1) A subsidiary ledger is a book of accounts that provides supporting details on
individual balances, the total of which appears in the general journal.
2) Data from source documents such as sales receipts and bank deposit slips are
referred to as outputs of a data processing system.
3) Investors provide money to a business to begin operations.
4) In a periodic inventory system, an overstatement of beginning inventory results in an
overstatement of gross margin.
5) Adjusting journal entries impact both the income statement and the balance sheet.
6) Businesses do not accrue contingent gains but do report actual gains.
7) The recognition criteria for revenues tell accountants when to record revenue by
making a journal entry and the amount of revenue to record.
8) The cost of a trademark or trade name is amortized over its useful life or 60 years.
9) Assets are economic resources of a business expected to be of benefit in the future.
10) When applying the lower-of-cost-and-net-realizable-value rule to ending inventory
valuation, net realizable value generally refers to the company’s expected selling price
for its inventory net of any selling costs.
11) Purchase returns of merchandise decrease the liability to a creditor.
12) Electronic Data Interchange is a method of streamlining payments that avoids
approval for single transactions.
13) The person to whom a cheque is paid is referred to as the maker.
14) Journalizing is the process of copying information from the ledger to the journal.
15) Special journals save much time in recording repetitive transactions and posting to
the ledgers.
16) Owner’s equity and total assets were $32,000 and $79,000 respectively at the
beginning of the period. Assets increased 50% and liabilities decreased 60% during the
period. What is owner’s equity at the end of the period?
A) $47,000
B) $43,300
C) $99,700
D) $105,700
17) Which statement addresses the consistency characteristic of accounting
information?
A) Companies in the same industry must use the same inventory costing method to
facilitate comparison of results
B) Financial reporting practices in one country should be consistent with those in other
countries
C) Businesses should generally use the same accounting methods and procedures from
one period to the next
D) Once a company selects an inventory costing method, it must always use that
method
18) The accounts receivable credit column of the cash receipts journal is:
A) posted in summary only at the end of the month
B) posted by individual amounts only at the end of the month
C) not posted
D) posted in summary at the end of the month and by individual amounts on a daily
basis
19) 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________
20) The entries to record a $5,000 cash sale under a perpetual inventory system, when
the cost of the merchandise is $3,200, include a:
A) debit to Inventory for $5,000
B) debit to Sales Revenue for $5,000
C) credit to Cost of Goods Sold for $3,200
D) debit to Cost of Goods Sold for $3,200
21) The primary objective of financial reporting is to provide information:
A) to the federal government
B) about the profitability of the business
C) regarding the cash flows of the business
D) useful for making investment decisions and for assessing management’s stewardship
22) On November 1, 2013, Two Sisters Company pays $36,000 cash for six months rent
and debits prepaid rent at the time of the payment. The amount of the adjusting entry on
December 31, 2013, would be:
A) $12,000
B) $24,000
C) $6,000
D) $0
23) Match the following.
A) maturity value
B) promissory note
C) maker of the note
D) default on a note
1> A written promise to pay a specified amount of money at a particular future date
2> The person or business that signs a note and promises to pay the amount required by
the note agreement
3> The sum of the principal and interest due on the due date of a note
4> Failure of the maker of a note to pay at maturity. Also called dishonour of a note
24) An organization’s list of all its accounts and the related account numbers is called a:
A) balance sheet
B) chart of accounts
C) ledger
D) trial balance
25) Performing a service for $500 cash and $700 on account would include a:
A) debit to cash for $700
B) debit to service revenue for $700
C) credit to service revenue for $1,200
D) credit to accounts receivable for $700
26) If owner’s equity is $135,000 and total liabilities are $90,000, then total assets
would be:
A) $45,000
B) $225,000
C) $90,000
D) $135,000
27) 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__________
28) Table 1-1
Following is a random list showing the account balances of various assets, liabilities,
revenues, and expenses for Spiffy’s Garage at December 31, 2014, the end of its first
year of operations.
The owner, Spiffy Sloan, invested $22,600 at the beginning of the year and withdrew
$5,000 during the year for personal use.
Refer to Table 1-1. Total liabilities at December 31, 2014, were:
A) $12,800
B) $13,900
C) $20,600
D) $22,600
29) Which of the following statements is correct?
A) Businesses classified as publicly accountable enterprises must use IFRS and other
businesses must use ASPE
B) Businesses classified as publicly accountable enterprises may use IFRS or ASPE
depending on their size
C) Businesses not classified as publicly accountable enterprises may not use IFRS
D) Businesses classified as publicly accountable enterprises must use IFRS and other
businesses may use IFRS or ASPE
30) 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__________
31) The entry to record the return of $250 of inventory to a supplier under the perpetual
inventory system is recorded with a debit to:
A) Accounts Payable and a credit to Purchases Discounts
B) Purchases Returns and Allowances and a credit to Accounts Payable
C) Accounts Payable and a credit to Inventory
D) Inventory and a credit to Accounts Payable
32) A perpetual inventory system:
A) keeps a running record of all goods
B) can be maintained only with computer software
C) is used only for inexpensive goods
D) does not required a physical count at the end of the fiscal year
33) An owner investment of equipment into the business would:
A) increase net income
B) have no effect on total assets
C) have no effect on owner’s equity
D) have no effect on liabilities
34) Equipment with a cost of $103,000 has a useful life of four years. Using
straight-line amortization, what is the book value after three years?
A) $77,250
B) $103,000
C) $25,750
D) $51,500
35) 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 for 2013 if Bark uses
double-declining-balance amortization?
A) $12,000
B) $13,750
C) $6,875
D) $6,000
36) Short-term notes payable:
A) are an unusual form of financing
B) are generally due within one year
C) are classified on the balance sheet as non-current
D) are shown on the balance sheet as a reduction to notes receivable
37) Table 10-8 Zane Manufacturing
On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000.
The company expects to use the machine a total of 24,000 hours over the next 6 years.
The estimated sales price of the machine at the end of 6 years is $4,000. The company
used the machine 8,000 hours in 2013 and 12,000 in 2014 .
Refer to Table 10-8. What is the journal entry to record the sale of the machine at the
end of 2014 for $26,500 if the company uses straight-line amortization?
A)
B)
C)
D)
38) A company that uses bank credit cards avoids all of the following except:
A) checking a customer’s credit rating
B) keeping an accounts receivable subsidiary ledger for each customer
C) paying a credit card discount expense
D) having to collect cash from customers
39) A trial balance lists accounts in which order?
A) assets, liabilities, revenues, expenses, capital
B) assets, expenses, liabilities, revenues, capital
C) assets, revenues, liabilities, expenses, capital
D) assets, liabilities, capital, revenues, expenses
40) Which of the following users of accounting information seek to assess the
organization’s ability to make scheduled payments?
A) creditors
B) taxing authorities
C) government regulatory agencies
D) employees
41) Complete the following December 31, 2014 worksheet. for Alcazar Services:
AdjustedIncomeBalance
Trial BalanceAdjustmentsTrial BalanceStatementSheet
42) Companies reporting under IFRS and ASPE go through the same adjusting process.
What is the most significant difference between IFRS and ASPE in the terms used in
the amortization journal entries?
43) Why is a well-structured chart of accounts particularly important in a computerized
accounting system?
44) Why were Accounting Standards for Private Enterprises (ASPE) implemented in
Canada?
45) Using the following data, compute the book balance for Stronaway Services before
the preparation of a bank reconciliation on May 31, 2013:
– The bank statement reveals a balance of $4,463.
-The bank statement indicates service charges of $36.
-Outstanding cheques on May 31, 2010, amount to $11,412.
– Deposits in transit on May 31, 2010, amount to $9,650.
– The bookkeeper mistakenly recorded a $21 cheque payment to a vendor as $210.
– The bank mistakenly recorded a deposit of $5,000 as $50.
46) Aardvark Novelty Sales has the following information available:
Selling
CostPrice
Beginning inventory$75,600$108,000
Purchases252,000360,000
Net sales348,000
Required:
Estimate the value of the ending inventory using the Retail Method.
47) Table 8-1
The petty cash fund had the following petty cash ticket:
Toner for a printer$42
Freight to deliver goods sold39
Freight on inventory purchased.112
Miscellaneous expense10
Postage expense 25
$228
Refer to Table 8-1. Assume that the business has established a petty cash fund in the
amount of $250 and that the amount of cash in the fund at the time of replenishment is
$20. The business uses a periodic inventory system.
Prepare the entry to replenish the fund on February 28 .
48) Sam & Sons Ltd. purchased machinery on September 30, 2013, at a total cost of
$46,500. Sam estimated the useful life of the machinery to be eight years or 50,000
hours, with an estimated residual value of $3,500. The machinery was used for 5,000
hours in 2013 and 12,000 hours in 2014.
Calculate amortization expense for 2013 and 2014 under each of the methods below.
Round to the nearest dollar where necessary.
20132014
Straight-line ________________________
Double-declining-balance________________________
Units-of-production ____________ ____________
49) The following are the adjusting journal entries recorded by Sterling Services for the
year ended December 31, 2013 . Assuming that Sterling uses reversing entries, prepare
the reversing entries on January 1, 2014 .
Explanations are not required.
General Journal