Reference no: EM132029524
Question: Part 1: 1. Employees performed services in 2005, but the wages were not paid until 2006. During which year would the wages expense be reported on the income statement under (a) the cash basis? (b) The accrual basis?
2. Is the balance listed for supplies on the trial balance, before the accounts have been adjusted, the amount that should normally be reported on the balance sheet? Explain.
3. Is the matching concept related to (b) the accrual basis of accounting?
4. Explain the purpose of the two accounts: Depreciation Expense and Accumulated Depreciation.
5. In the Income Statement columns of the work sheet, the debit column total is greater than the credit column total before the amount for the net income or net loss has been included. Would the income statement report a net income or a net loss? Explain.
6. Describe how the periodic method differs from the perpetual method of accounting for merchandise inventory.
7. What are the major advantages and disadvantages of the single-step form of income statement compared to the multiple-step statement?
8. What type of revenue is reported in the Other income section of the multiple-step income statement?
9. What is the nature of (a) a credit memorandum issued by the seller of merchandise, (b) a debit memorandum issued by the buyer of merchandise?
10. Name at least three accounts that would normally appear in the chart of accounts of a merchandising business but would not appear in the chart of accounts of a service business.
11. The inventory shrinkage at the end of the year was understated by $18,500. (a) Did the error cause an overstatement or an understatement of the gross profit for the year? (b) Which items on the balance sheet at the end of the year were overstated or understated as a result of the error?
13. Martin Co. sold merchandise to Fess Company on December 31, FOB shipping point. If the merchandise is in transit on December 31, the end of the fiscal year, which company would report it in its financial statements? Explain.
14. A manufacturer shipped merchandise to a retailer on a consignment basis. If the merchandise is unsold at the end of the period, in whose inventory should the merchandise be included?
15. Which of the three methods of inventory costing-fifo, lifo, or average cost-will in general yield an inventory cost most nearly approximating current replacement cost?
16. How is the method of determining the cost of the inventory and the method of valuing it disclosed in the financial statements?
17. What uses can be made of the estimate of the cost of inventory determined by the gross profit method?
Part 2: 1.The combined cash count of all cash registers at the close of business is $110 less than the cash sales indicated by the cash register records. (a) In what account is the cash shortage recorded? (b) Are cash shortages debited or credited to this account?
2. In which section of the income statement would a credit balance in Cash Short and Over be reported?
3. The balance of Cash is likely to differ from the bank statement balance. What two factors are likely to be responsible for the difference?
4. What is the purpose of preparing a bank reconciliation?
5. Do items reported on the bank statement as credits represent (a) additions made by the bank to the depositor's balance, or (b) deductions made by the bank from the depositor's balance?
6. What entry should be made if a check received from a customer and deposited is returned by the bank for lack of sufficient funds (an NSF check)?
7. What account or accounts are debited when (a) establishing a petty cash fund and (b) replenishing a petty cash fund?
8. The petty cash account has a debit balance of $800. At the end of the account-ing period, there is $110 in the petty cash fund, along with petty cash receipts totaling $690. Should the fund be replenished as of the last day of the period? Discuss.