Yeditepe University

Dr. Mge Tiryakiolu

AFN 132 Principles of Financial Accounting
Homework I

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

4. Which of the following statements concerning the double-entry system is correct?

a. Under the double-entry system, revenues must always equal expenses.

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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.
5. 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.

6. 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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7. 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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