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.
3) The right-hand side of an account is called the increase side.
4) Financial statements provide information about business activities to decision
makers.
5) An organization, for accounting purposes, stands apart from other organizations and
individuals as a separate accounting entity.
6) The petty cash fund must be replenished on the balance sheet date, otherwise the
ledger will not balance.
7) A fully amortized asset no longer has value to the business.
8) Recording the transaction in the journal is the first step in the journalizing process.
9) One way of increasing the equity of a business is to increase a liability.
10) Overstating ending inventory in 2012 will overstate net income for 2013 .
11) The worksheet is the financial statement that must be prepared before all of the
others.
12) The owner withdrawing cash for personal use would:
A) have no effect on assets
B) decrease owner’s equity
C) decrease net income
D) increase assets
13) 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 entry to record the payroll for Peter would include a:
A) debit to Salary Payable to Employees for $802.50
B) credit to Employee Income Tax Payable for $120.38
C) credit to Canada Pension Plan Payable for $15.01
D) credit to Employee Benefits Expense for $54.73
14) Burton 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)Purchased inventory for cash, $2,300__________
b)Received $3,000 from a customer on account__________
c)Purchased supplies on account, $375__________
d)Sold merchandise for cash, $2,460__________
e)Paid the weekly employees’ wages, $5,300__________
f)Returned merchandise previously bought on
account for credit, $1,670__________
g)Made a $350 adjusting entry for expired insurance__________
h)Borrowed $10,000 from the bank by signing a note
payable with interest at 8%__________
i)Purchased office equipment for cash__________
j)Paid for merchandise previously bought on account,
taking the 2% discount $2,345__________
15) The final stage of data processing is the:
A) posting of transactions to the accounts
B) generation of the accounting reports
C) batch processing of transactions
D) preparation of the special journals
16) 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 interest expense recorded in 2014?
A) $98.63
B) $193.97
C) $101.92
D) $120.00
17) Table 5-5
The following items were taken from the December 31, 2013 records of Speedy Boat
Company, which uses a periodic inventory system:
Refer to Table 5-5. Cost of goods available for sale for Speedy Boat Company is:
A) $155,000
B) $225,000
C) $230,000
D) $250,000
18) Table 4-6
Selected accounting data as at December 31, 2014 for Martineau Delivery follows:
Cash$25,000
Accounts payable33,000
Accounts receivable34,000
Salary payable7,500
Supplies6,600
Unearned revenue16,500
Prepaid rent4,000
Mortgage payable (due 2018)48,000
Equipment52,000
C. Lexus, Capital10,000
Accum. amort.-equipment12,000
Service revenue69,000
Salary expense31,000
Accum. amort.-furniture6,000
Furniture49,400
Referring to Table 4-6, the current liabilities and total liabilities are:
A) $61,000 and $109,000 respectively
B) $40,500 and $88,500 respectively
C) $40,500 and $105,000 respectively
D) $57,000 and $105,000 respectively
19) A record that contains the details by customer or vendor of the individual account
balances would be called a:
A) control account
B) subsidiary ledger
C) journal
D) liability account
20) The balance sheet reports the:
A) assets, equity, and revenues at a certain point in time
B) assets, liabilities, and equity at a certain point in time
C) assets, expenses, and revenues for a period of time
D) assets, liabilities, and equity for a period of time
21) Table 11-10
Benny’s Bagels operates in a province that has HST collected by the federal government
at a rate of 12%. During the month of December 2013 Benny’s Bagels purchased baking
materials for $12,000; bought a new oven for $15,000; paid salaries of $14,000; and,
had cash sales of $35,000.
Refer to Table 11-10. What is the correct journal entry to record the sales made during
December?
A)
B)
C)
D)
22) Ford Enterprises paid a creditor on account. Assuming the use of special journals,
this entry would be recorded in the:
A) cash payments journal
B) purchases journal
C) general journal
D) cash receipts journal
23) 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.
24) 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________
25) To update the inventory records for the sale of merchandise under a perpetual
inventory system, the entry would include a:
A) debit to Inventory
B) credit to Accounts Payable
C) debit to Sales Revenue
D) debit to Cost of Goods Sold
26) Which of the following journal entries would be recorded if a business makes a
cash payment to a supplier of $600 “on account” (the business had purchased supplies
on account in the previous month)?
A)
B)
C)
D)
27) Assets are reported on the:
A) income statement
B) income statement and balance sheet
C) statement of owner’s equity
D) balance sheet
28) Which of the following statements is TRUE?
A) The current ratio measures the ability of a company to pay its current debts
B) The current ratio is calculated by dividing current liabilities by current assets
C) The current ratio is calculated by dividing current assets by total assets
D) The current ratio is calculated by dividing total assets by current assets
29) All of the following are payroll costs that are expenses of the employer except:
A) Workers’ Compensation Plan premiums
B) Employee income taxes
C) Employment Insurance premiums
D) Canada Pension Plan contributions
30) On December 31, 2013, Manfred Repairs omitted the following adjusting entries:
a) Accrued wages of $5,000 owed to employees
b) Accrued revenue for services rendered of $5,500
Assuming the financial statements are prepared before the errors are discovered, state
the effects of each error on the financial statement elements by completing the chart.
31) All of the following are unearned revenues except:
A) deferred revenues
B) accrued revenues
C) revenues collected in advance
D) customer prepayments
32) Prepaid rent shows a beginning balance of $3,600 and an ending balance of $2,900.
The income statement for the current period reports rent expense of $3,200. What was
the amount of rent purchased during the year?
A) $6,100
B) $6,800
C) $2,500
D) $400
33) CAs, CGAs and CMAs are expected to maintain higher standards than society in
general:
A) because they are required to by federal law
B) only if they are certifying the financial statements of a company whose stock is
listed on a national exchange
C) because their ability to attract business depends entirely upon their reputation
D) as long as they are working for themselves
34) Given the following worksheet with the trial balance already entered, and the
related adjustment information, complete the worksheet.
All Star Merchandising
Accounting Work Sheet
For the Year Ended December 31, 2014
AccountTrialAdjustmentsInc.Balance
BalanceStatementSheet
Additional information:
a) Prepaid rent expired, $3
b) Amortization on furniture, $2
c) Unearned sales revenue earned during the period, $4
d) Accrued salaries, $5
e) Physical count of ending inventory, $33
35) Which of the following is a feature of limited-liability partnerships?
A) They are restricted to a limited number of partners who are liable for the business
B) Liability is limited to 150% of each partners investment in the business
C) Partner liability is unlimited but the liability of partner families is limited
D) Each partner is liable for his or her own actions
36) Credit terms of 1/10 n/30 indicates that the buyer is:
A) allowed a 10% discount if payment is made within 30 days
B) allowed a 1% discount if payment is made within 10 days
C) allowed a 1% discount if payment is made within 30 days
D) allowed a 30% discount if payment is made within 10 days
37) Inventory and cost of goods sold for a business using the periodic inventory system
appear on the:
A) balance sheet and statement of owner’s equity, respectively
B) statement of owner’s equity and income statement, respectively
C) balance sheet and income statement, respectively
D) income statement and cash flow statement, respectively
38) Which of the following statements regarding the relationship between amortization
and income taxes is TRUE?
A) All capital assets have the same amortization rate
B) The same amortization method must be used for income tax purposes and for the
books
C) Canada Revenue Agency specifies the maximum amortization rate (CCA rate) a
taxpayer may use
D) Most companies use straight-line amortization for income tax purposes
39) Unearned revenue represents revenue that has:
A) been earned and collected
B) been earned but not yet collected
C) been collected but not yet earned
D) not been collected nor earned
40) The information needed to record salary expense for the period comes from the:
A) employee earnings record
B) T1 Special
C) TD1 form
D) payroll register
41) The following data pertain to Corbet Merchandising for the year ended December
31, 2013:
Beginning inventory$190,300
Purchases of inventory on credit during the year 450,000
Cost of goods sold during the year 65% of sales
Sales (75% on credit) during the year 800,000
a) Prepare entries for the following transactions using a perpetual inventory system:
1> Purchase of inventory during 2013
2> Sales during 2013
3> Cost of goods sold during 2013
b) Compute the balance in the inventory account on December 31, 2013 .
42) Patents and copyrights are examples of:
A) current assets
B) property, plant, and equipment assets
C) intangible assets
D) goodwill
43) Which accounts are affected in the closing process under a periodic inventory
system?
A) Gross Margin and Cost of Goods Sold
B) Cost of Goods Sold, Sales Returns and Allowances, and Sales Discounts
C) Gross Margin, Sales Returns and Allowances, and Sales Discounts
D) operating expenses, Sales Revenue, and Purchases
44) Using the following data, compute the book balance for Backwater Services before
the preparation of a bank reconciliation on May 31, 2010:
– The bank statement reveals a balance of $5,642.
-Outstanding cheques on May 31, 2011, amount to $4,620
-The bank statement indicates service charges of $36.
– Deposits in transit on May 31, 2011, amount to $1,490.
– The bookkeeper mistakenly recorded a $21 cheque payment to a vendor as $210.
-A note had been collected by the bank for $1,000 plus $50 interest.
45) Beta Construction Ltd. acquired the following property, plant and equipment on
January 1, 2013: Residual
Asset CostValueUseful Life
Office equipment $ 75,000 $ 5,0005 years
Building 200,000 20,00025 years
Delivery equipment250,000 25,00010 years
Beta Construction Ltd. amortizes the office equipment using the straight-line method,
the building using the double-declining-balance method, and the delivery equipment
using the units-of-production method. The delivery equipment is estimated to be useful
for 100,000 kilometres and during 2013 was driven 33,000 kilometres.
Calculate amortization for 2013 for each of the above assets.
Office equipment________________
Building________________
Delivery equipment________________
46) Data Services has five hourly employees. Some employees work overtime each
week and are paid time and one-half for all work exceeding 40 hours per week. Based
on the data below, compute gross pay for each employee.
47) Refer to table 5-6. Prepare the journal entries for New Miss Store for the
transactions listed, assuming that New Miss Store uses a perpetual inventory system.
48) Table 2-1
The following is a list of the accounts and their balances appearing in the ledger of
Henry Garage Repairs as of December 31, 2014, the company’s year end. The accounts
are in alphabetical order and have normal balances.
Accounts payable$450
Accounts receivable 1,250
Cash 400
Equipment 12,600
Gasoline expense 600
Ian Henry, Capital 6,600
Ian Henry, Withdrawals 500
Notes payable 11,000
Rent expense 1,200
Repairs expense 650
Salary expense 700
Salary payable 100
Service revenue 8,250
Supplies 200
Supplies expense 300
Truck 8,000
Refer to Table 2-1. Prepare a Statement of Owner’s Equity for Henry Garage Repairs
for the year ended December 31, 2014 . Assume the capital amount did not change
since January 1, 2014 .