Accounting -1Rosa’s Pizza operates strictly on a carryout basis.

| January 30, 2017

Question
1Rosa’s Pizza operates strictly on a carryout basis. Customers pick up their orders at a counter where a clerk exchanges the pizza for cash. While at the counter, the customer can see other employees making the pizzas and the large ovens in which the pizzas are baked.

Identify the six principles of internal control and give an example of each principle that you might observe when picking up your pizza. (Note: It may not be possible to observe all the principles.)

2.

Oct. 1 A petty cash fund is established with a check for $147 issued to the petty cash custodian.
31 A check was written to reimburse the fund and increase the fund to $197. A count of the petty cash fund disclosed the following items:

Currency $59.00
Coins 2.06
Expenditure receipts (vouchers):
Supplies $24.74
Telephone, Internet, and fax 15.04
Postage 38.34
Freight-Out 5.44

Journalize the entries in October that pertain to the petty cash fund. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation Debit Credit
Oct. 1
Oct. 31

Enright Company expects to have a cash balance of $56,840 on January 1, 2014. These are the relevant monthly budget data for the first two months of 2014.

1. Collections from customers: January $81,840, February $156,840.
2. Payments to suppliers: January $50,840, February $85,840.
3. Wages: January $30,559, February $40,559. Wages are paid in the month they are incurred.
4. Administrative expenses: January $21,559, February $24,559. These costs include depreciation of $1,000 per month. All other costs are paid as incurred.
5. Selling expenses: January $15,559, February $20,559. These costs are exclusive of depreciation. They are paid as incurred.
6. Sales of short-term investments in January are expected to realize $12,559 in cash. Enright has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $30,840.

Prepare a cash budget for January and February.

ENRIGHT COMPANY
Cash Budget
For the Two Months Ending February 28, 2014
January February
Cash receiptsSale of short-term investmentsEnding cash balanceSelling expensesAdministrative expensesCash disbursementsWagesCollections from customersExcess (deficiency) of available cash over disbursementsTotal disbursementsTotal available cashBeginning cash balanceFinancingPayments to suppliersBorrowingsRepaymentsTotal receipts $ $
Add: Cash receiptsFinancingCollections from customersSale of short-term investmentsCash disbursementsTotal receiptsAdministrative expensesTotal disbursementsTotal available cashEnding cash balancePayments to suppliersWagesSelling expensesExcess (deficiency) of available cash over disbursementsBorrowingsRepaymentsBeginning cash balance
Sale of short-term investmentsFinancingCash receiptsTotal receiptsEnding cash balanceCash disbursementsTotal available cashTotal disbursementsRepaymentsCollections from customersExcess (deficiency) of available cash over disbursementsBeginning cash balanceBorrowingsPayments to suppliersAdministrative expensesSelling expensesWages
BorrowingsExcess (deficiency) of available cash over disbursementsRepaymentsCash receiptsTotal receiptsCollections from customersBeginning cash balanceSale of short-term investmentsAdministrative expensesCash disbursementsTotal disbursementsFinancingTotal available cashEnding cash balancePayments to suppliersWagesSelling expenses
Cash disbursementsExcess (deficiency) of available cash over disbursementsSelling expensesBeginning cash balanceTotal disbursementsTotal available cashBorrowingsPayments to suppliersCollections from customersSale of short-term investmentsCash receiptsTotal receiptsWagesAdministrative expensesRepaymentsFinancingEnding cash balance
FinancingWagesEnding cash balanceCash receiptsTotal receiptsTotal available cashTotal disbursementsCollections from customersRepaymentsAdministrative expensesSale of short-term investmentsCash disbursementsBeginning cash balancePayments to suppliersSelling expensesExcess (deficiency) of available cash over disbursementsBorrowings
Less: Ending cash balanceWagesBeginning cash balanceSale of short-term investmentsCash disbursementsCollections from customersCash receiptsPayments to suppliersTotal disbursementsFinancingAdministrative expensesSelling expensesTotal receiptsExcess (deficiency) of available cash over disbursementsTotal available cashBorrowingsRepayments
Selling expensesTotal disbursementsTotal receiptsTotal available cashCash receiptsFinancingExcess (deficiency) of available cash over disbursementsCollections from customersPayments to suppliersBorrowingsEnding cash balanceSale of short-term investmentsCash disbursementsWagesAdministrative expensesRepaymentsBeginning cash balance
Total disbursementsFinancingAdministrative expensesSelling expensesBeginning cash balanceBorrowingsWagesEnding cash balanceRepaymentsCash receiptsTotal receiptsCollections from customersSale of short-term investmentsExcess (deficiency) of available cash over disbursementsCash disbursementsTotal available cashPayments to suppliers
Selling expensesTotal disbursementsTotal available cashCash disbursementsBorrowingsExcess (deficiency) of available cash over disbursementsRepaymentsBeginning cash balanceFinancingPayments to suppliersTotal receiptsEnding cash balanceCash receiptsCollections from customersSale of short-term investmentsWagesAdministrative expenses
Cash receiptsSale of short-term investmentsCollections from customersCash disbursementsBeginning cash balanceBorrowingsTotal receiptsRepaymentsExcess (deficiency) of available cash over disbursementsAdministrative expensesFinancingTotal available cashPayments to suppliersWagesSelling expensesTotal disbursementsEnding cash balance
FinancingWagesSale of short-term investmentsTotal receiptsAdministrative expensesSelling expensesPayments to suppliersRepaymentsExcess (deficiency) of available cash over disbursementsBorrowingsBeginning cash balanceCollections from customersEnding cash balanceCash receiptsTotal available cashTotal disbursementsCash disbursements
Total receiptsExcess (deficiency) of available cash over disbursementsBorrowingsAdministrative expensesRepaymentsCash disbursementsTotal disbursementsFinancingPayments to suppliersWagesTotal available cashBeginning cash balanceEnding cash balanceCash receiptsSelling expensesCollections from customersSale of short-term investments
Total receiptsExcess (deficiency) of available cash over disbursementsTotal available cashRepaymentsWagesBorrowingsBeginning cash balanceTotal disbursementsFinancingCash disbursementsEnding cash balanceCollections from customersAdministrative expensesPayments to suppliersCash receiptsSelling expensesSale of short-term investments
Add: Total disbursementsRepaymentsCollections from customersEnding cash balanceSale of short-term investmentsCash receiptsBeginning cash balanceTotal receiptsTotal available cashPayments to suppliersCash disbursementsBorrowingsFinancingExcess (deficiency) of available cash over disbursementsWagesAdministrative expensesSelling expenses
Less: Total available cashWagesAdministrative expensesCash disbursementsBeginning cash balanceFinancingSelling expensesTotal receiptsEnding cash balanceRepaymentsTotal disbursementsExcess (deficiency) of available cash over disbursementsBorrowingsCash receiptsCollections from customersSale of short-term investmentsPayments to suppliers
Payments to suppliersTotal receiptsAdministrative expensesSale of short-term investmentsRepaymentsSelling expensesTotal available cashEnding cash balanceFinancingBorrowingsCash receiptsTotal disbursementsBeginning cash balanceCollections from customersCash disbursementsWagesExcess (deficiency) of available cash over disbursements $ $

At December 31, 2014, the trial balance of Sloane Company contained the following amounts before adjustment.

Debit Credit
Accounts Receivable $180,700
Allowance for Doubtful Accounts $ 3,940
Sales Revenue 846,100

(a) Prepare the adjusting entry at December 31, 2014, to record bad debts expense, assuming that the aging schedule indicates that $22,910 of accounts receivable will be uncollectible.
(b) Repeat part (a), assuming that instead of a credit balance there is a $3,940 debit balance in Allowance for Doubtful Accounts.
(c) During the next month, January 2015, a $2,060 account receivable is written off as uncollectible. Prepare the journal entry to record the write-off.
(d) Repeat part (c), assuming that Sloane Company uses the direct write-off method instead of the allowance method in accounting for uncollectible accounts receivable.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No. Account Titles and Explanation Debit Credit
(a)
(b)
(c)
(d)

At the end of 2013, Morley Co. has accounts receivable of $811,300 and an allowance for doubtful accounts of $26,180. On January 24, 2014, it is learned that the company’s receivable from Spears Inc. is not collectible and therefore management authorizes a write-off of $4,680.

(a) Prepare the journal entry to record the write-off. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation Debit Credit

(b) What is the cash realizable value of the accounts receivable before the write-off and after the write-off?

Before Write-Off After Write-Off
Cash realizable value $
$

Reynolds.com uses the allowance method of accounting for bad debts. The company produced the following aging of the accounts receivable at year-end.

Number of Days Outstanding
Total 0–30 31–60 61–90 91–120 Over 120
Accounts Receivable $377,000 $222,000 $90,000 $38,000 $15,000 $12,000
% uncollectible 1% 4% 5% 8% 10%
Estimated bad debts

Assume the unadjusted balance in Allowance for Doubtful Accounts is a $4,000 debit.

(e) Reynolds.com used 3% of total accounts receivable, rather than aging the accounts receivable. Comment on your results. What are the advantages to the company of aging the accounts receivable rather than applying a percentage to total accounts receivable?

Howe Chemicals Company acquires a delivery truck at a cost of $32,600 on January 1, 2014. The truck is expected to have a salvage value of $2,250 at the end of its 6-year useful life.

Compute annual depreciation for the first and second years using the straight-line method. (Round answers to 0 decimal places, e.g. 125.)

First Year Second Year
Annual depreciation under straight-line method $ $

Quinn Company sells office equipment on July 31, 2014, for $21,210 cash. The office equipment originally cost $73,520 and as of January 1, 2014, had accumulated depreciation of $38,850. Depreciation for the first 7 months of 2014 is $4,270.

Prepare the journal entries to (a) update depreciation to July 31, 2014, and (b) record the sale of the equipment. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No. Account Titles and Explanation Debit Credit
(a)
(b)

These are selected 2014 transactions for Amarista Corporation:

Jan. 1 Purchased a copyright for $154,920. The copyright has a useful life of 6 years and a remaining legal life of 34 years.
Mar. 1 Purchased a patent with an estimated useful life of 6 years and a legal life of 24 years for $132,480.
Sept. 1 Purchased a small company and recorded goodwill of $152,710. Its useful life is indefinite.

Prepare all adjusting entries at December 31 to record amortization required by the events.(If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation Debit Credit
Dec. 31
(To record amortization of Copyrights)
Dec. 31
(To record amortization of Patents)
Dec. 31
(To record amortization of Goodwill)

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