1) The adjusting entry to record inventory shrinkage would include a debit to the cost of
goods sold account in a perpetual inventory system.
2) The only way to reduce a current liability is to pay out cash.
3) The maturity value of a 15%, 90-day note for $10,000 is $9,625.
4) Manual accounting systems are never used in real life.
5) The cost of a property, plant, and equipment asset includes the purchase price,
provincial sales taxes, purchase commissions, and all other amounts paid to acquire the
asset and to ready it for its intended use.
6) When the sales value of the inventory subsequently increases after a write down to
net-realizable-value the reported value may be increased to the the limit of the original
cost.
7) Rules of professional conduct for accountants apply to accountants working in public
practice but not for accountants employed by companies.
8) Transactions in the sales journal are posted both to the general ledger and the
accounts payable subsidiary ledger.
9) When a journal entry contains an error and the error is detected after posting, the
entry can be corrected.
10) A trial balance proves the equality of the debits and credits at the end of the
accounting period.
11) When a prepaid expense is recorded initially as an asset, the adjusting entry
transfers the used portion of the asset to the expense account.
12) On a classified balance sheet unearned revenue is classified as a current revenue.
13) When posting transactions debits must always equal credits.
14) The design of the system of internal controls is the responsibility of the external
auditor.
15) The accounting cycle is the process by which companies produce their financial
statements for a specific period of time.
16) On September 1, 2014, Two Sisters Company pays $36,000 cash for six months
rent. The balance in prepaid rent on December 31, 2014, after adjustment, would be:
A) $6,000
B) $24,000
C) $12,000
D) $0
17) Match the following.
A) special journal
B) sales journal
C) control account
D) subsidiary ledger
E) balancing the ledgers
1> An account whose balance equals the sum of the balances in a group of related
accounts in a subsidiary ledger
2> Credit sales are recorded in this special journal.
3> Book of accounts that provides supporting details on individual balances, the total of
which appears in a general ledger account
4> An accounting journal designed to record one specific type of transaction
5> An important control feature that ensures the accuracy of the accounting records
18) If Real Losers records subscription money collected as revenue when received, then
what will be the balance in the unearned revenue account on December 31?
A) $150,000
B) $0
C) $180,000
D) $120,000
19) Table 5-5
The following items were taken from the December 31, 2013 records of Speedy Boat
Company, which uses a periodic inventory system:
Refer to Table 5-5. The net income for Speedy Boat Company is:
A) $156,000
B) $172,000
C) $168,000
D) $160,000
20) What is the difference between a sales return and a sales allowance?
A) A sales return reduces the amount receivable from the customer, but an allowance
does not
B) A sales return involves an adjustment to Inventory, but a sales allowance does not
C) A sales return requires a debit to Sales returns and allowances, but a sales allowance
does not
D) A sales allowance is deducted from Sales revenue to calculate net sales, but a sales
return is not
21) Answer the following questions briefly and concisely.
a)Why is it important for a company to separate the current portion of long-term debt
from the long-term debt?
b)How would the under accrual of warranty expense affect a company’s financial
statements?
c)What is the difference between a liability and a contingent liability?
d)What are contingent gains and how are they treated?
22) Cycle Company Ltd. made a lump-sum purchase of land, buildings, and equipment
for $630,000. The appraised market values for the items are respectively, $210,000,
$322,000, and $168,000. Cycle Company Ltd. should debit the equipment account for:
A) $289,800
B) $189,000
C) $151,200
D) $168,000
23) Which of the following statements is TRUE about a company making an accounting
change in its financial statements?
A) It must disclose the effect of the change on net income
B) It is generally entitled to make one accounting change per year
C) Companies can never make accounting changes because of the consistency
characteristic
D) Management must ask permission from the federal government
24) Tina Martin works as a cost accountant receiving $520 for a 40-hour work week.
She is paid time and one-half for anything over 40 hours. If Tina works 47 hours, her
total pay is:
A) $611.00
B) $520.00
C) $656.50
D) $567.00
25) Table 4-6
Selected accounting data as at December 31, 2014 for Martineau Delivery follows:
Cash$25,000
Accounts payable33,000
Accounts receivable34,000
Salary payable7,500
Supplies6,600
Unearned revenue16,500
Prepaid rent4,000
Mortgage payable (due 2018)48,000
Equipment52,000
C. Lexus, Capital10,000
Accum. amort.-equipment12,000
Service revenue69,000
Salary expense31,000
Accum. amort.-furniture6,000
Furniture49,400
Referring to Table 4-6, the current assets and total assets are:
A) $69,600 and $153,000 respectively
B) $65,600 and $153,000 respectively
C) $65,600 and $79,400 respectively
D) $69,600 and $77,400 respectively
26) Packard Company records returns and allowances in the general journal. On August
16, Packard issued a $150 credit memo to Lacker Company for merchandise sold on
credit on August 1 . What entry does Packard make?
A)
B)
C)
D)
27) 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 weighted-average
method, cost of goods sold on the income statement would be:
A) $396
B) $294
C) $389
D) $420
28) Which of the following financial statements reports an increase or decrease in net
cash during the time period covered?
A) Income statement
B) Trial balance
C) Statement of owner’s equity
D) Cash flow statement
29) Table 9-6
Jerri’s Jewellery accepted a $2,400 note receivable from S. Wells in settlement of an old
account receivable. The 10% note was dated October 2, 2013, and was due in 120 days.
Refer to Table 9-6. Assume that Jerri’s Jewellery closes its books on December 31 .
How much interest revenue is accrued on December 31, 2013?
A) $59.18
B) $39.18
C) $78.90
D) $240.00
30) 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 balance in the accumulated amortization account at the end of
2014, after recording amortization using the double-declining-balance method, is:
A) $10,800
B) $27,000
C) $16,200
D) $28,800
31) Prepaid insurance would appear on a classified balance sheet as a(n):
A) long-term liability
B) long-term asset
C) current asset
D) other asset
32) All of the following are included in the journal entry for a transaction except:
A) the name of the person making the entry
B) the titles of the accounts to be debited and credited
C) the date of the transaction
D) the dollar amounts of the debit and credit
33) Ending inventory for Commodity X consists of 20 units. Under the FIFO method,
the cost of the 20 units is $5 each. Current net realizable value is $4.75 per unit. Using
the lower-of-cost-and-net -realizable-value rule to value inventory, the balance sheet
would show ending inventory of:
A) $5.00
B) $4.75
C) $95.00
D) $100.00
34) Which of the following statements should be prepared before the balance sheet is
prepared?
A) statement of owner’s equity
B) statement of financial position
C) income statement
D) statement of owner’s equity and income statement
35) The bookkeeper recorded prepaying rent in the amount of $1,200 incorrectly as
$2,100. Which of the following journal entries will correct the ledger accounts if the
business records prepaying expenses by debiting an asset account?
A)
B)
C)
D)
36) Stardust Company issued a five-year, interest-bearing note payable for $50,000 on
January 1, 2013 . Each January, Stardust is required to pay $10,000 principal on the
note. What is the amount that will be reported on the current portion of long-term notes
payable on the December 31, 2014 balance sheet?
A) $10,000
B) $40,000
C) $30,000
D) $20,000
37) Table 9-3
Turbo Company has an allowance for doubtful accounts account with a $300 credit
balance. Net credit sales for the period were $180,000. An aging process shows that
$4,500 of the accounts receivable probably will be uncollectible. In addition, Turbo
believes that 4.5% of all net credit sales are uncollectible.
Referring to Table 9-3, if the aging approach is used to estimate uncollectibles, what is
the amount of the adjusting entry to record bad-debt expense, and what is the balance in
allowance for doubtful accounts after the adjusting entry is made?
A) $4,200 and $4,500, respectively
B) $4,500 and $4,200, respectively
C) $4,200 and $4,800, respectively
D) $4,800 and $4,500, respectively
38) Adjusting entries:
A) are recorded in the general journal
B) are recorded in the cash receipts journal
C) are recorded in the cash payments journal
D) are not recorded when a company uses special journals
39) A contingent liability that is likely and can be reasonably estimated should be:
A) disclosed in a note to the financial statements
B) accrued with a journal entry
C) either disclosed in a note or accrued with a journal entry
D) ignored until the liability materializes
40) Using the balance-sheet approach to estimate uncollectibles, accounts that are 90
days old are:
A) more likely to be collected than accounts 30 days old
B) equally likely to be collected as accounts 360 days old
C) less likely to be collected than accounts 30 days old
D) less likely to be collected than accounts 360 days old
41) The January 1, 2013, balance in the Prepaid Insurance account was $3,150 and
represented the unexpired portion of a two-year policy purchased October 1, 2012 .
What is the required year-end adjusting journal entry on December 31, 2013?
A)
B)
C)
D)
42) Nuyen Services Company records the payment of $500 cash for a previously
accrued expense and the accrual of $325 for another expense. The impact of these two
entries on total expenses and net income is:
A)
B)
C)
D)
43) Table 4-6
Selected accounting data as at December 31, 2014 for Martineau Delivery follows:
Cash$25,000
Accounts payable33,000
Accounts receivable34,000
Salary payable7,500
Supplies6,600
Unearned revenue16,500
Prepaid rent4,000
Mortgage payable (due 2018)48,000
Equipment52,000
C. Lexus, Capital10,000
Accum. amort.-equipment12,000
Service revenue69,000
Salary expense31,000
Accum. amort.-furniture6,000
Furniture49,400
Referring to Table 4-6, the current ratio is:
A) 0.82
B) 1.22
C) 1.46
D) 0.69
44) The type of account and normal balance of accumulated amortization is:
A) liability; credit
B) asset; debit
C) contra asset; credit
D) contra asset; debit
45) The interest on a $32,000 note at 9% for three months is:
A) $1,440
B) $720
C) $2,880
D) $710
46) A $100 collection on account was posted as a debit to cash and a credit to accounts
payable. This error will cause:
A) the trial balance to be in balance
B) the sum of the credits to exceed the sum of the debits by $100
C) the sum of the debits to exceed the sum of the credits by $100
D) accounts receivable account to be too low by $100
47) Janet Smythe started her personal coaching business, Smythe Personal Coaching,
on November 1, 2014 . Janet records purchasing supplies as assets and cash received
from clients on deposit as unearned revenue. The following transactions occurred
during the first month of operations:
Nov. 1Janet Smythe invested $25,000 personal cash in the business by depositing that
amount in the bank account titled Smythe Personal Coaching. The business gave capital
to Smythe.
Nov. 1Paid the November rent on the office space, $1,500.
Nov. 3Purchased a computer and printer for use in the business; she used her personal
credit card in the amount of $1,800. The computer has an expected life of three years
with no salvage value.
Nov. 5Purchased office supplies in the amount of $75 on an account she set up with the
store, Ace Office Depot.
Nov. 10Received $500 from her first client, Robert Jones, as payment in advance for
coaching fees. (Record this amount in the account Unearned Coaching Revenue.)
Nov. 17Travelled to Montreal to attend a personal coaches conference. The conference
lasted one week and costs were: travel $1,500; conference registration fee, $750. Used
cash from the business to pay for the expenses.
Nov. 25Paid Ace Office Depot the amount owing from November 5 .
Nov. 30Counted the office supplies and estimated that there was $25 of supplies
remaining. Robert Jones had received $100 of coaching during the month.
Required:
Prepare journal entries for the above transactions and the appropriate corresponding
adjusting journal entries necessary to prepare financial statements for the month of
November.
48) M & D Company has numerous employees who are paid on a monthly basis.
Payroll information for August of the current year is given below.
Employee compensation$135,000
Union dues 1,450
Charitable contributions875
Employee CPP contributions4,320
Employee EI contributions 2,336
Employee income tax withheld20,250
Prepare the journal entries to record the August payroll and the payroll benefits expense
for M & D Company for August. Also prepare the entries to record the payment of
payroll withholdings to the government and other agencies on September 15 .
Explanations are not required.
49) Scott’s Camera Shop started 2014 with total assets of $80,000 and total liabilities of
$40,000. During the year the business earned revenues of $120,000 and incurred
expenses of $70,000. Scott made an additional $15,000 capital contributions during the
year, and made withdrawals of $60,000. Prepare a statement of owner’s equity for
2014 .
50) Reid Art Supply Company uses a perpetual inventory system. The company had the
following transactions during August, 2013:
Aug. 5Purchased $2,900 of merchandise on account; FOB shipping point, 3/15, n/60.
Aug. 9Paid transportation costs of $440 for the Aug. 5 purchase.
Aug. 10Returned $600 of defective merchandise purchased on Aug. 5 .
Aug. 15Paid the amount owing for the merchandise purchased Aug. 5 .
Record the August journal entries for Reid Art Supply.
51) Based on the following adjusted trial balance, prepare an income statement for
Summers Company for the year ended December 31, 2013 .
Summers Company
Adjusted Trial Balance
December 31, 2013
DebitCredit
Cash$10,500
Accounts receivable20,000
Supplies2,700
Office furniture10,000
Accum. amort.-office furniture$4,350
Salary payable760
Unearned service revenue1,140
Jody Summers, Capital12,550
Jody Summers, Withdrawals2,800
Service revenue40,060
Salary expense8,360
Rent expense2,850
Amort. expense-office furn.350
Supplies expense 1,300_______
Total$58,860$58,860