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1) Gross margin is equal to net sales plus cost of goods sold. 2) Companies that report their results using international financial reporting standards (IFRS) still need to ensure that the debits and credits are equal for every transaction. Answer: […]

1) The following accounts appear in the adjusted trial balance columns of a worksheet. State the column that each account balance is extended to, choosing from the following columns: 1> income statement debit 2> balance sheet debit 3> income statement […]

1) Adjusting entries only involve income statement accounts. 2) Compare the effects of the FIFO and moving-weighted-average-cost methods on the value of ending inventory and cost of goods sold. Then contrast the methods when purchase prices are rising. Answer: FIFO […]

1) Under IFRS the preferred term for accounts payable is provisions. 2) The general journal is used to record all transactions that do not fit one of the special journals. Answer: TRUE 3) The operating cycle is the time span […]

1) An NSF cheque should be added to the bank balance on a bank reconciliation. 2) The sum of the account balances in the accounts receivable subsidiary ledger should equal the balance in the accounts receivable account in the general […]

1) Total assets at the end of the period were $330,000 and liabilities were 25% of owner’s equity. Determine owner’s equity at the end of the period. A) $264,000 B) $132,000 C) $462,000 D) $825,000 2) Details of purchase invoices […]

1) FIFO results in a more accurate portrayal of ending inventory on the balance sheet than does moving-weighted-average. 2) Most lines of credit are payable on demand. Answer: TRUE 3) The entry to record the purchase of inventory on account […]

1) In a periodic inventory system, purchases of inventory are debited to an account entitled Purchases. 2) In a periodic inventory system, purchase returns and allowances and purchase discounts are considered contra liability accounts. Answer: FALSE 3) The right-hand side […]

1) The concept underlying accounting for property, plant and equipment and amortization expense is the same as for prepaid expenses. 2) The purchase of office equipment for cash would increase assets and decrease liabilities. Answer: FALSE 3) Separation of duties […]

1) The entries to record a $5,000 cash sale under a periodic inventory system, when the cost of the merchandise is $3,200, include a: A) debit to Inventory for $5,000 B) credit to Sales Revenue for $5,000 C) debit to […]

1) Table 5-4 The following data is for the Atlantis Merchandising, which uses a periodic inventory system: Refer to Table 5-4. The operating income for Atlantis Merchandising is: A) $(11,000) B) $63,000 C) $51,000 D) $60,000 2) If a company […]

1) The methods of recording GST and HST are similar. 2) The supplier invoice should be matched with the purchase order and receiving report prior to preparing a cheque for payment. Answer: TRUE 3) Aging-of-accounts-receivable and percent-of-accounts receivable are both […]

1) A subsidiary ledger is a book of accounts that provides supporting details on individual balances, the total of which appears in the general journal. 2) Data from source documents such as sales receipts and bank deposit slips are referred […]

1) The accounting cycle as well as financial statement presentation is different for companies reporting under international financial reporting standards (IFRS) and those reporting under accounting standards for private enterprises (ASPE). 2) The postclosing trial balance will not include any […]

1) An amortizable asset’s carrying value is the assets cost less accumulated amortization. 2) The financial statements will contain errors if they are prepared before the adjusting entries are completed. Answer: TRUE 3) It is necessary to do a physical […]

1) An asset account is debited when unearned revenue is recorded initially as a revenue. 2) Members of the three professional accounting bodies in Canada, CAs, CGAs, and CMAs, have no set standards for ethical conduct. Answer: FALSE 3) Some […]

1) Selling on credit creates both a benefit and a cost. 2) The acid-test ratio tells whether the entity could pay all its current liabilities if they came due immediately. Answer: TRUE 3) In a perpetual inventory system, the closing […]

1) Match the following. A) gross margin percentage B) inventory turnover 1> Gross margin divided by net sales revenue 2> Ratio of cost of goods sold to average inventory 2) Indicate how the following columns are posted from the sales […]

1) In a system of good internal control, a payment to a supplier requires which documents for proper approval? A) a journal entry, a supplier invoice, and a description of the goods being purchased B) a receiving report, an invoice, […]

1) Accrual accounting provides several opportunities for unethical accounting. 2) The relative-fair-value method is the most conservative method of amortizing buildings and equipment. Answer: FALSE 3) The gross margin percentage is determined by dividing the gross margin by the net […]

1) A contingent gain that is likely and can be reasonably estimated should be: A) disclosed in a note to the financial statements B) accrued with a journal entry C) either disclosed in a note or accrued with a journal […]

1) A credit balance in the income summary account after closing revenues and expenses indicates a net income for the current period. 2) The entry to record the purchase of inventory on account in a perpetual inventory system includes a […]

1) The law requires most employers to provide a minimum number of weeks holiday per year. 2) The current ratio is the ratio of an entity’s current assets to owner’s equity. Answer: FALSE 3) Under the perpetual system, ending inventory […]

1) Gross pay is the total amount of compensation earned by the employee less deductions. 2) The reliability characteristic means that accounting information is free from error and bias, i.e., objective. Answer: TRUE 3) A journal is a chronological record […]

1) The most liquid asset is: A) notes receivable B) cash C) accounts receivable D) prepaid expenses 2) Match the following. A) goodwill B) intangible assets C) tangible assets 1> Excess of the cost of an acquired company over the […]

1) To maintain effective internal control, all incoming mail should be opened by a mail room employee who does not have access to the accounting records. 2) An unearned revenue arises when a company receives cash from its customers in […]

1) Match the following. A) debit B) normal balance C) credit 1> The left-hand side of an account 2> The right-hand side of an account 3> The side of the account where increases are recorded 2) Table 4-2 The ledger […]

1) Every adjusting entry affects an account on the income statement and an account on the balance sheet. 2) The credit department should have no access to cash. Answer: TRUE 3) Gross margin minus operating expenses equals income from operations […]

1) Accounts receivable has a debit balance of $5,000, and the allowance for doubtful accounts has a credit balance of $440. A specific account of $160 is written off. What is the amount of net receivables after the write-off? A) […]

1) The current credit balance in allowance for doubtful accounts before adjustment is $658. An aging schedule reveals $3,500 of uncollectible accounts. The journal entry for estimated uncollectible accounts should be prepared for: A) $658 B) $3,500 C) $4,158 D) […]

1) The adjusting entry to record inventory shrinkage would include a debit to the cost of goods sold account in a perpetual inventory system. 2) The only way to reduce a current liability is to pay out cash. Answer: FALSE […]

1) In a periodic inventory system, beginning inventory plus net purchases minus freight in equals cost of goods sold. 2) In provinces with PST, businesses must pay the tax when they are the final consumer of the goods. Answer: TRUE […]

1) Table 7-6 Provincewide Milling Company uses a sales journal. On June 2, the sales journal appears as you see below. Sales Journal Other sales that took place in June are as follows: Refer to Table 7-6, at the end […]

1) The balance sheet lists all the entity’s assets, liabilities, and owner’s equity as of a specific date. 2) It is possible to have a credit balance for a specific accounts receivable account. Answer: TRUE 3) Liquidity measures how quickly […]

1) A petty cash fund was established with a $400 balance. It currently has cash of $10 and petty cash tickets as shown below. The journal entry to replenish the account would be which of the following: A) Debit various […]

1) The cost of land includes fencing, paving, sprinkler systems, and lighting. 2) When a revenue is recorded, the asset account cash is always increased along with owner’s equity. Answer: FALSE 3) Days’ sales in receivables is computed as average […]

1) A loss on sale of an asset occurs when the book value is greater than the cash received. 2) A chart of accounts is a list of all of a company’s accounts with their account numbers. Answer: TRUE 3) […]

1) The initial entry to establish a petty cash fund involves a debit to cash and a credit to petty cash. 2) Goodwill has an indefinite life, so it is not amortized, but tested for impairment. Answer: TRUE 3) A […]

1) Service charge and interest on loan are both adjustments required to the bank balance on a bank reconciliation. 2) Goodwill is a tangible asset. Answer: FALSE 3) The system of electronic linkages that allows different computers to share the […]

1) Table 7-1 On April 1, Pro Company received a cheque from Carter Company for payment of an invoice dated March 24 for $3,000 with credit terms of 2/10 n/30. On March 28, Carter had returned $200 of the merchandise […]

1) The designation CA stands for Certified Public Accountant. 2) A liability account is credited when a prepaid expense is recorded initially as an expense. Answer: FALSE 3) It is necessary for the owners and top managers to demonstrate the […]

1) Table 10-2 On January 1, 2013, Homes Realty Ltd. purchased a $45,000 vehicle to chauffeur clients to prospective homes. Homes plans on driving the vehicle for five years or 100,000 kilometres. Expected residual value is $10,000. Refer to Table […]