Remove excessive detail from the general ledger.
B. Provide up-to-date information on customer or other specific account balances.
C. Aid in error identification for individual accounts.
D. Help with division of labor (recordkeeping tasks).
E. Eliminate the need for individual postings to the customer or supplier accounts.
82. The accounts receivable ledger:
A. Is a substitute for the sales journal.
B. Stores transaction data for individual customers.
C. Stores transaction data for individual creditors.
D. Is a substitute for the cash receipts journal.
E. Is also the controlling account.
83. Examples of other subsidiary ledgers besides those for accounts receivable and accounts
payable may include all of the following except:
A. Equipment.
B. Cash.
C. Payroll.
D. Inventory.
E. Investments.
84. Chandler Company sold merchandise on credit to Jamie Morgan for $700 and the cost of
the merchandise was $290. Chandler would record this sale in the:
A. General journal
B. Cash receipts journal.
C. Sales journal.
D. General ledger.
E. Accounts Receivable controlling account.
85. Chandler Company purchased merchandise on credit from Lighting Supply for $5,600.
Chandler would record this sale in the:
A. General journal
B. Cash receipts journal.
C. Cash disbursements journal.
D. Purchases journal.
E. Accounts Payable controlling account.
86. Doughton Furniture Company purchased merchandise on credit from Furniture Supply for
$8,000. Two days later Doughton returned $2,000 of the merchandise due to damage.
Doughton would record the return of merchandise in the:
A. General journal
B. Cash receipts journal.
C. Cash disbursements journal.
D. Purchases journal.
E. Accounts Payable controlling account.
87. Doughton Furniture Company purchased merchandise on credit from Furniture Supply for
$8,000. Two days later Doughton returned $2,000 of the merchandise due to damage. When
Doughton pays for the merchandise minus the return, it would record the payment in the:
A. General journal
B. Cash receipts journal.
C. Cash disbursements journal.
D. Purchases journal.
E. Accounts Payable controlling account.
88. Enterprise-resource planning software:
A. Refers to programs that help manage a company’s vital operations.
B. Is another name for spreadsheet programs.
C. Uses batch processing of business information.
D. Is substantially declining in use.
E. Is another name for database programs.
89. An approach that enters and processes data into the accounting system as soon as source
documents are available is called:
A. Date storage.
B. Batch processing.
C. Online processing.
D. Computer programming
E. Web communications.
90. Which of the following is not true about enterprise resource planning (ERP) software:
A. ERP refers to programs that help manage a company’s vital operations.
B. ERP can include programs that extend from order taking to manufacturing to accounting.
C. ERP can speed up business decision making and help reduce costs.
D. ERP cannot be used to share data with customers and suppliers.
E. ERP can be designed to link every part of a company’s operations.
91. A business segment is part of a company that:
A. Requires only internal reporting.
B. Is separately identified by its products, services, or geographic market.
C. Requires special journals.
D. Requires subsidiary ledgers.
E. Cannot report its results separately.
92. Alani’s Hawaiian segment had revenues of $2,075 million, operating income of $1,500
million, and average assets of $1,450 million. The Hawaiian segment return on assets is:
A. 72.3%
B. 69.9%
C. 103.4%
D. 96.7%
E. 138.3%
93. The segment return on assets:
A. Is applicable whether segments earn profits or losses.
B. Reflects on the profitability of a segment.
C. Is difficult to calculate because companies with traded stock are not required to report
segment information.
D. Is calculated as segment average assets divided by segment operating income.
E. Is calculated as segment sales divided by segment average assets.
94. When posting the sales journal’s activity at the end of the month, its totals are:
A. Debited to Sales and credited to Accounts Receivable.
B. Debited to Accounts Receivable and credited to Cash.
C. Debited to Cash and credited to Accounts Receivable.
D. Debited to Accounts Receivable and credited to Sales.
E. Debited to Cash and credited to Sales.
95. A list of all the accounts in the accounts receivable ledger with their balances and the total
is a:
A. Schedule of accounts.
B. Controlling account.
C. Schedule of accounts receivable.
D. Subsidiary ledger.
E. Special journal.
96. The Accounts Payable account in the general ledger is:
A. A controlling account for the subsidiary accounts payable ledger.
B. The account that controls the purchases journal.
C. The subsidiary account to the purchases journal.
D. Part of a special journal.
E. Part of a subsidiary ledger.
97. After posting is completed, there may be an error if:
A. The sum of the supplier account balances does not equal the total in the purchases journal.
B. The sum of the accounts receivable ledger does not equal the balance in the Sales account.
C. The sum of the supplier account balances does not equal the general ledger Accounts
Payable controlling account balance.
D. The balance in the sales journal does not equal the Accounts Receivable account balance.
E. The sum of the accounts receivable ledger does not equal the balance in the sales journal.
98. Assume that a company using a purchases journal made an error in totaling the journal’s
accounts payable column. The error should be discovered:
A. When the purchases journal is posted to the general ledger.
B. When the sum of the vendor accounts does not equal the balance in the Purchases journal.
C. When the total of the schedule of accounts payable is compared with the balance of the
Accounts Payable account.
D. When the creditors receive their payments.
E. When the financial statements are prepared.
99. The main difference in the sales journal under the perpetual and periodic inventory system
is:
A. The perpetual system has a column to record cost of goods sold but not the periodic system
does not.
B. The sales tax receivable column that is used under the perpetual system but not the
periodic.
C. The sales tax payable column that is used under the perpetual system but not the periodic.
D. The accounts receivable column that is used under the perpetual system but not the
periodic.
E. The column for recording cash that is used under the perpetual system but not the periodic.
100. The accounting principle that prescribes an accounting information system conform with
a company’s activities, personnel, and structure is the:
A. Control principle.
B. Compatibility principle.
C. Relevance principle.
D. Flexibility principle.
E. Cost-Benefit principle.
101. All of the following statements regarding source documents are true except:
A. Source documents provide the basic information processed by an accounting system.
B. Source documents include invoices, cash register files, and employee earnings records.
C. Source documents should not be sent directly from a company’s system to its customers or
suppliers.
D. Source documents can be paper or electronic files.
E. Source documents can include Web communications.
102. Which of the following statements regarding input devices are not true?
A. Input devices capture information from source documents and enable its transfer to the
system’s information processing component.
B. Input devices convert data on source documents from written form to a form usable for the
system.
C. Input devices include keyboards, scanners, and modems.
D. Input devices include journal entries.
E. Input devices make accounting system information available to users.
103. A company would use which of the following journals to record cash payments?
A. General journal
B. Cash receipts journal.
C. Cash disbursements journal.
D. Purchases journal.
E. Sales journal.
104. Which of the following journals would a company use to record a merchandise return?
A. General journal
B. Cash receipts journal.
C. Cash disbursements journal.
D. Purchases journal.
E. Sales journal.
105. Which of the following journals would a company use to record cash collections from
customers, net of discounts taken?
A. General journal
B. Cash receipts journal.
C. Cash disbursements journal.
D. Purchases journal.
E. Sales journal.
106. Which of the following journals would a company use to record period-end adjusting
entries to accrue revenues?
A. General journal
B. Cash receipts journal.
C. Cash disbursements journal.
D. Purchases journal.
E. Sales journal.
107. For a retailer required to collect sales taxes from customers, all of the following
adaptations would be made to the sales journal except:
A. Column totals would continue to be posted as usual.
B. A Sales Taxes Payable credit column would be added.
C. There would be a separate Accounts Receivable debit column.
D. A Sales Taxes Payable debit column would be added.
E. There would be a separate Sales credit column.
108. The process of adding the Debit column totals, then the credit column totals of a journal
and comparing the two sums for equality is an example of:
A. Crossfooting.
B. Footing.
C. Journalizing.
D. Posting.
E. Reconciling.
109. A company borrowed $80,000 from a bank by signing a long-term note payable. The
journal the transaction would be recorded in is the.
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchases journal.
E. General journal.
110. A company makes a payment of $5,000 on a long-term note payable. The journal the
transaction would be recorded in is the.
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchases journal.
E. General journal.
111. A company makes a cash sale of $24,000. The cost of the merchandise is $13,000.
Identify the journal the transaction would be recorded in.
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchase journal.
E. General journal.
112. A company sells merchandise on credit for $6,000. The merchandise cost is $3,400. The
journal that the transaction would be recorded in is the:
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchases journal.
E. General journal.
113. If a company purchases $15,200 of merchandise on credit, which journal will the
transaction be recorded in?
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchases journal.
E. General journal.
114. Flavor Ice Cream received a payment of $7,800 from a credit customer within the
discount period. Identify the journal the transaction would be recorded in.
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchases journal.
E. General journal.
115. If a company issues a check for $2,900 in payment of merchandise, identify the journal
the transaction would be recorded in.
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchases journal.
E. General journal.
116. Barrier Scuba Equipment purchased supplies costing $3,000 on credit. Identify the
journal the transaction would be recorded in.
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchases journal.
E. General journal.
117. If a company issues a check for $2,750 in payment of the salaries expense for the last
half of the month, the transaction will be recorded in which journal?
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchases journal.
E. General journal.
118. A company that reports segment information had average total assets of $1,522,450 and
total net income of $590,700. Segment A had average total assets of $927,800 and segment
operating income of $298,300. Segment B had average assets of $594,650 and segment
operating income of $292,400. The segment return on assets for Segment A is:
A. 60.9%.
B. 32.2%.
C. 50.5%.
D. 38.8%.
E. 49.2%.
119. A company that reports segment information had average total assets of $1,522,450 and
total net income of $590,700. Segment A had average total assets of $927,800 and segment
operating income of $298,300. Segment B had average assets of $594,650 and segment
operating income of $292,400. The segment return on assets for Segment B is:
A. 60.9%.
B. 32.2%.
C. 50.5%.
D. 38.8%.
E. 49.2%.
120. Maxie’s Game World sold games to a customer on credit for $2,600, terms 1/10, n/30
and the cost of the games was $1,700. When recording the sales transaction in its sales
journal, Maxie’s would enter:
A. $1,700 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cost of Goods
Sold Dr./Inventory Cr. column.
B. $2,600 in the Accounts Receivable Dr./Sales Cr. column and $1,700 in the Accounts
Payable Dr./Purchases Cr. column.
C. $2,600 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cash Cr.
column.
D. $2,600 in the Accounts Receivable Dr./Sales Cr. column and $1,700 in the Cost of Goods
Sold Dr./Inventory Cr. column.
E. $1,700 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Other Accounts
column Dr. column.
121. Maxie’s Game World sold games to a customer on credit for $2,600, terms 1/10, n/30
and the cost of the games was $1,700. When recording the collection from the customer made
within the discount period, in its cash receipts journal, Maxie’s would enter:
A. $2,600 in the Cash Dr. column and $2,600 in the Accounts Receivable Cr. column.
B. $2,574 in the Cash Dr. column and $2,574 in the Accounts Receivable Cr. column.
C. $2,574 in the Cash Dr. column, $26 in the Sales Discount Dr. column and $2,600 in the
Accounts Receivable Cr. column.
D. $2,600 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cash Cr.
column.
E. $2,600 in the Cash Dr. column. $2,600 in the Sales Cr. column, and $1,700 in the Cost of
Goods Sold Dr./Inventory Cr. column.
122. Wildlife Wholesale Supply sold birdseed to a retailer for $860, receiving cash at the time
of sale. The cost of the birdseed was $370. When recording the collection from the customer,
in its cash receipts journal, Wildlife would enter:
A. $860 in the Cash Dr. column and $860 in the Accounts Receivable Cr. column.
B. $370 in the Cash Dr. column and $370 in the Accounts Receivable Cr. column.
C. $860 in the Cash Dr. column; $860 in the Sales Cr. column; and $370 in the Other
Accounts Cr. column.
D. $860 in the Accounts Receivable Dr. column , $860 in the Cash Cr. column; and $370 in
the Cost of Goods Sold Dr./Inventory Cr. column.
E. $860 in the Cash Dr. column; $860 in the Sales Cr. column; and $370 in the Cost of Goods
Sold Dr./Inventory Cr. column.
123. Farthington Soccer Supplies purchases merchandise from a supplier on credit, terms
2/10, n/30 for $15,300. When recording the purchase transaction in its purchases journal,
Farthington would enter:
A. $15,300 in the Accounts Payable Cr. column and $15,300 in the Inventory Dr. column.
B. $15,300 in the Accounts Payable Cr. column and $15,300 in the Supplies Dr. column.
C. $15,300 in the Inventory Dr. column, $14,994 in the Accounts Payable Cr. column, and
$306 in the Purchase Discount Cr. column.
D. $14,994 in the Inventory Dr. column and $14,994 in the Accounts Payable Cr. column.
E. $15,300 in the Other Accounts Dr. column and $15,000 in the Inventory Cr. column.
124. Farthington Soccer Supplies purchases merchandise from a supplier on credit, terms
2/10, n/30 for $15,300. When recording the payment transaction made within the discount
period in its cash disbursement journal, Farthington would enter:
A. $15,300 in the Cash Cr. column and $15,300 in the Inventory Dr. column.
B. $15,300 in the Cash Cr. column and $15,300 in the Accounts Payable Dr. column.
C. $15,300 in the Inventory Cr. column; $14,994 in the Accounts Payable Dr. column; and
$306 in the Inventory Cr. column.
D. $14,994 in the Accounts Payable Dr. column and $14,994 in the Cash Cr. column.
E. $15,300 in the Accounts Payable Dr. column; $14,994 in the Cash Cr. column; and $306 in
the Inventory Cr. column.
125. Wexim Toys purchased merchandise from a supplier on credit, terms 2/10, n/30 for
$9,300. Three days later the company returned $1,100 of the merchandise. When recording
the return transaction, the company would record:
A. $1,100 in the Accounts Payable Cr. column and $1,100 in the Inventory Dr. column of the
purchases journal.
B. Debit Accounts Payable $1,100 and credit Inventory $1,100 in the general journal.
C. $1,100 in the Cash Cr. column and $1,100 in the Inventory Cr. column in the cash
disbursements journal.
D. Debit Cash $1,100 and credit Inventory $1,100 in the general journal.
E. $1,100 in the Accounts Payable Dr. column and $1,100 in the Cash Cr. column of the cash
disbursements journal.
126. Identify the accounting information system principle indicated in letters a–e that applies
to each of the situations below by entering the appropriate letter next to the statement.
a. Control
b. Compatibility
c. Relevance
d. Flexibility
e. Cost-benefit
_____ 1. International Company has designed its accounting information system to be
adaptable to changes in technology, the business environment, and the needs of
decision makers.
_____ 2. International Company has world-wide operations that must handle thousands
of different products, so the accounting information system is fairly complex to
conform to its activities, personnel, and structure.
_____ 3. International Company’s accounting information system has policies to ensure
that financial reports will be reliable, assets are safeguarded, and relevant laws
and regulations are complied with.
_____ 4. International Company’s accounting information system can be improved
markedly for a cost of about $10,000,000 and the company intends to complete
the upgrade because the benefits outweigh this cost.
_____ 5. International Company has designed its accounting information system so that
key managers can obtain the information they need to make decisions relating
to new products, sales, and controlling costs.
127. Match the following accounting system components a–e with their related items 1–10 by
placing the correct letter next to each item.
a. Source documents
b. Input devices
c. Information processor
d. Information storage
e. Output devices
____ 1. Computer keyboard
____ 2. Computer hard drive
____ 3. Journal entries
____ 4. Journals
____ 5. Financial statements
____ 6. Invoice from suppliers
____ 7. Employee paychecks
____ 8. Computer monitor
____ 9. Software
____ 10. Electronic files
1. B; 2. D; 3. B; 4. C; 5. E; 6. A; 7. E; 8. E; 9. C; 10. A
Blooms: Understand
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 2 Medium
Learning Objective: E-C1
Topic: Fundamental System Principles
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McGraw-Hill Education.
7-48
128. Enter the letter of the following terms on the line next to the appropriate definition of
each.
a. Cash disbursements journal
b. Input devices
c. Relevance principle
d. Accounting information system
e. Accounts payable ledger
f. Control principle
g. Purchases journal
h. Output devices
i. Information storage
j. Cash receipts journal
____ 1. The means of collecting and processing data from transactions and events,
organizing them into useful reports, and communicating results to decision
makers.
____ 2. The special journal used to record all purchases made on account.
____ 3. The special journal used to record all receipts of cash.
____ 4. An information system principle that prescribes that an accounting system have
methods and procedures allowing managers to control and monitor business
activities.
____ 5. An information system principle requiring that an accounting system report
useful, understandable, timely, and pertinent information for decision making.
____ 6. The component of an accounting system that keeps data in a form accessible to
information processors.
____ 7. The special journal that is used to record all cash payments.
____ 8. A record of the separate accounts of each supplier that supports its general ledger
controlling account.
____ 9. The component of an accounting system that is the means to take information
from an accounting system and make it available to users.
____10. The component of an accounting system that captures source document
information and enables its transfer to the information processor.
1. D; 2. G; 3. J; 4. F; 5. C; 6. I; 7. A; 8. E; 9. H; 10. B
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 2 Medium
Learning Objective: E-C1
Learning Objective: E-C2
Learning Objective: E-C3
Topic: Fundamental System Principles
Topic: Special Journals in Accounting
Topic: Subsidiary Ledgers
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McGraw-Hill Education.
7-49
129. Match the following terms with the appropriate definitions.
a. Sales journal
b. Controlling account
c. Accounts receivable ledger
d. Cash disbursements journal
e. Cash receipts journal
f. Schedule of accounts payable
g. Segment return on assets
h. Columnar journal
i. Special journal
j. Purchases journal
____ 1. The special journal used to record all receipts of cash.
____ 2. A journal with more than one column for recording data.
____ 3.A record of the separate accounts of each credit customer that is controlled by a
general ledger account.
____ 4. A journal used to record all purchases on credit.
____ 5. A journal used to record sales of merchandise on credit.
____ 6.A measure of the profitability of a segment, calculated as segment operating income
divided by segment average assets.
____ 7. A special journal used to record all payments of cash.
____ 8. Any journal used for recording and posting transactions of a similar type.
____ 9. A general ledger account, the balance of which, after posting, equals the sum of the
balances of the accounts in its related subsidiary ledger.
____10. A list of each customer from the accounts payable ledger with their balances and the
total.
1. E; 2. H; 3. C; 4. J; 5. A; 6. G; 7. D; 8. I; 9. B; 10. F
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 2 Medium
Learning Objective: E-A1
Learning Objective: E-C3
Learning Objective: E-P1
Topic: Segment Return on Assets
Topic: Subsidiary Ledgers
Topic: Sales Journal
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McGraw-Hill Education.
7-50
130. A company entered into the following transactions. Match each transaction with the
appropriate journal in which it should be recorded.
a. Sales journal
b. Purchases journal
c. Cash receipts journal
d. Cash disbursements journal
e. General journal
____ 1. Borrowed $7,000 cash from the local bank.
____ 2. A customer returned a $250 item purchased on account.
____ 3. Purchased merchandise on account, $2,100.
____ 4. Purchased equipment on account for $4,000.
____ 5. Paid $15,000 cash in wages to employees.
____ 6. Paid a telephone bill for $3,400 cash.
____ 7. Purchased $1,150 of office supplies on account.
____ 8. Recorded depreciation on office equipment of $2,000.
____ 9. Returned defective inventory purchased on account, $2,550.
____ 10. Recorded cash sales of $12,700.
1. C; 2. E; 3. B; 4. B; 5. D; 6. D; 7. B; 8. E; 8. E; 10. C
Blooms: Understand
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 2 Medium
Learning Objective: E-P1
Topic: Sales Journal
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McGraw-Hill Education.
7-51
131. A company entered into the following transactions. For each transaction, indicate the
appropriate journal in which it should be recorded.
a. Sales Journal
b. Purchases Journal
c. Cash Receipts Journal
d. Cash Disbursements Journal
e. General Journal
____ 1. Purchased merchandise on credit.
____ 2. Sold merchandise on credit.
____ 3. Purchased merchandise for cash.
____ 4. Sold merchandise for cash
____ 5. Paid cash to settle the utility bill.
____ 6. Owner invested more cash in the business.
____ 7. Recorded depreciation for the period.
____ 8. Borrowed cash from the bank.
____ 9. Bought office supplies on credit.
____ 10. Received cash from a customer to settle an account receivable.
1. B; 2. A; 3. D; 4. C; 5. D; 6. C; 7. E; 8. C; 9. B; 10. C
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 2 Medium
Learning Objective: E-P1
Topic: Sales Journal
Short Answer Questions
132. List the five basic principles of accounting information systems.
133. List the five basic components of accounting information systems and give an example
of each.
1. Source documents such as invoices, bank statements, checks, cash register files, and
employee earnings records.
2. Input devices such as keyboards, scanners, modems, bar code readers, and cameras.
3. Information processors such as journals, ledgers, working papers, and posting procedures.
4. Information storage such as computer hard drives, cloud storage, and paper document files.
5. Output devices such as printers, monitors, projectors, and web communications.
Feedback: Students should list one example from the list of several indicated.
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: E-C1
Topic: Fundamental System Principles
134. Explain the purposes, types, and uses of special journals.
135. What are controlling accounts and subsidiary ledgers? What is the relationship between
them?
136. Discuss how technology based information systems affect accounting.
137. What is the segment return on assets ratio? What is it used for?
138. Describe the posting process for special journals.
139. Explain how the amounts in the subsidiary ledgers are proved (or reviewed) for
accuracy.
140. Discuss the differences in the special journals between a company using a perpetual
inventory system and one using a periodic inventory system.
141. What is footing and crossfooting of the column totals in special journals? What is the
purpose?
142. Alex Reagent, owner of Delectable Candy Company, understands that accounting
systems are important for success. Explain how Alex can use the accounting system to assess
business operations.
143. The following information is available for some of Branson’s segments (all
amounts are in millions):
North
America Asia
Central
America
Segment sales…..…………………… $5,190 $750 $2,350
Segment operating income......... 1,494 273 1,127
Segment average assets…….….… 4,700 541 1,382
a. Determine the segment return on assets for each geographic segment.
b. Comment on the results. How do the segments compare with respect to profitability?
144. The Stapleton Company uses special journals for sales, purchases, cash receipts, cash
disbursements, and uses a general journal. They operate with a perpetual inventory system.
The following transactions occurred during the current month of September:
Sep. 1 Paid $2,400 cash for monthly rent to Wabash Properties, Check No. 1630.
4 Purchased merchandise on credit for $1,800 from Bell Co., terms 2/10,
n/30. Invoice dated September 4.
8 Sold merchandise on credit for $4,300 to Andrews Co., Invoice No. 413.
The cost of the goods sold is $2,750.
10 Sold merchandise for $1,500 cash to Lacey Corp., Invoice No. 414. The
cost of the good sold is $720.
13 Paid amount owed to Bell Co. from September 4 purchase, Check No.
1631.
17 Collected $4,300 cash from the Andrews Co. for merchandise sold on
September 8.
24 Sold merchandise on credit for $4,500 to Frasier Corp., Invoice No. 415.
The cost of goods sold is $2,600.
31 Purchased office supplies for $3,055 from Maxwell Corp., Check No.
1632.
Record the above transactions into the appropriate journals that follow.
Sales Journal
Page 15
Date Account Debited
Invoice
Number PR
Accounts Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr. Inventory
Cr.
Purchases Journal
Page 16
Date Account
Date of
Invoice Terms PR
Accounts
Payable
Cr.
Inventory
Dr.
Office
Supplies Dr.
Other
Accounts
Dr.
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7-58
Cash Receipts Journal
Page 17
Date
Account
Credited Explanation PR
Cash
Dr.
Sales
Discount
Dr.
Accounts
Receivable
Cr. Sales Cr.
Other
Accounts
Cr.
Cost of
Goods sold
Dr.
Inventory
Cr.
Cash Disbursements Journal
Page 22
Date Ck No. Payee
Account
Debited PR Cash Cr.
Inventory
Cr.
Other
Accounts
Dr.
Accounts
Payable
Dr.
Sales Journal
Page 15
Date Account Debited
Invoice
Number PR
Accounts Receivable
Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory Cr.
9/8
Andrews
413
4,300
2,750
9/24
Frasier Corp.
415
4,500
2,600
145. The Tigre Company uses special journals for sales, purchases, cash receipts, cash
disbursements, and uses a general journal. They operate with a perpetual inventory system.
Record the following transactions related to purchases and cash payments that occurred
during the current month of June:
June 1 Paid $800 cash for monthly rent to Frontier Properties, Check No. 2116.
3 Purchased merchandise on credit for $2,400 from Whistle Co., terms 2/10,
n/30. Invoice dated June 3.
5 Returned defective merchandise with a cost of $300 to Whistle from the
June 3 purchase.
8 Purchased equipment on credit from Jackson Co. for $6,700, terms 1/10,
n/30.
13 Paid amount owed to Whistle Co. from June 3 purchase with Check No.
2117.
30 Purchased office supplies for $1,075 from Paperly Corp., Check No. 2118.
Record the above transactions into the appropriate journals shown below.
Purchases Journal
Page 12
Date Account
Date of
Invoice Terms PR
Accounts
Payable
Cr.
Inventory
Dr.
Equipment
Dr.
Other
Accounts
Dr.
Cash Disbursements Journal
Page 19
Date Ck No. Payee
Account
Debited PR Cash Cr.
Inventory
Cr.
Other
Accounts
Dr.
Accounts
Payable
Dr.
General Journal
Page 4
Date Accounts PR Dr. Cr.
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7-61
146. The Saginaw Company uses special journals for sales, purchases, cash receipts, cash
disbursements, and uses a general journal. They operate with a perpetual inventory system.
Record the following transactions related to sales and cash receipts that occurred during the
month of August:
Aug. 3 Sold $8,700 merchandise to Kline Co., terms 2/10, n/30, Invoice No. 826.
The cost of the goods sold was $3,900.
6 Sold merchandise on credit for $3,500 to Mentor Corp., Invoice No. 827.
The cost of the good sold is $1,750.
10 Mentor Corp. returned $750 of defective merchandise from the Aug. 6
sale. The cost of the merchandise was $330.
12 Collected amount due from the Kline Co. for merchandise sold on Aug. 3.
31 Collected on the Aug. 6 sale to Mentor Corp, net of the return.
Record the above transactions into the appropriate journals that follow.
Sales Journal
Page 31
Date Account Debited
Invoice
Number PR
Accounts Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr. Inventory
Cr.
Cash Receipts Journal
Page 23
Date
Account
Credited Explanation PR
Cash
Dr.
Sales
Discount
Dr.
Accounts
Receivable
Cr.
Sales
Cr.
Other
Accounts
Cr.
Cost of
Goods sold
Dr.
Inventory
Cr.
General Journal
Page 8
Date Accounts PR Dr. Cr.
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7-63
147. A company uses a sales journal, purchases journal, cash receipts journal, cash
disbursements journal, and general journal. A perpetual inventory system is used. The
following transactions were completed by the company during the current month of February:
Feb. 3 Sold merchandise for $5,000 to the North Corp. on credit, Invoice No. 785. Cost
of the goods sold is $2,900.
6 Sold a piece of land for $25,000 cash. The land was originally purchased for
$25,000
11 Purchased supplies from Office Mate for $240 Cash. Check No. 2316.
15 Issued a credit memo for $850 to North Corp. for returned merchandise. Cost of
the goods returned is $410.
21 Returned $130 of merchandise purchased from Shifton Corp. for credit on
account.
22 Paid cash to Rentals Inc. for monthly rent of $3,500. Check No. 2317.
31 Recorded depreciation on equipment of $7,000.
Record these transactions in the appropriate journals that follow.
Sales Journal
Date
Account
Debited
Invoice
Number PR
Accounts Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory Cr.
Purchases Journal
Date Account
Date of
Invoice Terms PR
Accounts
Payable Cr. Inventory
Dr.
Office
Supplies
Dr.
Other
Accounts
Dr.
Cash Receipts Journal
Date
Account
Credited Explanation PR
Cash
Dr.
Sales
Disc.
Dr.
Accounts
Receivable
Cr.
Sales
Cr.
Other
Accounts
Cr.
Cost of
Goods
Sold Dr.
Inventory
Cr.
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7-65
Cash Disbursements Journal
Date
Ck.
No. Payee
Account
Debited PR Cash Cr.
Inventory
Cr.
Other
Accounts
Dr.
Accounts
Payable
Dr.
General Journal
Date Accounts DR CR
148. Salem Co. uses special journals to record its transactions. They use the perpetual
inventory system. Shown below are the purchasing and cash disbursement transactions for
current month of July:
July 1 Purchased merchandise for cash from Van Co. $4,400, Check No. 1033.
2 Purchased office equipment from Bat Co. on credit, $6,700, terms n/60.
Invoice dated July 1.
6 Paid Badger, Inc., $3,900 cash for previous purchases on account, which is
net of a $100 discount, Check No. 1034.
9 Purchased merchandise from Aztec, Inc. on credit, terms 1/15, n/30,
$23,600. Invoice dated July 8.
10 Paid Bat Co. cash for May 2 purchase, Check No. 1035.
18 Purchased office supplies on credit $130, terms net EOM from Roberts,
Co., Invoice dated July 17.
Record these transactions in the following journals.
Purchases Journal
Date Account
Date of
Invoice Terms PR
Accounts
Payable
Cr.
Inventory
Dr.
Office
Supplies
Dr.
Other
Accounts
Dr.
Cash Disbursements Journal
Date Ck. No. Payee Account Debited PR Cash Cr.
Inventory
Cr.
Other
Accounts
Dr.
Accounts
Payable
Dr.
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7-68
149. The following special journal is taken from a merchandising company that uses the
perpetual inventory system:
Date
Account
Credited Explanation PR Cash Dr.
Sales
Discount
Dr.
Accounts
Receivable
Cr.
Sales
Cr.
Other
Accounts
Cr.
Cost of
Goods
Sold Dr.
Inventory Cr.
1/31 Balance 51,739 1,023 13,265 5,567 33,930 3,000
2/2 H. Jones Inv. 452 x 637 13 650
2/14 Notes
Payable
Note to
bank 351 1,300 1300
2/17 Sales Cash sales x 1,248 1,248 680
2/22 Equipment 181 651 651
2/28 M. Simms Inv. 403 x
15
6 156
55,731 1,036 14,071 6,815 35,881 3,680
(101) (413) (112) (411) (X) (511/113)
1. What is the name of the journal shown above?
2. Write an explanation for each entry in this journal.
3. What do the numbers in parentheses at the bottom of the journal indicate?
1. This is a cash receipts journal (perpetual system).
2. Journal entries explanation:
a. February 2: Recorded receipt of a payment from H. Jones on a credit sale with a 2%
discount. Payment was received within the discount period.
b. February 14: Recorded receipt of proceeds on a note payable.
c. February 17: Recorded receipt of proceeds from cash sales; cost of the sale is $680.
d. February 22: Recorded receipt of proceeds from the sale of equipment.
e. February 28: Recorded receipt of a payment from credit customer M. Simms; no discount
given.
3. The numbers indicate that the column totals have been posted to the accounts indicated.
For instance, the 411 indicate that $6,815 was posted as a credit to the sales account.
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: E-P1
Topic: Sales Journal
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McGraw-Hill Education.
7-70
150. A company records its transactions and events in four special journals and a general
journal. The company completed the following transactions a through j. Identify the journal in
which each transaction should be recorded.
a. Sold merchandise for cash. __________________
b. Collected on a customer’s account. __________________
c. Paid the monthly electric bill. __________________
d. Purchased office supplies on credit. __________________
e. Sold merchandise on credit. __________________
f. Paid a creditor on account. __________________
g. Received returned merchandise for credit. __________________
h. Purchased merchandise on account. __________________
i. Received proceeds from a note issued to the bank. __________________
j. Returned damaged merchandise to the supplier. __________________
151. Gershwin Company uses four special journals: purchases, sales, cash receipts, and cash
disbursements. The following sales and cash collections transactions were incurred during
October:
Oct. 1 Sold merchandise on credit to Lake Co. for $3,000, terms 2/10, n/30, Invoice
No. 245. Cost of the goods sold is $1,320.
5 Sold merchandise on credit to Sigma Corp. for $2,000, terms, 2/10, n/30,
Invoice No. 246. Cost of the goods sold is $740.
10 Accepted merchandise returned by Lake Co. from October 1 sale. Issued
credit memorandum for $500. Cost of the goods returned is $290
13 Received cash payment from Lake Co. for October 1 sale.
19 Received cash payment in full from Sigma Corp. for the October 5 sale.
28 Recorded cash sales for the month, $8,000. Cost of the goods sold is $4,220.
Record these transactions in the appropriate special journals below.
Sales Journal
Date
Account
Debited
Invoice
Number PR
Accounts Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory Cr.
Cash Receipts Journal
Date
Account
Credited Explanation PR
Cash
Dr.
Sales
Discount
Cr.
Accounts
Receivable
Cr.
Sales
Cr.
Other
Accounts
Dr.
Cost of
Goods Sold
Dr.
Inventory
Cr.
General Journal
Date Accounts DR CR
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7-72
152. A company uses four special journals: purchases, sales, cash receipts, and cash
disbursements. The following purchase and cash payments transactions were incurred during
August:
Aug. 1 Purchased merchandise from Able Co. for $2,000, terms 2/10, n/30. Invoice dated
August 1
7 Paid salaries accrued on July 31, $2,100 to manager Ms. Krenz, Check No. 756.
9 Returned merchandise costing $200 to Able Co. from August 1 purchase.
11 Paid Able Co. for the August 1 purchase, Check No. 757.
28 Purchased office supplies from Mercantile Co. on credit, terms 1/10, n/EOM for $335.
29 Paid cash to Incite Telephone Co. for monthly telephone bill $250, Check No.758.
Record these transactions in the appropriate special journals below.
Purchases Journal
Date Account
Date of
Invoice Terms PR
Accounts
Payable Cr.
Inventory
Dr.
Office
Supplies
Dr.
Other
Accounts
Dr.
Cash Disbursements Journal
Date
Ck.
No. Payee
Account
Debited PR
Cash
Cr.
Inventory
Cr.
Other
Accounts
Dr.
Accounts
Payable
Dr.
General Journal
153. Trimble Company began business on July 1. They use the perpetual inventory method.
The following transactions involving purchases and cash disbursements occurred during the
first week of July.
July 4 Purchased $25,000 of merchandise inventory on credit from the Fort City
Company, terms 2/10, n/30. Invoice dated July 1.
July 5 Purchased $12,000 of merchandise inventory on credit from the Phoenix
Company, terms 2/10, n/30. Invoice dated July 2.
July 8 Purchased $3,000 of office supplies for cash from Gleason Co. Check no. 1267.
July 10 Purchased $36,000 of office equipment on credit from Office Minder, terms
n/60. Invoice dated July 3.
July 13 Paid the amount due for the merchandise purchased from Fort City Company.
Check no. 1268.
July 22 Purchased $14,500 of merchandise inventory for cash from the Shilling Co.
Check no. 1269.
a. Use the purchases journal and the cash disbursements journal provided to record these
transactions.
b. Prepare a schedule of accounts payable as of July 31. There was no accounts payable on
July 1.
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7-75
Purchases Journal
Date Account
Date of
Invoice Terms PR
Accounts
Payable
Cr.
Inventory
Dr.
Office
Supplies
Dr.
Other
Accounts
Dr.
Cash Disbursements Journal
Date Ck. No. Payee Account Debited PR Cash Cr.
Inventory
Cr.
Other
Accounts
Dr.
Accounts
Payable
Dr.
154. The Moonlight Company completed the following sales and cash receipts transactions
during the first week of November. The Moonlight Company uses the perpetual inventory
system.
Nov. 1 Sold merchandise for $6,700 on credit to the Three Rivers Co., terms 2/10, n/30.
Invoice no. 1455. Cost of the merchandise sold is $3,600.
Nov. 1 Sold merchandise for $3,400 on credit to the Milwaukee Co., terms 2/10, n/30.
Invoice no. 1456. Cost of the merchandise sold is $1,800.
Nov. 2 Sold merchandise for $590 for cash to the Madison Co. Invoice no. 1457. Cost of
the merchandise sold is $300.
Nov. 3 Borrowed $10,000 from Lake City Bank on a long-term note payable.
Nov. 3 Sold merchandise for $7,200 on credit to the Pare Co., terms 2/10, n/30. Invoice
no. 1458. Cost of the merchandise sold is $4,000.
Nov. 5 Received the amount due from the Three Rivers Co. from the sale on November
1.
Nov. 6 Sold merchandise on credit for $950 to the Manitowok Co., terms 2/10, n/30.
Invoice No. 1459. Cost of the merchandise is $500.
Nov. 10 Received the amount due from the Milwakee Co. from the sale on November 1.
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7-78
a. Use the sales journal and the cash receipts journal to record these transactions.
b. Prepare a schedule of accounts receivable as of November 10. There was no accounts
receivable balance at November 1.
Sales Journal
Date Account Debited
Invoice
Number PR
Accounts Receivable Dr.
Sales Cr.
Cost of Goods Sold
Dr.
Inventory Cr.
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Cash Receipts Journal
Date Account Credited Explanation PR Cash Dr.
Sales
Discount
Dr.
Accounts
Receivable
Cr.
Sales
Cr.
Other
Accounts
Cr.
Cost of
Goods Sold Dr.
Inventory Cr.
155. Climbers Unlimited uses special journals to record its daily transactions. They use the
perpetual inventory system. Shown below is its cash receipts journal and selected ledger
accounts. Post the cash receipts journal to the appropriate ledger accounts.
Date
Account
Credited Explanation PR
Cash
Debit
Sales
Disc
Debit
Accts.
Rec.
Credit
Sales
Credit
Other
Accts.
Credit
COGS Dr.
Inv. Cr.
July 4 Bale Co. Invoice 303 3,200 34 3,234 2,000
7 Sales Cash sales 700 700 450
9 SMT Co. Invoice 304 950 950
10 Notes Pay Bank loan 5,400 5,400
20 Notes Rec. Delta Co. 2,200
20 Int. Rev. 2,310 110
12,560 34 4,184 700 7,710 2,450
General Ledger
Cash No. 101 Notes Payable No. 250
Dat
e
PR Debit Credit Balance Date PR Debit Credit Balance
7/1 4,500
Accounts Receivable No. 106 Sales No. 403
Dat
e
PR Debit Credit Balance Date PR Debit Credit Balance
7/1 6,700 7/1 30,000
Inventory No. 109 Sales Discounts No. 405
Dat
e
PR Debit Credit Balance Date PR Debit Credit Balance
7/1 15,000 7/1 400
Notes Receivable No. 115 Interest Revenue No. 415
Dat
e
PR Debit Credit Balance Date PR Debit Credit Balance
7/1 2,200
Accounts Payable No. 201 Cost of Goods Sold No. 502
Dat
e
PR Debit Credit Balance Date PR Debit Credit Balance
7/1 3,450 7/1 18,000
Accounts Receivable Subsidiary Leger
Bale Co. SMT Co.
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Date PR Debit Credit Balance Date PR Debit Credit Balance
7/1 4,750 7/1 1,950
156. The Skyview Company uses a sales journal, purchases journal, cash receipts journal,
cash disbursements journal, and general journal. They use the periodic inventory method. The
following sales and cash collections transactions occurred during the month of December:
Dec. 4 Sold merchandise on credit for $3,300 to the B&A Co., Invoice No. 313.
10 Sold merchandise for $500 cash to CAR Corp., Invoice 314.
13 Collected $3,300 from the B&A Co. for merchandise sold on December
4.
24 Sold merchandise on credit for $4,500 to Cowl Corp., Invoice No. 315.
Record these transactions using the journals below.
Cash Receipts Journal
Page 17
Date
Account
Credited Explanation PR
Cash
Dr.
Sales
Discount
Cr.
Accounts
Receiv.
Cr.
Sales
Cr.
Other
Accounts
Dr.
Answer:
Sales Journal Page
15
Date Account Debited
Invoice
Number PR
Accounts Receivable Dr.
Sales Cr.
12/4 B&A Co. 313 3,300
12/24 Cowl Corp. 315 4,500
Cash Receipts Journal Page 17
Date
Account
Credited Explanation PR
Cash
Dr.
Sales
Discount
Dr.
Accounts
Receivable
Cr. Sales Cr.
Other
Accounts
Cr.
12/10 Sales Cash sale 500 500
12/13 B&A Inv. 313 3,300 3,300
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Sales Journal
Page 15
Date Account Debited
Invoice
Number PR
Accounts Receivable Dr.
Sales Cr.
157. The Skyview Company uses a sales journal, purchases journal, cash receipts journal,
cash disbursements journal, and general journal. They use the periodic inventory method. The
following purchase and cash payments transactions occurred during the month of December:
Dec. 8 Purchased merchandise on credit for $1,800 from the Wexler Co., terms
2/10, n/30. Invoice dated December 8.
17 Paid amount owed to Wexler Co. from December 8 purchase, Check No.
1011.
27 Paid $400 cash for monthly rent to Iowa Properties, Check No. 1012.
31 Purchased equipment for $3,055 from Gore Corp., Check No. 1013.
Record these transactions using the journals below.
Purchases Journal
Page 20
Date Account
Date of
Invoice Terms PR
Accounts
Payable Cr. Inventory
Dr.
Office
Supplies
Dr.
Other
Accounts
Dr.
Cash Disbursements Journal
Page 22
Date
Ck.
No. Payee
Account
Debited PR Cash Cr.
Inventory
Cr.
Other
Accounts
Dr.
Accounts
Payable
Dr.
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158. Daisy Company began business on May 1. They use the periodic inventory method. The
following transactions involving purchases and cash disbursements occurred during the first
week of May.
May 2 Purchased $25,000 of merchandise inventory on credit from the Farthing
Company, terms 2/10, n/30. Invoice dated May 1.
May 3 Purchased $12,000 of merchandise inventory on credit from the Hacks
Company, terms 2/10, n/30. Invoice dated May 2.
May 3 Purchased $3,000 of office supplies for cash from Liston Co. Check no. 1267.
May
May 4 Purchased $36,000 of office equipment on credit from Superior Office, terms
n/60. Invoice dated May 3.
May 6 Paid the amount due for the merchandise purchased from Farthing Company.
Check no. 1268.
May 6 Purchased $14,500 of merchandise inventory for cash from the Hills Co.
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Check no. 1269.
a. Use the purchases journal and the cash disbursements journal to record these transactions.
b. Prepare a schedule of accounts payable. There was no accounts payable balance on May 1.
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Purchases Journal Page 20
Date Account
Date of
Invoice Terms PR
Accounts
Payable Cr.
Purchases
Dr.
Office
Supplies Dr.
Other
Accounts Dr.
Cash Disbursements Journal Page 22
Date Ck. No. Payee Account Debited PR Cash Cr.
Purchases
Discount
Cr.
Other
Accounts
Dr.
Accounts
Payable Dr.
159. The Lavender Company completed the following sales and cash receipts transactions
during the first week of December. The Lavender Company uses the periodic inventory
system.
Dec 1 Sold merchandise for $6,700 on credit to the Banks Co., terms 2/10, n/30, invoice no.
1455. Cost of the merchandise sold is $3,600.
Dec 1 Sold merchandise for $3,400 on credit to the Warsaw Co., terms 2/10, n/30.
Invoice no. 1456. Cost of the merchandise sold is $1,800.
Dec 2 Sold merchandise for $590 for cash to the Draper Co. Invoice no. 1457. Cost of
the merchandise sold is $300.
Dec 3 Borrowed $10,000 from Franklin Savings on a long-term note payable.
Dec 3 Sold merchandise for $7,200 on credit to the Wentner Co., terms 2/10, n/30.
Invoice no. 1458. Cost of the merchandise sold is $4,000.
Dec 5 Received the amount due from the Banks Co. from the sale on December 1.
Dec 6 Sold merchandise on credit for $950 to the Global Co., terms 2/10, n/30. Invoice
No. 1459.
Dec 6 Received the amount due from the Warsaw Co. from the sale on December 1.
a. Use the sales journal and the cash receipts journal to record these transactions.
b. Prepare a schedule of accounts receivable. There was no accounts receivable balance at
December 1.
Sales Journal
Date Account Debited
Invoice
Number PR
Accounts Receivable Dr.
Sales Cr.
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Cash Receipts Journal
Date
Account
Credited Explanation PR
Cash
Dr.
Sales
Discount
Dr.
Accounts
Receivable
Cr.
Sales
Cr.
Other
Accounts
Cr.
160. The following information is available for Soda Station, Inc. (all amounts are in
millions):
U.S. Canada Mexico
Segment sales…………………… $6,300 $5,200 $3,800
Segment operating income…….. 2,120 2,240 1,200
Segment average assets……….. 3,800 4,200 2,800
a. Determine the segment return on assets for each geographic segment.
b. Comment on the results. How do the segments compare with respect to profitability?
c. What measures could be taken to improve segment return?
161. The following segment information is available for the three regions of the country in
which Fresh Snacks, Inc. does business (all amounts are in millions):
Midwest West South
Segment operating income…….. 120 380 75
Segment average assets……….. 310 782 103
a. Determine the segment return on assets for each geographic segment.
b. Comment on the results. How do the segments compare with respect to profitability?
162. Plimpton Sales uses special journals to record business transactions. Plimpton sells office
equipment. The company completed the following transactions a through j. Identify the
journal in which each transaction should be recorded.
a. Paid an installment on a bank loan.
b. Purchased inventory on credit.
c. Paid cash to a creditor.
d. Sold equipment to a customer on credit.
e. Sold equipment to a customer for cash.
f. Paid employees’ salaries in cash.
g. Received payment from a customer on credit.
h. Purchased office supplies on account.
i.
Returned inventory to creditor before
payment.
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j. Sold equipment on account.
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163. Jamison Company uses special journals to record transactions. All of the companies
listed below supply inventory to Jamison except McGarry Co. that supplies equipment. Use
the purchases journal given below to answer the following questions:
a. Foot and crossfoot the journal for accuracy.
Purchases Journal
Date Account Date of
Invoice Terms PR
Accounts
Payable
Cr.
Inventory
Dr.
Office
Supplies
Dr.
Other
Accounts
Dr.
5/3 Jones Co. 5/2 2/10, n/30 20,000 20,000
5/5 Perry Co. 5/4 2/10, n/30 18,000 18,000
5/7 McGarry Co./Equip. 5/6 n/60 36,000 36,000
5/8 Colder Co. 5/7 2/10, n/30 10,000
5/9 French Co. 5/8 2/10, n/30 12,000 12,000
b. An error was made in the journal. Identify the error and indicate how to correct it.
c. When Jamison compares the general ledger Accounts Payable account to the Accounts
Payable ledger, it notices that the general ledger control account is $10,000 more than the
schedule of Accounts Payable. What is the most likely cause and how should it be corrected?
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164. Morris Company uses special journals to record transactions. Below are the sales journal
and cash receipts journal for Morris. Prepare the following:
a. Open an accounts receivable subsidiary ledger having a T-account for each customer. Post
the invoices to the subsidiary ledger.
b. Open an Accounts Receivable controlling T-Account. Post the end-of the month totals that
affect the Accounts Receivable account only.
c. Prepare a schedule of accounts receivable and prove that its total equals the Accounts
Receivable controlling account balance.
Sales Journal
Date Account Debited
Invoice
Number PR
Accounts Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory Cr.
12/1 Wazoo Co. 1200 6,900 3,500
12/1 Fargo Co. 1201 3,400 1,800
12/3 Jansen Co. 1202 7,200 4,000
12/6 Marsh Co. 1203 3,000 1,500
Totals 20,500 10,800
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McGraw-Hill Education.
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Cash Receipts Journal
Date Account Credited Explanation PR
Cash
Dr.
Sales
Discount
Dr.
Accounts
Receivable
Cr.
Sales
Cr.
Other
Accounts
Cr.
Cost of Goods
Sold Dr.
Inventory Cr.
12/2
Sales
Cash sales
12,000
12,000
6,500
12/3
Notes Payable
Bank loan
15,000
15,000
12/5
Wazoo Co.
Invoice 12/1
6,762
138
6,900
12/6
Fargo Co.
Invoice 12/1
3,332
68
3,400
Totals
37,094
206
10,300
12,000
15,000
6,500
a.
Wazoo Fargo Jansen Marsh
6,900 6,900 3,400 3,400 7,200 3,000
0 0 7,200 3,000
b.
Accounts
Receivable
20,500 10,30
0
10,200
c.
Morris Company
Schedule of Accounts Receivable
December 6
Jansen Co. $7,200
Marsh Co. 3,000
Total accounts receivable $10,200
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: E-P2
Topic: Proving the Ledgers
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165. Fagin Company uses special journals to record transactions. Below are the sales journal
and cash receipts journal for Fagin in the first part of August.
Required:
a. Open an accounts receivable subsidiary ledger having a T-account for each customer. Post
the invoices to the subsidiary ledger.
b. Open an Accounts Receivable controlling T-Account. Post the end-of the month totals that
affect the Accounts Receivable account only.
c. Prepare a schedule of accounts receivable and prove that its total equals the Accounts
Receivable controlling account balance.
Sales Journal
Date
Account
Debited Invoice No. PR
Accounts Receivable
Dr. Sales Cr.
Cost of Goods Sold Dr.
Inventory Cr.
8/1 Pip Co. 1200 6,900 3,000
8/1 Rivers Co. 1201 4,200 1,900
8/3 Lloyd Co. 1202 7,200 4,000
8/6 Carmen Co. 1203 2,500 1,200
Totals 20,800 10,100
Cash Receipts Journal
Date
Account
Credited Explanation PR Cash Dr.
Sales
Discount
Dr.
Accounts
Receivabl
e Cr. Sales Cr.
Other
Accounts
Cr.
Cost of
Goods
Sold Dr.
Inventory
8/2 Sales Cash sales 10,000 10,000 5,500
8/3 Notes
Payable
Bank loan 12,000 12,000
8/5 Pip Co. Invoice 8/1 6,762 138 6,900
8/9 Lloyd Co. Invoice 8/3 7,056 144 7,200
Totals 35,818 282 14,100 10,000 12,000 6,500
a.
Carmen Lloyd Pip Rivers
2,500 7,200 7,200 6,900 6,900 4,200
2,500 0 0 4,200
b.
Accounts
Receivable
20,800 14,10
0
6,700
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c.
Fagin Company
Schedule of Accounts Receivable
August 9
Carmen Co. $2,500
Rivers Co. 4,200
Total accounts receivable $6,700
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: E-P2
Topic: Proving the Ledgers
166. Valley Company shows the following customer accounts in its subsidiary ledger and the
Accounts Receivable account in the general ledger for the month of July. Prepare a schedule
of accounts receivable as proof that the subsidiary ledger balances equals the Accounts
Receivable controlling account balance.
Laredo Spring Dallas Preston
2,500 1,200 5,650 5,650 3,950 1,950 7,200
1,300 0 2,000 7,200
Accounts
Receivable
19,300 8,800
10,500
167. HealthCo Company uses special journals to record transactions. HealthCo uses the
perpetual inventory system. Journalize the following transactions in the appropriate special
journal. All credit sales have 2/10, n/30 terms.
Nov. 3 The company purchased $5,500 of merchandise on credit from Hatch, terms 2/10,
n/30.
5 The company sold merchandise costing $5,250 to Level Company for $8,900,
invoice no. 278.
7 The owner, L. Garvey, contributed $15,000 cash to the company.
8 The company purchased $7,200 of merchandise on credit from Gentry Company,
terms 1/15, n/30.
10 The company sold merchandise costing $4,630 to Nance Company for $8,250,
invoice no. 279.
14 The company received payment from Level Company for the November 5 sale
within the discount period.
15 HealthCo paid salaries of $5,560 for the first half of the month, check no. 214.
16 HealthCo returned $1,200 of the merchandise purchased on November 8 to Gentry
Company.
20 HealthCo paid Gentry for the purchase on November 8 within the discount period,
check no. 215.
22 HealthCo purchased office equipment from Vale Co. costing $12,000 on credit,
terms n/30.
Sales Journal
Date Account Debited
Invoice
Number PR
Accounts Receivable
Dr. Sales Cr.
Cost of Goods Sold Dr.
Inventory Cr.
Purchases Journal
Date Account
Date of
Invoice Terms PR
Accounts
Payable
Cr.
Inventory
Dr.
Office
Supplies
Dr.
Other
Accounts
Dr.
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Cash Receipts Journal
Dat
e
Account
Credited
Explanation
PR
Cash
Dr.
Sales
Discount
Dr.
Accounts
Receivable
Cr. Sales Cr.
Other
Accounts
Cr.
Cost of
Goods Sold
Dr.
Inventory
Cr.
Cash Disbursements Journal
Date
Ck. No.
Payee Account Debited PR Cash Cr.
Inventory
Cr.
Other
Accounts
Dr.
Accounts
Payable
Dr.
General Journal
168. The following information is available for Napa, Inc. (all amounts are in millions):
U.S. Canada. Europe
Segment sales $7,745 $8,940 $4,780
Segment operating income 2,320 2,455 595
Segment average assets 5,590 8,750 1,480
a. Determine the segment return on assets for each geographic segment.
b. Comment on the results. How do the segments compare with respect to profitability?
169. The __________________ principle requires that the benefits from an activity in an
accounting information system outweigh the costs of that activity.
170. The _____________________ principle requires that an accounting information system
aid managers in controlling and monitoring business activities.
171. _____________________________________ consist of people, records, methods, and
equipment that collect and process data from transactions and events, organize them in useful
reports and communicate results to decision makers.
Topic: Accounting information systems
Blooms: Remember
AACSB: Technology
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Difficulty: 1 Easy
Learning Objective: E-C1
Topic: Fundamental System Principles
172. The _________________ principle requires that an accounting information system report
useful, understandable, timely, and pertinent information for effective decision making.
173. The __________________ principle requires that an accounting information system
conforms with a company’s activities, personnel, and structure, and must adapt to a company’s
unique characteristics.
174. The ___________ principle requires that an accounting information system must be able
to adapt to changes in the company, business environment, and needs of decision makers.
175. __________________ provide the basic information processed by an accounting system,
and can include bank statements, billings to customers, and employee earnings records.
176. ______________________ capture information from source documents and enable its
transfer to the system’s information processing component.
177. _____________________ are the part of the accounting information system that
interprets, transforms, and summarizes information for use in analysis and reporting.
178. ____________________ is the accounting system component that keeps data in a form
accessible to information processors.
179. ____________________ are the part of the accounting information system that provide
the means to take information out of the system and make it available to users.
180. A __________________ journal is used to record and post transactions of similar type.
181. A __________________ is an all-purpose journal that can record any type of
transaction.
182. Using _______________ ledgers, that store transaction data of individual accounts with
common characteristics, removes unnecessary details from the general ledger.
183. ____________________________________ refers to the programs that help managers
direct a company’s vital operations.
184. ___________________ processing of transactions enters and processes data as soon as
source documents are available.
185. __________________ processing of transactions accumulates source documents for a
period of time and then processes them all at once such as daily, weekly, or monthly.
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186. _______________________ are links among computers giving different users and
different computers access to common databases and programs.
187. A ____________________ is a part of a company that is separately identified by its
products, or services, or by the geographic market it serves.
188. The _______________________ ratio is a measure of a segment’s profitability and is
calculated as segment operating income divided by segment average assets.
189. Individual transactions in the sales journal are posted regularly to customers’ accounts in
the ___________________________.
190. A _______________________________________ is a listing of accounts from the
accounts payable ledger with their balances and the sum of all balances.
191. The difference in the sales journal between the perpetual and periodic inventory systems
is a column to record _________________________ and __________________ for each sale.
This column is used in the perpetual system but not in the periodic.