1) An amortizable asset’s carrying value is the assets cost less accumulated
amortization.
2) The financial statements will contain errors if they are prepared before the adjusting
entries are completed.
3) It is necessary to do a physical count of inventory when using a perpetual inventory
system.
4) Outstanding cheques in a bank reconciliation should include those cheques that are in
the mail between customers and the business as of the bank statement date.
5) Gross margin is the excess of net sales revenue over cost of goods sold.
6) The income statement shows how much the cash account either increased or
decreased during the period.
7) External auditors are entirely independent of a business.
8) A fully amortized asset always has a book value of zero.
9) Under either the periodic or the perpetual system, ending inventory will be the same
when FIFO inventory costing method is used.
10) Spreadsheets can be linked to computerized accounting packages to help create
more complex reports.
11) In a manual accounting system the posting from a purchases journal includes daily
posting for cash transactions.
12) Understating ending inventory in 2012 will overstate net income for 2013 .
13) The matching objective directs accountants to measure expenses.
14) Accrual accounting is not relevant under international financial reporting standards
(IFRS).
15) A bookkeeper should not be allowed to handle cash.
16) A business making a monthly mortgage payment that included $1,200 principal and
$300 interest should be recorded as:
A)
B)
C)
D)
17) Piggly Wiggly Sales had six CD players in inventory on December 31 . The players
were purchased in November for $170. Price lists from Piggly Wiggly Sales’ supplier
indicate that the same CD player would now cost the company $168. The current sales
price for each of the CD players is $320. Using the
lower-of-cost-and-net-realizable-value rule, the ending inventory of CD players should
be shown at:
A) $1,008
B) $1,035
C) $1,020
D) $1,920
18) The income statement presents a summary of the:
A) cash inflows and outflows of an entity
B) revenues and expenses of an entity
C) assets and liabilities of an entity
D) changes that occurred in the owner’s equity of an entity
19) Prepare journal entries for the following independent transactions:
a) Cash sales for the day based on the cash register tape amounted to $19,559.40. Cash
receipts for the day amounted to $19,640.50.
b) Cash sales for the day according to the cash register tape amounted to $11,950.38.
Cash receipts for the day amounted to $11,942.59.
20) The account debited when payment is made for equipment purchased previously on
account is:
A) accounts payable
B) cash
C) accounts receivable
D) equipment
21) Which of the following is not a component of internal control?
A) assigning to one individual the responsibility for accounting for and custody of
assets
B) monitoring of controls via internal and external auditors
C) risk assessment to identify risk areas
D) effective control environment where importance of internal control is emphasized
22) Day Company purchased $3,000 of merchandise on credit, terms 3/15 n/30. The
entry to record payment for the merchandise within the discount period under a periodic
inventory system would include a:
A) debit to Inventory of $1,940
B) debit to Accounts Payable of $1,940
C) credit to Purchase Discounts of $90
D) credit to Inventory of $90
23) The acid-test ratio would include in the denominator:
A) total liabilities
B) long-term liabilities
C) total current liabilities
D) total current assets
24) Identify the inventory method; FIFO, weighted-average, or specific-unit-cost, most
likely used for the following situations.
a)results in ending inventory close to current cost
of replacing inventory________
b)precisely matches cost of goods sold against sales revenue________
c)used to account for inventory of automobiles________
d)Usually the best method to maximize gross margin
when prices are rising________
e)provides a middle-ground measure of ending inventory
and cost of goods sold________
f)generally tends to maximize net income when prices are rising________
25) A payment of $400 to a creditor, on account, will cause:
A) cash to be debited for $400
B) accounts receivable to be credited for $400
C) accounts payable to be debited for $400
D) accounts payable to be credited for $400
26) A $500 rent bill received for the current period that will be paid in the following
period would include a:
A) debit to accounts payable for $500
B) credit to rent expense for $500
C) debit to rent expense for $500
D) credit to cash for $500
27) A company’s accountant capitalizes a payment that should be recorded as an
expense. Which of the following is TRUE?
A) Revenue is overstated
B) Expenses are overstated
C) Assets are overstated
D) Liabilities are overstated
28) All of the following are listed on a worksheet except:
A) a debit and credit column for a statement of owner’s equity
B) a debit and credit column for an income statement
C) a debit and credit column for a balance sheet
D) a debit and credit column for adjustments
29) A merchandiser received payment in full after the expiration of the discount period
on a $3,000 sales invoice, terms 3/15 n/30. The journal entry would include a:
A) debit to Cash for $2,910
B) credit to Accounts Receivable for $2,910
C) debit to Sales Discount of $90
D) debit to Cash for $3,000
30) The bookkeeper recorded purchasing $50 of office supplies by erroneously
crediting cash instead of accounts payable. Which of the following journal entries will
correct the ledger accounts?
A)
B)
C)
D)
31) All of the following duties should be performed by a credit department except:
A) handle cash receipts and payments
B) review applicant’s income and credit history
C) monitor customer payment records
D) evaluate customers who apply for credit
32) Accrued expenses are expenses that have been:
A) paid but not incurred
B) not paid but incurred
C) not paid and not incurred
D) paid and incurred
33) If a company uses periodic inventory and FIFO when prices are falling, the effect
will:
A) reduce cost of goods sold
B) increase the inventory ending balance on the balance sheet
C) reduce the gross margin
D) increase the gross margin
34) Refer to Table 9-10. If bad debts expense is determined by the direct write-off
method then which of the following will be the amount of bad debts expense?
A) $2,250
B) $3,450
C) $7,000
D) $2,850
35) The ________ is/are transferred from the statement of owner’s equity to the balance
sheet.
A) net income
B) beginning capital
C) ending capital
D) withdrawals
36) A cash receipts journal would likely contain all of the following columns except:
A) cash debit
B) sales revenue credit
C) accounts receivable debit
D) sales discounts debit
37) To measure amortization for a property, plant, and equipment asset, all of the
following must be known except:
A) estimated useful life
B) historical cost
C) current market value
D) estimated residual value
38) The purchase of equipment on account would be recorded in the:
A) cash payments journal
B) general journal
C) purchases journal
D) sales journal
39) Table 5-1
Referring to Table 5-1, what is net sales revenue?
A) $400,000
B) $445,000
C) $415,000
D) $455,000
40) The entries in a purchases journal are posted to the ________ subsidiary ledger.
A) accounts receivable
B) customer
C) accounts payable
D) vendor
41) Net income is reported on the income statement at $40,000. Adjusting entries for
accrued revenues of $5,000 and unearned revenue earned during the current period of
$2,000 were accidentally omitted. The correct net income is:
A) $33,000
B) $37,000
C) $47,000
D) $43,000
42) A $300 receipt of cash on account was recorded as a $500 debit to cash and a $500
credit to accounts receivable. This error will cause:
A) cash to be overstated $200
B) cash to be understated $500
C) cash to be understated by $800
D) accounts receivable to be overstated $500
43) Unearned fees appears on the:
A) adjusted trial balance debit column and income statement credit column of a
worksheet
B) adjusted trial balance debit column and balance sheet credit column of a worksheet
C) balance sheet credit column and adjusted trial balance credit column of a worksheet
D) “Unearned fees” does not appear on a worksheet
44) Table 4-4
Selected accounting data as at December 31, 2014 for Huma Delivery follows:
Cash$11,000
Accounts payable8,000
Accounts receivable5,500
Salary payable6,300
Supplies1,200
Unearned revenue2,200
Prepaid rent4,600
Mortgage payable (due 2018)5,500
Equipment22,000
J. Huma, Capital19,900
Accum. amort.-equipment6,100
Service revenue29,000
Salary expense8,000
Furniture12,000
Accum. amort.-furniture4,000
Amortization expense6,800
Utilities expense4,300
Rent expense5,600
Referring to Table 4-4, current liabilities and total liabilities are:
A) $14,300 and $5,500 respectively
B) $14,300 and $19,800 respectively
C) $14,300 and $22,000 respectively
D) $16,500 and $22,000 respectively
45) 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 percent-of-sales method.
Management estimates that 3% of net credit sales will be uncollectible. Which of the
following will be the balance of the allowance for uncollectible accounts after
adjustment?
A) $7,000
B) $3,450
C) $2,850
D) $2,250
46) A merchandiser purchases inventory on account under a perpetual inventory system
with terms of 2/10 n/30. The merchandiser would:
A) credit Inventory on date of payment if the discount is taken
B) credit Inventory on date of payment if the discount is not taken
C) credit Purchases Discounts on date of purchase if the discount is taken
D) debit Purchases Discounts on date of purchase if the discount is not taken
47) When the FIFO method of inventory valuation is used, cost of goods sold is
assumed to consist of the:
A) most recently purchased units
B) most expensive units
C) least expensive units
D) oldest units
48) The heading of the income statement includes in the proper order:
A) title of the statement; name of the entity, date of the statement
B) name of the entity; title of the statement; date of the statement
C) title of the statement; name of the entity, period covered by the statement
D) name of the entity; title of the statement; period covered by the statement
49) Receiving cash for services performed the same day would:
A) increase owner’s equity and decrease total assets
B) decrease total assets and decrease liabilities
C) increase liabilities and increase total assets
D) increase owner’s equity and have no effect on liabilities
50) Posting involves:
A) transferring information from the general journal to the general ledger
B) using information from the general ledger to prepare the trial balance
C) using information from the general ledger to prepare the financial statements
D) transferring information from the general ledger to the general journal
51) A business purchases equipment for cash of $100,000. This transaction will cause:
A) cash to be credited for $100,000
B) equipment to be credited for $100,000
C) capital to be credited for $100,000
D) capital to be debited for $100,000
52) Describe what is meant by balancing the ledgers.
53) Table 9-9
The following information is available for Martin Services for the year for the year
ended December 31, 2014 .
Accounts receivable Bal. Jan. 1, 2014$20, 500
Allowance for doubtful accounts,
Jan 1, 2014 1,000Cr.
Sales Revenue for 2014 (40% on credit)600,000
Bad debt write-offs during 20141,500
Bad debt recoveries during 2014600
Collections on account during 2014 230,000
Refer to Table 9-9. Assume that Martin Services uses the
percent-of-accounts-receivable method of estimating bad debts, at the rate of 4%.
Calculate the balance of the allowance for doubtful accounts at December 31, 2014 and
provide the net amount of accounts receivable to be reported on the balance sheet at
December 31, 2014 .
54) On March 1, 2013, Carter Craft & Company Ltd. purchased a mineral deposit by
paying $50,000 in cash and signing a $350,000 promissory note. A geological report
estimated the mineral deposit contained 125,000 tonnes of ore. Carter Craft &
Company Ltd. expects the asset to have a zero residual value when fully amortized.
During 2013, 34,000 tonnes of ore were mined.
Prepare the journal entries on March 1, 2013 and December 31, 2013 to record the
purchase of the right to the mineral deposit and the amortization of the mineral deposit
for the first year.
55) What are the potential differences in balance sheet presentation for companies
reporting under ASPE versus IFRS?
56) Storemount Delivery reports the following transactions for May 2014:
May1Purchased a two-year insurance policy for cash, $1,800.
9Performed a service on account, $800.
16Paid wages to employees, $950.
18Completed a job for a customer and collected $600 cash.
23Collected $500 of the amount owed from May 9.
30Accrued wages of $650.
Show the amount of revenue and expense recognized for each transaction during May
2014 under both the cash basis and the accrual basis of accounting by completing the
following chart.
Cash-Basis Accounting
Accrual Accounting
57) The following is the classified balance sheet of Dave Scott and Associates at
December 31, 2014 .
Calculate the current ratio and the debt ratio for Dave Scott and Associates at December
31, 2014 .
Dave Scott and Associates
Balance Sheet
December 31, 2014
Assets
Current assets
Cash$13,600
Accounts receivable2,000
Office supplies700
Prepaid insurance1,200
Total current assets$17,500
Property, plant and equipment
Equipment$15,600
Less: accumulated amort.3,900
11,700
Total assets$29,200
Liabilities
Current liabilities
Accounts payable$6,800
Salary payable1,100
Unearned service revenue 800
Total current liabilities$8,700
Owner’s equity
Dave Scott, Capital 20,500
Total liabilities and owner’s equity$29,200
58) On January 1, 2014, Brad Thomas invested $30,000 in Thomas Repairs. During
2014, Brad withdrew $17,000 for personal use. Thomas Repairs reports the following
balances on December 31, 2014:
Accounts receivable$ 9,000
Accounts payable4,200
Service revenue25,550
Land4,000
Rent expense4,500
Note payable3,800
Supplies900
Brad Thomas, Capital, Jan. 1, 20140
Salary expense9,650
Cash18,500
Brad Thomas, Withdrawals17,000
Prepare an income statement for the year ended December 31, 2014 .
59) Newtowne Furniture Gallery issued two notes payable during 2013 . Pertinent data
on these notes are shown below:
NoteAmountRateTermDate Issued
A $10,00010%120 daysNovember 1
B$12,5009%60 daysDecember 1
In addition to the above two notes, Newtowne Furniture Gallery gave a $50,000, 8%,
180-day note to the First City Bank on September 2, 2013 for a cash loan.
Prepare adjusting entries on December 31, 2013, for the above three notes.
60) Record journal entries for the following transactions for Sampson Company.
Sampson uses a perpetual inventory system.
Nov. 1Purchased merchandise on account from County Suppliers, $2,000,
terms n/30.
15Purchased merchandise from Shuping Wholesalers, $5,000, by issuing a
60-day, 12% note.
30Paid the amount due to County Suppliers.
Dec. 1Gave a 90-day, $25,000, 12% note to the FP Bank for a cash loan.
Dec. 31Recorded any necessary adjusting entries.