BUS 319
Accounting Information Systems
PINK Book and Chapters 4, 5, 7, 8, & 9
Tad Miller
02/24/2009
1. Use the Trial Balance to prepare a set of financial statements. You do not need to prepare a Statement of
Cash Flows.
Questions 2 – 7 are worth 5 points each -- In the following questions you should use an (R) to indicate the
journal(s) or ledger(s) in which the transaction would be recorded and a (P) to indicate the journal(s) or
ledger(s) into which the transaction would be posted.
2. A credit sale
Accounts Payable Subledger
Accounts Receivable Subledger
Cash Disbursements Journal
Cash Receipts Journal
Fixed Asset Subledger
General Journal
General Ledger
Inventory Subledger
Payroll Journal
Payroll Register
Purchases Journal
Sales Journal
3. The collection when the customer in the previous question pays their bill
Accounts Payable Subledger
Accounts Receivable Subledger
Cash Disbursements Journal
Cash Receipts Journal
Fixed Asset Subledger
General Journal
General Ledger
Inventory Subledger
Payroll Journal
Payroll Register
Purchases Journal
Sales Journal
4. The acquisition of inventory on credit
Accounts Payable Subledger
Accounts Receivable Subledger
Cash Disbursements Journal
Cash Receipts Journal
Fixed Asset Subledger
General Journal
.
General Ledger
Inventory Subledger
Payroll Journal
Payroll Register
Purchases Journal
Sales Journal
5. The payment of the previous inventory acquisition
Accounts Payable Subledger
Accounts Receivable Subledger
Cash Disbursements Journal
Cash Receipts Journal
Fixed Asset Subledger
General Journal
General Ledger
Inventory Subledger
Payroll Journal
Payroll Register
Purchases Journal
Sales Journal
6. A cash sale
Accounts Payable Subledger
Accounts Receivable Subledger
Cash Disbursements Journal
Cash Receipts Journal
Fixed Asset Subledger
General Journal
General Ledger
Inventory Subledger
Payroll Journal
Payroll Register
Purchases Journal
Sales Journal
7. The cash purchase of a truck for our company
Accounts Payable Subledger
Accounts Receivable Subledger
Cash Disbursements Journal
Cash Receipts Journal
Fixed Asset Subledger
General Journal
General Ledger
Inventory Subledger
Payroll Journal
Payroll Register
Purchases Journal
Sales Journal
8. Miller Motor Company receives their bank statement which shows an ending balance of $795. Their General
Ledger shows $835 balance in their cash account. A $400 deposit, made on the last day of December, does
not appear on the bank statement. The bank statement indicates this month’s bank fee is $25. Check # 851
for $255 and check # 853 for $130 are still outstanding.


Prepare a bank reconciliation.
If necessary, prepare any, and all, adjusting journal entries.
9. The balances in Accounts Receivable and the Allowance for Doubtful Accounts are shown below. Please
notice that the Allowance for Doubtful Accounts currently has a debit balance. The Company calculates the
required balance in Allowance for Doubtful Accounts as 4% of the balance in Accounts Receivable to
calculate
debit
1200 Accounts Receivable
1205 Allowance for Doubtful Accounts


credit
5000
50
To which financial statement assertion would it relate if we failed to adjust the balance in Allowance for
doubtful Accounts?
Prepare the necessary adjusting journal entries.
10. You take a physical count of your inventory. The physical count reveals that you actually have 23 units of
item C3PO in the warehouse. The Inventory Subsidiary Ledger indicates that item C3PO costs $1,500 per
unit and you should have 15 units of item C3PO. The General Ledger shows a balance of $34,500.



Is a Journal Entry necessary to correct this problem?
If necessary, prepare the correcting journal entry.
If no JE is necessary, describe the steps necessary to reconcile the AR Sub Ledger with the GL.
begin
balance
1/1/2008
6/30/2008
1/1/2009
6/30/2009
1/1/2010
6/30/2010
1/1/2011
6/30/2011
75,000.00
67,145.87
58,899.03
50,239.86
41,147.72
31,600.97
21,576.89
11,051.61
interest
expense @
10.00%
3,750.00
3,357.29
2,944.95
2,511.99
2,057.39
1,580.05
1,078.84
552.58
payment
principle
ending
balance
11,604.13
11,604.13
11,604.13
11,604.13
11,604.13
11,604.13
11,604.13
11,604.13
7,854.13
8,246.84
8,659.18
9,092.14
9,546.74
10,024.08
10,525.29
11,051.55
67,145.87
58,899.03
50,239.86
41,147.72
31,600.97
21,576.89
11,051.61
0.06
6/30/2008
12/31/2008
6/30/2009
12/31/2009 17,751.32
6/30/2010
12/31/2010
6/30/2011
12/31/2011
11. The amortization schedule is for a four-year note payable. The note requires semi-annual payments of
$11.604.13 on 6/30 and 12/31.

Prepare the entry when you made the 12/31/2008 payment.

Prepare the entry to report the Current Portion of the Note Payable if there is currently a $23,208.26
balance in the Current Portion of the Note Payable account.
12. You are unable to reconcile the Accounts Payable Subsidiary Ledger with the balance on the General
Ledger. This is because an $800 credit purchase was recorded in the General Ledger but not recorded in the
Subsidiary Ledger.



Is a Journal Entry necessary to correct this problem?
If necessary, prepare the correcting journal entry.
If no JE is necessary, describe the steps necessary to reconcile the AR Sub Ledger with the GL.
13. When reconciling the Inventory Subsidiary Ledger to the General Ledger you see that a $1,050 inventory
purchase which should have been charged (debited) to account 1300 Inventory was incorrectly charged to
account 6300 Rent Expense.


Prepare the correcting journal entry.
What effect does correcting this problem have on Net Incom
14. When reconciling the Payroll Subsidiary Ledger to the General Ledger you see that $5,000 of Salary
Expense was erroneously charged to Depreciation Expense.


Prepare the correcting journal entry.
What effect does correcting this problem have on Net Income
15. Breifly explain the requirements of the Foreign Corrupt Practices Act of 1977?
16. Regarding “internal controls” what does the Sarbanes-Oxley Act of 2002 require the senior management of
the company to do every year?
17. Regarding “internal controls” what does the Sarbanes-Oxley Act of 2002 require the independent auditor to
do every year?
18. Brown identified the eight specific risks listed below. In Brown’s Risk Taxonomy these risks are placed in
four categories. Indicate to which of the four categories of risk each element should be assigned.
Business Strategy risk
Credit risk
Directors’ & officers’ liability
Human error
Legal & regulatory risk
Liquidity risk
Market risk
Systems risk
(F)
(O)
(S)
(H)
(F)
(O)
(S)
(H)
19. What is COSO’s (Committee of Sponsoring Organizations Treadway Commission) definition of Internal
Control?
20. What are the five elements in COSO’s Integrated Framework of internal control?
21. On the line to the right of each symbol, please indicate what the symbol represents.
.
.
.
.
.
.
22. What are the 5 financial statement assertions? You will get full credit it you name the three assertions that
we agreed to focus on in our class.
23. List the steps in the Sales/Collection Process (the book lists 7 steps but we ignored the last step in our class).
24. Give an example of a control we might implement to prevent us from paying for inventory that we did not
order or have not received?
25. List the steps in the Acquisition/Payment Process ( the book lists 6 steps but we ignored the last step in our
class).
List the name of the documents used in the Acquisition/Payment Process in the order in which they occur.
Do not include the Purchases Journal or the Accounts Payable Subsidiary Ledger as documents. Next to
each them name of each document, describe the purpose of the document.
26. List the name for each of the documents in the preceding problem in the same order as they previously
appeared. To the right of each name indicate the department or organization that originated the document
and the department or organization that received the document.
Originator
Recipient
27. To which financial statement assertion would it relate if the balance sheet did not include inventory that we
have ordered and received?
28. To which financial statement assertion would the following situation relate? We report inventory on our
balance sheet at the price we intend to sell it for rather than at the cost we paid for the inventory.
29. What are the four types of controls we discussed (Hint P, D, M, A)?

preventative