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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.
3) With a computerized accounting system, the accounting cycle has several additional
steps.
4) Intangible assets always have residual values.
5) Amortization expense on wasting assets is usually computed in the same manner as
units-of-production amortization.
6) The document issued by a seller for a credit to a customer's Accounts Receivable is
the Debit Memo
7) When the seller accepts a return of undamaged goods from the purchaser, the seller's
journal entries would include two entries, if they are using a perpetual inventory
system.
8) In accounting for natural resources the future removal and restoration costs are
referred to as an "asset retirement obligation".
9) The cost of coverage for worker's compensation premiums is the responsibility of the
employee.
10) In a purchase discount, the larger the quantity of merchandise purchased, the lower
the price per item.
11) Publicly accountable enterprises, generally speaking, are publicly traded or for
which a strong public interest exists.
12) A deposit in transit has been recorded by the bank but not the company.
13) The closing process applies to only balance sheet accounts.
14) Current portion of long-term debt refers to the amount of principle on a note
payable that must be paid within a year.
15) The matching objective directs accountants as to when to record expenses on the
income statement to be matched against liabilities on the balance sheet.
16) The adjusting entries can be recorded in the journal as they are entered on the
worksheet.
17) Cost of goods sold is an operating expense.
18) Table 9-11 Mark's Sales
At the beginning of 2014, Mark's sales had the following ledger balances:
During the year there were $450,000 of credit sales, $460,000 of collections, and
$3,700 of write-offs.
Refer to Table 9-11. At the end of the year, Mark's adjusted for uncollectible account
expense using the percent-of-sales method, and applied a rate, based on past history, of
1.2%. At the end of the year, what was the balance in the bad debts expense?
A) $2,300
B) $5,400
C) $6,400
D) $2,700
19) In a computerized accounting system, a list of options for choosing computer
functions is called a(n):
A) menu
B) server
C) on-line processor
D) batch processor
20) An item is considered material if:
A) it facilitates comparison with the financial statements of another company in the
same industry
B) its inclusion in the financial statements would cause a statement user to change a
decision
C) its dollar value is greater than 10% of net income
D) it is accounted for using a treatment that is not normally allowed by generally
accepted accounting principles
21) A contingent liability that has a remote chance of occurrence and an uncertain
amount 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 entry
D) ignored until the liability materializes
22) Table 4-5
Selected accounting data for Dustman Consulting follows:
Current assets $74,000
Current liabilities44,000
Property, plant and equipment95,000
Long-term liabilities60,000
Total revenues50,000
Total expenses30,000
Referring to Table 4-5, the current ratio is:
A) 0.59
B) 1.68
C) 0.71
D) 1.41
23) A worksheet is a:
A) formal document shown with a company's annual report
B) formal document required by the Canada Revenue Agency
C) formal document required by creditors
D) multicolumn document used by accountants to aid in the preparation of the financial
statements
24) Table 6-2
On December 31, a physical count reveals 80 units in ending inventory.
Referring to Table 6-2, assuming all goods are sold throughout the year for $19 per unit,
gross margin calculated under the periodic FIFO method would be:
A) $1,620
B) $1,510
C) $1,260
D) $1,570
25) Which of the following accounts would be used under the accrual basis of
accounting, but not under the cash-basis of accounting?
A) cash
B) unearned revenue
C) equipment
D) salary expense
26) Making a $350 payment on an account with a current balance of $800 would
include a:
A) debit to accounts receivable and a credit to cash for $350
B) debit to accounts payable and a credit to cash for $450
C) debit to accounts payable and a credit to cash for $350
D) debit to accounts receivable and a credit to capital for $350
27) Unearned revenue shows a beginning balance of $4,700 and an ending balance of
$3,400. The adjusting entry shows a credit to service revenue for $10,200. How much
cash was received in advance during the year?
A) $8,900
B) $10,200
C) $14,900
D) $13,600
28) If a company uses a periodic inventory system, which of the following entries is
required to record the sale of merchandise on credit?
A)
B)
C)
D)
29) Match the following.
A)gross profit
B)weighted average
C)specific-unit-cost method
D)perpetual inventory system
E)FIFO
1> Inventory cost method based on the specific cost of particular units of inventory.
2> Another name for gross margin
3> Inventory costing method in which ending inventory is based on the costs of the
most recent purchases
4> Inventory system maintaining a continual count of inventory
30) The purchase of office equipment for cash would be recorded in:
A) the cash payments journal
B) the cash receipts journal
C) either the cash payments journal or the purchases journal
D) the purchases journal
31) A company accepted $6,000 on August 1 for services to be performed evenly over
the next 12 months. The adjusting entry on December 31 would include a:
A) debit to unearned revenue $2,500
B) debit to service revenue for $2,500
C) debit to unearned revenue for $3,500
D) credit to service revenue for $3,500
32) Identify the following accounts as one of the following categories assuming the date
is December 31, 2014:
a) Current asset
b) Property, plant and equipment
c) Current liability
d) Long-term liability
e) Owner's equity
1> ________ Cash
2> ________ Philip Curtis, Capital
3> ________ Accounts payable
4> ________ Mortgage payable due June 30, 2018
5> ________ Building
6> ________ Salary payable
7> ________ Unearned service revenue
8> ________ Equipment
9> ________ Accumulated amortization
10> ________ Accounts receivable
33) Interest expense appears on a bank reconciliation as a(n):
A) deduction from the book balance
B) deduction from the bank balance
C) addition to the book balance
D) addition to the bank balance
34) The debt ratio is computed by:
A) dividing owner's equity by total liabilities
B) dividing current liabilities by total assets
C) dividing total assets by total liabilities
D) dividing total liabilities by total assets
35) Which of the following best describes the action known as balancing the ledgers?
A) Totaling the subsidiary account balances and cross checking against the main
account balance
B) Making sure that the ending balance in Sales is equal to the ending balance in
Accounts receivable
C) Identifying the differences between the cash balance in the ledger and the bank
statement
D) Totaling the expense account balances and cross checking against total expenses
shown on the income statement
36) The amount of a note receivable plus the total interest due is referred to as the:
A) face value of the note
B) par value of the note
C) principal value of the note
D) maturity value of the note
37) Which of the following situations would result in an increase in income under the
accrual basis of accounting, but would not result in an increase in income under the
cash-basis of accounting?
A) cash received from a customer in advance of the service being performed
B) writing off an uncollectable account receivable
C) receipt of cash for services that were performed earlier on account
D) performance of services on account
38) Table 11-6
Peter Tomach works for a manufacturing company. He earns $600 a week for a 40-hour
week and time and a half for anything over 40 hours per week. During the first week of
the year, Peter worked 49 hours. The income tax withholdings are 15% of gross
earnings. Canada Pension Plan deductions are 4.95% of gross earnings and
Employment Insurance deductions are 1.83% of gross earnings. Ignore the basic
Canada Pension Plan exemption.
Referring to Table 11-6. The amount of Peter's gross pay is:
A) $600.00
B) $735.00
C) $802.50
D) $824.50
39) What is the qualitative characteristic that states that accounting records and
statements are based on the most reliable data available so they are as accurate and
useful as possible?
A) Reliability
B) Relevance
C) Comparability
D) Understandability
40) The entry to record an owner investment of $400 cash into the business would be:
A)
B)
C)
D)
41) All amounts paid to acquire an asset and to get it ready for its intended use are
referred to as:
A) equity expenditures
B) salvage expenditures
C) the cost of an asset
D) revenue expenditures
42) If a purchaser returns goods purchased on account to the supplier under a perpetual
inventory system, the purchaser would debit:
A) Inventory and credit Accounts Payable
B) Accounts Payable and credit Inventory
C) Inventory and credit Accounts Receivable
D) Accounts Receivable and credit Inventory
43) Two separate errors affected Rollings Company in 2013 . The beginning inventory
was overstated by $12,000 and the ending inventory was overstated by $18,000. Net
income in 2013 will be:
A) overstated by $30,000
B) overstated by $12,000
C) overstated by $6,000
D) understated by $6,000
44) Match the following.
A) bank reconciliation
B) bank statement
C) deposit in transit
D) cash equivalents
E) cash
F) outstanding cheque
G) non-sufficient funds cheque
1> A cheque for which the payor's bank account has insufficient money to cover the
cheque
2> Process of explaining the reasons for the difference between a depositor's records
and the bank's records about the depositor's bank account
3> A cheque issued by the company and recorded in the accounting records, but not yet
paid by its bank.
4> Document for a particular bank account showing its beginning and ending balances
and listing the month's transactions that affected the account
5> A deposit recorded by the company but not yet by the bank
6> Liquid assets such as term deposits and certificates of deposit
45) Design of an accounting system begins with the:
A) previous year's financial statements
B) using a firewall
C) chart of accounts
D) opening trial balance
46) Table 3-2
The unadjusted trial balance of Danvon Collection Services at December 31, 2014
follows. Danvon records payments for insurance, rent and supplies to the expense
accounts; and, cash received in advance from customers as revenue.
DebitCredit
Cash$4,800
Accounts receivable10,400
Prepaid insurance
Prepaid rent
Office supplies
Equipment16,500
Accumulated amortization$2,400
Salaries payable
Interest payable
Unearned service revenue600
Note payable8,000
Ted Danvon, capital15,200
Ted Danvon, withdrawals3,000
Service revenue42,500
Salaries expense20,500
Amortization expense
Rent expense16,200
Insurance expense2,200
Office supplies expense600
Interest expense500______
$71,700$71,700
Refer to Table 3-2. Given the following information, prepare the necessary adjusting
entries at year end, December 31, 2014, for Danvon Collection Services.
a) A count revealed that $100 of office supplies were still on hand at December 31,
2014 .
b) The accountant has determined that the prepaid insurance balance at December 31,
2014, should be in the amount of $450.
c) The equipment is amortized at the rate of $200 per month.
d) The accountant has determined that the unearned service revenue balance at
December 31, 2014 should be in the amount of $350.
e) Interest of $200 on the note payable has accrued to the end of the year.
f) Salaries accrued at December 31, 2014 amounted to $650.
g) The accountant has determined that the prepaid rent balance at December 31, 2014
should be in the amount of $100.
47) Balancing the ledgers refers to establishing equality in all of the following except:
A) total debits and total credits in the general ledger
B) Balance of A/R control account and A/R subsidiary ledger
C) Balance of sales account in the general ledger and A/R subsidiary ledger
D) Balance of A/P control account and A/P subsidiary ledger
48) Table 11-7
Camparound Canada has 24 employees who are paid on a monthly basis. For the most
recent month, gross earnings were $68,000. The income tax withholdings are 15% of
gross earnings. Canada Pension Plan deductions are 4.95% of gross earnings and
Employment Insurance deductions are 1.83% of gross earnings. All employees have
$15 per month withheld for charitable contributions. Ignore the basic Canada Pension
Plan exemption.
Referring to Table 11-7, Camparound Canada's total payroll cost for the month is:
A) $72,637.60
B) $73,108.16
C) $72,620.40
D) $69,780.24
49) The basic summary device of accounting is the:
A) ledger
B) account
C) debit
D) credit
50) Transactions are first recorded in a(n):
A) trial balance
B) journal
C) account
D) ledger
51) Which of the following is TRUE about future removal and site restoration costs for
natural resource companies?
A) These estimated costs are both an asset and a liability on the balance sheet
B) These estimated costs impact only the asset section of the balance sheet
C) These estimated costs impact only the liability section of the balance sheet
D) These estimated costs do not impact the balance sheet but are disclosed in the notes
52) For an asset that generates revenue fairly evenly over time, which is the most
appropriate method of amortization?
A) units-of-production method
B) double declining balance method
C) straight-line method
D) declining-balance method
53) A cheque issued to settle an account for $145 was recorded on the books as $1,450.
On a bank reconciliation, this will appear as a(n):
A) addition to the book balance
B) deduction from the book balance
C) addition to the bank balance
D) deduction from the bank balance
54) Given the following worksheet with the trial balance already entered, and the
adjustment information, complete the worksheet.
Beatty Services
Work Sheet
For the Year Ended December 31, 2014
TrialAdjustmentsAdj. TrialInc.Balance
AccountBalanceBal.StatementSheet
Additional information:
a) Supplies used, $4.
b) Amortization on equipment, $6.
c) Unearned service revenue earned during period, $12.
d) Accrued salaries, $3.
e) Accrued service revenue, $4.
55) Under a perpetual inventory system, the entries to record a $3,400 sales return for
undamaged goods on an original cash sale when the merchandise had a cost of $1,500
include a debit to:
A) Accounts Receivable of $3,400
B) Cost of Goods Sold of $1,500
C) Sales Returns and Allowances of $1,500
D) Inventory of $1,500
56) Receiving a payment from a customer on account would:
A) increase both assets and owner's equity
B) increase net income and decrease liabilities
C) have no effect on total assets or owner's equity
D) decrease liabilities and increase owner's equity
57) An accountant recognizes the impact of a business event when cash is received or
paid in which basis of accounting?
A) accrual
B) managerial
C) cash-basis
D) financial
58) The Big Hill Outdoor Shop Corp. is a retail store that uses the perpetual inventory
system. A GST rate of 5 percent is applicable to all sales and purchases.
Record the following transactions for The Big Hill Outdoor Shop. Explanations are not
required.
Jan. 4Purchased equipment for $20,000 plus GST, signing a three-month,
10 percent note payable.
10Purchased merchandise for resale costing $14,000 plus GST on account.
31Recorded the month's cash sales of $180,000 plus GST.
31Paid the monthly income tax instalment of $4,200.
Feb. 7Sent January's GST to the Receiver General.
59) Table 10-7
On January 1, 2013, Brazeau Transport purchased a $165,000 truck for hauling cattle
across the border. Brazeau plans on driving the truck for four years or 450,000
kilometres. Expected residual value for the truck is $35,000. On June 30, 2016, after
having driven the truck 44,000 kilometres, the truck had an accident on the highway
and was totalled. The insurance proceeds for the truck was $42,000 cash.
Refer to Table 10-7. Calculate and record the amortization expense for the truck for the
year 2015 assuming the unit-of-production method is used and that the truck was driven
for 115,000 kilometers during 2015 .
60) List at least five characteristics of an effective system of internal control. What is
one inherent limitation/weakness of any system of internal control?
61) On December 1, 2013, Parsons Sales sold machinery to a Janet's Vegetables for
$2,000. Janet could not pay at the time of sale, but agreed to pay 9 months later, and
signed a 9-month note at 12% interest. Parsons accrues interest only at year-end. On
September 1, 2014 Parsons collected the whole amount due
Parsons Sales uses the periodic method for recording inventory transactions. Janet's
Vegetables will be using the equipment in the business.
Provide all of the required journal entries for Parson Sales for 2013 and 2014; and, for
Janet's Vegetables the 2013 required journal entries, assuming a one-year useful life and
$200 estimated residual value for the equipment.
General Journal-Parsons Sales
General Journal-Janet's Vegetables
62) The following information is available for Blue Moon Company regarding its June
30, 2014, bank statement:
- Balance per bank statement is $10,300.34.
- Balance per books is $9,652.78. Cheque #506 for $1,948.52 and cheque #510 for
$1,600.25 were not returned with the June 30 bank statement.
- A deposit in transit of $4,562.21 had not been received by the bank when the bank
statement was generated.
- A bank debit memo indicated an NSF cheque written by Bruce Garrett to Blue Moon
Company on June 13 for $279.
- A bank credit memo indicated a bank collection of $1,900 and interest revenue of $75
on June 20 .
- The bank statement indicated service charges of $35.
Prepare a bank reconciliation for Blue Moon Company dated June 30, 2014
63) Table 10-7
On January 1, 2013, Brazeau Transport purchased a $165,000 truck for hauling cattle
across the border. Brazeau plans on driving the truck for four years or 450,000
kilometres. Expected residual value for the truck is $35,000. On June 30, 2016, after
having driven the truck 44,000 kilometres, the truck had an accident on the highway
and was totalled. The insurance proceeds for the truck was $42,000 cash.
Refer to Table 10-7. What is the amortizable cost of the truck?
64) Table 6-5
Assume the following data for Kruger Sales for November 2013:
Beginning inventory Nov. 15 units at $90 each
Sale Nov. 33 units at $120 each
Nov. 6 purchase11 units at $95 each
Sale Nov. 84 units at $120 each
Sale Nov. 93 units at $120 each
On November 30, a physical count reveals 6 units on hand.
Refer to Table 6-5. Calculate ending inventory for Kruger Sales assuming the periodic
FIFO cost method is being used.
65) List the four special journals.
66) Table 4-8 Tuttle Photography
The following is the adjusted trial balance for Tuttle Photography.
Prepare the closing journal entries for Tuttle Photography and an adjusted trial balance
dated December 31, 2013 .
