FOUNDATIONS OF ACCOUNTING AND FINANCE

 Question 1

 Tyler Kirsch has recently been hired as the manager of Dark Canyon Coffee. Dark Canyon Coffee is a national chain of franchised coffee shops. During his first month as store manager,

Tyler encountered the following internal control situations:

  1. Dark Canyon Coffee has one cash register. Prior to Tyler’s joining the coffee shop, each employee working on a shift would take a customer order, accept payment, and then prepare the order. Tyler made one employee on each shift responsible for taking orders and accepting the customer’s payment. Other employees prepare the orders.
  1. Since only one employee uses the cash register, that employee is responsible for counting the cash at the end of the shift and verifying that the cash in the drawer matches the amount of cash sales recorded by the cash register. Tyler expects each cashier to balance the drawer to the penny every time—no exceptions.
  1. Tyler caught an employee putting a box of 100 single-serving tea bags in his car. Not wanting to create a scene, Tyler smiled and said, “I don’t think you’re putting those tea bags on the right shelf. Don’t they belong inside the coffee shop?” The employee returned the tea bags to the stockroom.

Required:

State whether you agree or disagree with Tyler’s method of handling each situation and  explain your answer.

 

Question 2

 The following data were accumulated for use in reconciling the bank account of Spectrum Co. for July:

  1. Cash balance according to the company’s records at July 31, $8,346.50.
  2. Cash balance according to the bank statement at July 31, $9,066.35.
  3. Checks outstanding, $3,175.25.
  4. Deposit in transit, not recorded by bank, $2,615.40.
  5. A check for $240 in payment of an account was erroneously recorded in the check register as $420.
  6. Bank debit memorandum for service charges, $20.00.

Required:

  1. a) Prepare a bank reconciliation statement (15 marks)
  2. b) Journalize the entry or entries that should be made by the company (10 marks)      Total 25 marks

 

Question 3

 The following were selected from among the transactions completed by Hunter Co. during the current year. Hunter Co. sells and installs home and business security systems. Jan. 15. Loaned $6,000 cash to Dan Hough, receiving a 90-day, 8% note. Feb. 6. Sold merchandise on account to Kent and Son, $16,000. The cost of the merchandise sold was $9,000. Feb.13. Sold merchandise on account to Centennial Co., $30,000. The cost of merchandise sold was $15,750. Mar. 5. Accepted a 60-day, 6% note for $16,000 from Kent and Son on account. Mar.14. Accepted a 60-day, 12% note for $30,000 from Centennial Co. on account. Apr. 15. Received the interest due from Dan Hough and a new 90-day, 10% note as a renewal of the loan of January 15. (Record both the debit and the credit to the notes receivable account.) May 4. Received from Kent and Son the amount due on the note of March 5. May

  1. Centennial Co. dishonored its note dated March 14. June 12. Received from Centennial Co. the amount owed on the dishonored note, plus interest for 30 days at 12% computed on the maturity value of the note. July 14. Received from Dan Hough the amount due on his note of April 15. Aug. 10. Sold merchandise on account to Conover Co., $10,000. The cost of the merchandise sold was $6,500. Aug 20. Received from Conover Co. the amount of the invoice of August 10, less 1% discount.

 Required:

Journalize the transactions.

Each journal entry carries equal marks.     Total 25 marks

 

Question 4

 Kelly Melnik owns and operates Aaladin Print Co. During July, Aaladin Print Co. incurred the following costs in acquiring two printing presses. One printing press was new, and the other was used by a business that recently filed for bankruptcy.

Costs related to new printing press:

  1. Sales tax on purchase price
  2. Insurance while in transit
  3. Freight
  4. Special foundation
  5. Fee paid to factory representative for installation
  6. New parts to replace those damaged in unloading Costs related to used printing press:
  7. Fees paid to attorney to review purchase agreement
  8. Installation
  9. Repair of vandalism during installation
  10. Replacement of worn-out parts
  11. Freight
  12. Repair of damage incurred in reconditioning the press

 

Required:

  1. a) Indicate which costs incurred in acquiring the new printing press should be debited to the asset account.
  1. b) Indicate which costs incurred in acquiring the used printing press should be debited to the asset account.

 Each requirement carries equal marks Total 25 marks