1) Table 10-2
On January 1, 2013, Homes Realty Ltd. purchased a $45,000 vehicle to chauffeur
clients to prospective homes. Homes plans on driving the vehicle for five years or
100,000 kilometres. Expected residual value is $10,000.
Refer to Table 10-2. The amortization expense for 2014 using the
double-declining-balance method is:
A) $6,480
B) $8,750
C) $10,800
D) $2,880
2) Purchasing supplies on account would include a:
A) debit to supplies and a credit to note payable
B) debit to supplies and a credit to cash
C) debit to supplies and a debit to accounts payable
D) debit to supplies and a credit to accounts payable
3) The entry to record the return of $300 of supplies purchased on account would be:
A)
B)
C)
D)
4) Under the income-statement approach (percent-of-sales approach), the entry to
accrue bad-debt expense involves:
A) a debit to allowance for doubtful accounts and a credit to bad-debt expense
B) a debit to bad-debt expense and a credit to allowance for doubtful accounts
C) a debit to bad-debt expense and a credit to accounts receivable
D) a debit to allowance for doubtful accounts and a credit to accounts receivable
5) 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, how would this transaction be recorded in Pro’s cash receipts
journal if payment is made on April 15?
A) debit Cash $2,800; credit Accounts Receivable-Carter Company $3,000
B) debit Cash $2,800; credit Accounts Receivable-Carter Company $2,800
C) debit Cash $2,800; credit Accounts Receivable-Carter Company $3,000 and Sales
Discounts $56
D) debit Accounts Receivable-Carter Company $3,000; credit Cash $2,744 and Sales
Discounts $56
6) A company gives a $50,000, 60-day note at the bank at 7%. How much will the
company pay the bank at maturity?
A) $50,287.67
B) $49,424.66
C) $49,712.33
D) $50,575.34
7) A merchandiser purchases inventory on account under a periodic inventory system
with terms of 2/10 n/30. The merchandiser would:
A) credit Inventory on date of payment if the discount is taken
B) credit Inventory on date of payment if the discount is not taken
C) credit Purchases Discounts on date of purchase if the discount is taken
D) credit Purchases Discounts on date of purchase if the discount is not taken
8) The cheques that have been paid by the bank on behalf of the depositor and included
with the bank statement are called:
A) outstanding cheques
B) deposited cheques
C) cancelled cheques
D) cheques in transit
9) Table 1-2
Following is a list showing the account balances of various assets, liabilities, revenues,
and expenses for Tim’s Landscaping at December 31, 2014, the end of its first year of
operations.
The owner, Tim Brown, invested $45,200 during the year and withdrew $10,000 during
the year for personal use.
Refer to Table 1-2. Total liabilities at December 31, 2014, were:
A) $25,600
B) $27,800
C) $41,200
D) $45,200
10) Which of the following statements is FALSE?
A) Reliable data are verifiable
B) Reliable data may be supported by objective evidence
C) Owner opinions are one source of objective evidence
D) An independent appraisal is usually considered reliable
11) The current debit balance in allowance for doubtful accounts is $150. Management
estimates that 2% of net credit sales of $100,000 will be uncollectible. Based on the
foregoing data, what is the bad-debt expense balance on the income statement?
A) $2,150
B) $1,850
C) $3,150
D) $2,000
12) Prepaid insurance shows a beginning balance of $500 and an ending balance of
$2,800. The insurance expense account was debited during the adjusting process for
$1,800. How much cash was spent for insurance?
A) $1,500
B) $4,100
C) $1,000
D) $3,300
13) A machine was purchased on May 18, 2014 for $7,500. The estimated life is six
years and estimated residual value is $300. Assuming straight-line amortization and that
the company records no amortization for the month on assets purchased after the 15th
of the month, the amortization expense for the year ended December 31, 2014, is:
A) $800
B) $700
C) $833
D) $1,200
14) Assuming the use of special journals, the borrowing of $80,000 from the bank by
signing a note payable would be recorded in the:
A) cash payments journal
B) sales journal
C) cash receipts journal
D) general journal
15) Refer to Table 6-1. Assume a perpetual inventory system and all sales occurred
prior to October 30th. Under the FIFO method, cost of goods sold on the income
statement would be:
A) $375
B) $537
C) $162
D) $420
16) A business receives its bill for utilities for the current month that it plans to pay next
month when the payment is due. This transaction causes:
A) an increase in both assets and owner’s equity
B) a decrease in both owner’s equity and liabilities
C) an increase in both assets and liabilities
D) an increase in liabilities and a decrease in owner’s equity
17) Table 10-4
Golden Miners purchased a mine in 2013 for $960,000. It was estimated that the mine
contained 3,000,000 tonnes of ore, and would be totally worthless once all ore was
extracted. Golden Miners extracted 250,000 tonnes in 2013 and 300,000 tonnes in 2014
.
Referring to Table 10-4, amortization expense for 2014 would equal:
A) $80,000
B) $300,000
C) $250,000
D) $96,000
18) The two most widely used methods of accounting are:
A) financial and managerial
B) cash-basis and financial
C) accrual and managerial
D) accrual and cash-basis
19) Sales revenue for Joe’s Sporting Goods for the current period amounted to
$215,000. Joe’s Sporting Goods records GST when merchandise is sold. All sales are on
account. The GST rate is 5%. The journal entry would include a debit to:
A) Accounts Receivable for $215,000
B) Accounts Receivable for $225,750
C) GST Payable for $10,750
D) Sales Revenue for $215,000
20) State the account to be debited and the account to be credited for the following
transactions. Choose from the following list of accounts: cash, accounts receivable,
supplies, equipment, land, accounts payable, note payable, capital, withdrawals, service
revenue, utilities expense, and salary expense.
a) Purchased equipment for cash.
b) Performed services for cash.
c) Owner invests cash into the business.
d) Purchased supplies for cash.
e) Purchased equipment by issuing a note payable.
f) Purchased supplies on account.
g) Performed services on account.
h) Received cash on account.
i) Paid a creditor on account.
j) Paid salary of employees for the current period.
k)Owner invested land in the business
DebitCredit
a)________________________________
b)________________________________
c)________________________________
d)________________________________
e)________________________________
f)________________________________
g)________________________________
h)________________________________
i)________________________________
j)________________________________
k) ________________________________
21) Table 9-12 Adirondac Marine Supplies
On September 1, 2013, Adirondac Marine Supplies made a loan to one of its customers.
The customer signed a 6-month note for $1,500 at 10%.
Refer to Table 9-12. How much interest revenue did Adirondac record in the year 2014?
A) $150.00
B) $12.50
C) $25.00
D) $50.00
22) The principle that states that assets acquired by the business should be recorded at
their exchange price is the:
A) subjectivity principle
B) cost principle of measurement
C) revenue-recognition principle
D) matching principle
23) Determine net income for the period if beginning owner’s equity is $20,000, cash
withdrawals by the owner amount to $7,000, and ending owner’s equity is $37,000.
A) $10,000
B) $27,000
C) $24,000
D) $13,000
24) Goodwill is equal to the excess of the cost of an acquired business over the sum of
the:
A) book value of its net assets
B) book value of its assets
C) market value of its net assets
D) market value of its assets
25) Table 10-2
On January 1, 2013, Homes Realty Ltd. purchased a $45,000 vehicle to chauffeur
clients to prospective homes. Homes plans on driving the vehicle for five years or
100,000 kilometres. Expected residual value is $10,000.
Referring to Table 10-2, the amortizable cost of the vehicle is:
A) $9,000
B) $45,000
C) $35,000
D) $55,000
26) For the current year, Heedy’s Department Store reported the following data:
The current net realizable value of the inventory on the balance sheet date is $91,730.
Using the lower-of-cost-and-net-realizable-value rule, what is cost of goods sold for
Heedy’s Department Store?
A) $989,020
B) $982,720
C) $897,290
D) $1,080,750
27) The balance in the capital account after all closing entries have been posted is:
A) equal to net income or loss for the period
B) the same as the balance of the account on the worksheet
C) always more than the balance of the account on the worksheet
D) the balance that will appear on the balance sheet
28) An owner withdrawal of $20,000 cash would:
A) decrease owner’s equity and increase assets by $20,000
B) increase owner’s equity and decrease liabilities by $20,000
C) increase liabilities and assets by $20,000
D) decrease assets and owner’s equity by $20,000
29) The balance in prepaid rent after adjustment represents:
A) a liability on the balance sheet
B) an expense on the income statement
C) revenue on the income statement
D) an asset on the balance sheet
30) Franconia Sales offers warranties on all their electronic goods. Warranty expense is
estimated at 2% of sales revenue. In 2013, Franconia had $500,000 of sales. In the same
year, Franconia paid out $7,500 of warranty payments. Which of the following is the
entry needed to record the estimated warranty expense?
A)
B)
C)
D)
31) A pharmaceutical company testing drugs to determine possible side effects is a part
of:
A) monitoring controls
B) information systems
C) control procedures
D) risk assessment
32) Which of the following credit terms allows for a cash discount?
A) n/30
B) n/eom
C) n/60
D) 1/10 n/30
33) In a periodic inventory system, when a company returns merchandise previously
purchased on account, the entry to record the return would include a:
A) debit to Inventory
B) credit to Purchase Returns and Allowances
C) debit to Sales Returns and Allowances
D) credit to Accounts Payable
34) 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. Total assets at December 31, 2014, were:
A) $31,600
B) $32,700
C) $36,200
D) $36,600
35) A petty cash fund, established with a $250 balance, had petty cash tickets totalling
$219 and cash in the amount of $34. The entry to replenish the fund would include a:
A) credit to Cash in Bank for $250
B) debit to Petty Cash for $219
C) debit to Cash Short and Over for $3
D) credit to Cash in Bank for $216
36) A company purchased a used machine for $80,000. The machine required
installation costs of $8,000 and insurance while in transit of $500. At which of the
following amounts would the equipment be recorded?
A) $80,500
B) $88,500
C) $88,000
D) $80,000
37) The balance sheet reports accounts receivable at:
A) lower-of-cost-or-market
B) historical cost
C) fair value
D) market value
38) 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 book value of the machine at the end of 2014 if the
company uses units-of-production amortization?
A) $20,000
B) $10,000
C) $17,778
D) $28,000
39) Park Place received a bank statement showing a balance of $1,400. What is the
adjusted balance if there was a bookkeeper error of $100 in the depositor’s favour, two
outstanding cheques totalling $40, a service charge of $10, a deposit in transit of $150,
and interest revenue of $26 earned by the depositor?
A) $1,110
B) $1,510
C) $1,636
D) $1,610
40) Table 11-3
Bentley Enterprises purchased $8,000 of inventory by issuing a six-month, 7.5% note
payable on November 1, 2013 . Bentley has a December 31 year end.
Refer to Table 11-3. The December 31, 2013, balance sheet would report:
A) an interest payable of $100
B) an interest expense of $300
C) a note payable of $8,100
D) a note payable of $8,200
41) Table 11-17
Grant Caballero works for a media company. He earns $3,000 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, Grant worked 45 hours. The income tax withholdings are 25% of gross
earnings. Canada Pension Plan deductions are 4.95% of gross earnings and
Employment Insurance deductions are 1.83% of gross earnings. The worker’s
compensation premium is 1.6% of gross earnings. Both Grant and the company
contribute 5% of gross earnings into a group RRSP. In addition Grant has $25 deducted
from his weekly pay to contribute to his favorite charity, Accounting Students’ Tutor
Fund.
Refer to Table 11-17. Prepare the journal entries to record the salary expense and the
employer’s share of the withholdings for the first week in January. Ignore the basic
Canada Pension Plan exemption.
42) Describe the posting process and how it relates to the accounting process. Give an
example in your discussion.
43) Tobermory Merchandising had the following transactions during May:
May 5Purchased $2,700 of merchandise on account, terms 3/15 n/60,
FOB shipping point.
9Paid transportation cost on the May 5 purchase, $250.
10Returned $400 of defective merchandise purchased on May 5 .
15Paid for the May 5 purchase, less the return and the discount.
Required:
Assuming the perpetual inventory system is used, prepare the journal entries to record
the above transactions.
44) With their accounting information system, companies reporting under international
financial reporting standards (IFRS) may need to collect additional information in order
to properly prepare and present their financial information. Give an example.
45) December 31, 2013 Balance Sheet
46) 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 Latest Fashions for the transactions
listed, assuming that Latest Fashions uses a periodic inventory system.
47) Following is a random list of some of the accounts and their December 31, 2014,
balances for Carmen & Company. Carmen & Company uses a periodic inventory
system and all account balances are normal.
Purchases $320,000
Sales revenue 460,000
Interest revenue 23,000
Salary expense45,000
Freight in 17,000
Purchase discounts 31,000
Sales returns and allowances35,000
Interest expense 18,000
Delivery expense 24,000
Sales discounts 27,000
Insurance expense 16,000
Purchase returns and allowances 46,000
B.J. Carmen, Capital 30,000
Utilities expense14,000
Amortization expense-equipment10,000
B.J. Carmen, Withdrawals 15,000
The beginning and ending amounts for inventory are $58,000 and $65,000, respectively.
Prepare the closing entries for Carmen & Company.
48) 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 gross profit for Kruger Sales assuming the periodic FIFO
cost method is being used.