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 including shipping terms, credit terms, and returns
appear below. Compute the total amount to be paid in full settlement of each invoice,
assuming that credit for returns is granted before the expiration of the discount period
and payment is made within the discount period.
Invoice Freight and Credit Terms Transportation Charges Returns and
Allowances
a) $2,000 FOB destination, 3/10 n/45 $55 $200
b) $5,500 FOB shipping point, 2/10 n/30 $100 $50
c) $6,700 FOB shipping point, 2/10 n/45 $200 $350
d) $9,300 FOB destination, 2/10 n/60 $150 $550
3) In reconciling a bank statement, the bank balance is $1000 and the checkbook
balance is $1205. Which of the following is the MOST probable reason why the
chequebook balance is larger than the bank balance?
A) The bank has not cleared certain cheques
B) The bank has added interest revenue to the account balance
C) A deposit in transit was made at the end of the month
D) The bank received an EFT from a customer
4) A lump-sum purchase of assets requires an allocation of the purchase price among
the assets acquired. This allocation method is called the:
A) book-value method
B) relative-fair-value method
C) accumulated method
D) betterment approach
5) The steps in the accounting cycle (excluding the preparation of the worksheet) are
listed below in random order. List the steps in the proper sequence, inserting the
number 1 to 11 .
a)______Prepare a postclosing trial balance
b)______Prepare an adjusted trial balance
c)______Analyse transactions as they occur
d)______Prepare an unadjusted trial balance
e)______Compute the adjusted balance in each of the ledger accounts
f)______Post the journal entries to the ledger accounts
g)______Journalize adjusting journal entries
h)______Journalize and post closing entries
i)_______Prepare financial statements
j)_______Compute the unadjusted balance in each of the ledger accounts
k)______Journalize the transactions
6) An owner investment of office furniture into the business would:
A) decrease owner’s equity and decrease liabilities
B) increase total assets and increase liabilities
C) increase owner’s equity and increase total assets
D) decrease owner’s equity and increase liabilities
7) Which of the following is TRUE concerning accounting for sales tax in the sales
journal?
A) Sales tax payable is credited each time a sale is recorded
B) Sales tax payable is debited each time a sale is recorded
C) Sales tax receivable is debited each time a sale is recorded
D) Sales tax receivable is credited each time a sale is recorded
8) Which of the following transactions would increase an asset and increase owner’s
equity?
A) payment of a note payable
B) receipt of cash in payment of an account receivable
C) owner investment of land into the business
D) payment of the telephone bill
9) Table 6-6 Sam’s Wholesale Bikes
Refer to Table 6-6. What is the cost of goods sold for the two months assuming that
Sam’s uses the perpetual FIFO inventory method?
A) $42,225
B) $56,400
C) $48,900
D) $38,900
10) Warranty expense is debited in the period that:
A) the product is repaired
B) the product is sold
C) the cash is collected from the customer
D) either the product is sold or the cash is collected
11) Allowance for doubtful accounts has a debit balance of $980 at the end of the
current year (prior to adjustment). An analysis of the accounts in the customers’ ledger
indicates uncollectible accounts of $16,000. The adjusting entry would require a credit
to:
A) bad-debt expense for $16,980
B) allowance for doubtful accounts for $16,980
C) allowance for doubtful accounts for $15,020
D) accounts receivable accounts for $15,020
12) Franconia Sales offers warranties on all their electronic goods. Warranty expense is
estimated at 2% of sales revenue. In 2013, Franconia had $500,000 of sales. In the same
year, Franconia paid out $7,500 of warranty payments. Which of the following is the
entry needed to record the disbursement of warranty payments?
A)
B)
C)
D)
13) Match the following.
A) deductions
B) Canada Pension Plan contributions
C) Employment Insurance contributions
D) employees’ income tax payable
E) benefits
F) Workers’ Compensation premiums
G) gross pay
H) net pay
1> A contribution withheld from employees’ pay and matched by the employer
2> A contribution withheld from employees’ pay and matched by the employer at the
rate of 1.4 times that of the employee’s contribution
3> Income tax deducted from employees’ total compensation
4> Premiums paid by employers which is used to pay benefits to employees who are
injured at work
5> Total amount of employee compensation before taxes and other deductions are taken
out
6> The amount of employee compensation that the employee actually takes home
7> Amounts withheld from an employee’s cheque
8> Extra compensation items not paid directly to the employee
14) Purchasing a truck by signing a note payable would include a:
A) credit to truck
B) debit to note payable
C) credit to note payable
D) debit to truck expense
15) The normal balance of an expense is a ________ while the normal balance of an
asset is a ________.
A) debit, credit
B) debit, debit
C) credit, credit
D) credit, debit
16) For each of the independent situations below, determine the age of the asset in
question.
a)The balance in the buildings account is $550,000, while the balance sheet shows the
book value of buildings at $233,200. The notes to the financial statements indicate that
straight-line amortization is used for all property, plant and equipment and that residual
values are estimated at 10% of cost. The estimated useful life of the buildings is 25
years.
b) The book value of delivery equipment is $51,600, while the balance in accumulated
amortization is $68,400. The company uses the straight-line method of amortization for
delivery equipment and estimates life at five years. Residual values are 5% of cost.
c)The balance in the accumulated amortization account for furniture is $21,875. The
furniture has been amortized a total of 43.75% of its original cost. The company’s notes
to the financial statements indicate that double-declining-balance amortization is used
for all furniture. The company estimates useful life at eight years and residual value at
15% of cost.
17) Given the following data, what is the cost of goods sold rounded to the nearest
whole dollar using periodic FIFO?
A) $400
B) $360
C) $890
D) $850
18) For each of the items or entries described, indicate with a code letter, provided
below, the effect of the transaction or the correction of the error described on the
corrected net income:
Net income would increase I
Net income would decrease D
No effect on net income N/E
A) I
B) D
C) N/E
Prepaid rent was originally recorded to rent expense and no adjustment has yet been
made.
19) When a note matures, the payee should record:
A) unearned revenue
B) interest revenue
C) interest expense
D) note expense
20) All of the following statements regarding a worksheet are TRUE except:
A) it provides an orderly way to summarize the data for the financial statements
B) it is a multicolumn document, which helps move data from the trial balance to the
financial statements
C) it replaces the adjusting entries in the general journal
D) it aids the closing process by listing the adjusted balance of all accounts
21) Which of the following is the last step in the daily control over cash receipts by
mail?
A) A mail room employee sends all customer checks to the treasurer who has the
cashier make the bank deposit
B) A mail room clerk opens the mail and sends the remittance advices to the accounting
department
C) The controller compares the records of the day’s bank deposit amount from the
treasurer and the debit to cash from the accounting department
D) The accounting department prepares journal entries to cash and the customers’
accounts
22) Which of the following transactions would increase an asset and increase a
liability?
A) payment of an account payable
B) borrowing money from a bank
C) an owner investment of cash into the business
D) purchasing office equipment for cash
23) Given the following data, what is the weighted-average cost of ending inventory
rounded to the nearest whole dollar?
A) $400
B) $360
C) $346
D) $864
24) Which of the following financial statements reports owner’s equity as of the end of
the accounting period?
A) income statement and the balance sheet
B) cash flow statement and the balance sheet
C) statement of owner’s equity and the balance sheet
D) cash flow statement and the income statement
25) Referring to Table 4-3, the debt ratio is:
A) 0.44
B) 2.26
C) 0.53
D) 0.29
26) The Sarbanes-Oxley Act has impacted Canadian companies in the following way.
A) More companies are using third party accounting services
B) Public companies are borrowing exclusively through Canadian banks
C) Public companies are relying solely on internal auditors to guarantee financial
statements
D) Public companies traded on US stock exchanges must abide by the Sarbanes-Oxley
Act
27) The requirement that a store manager approve all returns of merchandise is an
example of which characteristic of internal control?
A) separation of duties
B) competent, reliable, and ethical personnel
C) proper authorization
D) assignment of responsibilities
28) Collecting cash on account causes:
A) assets to increase and owner’s equity to decrease
B) assets to increase and liabilities to increase
C) assets to increase and owner’s equity to increase
D) no change in total assets
29) Under a perpetual inventory system, the entry to record the return of inventory sold
on account for $250 with a cost of $185 would be recorded by the seller as a:
A) debit to Accounts Receivable for $250
B) debit to Sales Returns and Allowances for $185
C) credit to Sales Revenue for $250
D) credit to Cost of Goods Sold for $185
30) For each of the following contingent situations, state the proper accounting
treatment.
a)Glendale Company is involved in several lawsuits at the end of the current year
involving a defective product. Glendale’s legal counsel feels it is probable that Glendale
will incur losses of $500,000.
b)Riverside Company is involved with Canada Revenue Agency in a tax dispute.
Riverside’s legal counsel feels it is possible, but not likely that Riverside will incur
losses of $200,000.
c)Daniels Company is involved in a lawsuit, which its legal counsel feels has no merit.
Legal counsel advises Daniels the chances of incurring a loss are extremely remote.
d)Sparks Brothers is involved in a lawsuit against a supplier and is anticipating a cash
settlement in its favour of $500,000. Legal counsel advises Sparks Brothers that the
chances of winning the suit and being awarded the $500,000 are excellent.
31) Table 10-1
On January 1, 2013, Bark Manufacturing Company Ltd. purchased a machine for
$27,500, and expects to use the machine a total of 32,000 hours over the next four
years. Bark set the residual value on the machine at $3,500. Bark used the machine
6,000 hours in 2013 and 7,200 hours in 2014 .
Referring to Table 10-1, what is the amortization expense in 2014 if Bark uses
straight-line amortization?
A) $6,875
B) $13,750
C) $12,000
D) $6,000
32) Table 11-1
A $10,000, 90-day, 12% note payable was issued on November 1, 2013 .
Referring to Table 11-1, what is the amount of the accrued interest on December 31,
2013?
A) $394.52
B) $95.34
C) $101.92
D) $197.26
33) Compute net accounts receivable for the following independent situations.
a)Accounts receivable has a balance of $16,000. The allowance for doubtful accounts
has a credit balance prior to adjustment of $350. An aging schedule prepared on
December 31 reveals $1,250 of uncollectible accounts.
b)Accounts receivable has a balance of $17,500. The allowance for doubtful accounts
has a debit balance prior to adjustment of $560. An aging schedule prepared on
December 31 reveals $1,500 of uncollectible accounts.
c)Accounts receivable has a balance of $15,500. The allowance for doubtful accounts
has a debit balance prior to adjustment of $760. Net credit sales for the year are $35,000
and 3.5% of net credit sales are deemed uncollectible.
d)Accounts receivable has a balance of $20,200. The allowance for doubtful accounts
has a credit balance prior to adjustment of $460. Net credit sales for the year are
$35,000 and 4.5% of net credit sales are deemed uncollectible.
34) Match the following.
A) gross margin method
B) retail method
C) gross margin percentage
1> One of two methods used to estimate ending inventory
2> A method of estimating ending inventory based on the total cost and total selling
price of opening inventory and net purchases
3> The relationship of gross margin to net sales.
35) Table 11-2
A $6,000, 120-day, 8% note payable is signed at the bank on October 2, 2013 to borrow
cash for the purchase of a car.
Referring to Table 11-2, the adjusting entry on December 31, 2013, would include a:
A) debit to Interest Expense for $147.81
B) credit to Interest Expense for $118.36
C) debit to Note Payable for $118.36
D) credit to Interest Payable for $118.36
36) Purchasing supplies and office equipment for cash would include a:
A) debit to supplies; credit to office equipment and cash
B) debit to supplies and office equipment; credit to cash
C) debit to office equipment; credit to supplies and cash
D) debit to cash; credit to office equipment and supplies
37) Piggly Wiggly Sales had six CD players in inventory on December 31 . They were
purchased in November for $170 each. A quoted price received from the supplier on
December 31 shows the CD players now cost $175 each. Piggly Wiggly has marked
each player to sell for $320. Using the lower-of-cost-and-net-realizable-value rule, the
ending inventory of CD players should be shown at:
A) $1,050
B) $1,920
C) $1,020
D) $900
38) A system of principles and rules that guide behaviour
39) Determine the expenses for the current period based on the following data:
Net income for the current period$55,000
Ending owner’s equity85,000
Beginning owner’s equity49,000
Owner withdrawals19,000
Revenue for the current period96,000
40) Very Bouys Inc. had cash sales of $650,000 during the month of December and
collected the 8% sales tax on these sales required by the province in which Very Bouys
operates. Very Bouys must remit the sales tax to the province.
Required:
Prepare all necessary journal entries to account for the collection and payment of the
sales tax assuming Very Bouys maintains a separate sales tax account.
41) Charlton Cleaning Services pays out wages every week on Friday afternoon.
Payroll expense totals $3,500 per week, based on a 5-day week. The month of June
ended on a Thursday. On Thursday, June 30, Charlton made the following accrual
adjustment:
At the same time, they prepared the following reversing entry to be booked on July 1:
On Friday afternoon, when wages were paid out, what journal entry is required?
42) Marvin Painting and Accessories reports the following transactions for the month of
March.
May 2Purchased inventory on credit from Paint Suppliers,
terms 2/10 n/30, $5,000.
7Purchased supplies on credit from Office Wholesalers, terms
2/10 n/45, $650.
9Returned $2,700 of inventory purchased on April 2 to Paint
Suppliers for full credit.
10Purchased office equipment on account from Officeland, terms
3/15 n/45, $4,300.
Record the above transactions in the purchases journal and the general journal.
Purchases Journal
|Credit|Debits|
General Journal
