1) Gross pay is the total amount of compensation earned by the employee less
deductions.
2) The reliability characteristic means that accounting information is free from error and
bias, i.e., objective.
3) A journal is a chronological record of transactions.
4) The adjusting entry required when the inventory counted is greater than the balance
in the inventory account has a credit to Cost of Goods Sold.
5) An income statement is dated for a period of time such as “For the Year Ended
December 31, 2014.”
6) Accounts receivable may be presented on the balance sheet without the contra
account, allowance for doubtful accounts.
7) Overstating ending inventory in 2012 will understate net income for 2013 .
8) An advantage of enterprise resource planning (ERP) systems is the integration of all
company activities from purchasing to production to customer service.
9) It is possible to have a debit balance in the allowance for doubtful accounts account
before adjusting journal entries at the end of the year.
10) The specific-unit-cost method is useful for inventory items that have common
characteristics, such as tonnes of ore or litres of paint.
11) When similar assets are exchanged and no cash is received or given up, this
indicates that the fair value of each of the assets is equal.
12) If a company constructs its own assets, the cost of the building may include the cost
of interest on money borrowed to finance the construction.
13) A seller requesting payment will send the purchaser a purchase order.
14) Under both ASPE and IFRS, obligations to parties outside the company are
typically carried at their fair value.
15) FIFO costing is consistent with the physical movement of inventory for many
companies.
16) On the worksheet, the difference between the balance sheet debit column and the
balance sheet credit column represents the net income or net loss.
17) The adjusting entry to record inventory shrinkage would include a debit to the cost
of goods sold account in a periodic inventory system.
18) Liabilities are:
A) insider claims to the business’s assets
B) outsider claims to the business’s assets
C) economic resources of a business
D) increases in owner’s equity earned by delivering goods or services
19) With respect to cash, which of the following can be a difference between
accounting standards for private enterprises (ASPE) and international financial
reporting standards (IFRS)?
A) Presentation of cash on the balance sheet
B) Valuation of cash on the balance sheet
C) Components of cash on the balance sheet
D) Inclusion of cash on the balance sheet
20) 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 periodic inventory FIFO inventory method?
A) $4,100
B) $21,600
C) $11,600
D) $18,275
21) After preparing the bank reconciliation, journal entries must be prepared for:
A) any errors made on the books revealed by the bank reconciliation
B) any errors made by the bank revealed by the bank reconciliation
C) deposits in transit
D) outstanding cheques
22) For ABC Delivery Service, how much was net income or net loss in June?
A) $2,800 net income
B) $1,800 net income
C) $6,300 net loss
D) $3,800 net income
23) Entries in the purchases journal are posted to the:
A) general ledger only
B) general ledger and the accounts payable subsidiary ledger
C) accounts payable subsidiary ledger and the purchases ledger
D) accounts payable subsidiary ledger only
24) The following are the ending month’s balances for Toys Galore.
What is the total amount of credits for the trial balance?
A) $21,630
B) $16,400
C) $20,580
D) $30,310
25) The total amount of employee compensation before deductions are taken out is
referred to as:
A) gross pay
B) net pay
C) compensation after withholdings
D) take-home pay
26) The first step in the journalizing process is to identify the transaction and its data.
27) If the bank mistakenly recorded a $29 payment as $92, the error would be shown on
the bank reconciliation as a:
A) $63 addition to the bank balance
B) $92 deduction from the bank balance
C) $92 addition to the bank balance
D) $63 deduction from the bank balance
28) Keeping office supplies under lock and key is representative of:
A) safeguarding assets
B) following company policies
C) promoting operations efficiency
D) ensuring accurate, reliable accounting records
29) If a bookkeeper mistakenly recorded an $85 deposit as $58, 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
30) Prepare adjusting entries for the following items on December 31, the end of the
fiscal year for Jackson Installation.
a) Amortization on equipment, $4,500
b) Services performed but unbilled, $3,500
c) Salaries owed to employees at year end, $2,500
d) Unearned service revenue earned, $5, 500
e) Supplies used during the year, $3,200
f) Prepaid rent expired during the year, $7,500
31) On August 1, 2014, Rubble Station established a $350 petty cash fund. At the end of
August, the petty cash fund contained:
– Cash on hand$65.25
– Petty cash tickets for
postage$95.50
office supplies94.50
miscellaneous items99.25
a) Prepare the journal entry to establish the petty cash fund on August 1, 2014 .
b) Prepare the journal entry on August 31, 2014, to replenish the petty cash fund.
c) Assume on August 31, 2014, after replenishing the petty cash fund, Rubble Station
desires to increase the petty cash fund to $400. Prepare the necessary journal entry.
32) Table 7-6
Provincewide Milling Company uses a sales journal. On June 2, the sales journal
appears as you see below.
Sales Journal
Other sales that took place in June are as follows:
Refer to Table 7-6, at the end of the month what entry was made to cost of goods sold?
A) Credit $2,260
B) Debit $2,260
C) Debit $6,700
D) Credit $6,700
33) When a discount is taken for prompt payment under a perpetual inventory system,
the purchaser would credit:
A) Accounts Payable
B) Accounts Receivable
C) Purchases Discounts
D) Inventory
34) Ronnie’s Wings acquired equipment on January 1, 2013, for $300,000. The
equipment had an estimated useful life of 10 years and an estimated salvage value of
$25,000. On January 1, 2016, Ronnie’s Wings revised the total useful life of the
equipment to 12 years. Compute amortization expense for the year ended December 31,
2016, if Ronnie’s Wings uses straight-line amortization.
A) $21,389
B) $24,167
C) $18,125
D) $16,042
35) Table 11-7
Camparound Canada has 24 employees who are paid on a monthly basis. For the most
recent month, gross earnings were $68,000. The income tax withholdings are 15% of
gross earnings. Canada Pension Plan deductions are 4.95% of gross earnings and
Employment Insurance deductions are 1.83% of gross earnings. All employees have
$15 per month withheld for charitable contributions. Ignore the basic Canada Pension
Plan exemption.
Referring to Table 11-7, the employees’ total net pay is:
A) $68,000.00
B) $53,189.60
C) $52,829.60
D) $57,800.00
36) Which of the following liabilities creates no expense on the part of the company?
A) Employment Insurance payable
B) Canada Pension Plan payable
C) GST payable
D) estimated warranty payable
37) The total payroll expense of the employer is equal to:
A) net pay plus employee withholdings
B) gross pay plus employees’ income tax
C) net pay plus employer payroll taxes and fringe benefits
D) gross pay plus employer payroll contributions and fringe benefits
38) Faulkner Company engaged in the following transactions regarding unearned rent
during 2013:
Feb. 1Collected $6,000 from a tenant who was paying for a two-year lease.
(Lease A)
Mar. 1Collected $3,600 from a tenant who was paying for a one-year lease.
(Lease B)
Apr. 1Collected $7,200 from a tenant who was paying for a one-year lease.
(Lease C)
a)Prepare journal entries for the above transactions.
b)Prepare adjusting entries on December 31, 2013, for the above transactions.
39) Which of the following is included in the cost of a plant asset?
A) amounts paid to ready the asset for its intended use
B) regular maintenance cost
C) normal repair cost
D) wages of workers who use the asset
40) Which of the following statements is FALSE?
A) A company generally prefers to have a high debt ratio
B) The current ratio measures the ability to pay current liabilities with current assets
C) The debt ratio measures a business’s ability to pay both current and long-term
liabilities
D) A company generally prefers to have a high current ratio
41) The maturity value of a note is equal to the:
A) principal minus total interest due
B) principal times the interest rate
C) principal plus total interest due
D) face value of the note
42) Table 10-6
On January 1, 2013, Grant Transport purchased a $120,000 truck for hauling cattle
across the border. Grant plans on driving the truck for eight years or 400,000
kilometres. Expected residual value for the truck is $30,000.
Refer to Table 10-6. The book value of the vehicle at the end of 2016, after recording
amortization for the year using the straight-line method, is:
A) $60,000
B) $75,000
C) $86,250
D) $63,750
43) Which of the following accounts are not used in cash-basis accounting?
A) payables
B) revenue
C) equity
D) expenses
44) Outputs would include:
A) fax orders
B) sales receipts
C) bank deposit slips
D) an income statement
45) A company’s accountant capitalizes a payment that should be recorded as an
expense. Which of the following is TRUE?
A) Net income is overstated
B) Revenues are understated
C) Assets are understated
D) Liabilities are overstated
46) Under accrual accounting, the receipt of cash from a customer in advance of
performing the service would be credited to a(n):
A) unearned revenue account
B) prepaid asset account
C) accrued revenue account
D) deferred asset account
47) Jonathan Swift Movers had the following current ratios 2.2:1; 2.5:1; 2.8:1 for 2012,
2013, 2014 respectively. Which of the following statements most correctly depicts the
change in liquidity?
A) Liquidity is improving from selling office supplies
B) Liquidity is improving due to accounts receivable being collected more quickly
C) Liquidity is deteriorating due to purchasing equipment
D) Liquidity is improving due to cash received in exchange of a long-term note payable
48) Table 9-7
The following are the unadjusted balances of Matheson Merchandising for the year
ended December 31, 2014 . Only half of Matheson’s sales are on account as are the
sales returns and allowances.
Accounts receivable$110,500
Allowance for doubtful accounts,
Dec. 31, 2014, prior to adjustment 520Cr.
Sales Revenue for 2014400,400
Sales Returns and Allowances for 2014 10,400
Refer to Table 9-7. Assuming that Matheson estimates bad debts at 0.75% of net credit
sales, what is the amount of the bad debt expense for the year.
49) Following is a random list of accounts with normal balances for the Lexis
Merchandising as of December 31, 2013 . All adjusting entries have been made.
Closing entries have not been made.
K. Lexis, Capital$159,000
Land80,000
Sales discounts18,000
Supplies expense9,000
Interest revenue14,000
Mortgage payable80,000
Cash22,000
Accounts receivable34,000
Unearned service revenue11,000
Salary expense23,000
Accounts payable36,000
Accumulated amort.-building17,000
Equipment46,000
Prepaid insurance8,000
Interest expense6,000
K. Lexis, Withdrawals15,000
Sales revenue285,000
Interest receivable5,000
Inventory28,000
Accumulated amort.-equipment12,000
Insurance expense21,000
Salary payable6,000
Supplies4,000
Cost of goods sold156,000
Sales returns & allowances13,000
Amortization expense-building8,000
Amortization expense-equipment8,000
Interest payable14,000
Utilities expense8,000
Delivery expense7,000
Building115,000
Prepare a multi-step income statement for Lexis Merchandising for the year ended
December 31, 2013 .
50) Parker Industrial Corp. uses a sales journal to record each sale transaction. On
January 19, the sales journal was as you see below. Later in the month, two additional
sales were made as follows:
Please enter the above two transactions into the sales journal and calculate the totals for
the month.
Sales Journal
51) Table 2-1
The following is a list of the accounts and their balances appearing in the ledger of
Henry Garage Repairs as of December 31, 2014, the company’s year end. The accounts
are in alphabetical order and have normal balances.
Accounts payable$450
Accounts receivable 1,250
Cash 400
Equipment 12,600
Gasoline expense 600
Ian Henry, Capital 6,600
Ian Henry, Withdrawals 500
Notes payable 11,000
Rent expense 1,200
Repairs expense 650
Salary expense 700
Salary payable 100
Service revenue 8,250
Supplies 200
Supplies expense 300
Truck 8,000
Refer to Table 2-1. Prepare an Income statement for Henry Garage Repairs for the year
ended December 31, 2014 .
52) 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 and provide a schedule balancing the accounts payable subsidiary
ledger to the accounts payable control account.
53) Table 2-2
The following is a list of the accounts and their balances appearing in the ledger of
Martin Mann Garage as of December 31, 2014, the company’s year end. The accounts
are in alphabetical order and have normal balances.
Accounts payable 1,350
Accounts receivable 3,750
Cash 1,200
Equipment 37,800
Gasoline expense 1,800
Martin Mann, Capital 19,800
Martin Mann, Withdrawals 1,500
Notes payable 33,000
Rent expense 3,600
Repairs expense 1,950
Salary expense 2,100
Salary payable 300
Service revenue 24,750
Supplies 600
Supplies expense 900
Truck 24,000
Refer to Table 2-2. Prepare an Income statement for Martin Mann Garage for the year
ended December 31, 2014 .
54) 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 aging method. At the end
of the year, the aging analysis produces a figure of $700, being the estimate of
uncollectible accounts at the end of year.
1>What is the amount that should be recorded for bad debts expense?
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?
55) Given a random list of accounts with their normal balances, prepare a trial balance
for Sanders Mobile as of December 31, 2013 . List the accounts in the appropriate
order.
Capital$75,200
Building55,000
Accounts receivable19,500
Note payable63,000
Service revenue68,000
Supplies2,500
Advertising expense12,800
Land48,000
Equipment9,800
Salary expense47,000
Accounts payable34,000
Withdrawals15,500
Utilities expense19,800
Cash? ? ?
56) For the items listed below, choose the appropriate code letter to indicate whether the
item is an asset, liability, owner’s equity, revenue, expense or withdrawal item:
AssetA
LiabilityL
Owner’s EquityOE
RevenueR
ExpenseE
WithdrawalW
1> Accounts receivable
2> Service revenue
3> Salary expense
4> Accounts payable
5> Office supplies
6> Cash
7> Note payable
8> Tim Brown, Capital
9> Building
10> Tim Brown, withdrawals
11> Land
12> Truck
13> Rent expense
14> Furniture
15> Equipment
16> Supplies expense