Business Smarts - Sample Module for Introduction to Financial Accounting I

Scenario I
Mark Smith is in his fourth month as the sole proprietor of a lawn mowing business. He now has several regular customers whom he bills $50 per month. During the current month of June, 62 customers paid their bills, and Mark had 12 one time cash customers who paid $25 each. Mark paid his phone bill of $125.00 and bought 90 gallons of gas at $3.00 per gallon. Mark persuaded his wife to help in the business, and created a petty cash fund for her to use when she needs to. Its value is $150.00. She used $60 to buy small office supplies such as paper, pens, a stapler, and a calendar. Mark paid himself $2,000 for the month.

1) Write the entries for the cash receipts journal.

 a)                  Cash Receipts Journal

       Date      Credit Account                               Amount
       June xx   Sales   ..........................           300.00
                 To record cash sales.

       June xx   Accounts Receivable   ............         3,100.00
                 To record receivables payments.

       June xx   Gas Expense   .....................          270.00
                 To record use of credit line.

 b)                  Cash Receipts Journal

       Date      Credit Account                               Amount
       June xx   Sales   .........................          3,100.00
                 To record cash sales.

       June xx   Accounts Receivable   ...........            300.00
                 To record receivables payments.

 c)                  Cash Receipts Journal

       Date      Credit Account                               Amount
       June xx   Sales   .........................            300.00
                 To record cash sales.

       June xx   Accounts Receivable   ...........          3,100.00
                 To record receivables payments.

 d)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       June xx   Sales  .........................             300.00
                 To record cash sales.

       June xx   Accounts Receivable  ...........           3,100.00
                 To record receivables payments.

 e)  None of the above.

2) Write the general journal entry for the month's cash receipts.

 a)  Accounts Receivable   ......................   3,100.00
          Cash   ..................................              3,100.00
             To record cash receipts.

 b)  Accounts Receivable   ......................   3,100.00
       Sales   ....................................     300.00
          Cash   ..................................              3,400.00
             To record cash receipts.

 c)  Cash   .....................................   3,400.00
          Accounts Receivable   ...................              3,100.00
          Sales   .................................                300.00
             To record cash disbursements.

 d)  Cash   .....................................   3,400.00
          Accounts Receivable   ...................              3,100.00
          Sales   .................................                300.00
             To record cash receipts.

 e)  None of the above.

3) Write the entries for the petty cash record.

 a)                  Petty Cash Record

       Date      Explanation                   Receipts      Disbursements
       June  1   Initial receipt                 250.00
       June  x   Office Supplies                                60.00
       July  1   Replenish fund                  160.00

 b)                  Petty Cash Record

       Date      Explanation                   Receipts      Disbursements
       June  1   Initial receipt                 150.00
       June  x   Office Supplies                                60.00
       July  1   Replenish fund                   60.00

 c)                  Petty Cash Record

       Date      Explanation                   Receipts      Disbursements
       June  x   Office Supplies                                60.00

 d)                  Petty Cash Record

       Date      Explanation                   Receipts      Disbursements
       June  1   Replenish fund                  150.00
       June  x   Office Supplies                                60.00
       July  1   Initial receipt                  60.00

 e)  None of the above.

4) Write the cash disbursements journal entry for the petty cash initiation.

 a)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       June  1   Petty Cash   .....................           250.00
                 To record the creation petty cash fund.

 b)                  Cash Receipts Journal

       Date      Credit Account                               Amount
       June  1   Petty Cash   .....................           150.00
                 To record the creation petty cash fund.

 c)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       June  1   Petty Cash   .....................           150.00
                 To record the creation petty cash fund.

 d)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       June  1   Cash   ...........................           250.00
                 To record the creation petty cash fund.

 e)  None of the above.

5) Write the cash disbursements journal entry for the petty cash replenishment.

 a)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       July  1   Petty Cash   .....................           150.00
                 To record the replenishment of petty cash fund.

 b)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       June  1   Petty Cash   .....................            60.00
                 To record the replenishment of petty cash fund.

 c)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       July  1   Petty Cash   .....................            90.00
                 To record the replenishment of petty cash fund.

 d)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       July  1   Petty Cash   .....................            60.00
                 To record the replenishment of petty cash fund.

 e)  None of the above.

6) Write the cash disbursements journal entries for the month's payments.

 a)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       June xx   Phone Expense   ..................           125.00
                 To record payment of phone bill.

       June xx   Gas Expense   ....................           270.00
                 To record purchase of gasoline.

       June 30   Capital - Mark Smith   ...........         2,000.00
                 To record owner withdrawal.

 b)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       June xx   Phone Expense   ..................           125.00
                 To record payment of phone bill.

       June xx   Gas Expense   ....................           270.00
                 To record purchase of gasoline.

 c)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       June xx   Phone Expense   ..................           125.00
                 To record payment of phone bill.

       June xx   Gas Expense   ....................           270.00
                 To record purchase of gasoline.

       June 30   Wages Expense   ..................         2,000.00
                 To record owner withdrawal.

 d)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       June xx   Phone Expense   ..................           270.00
                 To record payment of phone bill.

       June xx   Gas Expense   ....................           125.00
                 To record purchase of gasoline.

       June 30   Capital - Mark Smith   ...........         2,000.00
                 To record owner withdrawal.

 e)  None of the above.

7) Write the general journal entry for the month's cash disbursements.

 a)  Capital - Mark Smith   .....................   2,000.00
          Cash   ..................................              2,000.00
             To record cash disbursements.

 b)  Capital - Mark Smith   .....................   2,000.00
       Gas Expense   ..............................     125.00
       Phone Expense   ............................     270.00
          Cash   ..................................              2,505.00
             To record cash disbursements.

 c)  Wages Expense   ............................   2,000.00
       Gas Expense   ..............................     270.00
       Phone Expense   ............................     125.00
          Cash   ..................................              2,395.00
             To record cash disbursements.

 d)  Capital - Mark Smith   .....................   2,000.00
       Gas Expense   ..............................     270.00
       Phone Expense   ............................     125.00
          Cash   ..................................              2,395.00
             To record cash disbursements.

 e)  None of the above.

8) Write the general journal entry for next month's petty cash replenishment.

 a)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       July  1   Petty Cash   .....................            60.00
                 To record the replenishment of petty cash fund.

 b)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       June  1   Petty Cash   .....................            60.00
                 To record the replenishment of petty cash fund.

 c)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       July  1   Petty Cash   .....................           150.00
                 To record the replenishment of petty cash fund.

 d)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       July  1   Petty Cash   .....................            90.00
                 To record the replenishment of petty cash fund.

 e)  None of the above.

Scenario II
Diedre Jackson has been running her own small cleaning services business for several months. During the current month she received payments from 4 major customers; $2,400 on Oct. 8, $1,800 on Oct. 12, $2,800 on Oct. 24, and $1,700 on Oct. 31 (after bank hours). She made payments, all by check, for rent on Oct. 1 of $2,500, to her supplier on Oct. 16 of $1,600, to her 2 employees of $1,500 on Oct. 15, and another $1,500 on Oct. 31. Also on Oct. 31, she paid herself $2,000. Diedre charged $300 for the depreciation of her van and cleaning equipment.

On Nov. 4, Diedre received her bank statement. It showed a balance for Oct. 31 of $3,600.00. Fees for the month were $20. A payment of $900 made in September was paid in October, and a deposit of $400 made Sept. 30 was banked on Oct. 2. A Sept. customer payment recorded as $900 in error was correctly banked as $1,000. The cash balance on Oct. 31 according to Diedre's accounting records was $1,720.00

9) Write the entries for the cash receipts journal.

 a)                  Cash Receipts Journal

       Date      Credit Account                               Amount
       Oct.  8   Accounts Receivable   ............         2,400.00
                 To record receivables payments.

       Oct. 12   Accounts Receivable   ............         1,800.00
                 To record receivables payments.

       Oct. 24   Accounts Receivable   ............         2,800.00
                 To record receivables payments.

 b)                  Cash Receipts Journal

       Date      Credit Account                               Amount
       Oct.  8   Accounts Receivable   ............         2,400.00
                 To record receivables payments.

       Oct. 12   Accounts Receivable   ............         1,800.00
                 To record receivables payments.

       Oct. 24   Accounts Receivable   ............         2,800.00
                 To record receivables payments.

       Oct. 31   Accounts Receivable   ............         1,700.00
                 To record receivables payments.

 c)                  Cash Receipts Journal

       Date      Credit Account                               Amount
       Oct.  8   Accounts Receivable   ............         2,400.00
                 To record receivables payments.

       Oct. 12   Accounts Payable   ...............         1,800.00
                 To record receivables payments.

       Oct. 24   Accounts Receivable   ............         2,800.00
                 To record receivables payments.

       Oct. 31   Inventory   ......................         1,700.00
                 To record receivables payments.

 d)                  Cash Disbursements Journal

       Date      Debit Account                                Amount
       Oct. 18   Accounts Receivable   ............         2,400.00
                 To record receivables payments.

       Oct.  2   Accounts Receivable   ............         1,800.00
                 To record receivables payments.

       Oct. 29   Accounts Receivable   ............         2,800.00
                 To record receivables payments.

       Oct. 32   Accounts Receivable   ............         1,700.00
                 To record receivables payments.

 e)  None of the above.

10) Write the general journal entry for the month's cash receipts.

 a)  Accounts Receivable   ......................   8,700.00
          Cash   ..................................              8,700.00
             To record cash receipts.

 b)  Accounts Receivable   ......................   7,000.00
          Cash   ..................................              7,000.00
             To record cash receipts.

 c)  Cash   .....................................   8,700.00
          Accounts Receivable   ...................              8,700.00
             To record cash receipts.

 d)  Cash   .....................................   8,700.00
          Sales   .................................              8,700.00
             To record sales.

 e)  None of the above.

11) Write the cash disbursements journal entries for the month's payments.

 a)                 Cash Disbursements Journal

       Date      Debit Account                                Amount
       Oct.  1   Rent Expense   ...................         2,500.00
                 To record payment of rent.

       Oct. 15   Wages Expense   ..................         1,500.00
                 To record payment of wages.

       Oct. 16   Accounts Payable   ...............         1,600.00
                 To record payment of supplies purchase.

 b)                 Cash Disbursements Journal

       Date      Debit Account                                Amount
       Oct.  1   Rent Expense   ...................         2,500.00
                 To record payment of rent.

       Oct. 15   Wages Expense   ..................         1,500.00
                 To record payment of wages.

       Oct. 16   Accounts Payable   ...............         1,600.00
                 To record payment of supplies purchase.

       Oct. 31   Wages Expense   ..................         1,500.00
                 To record payment of wages.

       Oct. 31   Capital - Deidre Jackson   .......         2,000.00
                 To record owner withdrawal.

 c)                 Cash Disbursements Journal

       Date      Debit Account                                Amount
       Oct.  1   Rent Expense   ...................         2,000.00
                 To record payment of rent.

       Oct. 15   Wages Expense   ..................         1,400.00
                 To record payment of wages.

       Oct. 16   Accounts Payable   ...............         1,600.00
                 To record payment of supplies purchase.

       Oct. 31   Depreciation Expense   ...........           300.00
                 To record payment of wages.

       Oct. 31   Wages Expense   ..................         1,400.00
                 To record payment of wages.

       Oct. 31   Capital - Deidre Jackson   .......         2,000.00
                 To record owner withdrawal.

 d)                 Cash Disbursements Journal

       Date      Debit Account                                Amount
       Oct.  1   Rent Expense   ...................         2,500.00
                 To record payment of rent.

       Oct. 10   Wages Expense   ..................         1,500.00
                 To record payment of wages.

       Oct. 18   Accounts Payable   ...............         1,600.00
                 To record payment of supplies purchase.

       Oct. 30   Wages Expense   ..................         1,500.00
                 To record payment of wages.

       Oct. 28   Capital - Deidre Jackson   .......         2,000.00
                 To record owner withdrawal.

 e)  None of the above.

12) Write the general journal entry for the month's cash disbursements.

 a)  Capital - Diedre Jackson   .................   2,000.00
          Cash   ..................................              2,000.00
             To record cash disbursements.

 b)  Capital - Deidre Jackson   .................   2,000.00
       Rent Expense   .............................   2,500.00
       Wages Expense   ............................   1,500.00
          Cash   ..................................              6,000.00
             To record cash disbursements.

 c)  Capital - Deidre Jackson   .................   2,000.00
       Rent Expense   .............................   2,500.00
       Wages Expense   ............................   1,500.00
       Accounts Payable   .........................   1,600.00
       Depreciation Expense   .....................     300.00
          Cash   ..................................              7,600.00
             To record cash disbursements.

 d)  Capital - Deidre Jackson   .................   2,000.00
       Rent Expense   .............................   2,500.00
       Wages Expense   ............................   3,000.00
       Accounts Payable   .........................   1,600.00
          Cash   ..................................              9,100.00
             To record cash disbursements.

 e)  None of the above.

13) Find the reconciled cash balance starting from the book balance.

 a)           Bank reconciliation as at Oct. 31, 200x.

       Book Balance   .............................    $1,720.00
            Add: Error   ..........................       100.00
            Deduct: Fees   ........................        20.00
       Reconciled Balance   .......................     1,800.00

 b)           Bank reconciliation as at Sept. 30, 200x.

       Book Balance   .............................    $1,720.00
            Add: Error   ..........................       100.00
            Deduct: Fees   ........................        20.00
       Reconciled Balance   .......................     1,800.00

 c)           Bank reconciliation as at Oct. 31, 200x.

       Book Balance   .............................    $1,720.00
            Add:   ................................         0.00
            Deduct: Fees and Error  ...............       120.00
       Reconciled Balance  ........................     1,600.00

 d)           Bank reconciliation as at Oct. 31, 200x.

       Book Balance   .............................    $1,720.00
            Add: Fees and Error   .................       120.00
            Deduct:   .............................         0.00
       Reconciled Balance   .......................     1,840.00

 e)  None of the above.

14) Find the reconciled cash balance starting from the bank balance.

 a)           Bank reconciliation as at Nov. 4, 200x.

       Bank Balance   .............................    $3,600.00
            Add: Deposits-in-Transit   ............     1,700.00
            Deduct: o/s Checks   ..................     3,500.00
       Reconciled Balance   .......................     1,800.00

 b)           Bank reconciliation as at Oct. 31, 200x.

       Bank Balance   .............................    $3,600.00
            Add: Deposits-in-Transit   ............     1,500.00
            Deduct: o/s Checks   ..................     3,500.00
       Reconciled Balance   .......................     1,600.00

 c)           Bank reconciliation as at Oct. 31, 200x.

       Bank Balance   .............................    $3,600.00
            Add: Deposits-in-Transit   ............     1,700.00
            Deduct: o/s Checks   ..................     3,500.00
       Reconciled Balance   .......................     1,800.00

 d)           Bank reconciliation as at Oct. 31, 200x.

       Bank Balance   .............................    $3,600.00
            Add: Deposits-in-Transit   ............     1,900.00
            Deduct: o/s Checks   ..................     4,400.00
       Reconciled Balance   .......................     1,100.00

 e)  None of the above.

15) Write the general journal entry that results from the bank reconciliation.

 a)  Accounts Receivable   ......................      80.00
       Bank Charges   .............................      20.00
            Cash   ................................                100.00
               To record adjustments from the bank reconciliation.

 b)  Cash   .....................................      20.00
       Bank Charges   .............................      80.00
            Accounts Receivable   .................                100.00
               To record adjustments from the bank reconciliation.

 c)  Cash   .....................................     100.00
       Bank Charges   .............................      20.00
            Accounts Receivable   .................                 80.00
               To record adjustments from the bank reconciliation.

 d)  Cash   .....................................      80.00
       Bank Charges   .............................      20.00
            Accounts Receivable   .................                100.00
               To record adjustments from the bank reconciliation.

 e)  None of the above.

Scenario III
Harold Qwan is a staff accountant at a small incorporated firm, Lakeview Corp.. Preparing bank reconciliations is one of his duties. The month end cash balance in the books was $5,520.00. The cash disbursements journal for the month looks as follows:

                    Cash Disbursements Journal

    Date      Debit Account                              Amount
    Apr. 30   Accounts Payable   ...................   2,200.00
              To record payment of supplies purchase.

    Apr. 30   Wages Expense   ......................   6,500.00
              To record payment of wages.

    May   1   Rent Expense   .......................   4,200.00
              To record payment of rent.

    May  18   Dividends Payable   ..................   5,000.00
              To record the payment of dividends.

    May  31   Wages Expense   ......................   6,500.00
              To record payment of wages.

The cash receipts journal for the month looks as follows:

                    Cash Receipts Journal

    Date      Credit Account                             Amount
    Apr. 30   Accounts Receivable   ................   1,900.00
              To record receipt of payment.

    May   4   Bank Loans Payable   .................   5,000.00
              To record use of credit line.

    May  10   Accounts Receivable   ................   1,800.00
              To record receipt of payment.

    May  16   Interest Income   ....................   1,000.00
              To record receipt of interest on investments.

    May  31   Accounts Receivable   ................   2,400.00
              To record receipt of payment.

The bank statement for the month looks as follows:

    Sanata Bank    Statement for period May 1 - May 31.   Lakeview Corp.

    Date      Credit            Debit                   Balance
    May   2   1,900,00                                 9,720.00

    May   3                     6,500.00               3,220.00

    May   5   5,000.00          4,200.00               4,020.00

    May  11   1,800.00                                 5,820.00

    May  13                     1,850.00               3,970.00

    May  17   1,000.00                                 4,970.00

    May  20   5,000.00                                 9,970.00

    May  31      40.00            100.00               9,910.00

The bank statement includes an NSF notice for the May 11 deposit and a $50 service charge for handling it. The maintenance charges for the month were $100. A rebate of $40 was given on last month's maintenance charges.

16) Find the reconciled cash balance starting from the book balance.

 a)           Bank reconciliation as at May 31, 200x.

       Book Balance   .............................     5,520.00
           Add: Fee Rebate   ......................        40.00
           Deduct: Fees and NSF item   ............     1,950.00
       Reconciled Balance   .......................     3,790.00

 b)           Bank reconciliation as at May 31, 200x.

       Book Balance   .............................     5,520.00
            Add: Fee Rebate   .....................        40.00
            Deduct: Fees and NSF item   ...........     1,950.00
       Reconciled Balance   .......................     3,610.00

 c)           Bank reconciliation as at May 31, 200x.

       Book Balance   .............................     5,520.00
            Add: Fee Rebate   .....................        40.00
            Deduct: Fees and NSF item   ...........     1,950.00
       Reconciled Balance   .......................     3,690.00

 d)           Bank reconciliation as at May 31, 200x.

       Book Balance   .............................     5,500.00
            Add: Fees and Error  ..................       100.00
            Deduct:   .............................     1,800.00
       Reconciled Balance  ........................     1,840.00

 e)  None of the above.

17) Find the reconciled cash balance starting from the bank balance.

 a)           Bank reconciliation as at May 31, 200x.

       Bank Balance   .............................     7,810.00
            Add: Deposits-in-Transit   ............     2,400.00
            Deduct: o/s Checks   ..................     6,500.00
       Reconciled Balance   .......................     3,610.00

 b)           Bank reconciliation as at April 30, 200x.

       Bank Balance   .............................     7,810.00
            Add: Deposits-in-Transit   ............     2,400.00
            Deduct: o/s Checks   ..................     6,500.00
       Reconciled Balance   .......................     3,610.00

 c)           Bank reconciliation as at May 31, 200x.

       Bank Balance   .............................     9,910.00
            Add: Deposits-in-Transit   ............     2,700.00
            Deduct: o/s Checks   ..................     8,700.00
       Reconciled Balance   .......................     3,610.00

 d)           Bank reconciliation as at May 31, 200x.

       Bank Balance   .............................     9,910.00
            Add: Deposits-in-Transit   ............     2,400.00
            Deduct: o/s Checks   ..................     8,700.00
       Reconciled Balance   .......................     3,610.00

 e)  None of the above.

18) Write the general journal entry adjustment for the NSF item.

 a)  Accounts Receivable   ......................   1,800.00
       Bank Charges   .............................      50.00
          Cash   ..................................              1,850.00
               To record NSF item.

 b)  Accounts Receivable   ......................   1,800.00
          Cash   ..................................              1,800.00
            To record NSF item.

 c)  Accounts Receivable   ......................   1,800.00
       Bank Charges   .............................     150.00
          Cash   ..................................              1,150.00
             To record NSF item.

 d)  Cash   .....................................   1,850.00
          Bank Charges   ..........................                 50.00
          Accounts Receivable   ...................              1,800.00
             To record NSF item.

 e)  None of the above.

19) Write the general journal entry adjustment for the bank charge rebate.

 a)  Bank Charges   .............................     100.00
          Cash   ..................................                100.00
             To record bank charge rebate.

 b)  Cash   .....................................      50.00
          Bank Charges   ..........................                 50.00
             To record bank charge rebate.

 c)  Cash   .....................................      40.00
          Bank Charges   ..........................                 40.00
             To record bank charge rebate.

 d)  Cash   .....................................      40.00
          Accounts Receivable   ...................                 40.00
             To record bank charge rebate.

 e)  None of the above.

20) Write the general journal entry for the adjustment for regular bank charges, fees, and errors.

 a)  Bank Charges   .............................      50.00
          Cash   ..................................                 50.00
             To record bank charges.

 b)  Cash   .....................................     100.00
          Bank Charges   ..........................                100.00
             To record bank charges.

 c)  Bank Charges   .............................      40.00
          Cash   ..................................                 40.00
             To record bank charges.

 d)  Bank Charges   .............................      100.00
          Accounts Payable   ......................                100.00
             To record bank charges.

 e)  None of the above.

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