1) Accounts receivable has a debit balance of $5,000, and the allowance for doubtful
accounts has a credit balance of $440. A specific account of $160 is written off. What is
the amount of net receivables after the write-off?
A) $4,720
B) $4,400
C) $4,560
D) $5,000
2) The concept that assists accountants in determining how often to prepare financial
reports is the:
A) Cost principle
B) Time-period assumption
C) Recognition criteria for revenue
D) Matching objective
3) Which of the following amounts appears on both the income statement and statement
of owner’s equity?
A) Ending capital
B) Net income
C) Total revenues
D) Drawings
4) BCB Corporation has made 11 monthly payments for its estimated annual income
tax totalling $160,000. At year end, income tax expense for BCB Corporation amounts
to $185,000. The adjusting entry will involve a:
A) debit to Income Tax Payable for $25,000
B) debit to Income Tax Expense for $185,000
C) debit to Income Tax Expense for $25,000
D) credit to Income Tax Payable for $185,000
5) On April 1 of the current year, Wood Services received $15,000 for services to be
performed evenly over the next 12 months. Wood Services initially recorded the
$15,000 as unearned service revenue. The adjusting entry on December 31 of the
current year will include a:
A) debit to service revenue for $11,250
B) debit to service revenue for $3,750
C) debit to unearned service revenue for $3,750
D) credit to service revenue for $11,250
6) Table 4-1
Postclosing Trial Balance
Red Brown, Capital$154,900
Cash35,200
Accounts receivable10,900
Accounts payable3,500
Unearned service revenue6,850
Supplies1,200
Equipment110,600
Land15,400
Accumulated amortization? ? ?
Referring to Table 4-1, calculate the total amount in the credit column of the
postclosing trial balance.
A) $120,900
B) $165,250
C) $173,300
D) nil
7) Accruing warranty expense is prescribed by the:
A) recognition criteria for revenues
B) matching objective
C) full-disclosure principle
D) going-concern assumption
8) Cash sales for the day amount to $1,553.83. The cash count of the cash register
amounts to $1,554.95. The journal entry to record cash sales for the day will require:
A) a debit to Cash for $1,553.83
B) a credit to Sales Revenue for $1,554.95
C) a debit to Cash Short and Over for $1.12
D) a credit to Cash Short and Over for $1.12
9) The cost of land would include all of the following except:
A) delinquent property taxes paid by the purchaser
B) net purchase price
C) grading of the land
D) paving
10) 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 book value of the machine at the end of 2014 if the
company uses the double-declining-balance amortization?
A) $20,000
B) $17,778
C) $13,333
D) $28,000
11) Failure to record the adjusting entry for amortization:
A) overstates assets and overstates equity
B) understates assets and overstates equity
C) overstates assets and understates equity
D) understates assets and understates equity
12) The balance in the Office Supplies account had a debit balance on January 1, 2013,
that equalled the $240 of supplies on hand. During the year, the company purchased
$4,200 of supplies that were debited to the Office Supplies Expense account. The
proprietor estimates that the cost of supplies remaining on hand on December 31 is
$960. What is the required adjusting journal entry on December 31?
A)
B)
C)
D)
13) Which one of the following is not a provision in the Sarbanes-Oxley Act?
A) Public companies must have their internal control evaluated by the external auditor
B) Accounting firms cannot both audit and provide certain consulting services to a
client
C) Violators will receive a reprimand and further accounting training
D) Auditors of public companies are overseen by an oversight board
14) Cost of goods sold is $7,400. Beginning inventory is $3,500 and ending inventory is
$4,000. If there is no freight in and total purchases were $8,250, what were purchase
returns and allowances?
A) $850
B) $500
C) $350
D) $550
15) For each of the following events, indicate the amount by which assets increased or
decreased.
a) Owner invested cash of $25,000 and equipment valued at $10,500 into the business.
b) Purchased $600 of supplies on account.
c) Borrowed $10,000 from the bank, issuing a note payable.
d) Performed a service for $1,500 and immediately collected the cash.
e) Paid the employee salaries of $1,200.
f) Purchased equipment for $550 cash.
g) Received monthly rent bill of $1,300, to be paid in the following month.
h) Performed a service on account for $2,300.
16) Table 6-1
Assume the following data for Burnette Merchandsing for 2014:
On December 31, a physical count reveals 15 units in ending inventory.
Refer to Table 6-1. Assume a periodic inventory system. Under the FIFO method,
ending inventory would be valued at:
A) $165
B) $105
C) $162
D) $135
17) 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 and provide a schedule balancing the accounts receivable subsidiary
ledger to the accounts receivable control account.
18) The ________, a more stringent measure than the current ratio, measures a
company’s ability to pay its current liabilities.
A) debt ratio
B) equity ratio
C) acid-test ratio
D) days’ sales in receivables
19) For the following independent situations, determine the amount of net income or
net loss.
a) Revenues for the year were $200,000 and expenses were $103,000. The owner
withdrew $40,000 for personal use and made an additional investment of $30,000
during the year.
b) Revenues for the year were $249,000 and expenses were $136,000. The owner
withdrew $55,000 for personal use and made no additional investments.
c) Revenues for the year were $154,000 and expenses were $189,000. The owner made
an additional investment of $90,000 and withdrew $67,000 for personal use.
d) Revenues for the year were $150,000 and expenses were $101,000. The owner made
no withdrawals during the year but invested $20,000 cash during the year into the
business.
20) Which of the following financial statements lists the entity’s assets, liabilities, and
owner’s equity as of a specific date?
A) Balance sheet
B) Statement of owner’s equity
C) Income statement
D) Statement of cash flows
21) The Hide and Seek Company has retail outlets at both large malls and small strip
malls throughout Canada. Its accounting information system is able to track total
revenues by store, by type of mall, by size of the store, by province, and by region. This
is an example of which feature of a good information accounting system?
A) flexibility
B) favourable cost/benefit relationship
C) compatibility
D) control
22) 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 on the maturity date to record the payment of the note
payable plus accrued interest would include a:
A) credit to Note Payable of $50,000.00
B) debit to Interest Payable of $900.00
C) credit to Cash of $52,219.18
D) debit to Interest Expense of $1,319.18
23) Underwater Adventures has the following account balances on August 31, 2014:
Accounts payable$8,800
Accounts receivable9,600
Accumulated amortization – equipment30,300
Cash2,200
Cost of goods sold341,500
Jacobson, capital190,700
Jacobson, withdrawals44,000
Equipment88,000
Interest earned2,000
Inventory71,500
Operating expenses175,500
Sales discounts3,100
Sales returns and allowances14,400
Sales revenue520,600
Supplies7,100
Unearned sales revenue4,500
The following information as at August 31, 2014 was also available:
a.A physical count of items showed $1,200 of supplies on hand.
b.An inventory count showed inventory on hand of $66,400.
c.The equipment has an estimated useful life of eight years and is expected to have no
salvage value.
d.Unearned sales revenue of $1,000 was earned.
Required:
1>Prepare the necessary adjusting journal entries at August 31, 2014 . For simplicity all
operating expenses are combined into a single operating expense account for financial
statement purposes. Use the normal account name for the adjusting journal entries.
2>Prepare a classified balance sheet based on adjusted account balances.
24) Match the assumption, principle, or constraint description with the appropriate
term.
A) understandability characteristic
B) stable-monetary unit assumption
C) cost/benefit constraint
D) materiality constraint
E) relevance principle
F) cost principle of measurement
G) recognition principle
H) going-concern assumption
I) reliability characteristic
J) economic-entity assumption
1> Benefits of the information produced by an accounting system must be greater than
the costs
2> Amounts may be ignored if the effect on a decision maker’s decision is not
significant
3> Transactions are recorded based on the cash amount received or paid
4> Transactions are expressed using units of money
5> Assumes that a business is going to continue operations indefinitely
6> Business must keep its accounting records separate from its owner’s accounting
records
25) In a periodic inventory system, the closing process includes crediting the following
accounts to bring their balances to zero:
A) Cost of Goods Sold and Freight In
B) Purchases and Freight In
C) Purchase Discounts and Sales Discounts
D) Purchase Returns and Allowances and Purchase Discounts
26) Keeping accurate records of accounts receivable is an example of which feature of a
good accounting information system?
A) control
B) compatibility
C) favourable cost/benefit relationship
D) flexibility
27) Prepare any necessary journal entries based on the following data regarding the
bank reconciliation prepared by Macky Park on Nov. 30, 2014 .
a) Outstanding cheques amount to $6,950.
b) The service charges for February amount to $55.
c) Cheque #443 for $480 for the cash purchase of office supplies was erroneously
recorded by the bookkeeper as $48.
d) The bank erroneously credited Macky Park’s account for $300 for a deposit made by
Lacky Park.
e) A deposit ticket correctly prepared for $100 appeared on the bank statement as a
deposit for $1,000.
f) Cheque #650 for $4,000 for Rent expense was erroneously recorded by the
bookkeeper as $400.
g) A customer’s cheque for $950 was returned with the bank statement and stamped
NSF.
28) In the double-entry accounting system each transaction:
A) involves exactly two accounts
B) involves at least two accounts
C) involves an asset account and a liability account
D) involves a liability account and an equity account
29) 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
straight-line amortization?
A) $6,000
B) $9,000
C) $13,333
D) $10,000
30) Given the following data, what is the value of ending inventory if the FIFO periodic
method is used?
A) $1,400
B) $840
C) $910
D) $1,600
31) Which of the following are all temporary accounts?
A) liabilities, revenues, and expenses
B) revenues, expenses, and withdrawals
C) revenues, expenses, and capital
D) assets, revenues, and withdrawals
32) Bachman Merchandising has ten employees who each earn $180 per day. If they
accumulate vacation time at the rate of 1.5 vacation days for each month worked, the
amount of vacation benefits that should be accrued at the end of the month is:
A) $1,800
B) $180
C) $270
D) $2,700
33) 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 .
34) A method of accounting for uncollectible accounts by which the company waits
until the credit department decides that a customer’s account is uncollectible, and then
writes it off directly to bad-debt expense
35) 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 sale of the truck on March
31, 2015 for $21,000 assuming that Sandu Trucking uses straight-line amortization up
to the point of sale.
36) Indicate using the following codes, indicate whether the items described are inputs
(Code I), outputs (Code O), or neither input or output (Code N) of the computerized or
manual accounting system.
1>Bank statement________
2>Sales invoice________
3>Cheque from customer________
4>Cheque payable to supplier________
5>Bank deposit slip________
6>Inventory printout________
7>Balance sheet________
8>Debit memo from supplier________
9>Post closing trial balance________
10>Unadjusted trial balance________
11>Auditor’s report________
37) Sam Levine Merchandising had the following transactions during May:
May 1Beginning inventory was 20 units valued at $25 per unit.
May 5Purchased purchased 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.
38) Table 7-4
Accounts Payable
Accounts Receivable
Accumulated Amortization – Factory
Amortization Expense
Cash
Cost of Goods Sold
Factory Building
GST Payable
GST Recoverable
Inventory
Land
Marvin Fish, Capital
Marvin Fish, Withdrawals
Sales
Sales Discounts
Sales Returns and Allowances
Supplies
Unearned Rent Revenue
Wages Payable
Refer to Table 7-4.
Put the accounts in the proper order for the chart of accounts, starting with the most
liquid assets.