To be capitalized, an expenditure must ________.
A) extend the useful life of a long-term asset
B) enhance the operating efficiency of a long-term asset
C) be reasonable and necessary to put a long-term asset into a working condition
D) all of these
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Q. 2) Two features of internal control are presented in the following sections. Each is followed by a list of fourirregularities that occurred in processing data. Identify the one irregularity from each list that would be discoveredor prevented by the feature of internal control described. (a) The sum of the balances of the accounts in the customer's ledger is compared at the end ofeach month with the balance of the accounts receivable account in the general ledger by aperson who has no responsibility for maintaining either the general ledger or the customer'sledger. (1) Five hours of services were rendered but the customer was only billed for four hours. (2) A cash receipt of 750 was recorded correctly in the accounts receivable controllingaccount but was posted to the customer's ledger as 75. (3) A bill for services rendered to Cole Co was erroneously posted to the account ofColeman Co in the customer's ledger. (4) No entry was made in the accounting records for services rendered to a customer. (b) Both cash and credit charges for services rendered are recorded on prenumbered invoices.At the end of the day, all invoices are accounted for before the duplicate copies of theinvoices are routed to the accounting department for entry into the accounts and the cash issent to the cashier's department for deposit. (1) Some charge customers complained that the monthly statements of account did notadd all amounts correctly. (2) Some clerks used incorrect hourly rates in preparing invoices. (3) Some clerks destroyed duplicate copies of cash invoices and misappropriated the cash. (4) Some charge customers complained that the monthly statement of account did notindicate credits for payments made.
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Q. 3) On October 15, Manx Company bought 400 shares of its own stock for 16 per share. On December 10, Manx Company sold all of the same shares on the market for 20 per share.
Show how both of these transactions affect the accounting equation.
Include both account titles and amounts.
Shareholders' equity
Assets Liabilities Contributed capital Retained earnings
What will be an ideal response?
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Q. 4) For merchandising businesses, the term purchases refers only to merchandise acquired for resale.
a. True
b. False
Indicate whether the statement is true or false
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Q. 5) On July 1, 2012, Homer, Inc. loaned a customer 10,000 on a 3-month, 9 note.
Part A: Show the effect on the accounting equation of the July 31, 2012 adjusting entry for interest. Include both account titles and amounts.
Shareholders' equity
Assets Liab. CC Retained earnings
Part B: Put an X to indicate each financial statement that is affected by the adjusting entry to accrue interest.
______ Income Statement ______ Statement of Changes in Shareholders' Equity
______ Statement of Cash Flows ______ Balance Sheet
Part C: Would your answer in Part A be different if the note were a 10,000, 6-MONTH, 9 note, instead of a 3-month note?
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Q. 6) Master data control plans regulate transaction processing by calculating control totals at various points in a processing run and subsequently comparing these totals.
Indicate whether the statement is true or false
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