Book Title
Accounting-- Volume 1 9th Edition

MET MG 783 Test 2

September 25, 2014
1) Service charge and interest on loan are both adjustments required to the bank balance
on a bank reconciliation.
2) Goodwill is a tangible asset.
3) The system of electronic linkages that allows different computers to share the same
information is called a worksheet.
4) Accrual accounting records the effect of every business transaction as it occurs.
5) In a computerized accounting system, the posting to the general accounts ledger is
done automatically.
6) The matching objective requires that a company record warranty expense at the time
the repair is made.
7) Sales discounts is a contra account and has a normal credit balance.
8) A journal is like a diary; it shows a chronological listing of a business's activities.
9) Outputs are the reports used for decision making.
10) One method of establishing internal control over receivables is to establish a bank
lock box.
11) Long-term debt refers to obligations that have to be paid within a year of the
balance sheet date.
12) In computerized accounting systems, modules can be the same as submenus.
13) Federated Express purchased equipment costing $75,000 on October 2, 2013, by
paying 30% down and signing an 8%, 120-day note payable for the balance. Federated's
year end is December 31 .
1>Prepare journal entries to:
a) record the purchase of the equipment on October 2, 2013
b) record the accrual of interest on December 31, 2013
c) record payment of the note on January 30, 2014
2>Determine the balance of any current liabilities associated with the note as of
December 31, 2009 .
14) Assuming the use of special journals, the sale of merchandise to Landon Browning
for cash would be recorded in the:
A) cash receipts journal
B) cash payments journal
C) general journal
D) sales journal
15) A document issued by a purchaser when returning merchandise is referred to as
A) seller's memorandum
B) debit memo
C) credit memo
D) accounts payable memo
16) Which of the following journal entries most accurately records an owner investing
building and land into a business valued at $250,000 and $400,000 respectively?
17) Under international financial reporting standards (IFRS) what is the preferred
terminology for accrued liabilities?
A) provisions
B) obligations
C) trade payables
D) current debt
18) Temporary accounts are:
A) current assets but not current liabilities
B) all of the owner equity accounts
C) current asset and current liability accounts
D) also called nominal accounts
19) When an unearned revenue is initially recorded as a revenue, the adjusting entry:
A) transfers the earned portion to a liability account
B) transfers the earned portion to a revenue account
C) transfers the unearned portion to a revenue account
D) transfers the unearned portion to a liability account
20) Performing a service on account would include a:
A) debit to accounts payable
B) credit to accounts payable
C) credit to the cash
D) credit to service revenue
21) If an adjustment for prepaid insurance is not made at year end, net income will be:
A) unaffected
B) understated
C) overstated
D) correct this year but incorrect next year
22) Clayton Consulting initially records all prepaid expenses as expenses and all
unearned revenues as revenues. Given the following information, prepare the necessary
adjusting entries at year end, December 31, 2014 .
a) On January 3, 2014, $500 of supplies were purchased. A count revealed $100 still on
hand at December 31, 2010 .
b) On January 4, 2014, a $10,500 payment was made to an insurance agency for two
and a half years of insurance.
c) On October 30, 2014, received four months' rent in advance from a tenant, $8,000.
d) On August 1, 2014, received six months' rent in advance from a tenant, $2,400.
23) If the amount of net income for the current period exceeds the amount of the
owner's withdrawals, there will be a(n):
A) decrease in the cash account
B) increase in the owner's capital account
C) decrease in the owner's capital account
D) increase in the cash account
24) A petty cash fund, established with a $300 balance, had petty cash tickets totalling
$269 and cash in the amount of $29. The entry to replenish the fund would include a:
A) credit to Cash in Bank for $269
B) debit to Petty Cash for $271
C) debit to Cash Short and Over for $2
D) credit to Petty Cash for $271
25) Accounting information systems cope with heavy transaction loads by:
A) computerization and specialization
B) segregation of duties between personnel
C) hiring temporary personnel
D) outsourcing the processing of data
26) Providing services for $2,000 where cash is immediately received, will cause:
A) service revenue to be debited for $2,000
B) service revenue to be credited for $2,000
C) cash to be credited for $2,000
D) accounts receivable to be credited for $2,000
27) A cash investment into the business by the owner would:
A) increase liabilities and increase owner's equity
B) increase total assets and decrease owner's equity
C) increase owner's equity and increase total assets
D) increase total assets and decrease liabilities
28) If inventory items may be identified individually, the business could easily use this
method of inventory costing:
A) average cost
B) specific-unit-cost
D) weighted-average cost
29) Two separate errors affected Satellite City in 2013 . The beginning inventory was
understated by $28,000 and the ending inventory was understated by $43,000. Net
income in 2014 will be:
A) overstated by $15,000
B) overstated by $43,000
C) understated by $43,000
D) understated by $71,000
30) A company began operations and purchased $5,000 of supplies. By year end,
$2,700 was still on hand. The adjusting entry at year end would include a:
A) debit to supplies of $5,000
B) credit to supplies for $2,700
C) credit to supplies for $2,300
D) debit to supplies expense for $2,700
31) Which of the following transactions would increase one asset, decrease another
asset, and increase a liability?
A) purchasing supplies and equipment on account
B) paying liabilities incurred last period
C) owner investment of cash and equipment into the business
D) purchasing land with a cash down payment and a note payable
32) Customers' individual accounts included in a subsidiary ledger are said to be
controlled by the Accounts Receivable account in the:
A) accounts payable ledger
B) accounts receivable ledger
C) controlling ledger
D) general ledger
33) Which of the following describes the control environment?
A) Internal auditors monitor company controls to safeguard assets, and external
auditors monitor the controls to ensure that the accounting records are accurate
B) The control environment is the "tone at the top" of the business
C) The control environment is designed to ensure that the business's goals are achieved
D) A company must identify its risks.
34) The current credit balance in allowance for doubtful accounts is $150. Management
estimates that 2.5% of net credit sales of $105,000 will be uncollectible. Based on the
foregoing data, what is the bad-debt expense balance on the income statement?
A) $2,775
B) $2,475
C) $2,650
D) $2,625
35) If the bank mistakenly recorded a $17 deposit as $71, the error would be shown on
the bank reconciliation as a:
A) $71 addition to the bank balance
B) $54 addition to the bank balance
C) $71 deduction from the bank balance
D) $54 deduction from the bank balance
36) Prepare any necessary journal entries based on the following data regarding the
bank reconciliation prepared by Bootlegger Company on February 28, 2013 .
a) Outstanding cheques amount to $650.
b) The service charges for February amount to $40.
c) Cheque #665 for $3,525 for the cash purchase of office equipment was erroneously
recorded by the bookkeeper as $3,552.
d) The bank erroneously credited Bootlegger Company's account for $300 for a deposit
made by Bootlegger Company.
e) A deposit ticket correctly prepared for $975 appeared on the bank statement as a
deposit for $795.
f) Cheque #650 for $100 for utilities expense was erroneously recorded by the
bookkeeper as $10.
g) A customer's cheque for $250 was returned with the bank statement and stamped
37) Match the following terms and definitions:
A) account receivable
B) proprietorship
C) earnings estimate
D) transaction
E) generally accepted accounting principles
F) corporation
G) asset
H) expense
I) accounting
J) liability
K) limited-liability partnership
L) revenue
M) capital
1> A business owned by shareholders
2> Another name for the owner's equity of a proprietorship
3> An entity with a single owner
38) Table 11-8
BCN Bank agrees to lend Samson Company $80,000 on January 1 . Samson Company
signs an $80,000, 5%, 9-month note.
Refer to Table 11-8. Prepare the entry made by Samson Company on January 1 to
record the proceeds and issue of the note.
39) Describe two common events that create receivables and provide the generic names
of the two parties involved in a credit transaction.
40) At January 1, Everbright Sales has the following balances:
During the year, Everbright has $150,000 of credit sales, collections of $140,000, and
write-offs of $3,000. Everbright records bad debt expense at the end of the year using
the aging method. At the end of the year, the aging analysis produces a figure of $1,900,
being the estimate of uncollectible accounts at end of year.
1>What is the December 31 journal entry to record the bad debts expense?
2>Present the Everbright accounts receivable in a partial balance sheet at December
41) M and N Sporting Goods reports these selected transactions for the month of July:
July 9Issued invoice No. 159 for a sale on account to Evans Company, $4,600,
terms 1/10 n/30. The cost of the merchandise was $2,700.
10Issued invoice No. 160 for a sale on account to Sails and Boats, $5,700,
terms 2/15 n/45. The cost of the merchandise was $2,450.
20Issued a credit memo to Sails and Boats for $2,800 for merchandise
returned. The cost of the returned merchandise was $1,200.
Record the above transactions in either the sales journal or the general journal. M and N
Sporting Goods has a perpetual inventory system.
Sales Journal
General Journal
42) Why has Canada, along with most other countries, adopted International Financial
Reporting Standards?
43) Table 9-8
The following information is available for Beauchemin Merchandising for the year
ended December 31, 2014 .
Accounts receivable Bal. Jan. 1, 2014$19, 500
Allowance for doubtful accounts,
Jan 1, 2014 1,040Cr.
Sales Revenue for 2014 (30% on credit)520,000
Bad debt write-offs during 20141,690
Collections on account during 2014 159,900
Refer to Table 9-8. Assume that Beauchemin uses the percent-of-accounts-receivable
method of estimating bad debts, at the rate of 2%, calculate the amount of the bad-debt
expense for Beauchemin for the year ended December 31, 2014 .
44) With respect to accounts receivable, Canadian standards are said to be converged
with international financial reporting standards (IFRS). Justify this statement.

Subscribe Now

Sign up to view full document

View Document