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 ledger.
3) Intangible assets are generally amortized using an accelerated method over 40 years
or less.
4) Credit postings to the accounts receivable general ledger account come from the cash
receipts journal and the general journal.
5) Notes receivable is a liability account.
6) On a worksheet, the sum of the income statement debit column exceeds the sum of
the income statement credit column. This indicates the company generated a net loss
during the current period.
7) The income from operations is presented on both the multi-step and single-step
income statements.
8) A proprietorship can have two owners, so long as they are husband and wife.
9) Gross margin minus expenses equals gross profit.
10) An NSF cheque would be entered into the books by a debit to accounts receivable.
11) The unadjusted trial balance columns of a worksheet contain the account balances
that appear on the financial statements.
12) The basic summary device of accounting is the account.
13) A subsidiary ledger is a group of accounts that provides supporting details on
individual balances, the total of which appears in a general ledger account.
14) Canada Revenue Agency specifies the maximum amortization a taxpayer may
deduct for income tax purposes.
15) A chart of accounts is organized in order of the accounting equation, with assets
first, followed by liabilities and owner’s equity.
16) The maturity value of a note is equal to the principal amount less the interest due at
the maturity date.
17) The cash receipts journal needs a column for GST receivable.
18) Quantity discounts offered by suppliers for large shipments of inventory are always
recorded separately.
19) Understating beginning inventory in 2012 will overstate net income for 2013 .
20) When goods are shipped FOB destination and a periodic inventory system is used,
the buyer would:
A) debit Freight In for the amount of the transportation charges
B) debit Delivery Expense for the amount of the transportation charges
C) make no journal entry for the transportation charges
D) debit Inventory for the amount of the transportation charges
21) An accrued expense adjustment has the following effect on the financial statements:
A) increases expenses and increases net income
B) increases expenses and decreases assets
C) increases expenses and increases liabilities
D) decreases expenses and increases liabilities
22) Table 5-2
Referring to Table 5-2, what is the net income or net loss?
A) net loss of $3,000
B) net income of $30,000
C) net loss of $30,000
D) net income of $153,000
23) Big Industries purchased merchandise from Small Company paying $5,000 in cash
and promising to pay the remaining $5,000 in 30 days. Assuming the use of special
journals, Big Industries would record this entry in the:
A) cash payments journal
B) general journal
C) sales journal
D) cash receipts journal
24) Following is a random list of some of the accounts and their balances on December
31, 2013, for Copperfield Merchandising. Copperfield uses a perpetual inventory
system and all account balances are normal.
Inventory$ 67,000
Sales revenue470,000
Interest revenue28,000
Salary expense46,000
Sales returns & allowances30,000
Interest expense13,000
Delivery expense15,000
Sales discounts25,000
Insurance expense8,000
P.Copperfield, Capital50,000
Utilities expense29,000
Amortization expense20,000
P Copperfield, Withdrawals25,000
Cost of goods sold259,000
Accounts payable56,000
Accounts receivable78,000
Cash29,000
A physical count on December 31, 2013, reveals $65,000 of inventory on hand.
a) Prepare the entry to adjust the inventory account on December 31, 2013 .
b) Prepare the closing entries on December 31, 2013 .
25) Sandhill Construction initially records all prepaid expenses as expenses and all
unearned revenues as revenues. Given the following information, prepare the necessary
adjusting entries at year end, December 31, 2014 .
a) On January 3, 2014, $2,500 of supplies were purchased. A count revealed $300 still
on hand at December 31, 2014 .
b) On January 4, 2014, a $21,000 payment was made to an insurance agency for two
and a half years of insurance.
c) On June 30, 2014, received nine months payment in advance from a customer,
$16,200.
d) On August 1, 2014, received six months payment in advance from a customer,
$9,600.
26) The worksheet includes debit and credit columns for:
A) post-closing trial balance, adjustments, income statement, balance sheet, trial
balance
B) trial balance, income statement, adjustments, balance sheet, adjusted trial balance
C) adjustments, trial balance, post-closing trial balance, adjusted trial balance, income
statement, balance sheet
D) general ledger, trial balance, adjustments, income statement, balance sheet
27) Which of the following most completely describes businesses that use a chart of
accounts?
A) service but not merchandising or manufacturing businesses
B) merchandising but not service or manufacturing businesses
C) manufacturing but not service or merchandising businesses
D) Service, merchandising, and manufacturing businesses all use a chart of accounts.
28) The main computer in a network, where the program and data are stored, is called
the:
A) database
B) hardware
C) server
D) software
29) Table 4-2
The ledger accounts for Alice’s Rentals include the following normal balances as of
December 31, 2014:
Accumulated amortization$ 2,000
Cash 7,300
Equipment15,000
Alice Normanson, Capital 9,300
Alice Normanson, Withdrawals 2,200
Prepaid rent 3,600
Accounts payable7,800
Supplies 1,200
Unearned revenue1,600
Notes payable (due Dec. 31, 2018)7,500
Referring to Table 4-2, what are the total current liabilities and total liabilities for
Alice’s Rentals?
A) $7,800 and $16,900
B) $9,400 and $16,900
C) $7,800 and $15,300
D) $9,400 and $18,900
30) Mandy Smith’s account was written off last year. She owed City Company $5,000.
Using the allowance method, the journal entry to reinstate her account involves:
A) a debit to Smith’s account receivable and a credit to bad-debt expense
B) a debit to allowance for doubtful accounts and a credit to Smith’s account receivable
C) a debit to bad-debt expense and a credit to Smith’s account receivable
D) a debit to Smith’s account receivable and a credit to allowance for doubtful accounts
31) If the bank mistakenly recorded a $92 payment as $29, the error would be shown on
the bank reconciliation as a:
A) $63 addition to the bank balance
B) $92 deduction from the bank balance
C) $92 addition to the bank balance
D) $63 deduction from the bank balance
32) Table 5-3
Refer to Table 5-3. Net sales is:
A) $681,000
B) $750,000
C) $725,000
D) $706,000
33) Journalize the following transactions for Benjie’s Repair Shop and prepare a trial
balance dated June 30, 2014 .
a) Owner, Benjie Brown invested $6,000 cash into the business.
b) Rented a garage and paid one month’s rent, $1,200.
c) Purchased $80 of supplies for cash.
d) Performed repair services on account, $1,700.
e) Paid $1,100 cash for equipment.
f) Owner, Benjie Brown withdrew $500 cash for personal use.
34) The primary difference between deferred and accrued expenses is that accrued
expenses:
A) have been paid but deferred expenses haven’t
B) have not been paid but deferred expenses have
C) involve assets instead of liabilities
D) There is no difference between deferred and accrued expenses
35) Current liabilities on the balance sheet would include all of the following except:
A) accrued expenses
B) estimated liabilities
C) earned revenues
D) unearned revenues
36) Failure to record accrued interest on a note payable causes a company to:
A) overstate interest income
B) understate interest expense
C) understate retained earnings
D) overstate interest expense and understate retained earnings
37) A company has $60,000 in cash, $75,000 in short-term investments, $140,000 in net
current receivables, and $145,000 in inventory. The total current liabilities of the firm
are $395,000. The acid-test ratio of the company is:
A) 1.06
B) 0.94
C) 0.91
D) 0.70
38) Table 6-4
Assume the following data for Burnette Sales for 2014:
On December 31, a physical count reveals 15 units on hand.
Refer to Table 6-4. Assume a perpetual system. Under the
moving-weighted-average-cost method, the cost of goods sold for the first sale (20
units) would be valued at:
A) $164
B) $105
C) $115
D) $135
39) Lester Company uses the allowance method and estimates its bad-debt expense
based on aging the receivables. Before the adjusting entry, the allowance for doubtful
accounts had a $425 debit balance. Based on aged receivables, Lester estimates that
$3,700 will probably prove uncollectible. What is the amount of the adjusting journal
entry that Lester should make?
A) $3,700
B) $3,275
C) $4,125
D) $425
40) When inventory prices are declining, the weighted-average method will generally
result in a:
A) lower gross margin than FIFO
B) higher ending inventory value than FIFO
C) lower owner’s equity balance than FIFO
D) higher cost of goods sold than FIFO
41) A business paid $8,500 to a creditor. The effect of this transaction is to:
A) increase assets and decrease liabilities
B) increase assets and decrease owner’s equity
C) decrease liabilities and owner’s equity
D) decrease assets and decrease liabilities
42) The gross margin percentage is calculated as:
A) gross margin minus net sales revenue
B) gross margin divided by net sales revenue
C) gross margin plus net sales revenue
D) gross margin times net sales revenue
43) Table 11-12
On April 1st 2013 Jamboree Sales purchased inventory for $40,000 by signing a
one-year note payable, due March 31, 2014 . The note bears interest at an annual rate of
8%.
Refer to Table 11-11. What is the correct journal entry on March 31, 2014?
A)
B)
C)
D)
44) Stanton Delivery purchased a truck costing $100,000 on September 3, 2013, by
paying $4,000 down and signing a 10%, 180-day note payable for the balance. Stanton’s
year end is December 31 .
1>Prepare journal entries to:
a) record the purchase of the truck on September 3, 2013
b) record the accrual of interest on December 31, 2013
c) record payment of the note on February 2, 2014
2>Determine the balance of any current liabilities associated with the note as of
December 31, 2013 .
45) Match the following.
A) compensating balance
B) overdraft
C) cheque
D) Cash Short and Over
E) invoice
F) petty cash
1> Document that instructs the bank to pay the designated person or business the
specified amount of money
2> Fund containing a small amount of cash that is used to pay minor expenditures
3> An account used to handle small discrepancies in cash
4> Money left on deposit to guarantee a bank loan
46) On December 21, 2014, Mr. Bagger received and deposited $790 from a customer,
Mrs. McCartney, who paid in advance of the work. He recorded the receipt by crediting
a revenue account, Computer Service Fees Earned. As of December 31, none of the
work had been completed. What, if any, is the required adjusting journal entry on
December 31?
A) No entry is required
B)
C)
D)
47) Camrey Company issued a five-year, interest-bearing note payable for $50,000 on
January 1, 2013 . Each January Camrey is required to pay $10,000 principal on the
note. What is the amount that will be reported on the long-term portion of long-term
notes payable on the December 31, 2014 balance sheet?
A) $10,000
B) $40,000
C) $30,000
D) $20,000
48) Define gross margin and operating income. Explain how they are used in evaluating
a company.
49) At the beginning of 2013, Enco Ltd acquired office furniture at a cost of $25,000.
The furniture is being amortized straight line over 10 years and has no expected
residual value. For income tax purposes, the furniture falls in class 8, with a 20%
declining balance amortization rate, and is subject to the half year rule resulting in only
half of the calculated declining balance amortization being claimed in 2013 . Calculate
the amortization expense for 2013 and 2014 under each method.
50) Based on the following adjusted trial balance, prepare an income statement for
Summers Company for the year ended December 31, 2013 .
Summers Company
Adjusted Trial Balance
December 31, 2013
DebitCredit
Cash$10,500
Accounts receivable20,000
Supplies2,700
Office furniture10,000
Accum. amort.-office furniture$4,350
Salary payable760
Unearned service revenue1,140
Jody Summers, Capital12,550
Jody Summers, Withdrawals2,800
Service revenue40,060
Salary expense8,360
Rent expense2,850
Amort. expense-office furn.350
Supplies expense1,300_______
Total$58,860$58,860
51) Discuss the characteristics of an effective system of internal control for cash
payments by cheque. Include the specifics for a purchase of merchandise for resale.
52) Describe how the accounting equation can be used to analyse business transactions.
53) Why is the valuation of cash the same under accounting standards for private
enterprises (ASPE) as it is for international financial reporting standards (IFRS)?
54) Delta Cleaning Supplies reported the comparative income statement for the years
ended December 31, 2013 and 2014:
20142013
Sales revenue$82,500$73,000
Cost of goods sold:
Beginning inventory8,2507,700
Net purchases 45,500 39,000
Cost of goods available53,75046,700
Ending inventory 11,800 8,250
Cost of goods sold 41,950 38,450
Gross margin40,55034,550
Operating expenses 18,200 15,750
Net income before taxes$ 22,350$18,800
In the audit of the 2013 financial statements it was discovered that the ending inventory
was actually $10,050 and the beginning inventory was actually $6,500.
Required:
1>What adjustment to the 2013 owner’s capital account is necessary?
2>Prepare a corrected income statement for 2014.