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Exercise 9.1 Journalizing cash receipts. LO 9-1
Northwest Gift Shop, a retail business, started business on April 29, 2019. It keeps a $300 change fund in its cash register.
The cash receipts for the period from April 29 to April 30, 2019, are shown below.
 

DATE		TRANSACTIONS
April	29	Cash sales per the cash register tape, $1,530.
		Cash count, $1,820.
	30	Cash sales per the cash register tape, $1,437.
		Cash count, $1,738.

Record the cash receipts on April 29 and April 30, 2019, in a general journal.
 

 
Exercise 9.2 Recording the establishment of a petty cash fund. LO 9-2
On January 2, The Public Legal Clinic issued Check 2108 for $320 to establish a petty cash fund.
Indicate how this transaction would be recorded in a general journal. 
 

   
Exercise 9.3 Recording the establishment and replenishment of a petty cash fund. LO 9-2
On January 2, Jasmine’s Beauty Supplies Inc. issued Check 3100 for $300 to establish a petty cash fund. On January 31,
Check 3159 was issued to replenish the petty cash fund. An analysis of payments from the fund showed these totals:
Supplies, $41; Delivery Expense, $82; and Miscellaneous Expense, $17.

Indicate how these transactions would be recorded in a general journal.
 
Exercise 9.3 Recording the establishment and replenishment of a petty cash fund. LO 9-2
On January 2, Jasmine’s Beauty Supplies Inc. issued Check 3100 for $300 to establish a petty cash fund. On January 31,
Check 3159 was issued to replenish the petty cash fund. An analysis of payments from the fund showed these totals:
Supplies, $41; Delivery Expense, $82; and Miscellaneous Expense, $17.

Indicate how these transactions would be recorded in a general journal.

   
Exercise 9.4 Determining an adjusted bank balance. LO 9-5, 9-6
Teng Corporation received a bank statement showing a balance of $14,500 as of October 31, 2019.
The firm’s records showed a book balance of $14,098 on October 31.
The difference between the two balances was caused by the following items.
 
A debit memorandum for an NSF check from Richard Wolf for $420.
Three outstanding checks: Check 7017 for $120, Check 7098 for $51, and Check 7107 for $1,520.
A bank service charge of $16.
A deposit in transit of $853.

Prepare the adjusted bank balance section and the adjusted book balance section of the bank reconciliation statement.
Prepare the necessary journal entries for the year 2019.
 


   
Exercise 9.5 Analyzing bank reconciliation items. LO 9-5, 9-6
At Livermore Delivery and Courier Service the following items were found to cause a difference between the bank statement and the firm’s records.
Indicate whether each item will affect the bank balance or the book balance when the bank reconciliation statement is prepared.
Also indicate which items will require an accounting entry after the bank reconciliation is completed.
 

   
Exercise 9.6 Preparing a bank reconciliation statement. LO 9-5, 9-6
Di Stefano Office Supply Company received a bank statement showing a balance of $67,705 as of March 31, 2019.
The firm’s records showed a book balance of $69,451 on March 31. The difference between the two
balances was caused by the following items.
 
A debit memorandum for $44, which covers the bank’s collection fee for the note (item 6).
A deposit in transit of $3,400.
A check for $242 issued by another firm that was mistakenly charged to Di Stefano’s account.
A debit memorandum for an NSF check of $6,105 issued by Wozniak Construction Company, a credit customer.
Outstanding checks: Check 3782 for $1,900; Check 3840 for $145.
A credit memorandum for a $6,000 noninterest-bearing note receivable that the bank collected for the firm.
 
Prepare a bank reconciliation statement for the firm as of March 31. Prepare the necessary journal
entries for March 31, 2019 from the statement.
 


   
Exercise 9.7 Determining the adjusted bank balance. LO 9-5
Florence Company received a bank statement showing a balance of $12,100 on November 30, 2019.
During the bank reconciliation process, Florence’s accountant noted the following bank errors:
 
A check for $144 issued by Florentine, Inc., was mistakenly charged to Florence Company’s account.
Check 2782 was written for $100 but was paid by the bank as $1,100.
Check 2920 for $78 was paid by the bank twice.
A deposit for $670 on November 22 was credited by the bank for $760.
 
Assuming outstanding checks total $1,450, prepare the adjusted bank balance section of the
November 30, 2019, bank reconciliation.
 

   
Exercise 9.8 Journalizing electronic transactions. LO 9-7
After returning from a three-day business trip, the accountant for Southeast Sales, Johanna Estrada,
checked bank activity in the company’s checking account online. The activity for the last three days follows.
 

Business Checking		Account #123456-987
Date	Type	Description	Additions			Payments			Balance
09/24/2019	Loan Payment	Online Transfer to CM XXXX				$	4,700.00		$	16,875.06
09/24/2019	Deposit	DEPOSIT ID NUMBER 8888	$	2,389.60					$	21,575.06
09/23/2019	Check	CHECK #1554 (view)				$	4,700.00		$	19,185.46
09/23/2019	Bill Payment	Online Payment				$	48.05		$	23,885.46
09/22/2019	Check	CHECK #1553 (view)				$	360.00		$	23,933.51
09/22/2019	Check	CHECK #1551 (view)				$	1,870.00		$	24,293.51
09/22/2019	ACH Credit	Edwards UK AP PAYMENT	$	10,100.00					$	26,163.51
09/22/2019	ATM	ATM WITHDRAWAL				$	360.00		$	16,063.51

 
After matching these transactions to the company’s Cash account in the general ledger, Johanna noted the following unrecorded transactions: 
 
The ATM withdrawal on 9/22/2019 was for personal use by the owner, Robert Savage.
The ACH credit on 9/22/2019 was an electronic funds payment received on account from Edwards UK, a credit customer located in Great Britain.
The bill payment made 9/23/2019 was to Waste Control Trash Services (utilities).
The loan payment on 9/24/2019 was an automatic debit by Central Motors for the company’s monthly payment on a loan for its automobiles.
The loan does not bear interest.
 
Prepare the journal entries in a general journal to record the four transactions above. (Round your answers to 2 decimal places.)
 


Current Assets                   50,000
Noncurrent Assets           10,000
Noncurrent Liabilities     15,000
Stockholders' Equity       25,000

Capital as of 3/31:            30,000

60,000 – 25,000 = 35,000
35,000 - 15,000 = 20,000
50,000 - 20,000 = 30,000
   
XYZ obtained a $100,00 loan (note) on Oct 1, 2012 at an annual rate of 6%. The interest and principal is due on Sept 30, 2013.
Give the entry to record the note on Oct 1,2012
 
Cash                                      100,000
Notes Payable                                   100,000
   
XYZ obtained a $100,00 loan (note) on Oct 1, 2012 at an annual rate of 6%. The interest and principal is due on Sept 30, 2013.

Interest Expense              1500
Interest Payable                               1500
 
100,000 x 0.06 x 3/12 = 1500
   
XYZ obtained a $100,00 loan (note) on Oct 1, 2012, at an annual rate of 6%. The interest and principal is due on Sept 30, 2013.

Interest Expense              4500
Interest Payable               1500
Note Payable                     100,00
Cash                                      106,000
 
500 x 9 = 4,500
   
Fazel Company makes and sells paper products. In the coming year, Fazel expects total sales of $19,500,000.
There is a 6% commission on sales. In addition, fixed expenses of the sales and administrative offices include the following:

Salaries                 $             960,000
Utilities                                 365,000
Office space                        230,000
Advertising                         1,200,000
Required:

Prepare a selling and administrative expenses budget for Fazel Company for the coming year.

Fazel Company
Selling and Administrative Expenses Budget
For the Coming Year

1. Variable selling expenses
     Fixed expenses:
2. Salaries
3. Utilities
4. Office space
5. Advertising
6. Total fixed expenses
7. Total selling and administrative expenses
 
1,170,000
960,000
365,000
230,000
1,200,000
2,755,000
3,925,000
   
All sales are on credit. If credit sales for January and February are $100,000 and $200,000, respectively,
the cash collections for February are
 
a. $140,000.
b. $300,000.
c. $120,000.
d. $160,000.
e. $80,000.
   
Preparing an Accounts Payable Schedule

Wight Inc. purchases raw materials on account for use in production. The direct materials purchases budget
shows the following expected purchases on account:

April       $              373,900
May                       411,900
June                       416,200

Wight typically pays 40% on account in the month of billing and 60% the next month.

Required:

1. How much cash is required for payments on account in May?
2. How much cash is expected for payments on account in June?
 
1. 389,100
2. 413,620
   
The percentage of accounts receivable that is uncollectible can be ignored for cash budgeting because

a. no cash is received from an account that defaults.
b. it is included in cash sales.
c. it appears on the budgeted income statement.
d. for most companies, it is not a material amount.
e. None of these.


Which of the following is not an advantage of participative budgeting?

a. It encourages budgetary slack.
b. It tends to lead to a higher level of performance.
c. It fosters a sense of responsibility.
d. It encourages greater goal congruence.
e. It fosters a sense of creativity in managers.
   
Of Mama's Little Bakery's Accounts Receivable, 30% pay in the month of purchase, 50% pay in the month following purchase,
and 20% pay in the second month following purchase. If January sales were $5,000, February sales were $10,000, and March
sales (estimated) were $7,500, the estimated cash inflows for March would be $10,000.
 
True
False
   
Which of the following is a difference between planning and control?
 
Planning is looking ahead, whereas control is looking backward
Planning is a one-time process, whereas control is a continuous process.
Planning is management's discretion, whereas control is mandated by law.
Planning is looking ahead, whereas control is looking backward.
Planning is a continuous process, whereas control is a one-time process.
   
Which of the following is part of the planning cycle?

Budget
Monitoring of actual activity
Investigation
Corrective action
   
Which of the following is true of operating budgets?

Operating budgets detail cash inflows and outflows.
Operating budgets describe the income-generating activities of a firm.
Operating budgets detail the investing activities of a firm.
Operating budgets are prepared after the preparation of the financial budget.
   
Which of the following is the basis for all of the other operating budgets and most of the financial budgets?

Production budget
Overhead budget
Sales budget
Direct labor budget
   
Direct materials purchases budget:

tells the amount and cost of raw materials to be acquired in each time period.
tells the amount of direct materials that should be used in production under ideal conditions.
tells the amount and cost of raw materials to be purchased and sold in each time period.
tells the amount of direct material and labor to be used in each time period.
   
Which of the following formulas is used for calculating purchases?

Purchases = Direct materials in beginning inventory - Direct materials in ending inventory
Purchases = Direct materials needed for production
Purchases = Direct materials in desired ending inventory - Direct materials in beginning inventory - Direct materials needed for production
Purchases =
Direct materials needed for production + Direct materials in desired ending inventory – Direct materials in beginning inventory
   
Which of the following budgets shows the expected cost of all production costs other than direct materials and direct labor?

Production budget
Overhead budget
Cash budget
Direct labor budget
   
Which of the following is true of the selling and administrative expenses budget?

It outlines planned expenditures for nonmanufacturing activities.
It outlines planned expenditures for manufacturing as well as nonmanufacturing activities.
It is the basis for all of the other operating budgets and financial budgets.
It is the basis for all of the other operating budgets
   
The budgeted income statement helps managers:

determine the amounts to be spent on nonproduction categories.
determine the expected cost of producing one unit of finished goods.
determine how much to borrow during the budgeted period.
determine how profitable the coming year will be.
   
To calculate purchases, add direct materials needed for production and direct materials in desired ending inventory,
and then subtract direct materials in beginning inventory.
 
True
False
   
Which of the following is a benefit of preparing a cash budget?

It helps to estimate the average collection period of sales during a period.
It helps to estimate the amount of credit sales during a period.
It helps to estimate the current assets ratio during the budgeted period.
It helps estimate the amount to be borrowed or loans to be repaid during a period.
   
Which of the following is part of cash disbursement section of cash budget?

Depreciation expense
Purchases
Loss on sale of assets
Cash sales
   
The amount of borrowings necessary to achieve minimum desired cash amount is called

cash deficiency.
operating loss.
cash outflow.
solvency level
   
The cash budget is estimated cash inflows minus estimated cash outflows.
 
True
False
   

Budgeted cash outflows are the expected payments of cash for select reasons over the defined period
 
True
False
 
Depreciation of equipment should not be included in the estimated cash outflows on the cash budget
 
True
False
   
Which of the following is true of a flexible budget?

It compares the actual costs with the budgeted costs for the budgeted level of activity.
It compares the actual costs with the budgeted costs for the actual level of activity.
It compares the actual costs with the budgeted costs for the actual level of activity of the previous year.
It compares the actual costs with the budgeted costs for the budgeted level of activity of the previous year.
   
Which of the following is a characteristic of a static budget?

It enables a firm to compute expected costs for a range of activity levels.
It has two types: before-the-fact and after-the fact.
It helps a company to have the knowledge of fixed and variable costs.
It is created in advance, based on a particular level of activity.
   
The difference between the actual amount and the flexible budget amount is known as the _____.

flexible budget cost
variable expense
flexible budget variance
controllable difference
   
Flexible budgets for planning purposes are created before the fact for one output level.
 
True
False
   
With flexible budgets for planning, the average total fixed cost per unit decreases as the output level increases.
 
True
False
   
The flexible budget prepared after the period is over for the actual level of performance has two columns:
actual cost and budgeted cost for actual output.
 
True
False
 
An after-the-fact flexible budget allows management to compute what the costs should be for the level of output that occurred.
 
True
False
   
Which of the following is most likely to promote a reasonable degree of positive behavior?

Budgetary slack
Cost control
Single measure of performance
Participative budgeting
   
Which of the following is true of the term pseudo participation?

It exists when a manager deliberately underestimates revenues in reality.
It is viewed as ethical professional practice.
It occurs when top management assumes total control of the budgeting process, seeking only superficial
participation from lower-level managers.
It is a trick to get managers in a participative setting to set high but achievable goals.
   
____ occurs when a manager takes actions that improve budgetary performance in the short run but bring
long-run harm to a firm?

Budgetary slack
Myopic behavior
Goal congruence
Sabotage
 
A budget

a. is a long-term plan.
b. is used primarily in manufacturing businesses as a tool for controlling costs.
c. is only a control tool.
d. is the same as a forecast.
e. is a short-term financial plan.
   
Which of the following is part of the control process?

a. Monitoring of actual activity
b. Comparison of actual with planned activity
c. Investigating
d. Taking corrective action
e. All of these.
   
Which of the following is not an advantage of budgeting?

a. It forces managers to plan.
b. It provides information for decision making.
c. It guarantees an improvement in organizational efficiency.
d. It provides a standard for performance evaluation.
e. It improves communication and coordination.
   
A moving, 12-month budget that is updated monthly is

a. not used by manufacturing firms.
b. a waste of time and effort.
c. a master budget.
d. a continuous budget.
e. always used by firms that prepare a master budget.
   
Which of the following is not part of the operating budget?

a. The direct materials purchases budget
b. The supplies budget
c. The advertising budget
d. The capital budget
e. The production budget
   
Before a direct materials purchases budget can be prepared, you should first

a. prepare a sales budget.
b. prepare a production budget.
c. decide on the desired ending inventory of materials.
d. obtain the expected price of each type of material.
e. All of these.
   
The first step in preparing the sales budget is to

a. prepare a sales forecast.
b. increase sales beyond the forecast level.
c. estimate marketing expenses.
d. talk with past customers.
e. assess the desired ending inventory of finished goods.
   
Which of the following is needed to prepare the production budget?

a. Direct labor needed for production
b. Expected unit sales
c. Production manager's salary expense
d. Direct materials needed for production
e. None of these choices are correct.
   
A company requires 110 pounds of plastic to meet the production needs of a small toy. It currently has
10 pounds of plastic inventory. The desired ending inventory of plastic is 30 pounds. How many pounds of
plastic should be budgeted for purchasing during the coming period?

a. 140 pounds
b. 130 pounds
c. 90 pounds
d. 120 pounds
e. None of these.