ACCOUNTINGM ATCHING1- 1 Many accounting professionals work in one of the following three areas.A. Financial accountingB. Managerial accountingC. Tax accountingIdentify the area of accounting that is most involved in each of the following responsibilities.1. Internal auditing. 5. Investigating violations of tax laws.2. Exter nal audit ing. 6. Planning tran sacti ons to mini mize taxes.3. Cost accounting. 7. Preparing external financial statements.4. Budgeti ng. 8. Reviewi ng reports for SEC complia nee.1- 2 Identify the following users as either external users (E) or internal users (I).1- 3 Match each of the numbered descriptions with the principle it best reflects. Indicate youranswer by writing the letter for the appropriate principle in the blank space next to eachdescription.A. General accounting principleB. Cost prin cipleC. Busin ess en tity prin ciple E. Specific accountingprincipleF. Objectivity prin cipleG. Goin g-c oncern prin cipleD. Revenue recog niti on prin ciple1. Usually created by a pronoun ceme nt from an authoritative body. ____________2. Finan cial stateme nts reflect the assumpti on that the bus in ess con ti nues operati ng.3. Derived from Ion g-used and gen erally accepted acco un ti ng practices.4. Every bus in ess is acco un ted for separately from its owner or own ers.5. Reve nue is recorded only whe n the earnings process is complete.6. In formati on is based on actual costs in curred in tran sact ions.-7. Finan cial stateme nt data are supported by evide nee other tha n some one belief.-1-4 Identify the items from the following list that are likely to serve as source documents.a. Sales ticket d. Teleph one bill g. Bala nee sheetb. I ncome stateme nt e. I nvoice from supplier h. Prepaid in sura ncec. Trial bala nce f. Compa ny revenue acco un t i. Bank stateme nt1-5 Identify the financial statement(s) where each of the following items appears. Use I forincome statement, E for statement of owner ' s equity, and B for balance sheet.a. Customersb. Suppliersc. Brokersd. Busin ess presse. Man agersf. District attor neyg. Shareholdersh. Len dersi. Con trollersj. FBI and IRSk. Con sumer groupl. Sales staffs opinion or1-6 The following are common categories on a classified balance sheet.A. Current assetsD. Intan gible assets B. Lon g-term in vestme ntsE. Current liabilities C. Plant assetsF. Lon g-term liabilities For each of the following items, select the letter that identifies the balance sheet category where theitem typically would appear._____ 1. Land not curre ntly used in operati ons _____ 5. Acco unts payable_____ 2. Notes payable (due in three years) ______ 6. Store equipme nt_____ 3. Acco unts receivable _____ 7. Wages payable_____ 4. Trademarks ______ 8. Cash 1-7 In the blank space beside each numbered balance sheet item, enter the letter of itsbalance sheet classification. If the item should not appear on the balance sheet, enter a Z inthe blank.1-8 In the blank space beside each numbered balance sheet item, enter the letter of itsbalance sheet classfication. If the item should not appear on the balance sheet, enter a Z inthe blank.A. Current assets E. Curren t liabilitiesB. Long-term investments F. Long-term liabilitiesC. Pla nt assets G. EquityD. Intan gible assets_____ 1. Commissi ons earned______ 11. Rent receivable _____ 2. In terest receivable ______ 12. Salaries payable_____ 3. Lon g-term in vestme nt in stock ________ 13. I ncome taxes payablea. Cash withdrawal by ownerb. Office equipme ntc. Acco unts payabled. Cashe. Utilities expe nsesf. Office suppliesg. Prepaid renth. Unearned feesi. Service fees earnedA. Current assetsD. Intan gible assetsB. Lon g-term in vestme nts E. Curre nt liabilitiesC. Plant assets_____ 1. Lon g-term in vestme nt in stock_____ 2. Depreciatio n expe nse — Buildi ng_____ 3. Prepaid rent_____ 4. I nterest receivable_____ 5. Taxes payable_____ 6. Automobiles_____ 7. Notes payable (due in 3 years)_____ 8. Acco unts payable ___ 9. Prepaid in sura nce 10. Owner,Capital 11. Unearned services revenueF. Lon g-term liabilitiesG. Equity _____ 12. Accumulated depreciatio n — Trucks _____ 13. Cash _____ 14. Build ings _____ 15. Store supplies _____ 16. Office equipme nt _____ 17. Land (used in operatio ns) __ 18. Repairs expe nse __ 19. Office supplies__ 20. Current portion of Ion g-term note payable_____ 4. Prepaid in sura nee _____ 14. Owner, Capital_____ 5. Machi nery _____ 15. Office supplies_____ 6. Notes payable (due in 15 years) ________ 16. In terest payable_____ 7. Copyrights ______ 17. Rent revenue_____ 8. Current porti on of Ion g-term note payable _____ 18. Notes receivable (due in 120 days) _____ 9. Accumulated depreciati on — Trucks ________ 19. Land (used in operatio ns)_____ 10. Office equipme nt ______ 20. Depreciati on expe nse —TrucksEASSAY QUESTION2- 1 What is the purpose of accounting in society?2- 2 Ide ntify the four basic finan cial stateme nts of a bus in ess.2- 3 What in formati on is reported in an in come stateme nt?2-4 What in formati on is reported in a bala nee sheet?2-5 Discuss the steps in process ing bus in ess tran sact ions.2-6 What is a company ' s operating cycle?2-7 Why is the accrual basis of acco unting gen erally preferred over the cash basis?3- 1 Prepare journal entries for each of the following selected transactions.a. On January 13, DeShaw n Tyler ope ns a Ian dscap ing bus in ess called Elega nt Law ns by in vest ing $70,000 cash along with equipment having a $30,000 value.b. On January 21, Elega nt Law ns purchases office supplies on credit for $280.c. On Jan uary 29, Elega nt Law ns receives $7,800 cash for perform ing Ian dscap ing services.d. On January 30, Elega nt Law ns receives $1,000 cash in adva nee of providi ng Ian dscap ing services to a customer.3- 2 The adjusted trial bala nee for Chiara Compa ny as of December 31,2008, follows.Debit CreditCash ................................................................... $ 30,000Acco unts receivable ........................................... 52,000In terest receivable ............................................... 18,000Notes receivable (due in 90 days) .......................... 168,000Office supplies ..................................................... 16,000Automobiles ........................................................ 168,000Accumulated depreciatio n —Automobiles ........... $ 50,000Equipme nt ........................................................ 138,000Accumulated depreciatio n —Equipme nt ............... 18,000Land .................................................................... 78,000Acco unts payable ............................................... 96,000In terest payable ................................................. 20,000Salaries payable .................................................. 19,000Unearned fees .................................................... 30,000Lon g-term no tes payable ................................ 138,000R.Chiara,Capital ................................................ 255,800R.Chiara,Withdrawals ............................. 46,000Fees earned ........................................................ 484,000In terest earned ................................................... 24,000Depreciati on expe nse—Automobiles ............... 26,000Depreciati on expe nse—Equipme nt ................. 18,000Salaries expe nse ............................................... 188,000Wages expe nse ................................................. 40,000In terest expe nse ............................................... 32,000Office supplies expe nse ..................................... 34,000Advertis ing expe nse .......................................... 58,000Repairs expe nse— Automobiles ........................ 24,800Totals ................................................................ $1,134,800 $1,134,800Required1. Use the in formati on in the adjusted trial bala nce to prepare (a) the in come stateme nt for the year ended December 31,2008; (b) the statement of owner' equity for the year ended December 31,2008;a nd (c) the bala ncesheet as of December 31,2008.2. Calculate the profit margin for year 2008.3- 3 On April 1,2008, Jiro Nozomi created a new travelagency, Adventure Travel. The following tran sact ions occurred duri ng the compa ny ' s first mon th..April 1 Nozomi in vested $30,000 cash and computer equipme nt worth $20,000 in the bus in ess.s (April) rei2 Ren ted furni shed office space by pay ing $1,800 cash for the first month3 Purchased $1,000 of office supplies for cash.10 Paid $2,400 cash for the premium on a 12-m onth in sura nce policy. Coverage beg ins onApril 11.14 Paid $1,600 cash for two weeks ' salaries earned by employees.24 Collected $8,000 cash on commissi ons from airli nes on tickets obta ined for customers.28 Paid another $1,600 cash for two weeks ' salaries earned by employees.29 Paid $350 cash for minor rep airs to the company ' s computer.30 Paid $750 cash for this mon th ' s telepho ne bill.30 Nozomi withdrew $1,500 cash for pers onal use.The company ' s chart of accounts follows:101 Cash 405 Commissi ons Earned106 Acco unts Receivable 612 Depreciati on Expe nse —Computer Equip.124 Office Supplies 622 Salaries Expe nse128 Prepaid In sura nee 637 In sura nee Expe nse167 Computer Equipme nt 640 Rent Expe nse168 Accumulated Depreciati on —Computer Equip. 650 Office Supplies Expe nse209 Salaries Payable 684 Repairs Expe nse301 J.Nozomi,Capital 688 Telepho ne Expe nse302 J.Nozomi,Withdrawals 901 In come SummaryRequired:1. Use the bala nee colu mn format to set up each ledger acco unt listed in its chart of acco un ts.2. Prepare journal entries to record the transactions for April and post them to the ledger accounts.The compa ny records prepaid and unearned items in bala nee sheet acco un ts.3. Prepare an unadjusted trial balance as of April 30.4. Use the follow ing in formati on to journ alize and post adjusti ng en tries for the mon th:a. Two-thirds of one mon th ' s in sura nce coverage has expired.b. At the end of the mon th, $600 of office supplies are still available.c. This month ' s depreciation on the computer equipme$500.d. Employees earned $420 of un paid and un recorded salaries as of mon th-e nd.e. The compa ny earned $1,750 of commissi ons that are not yet billed at mon th-e nd.5. Prepare the in come stateme nt and the stateme nt of owner ' s equity for the mdnth of April a the balance sheet at April 30, 2008.6. Prepare journal en tries to close the temporary acco unts .7. Prepare a post-clos ing trial bala nce.。