1) A loss on sale of an asset occurs when the book value is greater than the cash
received.
2) A chart of accounts is a list of all of a company’s accounts with their account
numbers.
3) A machine acquired on April 1 would be amortized a total of eight months for the
year ended December 31 .
4) When the seller accepts a return of undamaged goods from the purchaser, the seller’s
journal entries would include two entries, if they are using a periodic inventory system.
5) The adjusting entry to record $500 of expired insurance would include a debit to
insurance expense.
6) Under accrual accounting receivables and payables are not recorded.
7) It is poor planning to have employees rotate through jobs.
8) The allowance for doubtful accounts is a contra account to cash.
9) Double-declining-balance amortization computes annual amortization by multiplying
the asset’s book value by two times the straight-line rate.
10) The lower-of-cost-or-net-realizable-value rule does not apply to Canadian
companies reporting under the accounting standards for private enterprises (ASPE).
11) On the income statement, revenues and expenses are classified as either current or
long-term to indicate their relative liquidity.
12) A 10% six month note receivable for the principal amount of $1,000 will earn
interest revenue of $100.
13) Accountants use the Accumulated Amortization account to show the cumulative
sum of all amortization expense from the date of acquiring the asset.
14) The cash register in an internal control device.
15) In a lump-sum purchase of assets, the total cost of the assets is divided among the
assets according to their relative market values.
16) The purchase of equipment by issuing a note payable would involve a debit to note
payable.
17) The practice of selling a note receivable before maturity is called dishonouring the
note.
18) In some provinces individual consumers must pay both HST and PST.
19) Under the allowance method, the recovery of an account previously written off
results in an increase in income.
20) IFRS specify that depreciation is the term to be used, whereas ASPE allow both
amortization and depreciation to be used.
21) A business acquires equipment costing $10,000 by making a $2,000 down payment
and issuing a note for the balance. This transaction will cause:
A) equipment to be debited for $10,000
B) notes payable to be debited for $8,000
C) cash to be credited for $8,000
D) equipment to be credited for $8,000
22) Five hundred hectares of land are purchased for $120,000. Additional costs include
$5,000 real estate commission, $10,000 for removal of an old building, $6,000 for
paving, and $800 delinquent property taxes. What is the cost of the land?
A) $141,800
B) $141,000
C) $135,000
D) $135,800
23) In terms of presentation, the main difference between a balance sheet prepared
under accounting standards for private enterprises (ASPE) and a statement of financial
position prepared under international financial reporting standards (IFRS) might be:
A) the time period being covered
B) the level of detail presented
C) the items included
D) the ordering of the assets and liabilities
24) A review of the accounting records discovered that unearned rent revenue in the
amount of $1,500 had been incorrectly recorded as $2,200. Which of the following
journal entries will correct the ledger accounts if the business records unearned
revenues by crediting a revenue account?
A)
B)
C)
D)
25) 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 periodic inventory system?
A)
B)
C)
D)
26) 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 salary expense includes a:
A) debit to Salary Payable to Employees
B) debit to Employee Income Tax Expense
C) credit to Employee Income Tax Payable
D) credit to Employee Benefits Expense
27) All of the following are pitfalls of E-commerce except:
A) stolen credit card numbers
B) computer viruses
C) reduced credit limits
D) phishing
28) State whether the account should be debited or credited and the normal balance of
the account for the items listed below:
Account Recorded as a debit or credit Normal balance of the account
a) Increase in Accounts payable
b) Increase in Salary expense
c) Increase in Withdrawals
d) Decrease in Capital
e) Decrease in Supplies
f) Increase in Accounts receivable
g) Decrease in Note payable
h) Decrease in Note receivable
i) Increase in Utilities expense
j) Decrease in Land
29) Indicate where each of the following accounts would be reported in the financial
statements for the year ended December 31, 2014:
a) property, plant and equipment
b) current asset
c) current liability
d) long-term liability
e) revenue
f) expense
1> __________ supplies
2> __________ unearned revenue
3> __________ note payable (due June 30, 2017)
4> __________ accounts receivable
5> __________ accounts payable
6> __________ service revenue
7> __________ accumulated amortization
8> __________ amortization expense
9> __________ prepaid insurance
10> __________ equipment
30) Table 7-7 Chaney Aircraft Service
Chaney Aircraft Service Co. started business on April 1, 2013 . They began business
with $12,000 in cash and no other assets. During the first month of business, they used
a purchase journal and a cash payment journal, and at the end of the month those
journals appear as follows:
Purchase Journal
Cash Payments Journal
Refer to Table 7-7 at the end of April, what was the balance in the subsidiary ledger for
the accounts payable for A1 Products?
A) $3,000 debit
B) $ 0
C) $1,000 credit
D) $3,000 credit
31) Match the following.
A) periodic inventory system
B) FIFO
C) conservatism
D) consistency characteristic
E) materiality
F) disclosure principle
1> Inventory system sometimes referred to as the physical system because it relies on
the actual physical count of inventory
2> Inventory cost method that will result in the same value for ending inventory using
either a perpetual or periodic inventory system
3> Principle that allows the financial statement user the ability to know which of the
cost methods is being used in valuing inventory.
4> A principle requiring the financial statements to report enough information for
outsiders to make knowledgeable decisions about the business
5> A concept by which the least favourable figures are presented in the financial
statements
6> A characteristic requiring the use of the same accounting methods and procedures
from period to period
7> Accounting concept that states that a company must perform strictly proper
accounting only for items that are significant to the business’s financial statements
8> The accounting principle that discourages managers from manipulating income by
changing from one inventory method to another
32) Assume a beginning inventory of $28,000, ending inventory of $47,000, and
purchases of $110,000. If the gross margin percent is 60%, how much is net sales
revenue?
A) $168,333
B) $101,000
C) $252,500
D) $227,500
33) Classify each event below as an operating activity, investing activity, or financing
activity.
a)________Owner invested cash into the entity.
b)________Purchased equipment for cash.
c)________Paid salaries of employees.
d)________Collected cash on account and from cash customers.
e) ________Paid utilities for the current period.
f)________Borrowed money from the bank.
g)________Pay for interest on bank loan.
h)________Owner withdraws cash from the business for personal use.
34) A withdrawal of cash for personal use by an owner would:
A) decrease total assets and decrease owner’s equity
B) increase owner’s equity and increase liabilities
C) decrease total assets and increase owner’s equity
D) increase total assets and decrease owner’s equity
35) Avery Supplies uses a periodic inventory system. Avery purchased $10,000 of
inventory on account. The terms were 3/10, n/30. The purchase was made on February
1. Avery paid the supplier on February 9 . Which of the following journal entries
properly records this payment transaction?
A)
B)
C)
D)
36) Table 7-6
Provincewide Milling Company uses a sales journal. On June 2, the sales journal
appears as you see below.
Sales Journal
Other sales that took place in June are as follows:
Refer to Table 7-6, at the end of the month, what entry was made to accounts
receivable?
A) Credit $6,700
B) Debit $6,700
C) Debit $2,260
D) Credit $2,260
37) Receiving cash from a customer in payment of an account receivable would:
A) decrease total assets and increase owner’s equity
B) increase owner’s equity and increase liabilities
C) increase total assets and decrease liabilities
D) have no effect on total assets or owner’s equity
38) Table 9-1
Ringo Company had the following information relating to net credit sales for 2014:
Referring to Table 9-1, if uncollectible accounts are determined by the aging of
receivables to be $3,450, the amount of net accounts receivable after adjusting entries
for 2014 would be:
A) $13,950
B) $15,150
C) $17,400
D) $22,550
39) Two separate errors affected Rollings Company in 2013 . The beginning inventory
was overstated by $12,000 and the ending inventory was overstated by $18,000. Net
income in 2014 will be:
A) overstated by $30,000
B) understated by $18,000
C) overstated by $18,000
D) overstated by $6,000
40) All of the following are forms of business organizations except:
A) proprietorship
B) partnership
C) corporation
D) governmental unit
41) Which of the following is correct?
A) liabilities = assets – owner’s equity
B) owner’s equity = assets + liabilities
C) assets = liabilities – owner’s equity
D) assets = owner’s equity – liabilities
42) Cost of goods sold is $108,000 ,ending inventory is $12,000 and purchases is
$100,000. What is beginning inventory?
A) $20,000
B) 32,000
C) $120,000
D) $102,000
43) A new employee with little accounting knowledge prepared the following trial
balance. Prepare a corrected trial balance as of December 31, 2014, based on the
incorrect trial balance and the additional data.
Dillon’s Publishing Service
Trial Balance
December 31, 2014
DebitCredit
Cash$ 35,000
Accounts receivable11,500
Office supplies1,500
Prepaid insurance800
Office equipment14,000
Accounts payable$18,000
Note payable9,250
Martin Dillon, Capital34,000
Martin Dillon, Withdrawals2,800
Service revenue71,300
Salary expense9,200
Rent expense7,500
Advertising expense 3,500_______
Total$140,400$77,950
Additional data:
– All accounts have a normal balance.
– Service revenue has a transposition error.
– Note payable is understated by $7,250.
44) Quick Airlines Ltd. financial data follow:
Book value of assets$650,000
Market value of assets780,000
Book value of liabilities120,000
Slow Airlines Ltd. has agreed to purchase Quick Airlines Ltd. for $900,000 cash on
January 1 of the current year.
a) Determine the amount of goodwill, if any.
b) Prepare the journal entry to record the purchase of Quick Airlines Ltd.
45) Which of the following types of organizations have the entity legally separate from
its owners?
A) corporation
B) proprietorship
C) partnership
D) sole proprietorship
46) Table 11-12
On April 1st 2013 Jamboree Sales purchased inventory for $40,000 by signing a
one-year note payable, due March 31, 2014 . The note bears interest at an annual rate of
8%.
Refer to Table 11-11. What is the correct adjusting journal entry on December 31,
2013?
A)
B)
C)
D)
47) 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 2013 if the company uses
units-of-production method?
A) $6,000
B) $13,333
C) $6,667
D) $12,000
48) A good accounting information system includes all of the following features except:
A) compatibility
B) inflexibility
C) a favourable cost/benefit relationship
D) control
49) Following is a list of errors made during the posting process. Indicate the exact
dollar impact each error would have on (1) total assets, (2) total liabilities, and (3)
owner’s equity.
a) A $100 debit to the accounts payable account was posted as a $400 debit.
b) A $500 debit to withdrawals was never posted.
c) A $2,000 debit to the land account was posted as a $2,200 debit.
d) A $1,700 credit to the revenue account was credited to an expense account.
e) A $4,000 debit to and expense account was debited to land account instead.
Error Assets Liabilities Owner’s Equity
a)
b)
c)
d)
e)
50) The links among the financial statements are:
A) net income from the income statement to the statement of owner’s equity
B) net income from the statement of owner’s equity to the balance sheet
C) ending capital from the income statement to the statement of owner’s equity
D) ending capital from the statement of owner’s equity to the income statement
51) If a bookkeeper mistakenly recorded a payment as $38 instead of the correct
amount of $83, the error would be shown on the bank reconciliation as a:
A) $45 addition to the book balance
B) $45 deduction from the book balance
C) $45 deduction from the bank balance
D) $45 addition to the bank balance
52) Ronnie’s Wings acquired equipment on January 1, 2013, for $300,000. The
equipment had an estimated useful life of 10 years and an estimated salvage value of
$25,000. On January 1, 2016, Ronnie’s Wings revised the total useful life of the
equipment to eight years. Compute amortization expense for the year ended December
31, 2016, if Ronnie’s Wings uses straight-line amortization.
A) $43,500
B) $38,500
C) $60,000
D) $27,500
53) Using the FIFO method, the earliest purchases of inventory are assumed to be
contained:
A) on the balance sheet as part of ending inventory
B) on the income statement as part of cost of goods sold
C) equally split between the income statement and the balance sheet
D) majority on the income statement and minority on the balance sheet
54) Which of the following statements best describes managerial accounting?
A) Managerial accounting focuses on information for internal decision making
B) Managerial accounting focuses on outside investors and lenders
C) Managerial accounting provides information for the public
D) Managerial accounting provides information for taxing authorities
55) If a purchaser returns goods purchased on account to the supplier under a periodic
inventory system, the purchaser would debit:
A) Inventory and credit Accounts Payable
B) Accounts Payable and credit Inventory
C) Inventory and credit Accounts Receivable
D) Accounts Payable and credit Purchase Returns
56) On January 1, 2013, William Kelly started Kelly’s Computer Service by investing
$10,000. On January 3, the business borrowed $10,000 from a creditor and executed a
Note payable with the principal and interest to be due in one year. On January 5, the
business purchased $12,000 of equipment for cash. On January 8, Kelly’s rendered
service to his first corporate client and earned $2,500 in cash. On January 12, Kelly’s
incurred repair expense of $1,200 and promised to pay the repair contractor the
following month. On January 18, Kelly’s rendered service to a new client in the amount
of $6,000 “on account” (the client promised to pay the following month). At the end of
January, Kelly took a withdrawal of $1,000. Prepare an income statement for the month
of January, a statement of owner’s equity for the month of January, and a balance sheet
at January 31, 2013 .
57) The main ethical issue in accounting for property, plant, and equipment and
intangible assets is whether to capitalize or expense a particular cost. Explain.
58) Define internal control. Who is responsible for establishing an effective system of
internal control? What is the major constraint of any system of internal control?
59) A business that purchases on account must have good accounts payable records to
ensure that purchase discounts are not being forgotten and to keep good business
relationship with suppliers. What is the name of detailed record of amounts payable to
individual suppliers?
60) The following unadjusted account balances and adjustment data are for Nugent
Consulting as of December 31, 2014:
Cash$12,900
Prepaid insurance2,000
Office supplies1,300
Office equipment10,500
Accumulated amort.-office equipment3,500
Accounts payable2,900
Salary payable0
Unearned service revenue4,500
Neela Nugent, Capital11,750
Neela Nugent, Withdrawals5,600
Service revenue13,350
Salary expense3,700
Amort. expense-office equipment0
Supplies expense0
Insurance expense0
Adjustment data:
Office supplies on hand December 31, 2014, $250
Prepaid insurance expired during 2014, $325
Unearned service revenue, December 31, 2014, $2,500
Amortization on equipment for 2014, $1,800
Accrued salaries, $900
Fill in the trial balance, adjustments, and adjusted trial balance columns in the following
table.
Nugent Consulting
Preparation of Adjusted Trial Balance
December 31, 2014
AccountTrial BalanceAdjustmentsAdjusted Trial Balance
61) ( $21213,144(13,144)
526,1781,034
40 $2168,640
459,674
2>Total units = 26 + 65 + 38 + 40=169
Total Cost = $5,122 + 13,650 + 8,170 + 8,640 = $35,582
Weighted-average = $35,583/169
= $211.
Ending Inventory in units = 169 – [(12 + 50 + 62)]
= 169 – 124
= 45
Total cost of Ending Inventory = 45 $211 = $9,495
62) Compute the amounts indicated for each of the following independent situations.
63) On April 1st 2013 Prickley Sales purchased inventory for $20,000 by signing a
one-year note payable, due March 31, 2014 . The note bears interest at an annual rate of
6%. Prickley Sales uses the periodic method for recording inventory.
Prepare the required journal entries from April 1, 2013 through March 31, 2014 .
64) Describe a worksheet and list the benefits to be derived from using a worksheet. Be
specific.
65) Table 11-9
During 2013, Cougar Manufacturing launched a new product carrying a two-year
warranty against defects. The estimated warranty costs related to dollar sales are 3%
within 12 months following sale and 5% in the second 12 months following sale. Sales
and actual warranty claims for the years ended December 31, 2013 and 2014 were as
follows:
Actual
Warranty
SalesClaims
2013$400,000$19,000
2014500,00032,000
$900,000$51,000
Refer to Table 11-9. Prepare the journal entry at December 31, 2013 for the accrual of
warranty expenses.