1) Table 7-1
On April 1, Pro Company received a cheque from Carter Company for payment of an
invoice dated March 24 for $3,000 with credit terms of 2/10 n/30. On March 28, Carter
had returned $200 of the merchandise because it was defective.
Referring to Table 7-1, when will the cash receipt be posted to Carter Company’s
account receivable account in the accounts receivable subsidiary ledger?
A) on April 30, because special journals are always posted monthly
B) on April 1, because subsidiary ledgers are posted daily
C) anytime, it doesn’t matter when subsidiary ledgers are posted
D) at the end of the next accounting period
2) Match the following.
A) current ratio
B) debt ratio
1> Current assets divided by current liabilities
2> Total liabilities divided by total assets
3) Table 10-3
Gotcha Company Ltd. acquired equipment on April 1, 2013, for $300,000. The residual
value of the equipment is $30,000 and the estimated life is six years or 120,000 hours.
Referring to Table 10-3, compute amortization expense for the year ended December
31, 2013, if Gotcha Company Ltd. uses straight-line amortization.
A) $45,000
B) $37,500
C) $11,250
D) $33,750
4) Match the following.
A) general journal
B) account number
C) credit memo
D) page number
E) debit memo
1> The document issued by a seller for a credit to a customer’s Accounts Receivable
2> The document issued by a buyer to reduce the buyer’s Accounts Payable
3> Journal used to record all transactions that do not fit one of the special journals
4> The posting reference in the general journal when posting to the general ledger
5) Table 10-6
On January 1, 2013, Grant Transport purchased a $120,000 truck for hauling cattle
across the border. Grant plans on driving the truck for eight years or 400,000
kilometres. Expected residual value for the truck is $30,000.
Refer to Table 10-6. The 2017 amortization expense using the double-declining-balance
method is:
A) $7,969
B) $9,492
C) $16,875
D) $12,656
6) A $200 payment on a notes payable posted as a debit to notes payable and a debit to
cash. 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 $400
C) the sum of the debits to exceed the sum of the credits by $400
D) the sum of the debits to exceed the sum of the credits by $200
7) Table 10-6
On January 1, 2013, Grant Transport purchased a $120,000 truck for hauling cattle
across the border. Grant plans on driving the truck for eight years or 400,000
kilometres. Expected residual value for the truck is $30,000.
Refer to Table 10-6. The balance in the accumulated amortization account at the end of
2014, after recording amortization using the double-declining-balance method, is:
A) $33,750
B) $69,375
C) $30,000
D) $52,500
8) For each of the following, state whether you agree or disagree with the accounting
treatment. What concepts support your view?
a) A company records all revenue when earned, whether it has been collected or not.
b) Payment of a three-year insurance policy is charged to insurance expense and not
adjusted.
c) Because the December telephone bill did not arrive until January, no telephone
expense was recorded for December.
d) Management of Classic Cars requires the accountants to prepare monthly financial
statements.
9) Jas Singh owns a construction business. Which of the following
principles/objectives/assumptions requires the equipment used in the business to be
amortized?
A) revenue recognition principle
B) the reliability characteristic
C) stable-monetary unit assumption
D) matching objective
10) Which of the following items used to reconcile cash does not require an adjusting
entry?
A) bank service charge
B) interest earned
C) note collected by the bank
D) outstanding cheques
11) Purchasing office equipment on account would:
A) increase total assets and increase liabilities
B) increase total assets and decrease owner’s equity
C) have no effect on total assets or liabilities
D) increase liabilities and decrease owner’s equity
12) The Brown Roof Company has three employees: an hourly employee, a salaried
employee, and an employee who works for a flat fee plus commissions. Payroll
information for the most recent week is as follows:
Juan is paid $14 per hour with time and one-half for all hours over 40 per week. Juan
worked 49 hours this week.
Maria is paid a salary of $900 per week plus a bonus whenever sales exceed $100,000
for any given week. Sales this week were $100,900. The bonus is 5% of sales in excess
of $100,000.
Li is paid a flat $100 per week plus a 10% commission on all her sales. Li’s sales for
this week amount to $6,800.
Employee income taxes equal 15% of gross earnings. CPP and Employment Insurance
deductions equal 4.95% and 1.83% of gross earnings respectively. Juan has $10 per
week withheld for a charity organization. All employees pay $20 per week for union
dues.
a)Compute the gross pay for each employee.
b)Determine the total net pay for all employees combined (ignore annual exemption for
the CPP deduction calculation).
[Note: Round all answers to the nearest whole dollar in part (a).]
13) If total liabilities decrease by $22,000 and owner’s equity increases by $8,000
during the period, then assets must have:
A) increased $30,000
B) decreased $30,000
C) increased $14,000
D) decreased $14,000
14) An adjusted trial balance is shown below.
What will the final balance in Capital be after the closing entries?
A) $37,800
B) $12,700
C) $24,000
D) $36,800
15) If a required accrued expense adjustment had not been made, the financial
statements would have been affected as follows:
A) net income understated, assets overstated, liabilities unaffected, and owner’s equity
understated
B) net income overstated, assets unaffected, liabilities understated, and owner’s equity
overstated
C) net income understated, assets overstated, liabilities understated, and owner’s equity
unaffected
D) net income overstated, assets overstated, liabilities understated, and owner’s equity
overstated
16) In a bank reconciliation, a $400 NSF cheque is:
A) deducted from the book balance
B) added to the book balance
C) deducted from the bank balance
D) added to the bank balance
17) Table 5-4
The following data is for the Atlantis Merchandising, which uses a periodic inventory
system:
Refer to Table 5-4. The total cost of goods available for sale for the Atlantis
Merchandising is:
A) $434,000
B) $408,000
C) $476,000
D) $441,000
18) Table 5-1
Referring to Table 5-1, what is gross margin?
A) $145,000
B) $105,000
C) $140,000
D) $90,000
19) Jane Browning purchased a tract of land and contracted with a builder to build an
office building on the property. She also engaged other contractors for lighting, fencing,
paving, etc.
Based on the following transactions, determine the total costs allocated to the land,
building, and land improvements accounts.
a) Purchased land for $125,000.
b) Paid a contractor $150,000 to design and build the office building.
c) Paid a demolition company $20,000 to remove an old structure on the property.
d) Paid $15,000 in delinquent taxes on the property.
e) Paid $20,000 for fencing.
f) Paid $10,000 for paving.
g) Paid an electrical contractor $15,000 for outdoor lighting.
Cost of land________________
Cost of building________________
Cost of land improvements________________
20) Which of the following is not an element of internal control?
A) assessing cost/benefit relationship
B) safeguarding assets and records
C) authorizing transactions
D) procedures to ensure adherence to company policy
21) Cost of goods sold plus ending inventory equals:
A) net purchases
B) cost of goods available for sale
C) gross margin
D) gross profit
22) On a worksheet, the income statement debit column equals $190,800 and the
income statement credit column equals $195,600. From this data, it can be determined
that:
A) the company had a net loss of $4,800 added to the income statement credit column
B) the company had a net income of $4,800 added to the income statement debit
column
C) the company had a net loss of $4,800 added to the income statement debit column
D) the company had a net income of $4,800 added to the income statement credit
column
23) An owner investment of a building, valued at $200,000, along with a $55,000
outstanding mortgage, into an entity would:
A) increase owner’s equity $145,000
B) increase total assets $55,000
C) decrease liabilities $145,000
D) increase owner’s equity $200,000
24) Inventory at the end of the current year is overstated by $20,000. What effect will
this error have on the following year’s net income?
A) Net income will be overstated $20,000
B) Net income will be understated $20,000
C) Net income will be correctly stated
D) Net income will be understated $40,000
25) The general ledger accounts used when posting the sales journal are:
A) cash, sales revenue, accounts receivable, and inventory
B) sales returns and allowances, sales revenue, accounts receivable, and cost of goods
sold
C) sales revenue, cost of goods sold, inventory, and accounts receivable
D) sales discounts, sales returns and allowances, sales revenue, and accounts receivable
26) A purchase return or allowance under a periodic inventory system is credited to:
A) Accounts Payable
B) Purchase Returns and Allowances
C) Inventory
D) Purchases
27) Table 6-6 Sam’s Wholesale Bikes
Refer to Table 6-6. What is the gross margin for the two months assuming that Sam’s
uses the perpetual inventory FIFO inventory method?
A) $18,275
B) $4,100
C) $11,600
D) $21,600
28) The entry to accrue sales tax expense includes a:
A) debit to Sales Tax Expense
B) credit to Sales Tax Payable
C) debit to Sales Tax Payable
D) There is no accrual of sales tax expense
29) Unearned revenue has:
A) been earned but the cash has not been received
B) not been earned nor has the cash been received
C) been earned and the cash has been received
D) not been earned but the cash has been received
30) Which of the following is FALSE?
A) amortization is a process of valuation
B) amortization expense is the amortized amount for the current period only
C) accumulated amortization is that portion of the property, plant, and equipment asset’s
cost that has already been recorded as an expense
D) book value is cost less accumulated amortization
31) 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. Not including the investment, the net change in owner’s equity for
the year ended December 31, 2014, was:
A) an increase of $5,100
B) a decrease of $7,800
C) an increase of $22,700
D) an increase of $100
32) The normal balance of land is a ________ because it is a(n) ________ account.
A) debit, expense
B) credit, asset
C) debit, asset
D) credit, revenue
33) 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 the
straight-line method?
A) $6,667
B) $13,333
C) $12,000
D) $6,000
34) The following information is available for Matt’s Unlimited Company for the
current month. What is the adjusted book balance on the bank reconciliation?
A) $7,466
B) $5,500
C) $5,550
D) $5,525
35) Which of the following entries would be used to account for uncollectible
receivables using the allowance method?
A) Allowance for uncollectible accounts is debited and Bad debts expense is credited
B) Bad debts expense is debited and Allowance for uncollectible accounts is credited
C) Bad debts expense is debited and Accounts receivable is credited
D) Accounts receivable is debited and Bad debts expense is credited
36) For each of the following events, indicate the amount by which liabilities increased
or decreased.
a) Owner invested cash of $20,000 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 period.
h) Performed a service on account for $2,300.
37) Recording salaries paid to employees as a debit to accounts receivable and a credit
to cash will cause:
A) accounts receivable to be understated
B) total credits on the trial balance to be understated
C) salary expense to be understated
D) total debits on the trial balance to be overstated
38) The steps in the accounting cycle (excluding the preparation of the worksheet) are
listed below in random order. List the steps in the proper sequence, inserting the
number 1 to 11 .
a)Prepare a post closing trial balance________
b)Prepare an adjusted trial balance________
c)Analyse transactions as they occur________
d)Prepare an unadjusted trial ________
e)Compute the adjusted balance in each
of the ledger accounts________
f)Post the journal entries to the ledger accounts________
g)Journalize adjusting journal entries________
h)Journalize and post closing entries________
i)Prepare financial statements________
j)Compute the unadjusted balance in each
of the ledger accounts________
k)Journalize the transactions________
39) Suppose a business has current assets of $75,000 and current liabilities of $50,000.
The business is trying to obtain a bank loan for $25,000, which would be financed over
six months. The terms of the loan agreement specify that the business’s current ratio
cannot fall below 1.50 at any time. Calculate the current ratio before and after the loan.
Do you think the loan will be granted?
40) With respect to accounting for property, plant, and equipment, what are the two
main differences in accounting for amortization for companies reporting under
international financial reporting standards (IFRS) compared to accounting standards for
private enterprises (ASPE)?
41) 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 and the following information:
Prepare the journal entry to record the amortization expense in 2014 with the following
assumptions:
1>straight-line amortization
2>January 2, 2014 a new canopy was installed onto the truck at a cost of $2,500
3>the useful life was changed from four years to six years
4>the estimated residual value was changed to $4,000
Prepare the following journal entries:
1>Prepare the journal entry to record the expenditure on the canopy for cash
2>Prepare the journal entry to record the amortization expense for 2014 .
3>Close the amortization expense account on December 31, 2014 .
42) Table 5-10
The December 31, 2014 adjusted trial balance for Camptown Company is shown below.
Using the information from Table 5-10 prepare an income statement in single-step
format and the closing entries for Camptown Company.
43) Based on the following adjusted trial balance, prepare a balance sheet for Dave
Scott and Associates (a proprietorship) on December 31, 2014 . You will have to
compute the owner’s capital account balance on December 31, 2014 .
Dave Scott and Associates
Adjusted Trial Balance
December 31, 2014
DebitCredit
Cash$13,600
Accounts receivable2,000
Office supplies700
Prepaid insurance1,200
Equipment15,600
Accum. amort.-equipment$3,900
Accounts payable6,800
Salary payable1,100
Unearned service revenue800
Dave Scott, Capital22,900
Dave Scott, Withdrawals4,900
Service revenue9,250
Advertising expense1,400
Amort. expense-equipment1,300
Supplies expense500
Insurance expense650
Utilities expense2,900_______
Total$44,750$44,750
44) Given the following adjusted trial balance for Leighton Industries, prepare a
postclosing trial balance dated December 31, 2014 .
Leighton Industries
Adjusted Trial Balance
December 31, 2014
DebitCredit
Cash$13,000
Accounts receivable7,000
Prepaid rent3,000
Prepaid insurance3,500
Supplies3,300
Land32,000
Building55,000
Accumulated amort.-building$12,000
Equipment36,000
Accumulated amort.-equipment9,000
Accounts payable8,000
Salary payable2,000
Interest payable2,500
Mortgage payable (due 12/31/2019)55,000
Leane Leighton, Capital70,500
Leane Leighton, Withdrawals25,000
Service revenue96,000
Salary expense34,000
Insurance expense1,200
Rent expense1,800
Utilities expense16,000
Advertising expense2,000
Amortization expense-building11,000
Amortization expense-equipment10,000
Supplies expense 1,200________
Total$255,000$255,000
Calculate the current ratio and the debt ratio for Leighton Industries. Explain what these
two ratios measure and whether it is usually preferable to have a higher or lower ratio
for each.
45) Table 5-5
The following items were taken from the December 31, 2013 records of Speedy Boat
Company, which uses a periodic inventory system:
Based on the information in Table 5-5 provide the following:
1>Multi-step income statement
2>Gross margin percentage and the inventory turnover ratio for Speedy Boat Company.
Comment on the effect that an increasing inventory turnover has on a business.
46) Table 5-5
The following items were taken from the December 31, 2013 records of Speedy Boat
Company, which uses a periodic inventory system:
Based on the information in Table 5-5 provide the following:
1>Multi-step income statement
2>Gross margin percentage and the inventory turnover ratio for Speedy Boat Company.
Comment on the effect that an increasing inventory turnover has on a business.
