2024 – 11 An account is an important accounting record where financial information is stored until needed Briefly explain 1
ACCT504 – Midetrm Exam – September 2015 – Essay Part – 2024
11. An account is an important accounting record where financial information is stored until needed. Briefly explain (1) the nature of an account, (2) the different types of accounts, and (3) the manner in which an account is increased and decreased, and the normal balance of each type of accounts.
12. (TCOs B and E) The adjusted trial balance of Gertz Company included the following selected accounts.
|
Debit |
Credit |
|
|
Sales |
$575,000 |
|
|
Sales returns and allowances |
$ 50,000 |
|
|
Sales discounts |
9,500 |
|
|
Cost of goods sold |
347,000 |
|
|
Freight-out |
2,000 |
|
|
Advertising expense |
15,000 |
|
|
Interest expense |
19,000 |
|
|
Store salaries expense |
74,000 |
|
|
Utilities expense |
18,000 |
|
|
Depreciation expense |
3,500 |
|
|
Interest revenue |
25,000 |
Instructions:
· Use the above information to prepare a multiple-step income statement for the year ended December 31, 2010.
· Calculate the profit margin ratio and gross profit rate. To qualify for full credit, you must state the formula you are using, show your computations, and explain your findings. (Points : 30)
13. (TCOs D and E) Please prepare the following journal entries. Indicate which account should be debited and which account should be credited, along with the dollar amount of the debit and credit.
Investors invest $600,000 in exchange for 30,000 shares of common stock.
Company paid rent of $3,000.
Company billed $5,000 for services performed.
Company purchased supplies of $3,000.
Company received $20,000 for services not yet performed. (Points : 30)
14. (TCO D) Your friend Sally has hired you to evaluate the following internal control procedures.
Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which principle relates to each of the internal controls.
For the weaknesses, you also need to state a recommendation for improvement.
Invoices are pre-numbered.
The controller approves of the purchases and makes the payment since he or she is familiar with the purchases.
The office manager is in charge of the petty cash fund.
Blank checks are stored in the safe.
At the end of the day, the total receipts are counted by the cashier on duty and reconciled to the cash register total. (Points : 30)
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