1) The accounting cycle as well as financial statement presentation is different for
companies reporting under international financial reporting standards (IFRS) and those
reporting under accounting standards for private enterprises (ASPE).
2) The postclosing trial balance will not include any revenue or expense accounts.
3) Amortization is a process of asset valuation.
4) Under moving-weighted-average cost method, the cost of goods sold is based on the
oldest purchases.
5) The entry to record the employer’s contribution for Employment Insurance (EI) and
Canada Pension Plan (CPP) includes a debit to Employee Benefits Expense.
6) In a periodic inventory system, cost of goods sold is determined by subtracting the
ending inventory from the cost of goods available for sale.
7) The caption “Net sales” in a multi-step income statement is different if a business
uses the periodic instead of the perpetual inventory system.
8) Unearned revenue recorded initially as revenue is adjusted by debiting a liability
account.
9) Some liability accounts can have their balances split between the current liability and
long-term liability sections of a balance sheet.
10) A transaction always involves exactly two accounts.
11) Because contingent liabilities are not real liabilities, they are easy to overlook.
12) The direct write-off method is the preferred way to apply the accrual basis for
measuring bad-debt expense since it matches revenues and expenses on the income
statement.
13) To apply the retail method of estimating the cost of inventory the business must
know both the total cost and total selling price of its’ net purchases.
14) Cash in the chart of accounts is an example of a control account.
15) The journal entry to record an NSF cheque would require a:
A) debit to Accounts Payable and a credit to Cash
B) debit to Cash and a credit to Accounts Receivable
C) debit to Accounts Receivable and a credit to Cash
D) debit to Miscellaneous Expense and a credit to Cash
16) A purchase return or allowance under a perpetual inventory system is credited to:
A) Accounts Payable
B) Purchase Returns and Allowances
C) Inventory
D) Purchases
17) Match the following terms and definitions:
A) account receivable
B) proprietorship
C) earnings estimate
D) transaction
E) generally accepted accounting principles
F) corporation
G) asset
H) expense
I) accounting
J) liability
K) limited-liability partnership
L) revenue
M) capital
1> An event that affects the financial position of a particular entity and can be reliably
measured
2> An increase in owner’s equity that is earned by delivering goods or services to
customers
3> An economic resource that is expected to be of benefit in the future
4> An economic obligation payable to an individual or an organization outside of the
business
5> A decrease in owner’s equity that occurs in the course of delivering goods or services
to customers
18) Journalize the following transactions for Benjies’s Repair Shop and prepare a trial
balance dated June 30, 2014 .
a) Owner, Benjie Brown invested $6,000 cash into the business.
b) Rented a garage and paid one month’s rent, $1,200.
c) Purchased $80 of supplies for cash.
d) Performed repair services on account, $1,700.
e) Paid $1,100 cash for equipment.
f) Owner, Benjie Brown withdrew $500 cash for personal use.
19) If owner’s equity is $200,000 and total assets are $325,000, total liabilities would
be:
A) $200,000
B) $525,000
C) $125,000
D) $325,000
20) The sales journal contains columns for:
A) accounts receivable/sales revenue and supplies/inventory
B) accounts receivable/sales revenue and inventory/accounts payable
C) accounts receivable/sales and cost of goods sold/inventory
D) accounts receivable/inventory and cost of goods sold/accounts payable
21) Match the following.
A) natural resources
B) depletion expense
C) depletion
D) amortization expense
1> Another word to describe the amortization of wasting assets
2> Long-term assets that are wasting assets
3> That portion of a natural resource’s cost that is used up in a particular period
22) Keep Afloat Tugboats had the following debt ratios 0.60; 0.50; 0.45 for 2012, 2013,
2014 respectively. Which of the following statements most correctly depicts the
changing ratios?
A) The proportion of assets represented by equity has increased
B) The business is more at risk to interest rate changes due to increased borrowing
C) The business is less at risk due to exchanging accounts payable for notes payable
D) Business risk has not changed due to leverage remaining constant
23) If a bank reconciliation included a credit memo for a $2,000 note collected with an
additional $20 of interest revenue, the entry to record this reconciling item would
include a:
A) credit to note receivable for $2,020
B) credit to cash for $2,020
C) debit to cash for $2,020
D) No entry is required
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) The financial statement that lists the revenue and expense accounts is referred to as
the:
A) statement of owner’s equity
B) balance sheet
C) cash flow statement
D) income statement
26) Which of the following sets of characteristics best describes those of a corporation?
A) limited liability, definite life, shareholders are legally separate
B) limited liability, indefinite life, shareholders are legally separate
C) unlimited liability, definite life, shareholders are not legally separate
D) unlimited liability, indefinite life, shareholders are not legally separate
27) State the effect on net income, total assets, and total liabilities if the following
adjustments were not made.
a) Service revenue earned but not yet collected, $2,400.
b) Utilities expense incurred but not yet recorded, $1,200.
c) Unearned revenue earned during the period, $5,600.
d) Supplies used during the period, $1,700.
e) Amortization on buildings, $26,000.
Item Effect on Net Income Effect on Total Assets Effect on Total Liabilities
a)
b)
c)
d)
e)
28) Table 11-16
Sandra Singh works as the manager for the Shmenge Brothers music store. She earns
$1,200 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, Sandra worked 46 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 11-16. What is the correct journal entry to record the salary expense?
A)
B)
C)
D)
29) The normal balance of a liability is a ________ while the normal balance of
revenue is a ________.
A) credit, debit
B) debit, debit
C) debit, credit
D) credit, credit
30) If beginning capital was $25,000, ending capital is $37,000, and the owner’s
withdrawals were $23,000, the amount of net income or net loss for the period was:
A) net loss of $35,000
B) net income of $35,000
C) net income of $14,000
D) net loss of $14,000
31) The following data are for Fern’s Florist Shop for the first seven months of its fiscal
year:
What is the estimated ending inventory?
A) $28,110
B) $65,590
C) $100,890
D) $63,410
32) All of the following are components of a payroll system except a(n):
A) payroll sinking fund
B) payroll register
C) payroll cheques
D) employee earnings record
33) Table 9-5
The Ritchie Company gathered the following information pertaining to its year ended
December 31, 2014, prior to any adjustments:
Aging of accounts receivable at December 31, 2014:
Refer to Table 9-5. Assume Ritchie uses the aging-of-accounts-receivable method for
estimating uncollectible accounts. Ritchie estimates that bad-debt expense will be aged
as follows: 2.5% for 1-30 days; 4.5% for 31-60 days; 7.5% for 61-90 days; and 22.5%
for over 90 days. After the adjustment for uncollectible accounts is made, the net
realizable value of the accounts receivable will be:
A) $157,840
B) $161,040
C) $170,000
D) $164,240
34) Journalize the following transactions for Redmond Storage and prepare a trial
balance dated June 30, 2014 .
a) Owner, Roger Redmond invested $10,000 cash into the business.
b) Rented an office and paid one month’s rent, $1,100.
c) Purchased $450 of supplies on account.
d) Performed a service on account, $1,550.
e) Paid $2,500 cash for office furniture.
f) Owner, Roger Redmond withdrew $1,700 cash for personal use.
g) Collected $1,200 on account.
35) In a computerized accounting system, the posting of journal entries performed on a
continuous basis is referred to as:
A) batch processing
B) on-line processing
C) quick processing
D) accuracy processing
36) Inventory turnover is calculated as:
A) cost of goods sold divided by average inventory
B) cost of goods sold minus average inventory
C) cost of goods sold times average inventory
D) average inventory divided by cost of goods sold
37) Partnerships and proprietorships:
A) are separate legal entities from their owners, are for small businesses, and for
financial reporting purposes do not keep the business affairs separate from those of the
owners
B) are separate legal entities from their owners, are for small to large businesses, and
for financial reporting purposes keep the business affairs separate from those of the
owners
C) are not separate legal entities from their owners, are for small to large businesses,
and for financial reporting purposes do not keep the business affairs separate from those
of the owners
D) are not separate legal entities from their owners, are for small to large businesses,
and for financial reporting purposes keep the business affairs separate from those of the
owners
38) The accountant for Withers Company is trying to decide which method to use for
estimating uncollectible accounts. An aging of accounts receivable revealed $14,325 in
uncollectible accounts. Under the percent-of-sales method, bad-debt expense was
estimated at $14,780. The balance in allowance for doubtful accounts prior to
adjustment was $1,760 (Dr.) and the balance in accounts receivable was $284,500.
a) Determine the amount of the adjusting entry under each method.
b) What will be the amount reported on the balance sheet as uncollectible under each
method?
c) Calculate the net realizable value for accounts receivable reported on the balance
sheet under each method.
39) If the cost of an item of inventory is $80 and the current selling price is $75, the
amount shown in inventory on the balance sheet under the lower-of-cost-and-net
realizable-value rule is:
A) $75
B) $80
C) $100
D) $75 or $80
40) A customer with an overdue account of $450 pays $150 and provides a promissory
note for the balance. Which of the following is the most appropriate journal entry to
record this transaction?
A)
B)
C)
D)
41) Which of the following accounts are closed to the owner’s capital account?
A) liabilities and assets
B) the owner’s withdrawals account and liabilities
C) income summary and the owner’s withdrawals account
D) revenues, expenses, and liabilities
42) On September 1, 2013, a company paid $8,400 in advance for two years insurance
and debited prepaid insurance. The December 31, 2013, adjusting entry should include
a debit to:
A) insurance expense for $1,400
B) insurance expense for $7,000
C) prepaid insurance for $2,800
D) prepaid insurance for $1,400
43) Please refer to the following trial balance.
How much is the gross profit percentage?
A) 50.0%
B) 51.6%
C) 46.8%
D) 48.4%
44) Prepare journal entries for the following independent situations.
a)The allowance for doubtful accounts has a $525 debit balance prior to adjustment. An
aging schedule prepared on December 31 reveals uncollectible accounts of $7,600.
b)The allowance for doubtful accounts has a $500 credit balance prior to adjustment.
An aging schedule prepared on December 31 reveals uncollectible accounts of $7,800.
c)The allowance for doubtful accounts has a $700 credit balance prior to adjustment.
Net credit sales during the year are $260,000 and 4% are estimated to be uncollectible.
d)The allowance for doubtful accounts has a $800 credit balance prior to adjustment.
Net credit sales during the year are $270,000 and 3.5% are estimated to be uncollectible
receivable.
45) With regard to recording transactions which of the following is TRUE pertaining to
International Financial Reporting Standards (IFRS) and Accounting Standards for
Private Enterprises (ASPE)?
A) IFRS requires double-entry accounting; ASPE requires cash-basis accounting
B) IFRS requires the use of trial balances to prepare financial statements; ASPE
requires that financial statements are prepared directly from the accounts
C) ASPE requires double-entry accounting; IFRS requires cash-basis accounting
D) IFRS and ASPE both record transactions with debit and credit entries
46) Purchases minus purchase discounts and minus purchase returns and allowances
47) An entry done when an error has been detected in a journal entry after posting
48) 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. Record the disposal of the truck on June 30, 2016 assuming the
amortization expense for the truck to the date of the disposal has already been recorded
using the double-declining-balance method.
49) List and define three generally accepted accounting concepts/principles discussed in
Chapter 1.
50) The following data are available for Wood Products Company for 2013:
Sales revenue$400,500
January 1 inventory at cost 110,600
Purchases275,000
December 31 inventory at cost98,000
The current net realizable value of the inventory on December 31 is $93,500. Compute
gross margin for Wood Products Company assuming the use of the
lower-of-cost-and-net realizable value rule to value ending inventory.
51) Sam Levine Merchandising had the following transactions during May:
May 1Beginning inventory was 20 units valued at $25 per unit.
May 5Purchased 80 units of merchandise on account for $2,160, terms n/15,
FOB shipping point.
May 9Paid transportation cost on the May 5 purchase, $240.
May 10Returned two units of defective merchandise purchased on May 5 .
May 11Sold 30 units for $50 per unit on account.
May 15Paid for the May 5 purchase, less the return .
May 20Sold 10 units for $50 per unit on account.
Required:
1>Assuming FIFO and that the perpetual inventory system is used, prepare the journal
entries to record the above transactions.
2>Assuming weighted-average and that the periodic inventory system is used, prepare
the journal entries to record the above transactions.
52) At the end of 2014, Sam Lim had a liability to catering customers for deposits
received of $5,000. During 2015, the business received additional cash advances of
$75,000. At year end, the company’s cash deposits on hand from customers amounted to
$8,000.
Required:
1> The 2015 year-end adjusting journal entry if Sam Lim records cash deposits
received by customers as revenue.
2> The 2015 year end adjusting journal entry if Sam Lim records cash deposits received
by customers as a liability.