Yeditepe University Dr.

Mge Tiryakiolu AFN 132 Principles of Financial Accounting Homework I

This homework is due on Monday, March 18th, in class. Late assignments will not be accepted and will be given a grade of zero. Answer every question to the best of your ability. Question 8 is 72 points and each multiple choice question is 4 points.

1. Which of the following is NOT a part of the accounting process? a. b. c. d. e. Recording Identifying Interpreting economic events Financial decision making Communicating

2. Which of the following events cannot be quantified into dollars and cents (or Turkish liras and kuru) and recorded as an accounting transaction? a. b. c. d. e. The purchase of a new computer. The appointment of a new CPA firm to conduct an audit. The sale of store equipment. Payment of income taxes. Payment of dividends.

3. Which of the following is NOT an internal user of accounting information? a. b. c. d. e. The president of the company Production manager Merchandise inventory clerk President of the employees labor union Salesmen of the company

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4. Generally accepted accounting principles are a. b. c. d. e. Income tax regulations of the Ministry of Finance. Standards that indicate how to report economic events. Theories that are based on the physical laws of the universe. Principles that have been proven correct by academic researchers. A traditional way of recording transactions that is still being used despite being inaccurate.

5. Which of the following statements concerning the double-entry system is correct? a. Under the double-entry system, revenues must always equal expenses. b. The double-entry system of accounting refers to the placement of a double line at the end of a column of figures. c. At least two accounts need to be opened for every transaction that is recorded by using the double-entry accounting system. d. When performed correctly, the double-entry system ensures that the balance sheet identity always holds. e. The double-entry system requires that each transaction must be recorded first as a revenue and then as an expense. 6. Which of the following statements concerning a sole proprietorship is correct? a. The life of a sole proprietorship is potentially unlimited. b. A sole proprietor can generally raise large sums of capital quite easily. c. Transferring ownership of a sole proprietorship is easier than transferring ownership of a corporation. d. It is easy to create a sole proprietorship. e. A sole proprietorship is structured the same as a limited liability company.

7. Berk Savc began the BS Company by investing 50.000TL in the business. The company recorded revenues of 220.000TL, expenses of 185.000TL, and Mr. Savc withdrew 40.000TL from the business. What was BS Co.s owners equity at the end of the year? a. b. c. d. e. 55.000TL 85.000TL 45.000TL 230.000TL 225.000TL

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8. Consider the following balance sheet of a wholesale distributor of party supplies: Funco Supplies Company BALANCE SHEET December 31, 2011 Assets Liabilities and Stockholders Equity Cash $340.000 Liabilities Accounts receivable Accounts payable 400.00 $800.000 Merchandise inventory Stockholders equity 860.000 Prepaid rent Paid-in capital 40.000 $300.000 Equipment Retained earnings 100.000 640.000 Total stockholders equity $940.000 Total Total $1.740.000 $1.740.000

The following is a summary of transactions that occurred during 2012: a. Acquisition of inventory on open account for $1 million. b. Sales on open account for $1,5 million and $200.000 in cash. Therefore, total sales were $1,7 million. c. Merchandise carried in inventory at a cost of $1,25 million was sold as described in transaction b. d. The warehouse 12-month lease expired on September 1, 2011. However, the company immediately renewed the lease at a rate of $84.000 for the next 12-month period. The entire rent was paid in cash in advance. e. Depreciation expense for 2012 for the warehouse equipment was $20.000. f. Collections of accounts receivable in the amount of $1,25 million. g. Wages for 2012 were paid in full in cash, $70.000. h. Payments of $900.000 were made on accounts payable. Instructions: a. Prepare an analysis of transactions, employing the balance sheet equation approach used in class. For simplicity, show the amounts in thousands of dollars. b. Enter the beginning balances in the ledger as of January 1, 2012. Insert a check mark in the reference column of the ledger for the beginning balance. c. Journalize the 2012 transactions. d. Post the 2012 journal entries to the ledger. Assume that all entries are posted from page 1 of the journal. e. Prepare a trial balance on December 31, 2012. f. Prepare the balance sheet on December 31, 2012 and the income statement and retained earnings statement for the year ended December 31, 2012.

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