DQ1.From Chapter 7,
Fraud Case 7-1. Complete all parts of the case and respond to at least two of
your classmates’ postings.
What was the key
control weakness in this case?
Many
small businesses cannot afford to hire enough people for adequate separation of
duties. What can they do to compensate for this?
DQ2.Discuss the allowance
method and the direct write-off method of accounting for bad debts. When is the expense for uncollected accounts
receivable recognized under each method?
Respond to at least two of your classmates’ postings.
1. Partner
investments; journal entries. The LP partnership was formed on
January 1, 19X7, by investments from Bill Levy and Marv Parcells. Levy
contributed $30,000 cash and $80,000 of land. Parcells contributed cash of $50,000
and equipment with a value of $20,000.
a.
Prepare the journal entries needed to record the investments of Levy and
Parcells.
2. Payroll
accounting. Assume that the following tax rates and payroll information
pertain to Brookhaven Publishing:
The
company incurred a salary expense of $50,000 during February. All employees had
earned less than $5,000 by month-end.
a.
Prepare the necessary entry to record Brookhaven’s February payroll. The entry
will include deductions for the following:
· Social
Security taxes
· Medicare
taxes
· Federal
income taxes withheld
· State
income taxes
·
Insurance withholdings
b.
Prepare the journal entry to record Brookhaven’s payroll tax expense. The entry
will include the following:
· Matching
Social Security taxes
· Matching
Medicare taxes
· State
unemployment taxes
· Federal
unemployment taxes
3.
Current liabilities: entries and disclosure. A review of selected financial
activities of Visconti’s during 20XX disclosed the following:
Established
a warranty liability for the XY-80, a new product. Sales are expected to total
1,000 units during the month. Past experience with similar products indicates
that 2% of the units will require repair, with warranty costs averaging $27 per
unit.
Accrued
3 days of salaries at a total cost of $1,400.
Instructions
a.
Prepare journal entries to record the transactions.
b.
Prepare adjusting entries on October 31 to record accrued interest.
c.
Prepare the Current Liability section of Red Bank’s balance sheet as of October
31. Assume that the Accounts Payable account totals $203,600 on this date.
4. Issuance
of stock: organization costs. Snowbound Corporation was incorporated
in July. The firm’s charter authorized the sale of 200,000 shares of $10
par-value common stock. The following transactions occurred during the year:
9/1 Declared
a cash dividend on 9/1 for $1.00 a share for shareholders on record 10/1 with
payment being made on 11/1.
Instructions
a. Prepare
journal entries for the two stock issues.
b. Prepare
journal entries for the cash dividend declaration and payment.
5. Notes
payable. Red Bank Enterprises was involved in the following transactions
during the fiscal year ending October 31:
Issued
a $40,000 note to Harris Motors for the purchase of a $40,000 delivery truck.
The note is due in 180 days and carries a 12% interest rate.
Purchased
merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day,
12% note in settlement of the balance owed.
Issued
a $60,000 note to Datatex Equipment in settlement of an overdue account payable
of the same amount. The note is due in 30 days and carries a 14% interest
rate.
10/10:
The note to Pans Enterprises was paid in full.
10/31:
The note to Datatex Equipment was paid in full.
11/30:
Paid note to Bank of Kingville
Instructions
a.
Prepare journal entries to record the transactions.
b.
Prepare adjusting entries on October 31 to record accrued interest.
c.
Prepare the Current Liability section of Red Bank’s balance sheet as of October
31. Assume that the Accounts Payable account totals $203,600 on this date.
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