1) The balance sheet lists all the entity’s assets, liabilities, and owner’s equity as of a
specific date.
2) It is possible to have a credit balance for a specific accounts receivable account.
3) Liquidity measures how quickly an asset can be converted to cash.
4) Cash equivalents include liquid assets such term deposits and certificates of deposit.
5) Double-entry accounting means entering business transactions twice to avoid
possible errors.
6) The concept of accrual accounting is accepted around the world.
7) The lower-of-cost-and-net-realizable-value rule is a good example of conservatism in
accounting.
8) Audits are conducted by accountants internal to the organization so that the users of
the financial information can have confidence in the accuracy of the financial reporting.
9) The purchase of a building with a down payment of cash and the signing of a note
payable for the remainder would include a debit to building and a credit to note payable
and to cash.
10) The ledger is the first book of entry for a business transaction.
11) Employment Insurance premiums are imposed on both the employer and the
employee.
12) In an exchange transaction commercial substance exists when the cash flows of
from the new asset received are similar in risk, timing and amount to the asset being
exchanged.
13) Because of its liquidity, the valuation of cash under GAAP for private enterprises is
significantly different than under international financial reporting standards (IFRS).
14) The renewal option period is excluded from the amortization period for leasehold
improvements.
15) Sales revenue and Net sales are synonymous terms.
16) The disclosure principle of accounting requires that a business reveal to the user of
the financial statement the method to value inventory that has been used.
17) The worksheet is used only for accounts that are adjusted.
18) Moving-weighted-average matches cost of goods sold to sales on the income
statement better than FIFO.
19) It is normal to have a debit balance in the allowance for doubtful accounts account
after adjusting journal entries at the end of the year.
20) Special journals are particularly efficient for:
A) similar, repetitive transactions
B) unusual transactions
C) transactions that require recording in 3 or more accounts
D) transactions that are corrections of previous errors
21) If a cash register is short by $19, and the cash register tape totalled $1,550, then:
A) Sales Revenue is credited for $1,569
B) Sales Revenue is credited for $1,531
C) Cash Short and Over is credited for $19
D) Cash Short and Over is debited for $19
22) Match the following.
A) trade receivables
B) accounts receivable
The IFRS account name for amounts owing from customers
23) Table 9-11 Mark’s Sales
At the beginning of 2014, Mark’s sales had the following ledger balances:
During the year there were $450,000 of credit sales, $460,000 of collections, and
$3,700 of write-offs.
Refer to Table 9-11. At the end of the year, Mark’s adjusted for uncollectible account
expense using the percent-of-sales method, and applied a rate, based on past history, of
1.2%. At the end of the year, what was the balance in the accounts receivable?
A) $10,300
B) $3,700
C) $14,000
D) $21,300
24) An error has been made on the worksheet if:
A) the trial balance columns and the adjusted trial balance columns are not equal
B) the income statement columns do not equal the balance sheet columns
C) the adjusted trial balance debit column and credit column do not equal
D) the unadjusted trial balance column is in balance
25) Ruby Company purchased inventory from Diamond Company, and received a
credit memo from Diamond Company. Diamond Company had charged Ruby Company
$3.85 rather than $3.58 for each of the 100 items ordered. What entry will Diamond
Company make?
A)
B)
C)
D)
26) Michelin Jewellers completed the following transactions. Michelin Jewellers uses
the perpetual inventory system. On April 2, Michelin sold $9,000 of merchandise to a
customer on account with terms of 3/15, n/30. Michelin’s cost of the merchandise sold
was $5,500. On April 4, the customer reported damaged goods and Michelin granted a
$1,000 sales allowance. On April 10, Michelin received payment from the customer.
Which of the following entries correctly records the cash receipt on Michelin’s books?
A)
B)
C)
D)
27) A computerized storehouse of information is known as a(n):
A) network
B) database
C) management system
D) input system
28) Table 1-1
Following is a random list showing the account balances of various assets, liabilities,
revenues, and expenses for Spiffy’s Garage at December 31, 2014, the end of its first
year of operations.
The owner, Spiffy Sloan, invested $22,600 at the beginning of the year and withdrew
$5,000 during the year for personal use.
Refer to Table 1-1. The statement of owner’s equity would show an ending capital
balance of:
A) $36,600
B) $3,900
C) $22,700
D) $22,600
29) Table 5-3
Refer to Table 5-3. Net purchases are:
A) $359,000
B) $415,000
C) $395,000
D) $439,000
30) When the buyer pays the freight costs, the entry to record the payment under a
periodic inventory system would include a debit to:
A) Delivery Expense
B) Purchases Discounts
C) Inventory
D) Freight In
31) Which of the following describes the internal control component monitoring of
controls?
A) Internal auditors monitor company controls to safeguard assets, and external
auditors evaluate the controls to ensure that the accounting records are accurate
B) Monitoring of controls is the “tone at the top” of the business
C) Monitoring of controls is designed to ensure that the business’s goals are achieved
D) A company must identify its risks
32) Given the following transactions for the The Warren Candle Company, prepare a
trial balance as of August 31, 2013 .
a) Owner, Wendy Warren invested $16,000 cash and equipment with a value of $7,500
into the business.
b) Purchased supplies on account, $350.
c) Rented office space paying one month’s rent, $950.
d) Performed a service on account, $1,500.
e) Purchased a truck by paying $2,000 down and signing a note for the balance of
$19,900.
f) Performed a service and immediately collected $900 cash.
g) Owner, Wendy Warren withdrew $900 for personal use.
33) Match the following.
A) gross margin
B) sales returns and allowances
C) inventory
1> The excess of sales revenue over cost of goods sold
2> All goods that a business owns and expects to sell in the normal course of operation
3> A contra account to Sales Revenue
34) Which of the following would be a reconciling item on the bank side of the
reconciliation?
A) collection of note receivable for $1,000
B) non-sufficient funds cheque for $75
C) service fee of $20
D) bank recorded a $2,000 deposit as $200
35) An asset was purchased for $12,000. The asset’s estimated useful life was 5 years,
and its residual value was $2,000. Straight-line amortization was used. How much gain
or loss is reported if the asset is sold for $9,000 at the end of the first year?
A) $1,000 gain
B) $2,000 loss
C) No gain or loss
D) $1,000 loss
36) Table 11-13
Arc Digital starts the year with balances in its Estimated warranty payable account and
Warranty expense account as shown below. During the year, there were $190,000 of
sales and $3,200 of warranty repair payments. Arc Digital estimates warranty expense
at 1.5% of sales.
Refer to Table 11-13. At the end of the year, what was the balance in the warranty
expense account?
A) $2,850 debit
B) $1,250 credit
C) $3,200 debit
D) $1,420 debit
37) 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 bad-debt
expense for the period would be:
A) $33,000
B) $28,500
C) $37,500
D) $30,000
38) Which of the following is a benefit of selling on credit?
A) Revenues are increased by making sales to a wider range of customers
B) Expenses are reduced by making sales to a wide range of customers
C) Some customers do not pay, creating an expense
D) Cash is received sooner
39) The buyer is responsible for the shipping costs when the shipping terms are:
A) FOB destination
B) COD destination
C) FOB shipping point
D) COD shipping point
40) The following information is needed to reconcile the cash balance for Woods Paper
Products.
A deposit of $5,794.62 is in transit.
Outstanding checks total $1,533.25.
The book balance is $5,695.62.
The bookkeeper recorded a $1,524.00 cheque as $15,240 in payment of the current
month’s rent.
The bank balance at February 28, 2008 was $16,500.25.
A deposit of $300 was credited by the bank for $3,000.
A customer’s cheque for $1,280 was returned for non-sufficient funds.
The bank service charge is $70.
What was the adjusted bank balance?
A) $6,472.38
B) $18,061.62
C) $9,355.63
D) $14,938.88
41) Perkins issued a $500 credit memo to a customer, Susan Richardson, for inventory
that Richardson returned because it was not what she had ordered. What entry does
Perkins make?
A)
B)
C)
D)
42) The entry to record amortization on a building is:
A)
B)
C)
D)
43) Table 9-5
The Ritchie Company gathered the following information pertaining to its year ended
December 31, 2014, prior to any adjustments:
Aging of accounts receivable at December 31, 2014:
Refer to Table 9-5. Assume Ritchie uses the percent-of-sales method for estimating
uncollectible accounts. Ritchie estimates that bad-debt expense will be 0.6% of net
credit sales. The balance in allowance for doubtful accounts after the adjusting entry for
uncollectible accounts will be:
A) $7,880
B) $4,680
C) $1,480
D) $3,200
44) Given the following data:
Which of the following depicts the proper account balance after the application of the
lower-of-cost-and-net-realizable-value rule?
A) Ending inventory will be $24,000
B) Cost of goods sold will be $36,400
C) Cost of goods sold will be $37,400
D) Ending inventory will be $23,600
45) Under the direct write-off method, the entry to write off an uncollectible account
would include a:
A) credit to bad-debt expense
B) credit to allowance for doubtful accounts
C) debit to allowance for doubtful accounts
D) credit to the customer’s account receivable
46) 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 ending inventory for Kruger Sales assuming the
weighted-average-cost method is being used and a periodic inventory system.
47) Table 5-6
The following are transactions for Latest Fashions for the month of June.
June 2Purchased $2,000 of inventory under terms 1/10, n/60 and FOB shipping point
from Trendy Manufacturing. The merchandise had cost Trendy $1,800
June 7Returned defective merchandise to Trendy Manufacturing with invoice price of
$400.
June 8Paid the freight charges on the purchase from Trendy Manufacturing in cash for
$100.
June 9Sold merchandise to New Miss Store on account for $5,000 with terms 2/15, n/60
FOB
shipping point. Cost of the merchandise sold was $4,000.
June 10Paid Trendy Manufacturing the balance on account.
June 12Granted sales allowance of $300 to New Miss Store for defective merchandise.
June 23Collected balance owing from New Miss Store.
Refer to table 5-6. Prepare the journal entries for New Miss Store for the transactions
listed, assuming that New Miss Store uses a periodic inventory system.
48) Alice Li started Li Design Consultants on December 1, 2013, and invested $5,000
into the business. On December 12, she rendered services to three clients “on account”
with total revenues earned of $4,500. She then incurred advertising expense on four
different websites and promised to pay a total of $1,600 at a later date. On December
15, she purchased $900 of office supplies for cash. On December 20, she received
$1,000 in cash payment from her first client and deposited it into the business account.
On December 22, she incurred $2,000 for legal expense and paid cash. On December
31, she made a payment of $300 to one of the websites that she owed for advertising
provided earlier in the month. No withdrawals were taken in December. Prepare an
income statement for the month of December, a statement of owner’s equity for the
month of December, and a balance sheet at December 31, 2013 .
49) 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 ending inventory for Kruger Sales assuming the perpetual
FIFO cost method is being used.
50) Using the following worksheet for Alcazar Services, prepare a non-classified
balance sheet.
Alcazar Services
Worksheet
December 31, 2014
AdjustedIncomeBalance
Trial BalanceAdjustmentsTrial BalanceStatementSheet
51) Table 8-2
The petty cash fund had the following petty cash ticket:
Paper for photocopier$100
Miscellaneous expense20
Freight on inventory purchased.22
Postage expense 47
$189
Refer to Table 8-2. Assume that the business has established a petty cash fund in the
amount of $200 and that the amount of cash in the fund at the time of replenishment is
$8. The business uses a perpetual inventory system.
Prepare the entry to replenish the fund on March 31 .
52) Complete the following December 31, 2014 worksheet for Alcazar Services, using
the following adjustments:
1> At year end $2,000 of work done for a client was unrecorded.
2> A count of supplies showed that there were $20 remaining.
3> Unrecorded amortization on the equipment amounted to $240.
4> Accrued salaries amounted to $180.
AdjustedIncome Balance
Trial BalanceAdjustments Trial Balance StatementSheet
53) Table 8-1
The petty cash fund had the following petty cash ticket:
Toner for a printer$42
Freight to deliver goods sold39
Freight on inventory purchased.112
Miscellaneous expense10
Postage expense 25
$228
Refer to Table 8-1. Assume that the business has established a petty cash fund in the
amount of $250 and that the amount of cash in the fund at the time of replenishment is
$24. The business uses a perpetual inventory system.
Prepare the entry to replenish the fund on February 28 .