1) The designation CA stands for Certified Public Accountant.
2) A liability account is credited when a prepaid expense is recorded initially as an
expense.
3) It is necessary for the owners and top managers to demonstrate the importance of
internal controls in order to expect the employees to take the controls seriously.
4) FIFO will report the lowest cost of goods sold on the income statement when prices
are falling.
5) The purchase of supplies on account would have an effect on the owner’s equity of
the firm.
6) Transactions entered in the general journal are posted to the general ledger, not the
subsidiary ledgers.
7) The closing process applies to only to income statement accounts.
8) Under the allowance method of accounting for uncollectible accounts, the entry to
write off an account that is determined to be uncollectible includes a debit to bad-debt
expense.
9) The “adjusted bank balance” in a bank reconciliation is always equal to the bank
statement balance plus all deposits in transit.
10) The accounts payable subsidiary ledger controls the accounts payable account in the
general ledger.
11) The entry to record unearned revenue received in advance includes a debit to
unearned revenue and a credit to cash.
12) Transactions must be recorded in either the general journal or a special journal, but
not both.
13) The method for recording business transactions is less complex using the
accounting standards for private enterprises as compared to the international financial
reporting standards.
14) All balance sheets have inventory listed as an asset.
15) The cost of improvements to leased assets appears on the business’s balance sheet
as leasehold improvements.
16) A low debt ratio is safer than a high debt ratio.
17) Journalize the following transactions for Redmond Storage and prepare a trial
balance dated June 30, 2014 .
a) Owner, Roger Redmond invested $10,000 cash into the business.
b) Rented an office and paid one month’s rent, $1,100.
c) Purchased $450 of supplies on account.
d) Performed a service on account, $1,550.
e) Paid $2,500 cash for office furniture.
f) Owner, Roger Redmond withdrew $1,700 cash for personal use.
g) Collected $1,200 on account.
18) Accumulated amortization appears on the:
A) balance sheet debit column of a worksheet
B) income statement credit column of a worksheet
C) income statement debit column and balance sheet credit column of a worksheet
D) adjusted trial balance credit column and balance sheet credit column of a worksheet
19) Owner’s equity is an:
A) insider claim to the business’s assets
B) outsider claim to the business’s assets
C) obligation to pay cash today
D) obligation to pay cash in the future
20) Jet Tool Company Ltd. paid $184,000 for equipment and a building with fair market
values of $100,000 and $150,000, respectively. Jet Tool Company Ltd. should debit the
equipment account for:
A) $73,600
B) $184,000
C) $110,400
D) $100,000
21) An advertising bill received in the current period that will be paid the following
period would:
A) decrease liabilities
B) have no effect on liabilities
C) increase net income
D) decrease owner’s equity
22) Liabilities that exist but whose exact amount is not known must be:
A) ignored
B) estimated
C) reported in the notes to the financial statements
D) treated as a contingent liability
23) The accountant for World Company discovered Central Bank had made an error on
World’s August 31 bank statement. The bank balance read $8,728, while the book
balance showed $6,998. The accountant found that an August 23 cheque for $1,250 did
not appear on the bank statement (thus representing an outstanding cheque). If this
cheque is the only reconciling item, how much is the amount of the bank error?
A) $2,980
B) $1,250
C) $480
D) $1,730
24) Assuming the use of special journals, the sale of equipment for cash would be
recorded in the:
A) sales journal
B) cash payments journal
C) cash receipts journal
D) general journal
25) A trial balance is:
A) a list of all accounts with their balances
B) the first step in the accounting cycle
C) another name for the chart of accounts
D) another name for the balance sheet
26) Record entries for the following transactions for Riviera Company. Riviera
Company maintains an allowance account.
a)Sold merchandise on account to Carver Company, $2,800.
b)Sold merchandise on account to Gwinett Company, $1,670.
c)Write off both the Carver Company and the Gwinett Company accounts.
d)Carver Company unexpectedly paid off its account in full.
27) Making a payment on account of a liability would:
A) decrease assets and increase liabilities
B) increase liabilities and decrease owner’s equity
C) decrease assets and decrease liabilities
D) decrease assets and increase net income
28) In a periodic inventory system, the entry to record the sale of $2,000 of
merchandise on account with a cost of $1,400 would include a:
A) credit to Accounts Receivable for $1,400
B) debit to Accounts Receivable for $2,000
C) debit to Cost of Goods Sold for $2,000
D) credit to Inventory for $1,400
29) When inventory prices are rising, the FIFO method will generally yield a gross
margin that is:
A) less than the weighted average method
B) equal to the gross margin of the weighted-average method
C) higher than the weighted-average method
D) FIFO does not generally cause a gross margin that is different from that of any other
costing method
30) Table 11-14
Tractor World offers warranties on all their tractors. They estimate warranty expense at
2.4% of sales. At the beginning of 2013, the estimated warranty payable account had a
credit balance of $900. During the year, Tractor World had $285,000 of sales, and had
to pay out $5,100 in warranty payments.
Refer to Table 11-14. At the end of the year, how much warranty expense was reported
on the income statement?
A) $2,640
B) $5,100
C) $4,200
D) $6,840
31) The accounts payable subsidiary ledger has postings from which sets of journals?
A) sales, cash payments, and general
B) purchases, cash receipts, and sales
C) purchases, cash payments, and general
D) purchases, general, and cash receipts
32) Which accounts are affected in the closing process under a perpetual inventory
system?
A) Gross Margin and Cost of Goods Sold
B) Cost of Goods Sold, Sales Returns and Allowances, and Sales Discounts
C) Gross Margin, Sales Returns and Allowances, and Sales Discounts
D) Operating Expenses, Sales Revenue, and Purchases
33) Journalize the following transactions for Stanley’s Repair Shop and prepare a trial
balance dated May 31, 2014 .
a) Owner, Stanley Knowles invested $5,000 cash into the business.
b) Rented a garage and paid one month’s rent, $1,400.
c) Purchased $50 of supplies for cash.
d) Performed repair services on account, $1,590.
e) Paid $1,500 cash for equipment.
f) Owner, Stanley Knowles withdrew $700 cash for personal use.
34) The concept that requires that accountants record amortization expense on
equipment is the:
A) Cost principle
B) Time-period assumption
C) Recognition criteria for revenue
D) Matching objective
35) A bank reconciliation:
A) should be prepared by an employee who handles cash transactions
B) is a formal financial statement
C) is part of a sound internal control system
D) is done only at the end of the fiscal year
36) Under the cash basis of accounting, the receipt of cash from a customer in advance
of performing the service would be credited to a(n):
A) prepaid asset account
B) deferred asset account
C) unearned revenue account
D) revenue account
37) All of the following are advantages of an enterprise resource planning system
except:
A) helps companies adjust to changes
B) expensive to implement
C) can replace hundreds of separate software systems
D) can save lots of money
38) Green Company purchased $3,600 of merchandise on account, terms 2/10 n/30. If
payment was made after the expiration of the discount period and a perpetual inventory
system is used, the entry to record the payment would include a:
A) credit to Inventory of $3,600
B) credit to Cash of $3,528
C) credit to Cash of $3,600
D) debit to Accounts Payable of $3,528
39) Warranty expense is debited:
A) in the period the product under warranty is repaired or replaced
B) in the period the revenue from selling the product was earned
C) the timing will depend on the length of the warranty period
D) in the period when the payment for the sale is received
40) The prepaid rent account has a balance that is $400 less in the worksheet’s balance
sheet debit column than in the worksheet’s trial balance debit column. This would be the
result of a:
A) $400 entry to prepaid rent in the worksheet’s adjustments debit column
B) $400 entry to prepaid rent in the worksheet’s adjustments credit column
C) $400 entry to rent expense in the worksheet’s adjustments credit column
D) mistake in cross-adding the worksheet
41) The perpetual and periodic inventory systems will produce identical cost of goods
sold and ending inventory balances using which of the following cost flow
assumptions:
A) FIFO
B) average
C) weighted-average
D) just in time
42) Sam’s Corner Store has the following purchase and sales information for one of
their inventory items:
Required:
For (a) and (b) assume the company uses the periodic inventory system.
(a)Calculate the gross profit if the company uses first-in, first-out (FIFO)
(b)Calculate the value of the ending inventory if the company uses weighted average.
For (c) and (d) assume the company uses the perpetual inventory system.
(c)What is the cost of goods sold for the Feb 25 sale if the company uses weighted
average to cost the inventory?
(d)What is the value of the ending inventory if the company uses FIFO?
43) Which of the following inventory costing methods requires a company to keep track
of the actual physical movement of individual inventory items?
A) specific-unit-cost
B) weighted-average cost
C) FIFO
D) average cost
44) The proper journal entry to record a proprietor taking $500 cash from the business
for personal use is:
A)
B)
C)
D)
45) 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 FIFO method, cost
of goods sold on the income statement would be:
A) $294
B) $375
C) $462
D) $420
46) Referring to Table 4-4, the debt ratio is:
A) 0.48
B) 0.99
C) 0.36
D) 1.11
47) All of the following are characteristics of property, plant and equipment except:
A) tangible
B) long-lived
C) held for investment
D) used in the business
48) Pattie’s Event Planning Service collects the fees from its customers in advance. At
January 1, 2013, the balance of the unearned revenue account was a credit of $4,000.
During January and February, the company collected $2,000 and $1,000 respectively.
During the two-month period, the company rendered services of $5,500. At the end of
February, the unadjusted trial balance will show what balance in unearned revenues?
A) debit balance of $1,500
B) credit balance of $1,500
C) debit balance of $7,000
D) credit balance of $7,000
49) A business pays weekly salaries on Friday of $25,000 for a five-day week ending on
Friday. Assuming the fiscal period ends on a Wednesday, the adjusting entry for accrued
salaries would involve a:
A) debit to salary payable for $10,000
B) debit to salary expense for $15,000
C) credit to salary payable for $10,000
D) credit to salary expense for $15,000
50) Beginning inventory plus net purchases and plus freight in equals:
A) net purchases
B) cost of goods available for sale
C) cost of goods sold
D) gross purchases
51) The following data are available for Matheson Avenue Retailers for April:
What is Matheson’s adjusted book balance on April 30 from the above data?
A) $1,580
B) $2,880
C) $2,080
D) $2,950
52) All of the following are items that cause a difference between the bank balance and
the book balance except:
A) cancelled cheques
B) deposits in transit
C) outstanding cheques
D) NSF cheques
53) 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 sales revenue?
A) Credit $6,700
B) Debit $6,700
C) Debit $2,260
D) Credit $2,260
54) Selected transactions for Mac’s Garage are shown below. State the effect in dollars
on the accounting equation of each transaction.
a) George McGuire invests $4,000 cash into a business known as Mac’s Garage.
b) George purchases supplies on account for $300.
c) George purchases a new welder for $1,500 cash.
d) George receives the garage’s telephone bill amounting to $100 to be paid next month.
e) George withdraws $200 cash for personal use.
f) Garage revenue for the current period amounts to $2,500. (all revenue transactions
involved cash)
Item Assets Liabilities Owner’s Equity
a)
b)
c)
d)
e)
f)
Totals
55) Lynnwood Services prepaid six months of insurance in advance on July 1, 2014 .
Lynnwood Services debited insurance expense for the entire amount of $12,000. The
adjusting entry on December 31, 2014, would include:
A) a debit to prepaid insurance for $6,000
B) a debit to prepaid insurance for $12,000
C) a credit to insurance expense for $12,000
D) No adjustment is necessary on December 31, 2014
56) Munich Company’s total sales for the year amounted to $100,000, of which 60
percent was on credit. The unadjusted trial balance showed accounts receivable of
$20,000, and the allowance for doubtful accounts reflected a $800 credit balance
(before the write-off of a bad account of $500). Munich uses 3% of accounts receivable
as an estimate of bad-debt expense. Calculate the bad-debt expense for the year for
Munich Company.
57) Little Construction Ltd. bought land, a building, and equipment for a lump-sum of
$600,000. Following are the appraised fair market values of the newly acquired assets:
Land $200,000
Building 300,000
Equipment 150,000
Determine the cost of each asset. Round to the nearest dollar if necessary.
Land ________________
Building________________
Equipment________________
58) Given the adjusted trial balance for the Stoney Creek Resort, prepare the statement
of owner’s equity for the year ended December 31, 2014 . There were no owner
investments during the year.
Stoney Creek Resort
Adjusted Trial Balance
December 31, 2014
DebitCredit
Cash$ 15,000
Accounts receivable30,000
Supplies3,200
Prepaid insurance7,500
Land40,000
Building160,000
Accum. amortization-building$ 12,000
Equipment75,000
Accum. amortization-equipment8,500
Accounts payable12,000
Salary payable2,000
Unearned service revenue25,000
Mortgage payable100,000
Douglas Reycraft, Capital60,000
Douglas Reycraft, Withdrawals23,000
Service revenue257,200
Salary expense65,000
Utilities expense24,000
Insurance expense13,000
Amortization expense-building9,000
Amortization expense-equipment3,000
Supplies expense 9,000________
Total$476,700$476,700
59) Romeo Merchandising had the following transactions in June. Prepare journal
entries for these transactions assuming Romeo uses a perpetual inventory system.
June 2Romeo received an $18,000 invoice from one of its suppliers. Terms
were 2/10 n/30, FOB shipping point. Romeo paid the freight bill
amounting to $2,000.
4Romeo returned $2,500 of the merchandise billed on June 2 because it
was defective.
5Romeo sold $8,000 of merchandise on account, terms 3/15 n/30.
The cost of the merchandise sold was $5,100.
10Romeo paid the invoice dated June 2, less the return and the discount.
15A customer returned $2,500 of merchandise sold on June 5. The cost of
the returned merchandise was $1,450.
19Britt received payment on the remaining amount due from the sale of
June 5, less the return and the discount.
60) A company has the following account balances. What is the acid-test ratio? (Please
round to two decimal places.)
61) The Cart Company, whose year end is December 31, entered into the following
transactions relating to notes payable during 2013:
Nov. 15Purchased inventory costing $45,000 by signing a 60-day,
6% note payable.
Dec. 1Purchased additional inventory costing $30,000 by signing a 120-day,
7% note payable.
Dec. 13Gave a 180-day, $20,000 note payable at the bank at 7.5% for a cash loan.
Prepare any necessary adjusting entries related to the above notes as of December 31,
2013 .
62) Marietta Products Company keeps a purchase journal. At the end of May, the
purchase journal appears as shown here:
Purchase Journal
Using the data above, please prepare a summary general journal entry including all the
accounts shown above.
63) Please refer to the following trial balance.
Please prepare a multi-step income statement:
64) List and describe the components of internal control and control procedures.