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ACC201 Week 2 P3-22 P3-25 P4-20 P4-21

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Problems: 3-22, 3-25
Problems: 4-20, 4-21
Survey of Accounting 3e

Problem 3-22 Identifying product and period costs

Required
Indicate whether each of the following costs is a product cost or a period (selling and administrative)
cost.
a. Advertising expense.
b. Insurance on vans used to deliver goods to customers.
c. Salaries of sales supervisors.
d. Monthly maintenance expense for a copier.
e. Goods purchased for resale.
f. Cleaning supplies for the office.
g. Freight on goods purchased for resale.
h. Salary of the marketing director.
i. Freight on goods sold to customer with terms FOB destination.
j. Utilities expense incurred for office building

Problem 3-25 Comprehensive cycle problem: Perpetual system
At the beginning of 2012, the Jeater Company had the following balances in its accounts:


Cash4300
Inventory9000
Common stock10000
Retained earnings3,300

During 2012, the company experienced the following events.
1. Purchased inventory that cost $2,200 on account from Blue Company under terms 1y10, ny30.
The merchandise was delivered FOB shipping point. Freight costs of $110 were paid in cash.
2. Returned $200 of the inventory that it had purchased because the inventory was damaged in
transit. The freight company agreed to pay the return freight cost.
3. Paid the amount due on its account payable to Blue Company within the cash discount period.
4. Sold inventory that had cost $3,000 for $5,500 on account, under terms 2y10, ny45.
5. Received merchandise returned from a customer. The merchandise originally cost $400 and
was sold to the customer for $710 cash during the previous accounting period. The customer
was paid $710 cash for the returned merchandise.
6. Delivered goods FOB destination in Event 4. Freight costs of $60 were paid in cash.
7. Collected the amount due on the account receivable within the discount period.
8. Took a physical count indicating that $7,970 of inventory was on hand at the end of the
accounting period.

Required
a. Identify these events as asset source (AS), asset use (AU), asset exchange (AE), or claims
exchange (CE).
b. Record each event in a statements model like the following one.
c. Prepare an income statement, a statement of changes in stockholders’ equity, a balance
sheet, and a statement of cash flows

Problem 4-20 Missing information in a bank reconciliation
The following data apply to Superior Auto Supply Inc. for May 2012.
1. Balance per the bank on May 31, $8,000.
2. Deposits in transit not recorded by the bank, $975.
3. Bank error; check written by Allen Auto Supply was charged to Superior Auto Supply’s
account, $650.
4. The following checks written and recorded by Superior Auto Supply were not included in the
bank statement:

3013$385
3054$735
3056$1,900

5. Note collected by the bank, $500.
6. Service charge for collection of note, $10.
7. The bookkeeper recorded a check written for $188 to pay for the May utilities expense as
$888 in the cash disbursements journal.
8. Bank service charge in addition to the note collection fee, $25.
9. Customer checks returned by the bank as NSF, $125.

Required
Determine the amount of the unadjusted cash balance per Superior Auto Supply’s books

Problem 4-21 Adjustments to the cash account based on the bank reconciliation

Determine whether the following items included in Yang Company’s bank reconciliation will
require adjustments or corrections on Yang’s books.

a. An $877 deposit was recorded by the bank as $778.
b. Four checks totaling $450 written during the month of January were not included with the
January bank statement.
c. A $54 check written to Office Max for office supplies was recorded in the general journal
as $45.
d. The bank statement indicated that the bank had collected a $330 note for Yang.
e. Yang recorded $500 of receipts on January 31, which were deposited in the night depository
of the bank. These deposits were not included in the bank statement.
f. Service charges of $22 for the month of January were listed on the bank statement.
g. The bank charged a $297 check drawn on Cave Restaurant to Yang’s account. The check was
included in Yang’s bank statement.
h. A check of $31 was returned by the bank because of insufficient funds and was noted on the
bank statement. Yang received the check from a customer and thought that it was good when
it was deposited into the account

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