III.

Matching Type (10 points)

Match the following terms with the appropriate definition. Write the letter of your answer
in your test booklets.
A. Debit memorandum
B. Credit period
C. Credit terms
D. Credit memorandum
E. Discount period
F. Gross profit
G. Periodic inventory system
H. Perpetual inventory system
I. Sales discount
J. Purchase discount

__H__ 1. An inventory accounting method that continually updates accounting records

for inventory available for sale and inventory sold.
___G_ 2. An inventory accounting method that updates the accounting records
for merchandise transactions only at the end of a period.
__E__ 3. The time period in which reduced payment can be made by the buyer because
of a cash discount offered by a seller of goods on credit.
__A__ 4. A notification that informs the seller of a debit made to the seller's account
payable in the buyer's records.
__J__ 5. A cash discount granted, from the view of the purchaser intended to
encourage buyers to pay amounts owed earlier.
__D__ 6. A notification that informs a buyer of a seller's credit to a buyer's account.
__I__ 7. A cash discount granted from the view of the seller, indicated in the credit
terms on the invoice.
_F___ 8. The calculation of net sales less cost of goods sold.
____C_ 9. The description of the amounts and timing of payments from a buyer to
a seller for a purchase.
___B_ 10. The amount of time allowed before full payment is due.

1) FALSE Accounts that appear in the balance sheet are often called temporary
(nominal) accounts.
2) TRUE Income Summary is a temporary account only used for the closing
process.
3) TRUE Revenue accounts are temporary accounts that should begin each
accounting period with zero balances.
4) TRUE Closing revenue and expense accounts at the end of the accounting
period serves to make the revenue and expense accounts ready for use in the
next period.
5) FALSE The closing process takes place before financial statements have been
prepared.
6) FALSE A company's fiscal year must correspond with the calendar year.
7) TRUE The time period assumption assumes that an organization's activities can
be divided into specific time periods such as months, quarters, or years.
8) FALSE Interim financial statements report a company's business activities for a
one-year period.
9) TRUE A fiscal year refers to an organization's accounting period that spans
twelve consecutive months or 52 weeks.
10) FALSE Adjusting entries are made after the preparation of financial statements.
11) TRUE The first step in the processing of a transaction is to analyze the
transaction and source documents.
12) FALSE Preparation of a trial balance is the first step in processing a financial
transaction.
13) TRUE Source documents identify and describe transactions and events entering
the accounting process.
14) TRUE Items such as sales tickets, bank statements, checks, and purchase
orders are examples of a business's source documents.
15) TRUE An account is a record of increases and decreases in a specific asset,
liability, equity, revenue, or expense item.
16) TRUE Accounting is an information and measurement system that identifies,
records, and communicates relevant, reliable, and comparable information about
an organization's business activities.
17) TRUE Recordkeeping, or bookkeeping, is the recording of transactions and
events, either manually or electronically. This is just one part of accounting.
18) TRUE An accounting system captures relevant data about transactions and then
classifies, records, and reports data.
19) TRUE Financial accounting is the area of accounting aimed at serving external
users by providing them with general-purpose financial statements.
20) TRUE ,Internal operating activities include research and development,
distribution, and human resources.

1. On December 31, Chu Company had performed $3,000 of management

services for clients that had not yet been billed. Prepare Chu's adjusting
entry to record these fees earned.(2 points)

2. A company's employees earn a total of $10,000 per week for a 5-day week
that begins on Monday. December 31 of Year 1 is a Monday, and all
employees worked that day.
a) Prepare the required adjusting journal entry to record accrued salaries on
December 31, Year 1. (2 points)
b) Prepare the journal entry to record the payment of salaries on
January 4, Year 2. (Assume no reversing entries were made). (2
points)

3. Glisten Co. leases an office to a tenant at the rate of $3,000 per month.
The tenant contacted Glisten and arranged to pay the rent for December
 on January 8 of the following year. Glisten agrees to this arrangement.
a.) Prepare the journal entry that Glisten must make at year ended
December 31 to record the accrued rent revenue. (2 points)

4. Prior to recording adjusting entries on December 31, a company's Office

Supplies account had a $780 debit balance. A physical count of the supplies
showed $425 of unused supplies available as of December 31. Prepare the
required adjusting entry. (2 points)