1) Selling on credit creates both a benefit and a cost.
2) The acid-test ratio tells whether the entity could pay all its current liabilities if they
came due immediately.
3) In a perpetual inventory system, the closing entries include a credit to the Inventory
account in an amount that equals the ending inventory, and a debit to the Inventory
account in an amount that equals the beginning inventory.
4) Under the allowance method, the entry to write off an account that has been deemed
uncollectible has an impact on the net income of the firm.
5) Owner’s equity is often referred to as net assets and represents the residual amount of
business assets that can be claimed by the owner.
6) Both the sales journal and the cash receipts journal require daily posting to the
accounts receivable subsidiary ledger and the accounts receivable control account.
7) One characteristic of an effective system of internal control is competent, reliable,
and ethical personnel.
8) The faster the sale of inventory and the collection of cash, the higher the profits will
be for a business.
9) Accrual accounting records the effect of every business transaction as it occurs.
10) A corporation’s journal entry to accrue income tax owed at year end includes a debit
to income tax payable.
11) Cost minus salvage value is called amortizable cost.
12) The allowance method and the direct write-off method are both methods of aging
accounts receivable.
13) Dishonoured notes receivable must always be written off.
14) Measuring the cost of inventory is difficult when prices are constant.
15) Retail businesses usually pay, without reimbursement, sales tax on the goods they
acquire for resale.
16) Construction in progress is a current liability if the construction period is less than
one year.
17) Failure to adjust for accrued revenue results in net income being understated and
assets being understated.
18) Owners and managers of companies whose profits do not meet expectations are
sometimes tempted to “cook the books” by manipulating the value of ending inventory.
19) Eastern Outfitters sold $2,500 of inventory to a customer on account, terms 3/15
n/40. Freight terms were FOB shipping point and freight charges totalled $150. The
entry to record the sale would include a:
A) credit to Accounts Receivable for $2,350
B) debit to Sales Revenue for $2,500
C) credit to Sales Revenue for $2,500
D) debit Accounts Receivable for $2,650
20) Using a perpetual 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) credit to Cash
21) 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 amount of net accounts receivable after adjustment?
A) $16,550
B) $17,750
C) $17,150
D) $13,000
22) Incorrectly treating a repair expenditure as a betterment:
A) understates expenses and understates owner’s equity
B) understates expenses and understates assets
C) overstates expenses and understates net income
D) overstates assets and overstates owner’s equity
23) 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 $161,600 and
the owner withdrew $5,850 during the current period, what was the current period’s net
loss?
A) $850
B) $6,700
C) $12,550
D) nil
24) If ending inventory for the current period is understated, then owner’s equity will
be:
A) overstated at the end of the current period and understated at the end of the next
period
B) understated at the end of the current period and overstated at the end of the next
period
C) overstated at the end of the current period, but it will be correct at the end of the next
period
D) understated at the end of the current period, but it will be correct at the end of the
next period
25) Sam Snead the owner of Snead’s Fine Golf Wear used $1,800 of his personal funds
to go on vacation. Which of the following is the most appropriate treatment regarding
this transaction?
A)
B)
C) record a memorandum in the general journal
D) do not record the transaction in the general journal
26) The portion of a long-term debt payable within the year is classified as a current
liability. The interest payable on the debt is:
A) added to the face value of the debt
B) classified separately from the principal amount of the debt
C) not recorded until maturity of the debt
D) accrued on the anniversary date of the debt
27) A cheque for the cash purchase of supplies for $239 was recorded on the books as
$329. On a bank reconciliation, this will appear as a(n):
A) addition to the book balance
B) deduction from the book balance
C) addition to the bank balance
D) deduction from the bank balance
28) In a periodic system, inventory balances and the cost of goods sold for the current
period are determined:
A) at the time of sale
B) on a frequent basis
C) on the first day of each year
D) when a physical inventory count is taken
29) The accounting equation can be stated as:
A) Assets = Liabilities – Owner’s Equity
B) Assets – Liabilities = Owner’s Equity
C) Liabilities = Assets + Owner’s Equity
D) Owner’s Equity = Assets + Liabilities
30) Amounts are posted individually from the purchases journal to the:
A) debit column of the cash account in the general ledger
B) credit column of the inventory account in the general ledger
C) credit column of the accounts receivable account in the general ledger
D) credit column of the creditors’ accounts in the accounts payable subsidiary ledger
31) Sam’s Corner Store has the following purchase and sales information for one of
their inventory items:
Required:
For (a) and (b) assume the company uses the periodic inventory system.
(a)Calculate the gross profit if the company uses first-in, first-out (FIFO)
(b)Calculate the value of the ending inventory if the company uses weighted average.
For (c) and (d) assume the company uses the perpetual inventory system.
(c)What is the cost of goods sold for the Feb 25 sale if the company uses weighted
average to cost the inventory?
(d)What is the value of the ending inventory if the company uses FIFO?
32) Kootenay Mining Company purchased a mine in 2013 for $3,400,000. It was
estimated that the mine contained 200,000 tons of ore and that the mine would be
worthless after all of the ore was extracted. The company extracted 25,000 tons of ore
in 2013 and 30,000 tons of ore in 2014 .
What is the amortization expense for 2014?
A) $425,000
B) $680,000
C) $340,000
D) $510,000
33) Table 11-3
Bentley Enterprises purchased $8,000 of inventory by issuing a six-month, 7.5% note
payable on November 1, 2013 . Bentley has a December 31 year end.
Referring to Table 11-3, the amount of accrued interest on December 31, 2013, would
be:
A) $200.00
B) $100.00
C) $50.00
D) $300.00
34) The year end balance in the capital account is determined by:
A) the change in cash from the beginning to the end of the year
B) the beginning capital balance, investments, net income or loss, and withdrawals
C) only investments and withdrawals
D) the change in total assets from the beginning to the end of the year
35) Table 5-2
Referring to Table 5-2, cost of goods sold is:
A) $105,000
B) $78,000
C) $100,000
D) $27,000
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 periodic weighted-average inventory method?
A) $42,787
B) $45,797
C) $38,992
D) $43,555
37) Starmount Company Ltd. sold an old copy machine for $3,200. The old copy
machine cost $9,000 and had accumulated amortization totalling $6,500. The entry to
record the sale is:
A)
B)
C)
D)
38) Lippman Company Ltd. collects 5% GST on sales. If sales are $963,000, the proper
accounting includes:
A) $101,115 credit to Sales
B) $48,150 credit to GST Payable
C) $48,150 debit to GST Recoverable
D) $963,000 debit to Accounts Receivable
39) 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, the balance in accumulated amortization must be:
A) $8,050
B) $10,200
C) $65,250
D) nil
40) A company has the following account balances. What is the acid-test ratio? (Please
round to two decimal places.)
A) .93
B) 1.45
C) .64
D) 1.76
41) The owner withdrawals account:
A) is not closed at the end of the accounting period
B) is used to record salary paid to the owner
C) is closed to the income summary account
D) is closed to the capital account
42) Which of the following assets is never amortized?
A) land
B) land improvements
C) patents
D) goodwill
43) The purchase of equipment for cash would:
A) increase total assets
B) increase total assets and decrease liabilities
C) decrease both liabilities and owner’s equity
D) have no effect on total assets
44) At the end of the fiscal period, Wilf Carter Services omitted the adjusting entry for
amortization on equipment. The effect of this error on the financial statements is to:
A) understate liabilities
B) understate owner’s equity
C) overstate expenses
D) overstate assets
45) Table 4-6
Selected accounting data as at December 31, 2014 for Martineau Delivery follows:
Cash$25,000
Accounts payable33,000
Accounts receivable34,000
Salary payable7,500
Supplies6,600
Unearned revenue16,500
Prepaid rent4,000
Mortgage payable (due 2018)48,000
Equipment52,000
C. Lexus, Capital10,000
Accum. amort.-equipment12,000
Service revenue69,000
Salary expense31,000
Accum. amort.-furniture6,000
Furniture49,400
Referring to Table 4-6, the debt ratio is:
A) 1.46
B) 0.82
C) 1.22
D) 0.69
46) Table 7-8 Nordin Avionics
J. Nordin Avionics began business on January 1, 2013 . The business was started with
$10,000 in the cash account and $30,000 of inventory in stock. Nordin uses a sales
journal to record credit sales and a cash receipts journal to record all cash receipts,
including both cash sales and cash collections of credit sales. At the end of January, the
two journals appeared as follows:
Sales Journal
Cash Receipts Journal
Refer to Table 7-8 at the end of January, what was the balance in accounts receivable?
A) $ 9,200
B) $14,200
C) $ 7,960
D) $ 8,000
47) Table 5-5
The following items were taken from the December 31, 2013 records of Speedy Boat
Company, which uses a periodic inventory system:
Refer to Table 5-5. The net purchases for Speedy Boat Company are:
A) $230,000
B) $195,000
C) $240,000
D) $205,000
48) The ________ is/are transferred from the income statement to the statement of
owner’s equity.
A) ending capital
B) withdrawals
C) net income
D) beginning capital
49) 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 amount of bad debts expense?
A) $7,000
B) $3,450
C) $2,250
D) $2,850
50) Match the following.
A) batch processing
B) database
C) menu
D) on-line processing
E) inputs
1> Computerized accounting for similar transactions in a group or batch
2> Computerized storehouse of information
3> The first stage of data processing
4> Computerized processing of related functions on a continuous basis
5> A list of options for choosing computer functions
51) Purchases of inventory minus purchase discounts and minus purchase returns and
allowances equals:
A) gross purchases
B) cost of goods available for sale
C) net purchases
D) cost of goods sold
52) Given the following data:
Which of the following depicts the proper account balance after the application of the
lower-of-cost-and-net realizable value rule?
A) Cost of goods sold will be $37,400
B) Cost of goods sold will be $36,400
C) Cost of goods sold will be $37,000
D) Ending inventory will be $24,000
53) Which of the following statements is TRUE?
A) A trial balance is in the same format as balance sheet
B) A trial balance presents data in debit and credit format, but a balance sheet does not
C) A trial balance shows total amounts for assets, liabilities, and equity
D) A trial balance is created after the balance sheet is prepared
54) Given the following worksheet with the trial balance already entered, and the
adjustment information, complete the worksheet.
Tree Top Trimming
Work Sheet
For the Year Ended December 31, 2014
TrialAdjustmentsAdj. TrialInc.Balance
AccountBalanceBal.StatementSheet
Additional information:
a) Accrued Salaries, $10.
b) Supplies used, $2.
c) Balance of unearned service revenue at end of period, $12.
d) Amortization expense, $3.
e) Accrued service revenue, $5.
55) The ________ journal is used by the seller to record the return by a customer of
merchandise sold for cash.
A) general
B) sales
C) cash receipts
D) cash payments
56) Incurring an expense in the current accounting period, which will be paid in the
following accounting period, will require:
A) a debit to an expense and a credit to a liability
B) a debit to a liability and a credit to an expense
C) a debit to an expense and a credit to cash
D) a debit to an expense and a credit to capital
57) At the end of a month, a business shows the following balances in its ledger.
Please use this data to prepare a trial balance in the proper format.
58) Describe in detail the process of posting data from the sales journal of a company
using a perpetual inventory system. Where does it go, when is it posted, and what steps
are followed?
59) Based on the following adjusted trial balance, prepare a classified balance sheet for
Dave Scott and Associates (a proprietorship) on December 31, 2014 . You will have to
compute the owner’s capital account balance on December 31, 2014 .
Dave Scott and Associates
Adjusted Trial Balance
December 31, 2014
DebitCredit
Cash$13,600
Accounts receivable2,000
Office supplies700
Prepaid insurance1,200
Equipment15,600
Accum. amort.-equipment$3,900
Accounts payable6,800
Salary payable1,100
Unearned service revenue800
Dave Scott, Capital22,900
Dave Scott, Withdrawals4,900
Service revenue9,250
Advertising expense1,400
Amort. expense-equipment1,300
Supplies expense500
Insurance expense650
Utilities expense 2,900_______
Total$44,750$44,750
60) Janet Smythe started her personal coaching business, Smythe Personal Coaching,
on November 1, 2014 . Janet records purchasing supplies as assets and cash received
from clients on deposit as unearned revenue. The following transactions occurred
during the first month of operations:
Nov. 1Janet Smythe invested $25,000 personal cash in the business by depositing that
amount in the bank account titled Smythe Personal Coaching. The business gave capital
to Smythe.
Nov. 1Paid the November rent on the office space, $1,500.
Nov. 3Purchased a computer and printer for use in the business; she used her personal
credit card in the amount of $1,800. The computer has an expected life of three years
with no salvage value.
Nov. 5Purchased office supplies in the amount of $75 on an account she set up with the
store, Ace Office Depot.
Nov. 10Received $500 from her first client, Robert Jones, as payment in advance for
coaching fees. (Record this amount in the account Unearned Coaching Revenue.)
Nov. 17Travelled to Montreal to attend a personal coaches conference. The conference
lasted one week and costs were: travel $1,500; conference registration fee, $750. Used
cash from the business to pay for the expenses.
Nov. 25Paid Ace Office Depot the amount owing from November 5 .
Nov. 30Counted the office supplies and estimated that there was $25 of supplies
remaining. Robert Jones had received $100 of coaching during the month.
Required:
Prepare journal entries for the above transactions and the appropriate corresponding
adjusting journal entries necessary to prepare financial statements for the month of
November.
61) Anchor Sales accepts bank credit cards from its customers. Assume Anchor makes a
sale of $100 and the bank charges a 3% fee. Provide the journal entry made by Anchor
to record the sales revenue.
62) Discuss the specific characteristics of an effective system of internal control for
cash receipts over the counter.
63) The following information is available for Andersen Company for the month ending
June 30, 2013 .
Balance per the bank statement is $10,241.43.
Balance per books is $9,745.06.
Cheque #506 for $1,948.52 and cheque #510 for $1,800.25 were not returned with the
June 30 bank statement.
A deposit in transit of $5,113.40 had not been received by the bank when the bank
statement was generated.
A bank debit memo indicated an NSF cheque in the amount of $79 written by Bruce
Garrett to Andersen Company on June 13 .
A bank credit memo indicated a note collected by the bank of $1,900 and interest
revenue of $75 on June 20 .
The bank statement indicated service charges of $35.
Prepare a bank reconciliation for Andersen Company for June 30, 2013 in the format
shown below.
64) Table 11-8
BCN Bank agrees to lend Samson Company $80,000 on January 1 . Samson Company
signs an $80,000, 5%, 9-month note.
Refer to Table 11-8. Prepare the adjusting journal entry made by Samson Company on
June 30 .
