CHAPTER 7 ACCOUNTING INFORMATION SYSTEMS

BE 115

Match each of the principles and phases in the development of an accounting system with the statement that best describes them.

a. Cost effectiveness

b. Flexibility

c. Useful output

_____ 1. Information must be understandable, relevant, reliable, timely, and accurate.

_____ 2. Benefits of information must outweigh the cost of providing it.

_____ 3. The system should accommodate a variety of users and changing information needs.

_____ 4. The accounting system must consider the needs and knowledge of various users.

_____ 5. The system should be capable of meeting the changes in the demands made upon it.

Ans: N/A, LO: 1, Bloom: C, Difficulty: Easy, Min: 3, AACSB: Technology, AICPA BB: Industry/Sector Perspective, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Business Applications

BE 116

Indicate whether each of the following accounts would be shown in the general ledger or subsidiary ledger.

1. Cash ______________________

2. Accounts Receivable—Larson ______________________

3. Equipment ______________________

4. Accounts Payable—Parks ______________________

5. Common Stock ______________________

6. Sales Revenue ______________________

Ans: N/A, LO: 2, Bloom: K, Difficulty: Easy, Min: 3, AACSB: Technology, AICPA BB: Industry/Sector Perspective, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Business Applications

BE 117

Richey Company maintains four special journals and a general journal to record its transactions. Using the code below, indicate in the space provided the appropriate journal for recording the transactions listed.

Code Journals

S Sales journal

CR Cash receipts journal

CP Cash payments journal

P Single-column purchases journal

G General journal

_____ 1. Mr. Richey invested cash in the business.

_____ 2. Purchased store supplies on account.

_____ 3. Sold merchandise to customer on account.

_____ 4. Purchased a 2-year fire insurance policy for cash.

_____ 5. Received a check from a customer as payment on account.

_____ 6. Paid for store supplies purchased in transaction 2.

_____ 7. Purchased merchandise on account.

_____ 8. Issued a credit memorandum to a customer who returned defective merchandise previously sold on account.

_____ 9. Purchased office equipment for cash.

_____ 10. Made an adjusting entry for store supplies used during the period.

Ans: N/A, LO: 3, Bloom: C, Difficulty: Easy, Min: 5, AACSB: Technology, AICPA BB: Industry/Sector Perspective, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Business Applications

BE 118

Indicate in which journal each of the following transactions is recorded.

1. Cash purchase of merchandise. _______________________

2. Owner investment of cash. _______________________

3. Sale of merchandise on account. _______________________

4. Purchase of supplies for cash. _______________________

5. Credit purchase of merchandise. _______________________

6. Collection on account from customers. _______________________

Ans: N/A, LO: 3, Bloom: C, Difficulty: Easy, Min: 5, AACSB: Technology, AICPA BB: Industry/Sector Perspective, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Business Applications

BE 119

Indicate the special journal(s) in which the following column headings appear.

1. Cash Cr. _______________________

2. Cost of Goods Sold Dr. _______________________

3. Accounts Receivable Dr. _______________________

4. Accounts Payable Cr. _______________________

5. Inventory Cr. _______________________

6. Sales Discounts Dr. _______________________

Ans: N/A, LO: 3, Bloom: K, Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Applications

E 120

Indicate which of the following cash payments journal columns are posted only in total, only daily, or both in total and daily.

1. Other Accounts _______________________

2. Accounts Payable _______________________

3. Inventory _______________________

4. Cash _______________________

Ans: N/A, LO: 3, Bloom: C, Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

EXERCISES

Ex. 121

After Picard Company had completed all posting for the month of December, the sum of the balances in the following accounts payable subsidiary ledger did not agree with the balance of the control account in the general ledger.

Name Ryker’s

Address 286 Buck Avenue

———————————————————————————————————————————

Date Item Post. Ref. Debit Credit Balance

———————————————————————————————————————————

Dec. 2 P25 2,400 2,400

Name Geordie Company

Address 818 Western Avenue

———————————————————————————————————————————

Date Item Post. Ref. Debit Credit Balance

———————————————————————————————————————————

Dec. 1 Balance 7,600

10 CP23 7,600 —

20 P32 3,300 3,300

29 J15 800 4,100

Name Laforge Company

Address 90210 Baker Boulevard

———————————————————————————————————————————

Date Item Post. Ref. Debit Credit Balance

———————————————————————————————————————————

Dec. 1 Balance 9,900

18 CP28 9,900 —

29 P34 10,500 600

Name Deanna Troi

Address 2720 Sommers Avenue

———————————————————————————————————————————

Date Item Post. Ref. Debit Credit Balance

———————————————————————————————————————————

Dec. 8 P27 6,000 6,000

27 P33 8,000 14,000

Name OBrien Supplies

Address 1560 Puckett Street

———————————————————————————————————————————

Date Item Post. Ref. Debit Credit Balance

———————————————————————————————————————————

Dec. 1 Balance 8,200

7 P26 5,600 13,800

12 J11 620 12,180

20 CP29 6,000 18,180

The balance in the Accounts Payable control account of $36,580 has been verified as correct. Also assume that the journals references in the Post Ref. columns of the accounts payable subsidiary ledger have been verified as correct.

Instructions

Determine the errors in the preceding accounts payable subsidiary accounts and prepare a corrected schedule of accounts payable.

Ans: N/A, LO: 2, Bloom: AN, Difficulty: Hard, Min: 20, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Research, AICPA PC: Problem Solving, IMA: Internal Controls

Ex. 122

On December 1, the accounts receivable control account balance in the general ledger of the Worf Company was $9,000. The accounts receivable subsidiary ledger contained the following detailed customer balances: Stewart $2,000, Gates $2,100, Burton $2,600, and Levar $2,300. The following information is available from the company's special journals for the month of December:

Cash Receipts Journal: Cash received from Burton $2,200, from Stewart $1,600, from Mirana $1,700, and from Gates $1,800.

Sales Journal: Sales to Mirana $3,900, to Burton $1,700, to Stewart $3,100, and to Levar $1,900.

Additionally, Burton returned defective merchandise for credit for $650. Stewart returned defective merchandise for $600 which he had purchased for cash.

Instructions

(a) Using T-accounts for Accounts Receivable Control and the detail customer accounts, post the activity for the month of December.

(b) Reconcile the accounts receivable control account with the subsidiary ledger by preparing a detail list of customer balances at December 31.

Ans: N/A, LO: 2, Bloom: AP, Difficulty: Hard, Min: 15, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Research, AICPA PC: Problem Solving, IMA: Internal Controls

Ex. 123

Maldanado Company has a balance in its Accounts Payable control account of $10,500 on January 1, 2014. The subsidiary ledger contains three accounts: Smith Company, balance $3,000; White Company, balance $2,500 and Marino Company. During January, the following payable-related transactions occurred.

Purchases Payments Returns

Smith Company $8,500 $6,000 $ -0-

White Company 5,250 2,500 1,500

Marino Company 6,100 6,250 -0-

Instructions

(a) What is the January 1 balance in the Marino Company subsidiary account?

(b) What is the January 31 balance in the control account?

(c) Compute the balances in the subsidiary accounts at the end of the month.

(d) Which January transaction would not be recorded in a special journal?

Ans: N/A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Ex. 124

Mangino Company has a balance in its Accounts Receivable control account of $15,000 on January 1, 2014. The subsidiary ledger contains three accounts: Jones Company, balance $6,000; Black Company, balance $2,500 and Denny Company. During January, the following receivable-related transactions occurred.

Credit Sales Collections Returns

Jones Company $12,000 $8,000 $ -0-

Black Company 9,000 2,500 2,000

Denny Company 8,500 6,000 -0-

Instructions

(a) What is the January 1 balance in the Denny Company subsidiary account?

(b) What is the January 31 balance in the control account?

(c) Compute the balances in the subsidiary accounts at the end of the month.

(d) Which January transaction would not be recorded in a special journal?

Ans: N/A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement,

Ex. 125

Devotchka Co. uses special journals and a general journal. The following transactions occurred during May 2014.

May 1 Z. Devotchka invested $25,000 cash in the business.

2 Sold merchandise to A. A. Bondy for $5,600 cash. The cost of the merchandise sold
was $3,500.

3 Purchased merchandise for $4,300 from Y. Vandyver using check no. 101.

14 Paid salary to D. Dilego $1,200 by issuing check no. 102.

16 Sold merchandise on account to S. Stevens for $840, terms n/30. The cost of the
merchandise sold was $500.

22 A check of $7,200 is received from S. Sufjan in full for invoice 101; no discount given.

Instructions

(a) Prepare a multiple-column cash receipts journal and a multiple-column cash payments journal. (Use page 1 for each journal.)

(b) Record the transaction(s) for May that should be journalized in the cash receipts journal and cash payments journal.

Ans: N/A, LO: 3, Bloom: AP, Difficulty: Medium, Min: 20, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA