Accounting

BRIEF EXERCISES – ANSWERS BELOW

BE1-1.  Use basic accounting equation.

(LO 3)

Presented below is the basic accounting equation. Determine the missing amounts.

BE1-2.  Use basic accounting equation.

(LO 3)

Given the accounting equation, answer each of the following questions.

(a)  The liabilities of Weber Company are $120,000 and the owner’s equity is $232,000. What is the amount of Weber Company’s total assets?

(b)  The total assets of Weber Company are $190,000 and its owner’s equity is $91,000. What is the amount of its total liabilities? read more

QUESTION – From an internal control standpoint, the asset most susceptible to improper diversion and use is

a. Prepaid insurance
b. Cash
c. Buildings
d. Land

ANSWER – B – Cash

QUESTION – In applying the high-low method, which months are relevant?

a. January and February
b. January and April
c. February and April
d. February and March

ANSWER – C. February and April read more

Chapter 8 – Accounting – Weygandt

1. An effective system of internal control will segregate functions between individuals to reduce the potential for errors and fraud. TRUE
2. When one individual is responsible for all of the related activities, the potential for errors and fraud is increased. TRUE
3. Independent internal verification should be made periodically and should be done by an employee who is independent of the employee responsible for the information. TRUE
4. The duties of receiving cash, recording cash receipts transactions, and having custody of cash should be assigned to a single capable individual. FALSE
5. At the end of an accounting period, a debit balance of $99.00 in the Cash Over and Short account would be reported in the income statement as Miscellaneous Revenue. FALSE
6. A check is a written order signed by the depositor directing the bank to pay a specified sum of money to a designated recipient. TRUE
7. Cash proceeds collected by the bank for a depositor would be identified in the bank statement by a credit memorandum to explain the entry. TRUE
8. The lack of agreement between the balance per books and the balance per bank is due to time lags and errors by either party. TRUE
9. An outstanding check that was also outstanding the previous month should not be included in the reconciliation of the bank statement this month. FALSE
10. A postage due expense of $4.75 would be paid out of petty cash and the entry to record the transaction would reduce the balance of the Petty Cash account by that amount. FALSE

Which of the following is a primary concern of internal control?

1. Promote training programs and control incentives
2. Enhancing the reliability of accounting data
3. Ensuring fairness of the financial statements
4. Encouraging adherence to prescribed managerial performance

ANSWER – B – Enhancing the reliability of accounting data

Each of the following is an attribute of internal control except

1. segregation of duties.
2. establishment of responsibility.
3. independent internal verification.
4. a sound marketing plan.

ANSWER – D – a sound marketing plan.

A company issues a check for $75 but records it incorrectly as $57. On the bank recon-ciliation, the $18 should be

1. deducted from the balance per bank.
2. added to the balance per bank.
3. deducted from the balance per books.
4. deducted from the balance per books and added to the balance per bank.

ANSWER – C – deducted from the balance per books.

 

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