The following transactions were made by Allen Company. Assume all investments are
short-term and are readily marketable.
Instructions
Journalize the transactions.
Answer:
The worksheet for Montoya Company has been completed through the adjusted trial
balance. You are ready to extend each amount to the appropriate financial statement
column. Indicate for each account, the financial statement column to which the account
should be extended by placing a check mark (ƒ–) in the appropriate column.
Answer:
Match the items below by entering the appropriate code letter in the space provided.
1> An incentive to encourage customers to pay their accounts early.
2> Expenses incurred in the process of earning sales revenue.
3> Freight terms that require the seller to pay the freight cost.
4> Sales revenue less sales returns and allowances and sales discounts.
5> A document that supports each credit purchase.
6> Net sales less cost of goods sold.
7> Freight cost to deliver goods to customers reported as a selling expense.
8> Requires a physical count of goods on hand to compute cost of goods sold.
9> Gross profit less total operating expenses.
10> Freight terms that require the buyer to pay the freight cost.
Answer:
Personnel who handle cash receipts should have the option of taking a vacation or not.
Answer:
The effective-interest method of amortization results in varying amounts of
amortization and interest expense per period but a constant interest rate.
Answer:
In accordance with the historical cost principle, brokerage fees should be added to the
cost of an investment.
Answer:
Galena Pharmacy reported cost of goods sold as follows:
Jim Holt, the bookkeeper, made two errors:
(1) 2015 ending inventory was overstated by $7,000.
(2) 2016 ending inventory was understated by $16,000.
Instructions
Assuming the errors had not been corrected, indicate the dollar effect that the errors had
on the items appearing on the financial statements listed below. Also indicate if the
amounts are overstated (O) or understated (U).
Answer: