Question: Assume that Old Harborreported the following

> The journal entry to record the receipt of land and a building and issuance of commonstock a. Debits Land and Building and credits Common Stock. b. Debits Land and credits Common Stock. c. Debits Land, Building, and Common Stock. d. Debits Common Stock a

> Which statement is false? a. Revenues are increased by credits. b. Assets are increased by debits. c. Liabilities are decreased by debits. d. Dividends are increased by credits.

> Which of the following is not an asset account? a. Salary Expense b. Service Revenue c. Common Stock d. None of the above accounts is an asset.

> All of the following are controls for cash received over the counter except a. The customer should be able to see the amounts entered into the cash register. b. The cash drawer should open only when the sales clerk enters an amount on the keys. c. The sa

> Where do we first record a transaction? a. Ledger b. Journal c. Trial balance d. Account

> Using your answers to Short Exercise 5-17, show how the First Interstate Bank will report the following: a. Whatever needs to be reported on its classified balance sheet at June 30, 2013. b. Whatever needs to be reported on its income statement for the y

> Sunnyvale Loan Company is in the consumer loan business. Sunnyvale borrows from banks and loans out the money at higher interest rates. Sunnyvale’s bank requires Sunnyvale to submit quarterly financial statements to keep its line of credit. Sunnyvale’s m

> Which of the following transactions will increase an asset and increase stockholders’equity? a. Collecting cash from a customer on an account receivable b. Borrowing money from a bank c. Performing a service on account for a customer d. Purchasing suppli

> Which of the following transactions will increase an asset and increase a liability? a. Purchasing office equipment for cash b. Issuing stock c. Buying equipment on account d. Payment of an account payable

> What is the effect on total assets and stockholders’ equity of paying the telephone bill assoon as it is received each month? Total assets _______Stockholders’ equity a. Decrease ………………………………… Decrease b. Decrease ………………………………… No effect c. No effect ………

> Purchasing a building for $95,000 by paying cash of $25,000 and signing a note payablefor $70,000 will a. Decrease total assets and increase total liabilities by $25,000. b. Decrease both total assets and total liabilities by $25,000. c. Increase both to

> Purchasing computer equipment for cash will a. Increase both total assets and total liabilities. b. Decrease both total assets and stockholders’ equity. c. Decrease both total liabilities and stockholders’ equity. d. Have no effect on total assets, total

> Receiving cash from a customer on account will a. Increase stockholders equity. b. Decrease liabilities. c. Increase total assets. d. Have no effect on total assets.

> Performing a service on account will a. Increase stockholders’ equity. b. Increase total assets. c. Increase total liabilities. d. Both a and b.

> Requiring that an employee with no access to cash do the accounting is an example of which characteristic of internal control? a. Monitoring of controls b. Competent and reliable personnel c. Assignment of responsibility d. Separation of duties

> Purchasing a laptop computer on account will a. Increase total assets. b. Have no effect on stockholders’ equity. c. Increase total liabilities. d. All of the above.

> An investment of cash into the business will a. Decrease total liabilities. b. Decrease total assets. c. Have no effect on total assets. d. Increase stockholders’ equity.

> Refer to Exercise 2-34B. In Exercise 2-34B Set upthe following T-accounts: Cash, Accounts Receivable, Office Supplies, Office Furniture, AccountsPayable, Common Stock, Dividends, Service Revenue, Salary Expense, and Rent Expense. Recordthe following tra

> On August 31, 2012, Nancy Totten borrowed $5,000 from First Interstate Bank. Totten signed a note payable, promising to pay the bank principal plus interest on August 31, 2013. The interest rate on the note is 7%. The accounting year of First Interstate

> Set upthe following T-accounts: Cash, Accounts Receivable, Office Supplies, Office Furniture, AccountsPayable, Common Stock, Dividends, Service Revenue, Salary Expense, and Rent Expense. Recordthe following transactions directly in the T-accounts without

> The trial balance of Doyle, Inc.,at September 30, 2012, does not balance. The accounting records hold the following errors: a. Recorded a $600 cash revenue transaction by debiting Accounts Receivable. The creditentry was correct. b. Posted a $3,000 cre

> The accounts of Custom PoolService, Inc., follow with their normal balances at June 30, 2012. The accounts are listed in noparticular order. Requirements 1. Prepare the company’s trial balance at June 30, 2012, listing accounts in pro

> The first seven transactionsof Gallagher Advertising, Inc., have been posted to the company’s accounts as follows: Requirement Prepare the journal entries that served as the sources for the seven transactions. Include anexplanation fo

> Refer to Exercise 2-29B. In Exercise 2-29B Double TreeCellular, Inc., completed the following transactions during September 2012, its first month ofoperations: Sep 1 Received $19,900 and issued common stock. 2 Purchased $400 of office supplies on accoun

> Double TreeCellular, Inc., completed the following transactions during September 2012, its first month ofoperations: Sep 1 Received $19,900 and issued common stock. 2 Purchased $400 of office supplies on account. 4 Paid $14,000 cash for land to use as a

> All of the following are internal control procedures except a. Electronic devices b. Assignment of responsibilities c. Internal and external audits d. Sarbanes-Oxley reforms

> Refer toExercise 2-27B. In Exercise 2-27B Gary Smith opened a medical practice specializing in surgery. During the first month of operation (July), the business, titled Gary Smith, Professional Corporation (P.C.), experienced thefollowing events: Jul 6

> Gary Smith opened a medical practice specializing in surgery. During the first month ofoperation (July), the business, titled Gary Smith, Professional Corporation (P.C.), experienced thefollowing events: Jul 6 Smith invested $41,000 in the business, whic

> Thefollowing selected events were experienced by either Simply Sensible, Inc., a corporation, or BillGriggs, the major stockholder. State whether each event (1) Increased, (2) Decreased, or (3) Had noeffect on the total assets of the business. Identify a

> Assume M. Crue opened a store in San Francisco, starting with cash and commonstock of $104,000. Sharon Saboda, the store manager, then signed a note payable to purchase landfor $95,000 and a building for $125,000. Saboda also paid $55,000 for equipment a

> 1. Compute the amount of interest during 2012, 2013, and 2014 for the following note receivable: On May 31, 2012, TMRN Bank lent $220,000 to Bob Morrison on a two-year, 8% note. 2. Which party has a (an) a. Note receivable? b. Note payable? c. Interest r

> Refer to Exercise 2-23A. 1. After recording the transactions in Exercise 2-23A, and assuming they all occurred in themonth of May 2012, prepare the trial balance of Lynn Dover, Attorney, at May 31, 2012. Usethe T-accounts that have been prepared for the

> Set upthe following T-accounts: Cash, Accounts Receivable, Office Supplies, Office Furniture, AccountsPayable, Common Stock, Dividends, Service Revenue, Salary Expense, and Rent Expense. Recordthe following transactions directly in the T-accounts without

> The trial balance of Garvey,Inc., at September 30, 2012, does not balance: The accounting records hold the following errors: a. Recorded a $100 cash revenue transaction by debiting Accounts Receivable. The creditentry was correct. b. Posted a $1,000 cr

> The accounts of Deluxe PatioService, Inc., follow with their normal balances at June 30, 2012. The accounts are listed in noparticular order. Requirements 1. Prepare the company’s trial balance at June 30, 2012, listing accounts in pr

> The first seven transactions ofEverett Advertising, Inc., have been posted to the company’s accounts as follows: Requirement Prepare the journal entries that served as the sources for the seven transactions. Include anexplanation for

> All of the following are objectives of internal control except a. To safeguard assets b. To maximize net income c. To ensure accurate and reliable accounting records d. To comply with legal requirements

> Analyze the impact of business transactions on accounts;record (post) transactions in the books; construct and use a trial balance) Refer to Exercise 2-18A. In Exercise 2-18A Doherty TreeCellular, Inc., completed the following transactions during April

> Doherty TreeCellular, Inc., completed the following transactions during April 2012, its first month ofoperations: Apr 1 Received $19,800 and issued common stock. 2 Purchased $200 of office supplies on account. 4 Paid $14,300 cash for land to use as a bui

> Refer toExercise 2-16A. In Exercise 2-16A Bob Morin opened a medical practice specializing in surgery. During the first month of operation (August), the business, titled Bob Morin, Professional Corporation (P.C.), experienced the following events: Aug 6

> Bob Morin opened a medical practice specializing in surgery. During the first month ofoperation (August), the business, titled Bob Morin, Professional Corporation (P.C.), experiencedthe following events: Aug 6 Morin invested $39,000 in the business, whic

> Thefollowing selected events were experienced by either Fact Finders, Inc., a corporation, or Peter Flip,the major stockholder. State whether each event (1) Increased, (2) Decreased, or (3) Had no effecton the total assets of the business. Identify any s

> Highland Bank & Trust Company lent $150,000 to Sherman Summers on a three-month, 8% note. Record the following for the bank (explanations are not required): a. Lending the money on February 10. b. Collecting the principal and interest at maturity. Specif

> Explain what a transaction is; analyze the impact of transactionson accounts) Assume Casual Wear opened a store in San Francisco, starting with cash and commonstock of $98,000. Nicole Marchildon, the store manager, then signed a note payable to purchase

> EighthInvestments, Inc., began by issuing common stock for cash of $100,000. The company immediatelypurchased computer equipment on account for $60,000. 1. Set up the following T-accounts of Eighth Investments, Inc.: Cash, Computer Equipment,Accounts Pay

> Accounting has its own vocabulary andbasic relationships. Match the accounting terms at the left with the corresponding definition ormeaning at the right. ___ 1. Debit ___ 2. Expense ___ 3. Net income ___ 4. Ledger ___ 5. Posting ___ 6. Normal balance

> Refer to Darlington, Inc.’s trial balance in ShortExercise 2-10. The purpose of this exercise is to help you learn how to correct three commonaccounting errors. Error 1.Slide. Suppose the trial balance lists Land as $4,500 instead of $4

> Assume Slippy Slides borrowed $17 million from West Side Bank and agreed to (a) Pay an interest rate of 7.0% and (b) Maintain a compensating balance amount equal to 5.1% of the loan. Determine Slippy Slides’ actual effective interest rate on this loan.

> Darlington, Inc.’s trial balance follows. Compute these amounts for the business: 1. Total assets 2. Total liabilities 3. Net income or net loss during December Darlington, Inc. Trial Balance December 31, 2012 Balance Debit Accoun

> TolmanUnlimited performed service for a client who could not pay immediately. Tolman expected to collectthe $4,700 the following month. A month later, Tolman received $3,000 cash from the client. 1. Record the two transactions on the books of Tolman Unli

> Architect Aaron Ashton purchased supplies onaccount for $1,700. Later Ashton paid $425 on account. 1. Journalize the two transactions on the books of Aaron Ashton, architect. Include an explanationfor each transaction. 2. Open a T-account for Accounts Pa

> After operating for several months,architect Edmund Roberge completed the following transactions during the latter part of March: Mar 15Borrowed $31,000 from the bank, signing a note payable. 22 Performed service for clients on account totaling $8,900. 2

> Roma Design specializes in imported clothing. During March, Romacompleted a series of transactions. For each of the following items, give an example of a transactionthat has the described effect on the accounting equation of Roma Design. a. Increase one

> Answer these questions about receivables and uncollectibles. For the true-false questions, explain any answers that turn out to be false. 1. True or false? Credit sales increase receivables. Collections and write-offs decrease receivables. 2. True or fal

> Refer to Short Exercise 2-3.Which of the transactions of Faith Varitek, MD, increased the total assets of the business? Foreach transaction, identify the asset that was increased. In Exercise 2-3 Faith Varitek, MD, opened a medical practice. The busines

> Faith Varitek, MD, opened a medical practice. The business completedthe following transactions: Apr 1Varitek invested $27,000 cash to start her medical practice. Thebusiness issued common stock to Varitek. 1 Purchased medical supplies on account totaling

> SmithSoftware began with cash of $11,000. Smith then bought supplies for $2,400 on account.Separately, Smith paid $5,500 for a computer. Answer these questions. a. How much in total assets does Smith have? b. How much in liabilities does Smith owe?

> Donn Communications, Inc., is preparing its cash budget for 2012. Donn ended 2011 with cash of $88 million, and managers need to keep a cash balance of at least $79 million for operations. Collections from customers are expected to total $11,323 million

> Bill Hooper opened a software consulting firm that immediately paid $6,000 for a computer. Was Hooper’s computeran expense of the business? If not, explain.

> Community Bank has a loan receivable from IMS Chocolates. IMS is six months late in making payments to the bank, and Jan French, a Community Bank vice president, is assisting IMS to restructure its debt. French learns that IMS is depending on landing a c

> This case is based on an actual situation experienced by one of the authors. Gilead Construction, headquartered in Topeka, Kansas, built a motel in Kansas City. The construction foreman, Slim Pickins, hired the workers for the project. Pickins had his wo

> Environmental Concerns, Inc., has poor internal control. Recently, Oscar Benz, the manager, has suspected the bookkeeper of stealing. Details of the business’s cash position at September 30 follow. a. The Cash account shows a balance of

> Refer to the RadioShack Corporation Consolidated Financial Statements in Appendix B at the end of this book. 1. Focus on cash and cash equivalents. Why did cash change during 2010? The statement of cash flows holds the answer to this question. Analyze th

> Refer to the Amazon.com, Inc., consolidated financial statements in Appendix A at the end of this book. The cash and cash equivalents section of the Consolidated Balance Sheet shows a balance of $3,777 as of December 31, 2010, and is made up of many diff

> The president of The Pembrook Company has recently become concerned that the bookkeeper has embezzled cash from the company. He asks you, confidentially, to look over the bank reconciliation that the bookkeeper has prepared to see if you discover any dis

> Perform the following accounting for the receivables of Garvey and Pullman, a law firm, at December 31, 2012. Requirements 1. Start with the beginning balances for these T-accounts: ▶ Accounts Receivable, $101,000 ▶ Allowance for Uncollectible Accounts,

> Dave Dern, the chief financial officer, is responsible for The Grand Design’s cash budget for 2013. The budget will help Dem determine the amount of long-term borrowing needed to end the year with a cash balance of $135,000. Dern’s assistants have assemb

> Sharon Hall, the owner of Sharon’s Party Picks, has delegated management of the business to Lola Oster, a friend. Hall drops by to meet customers and check up on cash receipts, but Oster buys the merchandise and handles cash payments. Business has been v

> Fast Pass Company manufactures a popular brand of footballs. Fast Pass employs 142 workers and keeps its employment records on time sheets that show how many hours the employee works each week. On Friday the shop foreman collects the time sheets, checks

> David Doyle, chief financial officer of Madison Wireless, is responsible for the company’s budgeting process. Doyle’s staff is preparing the Madison cash budget for 2013. A key input to the budgeting process is last ye

> The April 30 bank statement of Durkin Engineering Associates has just arrived from Maine First Bank. To prepare the Durkin bank reconciliation, you gather the following data: a. Durkin’s Cash account shows a balance of $7,795.12 on April 30. b. The April

> The cash data of Duff y Automotive for October 2012 follow: Duffy received the following bank statement on October 31, 2012: Additional data for the bank reconciliation include the following: a. The EFT deposit was a receipt of monthly rent. The EFT

> Each of the following situations reveals an internal control weakness: Situation a. In evaluating the internal control over cash payments of Yankee Manufacturing, anauditor learns that the purchasing agent is responsible for purchasing diamonds for use

> European Imports is an importer of silver, brass, and furniture items from Spain. Eloise Stiles is the general manager of European Imports. Stiles employs two other people in the business. Michelle Woods serves as the buyer for European Imports. In her w

> Nathan Farmer, chief financial officer of Bosworth Wireless, is responsible for the company’s budgeting process. Farmer’s staff is preparing the Bosworth cash budget for 2013. A key input to the budgeting process is la

> The November 30 bank statement of Donald Engineering Associates has just arrived from Kansas First Bank. To prepare the Donald bank reconciliation, you gather the following data: a. Donald’s Cash account shows a balance of $7,684.83 on November 30. b. Th

> The cash data of Durkin Automotive for April 2012 follow: Durkin received the following bank statement on April 30, 2012: Additional data for the bank reconciliation include the following: a. The EFT deposit was a receipt of monthly rent. The EFT deb

> Evan Neal operates a roller skating center. He has just received the monthly bank statement at January 31 from Citizen National Bank, and the statement shows an ending balance of $575. Listed on the statement are an EFT rent collection of $330, a service

> Gulig and Doherty, a law firm, started 2012 with accounts receivable of $26,000 and an allowance for uncollectible accounts of $2,000. The 2012 service revenues on account totaled $183,000, and cash collections on account totaled $133,000. During 2012, G

> During 2013, Chocolate Passion completed these transactions: 1. Sales revenue on account, $1,030,000 2. Collections on account, $895,000 3. Write-off s of uncollectibles, $15,000 4. Uncollectible-account expense, 2% of sales revenue Journalize Chocolate

> D. J. Hardy’s checkbook and August bank statement show the following: Requirement Prepare Hardy’s bank reconciliation at August 31. Date Check No. Item Check Deposit Balance 8/1 $ 535 4 622 Sun Cafe S 20 515 9. D

> The following items appear on a bank reconciliation. Classify each item as (a) An addition to the bank balance, (b) A subtraction from the bank balance, (c) An addition to the book balance, or (d) A subtraction from the book balance. 1. __ Outstanding ch

> Scott Smart served as executive director of Downtown Huntsville, an organization created to revitalize Huntsville, Alabama. Over the course of 14 years, Smart embezzled $236,000. How did Smart do it? He did it by depositing subscriber cash receipts in hi

> The following situations describe two cash payment situations and two cash receipt situations. In each pair, one set of internal controls is better than the other. Evaluate the internal controls in each situation as strong or weak, and give the reason fo

> Identify the internal control weakness in the following situations. State how the person can hurt the company. a. Jay Mott works as a security guard at TOWN parking in Des Moines. Mott has a master key to the cash box where customers pay for parking. Eac

> Assume Victor’s Vans borrowed $15 million from Jay’s Bank and agreed to (a) Pay an interest rate of 7.2% and (b) Maintain a compensating balance amount equal to 5.3% of the loan. Determine Victor’s Vans’ actual effective interest rate on this loan.

> Gale Communications, Inc., is preparing its cash budget for 2012. Gale ended 2011 with cash of $85 million, and managers need to keep a cash balance of at least $78 million for operations. Collections from customers are expected to total $11,335 million

> Flat Flyers Company manufactures a popular line of remote airplanes. Flat Flyers employs 125 workers and keeps their employment records on time sheets that show how many hours the employee works each week. On Friday the shop foreman collects the time she

> McIntosh stores use point-of-sale terminals as cash registers. The register shows the amount of each sale, the cashreceived from the customer, and any change returned to the customer. The machine also produces a customer receipt but keeps no record of tr

> Each of the following situations reveals an internal control weakness: a. In evaluating the internal control over cash payments of Farley Manufacturing, an auditor learns that the purchasing agent is responsible for purchasing diamonds for use in the com

> Roper stores use point-of-sale terminals as cash registers. The register shows the amount of each sale, the cashreceived from the customer, and any change returned to the customer. The machine also produces a customer receipt but keeps no record of trans

> Gretchen Cilla sells memberships to the Denver Symphony Association in Denver, Colorado. The Symphony’s procedure requires Cilla to write a patron receipt for all memberships sold. The receipt forms are prenumbered. Cilla is having personal financial pro

> Brenda Small manages Harris Manufacturing. Small fears that a trusted employee has been stealing from the company. This employee receives cash from clients and also prepares the monthly bank reconciliation. To check up on the employee, Small prepares her

> After preparing Rampart Corp.’s bank reconciliation in Short Exercise 4-8 , make the company’s journal entries for transactions that arise from the bank reconciliation. Date each transaction October 31, and include an explanation with each entry.

> The Cash account of Rampart Corp. reported a balance of $2,540 at October 31. Included were outstanding checks totaling $900 and an October 31 deposit of $400 that did not appear on the bank statement. The bank statement, which came from Tri Bank, listed

> Peacock Company requires that all documents supporting a check be cancelled by punching a hole through the packet. Why is this practice required? What might happen if it were not?

> Cash may be a small item on the financial statements. Nevertheless, internal control over cash is very important. Why is this true?

> How do computer viruses, Trojan Horses, and phishing expeditions work? How can these e-commerce pitfalls hurt you? Be specific.

> Identify the other control procedures usually found in a company’s system of internal control besides separation of duties, and tell why each is important.

> Explain why separation of duties is often described as the cornerstone of internal control for safeguarding assets. Describe what can happen if the same person has custody of an asset and also accounts for the asset.