1) Every adjusting entry affects an account on the income statement and an account on
the balance sheet.
2) The credit department should have no access to cash.
3) Gross margin minus operating expenses equals income from operations on a
multi-step income statement.
4) The two basic components of a computerized accounting information system are the
hardware and software.
5) When similar assets are exchanged and no cash is received or given up, there is no
entry needed.
6) Expenditures that increase the asset’s capacity or efficiency and/ or extend its useful
life are called betterments.
7) The process of allocating the cost of property, plant and equipment to expense over
their useful lives is called amortization.
8) When there is an exchange of assets, and no cash is paid, there will always be a gain
or loss on disposal of property, plant, and equipment recorded.
9) When a journal entry contains an error and the error is detected before posting, the
entry can be corrected.
10) The person or business to which the maker of a note promises future payment is
called the payee.
11) The Cash Short and Over account is a permanent account that appears on the
balance sheet.
12) The normal balance of account Accounts Payable is a debit.
13) The direct write-off method of recognizing bad debts is superior to the allowance
methods for the purpose of matching revenues and expenses.
14) Internal controls are the methods and procedures used to safeguard assets and
eliminate waste.
15) Increases in owner’s equity result from revenues and owner investments while
decreases result from expenses and owner withdrawals.
16) The entry to close the withdrawals account would include a credit to the income
summary account.
17) The statement of comprehensive income is a good example of the need to collect
more or different information when following international financial reporting
standards (IFRS).
18) Cashiers and mail room employees who handle cash do not have access to the
accounting records. Accountants who record cash receipts do not have on opportunity to
handle cash. This is an internal control feature illustrating proper separation of duties.
19) The cost of a property, plant, and equipment asset less its accumulated amortization
is referred to as historical cost.
20) What classifications of Canadian corporations are required to use International
Financial Reporting Standards (IFRS)?
A) publicly accountable enterprises
B) all companies
C) private companies
D) none
21) Bryson Company records returns and allowances in the general journal. On June 25,
Bryson issued a $120 debit memo for merchandise purchased on credit from Crimson
Company because part of the merchandise that was sent was not what Bryson ordered.
What entry does Bryson make assuming a perpetual inventory system?
A)
B)
C)
D)
22) All of the following are assets except:
A) cash
B) accounts receivable
C) land
D) accounts payable
23) When prices are rising, the cost of goods sold on the income statement reported on
a weighted-average basis is generally:
A) lower than on a FIFO basis
B) equal to ending inventory reported on a FIFO basis
C) greater than on a FIFO basis
D) equally likely to be higher or lower on a weighted-average basis as opposed to a
FIFO basis
24) Fresh Dairy Company uses the allowance method and estimates uncollectible
accounts based on a percent of sales. Net credit sales represent 75% of total sales. Total
sales for 2014 were $840,000. Historically, 1/2 of 1% of net credit sales have been
uncollectible. At December 31, 2014, the balance in allowance for doubtful accounts is
a $120 credit. What is the balance in bad-debt expense after the adjusting entry is
made?
A) $3,030
B) $4,200
C) $3,150
D) $3,270
25) Two or more employees working together to defraud a company is referred to as:
A) team work
B) collusion
C) embezzlement
D) fraud
26) Interest expense on a worksheet’s trial balance debit column has a $3,400 balance
and a $4,000 balance on the worksheet’s income statement debit column. The difference
is due to:
A) an entry in the adjustments credit column for $600 to interest expense
B) an entry in the adjustments debit column for $4,000 to interest expense
C) an entry in the adjustments credit column for $4,000 to interest expense
D) an entry in the adjustments credit column for $600 to interest payable
27) Assuming the use of special journals, the sale of merchandise to Jerri Blackwell on
account would be recorded in the:
A) general journal
B) accounts receivable journal
C) sales journal
D) cash receipts journal
28) A promise by a customer to pay cash in the future is a(n):
A) account receivable
B) liability
C) prepaid asset
D) note payable
29) Current liabilities:
A) are subtracted from long-term liabilities on the balance sheet
B) must be of a known amount
C) must be of an estimated amount
D) are due within one year or one operating cycle, whichever is longer
30) Accounts are grouped in a book called the:
A) trial balance
B) chart of accounts
C) journal
D) ledger
31) Prepare journal entries in good form for the following transactions.
a)Owner, Mira Addington invested equipment valued at $4,500 and cash of $7,000 into
the business.
b)Purchased office supplies for cash, $550.
c)Paid $700 for current month’s rent of office space.
d)Billed a client $2,000 for services rendered.
e)Owner, Mira Addington withdrew $1,600 for personal living expenses.
32) For each of the items or entries described, indicate with a code letter, provided
below, the effect of the transaction or the correction of the error described on the
corrected net income:
Net income would increase I
Net income would decrease D
No effect on net income N/E
A) I
B) D
C) N/E
1> Service revenue has been collected but not earned, and remains in the unearned
revenue account.
2> Service revenue has been collected but is now earned, and remains in the unearned
revenue account.
3> Wages owing to employees at the period end have not been accrued.
4> Supplies have been used during the year and the supplies account has not yet been
adjusted.
5> Supplies have been used during the year and the supplies account was adjusted with
a debit to the supplies expense account and a credit to the supplies account.
6> The amount of amortization expense recorded for the building is too low.
7> Interest accrued on the note payable was accrued for an amount that was too high.
8> Services rendered but not yet billed were debited to accounts receivable and credited
to service revenue.
9> Services rendered but not yet billed were debited to accounts receivable and credited
to unearned service revenue.
10> Prepaid insurance was not adjusted for the amount used up in the period.
11> The amount of accrued revenue was credited to revenue as an adjustment.
12> An electricity bill received at the end of the accounting period was not yet accrued.
13> An electricity bill received at the end of the accounting period was debited to
utilities expense and credited to accounts payable.
33) Which of the following groups of accounts have normal debit balances?
A) assets, revenues, and owner withdrawals
B) assets, expenses, and owner withdrawals
C) assets, liabilities, and capital
D) assets, revenues, and expenses
34) Table 6-3
Ending inventory at selling price (retail) $ 53,500
Referring to Table 6-3, the estimated ending inventory at cost, using the retail method,
is:
A) $36,380
B) $39,050
C) $71,155
D) $40,125
35) Allowance for doubtful accounts has a debit balance of $980 at the end of the
current year (prior to adjustment). Net credit sales for the current period amount to
$950,000 and 2.5% is estimated to be uncollectible. The adjusting entry would require a
debit to:
A) bad-debt expense for $23,750
B) allowance for doubtful accounts for $24,730
C) allowance for doubtful accounts for $22,770
D) accounts receivable accounts for $23,750
36) Net loss appears on the worksheet:
A) in the income statement credit column and balance sheet debit column
B) only in the income statement credit column
C) in the income statement debit column and balance sheet credit column
D) only in the balance sheet debit column
37) Which of the following items are both reconciling items on the bank side of the
reconciliation?
A) Outstanding cheques and correction of book error
B) Deposit in transit and NSF cheque
C) Deposit in transit and outstanding cheques
D) Bank service charge and correction of book error
38) Given the following totals of the financial statements columns of the worksheet,
determine the net income or loss for the period:
Income StatementBalance Sheet
DebitCreditDebitCredit
$9,500$7,750 $5,300 $7,050
A) $5,300 net loss
B) $1,750 net income
C) $7,750 net income
D) $1,750 net loss
39) The treasurer of a business is:
A) the chief accounting officer
B) responsible for cash management
C) reports to the audit committee
D) reports to the vice-president of production
40) In a periodic inventory system, the entry to record the taking of a cash discount for
the purchase of merchandise would include a:
A) credit to Purchase Discounts
B) credit to Inventory
C) debit to Purchase Discounts
D) credit to Purchase Returns and Allowances.
41) The current debit balance in allowance for doubtful accounts is $465. Management
estimates that 3% of net credit sales of $205,000 will be uncollectible. Based on the
foregoing data, what is the allowance for doubtful accounts balance on the balance
sheet?
A) $6,150
B) $6,615
C) $5,685
D) $465
42) Performing a service for $500 cash and $700 on account would include a:
A) debit to cash for $1,200
B) debit to service revenue for $1,200
C) credit to service revenue for $500
D) debit to accounts receivable for $700
43) Assets that are expected to be converted to cash, sold, or consumed during the next
12 months or within the business’s normal operating cycle if longer than a year are
referred to as:
A) permanent assets
B) quick assets
C) current assets
D) cash equivalent assets
44) Performing services on account would:
A) increase net income, decrease total assets, and decrease owner’s equity
B) increase net income, increase owner’s equity, and increase total assets
C) increase total assets and liabilities
D) decrease total assets, increase net income, and increase owner’s equity
45) The financial statement that presents a summary of the assets, liabilities, and
owner’s equity as of a specific date is the:
A) statement of assets
B) balance sheet
C) statement of owner’s equity
D) cash flow statement
46) Revenues, expenses, and withdrawals would not appear on a(n):
A) postclosing trial balance
B) adjusted trial balance
C) unadjusted trial balance
D) worksheet
47) Johnson Bookkeeping has a computer that was purchased July 1, 2013, for $1,800.
Ms. Johnson thinks that the computer will be obsolete by June 30, 2015, and will have
no value at that time. What is the required adjusting journal entry on December 31,
2013?
A)
B)
C)
D)
48) Following is a list of events for Sterling Moving for the month of January. Show the
effects in dollars of these events on the accounting equation by completing the table
below.
Jan.1Owner invested $30,000 cash into the business.
3Purchased $1,500 of equipment with cash.
5Purchased $400 of supplies on account.
12Bought a car, paying $2,000 in cash and signing a note
for $10,000.
14Performed services for a customer for $1,000 on account.
15Paid employee wages of $600.
18Paid $2,000 on the note payable for the car purchased on Jan. 12 .
24Performed services for a customer for cash, $2,500.
27Collected $500 from the customer of Jan. 14 .
30Owner withdrew $400 cash for personal use.
49) On January 1, 2012, a company buys a equipment for $10,000. It has estimated
residual value of $1,000, and an estimated life of 5 years. Assume the company uses
double-declining-balance amortization. Please complete the amortization schedule
below.
50) Janet Lee Music created a petty cash fund on July 1, 2014 with an imprest balance
of $200. During July, Gerry Lynn, the fund custodian, signed the following petty cash
tickets:
Ticket #ItemAmount
1Office supplies$19.42
2Postage 9.00
3Courier charges12.00
4Sheet music77.33
5Office supplies29.14
On July 31, prior to the replenishment, the fund contained these tickets plus $55.11.
Required:
Prepare journal entries to create the fund, replenish the fund, and increase the fund to
$250.
General Journal
51) Describe single-step and multi-step formats for income statements.
52) Table 10-9 Sandu Trucking
On July 1, 2013, Sandu Trucking bought a truck for $42,000 cash. It has estimated
residual value of $6,000, and an estimated life of 4 years, or 300,000 kilometres. The
truck drove 80,000 kilometres in 2013, 90,000 kilometres in 2014, 100,000 kilometres
in 2015, and 50,000 kilometres in 2016 . Sandu Trucking has a December 31st year end.
Refer to Table 10-9. Prepare the journal entry to record the amortization expense in
2016 if Sandu Trucking uses the units-of-production method to determine amortization.
53) Define a contingent liability. Discuss the CICA Handbook’s guidelines on reporting
contingencies. Give an example of a contingent liability and indicate how it should be
reported.
54) Richter Company, which has a December 31 year end, and uses a periodic
inventory system, completed the following transactions during 2013 and 2014:
2013
Oct. 14Sold merchandise to Bruce Company, receiving a 60-day,
9% note for $4,000.
Nov. 16Sold merchandise to Marine Company receiving a 72-day,
8% note for $6,500.
Dec. 13Received amount due from Bruce Company.
Dec. 31Accrued interest on the Marine Company note.
2014
Jan. 27Collected in full from Marine Company.
Prepare the necessary journal entries to record the above transactions.
55) A business that sells on account must have good accounts receivable records to
ensure collection from customers. What is the name of detailed record of amounts
collectible from individual customers?
56) Table 10-9 Sandu Trucking
On July 1, 2013, Sandu Trucking bought a truck for $42,000 cash. It has estimated
residual value of $6,000, and an estimated life of 4 years, or 300,000 kilometres. The
truck drove 80,000 kilometres in 2013, 90,000 kilometres in 2014, 100,000 kilometres
in 2015, and 50,000 kilometres in 2016 . Sandu Trucking has a December 31st year end.
Refer to Table 10-9 and the following information:
Prepare the journal entry to record the amortization expense in 2014 with the following
assumptions:
1>straight-line amortization
2>January 2, 2014 a new canopy was installed onto the truck at a cost of $2,500
3>the useful life was changed from four years to six years
4>the estimated residual value was changed to $4,000
Prepare the following journal entries:
1>Prepare the journal entry to record the expenditure on the canopy for cash
2>Prepare the journal entry to record the amortization expense for 2014 .
3>Close the amortization expense account on December 31, 2014 .
57) Table 5-7
Marvelous Merchandising charges GST on all its sales at the rate of 5% and pays GST
on all its purchases at the rate of 5%. For purposes of this question, any applicable PST
is ignored. The following are transactions for the month of May.
May 8Purchased inventory, on account, FOB destination, from Stranhern Wholesale
$1,000 plus applicable GST.
10Returned defective merchandise to Stranhern, $300 plus applicable GST.
12Sold merchandise to Dainty Store on account for $3,000 plus applicable GST.
FOB shipping point. Cost of the merchandise sold was $2,500.
28Collected balance on account from Dainty Store.
30Paid balance on account to Stranhern.
Refer to Table 5-7. Prepare the journal entries for Marvelous Merchandising for the
month of May, assuming that Marvelous Merchandising uses a perpetual inventory
system.
