Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1) An asset account is debited when unearned revenue is recorded initially as a revenue.
2) Members of the three professional accounting bodies in Canada, CAs, CGAs, and
CMAs, have no set standards for ethical conduct.
3) Some rules of conduct apply to accountants in public practice and not to those
employed in industry.
4) Managers strive for an accounting system that offers maximum benefits at a
minimum cost, known as a good cost/benefit relationship.
5) The accounts receivable account in the general ledger serves as a control account
because it summarizes the total of the receivables from all customers .
6) The use of IFRS for publicly accountable enterprises has the same impact on the
adjusting process as the use of ASPE.
7) The failure to record an accrued liability causes a company to overstate its net
income.
8) The materiality concept of accounting allows a business to expense the cost of freight
in rather than add it to the cost of the inventory on the basis that the difference in the
accounting treatment would not sway a decision by a financial statement user.
9) The income statement should be prepared after the balance sheet is prepared.
10) Accounting for intangible assets under international financial reporting standards
(IFRS) is more complex than under accounting standards for private enterprises
(ASPE).
11) The income statement presents a summary of an entity's revenues and liabilities
over a period of time.
12) The withdrawals account is a temporary account and it must be closed.
13) It is not possible for a posting error to have occurred when the debits equal the
credits on the trial balance.
14) If a firm changes its estimate of the useful life of an asset, the firm must recalculate
amortization expense for each previous year since the asset was placed in service.
15) Betterments must be expensed as capitalizing the transaction would affect the
subsequent calculations of amortization.
16) Inventory includes all goods that the company owns and expects to use in normal
operations.
17) In a corporation, the shareholders have liability for the actions of the corporation
that extends beyond their investment.
18) Goods and services tax (GST) paid on the purchase of an asset is recoverable only
if the asset acquired is used in the business as property, plant, and equipment.
19) Interest payable is a contra liability account and is deducted from the note payable
on the balance sheet.
20) Interest must be accrued on all current notes payable. For long-term notes the
interest is accrued at the maturity of the note.
21) The investment of cash into the business by the owner would:
A) increase net income
B) decrease owner's equity
C) have no effect on liabilities
D) decrease assets
22) Each financial statement includes a heading giving three pieces of data. Which of
the following items is not included in these headings?
A) Name of the financial statement
B) Date or time period covered
C) Name of the preparer of the statement
D) Name of the business
23) On December 31, 2014, Rainbow Appliances has $275,000 in accounts receivable
and an allowance account with a debit balance of $320. Current period net credit sales
were $780,000, and cash sales were $68,000.
a) Rainbow Appliances performs an aging schedule, and the results are summarized
below, along with the appropriate percentages that Rainbow applies to the categories
shown.
Percentage
Days OutstandingAmount Uncollectible
Not yet due $150,000 1%
31-60 days past due50,0005%
61-90 days past due40,00010%
91-120 days past due 25,00025%
Over 120 days past due 10,00050%
Assuming Rainbow uses the aging approach of accounting for uncollectible accounts,
prepare the adjusting entry required at the end of the accounting period.
b) Assume now Rainbow uses the percent-of-sales method of accounting for
uncollectible accounts. If historical data indicate that approximately 3% of net credit
sales are uncollectible, what is the amount of bad-debt expense and what is the balance
in the allowance for doubtful accounts after adjustment?
24) Stanley Fuel Services records $8,000 of service revenue being received in advance
and $4,500 of service revenue being accrued. Unearned revenue has a year-end balance
of $4,900. The effect of these entries on total service revenue for the year is an increase
of:
A) $7,600
B) $12,900
C) $9,400
D) $4,900
25) All of the following are current assets except:
A) cash
B) accounts receivable
C) buildings
D) prepaid rent
26) The normal balance of cash is a ________ because it is a(n) ________ account.
A) debit, expense
B) credit, asset
C) debit, asset
D) credit, revenue
27) If a required prepaid adjustment had not been made, the financial statements would
have been affected as follows:
A) net income overstated, assets overstated, liabilities unaffected, and owner's equity
overstated
B) net income understated, assets unaffected, liabilities overstated, and owner's equity
understated
C) net income overstated, assets understated, liabilities understated, and owner's equity
unaffected
D) net income understated, assets understated, liabilities understated, and owner's
equity unaffected
28) The allowance for doubtful accounts has a current debit balance of $2,550.
Bad-debt expense is estimated to be 3% of net credit sales. If net credit sales were
$250,000, which of the following would be part of the adjusting entry for bad-debt
expense?
A) debit allowance for doubtful accounts for $7,500
B) credit allowance for doubtful accounts for $4,950
C) debit bad-debt expense for $7,500
D) debit bad-debt expense for $10,500
29) Under the direct write-off method, the entry to record an uncollectible account has
the following effect on the financial statements:
A) increases expenses and decreases liabilities
B) decreases assets and increases owner's equity
C) decreases net income and decreases assets
D) increases expenses and increases assets
30) The end-of-month balance in Dryer Company's cash receipts journal cash column is
$22,630. How will this column be posted?
A) The total will be posted to the cash account as a credit
B) The total will be posted to the cash account as a debit
C) The individual amounts are posted on a daily basis
D) The total is not posted
31) After all the account balances have been extended to the balance sheet columns of
the worksheet, the totals of the debit and credit columns are $35,350 and $38,750,
respectively. It can be concluded the company has a:
A) net income of $3,400
B) net loss of $3,400
C) $74,100 net loss
D) $74,100 net income
32) All of the following are property, plant and equipment except:
A) office supplies
B) land
C) buildings
D) equipment
33) Ruby Company purchased inventory from Diamond Company, and received a
credit memo from Diamond Company. Diamond Company had charged Ruby Company
$3.85 rather than $3.58 for each of the 100 items ordered. What entry will Ruby
Company make assuming it is using a perpetual inventory system?
A)
B)
C)
D)
34) Which of the following methods represents the most accurate cost?
A) FIFO
B) specific-unit-cost
C) average cost
D) weighted-average cost
35) A $75 payment for rent expense was posted as a debit to salary expense and a credit
to cash. This error will cause:
A) the trial balance to be in balance
B) the sum of the credits to exceed the sum of the debits by $75
C) the sum of the debits to exceed the sum of the credits by $75
D) the sum of the debits to exceed the sum of the credits by $150
36) Table 6-6 Sam's Wholesale Bikes
Refer to Table 6-6. What is the cost of goods sold for the two months assuming that
Sam's uses the perpetual weighted-average inventory method?
A) $38,772
B) $42,523
C) $49,700
D) $46,996
37) When a prepaid expense is initially recorded as an expense, the adjusting entry has
the following effect on net income:
A) no effect
B) decrease
C) increase
D) current income is correct but next period's income is incorrect
38) The accounts that appear on a postclosing trial balance are:
A) assets, liabilities, withdrawals, and revenues
B) revenues, expenses, and capital
C) assets, liabilities, and expenses
D) assets, liabilities, and capital
39) The net income or loss for the period is placed on the worksheet to balance which
sets of columns?
A) the adjusted trial balance and the income statement columns
B) the income statement and the balance sheet columns
C) the balance sheet and the adjusted trial balance columns
D) the unadjusted trial balance and the adjusted trial balance columns
40) The owner's capital account has a January 1, 2014, balance of $59,000. The owner's
withdrawals account has a balance of $25,600 for the year ending December 31, 2014 .
The income summary account contains a debit for $20,500 and a credit for $56,900.
The balance in the owner's capital account on December 31, 2014, is:
A) $69,800
B) $3,000
C) $33,400
D) $84,600
41) Table 7-1
On April 1, Pro Company received a cheque from Carter Company for payment of an
invoice dated March 24 for $3,000 with credit terms of 2/10 n/30. On March 28, Carter
had returned $200 of the merchandise because it was defective.
Referring to Table 7-1, how would this transaction be recorded in Pro's cash receipts
journal?
A) debit Cash $3,000; credit Accounts Receivable-Carter Company $3,000
B) debit Cash $2,800; credit Accounts Receivable-Carter Company $2,800
C) debit Cash $2,744; credit Accounts Receivable-Carter Company $2,744
D) debit Cash $2,744 and Sales Discounts $56; credit Accounts Receivable-Carter
Company $2,800
42) Purchasing a building for $150,000 by paying cash of $30,000 and obtaining a
mortgage for $120,000 would:
A) increase assets and liabilities by $150,000
B) increase liabilities by $120,000
C) increase liabilities by $30,000
D) decrease assets and liabilities by $120,000
43) According to GAAP, to be useful, accounting information must be all of the
following except:
A) relevant
B) comparable
C) subjective
D) reliable
44) When inventory prices are rising, the weighted-average method will generally result
in a:
A) higher gross margin than FIFO
B) lower ending inventory value than FIFO
C) higher owner's equity balance than FIFO
D) lower cost of goods sold than FIFO
45) The cost of fencing should be charged to:
A) repairs expense
B) land improvements
C) land
D) improvements expense
46) The three parties to a cheque are the:
A) maker, payee, and bank
B) bank, maker, and payor
C) signer, depositor, and endorser
D) bank, payee, and the government
47) Which of the following entries records the billing of service revenue performed for
cash for $5,400?
A) debit to service revenue and a credit to cash for $5,400
B) debit to accounts payable and a credit to cash for $5,400
C) debit to cash and a credit to the owner's capital for $5,400
D) debit to cash and a credit to service revenue for $5,400
48) 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 post closing 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________
49) Which of the following is a revenue account?
A) accounts receivable
B) accumulated amortization
C) unearned revenue
D) sales
50) The adjusting entry at year end under a perpetual inventory system to record cost of
goods sold includes a:
A) debit to cost of goods sold and a credit to inventory for the ending balance of
inventory
B) debit to purchases and a credit to cost of goods sold for the beginning balance of
purchases
C) debit to cost of goods sold and a credit to inventory for the beginning balance of
inventory
D) No adjusting entry is required under a perpetual inventory system to adjust the
beginning and ending balances
51) All of the following are documents used to control a bank account except a(n):
A) bank reconciliation
B) signature card
C) invoice
D) deposit ticket
52) The concept that requires that accountants accrue wage expense at the end of the
accounting period for unpaid wages is the:
A) Cost principle
B) Time-period assumption
C) Recognition criteria for revenue
D) Matching objective
53) Prepare a balance sheet dated December 31, 2013, for Canfield Enterprises based
on the following transactions completed during 2013 .
a) Marilyn Canfield invested $16,000 cash and equipment valued at $6,000 into the
business.
b) Purchased $500 of supplies on account.
c) Purchased $2,000 of equipment for cash.
d) Purchased a building by issuing a $10,000 note.
54) 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 net income or loss for the year was:
A) $10,200
B) $25,600
C) $11,800
D) $15,400
55) Earning a revenue and immediately collecting the related cash would:
A) decrease total assets
B) have no effect on owner's equity
C) have no effect on total assets
D) increase owner's equity
56) Using the lower-of-cost-and-net-realizable-value rule of valuing inventory allows
the accountant to attain:
A) consistency
B) conservatism
C) matching
D) full disclosure
57) Table 11-4
Lumas Company gives a $50,000, 180-day note payable to its bank at 9% on September
15, 2013 for a cash loan. Lumas has a December 31 year end.
Refer to Table 11-4. The adjusting entry necessary at December 31, 2013, would be:
A)
B)
C)
D) no adjusting entry is necessary
58) Based on the following adjusted trial balance, prepare the closing entries for
Tudhope Plumbing on December 31, 2013 .
Tudhope Plumbing
Adjusted Trial Balance
December 31, 2013
DebitCredit
Cash$ 12,000
Accounts receivable20,500
Office supplies4,600
Prepaid insurance4, 800
Equipment80,500
Accum. amort.-equipment$ 43,300
Accounts payable15,500
Unearned service revenue6,800
Salary payable3,300
Mike Tudhope, Capital80,200
Mike Tudhope, withdrawals20,600
Service revenue77,500
Salary expense33,900
Advertising expense15,400
Utilities expense9,900
Miscellaneous expense1,700
Supplies expense4,900
Insurance expense5,400
Amort. expense-equipment 12,400________
Total$226,600$226,600
59) 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
$25. The business uses a periodic inventory system.
Prepare the entry to replenish the fund on February 28 .
60) Table 5-10
The December 31, 2014 adjusted trial balance for Camptown Company is shown below.
Using the information from Table 5-10 prepare an income statement in single-step
format and the closing entries for Camptown Company.
61) Explain the concept of amortization. Include in your discussion one common
misconception regarding what amortization represents.
62) Table 9-8
The following information is available for Beauchemin Merchandising for the year
ended December 31, 2014 .
Accounts receivable Bal. Jan. 1, 2014$19, 500
Allowance for doubtful accounts,
Jan 1, 2014 1,040Cr.
Sales Revenue for 2014 (30% on credit)520,000
Bad debt write-offs during 20141,690
Collections on account during 2014 159,900
Refer to Table 9-8. Assume that Beauchemin uses the percent-of-accounts-receivable
method of estimating bad debts, at the rate of 2%, 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 .
63) Bradson Merchandising, which has a December 31 year end, and uses a periodic
inventory system, completed the following transactions during 2013 and 2014:
2013
Oct. 1Sold merchandise to Bravo Links, terms n/60, $4,000.
Oct. 3Negotiated with Bravo Links to exchange the account receivable
for a 120-day, 10% note for $4,000.
Dec. 31Accrued interest on the Bravo Links note.
2014
Feb. 1Collected in full from Bravo Links
Prepare the necessary journal entries to record the above transactions.
