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10. Which of the following is an objective of internal control?
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Risk assessment
Information technology
Adequate records
Comply with legal requirements
11. Your friend, Lisa, 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 internal control procedure relates to each of the internal controls
For the weaknesses, you also need to state a recommendation for improvement.
(1) Paychecks are left on the desk for pick-up.
(2) Supervisors count cash receipts daily.
(3) Invoices are pre-numbered.
(4) Bonding of the cashiers is required.
(5) The accountant purchases and pays for supplies.
12.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.
(1) Investors invest $300,000 in exchange for 30,000 shares of common stock.
(2) Company made payment on account for $500.
(3) Employees work Monday through Friday and are paid on Friday. Salary expense is $20,000 per day, and December 31 falls on a Tuesday.
(4) Company purchased Supplies for $2,000.
(5) The company needs to record Supplies used for $500
13. What is the Accounting Equation?
14. The following items are taken from the financial statements of PQR Company for 2012:
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Cash
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$250,000
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Accounts Receivable
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150,000
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Prepaid Rent
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120,000
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Accounts Payable
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168,000
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Unearned Service Revenue
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25,000
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Equipment, net of accumulated depreciation
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333,000
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Common Stock
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250,000
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Retained Earnings 12/31/2011
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41,000
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Long-term debt
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300,000
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Service revenue
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165,000
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Cost of Goods Sold
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50,000
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Rent expense
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24,000
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Supplies expense
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10,000
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Insurance expense
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12,000
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Instructions:
(a) Please create a classified Balance Sheet in good form for the year ended 2012.
(b) Please calculate the current ratio.
15. The following items are taken from the financial statements of Ashe Company for 2012:
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Equipment
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$100,000
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Accounts Receivable
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12,000
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Accounts Payable
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9,000
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Cost of Goods Sold
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72,000
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Utilities Expense
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11,000
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Depreciation Expense
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17,000
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Insurance Expense
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9,000
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Common Stock
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200,000
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Dividends
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12,000
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Rent Expense
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3,000
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Note Payable (due 2014)
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40,000
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Advertising Expense
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14,000
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Prepaid Insurance
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17,000
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Retained Earnings (beginning)
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44,000
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Accumulated Depreciation
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50,000
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Salaries Expense
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60,000
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Salaries Payable
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3,500
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Net sales
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205,000
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Supplies
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4,000
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Supplies Expense
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5,000
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Instructions
(a) Calculate the net income.
(b) Calculate the balance of Retained Earnings that would appear on a balance sheet at December 31, 2012.
(c) Calculate the gross profit percentage.
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