1) A credit balance in the income summary account after closing revenues and expenses
indicates a net income for the current period.
2) The entry to record the purchase of inventory on account in a perpetual inventory
system includes a debit to the Purchases account.
3) Amortization is a process of allocating the cost of an asset over its useful life.
4) Receivables are classified as current assets when they are due within two years.
5) In a manual system, processing includes journalizing transactions, posting the
accounts, and preparing the financial statements.
6) The expense and withdrawals account are closed in the income summary account by
credit entries.
7) The preparation of the income statement for a merchandising company that is
following international financial reporting standards (IFRS) is not significantly different
from the approach used by companies following accounting standards for private
enterprises (ASPE).
8) Adjusting entries assign revenues to the period in which they are earned and
expenses to the period in which they are incurred.
9) Current assets are assets that are expected to be converted to cash, sold, or consumed
during the next 12 months or within the operating cycle if less than 12 months.
10) The multi-step income statement format shows subtotals to highlight significant
relationships.
11) Operating expenses are divided into manufacturing expenses and selling expenses
on the income statement.
12) The due date should be included when calculating the interest period on a
promissory note receivable.
13) The evaluated receipts settlement procedure streamlines payment processing by
eliminating the need for a receiving report.
14) The recording of an owner withdrawal has the same effect on owner’s equity as the
recording of an owner investment.
15) Financial statement users having easier access to information is a reason for the
development of Accounting Standards for Private Enterprises (ASPE).
16) The balance sheet of Rogers Company reports: accounts receivable (less allowance
for doubtful accounts of $25,700), $695,500. Therefore Rogers Company’s gross
accounts receivable must be $721,200.
17) The right side of the account is the correct side.
18) The Federal Government collects all the PST and GST for the country and then
passes on the collection of the PST to the individual provincial governments.
19) A special journal is an accounting journal designed to record one specific type of
transaction.
20) The specific-unit-cost method is useful for inventory items that have a distinctive
identity.
21) Table 11-13
Arc Digital starts the year with balances in its Estimated warranty payable account and
Warranty expense account as shown below. During the year, there were $190,000 of
sales and $3,200 of warranty repair payments. Arc Digital estimates warranty expense
at 1.5% of sales.
Refer to Table 11-13. At the end of the year, what was the balance in the estimated
warranty payable account?
A) $2,850 debit
B) $1,050 credit
C) $3,200 debit
D) $1,420 debit
22) A trial balance has all of the following except:
A) a heading
B) totals for both debits and credits
C) balances for each account contained in the ledger
D) subtotals for revenues and expenses
23) A review of the accounting records discovered that wages in the amount of $795
had been incorrectly recorded by debiting supplies expense in the amount of $975.
Which of the following entries will correct the ledger accounts?
A)
B)
C)
D)
24) Mars Company purchased $2,500 of merchandise on account, terms 3/10 n/60. If
payment was made within the discount period, the entry to record the payment under a
periodic inventory system would include a credit to:
A) Cash of $2,425
B) Inventory of $2,352
C) Accounts Payable of $2,400
D) Cash for $2,400
25) Internal control is the organizational plan and related measures that:
A) encourages operational inefficiency
B) prevents the safeguard of assets
C) ensures accurate accounting records
D) Eliminates errors and fraud
26) Table 6-4
Assume the following data for Burnette Sales for 2014:
On December 31, a physical count reveals 15 units on hand.
Refer to Table 6-4. Under the FIFO method (assuming a perpetual inventory system),
ending inventory would be valued at:
A) $162
B) $105
C) $115
D) $135
27) If a bookkeeper mistakenly recorded an $55 deposit as $85, the error would be
shown on the bank reconciliation as a(n):
A) $27 deduction from the book balance
B) $85 addition to the book balance
C) $27 addition to the book balance
D) $85 deduction from the book balance
28) When prices are falling, the ending inventory balance reported on a FIFO basis is
generally:
A) lower than on a weighted-average basis
B) greater than on a weighted-average basis
C) equal to ending inventory reported on a weighted-average basis
D) equally likely to be higher or lower on a weighted-average basis as opposed to a
FIFO basis
29) Refer to Table 5-4. Net sales for Atlantis Merchandising are:
A) $532,000
B) $600,000
C) $567,000
D) $565,000
30) Benny’s Shoes and Feet Stuff operates in a province where HST is applicable at a
rate of 12%. Last week he purchased $5,000 of shoe inventory on credit. Which of the
following journal entries correctly records this transaction if Benny’s Shoes and Feet
Stuff uses a periodic inventory system?
A)
B)
C)
D)
31) Which of the following is not an advantage of paying employees using electronic
funds transfer (EFT)?
A) reduced salary expense
B) reduced administrative costs
C) no lost pay cheques
D) ensures that appropriate employee is paid
32) Lawson Delivery initially records all prepaid expenses as expenses and all unearned
revenues as revenues. Given the following information, prepare the necessary adjusting
entries at year end, December 31, 2014 .
a) On January 3, 2014, $3,500 of supplies were purchased. A count revealed $700 still
on hand at December 31, 2014 .
b) On January 4, 2014, a $3,150 payment was made to an insurance agency for two and
a half years of insurance.
c) On June 30, 2014, received nine months’ rent in advance from a tenant, $8,100.
d) On August 1, 2014, received six months’ rent in advance from a tenant, $4,800.
33) If the allowance method of accounting for doubtful receivables is used, what
account is credited in the entry to write off a customer’s account as uncollectible?
A) allowance for doubtful accounts
B) accounts receivable
C) bad-debt expense
D) sales returns and allowances
34) Table 6-6 Sam’s Wholesale Bikes
Refer to Table 6-6. What is the gross margin for the two months assuming that Sam’s
uses the perpetual inventory weighted-average-cost method?
A) $13,504
B) $21,728
C) $10,800
D) $17,977
35) The same three inventory costing methods that are permitted under accounting
standards for private enterprises (ASPE) are allowed under international financial
reporting standards (IFRS). Specifically these include:
A) specific identification, FIFO and weighted-average
B) random identification, FIFO and weighted-average
C) specific identification, LIFO and weighted-average
D) specific identification, FIFO and average
36) Table 7-7 Chaney Aircraft Service
Chaney Aircraft Service Co. started business on April 1, 2013 . They began business
with $12,000 in cash and no other assets. During the first month of business, they used
a purchase journal and a cash payment journal, and at the end of the month those
journals appear as follows:
Purchase Journal
Cash Payments Journal
Refer to Table 7-7 at the end of April, what was the balance in the subsidiary ledger for
the accounts payable for Adams Equipment?
A) $2,800 credit
B) $ 0
C) $5,000 debit
D) $2,200 credit
37) A company gives a $100,000, 120-day note at the bank at 9%. How much will the
company pay the bank at maturity?
A) $102,958.90
B) $97,041.10
C) $98,520.55
D) $101,479.45
38) A 90-day note dated August 26 matures on:
A) November 24
B) November 23
C) November 25
D) November 26
39) The word “ethics” can best be described as:
A) company laws
B) rules for recording business transactions
C) moral principles in human contact
D) internal controls
40) Two separate errors affected Satellite City in 2014 . The beginning inventory was
understated by $28,000 and the ending inventory was understated by $43,000. Net
income in 2014 will be:
A) understated by $15,000
B) understated by $71,000
C) understated by $43,000
D) overstated by $15,000
41) Compute the ending balance in the allowance for doubtful accounts after the
adjusting entries have been prepared for the following independent situations.
a)Credit balance in allowance for doubtful accounts is $500 before adjustment. An
aging schedule indicates $3,500 of accounts receivables are uncollectible
b) Debit balance in allowance for doubtful accounts is $700 before adjustment. An
aging schedule indicates $4,300 of accounts receivables are uncollectible
c)Credit balance in allowance for doubtful accounts is $500 before adjustment. Net
credit sales for the current year are $325,000 and 1% is considered uncollectible
d)Debit balance in allowance for doubtful accounts is $700 before adjustment. Net
credit sales for the current year are $350,000 and 1.25% is considered uncollectible
42) What entry is required when a business estimates warranty payable each period
based on sales revenue?
A)
B)
C)
D)
43) For Ace Builders, what is the combined effect on cash from the June transactions?
A) Down $800
B) Down $2,500
C) Up $4,500
D) Up $500
44) Tom and Jerry 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)Sold merchandise on account, $5,800__________
b)A customer purchased additional inventory on account,
credit terms 2/10 n/30, $3,500__________
c)A customer who had previously purchased merchandise
on account returned defective merchandise for credit__________
d)Purchased inventory on account, $4,680__________
e)Purchased office furniture, no money down, with 60
days to pay, $1,850__________
f)Closed the income summary account to capital, net
income was $65,000__________
g)Collected $3,600 from cash sales__________
h)Purchased a used copy machine paying $3,200 cash__________
i)Received a cheque for $3,210 from a customer who was
paying off his account in full__________
j)Paid the telephone bill for the month, $230__________
45) Purchasing office equipment on account would:
A) decrease owner’s equity
B) increase owner’s equity
C) have no effect on owner’s equity
D) decrease liabilities
46) Which of the following statements is TRUE?
A) Ethical practice is good business
B) Most companies have no code of ethics for employees to follow
C) Accountants have no incentive to behave ethically
D) The CA, CPA, CGA, and CMA bodies have no set rules of professional conduct for
their members
47) 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.
48) The following are the adjusting journal entries recorded by Mandarin Consulting for
the year ended December 31, 2013 . Assuming that Mandarin uses reversing entries,
prepare the reversing entries on January 1, 2014 . Explanations are not required.
General Journal
49) Table 9-13 Davidson Services
At January 1, Davidson Services has the following balances:
During the year, Davidson has $104,000 of credit sales, collections of $100,000, and
write-offs of $1,400.
Refer to Table 9-13 to answer the following assuming that Davidson records
uncollectible account expense at the end of the year using the percent-of-sales method,
and applies a rate of 1.1% based on past history.
1>Prior to the year-end entry to adjust the bad debts expense, what is the balance in
accounts receivable?
2>After the year-end entry to adjust the bad debts expense, what is the ending balance
in the allowance for uncollectible accounts?
3>After the year-end to adjust the bad debts expense, what is the ending balance of net
accounts receivable?
4>If the business uses the direct-write-off method what will be the amount for
uncollectible accounts expense?
50) Determine the effect on cost of goods sold and net income for the current year of
the following inventory errors. Indicate your answer with either a + (overstated) or a –
(understated).
51) Describe the five features of a good accounting information system and give an
example of each.
52) Based on the partial trial balance and the partial adjusted trial balance shown below,
prepare the six missing adjusting entries. The adjusting entries should be dated
December 31 .
AccountTrial BalanceAdjusted Trial Balance
53) Based on the partial trial balance and the partial adjusted trial balance shown below,
prepare the six missing adjusting entries. The adjusting entries should be dated
December 31 .
AccountTrial BalanceAdjusted Trial Balance
54) Table 8-2
The petty cash fund had the following petty cash ticket:
Paper for photocopier$100
Miscellaneous expense20
Freight on inventory purchased.22
Postage expense 47
$189
Refer to Table 8-2. Assume that the business has established a petty cash fund in the
amount of $200 and that the amount of cash in the fund at the time of replenishment is
$12. The business uses a periodic inventory system.
Prepare the entry to replenish the fund on March 31 .
