1) The concept underlying accounting for property, plant and equipment and
amortization expense is the same as for prepaid expenses.
2) The purchase of office equipment for cash would increase assets and decrease
liabilities.
3) Separation of duties and responsibilities is essential in the control procedures for
both cash receipts and cash disbursements.
4) Assets, revenues, and withdrawals are all increased by debits.
5) A lock-box system reduces theft and places the business’s cash in circulation faster
than if the cash is collected and deposited by company personnel.
6) With respect to amortization, a business should match an asset’s expense against the
revenue the asset produces.
7) A journal produces a balance in each account.
8) The going-concern assumption states an entity will remain in operation for only the
next accounting period.
9) Sales for the current year amount to $900,000. The company estimates warranty
expense to be 5% of sales. The journal entry to accrue the estimated warranty expense
includes a debit to estimated warranty payable for $45,000.
10) If a customer’s cheque that has been deposited is returned with the bank statement
marked “insufficient funds (NSF),” it would appear on the bank reconciliation as a
deduction from the ending book balance.
11) The moving-weighted-average-cost method generates a gross margin that will be
lower than the gross margin generated under FIFO costing when prices are rising.
12) Net sales is equal to sales revenue plus sales returns and minus sales discounts.
13) The capital balance found in the balance sheet credit column of a worksheet is the
balance reported on the formal balance sheet.
14) The direct write-off method of recognizing bad debts usually results in assets being
overstated on the balance sheet.
15) Canada Pension Plan (CPP) contributions, employment insurance (EI), and personal
income taxes are statutory(legally required) payroll deductions.
16) Book value is determined by subtracting the residual value from the cost of an
asset.
17) Under the FIFO method, ending inventory is valued based on the most recent
purchases.
18) If special journals are used, the purchase of merchandise for cash would be
recorded in the cash payments journal.
19) When using the allowance method, the entry to write off an accounts receivable has
no effect on income.
20) State which inventory method would best meet the specific goal of management
stated below. Show your answer by inserting the proper letter beside each statement.
a) FIFO
b) Specific-unit-cost
c) Weighted-average
1>Management desires to precisely match cost of goods sold
with net sales revenue.________
2>Management desires to minimize the company’s ending
inventory balance during a period of falling prices.________
3>The company sells rare, antique items.________
4>Management desires to show the current value inventory
on the balance sheet.________
5>Management desires to maximize the company’s gross margin
during a period of rising prices.________
21) When a prepaid expense is initially recorded as an expense, the adjusting entry
would include a:
A) debit to a contra account
B) debit to a prepaid expense account
C) debit to an unearned expense account
D) debit to an unearned revenue account
22) Table 11-5
On March 1, 2014, William Browning received $15,000 in advance for services to be
provided over the next 12 months.
Refer to Table 11-5. The entry on March 1, 2014, would include a:
A) credit to Sales Revenue for $15,000
B) credit to Unearned Revenue for $15,000
C) debit to Sales Revenue for $15,000
D) debit to Unearned Revenue for $15,000
23) Table 9-10 Armadillo Camera Shop
The following information is from the 2013 records of Armadillo Camera Shop:
Refer to Table 9-10. Bad debts expense is estimated by the
aging-of-accounts-receivable method. Management estimates that $2,850 of accounts
receivable will be uncollectible.
Which of the following will be the amount of bad debts expense?
A) $7,000
B) $2,250
C) $3,450
D) $2,850
24) If the prepaid rent account had an unadjusted normal balance of $13,400, and an
adjustment was made crediting the account for $1,800, then the account would appear
on the worksheet as a(n):
A) $11,600 debit balance in the balance sheet columns
B) $1,800 credit balance in the income statement columns
C) $11,600 credit balance in the adjusted trial balance columns
D) $1,800 credit balance in the balance sheet columns
25) The journal entry to purchase merchandise under a periodic inventory system
includes a:
A) debit to cost of goods sold
B) debit to inventory
C) credit to purchases
D) debit to purchases
26) The posting reference column in the general journal is used to:
A) indicate if the account is an asset, a liability, or an owner equity
B) provide space for the bookkeeper to initial the transaction
C) record the page number of the general journal
D) record the account number of the general ledger account
27) Cash investments by the owner are reported on the:
A) balance sheet
B) income statement
C) cash flow statement
D) income statement and the balance sheet
28) Global Enterprises Inc. sold some fully amortized equipment for $2,700 cash. The
equipment had been purchased for $26,500 and Global had an estimated useful life at
eight years and residual value at $3,500. The journal entry to record the sale of the
equipment is:
A)
B)
C)
D)
29) Prepare an adjusted trial balance based on the following adjustment data and the
unadjusted trial balance.
Tudhope Plumbing
Unadjusted Trial Balance
December 31, 2014
DebitCredit
Cash$12,000
Accounts receivable20,500
Office supplies9,500
Prepaid insurance10,200
Equipment80,500
Accum. amort.-equipment$30,900
Accounts payable15,500
Unearned service revenue20,600
Mike Tudhope, Capital80,200
Mike Tudhope, Withdrawals20,600
Service revenue63,700
Salary expense30,600
Advertising expense15,400
Utilities expense9,900
Miscellaneous expense1,700_______
Total$210,900$210,900
Adjustment data:
a) Office supplies on hand on December 31, 2014, amount to $4,600.
b) During the year, $5,400 of prepaid insurance expired.
c) Amortization on equipment for the year is $12,400.
d) Unearned service revenue on December 31, 2014, amounts to $6,800.
e) Salaries owed to employees on December 31, 2014, amount to $3,300.
30) Table 11-5
On March 1, 2014, William Browning received $15,000 in advance for services to be
provided over the next 12 months.
Refer to Table 11-5. The adjusting entry on December 31, 2014, would include a:
A) debit to Sales Revenue for $12,500
B) debit to Unearned Revenue for $12,500
C) credit to Sales Revenue for $2,500
D) debit to Unearned Revenue for $2,500
31) Table 11-11
On April 1st 2013 Maudlin Sales purchased inventory for $80,000 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)
32) Table 9-4
On December 31, Asheville Company has a $330,000 debit balance in accounts
receivable. The allowance for doubtful accounts has a $4,500 credit balance. Net credit
sales for the period total $1,500,000. Asheville estimates 2% of its net credit sales may
be uncollectible, and from experience, Asheville determines that the allowance for
doubtful accounts should be 10% of accounts receivable.
Referring to Table 9-4, under the percent-of-sales method, the balance in allowance for
doubtful accounts after adjustment would be:
A) $25,500
B) $30,000
C) $34,500
D) $35,000
33) Table 5-3
Refer to Table 5-3. The cost of goods sold is:
A) $470,000
B) $478,000
C) $406,000
D) $351,000
34) Jan-Con Company provides the following information for the month of August.
Required:
(a)What is the value of the ending inventory assuming the company uses a periodic
inventory system and the weighted-average method?
(b) What is the cost of goods sold if the company uses a perpetual inventory system and
the FIFO method of valuing inventory?
(c)What is the cost of goods sold if the company uses a perpetual inventory system and
the weighted average method of valuing inventory?
35) If the petty cash fund is not replenished on the balance sheet date:
A) cash and income will be overstated
B) income will be understated
C) cash will be understated
D) liabilities will be understated
36) Which of the following statements is TRUE?
A) The value of a dollar changes over time
B) German accountants record transactions in dollars
C) The stable-monetary-unit concept requires adjustments to the accounting records for
the effects of inflation
D) High inflation rates indicate a dollar’s purchasing power is stable
37) Purchasing a parcel of land for $100,000 by paying $10,000 in cash and signing a
promissory note for the remainder would:
A) decrease owner’s equity by $90,000
B) increase owner’s equity by $10,000
C) decrease liabilities by $90,000
D) increase total assets by $90,000
38) Inputs would include:
A) sales receipts
B) an income statement
C) a balance sheet
D) a statement of owner’s equity
39) 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 aging method, and calculated an amount of $1,600 as their estimate
of uncollectible accounts. At the end of the year, what was the balance in the
uncollectible account expense?
A) $2,300
B) $5,400
C) $4,300
D) $2,700
40) Under a periodic 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 $3,400
D) Inventory of $1,500
41) An effective accounting information system:
A) allows employees flexibility in setting the working hours
B) guarantee a company will not go bankrupt
C) includes control, compatibility, flexibility, and a favourable cost/benefit relationship
D) promote operational efficiency
E) will prevent fraud in all cases.
42) Financial statements are prepared from:
A) an adjusted trial balance
B) an unadjusted trial balance
C) the general journal
D) the previous year’s financial statements
43) The entry to record the sale of merchandise for cash includes a:
A) debit to Accounts Receivable
B) credit to Sales Discounts
C) debit to Sales Revenue
D) credit to Sales Revenue
44) Receiving cash on account of $1,200 from a customer would include a:
A) debit to accounts receivable and a credit to service revenue for $1,200
B) debit to cash and a credit to accounts receivable for $800
C) debit to accounts payable and a credit to cash for $1,200
D) debit to cash and a credit to accounts receivable for $1,200
45) Given the following data, what is the gross margin if cost of goods sold is
determined using the FIFO periodic method?
A) $2,540
B) $1,460
C) $1,400
D) $1,390
46) On April 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) credit to unearned service revenue for $11,250
47) 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
48) Table 10-6
On January 1, 2013, Grant Transport purchased a $120,000 truck for hauling cattle
across the border. Grant plans on driving the truck for eight years or 400,000
kilometres. Expected residual value for the truck is $30,000.
Refer to Table 10-6. The 2015 amortization expense using the double-declining-balance
method is:
A) $30,000
B) $22,500
C) $16,875
D) $12,656
49) If income summary has a $13,500 debit balance before it is closed to the capital
account, the company:
A) generated a net income of $13,500
B) incurred a net loss of $13,500
C) had revenues that exceeded expenses by $13,500
D) had expenses that were $13,500 less than revenues
50) A company’s ledger shows an Inventory balance of $20,000 and a physical count of
the inventory shows $19,000. Which of the following entries is needed to record the
shrinkage?
A)
B)
C)
D)
51) A document issued by a seller to credit a customer’s account for returned
merchandise is referred to as a:
A) seller’s memorandum
B) debit memo
C) credit memo
D) accounts payable memo
52) Refer to Table 9-6. Assume that interest revenue was properly accrued on December
31, 2013 . The entry made at maturity in 2014 will include a credit to:
A) interest revenue of $39.45
B) interest revenue of $19.73
C) interest receivable of $60.82
D) interest receivable of $20.00
53) One method of establishing control over collections of accounts receivable is to:
A) allow no one but the bookkeeper to handle cash
B) designate an authorized cheque signer
C) set up a petty cash fund
D) establish a bank lock box
54) Table 5-3
Refer to Table 5-3. Operating income is:
A) $161,000
B) $214,000
C) $179,000
D) $176,000
55) The following information is given for Ribbons and Bows prior to adjustments on
December 31, 2013 . Ribbons and Bows prepares adjusting entries annually on
December 31 .
a) Salaries of $5,000 are paid every Friday for a five-day workweek ending on Friday.
December 31, 2013, is a Thursday.
b) On October 1, 2013, Ribbons and Bows collected $10,000 to be earned evenly over
the next five months and credited unearned revenue.
c) Accrued service revenue on December 31 amounts to $1,400.
d) On June 1, 2013, Ribbons and Bows purchased a $4,800, two-year insurance policy
and debited an asset account.
e) The supplies account had a January 1, 2013, balance of $2,400. Purchases of supplies
during 2013 amounted to $3,500. Supplies on hand December 31, 2013, amount to
$800.
Prepare adjusting entries needed on December 31, 2013 .
56) State whether the account should be debited or credited and the normal balance of
the account for the items listed below:
Account Recorded as a debit or credit Normal balance of the account
a) Decrease in Accounts payable
b) crease in Salary expense
c) Decrease in Withdrawals
d) Increase in Capital
e) Increase in Supplies
f) Decrease in Accounts receivable
g) Increase in Note payable
h) Increase in Note receivable
i) Decrease in Rent expense
j) Increase in Land
57) Owner equity accounts include:
A) assets, liabilities and capital
B) assets, revenues and expenses
C) only the capital and withdrawal accounts
D) the revenue, expense, capital and withdrawal accounts
58) 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 .
59) Compute the amounts indicated for each of the following independent situations.
60) Following is a list of events for Manning Cleaning for the month of April. Show the
effects in dollars of these events on the accounting equation by completing the table
below.
April1Owner invested $10,000 cash and equipment valued at
$25,000 into the business.
3Purchased $5,500 of equipment on account.
5Purchased $400 of supplies for cash.
10Bought a truck, paying $4,000 in cash and signing a note for $11,000.
14Performed services for a customer for $1,850 cash.
15Paid employee wages of $1,200.
18Paid $2,000 on the equipment purchased on April 3 .
24Performed services for a customer on account, $2,500.
27Collected $500 from the customer of April 24 .
30Owner withdrew $900 cash for personal use.
61) Using the following worksheet for Alcazar Services, prepare a statement of owner’s
equity.
Alcazar Services
Worksheet
December 31, 2014
AdjustedIncomeBalance
Trial BalanceAdjustmentsTrial BalanceStatementSheet
62) Given the following adjusted trial balance for Whitfield Industries, prepare a
postclosing trial balance dated December 31, 2013 .
Whitfield Industries
Adjusted Trial Balance
December 31, 2013
DebitCredit
Cash$ 12,000
Accounts receivable6,000
Prepaid rent2,000
Prepaid insurance2,500
Supplies2,300
Land31,000
Building54,000
Accumulated amort.-building$ 10,000
Equipment35,000
Accumulated amort.-equipment9,000
Accounts payable8,000
Salary payable1,000
Interest payable2,500
Mortgage payable (due 12/31/2016)66,000
Joe Whitfield, Capital50,500
Joe Whitfield, Withdrawals24,000
Service revenue95,000
Salary expense33,000
Insurance expense1,200
Rent expense1,800
Utilities expense15,000
Advertising expense2,000
Amortization expense-building10,000
Amortization expense-equipment9,000
Supplies expense 1,200________
Total$242,000$242,000
63) Organizational plan and integrated framework that managers use to keep the
business under control
64) Table 7-5
Accounts Payable
Accounts Receivable
Accumulated Amortization – Equipment
Amortization Expense
Cash
Cost of Goods Sold
Equipment
Insurance Expense
Interest Expense
Interest Revenue
Inventory
Marvin Fish, Capital
Marvin Fish, Withdrawals
Prepaid Insurance
Sales
Wages Payable
Refer to Table 7-5.
Put the accounts in the proper order for the chart of accounts, starting with the most
liquid assets.
65) Table 2-2
The following is a list of the accounts and their balances appearing in the ledger of
Martin Mann Garage as of December 31, 2014, the company’s year end. The accounts
are in alphabetical order and have normal balances.
Accounts payable 1,350
Accounts receivable 3,750
Cash 1,200
Equipment 37,800
Gasoline expense 1,800
Martin Mann, Capital 19,800
Martin Mann, Withdrawals 1,500
Notes payable 33,000
Rent expense 3,600
Repairs expense 1,950
Salary expense 2,100
Salary payable 300
Service revenue 24,750
Supplies 600
Supplies expense 900
Truck 24,000
Refer to Table 2-2. Prepare a Statement of Owner’s Equity for Martin Mann Garage for
the year ended December 31, 2014 . Assume the capital amount did not change since
January 1, 2014 .