1) The methods of recording GST and HST are similar.
2) The supplier invoice should be matched with the purchase order and receiving report
prior to preparing a cheque for payment.
3) Aging-of-accounts-receivable and percent-of-accounts receivable are both considered
income-statement approaches in estimating uncollectible accounts.
4) Not-for-profit organizations need accounting information, as do profit-oriented
organizations.
5) The entry to close a net loss for the period would include a debit to the income
summary account.
6) Inventory turnover does not affect profitability but does affect the amount of
inventory on the shelf.
7) Leasehold improvements are not subject to amortization.
8) In a perpetual inventory system, recording a sale also includes a corresponding
journal entry to record the inventory reduction.
9) A payment to a creditor would increase assets and decrease liabilities.
10) Both credit cards and debit cards bear a risk for the card holder, the issuer, and the
business accepting the card.
11) The law requires all employers to provide paid vacations to their employees.
12) Secured operating lines of credit normally have lower rates of interest than
unsecured operating lines of credit.
13) One way of safeguarding property, plant, and equipment assets is to carry adequate
casualty insurance.
14) The adjusting entry to record accrued salaries includes a debit to salary expense.
15) Accountants have additional incentives for ethical behavior and are expected to
maintain higher standards than society in general.
16) The accounting equation can be stated as assets + liabilities = owner’s equity.
17) Double-declining-balance amortization computes annual amortization by
multiplying the asset’s book value less residual value by two times the straight-line rate.
18) Under a perpetual inventory system, the entry to record the return of inventory sold
on account for $360 with a cost of $210 would be recorded by the seller as a:
A) credit to Accounts Receivable for $210
B) credit to Sales Returns and Allowances for $210
C) debit to Sales Revenue for $360
D) debit to Inventory for $210
19) The seller is responsible for the shipping costs when the shipping terms are:
A) FOB destination
B) COD destination
C) FOB shipping point
D) COD shipping point
20) Jacob’s Event Planning Service has just prepared the unadjusted trial balance, which
shows the following balances:
Salary expense: debit $8,000
Service revenue: credit $3,000
Interest expense: $0
If Jacob’s Event Planning Service had rendered one-third of the services covered by the
contract in the month the contract was signed, then the final balance of service revenue,
as shown on the adjusted trial balance, should be a:
A) credit balance of $2,100
B) credit balance of $600
C) debit balance of $600
D) credit balance of $3,300
21) If a bookkeeper mistakenly recorded a payment as $83 instead of the correct
amount of $38, the error would be shown on the bank reconciliation as a:
A) $45 addition to the book balance
B) $45 deduction from the book balance
C) $45 deduction from the bank balance
D) $45 addition to the bank balance
22) A cheque written for $68.30 in payment of an account was recorded on the books as
$86.30. 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
23) Audits conducted by external accountants express an opinion:
A) that evaluates the effectiveness of management
B) that taxing authorities use to ensure that the correct of amount of tax owing has been
calculated
C) that gives investors confidence their investment is not at risk
D) on whether or not the financial statements fairly reflect the economic events that
occurred during the accounting period
24) Both IFRS and ASPE:
A) provide the detailed accounting treatment for every business transaction
B) are principles based
C) are specific guidelines that never require professional interpretation
D) are designed to meet the needs of publicly accountable enterprises in Canada
25) Table 4-1
Postclosing Trial Balance
Red Brown, Capital$154,900
Cash35,200
Accounts receivable10,900
Accounts payable3,500
Unearned service revenue6,850
Supplies1,200
Equipment110,600
Land15,400
Accumulated amortization? ? ?
Using the data in Table 4-1, if the owner’s beginning capital balance was $141,600 and
the owner withdrew $15,850 during the current period, what was the current period’s
net income?
A) $9,300
B) $35,050
C) $25,750
D) $29,150
26) Avery Supplies uses a periodic inventory system. Avery purchased $10,000 of
inventory on account. The terms were 3/10, n/30. The purchase was made on February
1 . On February 2, Avery returned $400 of damaged goods to the supplier and was
granted an allowance. How should Avery properly record the allowance?
A)
B)
C)
D)
27) An owner investment of land valued at $20,000 and a building valued at $55,000
into the business would include a:
A) debit to the land and building account for $75,000
B) debit to the land account for $75,000
C) debit to the capital account for $75,000
D) debit to the building account for $55,000
28) For ABC Delivery Service, what is the combined effect on owner’s capital from the
June transactions?
A) Up $2,800
B) Up $5,300
C) Up $1,800
D) Down $1,000
29) Table 11-15
Sally Lee works for a tugboat company. She earns $900 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,
Sally worked 43 hours. The income tax withholdings are 20% of gross earnings.
Canada Pension Plan deductions are 4.95% of gross earnings and Employment
Insurance deductions are 1.83% of gross earnings. The worker’s compensation premium
is 1.6% of gross earnings. Ignore the basic Canada Pension Plan exemption.
Refer to Table 11-15. What is the correct journal entry to record the employer’s share of
the withholdings?
A)
B)
C)
D)
30) Net income appears on the worksheet:
A) only in the balance sheet credit column
B) only in the income statement credit column
C) in the income statement debit column and balance sheet debit column
D) in the income statement debit column and balance sheet credit column
31) All of the following are forms of employee compensation except:
A) salary
B) subcontractor fee
C) wages
D) commissions
32) The current credit balance in allowance for doubtful accounts is $1,150.
Management estimates that 2% of net credit sales of $100,000 will be uncollectible.
Based on the foregoing data, what is the bad-debt expense balance on the income
statement?
A) $2,000
B) $850
C) $3,150
D) $2,850
33) Which of the following is the proper accounting treatment for purchased goodwill?
A) Goodwill must be capitalized when acquired, and amortized over 70 years or less
B) Goodwill must be capitalized when acquired, and amortized over 20 years or less
C) Goodwill must be expensed when acquired
D) Goodwill must be capitalized when acquired, and expensed each year to the extent
that the value has declined
34) The concept that assists accountants in determining when to recognize revenue in
the accounts is the:
A) Cost principle
B) Time-period assumption
C) Recognition criteria for revenue
D) Matching objective
35) Table 1-2
Following is a list showing the account balances of various assets, liabilities, revenues,
and expenses for Tim’s Landscaping at December 31, 2014, the end of its first year of
operations.
The owner, Tim Brown, invested $45,200 during the year and withdrew $10,000 during
the year for personal use.
Refer to Table 1-2. The statement of owner’s equity would show an ending balance in
the Capital account at December 31, 2014, of:
A) $73,200
B) $7,800
C) $45,400
D) $45,200
36) Debts that are due to be paid within one year or within the entity’s operating cycle,
whichever is longer, are called:
A) current liabilities
B) liquid liabilities
C) quick liabilities
D) deferred liabilities
37) The concept that requires that accountants accrue revenue at the end of the
accounting period for work performed but not yet billed is the:
A) Cost principle
B) Time-period assumption
C) Recognition criteria for revenue
D) Matching objective
38) Inventory turnover indicates how:
A) quickly inventory is received from the supplier after the order is placed
B) many days it takes the inventory to travel between the seller’s warehouse and the
buyer’s warehouse
C) rapidly inventory is sold
D) many days it takes from the time an order is received to the day it is shipped
39) Table 11-7
Camparound Canada has 24 employees who are paid on a monthly basis. For the most
recent month, gross earnings were $68,000. 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. All employees have
$15 per month withheld for charitable contributions. Ignore the basic Canada Pension
Plan exemption.
Referring to Table 11-7, the entry to record the employer’s payroll costs includes a:
A) debit to Payroll Tax Payable for $14,484
B) credit to Employee Income Tax Payable for $10,200
C) debit to Canada Pension Plan Expense for $3,366
D) credit to Canada Pension Plan Expense for $3,366
40) Table 5-3
Refer to Table 5-3. The total cost of goods available for sale is:
A) $388,000
B) $478,000
C) $470,000
D) $394,000
41) Using a periodic inventory system, the entry to record the purchase of merchandise
on account involves a:
A) debit to Inventory
B) debit to Accounts Payable
C) credit to Inventory
D) debit to Purchases
42) Total assets and total liabilities were $31,000 and $26,000 respectively at the
beginning of the period. Assets increased by 20% and liabilities increased by 10%
during the period. What is the owner’s equity at the end of the period?
A) $8,600
B) $65,800
C) $290
D) $5,000
43) Prepare journal entries for the following transactions. Explanations are not required.
2013
Jan. 1Purchased a building for $84,000 cash, $4,000 residual value, 20-year
expected life, double-declining-balance amortization.
May 1Purchased equipment for $25,000 cash, $3,000 residual value, 10-year
expected life, straight-line amortization.
Dec. 31Recorded amortization on the building and equipment.
2014
June 30Sold the equipment for $21,000 cash. (Record amortization to date for
2014 before selling equipment.)
Dec. 31Recorded amortization on the building.
44) Describe the benefits of a computerized accounting system versus a manual
accounting system.
45) 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 .
46) Jenny’s Jewellery operates in a province that has HST collected by the federal
government at a rate of 12%. During the month of December 2013, Jenny’s Jewellery
purchased materials used in the production of jewellery for $24,000; bought new
equipment for $6,000; paid salaries of $15,000; and, had cash sales of $55,000.
Prepare the following general journal entries dated on December 31st:
1>to record the payments made during December that require HST using a compound
journal entry
2>to record the sales made during December
3>to record the payment of the HST amount owing at the end of December
47) A petty cash fund was established with a $300 balance. It currently has cash of $77
and petty cash tickets totaling $222 for travel expense. Please provide the journal entry
to record the replenishment of the account.
48) Table 11-9
During 2013, Cougar Manufacturing launched a new product carrying a two-year
warranty against defects. The estimated warranty costs related to dollar sales are 3%
within 12 months following sale and 5% in the second 12 months following sale. Sales
and actual warranty claims for the years ended December 31, 2013 and 2014 were as
follows:
Actual
Warranty
SalesClaims
2013$400,000$19,000
2014500,00032,000
$900,000$51,000
Refer to Table 11-9. Calculate the balance of the Estimated Warranty Payable account at
December 31, 2014 for Cougar Manufacturing.