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13. Assume that the sales made by Wessling Corporation for the month ended February 28, 20xx, were
made to customers using credit cards and totaled $5,666. Prepare one journal entry to record these
sales assuming that all of the credit card companies charge Wessling Corporation a 2.5 percent
discount fee. (Omit date.) Round to the nearest whole dollar.
General Journal
Date
Description
Post.
Ref.
Debit
Credit
14. Demmler Corporation entered into the transactions listed below. In the journal provided, prepare
Demmler's journal entries, assuming use of the periodic inventory system. Omit explanations.
Oct.
3
Purchased $1,500 of merchandise on credit, terms n/15.
6
Returned $300 of the goods purchased on October 3.
7
Paid freight charges of $150 on goods purchased on October 3.
12
Paid for the goods purchased on October 3.
13
Sold goods on credit for $1,000, terms n/30.
14
The customer of October 13 returned $200 of the goods.
23
Received payment from the customer of October 13.
25
Purchased office supplies for $450.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
15. Khan Products, Inc., entered into the transactions listed below. In the journal provided, prepare Khan's
journal entries, assuming use of the periodic inventory system. Omit explanations.
June
3
Purchased $1,600 of merchandise on credit, terms 2/10, n/60.
6
Returned $200 of the goods purchased on June 3.
7
Paid freight charges of $140 on goods purchased on June 3.
12
Paid for the goods purchased on June 3.
13
Sold goods on credit for $2,000, terms 1/10, n/30.
14
The customer of June 13 returned $200 of the goods.
23
Received payment from the customer of June 13.
25
Purchased office supplies for $500.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
16. Why is the separation of duties an important control activity in a good system of internal control?
17. An accountant is responsible for the following activities: (1) receiving all cash; (2) maintaining the
general ledger; (3) maintaining the accounts receivable subsidiary ledger that includes the individual
records of each customer; (4) maintaining the journals for recording sales, purchases, and cash
receipts; and (5) preparing monthly statements to be sent to customers. As a service to customers and
employees, the company allows the accountant to cash checks of up to $50 with money from the cash
receipts. When deposits are made, the checks are included in place of the cash receipts. What
weaknesses in internal control exist in this system?
18. Colton, Inc., a specialty retailer of customized audio systems for automobiles, installed a perpetual
inventory system in the second quarter of 20x7. The new system allowed the firm to adjust its
merchandise inventories to sales patterns more effectively and to prepare monthly financial statements.
Although the system led to an improvement in sales and income, the gross margin on the monthly
income statements was falling below both management's expectations and the industry average. At the
end of 20x8, a physical inventory revealed that actual merchandise inventory was considerably lower
than the perpetual inventory records indicated. The merchandise inventories of some stores were off
more than others, but all had deficiencies. What probably caused these losses and what steps could be
taken to prevent them in the future?
19. Indicate whether each business practice listed below strengthens (S) or weakens (W) a company's
system of internal control.
_____ a. Bonding of employees
_____ b. Limiting the number of people who have access to cash
_____ c. Combining the recordkeeping and custodianship functions
_____ d. Making all payments with cash
_____ e. Keeping rotation of key employees to a minimum
_____ f. Using prenumbered sales tickets
20. Indicate whether each business practice listed below strengthens (S) or weakens (W) a company's
system of internal control.
_____ a. Discouraging employees from taking paid vacations
_____ b. Using banking facilities as much as possible
_____ c. Having employees bonded
_____ d. Conducting surprise audits of cash on hand
_____ e. Having one person open the mail
_____ f. Having the receiving department compare goods received with goods ordered
21. For each description below, state which document is being described.
a. Document issued to permit the treasurer to make a payment
b. Bill sent by the vendor to the purchaser
c. Written request prepared by a department asking the purchasing department to make a purchase
d. Document accompanying money put in the bank
e. Document describing items in a shipment of goods delivered
f. Document sent to a vendor requesting shipment of goods
22. Indicate the letter of where each of the following documents would be prepared and the letter of where
it would be sent.
a. Requesting department
d. Accounting department
b. Purchasing department
e. Treasurer
c. Receiving department
f. Vendor
_____ 1. Purchase requisition
_____ 2. Receiving report
_____ 3. Invoice
_____ 4. Check authorization
_____ 5. Check
23. On August 1, Phillips Industries purchased $12,000 of merchandise on credit. Terms of 1/10, n/30 are
extended, and Phillips makes payment on August 9.
a. In the journal provided, make Phillips's entries, assuming use of the periodic inventory system.
b. Make the entry that would have been made had payment been made on August 17.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
24. Scuilli Corporation purchased $5,000 worth of merchandise, terms n/30, from the Zupcic Corporation
on June 4. The cost of the merchandise to Zupcic was $3,600. On June 10, Scuilli returned $700 worth
of goods to Zupcic for full credit. The goods had a cost of $450 to Zupcic. On June 12, the account
was paid in full. Prepare journal entries without explanations to record these transactions in (a)
Scuilli's records and (b) Zupcic's records. Assume use of the perpetual inventory system by both
companies.
a. Scuilli's records:
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
b. Zupcic's records:
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
25. Using the following information, calculate for 2010 (a) net sales, (b) cost of goods sold, (c) gross
margin, and (d) net income.
Freight-In
$ 200
Merchandise Inventory, December 31, 2009
15,000
Sales
60,000
Purchases Returns and Allowances
300
Advertising Expense
4,000
Purchases
20,000
Merchandise Inventory, December 31, 2010
5,000
Sales Returns and Allowances
500
General and Administrative Expenses
7,000
26. Using the following information, calculate for 20xx (a) net sales, (b) beginning merchandise inventory,
(c) gross margin, and (d) net income.
Sales staff Salaries Expense
$ 7,000
Sales
90,000
Ending Merchandise Inventory
16,000
Purchases Returns and Allowances
500
General and Administrative Expenses
11,000
Sales Returns and Allowances
1,200
Freight-In
1,500
Purchases
30,000
Cost of Goods Sold
47,000
27. The income statement account balances on December 31, 2010, for Janice Corporation appear below.
In addition, beginning merchandise inventory was $3,000 and ending merchandise inventory was
$4,000. Prepare a 2010 income statement for the company.
Account Name
Balance
Sales
$100,000
Sales Returns and Allowances
1,500
Purchases
50,000
Purchases Returns and Allowances
3,000
Freight-In
5,000
Selling Expense
25,000
General and Administrative Expenses
10,000
Income Taxes Expense
1,800
28. Compute the dollar amount of the items indicated by letters a through f in the table below.
Case 1
Case 2
Sales
$5,500
$13,000
Beginning Merchandise Inventory
75
d
Net Cost of Purchases
4,975
4,600
Ending Merchandise Inventory
a
600
Cost of Goods Sold
b
e
Gross Margin
c
4,800
Operating Expenses
450
f
Income Before Income Taxes
150
1,200
29. Prepare journal entries without explanations for the merchandising transactions listed below for Naveh
Corporation. Assume use of the periodic inventory system.
July
1
Sold merchandise to Hobart Company for $1,000, terms n/15.
2
Purchased merchandise from Stowe Corporation for $4,000, terms n/15.
3
Gave credit to Hobart Company for merchandise returned, $100.
5
Purchased merchandise from Rajah Company for $5,000, terms n/30.
10
Received payment from Hobart Company for purchase of July 1.
11
Returned $500 in merchandise to Rajah Company for credit.
13
Paid Stowe Corporation in full for purchase of July 2.
14
Paid Rajah Company in full for purchase of July 5.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
