Exam 3: Review of a Company S Accounting System

Companies create subsidiary ledgers to divide accounting tasks and to reduce the size of the general ledger, while keeping up-to-date records of customers and suppliers. This process is also used to minimize errors in recording transactions.

The McNally Company uses cash-basis accounting for its records. During 2015, McNally collected $500,000 from its customers, made payments of $200,000 to its suppliers for inventory, and paid $140,000 for operating costs. McNally wants to prepare accrual-basis financial statements. In gathering information for the accrual-basis financial statements, McNally discovered the following: · Customers owed McNally $35,000 at the beginning of 2015 and $50,000 at the end of 2015. · McNally owed suppliers $20,000 at the beginning of 2014 and $27,000 at the end of 2015. · McNally's beginning inventory was $42,000, and its ending inventory was $44,000. · McNally had prepaid expenses of $5,000 at the beginning of 2015 and $7,400 at the end of 2014. · McNally had accrued expenses of $12,000 at the beginning of 2015 and $19,000 at the end of 2015. · Depreciation for 2015 was $51,000. Required: Prepare an accrual-basis income statement for 2015 for McNally Company.

Slater Company uses the cash basis of accounting. Slater Company collected $950,000 from its customers during 2015. Customers owed Slater $150,000 of accounts receivable at the beginning of 2015, and $190,000 of accounts receivable at the end of 2015. What is Slater's sales revenue for 2015 under the accrual basis of accounting?

List the major steps in the accounting cycle.

Which of the following is a purchase return?

Which of the following is a sales return?

The adjustment necessary to convert cash-basis payments for other operating costs to accrual-basis operating expenses requires the addition of ending prepaid expenses to the beginning prepaid expenses, subtracting the beginning accrued expenses from this amount, and finally adding the ending accrued expenses.

What relationship exists between the general journal and the general ledger?

Joseph, Inc. uses the accrual basis of accounting. Joseph's insurance expense account had a $23,000 balance at the end of the year. The prepaid insurance account had a $6,000 balance at the beginning of the year and a $3,000 balance at the end of the year. How much cash was paid for insurance during the year?

The balances in deferred unearned) revenue accounts represent amounts that are

The accounting equation can be expressed as

Cash-basis accounting as a basis for preparing financial statements is

Which of the following is the third major step in the accounting cycle?

Step two in completing a worksheet is to

Which of the following is a contra account?

The another interpretation of the accounting equation is Assets = Liabilities + Contributed Capital + Beginning Retained Earnings + Net Income - Dividends + Beginning Accumulated Other Comprehensive Income + Other Comprehensive Income.

The accountant failed to make the adjusting entry to record the unpaid wages of its employees as of December 31. This error will cause

Which statement is true?

If the credit subtotal is greater than the debit subtotal in the Income Statement columns of a worksheet, the difference

On a worksheet, the balance in the accumulated depreciation account should be extended to which column?