1) An adjusting entry
is always a compound entry
affects two balance sheet accounts
c.affects two income statement accounts
d.affects a balance sheet account and an income statement account
2) Bell Food Store developed the following information in recording its bank statement
for the month of March.
Balance per books March 31$ 3,664
Balance per bank statement March 31$10,900
(1)Checks written in March but still outstanding $7,000.
(2)Checks written in February but still outstanding $3,100.
(3)Deposits of March 30 and 31 not yet recorded by bank $5,200.
(4)NSF check of customer returned by bank $1,200.
(5)Check No. 210 for $593 was correctly issued and paid by bank but incorrectly
entered in the cash payments journal as payment on account for $539.
(6)Bank service charge for March was $50.
(7)A payment on account was incorrectly entered in the cash payments journal and
posted to the accounts payable subsidiary ledger for $824 when Check No. 318 was
correctly prepared for $284. The check cleared the bank in March.
(8)The bank collected a note receivable for the company for $3,000 plus $100 interest
revenue.
Instructions
Prepare a bank reconciliation at March 31 .
3) Errors occasionally occur when physically counting inventory items on hand.
Identify the financial statement effects of an overstatement of the ending inventory in
the current period. If the error is not corrected, how does it affect the financial
statements for the following year?
4) Horizontal analysis (trend analysis) percentages for Staas Companys sales, cost of
goods sold, and expenses are listed here.
Horizontal Analysis 2015 2014 2013
Sales98.2%104.8%100.0%
Cost of goods sold102.598.0100.0
Expenses108.696.4100.0
Instructions
Explain whether Staas net income increased, decreased, or remained unchanged over
the 3-year period.
5) Why would special journals used in different businesses not be identical in format?
What type of business would maintain a cash receipts journal but not include a column
for accounts receivable?
6) The preparation of a ______________ and ______________ entries are two optional
steps in the accounting cycle.
7) Dredd Company has begun a worksheet for preparing a statement of cash flows. The
following additional information is provided:
1>Cash dividends of $8,000 were paid during the year.
2>Land which originally cost $60,000 was sold for $52,000.
3>Common stock was issued at par value for cash.
Instructions
Complete the worksheet for Judge Company.
DREDD COMPANY
Worksheet
Statement of Cash Flows
For the Year Ended December 31, 2014
BalanceReconciling ItemsBalance
Balance Sheet Accounts12/31/13DebitsCredits12/31/14
Debits
Cash30,00060,000
Accounts receivable40,00054,000
Inventory90,000112,000
Land60,000-0-
Equipment131,000142,000
Total351,000368,000
Credits
Accounts payable15,00010,000
Bonds payable25,00010,000
Accumulated depreciation
equipment81,00096,000
Common stock170,000180,000
Retained earnings 60,000 72,000
Total351,000368,000
Statement of Cash Flows Effects
Operating activities
Net income20,000
