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3 Basic Accounting Questions

Problem One:
The following data have been gathered for Leigh Corporation for the month ended September 30, 2009. Prepare a bank reconciliation based on the following information:
- The bank statement reveals a balance of $3,536.
- The September 30, 2009, book balance was $3,200.
- There was an EFT deposit of $1,800 on the bank statement for the monthly rent from a tenant.
- The bookkeeper had erroneously recorded a $500 check as $50. The check was to settle an account payable.
- The bank statement reveals $50 in service charges.
- Check #1572 for $260 and check #1606 for $285 were not returned with the bank statement.
- A deposit made on September 29, 2009, for $1,250 did not appear on the bank statement.
- A bank debit memo indicated an NSF check for $259.

Problem Two:
(1). In its first year of operations, 2005, Laredo Company had credit sales of $350,000 to 120 different customers. Of this amount, Mr. Joe purchased $400 and Ms. Kate purchased $180 on account. During the year, cash collections of $321,000 were made, of which Mr. Joe paid $360 and Ms. Kate paid $60. At the end of 2005, bad debts expense was estimated to be 5% of ending accounts receivable. One February 23, 2006, the balance in Ms. Kate's account was written off as uncollectible.
Prepare the appropriate journal entry on the books of Laredo Company for:
a. the $350,000 in credit sales
b. the collection of $321,000 from credit customers
c. the estimation of bad debts expense
d. the write-off of Ms. Kate's account

(2). Armstrong Company reports the following information for the years ended December 31, 2005 and 2006:
2006 2005
Sales $980,000 $820,000
Accounts Receivable 75,000 65,000
Sales consisted of 80% credit sales and 20% cash sales during 2005 and 2006.
From the information given above for Armstrong Company, determine the:
a. accounts receivable turnover for 2006.
b. days to collect accounts receivable for 2006 .

Problem Three:
(1). On March 1, 2007, Metro Electric Enterprises established an imprest petty cash fund for $200. An audit of the fund conducted on March 31, 2007, revealed the $30 cash on hand and the following receipts for petty cash disbursements:
Office supplies $135
Refreshments for meeting 20
Postage on packages mailed 15
Prepare the entry on March 1, 2007, to establish the petty cash fund, and the entry on March 31, 2007, to replenish the petty cash fund.

(2). In each of the following situations, identify the internal control weakness as well as the business's potential problem, and suggest a solution.
a. Sandy Bingham purchases supplies for Joe Mack Music Company and stores them in a locked room for which she has the key. She is also responsible for distributing these supplies to employees upon request. At the end of each month, Sandy takes an inventory of the supplies on hand and notifies the accounting department of the amount for the adjusting entry for supplies used.
b. The law firm of Wheeler, Dealer, and Brandt has been extremely busy in recent months. They need another lawyer, but the company has not had the chance to hire one. In the meantime, one of the secretaries has been preparing briefs, writing up wills, and preparing the closing papers for various real estate deals.

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(2). In each of the following situations, identify the internal control weakness as well as the business's potential problem, and suggest a solution.
a. Sandy Bingham purchases supplies for Joe Mack Music Company and stores them in a locked room for which she has the key. She is also responsible for distributing these supplies to employees upon request. At the end of each month, Sandy takes an inventory of the supplies on hand and notifies the accounting department of the amount for the adjusting entry for supplies used.
In the present case, the purchases of supplies, issue of supplies and also physical count of supplies at the end of each month is the indication of internal control weakness. This problem ...

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