Assignment: Process financial transactions and extract interim reports
Part One - Multiple Choice Questions
1. The source document for a cash sale could be a:
a. Purchase order
b. Credit card slip
c. Cheque butt
d. Credit note
2. The accounting entry to record the payment of a liability is
a. Debit an asset account and credit a liability account
b. Debit a liability account and credit an equity account
c. Debit an equity account and credit a liability account
d. Debit a liability account and credit an asset account
3. List the steps in the accounting cycle in their correct sequence:
1. Entries are made in the journal
2. A business transaction occurs
3. A trial balance is prepared
4. Entries are made in the ledger
a. 2, 4, 1, 3
b. 2, 1, 4, 3
c. 3, 2, 1, 4
d. 4, 2, 3, 1
4. A party to whom the entity owes money for goods or services provided to the entity is called
e. Creditor
f. Debtor
g. Debit
h. Credit
5. Which statement relating to the general journal is incorrect?
a. The debit and credit effects of each transaction are shown together
b. It is referred to as a book of original entry
c. It provides a record of transactions in date order
d. It can use the running balance format or the ‘T' format
6. Select the account types for these items:
- Repairs and maintenance
- Repairs and maintenance payable
- Accounts receivable
- Drawings
a. Expense, liability, asset, equity
b. Asset, liability, asset, equity
c. Expense, asset, asset, expense
d. Expense, liability, asset, liability
7. GST paid by a business on the purchase of its goods and services, and for which a reduction of GST collected will be claimed from the tax department, is stored in an account called:
a. GST outlays
b. GST collections
c. Creditable acquisitions
d. Input credits
8. A firm borrows $4000 cash from the bank. The transaction is recorded as:
a. Debit Bank Loan $4000; credit Owner's capital $4000
b. Debit Cash at bank $4000; credit Accounts Receivable $4000
c. Debit Cash at bank $4000; credit Bank Loan $4000
d. Debit Bank Loan $4000; credit Cash at bank $4000
9. Creol Soaps requires its customers to pay for their orders six weeks before shipping the goods. How should the payments be initially recorded by Creol?
a. Debit bank, credit a liability account
b. Debit bank, credit an expense account
c. Debit bank, credit an asset account
d. Debit bank, credit an income account
10. Machinery is purchased on credit for $16 000 plus GST. The general journal entry to record this transaction is:
$ $
DR CR
a. Equipment 16 000
Accounts Payable 16 000
b. Equipment 14 545
GST Outlays 1 455
Accounts Payable 16 000
c. Equity 16 000
GST Outlays 1 600
Accounts Payable 17 600
d. Equipment 16 000
GST Outlays 1 600
Accounts Payable 17 600
11. On 20 June Yin repaired Yan's computer and charged her $660 cash including GST. The general journal entry to record the transaction is:
$ $
DR CR
a. Cash at bank 660
GST Collections 60
Income from repairs 600
b. Cash at bank 600
GST Collections 60
Income from repairs 660
c. Cash at bank 660
GST Outlays 60
Income from repairs 600
d. None of the above
12. On 15 May Osaka paid $715 cash for an 18-month insurance policy including 10% GST. The general journal entry to record the payment is:
$ $
a. Insurance Expense 650
GST Outlays 65
Equity 715
b. Insurance Expense 585
GST Collected 65
Prepaid Insurance 650
c. Prepaid Insurance 650
GST Outlays 65
Cash 715
d. Cash 650
Prepaid Insurance 650
13. J. Wood performed carpentry services for $7500. He received cash of $2000 and gave credit for $5500. Ignoring GST the transaction is recorded as:
a. Debit Cash $2000, debit Accounts Receivable $7500; credit Accounts receivable $2000, credit Income Earned $7500
b. Debit Income Earned $7500; credit Cash $2000, credit Accounts Payable $5500
c. Debit Cash $7500; credit Equity $7500
d. Debit Cash $2000, debit Equity $5500; credit Income Earned $7500
14. Quinn paid $440, including GST, for advertising. The entry to record this transaction is:
a. Debit Advertising $440; credit Cash $440
b. Debit Advertising $400, debit GST Outlays $40; credit Cash $440
c. Debit Advertising $440; credit GST Outlays $40, credit Cash $400
d. Debit Advertising $440, debit GST Outlays $44; credit Cash $484
15. The correct classification for these ledger accounts is:
1. Land
2. Accounts Receivable
3. Interest Received
4. Mortgage Payable
a. 1 Asset 2 Liability 3 Income 4 Asset
b. 1 Asset 2 Asset 3 Liability 4 Liability
c. 1 Asset 2 Liability 3 Liability 4 Liability
d. 1 Asset 2 Asset 3 Income 4 Liability
Part Two - Practical Questions
The following transactions for ABCConstructions occurred during April and May 2016:
April 1 Owner contributes capital of $50 000, by an additional injection of cash.
April 3 Cash is received from a customer, F. Turnip, $15300.
April 5 Supplies are requisitioned for use in the office, $470.
April 9 Installation services are provided on credit for $15 000 to Banana Ltd.
April 12 A $7700 loan is taken out with AMP Loans Ltd. Interest is payable at 10% p.a.
April 18 A bill for electricity consumed is received, $360.
April 24 Office fixtures are purchased from Dots Ltd for $6 500. $1500 is paid immediately by cheque, the remainder is due in July.
April 27 A cheque is issued in payment of the electricity account received on 18 April.
April 29 Prepaid insurance costs have been used to the extent of $870.
May 1 Payment on account is made by cheque to Apple Suppliers, $38 000.
May 2 Supplies are purchased on account from Deluxe Supplies Ltd, $3 400.
May 13 Rent for the month is paid by cheque, $7 500.
May 17 Insurance expired, $870.
May 23 Installation equipment is purchased on account from Apple Suppliers, $27 000.
May 29 A salary of $5 500 is paid by cheque.
Required
a. Assuming that the accounting period is a calendar year, prepare general journal entries for ABC Constructions Ltd during April and May 2014. Ignore GST.
b. At the end of May, interest is owing on the loan taken out on 12 April with AMP Loans Ltd. Should this interest be recorded by ABC Constructions in its accounting records? Why or why not?