1) Match the following.
A) debit
B) normal balance
C) credit
1> The left-hand side of an account
2> The right-hand side of an account
3> The side of the account where increases are recorded
2) Table 4-2
The ledger accounts for Alice’s Rentals include the following normal balances as of
December 31, 2014:
Accumulated amortization$ 2,000
Cash 7,300
Equipment15,000
Alice Normanson, Capital 9,300
Alice Normanson, Withdrawals 2,200
Prepaid rent 3,600
Accounts payable7,800
Supplies 1,200
Unearned revenue1,600
Notes payable (due Dec. 31, 2018)7,500
Referring to Table 4-2, what is the current ratio for Alice’s Rentals?
A) 0.90
B) 1.55
C) 1.29
D) 1.09
3) Vacation pay expense should be debited:
A) when the employee takes vacation
B) when the employee has performed a service to the company and earned the vacation
C) is never debited
D) when the employee returns from vacation
4) Match the following.
A) creditor
B) receivable
C) accounts receivable subsidiary ledger
D) debtor
E) bad-debt expense
F) general customer ledger
1> Cost to the seller of extending credit
2> A monetary claim against a business or an individual
3> The party to a credit transaction who sells a service or merchandise and obtains a
receivable
4> The party to a credit transaction who makes a purchase and creates a payable
5> The ledger containing customer accounts
5) Prepare any necessary journal entries based on the following data regarding the bank
reconciliation prepared by Ragoon Services on May 31, 2014 .
a) Outstanding cheques amount to $1,650.
b) The service charges for February amount to $35.
c) Cheque #665 for $3,640 for the cash purchase of office equipment was erroneously
recorded by the bookkeeper as $364.
d) The bank erroneously credited Ragoon Services’ account for $300 for a deposit made
by Lagoon Company.
e) A deposit ticket correctly prepared for $975 appeared on the bank statement as a
deposit for $795.
f) Cheque #650 for $1,000 for utilities expense was erroneously recorded by the
bookkeeper as $100.
g) A customer’s cheque for $450 was returned with the bank statement and stamped
NSF.
6) Which of the following is TRUE of internal control?
A) A company’s outside auditor is responsible for the company’s internal control system
B) One of the major purposes of internal control is to ensure accurate, reliable
accounting records
C) Internal control procedures tend to diminish the importance of operational efficiency
D) Internal controls are only necessary for large businesses
7) Acme Investments plans to develop a shopping center. In the first quarter, they spent
the following amounts:
What amount should be recorded as the land cost?
A) $90,000
B) $91,200
C) $103,400
D) $96,200
8) 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
aging-of-accounts-receivable method. Management estimates that $2,850 of accounts
receivable will be uncollectible. Which of the following will be the balance of the
allowance for uncollectible accounts after adjustment?
A) $2,850
B) $3,450
C) $7,000
D) $2,250
9) 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, what was the gross margin for January?
10) In each of the following situations, identify the internal control weakness as well as
the business’s potential problem, and suggest a solution.
a) The law firm of Douglas and Gere has been extremely busy in recent months. It
needs another lawyer, but has not had the chance to hire one. In the meantime, one of
the secretaries has been preparing briefs, writing up wills, and preparing the closing
papers for various real estate deals.
b) Tobey Smith, an accounting clerk, is responsible for opening the mail, recording and
depositing cash receipts, as well as preparing the monthly bank reconciliation. Tobey
has not taken a vacation in over five years.
c) Carole Tobias purchases supplies for Darcey Company and stores them in a locked
room for which she has the key. She is also responsible for distributing these supplies to
employees upon request. At the end of each month, Carole takes an inventory of the
supplies on hand and notifies the accounting department of the amount of the adjusting
entry for supplies used.
11) After all the account balances have been extended to all columns of the worksheet,
the totals of the debit and credit columns for the income statement 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
12) Which of the following entries records the billing of service revenue performed on
account for $5,400?
A) debit to service revenue and a credit to accounts receivable for $5,400
B) debit to accounts payable and a credit to service revenue for $5,400
C) debit to accounts receivable and a credit to the owner’s capital for $5,400
D) debit to accounts receivable and a credit to service revenue for $5,400
13) Under a perpetual inventory system, the adjusting entry to account for inventory
shrinkage would include a:
A) credit to Miscellaneous Expense
B) credit to Cost of Goods Sold
C) credit to Inventory
D) debit to Miscellaneous Expense
14) The payroll register includes a column for all of the following except:
A) income taxes
B) Workers’ Compensation Board
C) cheque number
D) total deductions
15) Table 10-2
On January 1, 2013, Homes Realty Ltd. purchased a $45,000 vehicle to chauffeur
clients to prospective homes. Homes plans on driving the vehicle for five years or
100,000 kilometres. Expected residual value is $10,000.
Refer to Table 10-2. The book value of the vehicle at the end of 2013, after recording
amortization for the year using the straight-line method, is:
A) $38,000
B) $28,000
C) $36,000
D) $26,000
16) 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
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.
17) 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 2014 if the company uses the
double-declining-balance method?
A) $13,333
B) $8,889
C) $6,000
D) $10,000
18) The last step in the journalizing process is to:
A) enter the transaction to the journal
B) post the transaction to the ledger
C) determine the accounts involved in the transaction
D) identify the transaction and its data
19) 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 weighted-average inventory method?
A) $14,703
B) $16,945
C) $17,713
D) $21,508
20) 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 December 31, 2013, balance sheet would report a(n):
A) note payable of $50,900.00
B) interest payable of $51,319.18
C) note payable of $1,319.18
D) interest payable of $1,319.18
21) Which of the following is not a recognized amortization method?
A) straight-line method
B) lower-of-cost-or-market method
C) units-of-production method
D) double-declining-balance method
22) The entries to record a $4,500 sale on account under a perpetual inventory system,
when the cost of the merchandise is $3,000, include a:
A) debit to Inventory for $3,000
B) credit to Sales Revenue for $3,000
C) debit to Sales Revenue for $4,500
D) credit to Inventory for $3,000
23) Grubbs Company Ltd. acquired land and buildings for $1,350,000. The land is
appraised at $475,000 and the buildings are appraised at $775,000. The debit to the
buildings account will be:
A) $712,500
B) $675,000
C) $837,000
D) $775,000
24) Table 6-2
On December 31, a physical count reveals 80 units in ending inventory.
Referring to Table 6-2, the cost of ending inventory using the periodic FIFO method
would be:
A) $1,910
B) $860
C) $800
D) $850
25) Outstanding cheques are cheques:
A) not yet paid by the bank
B) not yet deducted on the books
C) not yet mailed by the payor
D) that have been paid by the bank
26) When prices are falling, the cost of goods sold reported on the income statement on
a weighted-average basis is generally:
A) lower than on a FIFO basis
B) greater than on a FIFO basis
C) equal to ending inventory reported on a FIFO basis
D) equally likely to be higher or lower on a weighted-average basis as opposed to a
FIFO basis
27) The account that is credited for every transaction entered in the purchases journal is:
A) cash
B) accounts payable
C) accounts receivable
D) sales discounts
28) The journal entry to sell merchandise under a periodic inventory system includes a:
A) debit to cost of goods sold
B) debit to inventory
C) credit to purchases
D) credit to sales revenue
29) Match the following.
A) monthly
B) daily
The frequency of posting account payable transactions from the purchases journal to the
A/P subsidiary ledger
30) Table 11-6
Peter Tomach works for a manufacturing company. He earns $600 a week for a 40-hour
week and time and a half for anything over 40 hours per week. During the first week of
the year, Peter worked 49 hours. 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. Ignore the basic
Canada Pension Plan exemption.
Referring to Table 11-6. The entry to record the employer’s portion of Canada Pension
Plan expense includes a:
A) credit to Salary Payable to Employees
B) credit to Employee Benefits Expense
C) debit to Salary Expense
D) credit to Canada Pension Plan Payable
31) Under a perpetual inventory system, which accounts would be closed to Income
Summary with credits?
A) Sales Returns and Allowances, Sales Revenue, and Inventory
B) Sales Discounts, Sales Returns and Allowances, and Cost of Goods Sold
C) Sales Revenue and Cost of Goods Sold
D) Sales Returns and Allowances and Sales Revenue
32) Table 11-10
Benny’s Bagels operates in a province that has HST collected by the federal government
at a rate of 12%. During the month of December 2013 Benny’s Bagels purchased baking
materials for $12,000; bought a new oven for $15,000; paid salaries of $14,000; and,
had cash sales of $35,000.
Refer to Table 11-10. What is the correct journal entry to record the payments made
during December that require HST?
A)
B)
C)
D)
33) In a periodic inventory system, the closing process includes:
A) debiting Purchases
B) crediting Purchase Returns and Allowances
C) debiting Sales Discounts
D) debiting Inventory for the ending balance
34) Table 10-7
On January 1, 2013, Brazeau Transport purchased a $165,000 truck for hauling cattle
across the border. Brazeau plans on driving the truck for four years or 450,000
kilometres. Expected residual value for the truck is $35,000. On June 30, 2016, after
having driven the truck 44,000 kilometres, the truck had an accident on the highway
and was totalled. The insurance proceeds for the truck was $42,000 cash.
Refer to Table 10-7. Calculate and record the amortization expense for the truck for the
year 2015 using the straight line method.
35) Bill’s Bargain Vacuums warrants all of its products for one full year against any
defect in manufacturing. Sales for 2013 and 2014 were $758,000 and $871,000,
respectively. Bill’s Bargain Vacuums expects warranty claims to run 4.5% of annual
sales. Bill’s paid $30,150 and $38,290, respectively, in 2013 and 2014 in warranty
claims.
1> Compute Bill’s warranty expense for 2013 and 2014 .
2> Compute the balance in estimated warranty payable on December 31, 2014,
assuming the January 1, 2013, balance in the account was $2,980.
36) What are the benefits of studying a manual accounting system given that most
companies have computerized accounting systems?
37) Explain the difference between cash-basis and accrual accounting. Are adjusting
entries necessary in both methods? Explain.
38) Prepare journal entries for the following transactions. Explanations are not required.
2013
Jan. 1Purchased a building for $84,000 cash, $4,000 residual value, 20-year
expected life, double-declining-balance amortization.
May 1Purchased equipment for $25,000 cash, $3,000 residual value, 10-year
expected life, straight-line amortization.
Dec. 31Recorded amortization on the building and equipment.
2014
June 30Sold the equipment for $21,000 cash. (Record amortization to date for
2014 before selling equipment.)
Dec. 31Recorded amortization on the building.
39) 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
weighted-average cost method is being used and a periodic inventory system.
40) For the items listed below, choose the appropriate code letter to indicate whether the
account is:
TRTemporary account with normal balance credit, closed to Income Summary
TETemporary account with normal balance debit, closed to Income Summary
PAPermanent Account with normal balance debit, not closed
PL&EPermanent Account with normal balance credit, not closed
1> Rent Expense
2> Amortization Expense
3> Supplies
4> Unearned Rent Revenue
5> Cash
6> Furniture
7> Accumulated Amortization
8> Salaries Payable
9> Salaries Expense
10> Supplies Expense
11> Prepaid Rent
12> Rent Revenue
41) Amortization allowed for income tax purposes by Canada Revenue Agency