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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. Recordingb. Identifyingc. Interpreting economic eventsd. Financial decision makinge. Communicating

2. Which of the following events cannot be quantified into dollars and cents (or Turkishliras and kuru) and recorded as an accounting transaction?

a. The purchase of a new computer.b. The appointment of a new CPA firm to conduct an audit.c. The sale of store equipment.d. Payment of income taxes.e. Payment of dividends.

3. Which of the following is NOT an internal user of accounting information?a. The president of the companyb. Production managerc. Merchandise inventory clerkd. President of the employees labor unione. Salesmen of the company

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4. Generally accepted accounting principles area. Income tax regulations of the Ministry of Finance.b. Standards that indicate how to report economic events.c. Theories that are based on the physical laws of the universe.d.

Principles that have been proven correct by academic researchers.

e. A traditional way of recording transactions that is still being used despite beinginaccurate.

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 byusing the double-entry accounting system.

d. When performed correctly, the double-entry system ensures that the balance sheetidentity always holds.

e. The double-entry system requires that each transaction must be recorded first as arevenue 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 companyrecorded 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. 55.000TLb. 85.000TLc. 45.000TLd. 230.000TLe. 225.000TL

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8. Consider the following balance sheet of a wholesale distributor of party supplies:Funco Supplies CompanyBALANCE SHEET December 31, 2011

Assets Liabilities and Stockholders EquityCash $340.000 Liabilities

Accounts receivable 400.00 Accounts payable $800.000Merchandise inventory 860.000 Stockholders equityPrepaid rent 40.000 Paid-in capital $300.000Equipment 100.000 Retained earnings 640.000

Total stockholders equity $940.000Total $1.740.000 Total $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, thecompany 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 approachused 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 markin 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 andretained earnings statement for the year ended December 31, 2012.