Achievement Test 4: Chapters 7 and 8 Name ___________________________

Accounting Principles, 9e Instructor ________________________

Weygandt, Kieso, & Kimmel Section # _________ Date __________

Part I II III IV V VI VII Total

Points 30 10 20 10 8 12 10 100

Score

PART I — MULTIPLE CHOICE (30 points)

Instructions: Designate the best answer for each of the following questions.

____ 1. The use of a cash register for cash receipts is an example of the internal control
principle of
a. documentation procedures.
b. physical, mechanical, and electronic controls.
c. independent internal verification.
d. segregation of duties.

____ 2. At April 30, Beckett Company has the following bank information: cash balance per
bank $4,600; outstanding checks $280; deposits in transit $550; credit memo for
interest $10; bank service charge $20. What is Beckett’s adjusted cash balance on
April 30?
a. $4,860
b. $4,880
c. $4,330
d. $4,870

____ 3. The objectives of internal control are to

a. prevent unintentional errors and irregularities.
b. safeguard assets and enhance the accuracy and reliability of the accounting
records.
c. enhance the accuracy and reliability of financial statements.
d. safeguard assets and prevent thefts.

____ 4. When a petty cash fund is in use,

a. an entry must be made to the appropriate expense, asset, etc. account when a
disbursement is made.
b. the size of the fund should be such that it can be used to cash employees' bi-
monthly payroll checks.
c. entries are generally made to Petty Cash only when it is initially set up or the
stipulated amount of the fund is changed.
d. an entry is made to Petty Cash when the fund is replenished to its original amount.
AT4- 2 Test Bank for Accounting Principles, Ninth Edition

____ 5. The balance of a control account in the general ledger

a. must always be zero.
b. must equal the amount of total assets.
c. is always greater than the composite balance of individual accounts in a related
subsidiary ledger.
d. must equal the composite balance of individual accounts in a related subsidiary
ledger.

____ 6. The bank statement that a depositor receives from the bank includes
a. notification of amounts deducted by the bank to cover such things as the cost of a
supply of new checks ordered by the depositor.
b. a designation of which checks are still outstanding at the end of the month.
c. a designation of which deposits are in transit at the end of the month.
d. notification of errors made by the depositor in recording checks written during the
month in the depositor's accounts.

____ 7. A sales journal is used to record

a. only cash sales of merchandise.
b. sales of all assets on credit and for cash.
c. only credit sales of merchandise.
d. credit sales of merchandise, sales returns and allowances, and sales discounts.

____ 8. In the month of November, Joles Company wrote checks in the amount of $9,250. In
December, checks in the amount of $12,658 were written. In November, $8,468 of
these checks were presented to the bank for payment, and $10,883 were presented in
December. What is the amount of outstanding checks at the end of November?
a. $1,775
b. $782
c. $2,557
d. $3,550

____ 9. Closing entries are recorded in

a. a special journal.
b. the general journal.
c. the general ledger.
d. a closing journal.

____ 10. The one characteristic that all entries recorded in a cash receipts journal have in
common is
a. a credit to the Cash account.
b. that they all represent collections from customers.
c. that they originate from the sales of merchandise.
d. a debit to the Cash account.
 Achievement Test 4 AT4- 3

PART II — INTERNAL CONTROL OVER CASH RECEIPTS AND DISBURSEMENTS (10 points)
Six internal control principles related to cash transactions are discussed in the textbook. These
principles, with code letters, are:

Code Internal Control Principle

A Establishment of responsibility
B Segregation of duties
C Documentation procedures
D Physical, mechanical, and electronic controls
E Independent internal verification
F Other controls

Instructions: Match the above principles to the following applications related to cash receipts
and cash disbursements by placing the code in the space provided. Each code letter can be used
once, more than once, or not at all.

____ 1. Cash receipts should be deposited in bank in total daily.

____ 2. Daily cash counts should be made by cashier department supervisors.

____ 3. The duties of receiving and recording cash should be assigned to different individuals.

____ 4. Cash register tapes should be used for over-the-counter receipts.

____ 5. All checks should be prenumbered.

____ 6. The duties of approving an item for payment and paying the item should be performed
by different individuals.

____ 7. Each check should be compared with approved invoices before being issued.

____ 8. Blank checks should be stored in a safe, and access should be restricted.

____ 9. All personnel who handle cash should be bonded.

____ 10. Only the treasurer should be authorized to sign checks.

AT4- 4 Test Bank for Accounting Principles, Ninth Edition

PART III — BANK RECONCILIATION WITH ENTRIES (20 points)

Instructions: Given the information provided below, prepare (a) a bank reconciliation in proper
format, and (b) the necessary journal entries for the month of September for Dolan Company.

1. Balance per Bank on September 30—$24,170

2. Balance per Books on September 30—$19,600
3. Total outstanding checks at September 30—$4,200
4. Debit memoranda:
a. NSF check from Lee Co.—$640
b. Printing company checks—$60
c. Payment to bank of $2,900 note owed bank by Dolan plus $200 interest.
5. Credit memorandum: Collection of note receivable for $5,500 plus $560 interest less $60
collection fee.
6. Errors:
a. A check written this month to Nance Co. for office supplies cleared the bank at the correct
amount of $680, but was recorded by Dolan at $860.
b. The bank charged a $210 check of Doane Company against Dolan's account this month.
7. Deposit in transit on September 30—$1,800.

(a) Bank Reconciliation

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 Achievement Test 4 AT4- 5

(b) Journal Entries (Note: Assume no interest has been accrued on the notes.)

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AT4- 6 Test Bank for Accounting Principles, Ninth Edition

PART IV — PETTY CASH FUND (10 points)

The ledger accounts given below, with an identification number for each, are used by Quayle
Company.

Instructions: Prepare appropriate entries for the month of March for each of the listed petty cash
fund transactions by placing the appropriate identification number(s) in the debit and credit
columns provided. Write "N/A" if no entry is appropriate.

1. Cash 6. Office Supplies Expense

2. Petty Cash 7. Postage Expense
3. Accounts Receivable 8. Freight-out
4. Office Supplies 9. Miscellaneous Expense
5. Merchandise Inventory 10. Cash Over and Short
———————————————————————————————————————————
Account(s) Account(s)
Entry Information Debited Credited
———————————————————————————————————————————
Mar. 1 Issued a check for $500 to establish a petty cash
fund.
———————————————————————————————————————————
Mar. 3 Disbursed $40 for pizza and drinks for staff
working overtime.
———————————————————————————————————————————
Mar. 5 Paid collect United Parcel Service bill for goods
purchased for resale $20.
———————————————————————————————————————————
(March 6 - 17 various other disbursements took place.)
———————————————————————————————————————————
Mar. 18 Replenished the petty cash fund by writing a check
for $445. On this date the fund consisted of $55 in
cash plus the following petty cash receipts: Freight
on inventory purchased $118, office supplies $145,
and miscellaneous expense $179.
———————————————————————————————————————————
Mar. 21 A check was written for $200 to increase the
stipulated amount of the fund.
 Achievement Test 4 AT4- 7

PART V — SPECIAL JOURNALS (8 points)

Instructions: Indicate in which journal the transactions given below would be recorded by
placing the appropriate journal abbreviation in the space provided.

Abbreviation Journal
G General Journal
CR Cash Receipts Journal
S Sales Journal
CP Cash Payments Journal
P Purchases Journal (One column)

_____ 1. Sold merchandise to customer on account.

_____ 2. Customer returned merchandise sold on account.

_____ 3. Received cash on account from customer.

_____ 4. Purchased office equipment on account.

_____ 5. Paid shipping charges on merchandise purchased on account.

_____ 6. Owner withdrew cash for personal use.

_____ 7. Purchased merchandise for resale on account.

_____ 8. Recorded adjusting entries.

PART VI—MATCHING: ACCOUNTING INFORMATION SYSTEMS TERMINOLOGY (12 points)

Instructions: Match the terms given below with the definitions or descriptions that follow by
placing the appropriate letter in the space provided.

A. Control account D. Special journal

B. Cost effectiveness E. Subsidiary ledger
C. Flexibility F. Usefulness

_____ 1. Used to record similar types of transactions.

_____ 2. The benefits of information must outweigh the cost of providing it.

_____ 3. An account in the general ledger that controls a subsidiary ledger.

_____ 4. The accounting system should accommodate a variety of users and changing
information needs.

_____ 5. A group of accounts with a common characteristic.

_____ 6. Information must be understandable, relevant, reliable, timely, and accurate.

AT4- 8 Test Bank for Accounting Principles, Ninth Edition

PART VII –– SPECIAL JOURNALS (10 points)

Listed below are various column headings that may appear in special journals. Using the
following code letters, identify for each column heading (1) the special journal where the column
heading would appear, and (2) whether the amounts entered under the column heading would be
posted in total, individually, or both in total and individually. (Note: column headings may appear
in more than one special journal)

Code: Special Journals Code: Posting

S = Sales journal I = Individual posting
P = One column purchases journal T = Total posting
CR = Cash receipts journal B = Both individual and total posting
CP = Cash payments journal

Heading Special Journal Posting

1. Sales Discounts—Dr. ____________ _____

2. Merchandise Inventory—Dr. ____________ _____

3. Accounts Receivable—Dr. ____________ _____

4. Other Accounts—Cr. ____________ _____

5. Accounts Payable—Dr. ____________ _____

 Achievement Test 4 AT4- 9

Solutions — Achievement Test 4: Chapters 7 and 8

PART I — MULTIPLE CHOICE (30 points)

1. b 3. b 5. d 7. c 9. b
2. d 4. c 6. a 8. b 10. d

PART II — INTERNAL CONTROL OVER CASH RECEIPTS AND DISBURSEMENTS (10 points)
1. F 3. B 5. C 7. E 9. F
2. E 4. C 6. B 8. D 10. A

PART III — BANK RECONCILIATION WITH ENTRIES (20 points)

(a) Bank Reconciliation Balance per books $19,600
Balance per bank statement $24,170 Add: Collection of note rec. $6,000
Add: Deposit in transit $1,800 Error in recording check 180 6,180
Bank error 210 2,010 25,780
$26,180 Less: NSF check 640
Less: Outstanding checks 4,200 Bank service charges 60
Adjusted balance per bank $21,980 Payment of note 3,100 3,800
Adjusted balance per books $21,980

(b) Journal Entries.

1. Cash ............................................................................................. 6,000
Miscellaneous Expense................................................................. 60
Notes Receivable ................................................................. 5,500
Interest Revenue .................................................................. 560

2. Accounts Receivable .................................................................... 640

Cash ..................................................................................... 640

3. Miscellaneous Expense ................................................................ 60

Cash ..................................................................................... 60

4. Interest Expense ........................................................................... 200

Notes Payable ............................................................................... 2,900
Cash ..................................................................................... 3,100

5. Cash ............................................................................................. 180

Office Supplies ..................................................................... 180

PART IV — PETTY CASH FUND (10 points)

Account(s) Account(s) Account(s) Account(s)
Date Debited Credited Date Debited Credited
Mar. 1 2 1 Mar. 18 4, 5, 9, 10 1
Mar. 3 N/A N/A Mar. 21 2 1
Mar. 5 N/A N/A
AT4- 10 Test Bank for Accounting Principles, Ninth Edition

PART V — SPECIAL JOURNALS (8 points)

1. S 5. CP
2. G 6. CP
3. CR 7. P
4. G 8. G

PART VI—MATCHING: ACCOUNTING INFORMATION SYSTEMS TERMINOLOGY (12 points)

1. D 4. C
2. B 5. E
3. A 6. F

PART VII —SPECIAL JOURNALS (10 points)

Heading Special Journal Posting
1. Sales Discounts—Dr. CR T
2. Merchandise Inventory—Dr. P, CP T
3. Accounts Receivable—Dr. S B
4. Other Accounts—Cr. CR I
5. Accounts Payable—Dr. CP B