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.
3) The entry to record the purchase of inventory on account in a periodic inventory
system includes a debit to the Purchases account.
4) Companies reporting under IFRS and ASPE do not go through the same adjusting
process.
5) A prepaid expense recorded initially as an expense is adjusted by crediting the asset
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 income
during the current period.
7) The seller would record the return of merchandise sold on account in the sales
journal.
8) The lower-of-cost-and-net-realizable-value rule is an application of the consistency
principle.
9) The province of Alberta has the lowest PST rate in Canada of 3%.
10) Unearned revenue recorded initially as unearned revenue is adjusted by debiting a
liability account.
11) The gross margin method is an estimate of inventory sometimes used to estimate
losses for insurance claims due to a fire or natural disaster.
12) A business with days’ sales in receivables of 39 days is more liquid than one with a
collection period of 31 days.
13) Paving, fencing, and exterior lighting should be debited to the land account.
14) Research and development costs are treated as expenses even when they benefit the
business for more than one accounting period.
15) Dapper Company Ltd. receives a patent on January 1, which cost $60,000 and has a
remaining legal life of 15 years and an expected useful life of nine years. What is the
amount of amortization expense for the current year?
A) $6,000
B) $4,000
C) $6,667
D) $1,500
16) Which of the following is a security procedure designed for e-commerce that
rearranges text messages by a mathematical process?
A) Trojans
B) firewalls
C) encryption
D) phishing
17) Which of the following is not a main issue in accounting for inventory under both
accounting standards for private enterprises (ASPE) and international financial
reporting standards (IFRS)?
A) costs to include in inventory
B) inventory costing method to use
C) competitor pricing of similar inventory
D) value of inventory when market value has fallen below cost
18) Net income is reported on the income statement at $63,000. Adjusting entries for
accrued salaries of $600 and amortization on equipment of $1,500 were accidentally
omitted. The correct net income is:
A) $65,100
B) $62,400
C) $61,500
D) $60,900
19) 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 to record the purchase of
inventory if Maudlin Sales uses a periodic inventory system?
A)
B)
C)
D)
20) When sales revenue exceeds cash receipts, the difference is:
A) debited to Cash Short and Over
B) credited to Cash Short and Over
C) debited to Cost of Goods Sold
D) credited to Cost of Goods Sold
21) Performing a service and immediately collecting the cash would:
A) increase net income less than if the service had been performed on account
B) increase assets more than if the service had been performed on account
C) increase owner’s equity less than if the service had been performed on account
D) have no effect on liabilities
22) Talbert Company Ltd. purchased land, buildings, and equipment for $3,000,000.
The land has been appraised at $865,000, the buildings at $1,175,000, and the
equipment at $510,000. The land account will be debited for:
A) $1,382,353
B) $1,017,647
C) $600,000
D) $865,000
23) Given the following data, what is gross margin?
A) $150,000
B) $640,000
C) $570,000
D) $310,000
24) You are informed that Warren Hodges, one of your customers, has declared
bankruptcy. Hodges has an account with your company with a current balance of
$2,300. Using the allowance method, the entry to write off the uncollectible account
involves:
A) a debit to allowance for doubtful accounts and a credit to the Hodges’s account
receivable
B) a debit to Hodges’s account receivable and a credit to bad-debt expense
C) a debit to bad-debt expense and a credit to Hodges’s account receivable
D) a debit to Hodges’s account receivable and a credit to allowance for doubtful
accounts
25) Accruals involve the recording of an expense or a revenue account:
A) either before or at the same time the cash is paid or received
B) after the cash is paid or received
C) at the same time the cash is paid or received
D) before the cash is paid or received
26) Underwater Adventures has the following account balances on August 31, 2014:
Accounts payable$8,800
Accounts receivable9,600
Accumulated amortization – equipment30,300
Cash2,200
Cost of goods sold341,500
Jacobson, capital190,700
Jacobson, withdrawals44,000
Equipment88,000
Interest earned2,000
Inventory71,500
Operating expenses175,500
Sales discounts3,100
Sales returns and allowances14,400
Sales revenue520,600
Supplies7,100
Unearned sales revenue4,500
The following information as at August 31, 2014 was also available:
a.A physical count of items showed $1,200 of supplies on hand.
b.An inventory count showed inventory on hand of $66,400.
c.The equipment has an estimated useful life of eight years and is expected to have no
salvage value.
d.Unearned sales revenue of $1,000 was earned.
Required:
1>Prepare the necessary adjusting journal entries at August 31, 2014. For simplicity all
operating expenses are combined into a single operating expense account for financial
statement purposes. Use the normal account name for the adjusting journal entries.
2>Prepare a classified balance sheet based on adjusted account balances.
27) 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 10-2. The book value of the vehicle at the end of 2015, after recording
amortization for the year using the double-declining-balance method, is:
A) $18,000
B) $10,000
C) $27,000
D) $10,800
28) Table 6-6 Sam’s Wholesale Bikes
Refer to Table 6-6. What is the value of the February ending inventory assuming that
Sam’s uses the periodic FIFO inventory method?
A) $7,500
B) $17,500
C) $14,175
D) $15,875
29) A cheque written for $86.30 in payment of an account was recorded on the books as
$68.30. On a bank reconciliation, this will appear as a(n):
A) addition to the bank balance for $18
B) deduction from the bank balance for $18
C) addition to the book balance for $18
D) deduction from the book balance for $18
30) 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 inventory system. Under FIFO method, the cost
of goods sold for the second sale (12 units) would be calculated as:
A) $165
B) $105
C) $115
D) $135
31) The following data are available for three products of the Classic Company:
ABC
Beginning inventory$ 5,000 $20,000$15,000
Purchases45,000 65,00062,000
Goods available for sale50,00085,00077,000
Ending inventory18,00013,0009,000
Cost of goods sold32,00072,00068,000
You discover the following errors:
a) Ending inventory for product A was overstated by $6,000.
b) Ending inventory for product B was understated by $5,000.
c) Beginning inventory for product C was overstated by $3,000.
Considering these errors, recalculate cost of goods sold for each product.
32) The journal entry to record the payment of a telephone bill immediately upon
receipt of the bill would:
A) have no effect on owner’s equity
B) decrease liabilities
C) decrease owner’s equity
D) increase owner’s equity
33) A $250 payment on account was recorded as a debit to accounts receivable and a
credit to accounts payable. This error will cause:
A) accounts receivable to be overstated
B) accounts payable to be understated
C) cash to be understated
D) owner’s equity to be overstated
34) Table 6-6 Sam’s Wholesale Bikes
Refer to Table 6-6. What is the value of the February ending inventory assuming that
Sam’s uses the perpetual weighted-average inventory method?
A) $13,877
B) $17,628
C) $6,700
D) $9,404
35) On October 1 of the current year, Wood Services received $15,000 for services to
be performed evenly over the next 12 months. Wood Services initially recorded the
$15,000 as service revenue. The adjusting entry on December 31 of the current year
will include a:
A) debit to service revenue for $11,250
B) debit to service revenue for $3,750
C) debit to unearned service revenue for $3,750
D) debit to unearned service revenue for $11,250
36) Using the following information, record journal entries that would be necessary
after preparing the bank reconciliation for Johnson Brothers. All items will not require
an entry.
a) The book balance is $5,895.62.
b) Outstanding cheques total $1,233.25.
c) The bank service charge based on the bank statement is $50.
d) A customer’s cheque for $500 was returned for non-sufficient funds.
e) A deposit of $3,000 was credited to Johnson Brothers for $300 by the bank.
f) The bookkeeper recorded a $1,200 cheque as $120 in payment of the current month’s
rent.
37) Based on the following transactions that occurred during 2014, prepare a trial
balance dated December 31, 2014, for Wellman Water Services
a) Randy Wellman invested $13,000 cash in the business.
b) Purchased $500 of supplies on account.
c) Bought equipment on account, $5,000.
d) Performed $6,000 of services on account.
e) Performed $3,000 of services for cash.
f) Paid $3,000 on equipment purchased in transaction c.
g) Paid salaries to employees for the current period, $2,500.
38) On the financial statements, which line item connects the balance sheet to the
statement of cash flows?
A) Owner’s equity (ending balance)
B) Net income
C) Total assets
D) Cash (ending balance)
39) Tom and Jerry Company uses special journals along with the general journal to
record its daily transactions. Using the following abbreviations, identify the appropriate
journal in which to record each transaction.
Sales JournalS
Purchases JournalP
Cash Receipts JournalCR
Cash Payments JournalCP
General JournalG
a)Sold merchandise on account, $5,800__________
b)A customer purchased additional inventory on account,
credit terms 2/10 n/30, $3,500__________
c)A customer who had previously purchased merchandise
on account returned defective merchandise for credit__________
d)Purchased inventory on account, $4,680__________
e)Purchased office furniture, no money down, with 60
days to pay, $1,850__________
f)Closed the income summary account to capital, net
income was $65,000__________
g)Collected $3,600 from cash sales__________
h)Purchased a used copy machine paying $3,200 cash__________
i)Received a cheque for $3,210 from a customer who was
paying off his account in full__________
j)Paid the telephone bill for the month, $230__________
40) Which of the following forms of business organizations protect the personal assets
of the owners from creditors of the business?
A) proprietorship
B) partnership
C) corporation
D) corporation and partnership
41) A company makes a purchase of $2,000 of inventory, subject to credit terms of 3/10
n/45 and returns $500 of inventory prior to payment. What is the amount of the
payment assuming payment is made within the discount period?
A) $1,500
B) $1,455
C) $1,440
D) $1,560
42) GAAP stands for:
A) generally accepted auditing practices
B) generally accrued auditing procedures
C) generally accepted accounting principles
D) generally accrued accounting principles
43) When a company issues a short-term note payable:
A) the note payable account is credited
B) the note payable is debited
C) the interest expense is credited
D) the interest expense account is debited
44) Indicate the proper journal to use to record each of the following transactions. Use
S for sales journal, P for purchases journal, CR for cash receipts journal, CP for cash
payments journal, and G for general journal.
a)Owner investment of cash________
b)Owner withdrawal of cash________
c)Payment of accrued salaries________
d)Sales of furniture in exchange for a
note receivable________
e)Receipt of payment on account________
f)Purchase of land for cash________
g)Returned merchandise, receiving a cash refund________
h)Payment for the purchase of inventory within
the discount period________
i)Made a cash refund to a customer for
returned merchandise________
j)Sale of merchandise on account________
k)Purchase of merchandise for cash________
l)Purchase of supplies on account________
m)Sale of merchandise for cash________
n)Owner investment of equipment________
45) State whether the following accounts are:
a) closed with a debit
b) closed with a credit
c) not closed
1>cost of goods sold________
2>sales returns and allowances________
3>salary expense________
4>inventory (assume perpetual inventory system)________
5>amortization expense________
6>accumulated amortization________
7>accounts receivable________
8>sales discounts________
9>interest expense________
10>sales revenue________
46) Williams Company had the following balances and transactions during 2013 .
What would the company’s inventory amount be on the December 31, 2013 balance
sheet if the perpetual FIFO method is used and the lower-of-cost-or-market-rule is
applied?
A) $1,200
B) $900
C) $1,050
D) $1,100
47) Los Amigos Company uses the direct write-off method in dealing with uncollectible
accounts. Following is a list of selected transactions for 2013 and 2014:
2013
Jan. 10 Sold merchandise on account to Terry Company, $6,000.
Oct. 15 Sold merchandise on account to Richards Company, $6,300.
Dec. 10Wrote off the total amount owed by Terry Company after receiving
notice that Terry Company had declared bankruptcy.
2014
May 15Wrote off the total amount owed by Richards Company after receiving
notice that Richards Company had declared bankruptcy.
a) Journalize the selected transactions for 2013 and 2014 .
b) What is the major flaw in using the direct write-off method as opposed to the
allowance method?
48) The account debited when supplies are purchased on account is:
A) accounts payable
B) cash
C) capital
D) supplies
49) Which of the following financial statements uses net income or net loss taken
directly from the income statement?
A) Statement of owner’s equity
B) Statement of cash flow
C) Balance sheet
D) Statement of expenditures
50) Performing a service on account would:
A) increase liabilities and decrease total assets
B) decrease liabilities and increase total assets
C) increase owner’s equity and decrease liabilities
D) increase total assets and increase owner’s equity
51) Net income for O’Neal Company is $25,000 for the current year. The owner
withdrew $3,000 per month for personal living expenses. The owner’s capital account
will show a net:
A) decrease of $25,000
B) increase of $61,000
C) decrease of $11,000
D) increase of $11,000
52) Employees of Ajax Renovations work Monday through Friday and are paid every
Friday for work done that week. The daily payroll is $1,200 and the last payday was
Friday December 28 . What is the required adjusting journal entry, if any, on December
31?
A)
B)
C) No entry is required
D)
53) In the following situation, which internal control procedure needs strengthening?
Hofstra Services hired a new clerk to keep custody of and maintain all the equipment in
the equipment yard. That employee has not yet been adequately trained on the
maintenance needs of the equipment.
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
54) Compare and contrast the three methods of estimating uncollectible accounts that
make use of the allowance for doubtful accounts. Be specific. What are the advantages
and disadvantages of each?
55) The following data are available for the month of April for Gore Company:
April 1 inventory120 units at $8.15 each
April 10 purchase200 units at $8.20 each
April 20 purchase410 units at $8.40 each
April 25 purchase310 units at $8.50 each
Gore sold 630 units during April.
Compute the value of ending inventory under the weighted-average method. Assume a
periodic inventory system.(round per unit cost to the nearest cent, round final answer to
the nearest dollar)
56) Define, in a few words, the meaning of internal control.
57) 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 2014 and 2015 using the double-declining-balance method.
58) The total of the accounts receivable subsidiary ledger appear in this account which
is used as a balance to reconcile to as a control feature for the subsidiary ledger?
59) Compute the amounts indicated for each of the following independent situations.
60) Sam Miyagi began Miyagi Landscaping in 2012 . He performed his own
bookkeeping using an accounting software package he purchased for that purpose. Sam
selected January 31 as his year end to coincide with the slower time of year for the
business. In February 2013, Sam provided his accountant, Mary Tang, with the source
documents and a backup copy of the software. Mary determined the following:
Sam purchased a second-hand truck and trailer on February 28, 2012, in anticipation of
starting Miyagi Landscaping. The vehicle stayed in Sam’s garage uninsured until April
1, 2012, which was the starting date of his business. Sam paid $12,000 for the truck; he
estimates that it will have a useful life in the business of five years at which time he
thinks its value will be $0. Sam debited the asset account, Truck, for the cost of the
vehicle.
On April 1, 2012, a one-year vehicle insurance policy was purchased in the amount of
$1,800. The account Prepaid Insurance was debited for the full amount.
Gardening supplies were purchased throughout the year. The Gardening Supplies
account had a year-end balance of $24,000; a count showed $400 of supplies on hand
on January 31, 2013 .
On January 15, 2013 Sam signed a contract to do monthly lawn maintenance for the
municipality starting on May 1 . The six-month contract will be paid on a monthly basis
in the amount of $1,500 starting May 31 .
On January 31, Miyagi Landscaping had $2,800 still owing from customers. This
amount was unrecorded in the accounting system.
Required:
Journalize the adjusting entries for the January 31, 2013, year end. Explanations are not
required.
