1) The most liquid asset is:
A) notes receivable
B) cash
C) accounts receivable
D) prepaid expenses
2) Match the following.
A) goodwill
B) intangible assets
C) tangible assets
1> Excess of the cost of an acquired company over the sum of the market values of its
net assets
2> Trademarks and copyrights are examples of these
3) Book value is defined as:
A) cost minus residual value
B) cost minus accumulated amortization
C) current market value minus residual value
D) current market value minus accumulated amortization
4) Which of the following records the payment of the current month’s rent bill for a
business?
A) debit to cash and a credit to rent expense
B) debit to rent expense and a credit to cash
C) debit to rent expense and a credit to accounts payable
D) debit to accounts payable and a credit to cash
5) Which of the following is not one of the purposes of internal control?
A) to encourage employees to follow company policy
B) to safeguard the company’s assets
C) to ensure accurate, reliable accounting records
D) to guarantee that a business makes a profit
6) The payment of the owner’s personal expenses from the business’s chequebook
should be recorded with a debit to:
A) withdrawals
B) accounts payable
C) cash
D) capital
7) If ending inventory for the current accounting period is overstated by $3,500:
A) net income for the current period will be overstated by $3,500
B) ending inventory for the next period will be overstated by $3,500
C) cost of goods sold for the current period will be overstated by $3,500
D) owner’s equity at the end of the next accounting period will be overstated by $3,500
8) Match the following.
A) gain on disposal
B) loss on disposal
The account debited when cash received is less than the book value of the asset being
sold
9) The person or business to whom the signer of a promissory note promises a future
payment is called the:
A) principal of the note
B) drawer of the note
C) maker of the note
D) payee of the note
10) All of the following are estimated liabilities except:
A) corporate income tax payable
B) vacation pay payable
C) employee income tax payable
D) warranty payable
11) In reconciling a bank statement, the bank balance is $1,800 and the chequebook
balance is $1,205. Which of the following is the MOST probable reason why the bank
balance is larger than the book balance?
A) There are outstanding cheques
B) The bank has deducted certain amounts for bank service charges
C) A deposit in transit was made at the end of the month
D) The company erroneously recorded a cheque for an amount less than actual
12) 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 entry to record the loan with the note on September 15, 2013,
would include a:
A) debit to Cash of $50,000
B) debit to Interest Expense of $2,219.18
C) credit to Note Payable, Short Term of $52,219.18
D) debit to Note Payable for $50,000
13) A significant amount of credit balances in customer accounts should be shown on
the financial statements as a(n):
A) liability
B) asset
C) owner’s equity
D) contra asset
14) Given the list of items below, show how each would be classified on the balance
sheet and indicate whether the amount is known or based on an estimate. The first item
is completed as an example.
Item Account Classification Known Amount or An Estimate
a) Salary payable current liability known
b) Sales tax payable
c) Accounts payable
d) Customer deposits payable
e) Employee income tax payable
f) Employment insurance payable
g) Note payable (due in six months)
h) Unearned rent revenue (to be earned in 12 months)
i) Note payable (due in three months)
j) Unearned rent revenue (to be earned in six months)
k) Estimated warranty payable (to expire in three months)
l) Contingent liability that is likely and cannot be reasonable estimated
m) Estimated vacation pay liability
15) An owner investment of land valued at $20,000 and a building valued at $55,000
into the business would include a:
A) debit to the land account for $55,000 and building account for $20,000
B) debit to the land account for $75,000
C) debit to the land account for $20,000 and building account for $55,000
D) debit to the building account for $75,000
16) A chart of accounts is:
A) a source document
B) another name for a trial balance
C) a list of all of the accounts of an organization and their related account numbers
D) prepared as the last step in analyzing transactions
17) 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________
18) Table 10-8 Zane Manufacturing
On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000.
The company expects to use the machine a total of 24,000 hours over the next 6 years.
The estimated sales price of the machine at the end of 6 years is $4,000. The company
used the machine 8,000 hours in 2013 and 12,000 in 2014 .
Refer to Table 10-8. What is the amortization expense for 2013 if the company uses
double-declining-balance method?
A) $6,667
B) $6,000
C) $13,333
D) $12,000
19) 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 accounts payable
account?
A) $1,200 debit
B) $3,450 credit
C) $10,870 debit
D) $2,270 credit
20) If the shipping terms are FOB shipping point and the freight bill is $200, the
purchaser, using a perpetual inventory system would record payment of the freight with
a debit to:
A) Inventory and credit to Cash for $200
B) Accounts Payable and credit to Inventory for $200
C) Inventory and credit to Purchases Discounts for $200
D) Purchases Discounts and credit to Inventory for $200
21) Landon Company sold a piece of land for $60,000, accepting a 10-year note
receivable in that amount. Assuming the use of special journals, this entry would be
recorded in the:
A) general journal
B) sales journal
C) cash receipts journal
D) long-term asset journal
22) Table 9-4
On December 31, Asheville Company has a $330,000 debit balance in accounts
receivable. The allowance for doubtful accounts has a $4,500 credit balance. Net credit
sales for the period total $1,500,000. Asheville estimates 2% of its net credit sales may
be uncollectible, and from experience, Asheville determines that the allowance for
doubtful accounts should be 10% of accounts receivable.
Referring to Table 9-4, under the percent-of-accounts-receivable method, the balance in
allowance for doubtful accounts after adjustment would be:
A) $33,000
B) $34,500
C) $30,000
D) $28,500
23) Match the following:
A) amortization
B) cash-basis accounting
C) accrual accounting
D) unearned revenue
E) accrued expense
F) contra account
G) book value
H) recognition criteria for revenues
I) accrued revenue
J) matching objective
1> The basis for recording revenues
2> The basis for recording expenses
24) Match the following.
A) closing entries
B) income summary
C) temporary account
D) permanent account
1> Another name for a real account
2> Entries that transfer the revenue, expense, and owner withdrawals balances to the
capital account
3> A temporary account into which the revenues and expenses are transferred prior to
their final transfer to the capital account
4> Another name for a nominal account
25) Table 9-1
Ringo Company had the following information relating to net credit sales for 2014:
Referring to Table 9-1, if uncollectible accounts are determined by the aging of
receivables method to be $3,040, the bad-debt expense for 2014 would be:
A) $3,640
B) $2,440
C) $3,040
D) $600
26) 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 a balance sheet dated December 31, 2014, for Thomas Repairs.
27) The following data pertain to Cross Company (assume a perpetual inventory
system) for the month ended January 31, 2013:
DateDescriptionUnitsUnit Cost Unit Selling Price
Jan.1Beg. Inventory10 $50
5 Purchase2552
10Sale(6)$80
16Sale(10)82
20Purchase 1255
25Sale (20)85
Required:
1> Compute the cost of goods sold and ending inventory under FIFO.
2> Compute Gross Margin under FIFO
28) Describe the revaluation model available under IFRS for reporting the values of
property, plant, and equipment subsequent to acquisition. Include in the description the
treatment of asset impairment.
29) Table 6-5
Assume the following data for Kruger Sales for November 2013:
Beginning inventory Nov. 15 units at $90 each
Sale Nov. 33 units at $120 each
Nov. 6 purchase11 units at $95 each
Sale Nov. 84 units at $120 each
Sale Nov. 93 units at $120 each
On November 30, a physical count reveals 6 units on hand.
Refer to Table 6-5. Calculate gross margin for Kruger Sales assuming the perpetual
moving-weighted-average-cost method is being used.
30) For each of the accounts below, choose the appropriate code letter to indicate the
proper financial statement classification:
CACurrent Asset
LTLong-term Asset
CLCurrent Liability
LLLong-term Liability
EEquity
1> Unearned revenue
2> Goodwill
3> Mortgage payable due in 3 years
4> Prepaid rent expense
5> Intangible assets
6> Owner’s capital
7> Accumulated amortization
31) Late on the night of September 30, 2014, an arsonist destroyed the Lampkin
Company warehouse, which was full of inventory. Luckily the accounting records were
stored in another facility and not destroyed in the fire. Lampkin Company is in the
process of filing a claim with its insurance company for the inventory loss due to the
fire.
Beginning inventory$350,500
Purchases through September 30, 2010470,250
Net sales revenue through Sept. 30, 2010745,200
The gross margin percent has historically been 40% of net sales revenue.
Estimate the value of the inventory destroyed in the fire using the gross margin method.