Exam
CHAPTER 1
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The heading of a balance sheet (in correct order) would include A) who, what, when B) who, what, why C) who, where, when. D) why, what, where
1)
2) The financial statement that shows revenue and expenses for a period of time is the A) income statement. B) statement of owner's equity. C) balance sheet. D) statement of cash flows.
2)
3) Which of the following would have claims against the assets of the business? A) Cash and Equipment B) Cash and liabilities C) Liabilities and owner's equity D) Equipment and liabilities
3)
4) The balance sheet contains A) expenses, assets and cash. C) assets, liabilities and revenues.
4) B) assets, liabilities and owner's equity. D) liabilities, expenses and capital.
5) Go Blue Retail Store collected $12,000 of its accounts receivable. The expanded accounting equation changes include A) Cash and Revenue increase $12,000. B) Cash increases and Accounts Receivable decreases $12,000. C) Accounts Receivable decreases and Capital increases $12,000. D) Cash and Capital increase, $12,000.
5)
6) The claims of creditors against the assets of a business are A) liabilities. B) expenses. C) assets.
6) D) revenues.
7) How does the purchase of equipment on account affect the accounting equation? A) Assets increase; owner's equity increases. B) Liabilities increase; owner's equity decreases. C) Assets increase; liabilities increase. D) Assets increase; liabilities decrease.
7)
8) Boxes R' Us paid $2,000 in salaries and wages for February. This transaction will A) increase expenses and increase liabilities. B) decrease assets and expenses. C) increase expenses and decrease revenue. D) decrease assets and increase expenses.
8)
9) When the company pays salaries, which of the following is true? A) Assets and Expenses increase. B) Liabilities and Capital increase. C) Assets and Capital increase. D) None of the above are correct.
9)
10) Which of the following would be considered a subdivision of owner's equity? A) Liabilities B) Cash C) Expenses D) Assets
10)
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11) An expense should be recorded when A) the expense is incurred. C) the bill is paid.
11) B) a bill is received in the mail. D) None of the above are correct.
12) The purchase of supplies for cash would affect which account category? A) Capital B) Assets C) Liabilities
12) D) Expense
13) Revenue, expenses, and withdrawals are subdivisions of A) owner's equity. B) assets. C) liabilities. D) All of these answers are correct.
13)
14) An acceptable variation of the accounting equation is A) Assets = Liabilities - Owner's Equity. B) Assets - Liabilities = Owner's Equity. C) Assets + Owner's Equity = Liabilities. D) All of these answers are correct.
14)
15) This type of business organization is subject to income tax. A) sole proprietorship. B) corporation. C) partnership. D) All of the above.
15)
16) Bob Allen's Company sells a machine it purchased last week for cash equivalent to the original cost of $15,000. This has the effect of A) decreasing liabilities and increasing owner's equity. B) decreasing assets and increasing owner's equity. C) no change to the overall accounting equation. D) decreasing assets and decreasing liabilities.
16)
17) Hazy Shades received and paid a utility bill for $725 for the month of March. This transaction will A) increase Cash and increase Utility Expense. B) increase Cash and decrease Utility Expense. C) decrease Cash and increase Utility Expense. D) increase Utility Expense and decrease Withdrawal.
17)
18) A Toyota plant would be considered a A) service company. C) manufacturer.
18) B) merchandise company. D) None of the above are correct.
19) If total liabilities are $15,000 and owner's equity is $7,000, the total assets must be A) $8,000. B) $15,000. C) $22,000. D) $7,000.
19)
20) A purchase of a vehicle for cash would have what affect on the accounting equation? A) Total asset amount remains the same. B) Total liabilities are overstated. C) Total owner's equity is overstated. D) Both A and B are correct.
20)
21) The basic accounting equation is A) Assets = Liabilities - Owner's Equity. C) Assets = Owner's Equity - Liabilities.
21) B) Assets = Liabilities + Owner's Equity. D) Assets = Revenues - Expenses.
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22) Which of the following is correct when speaking about a business's assets? A) Assets are shown at their resale value. B) Assets are things of value owned. C) Assets must always equal Liabilities. D) Assets are disclosed on the Income Statement.
22)
23) If a company's revenues are lower than its expenses, it will cause A) an increase in owner's equity. B) a decrease in owner's equity. C) no effect on owner's equity. D) an increase in assets.
23)
24) The type of business organization that can continue indefinitely is known as a A) sole proprietorship. B) corporation. C) partnership. D) None of the above.
24)
25) If total assets are $30,000 and total liabilities are $8,000, Capital must equal A) $8,000. B) $30,000. C) $22,000.
25) D) $38,000.
26) Bob purchased a new computer for the company on account. The transaction will A) increase Computer; increase Accounts Payable. B) increase Computer; increase Capital. C) decrease Cash; increase Computer. D) decrease Cash; increase Accounts Payable.
26)
27) The Owner's Equity of Leyla's Company is equal to one -quarter of the total assets. Liabilities equal $30,000. What is the amount of Owner's Equity? A) $40,000 B) $30,000 C) $10,000 D) None of these answers are correct.
27)
28) Sonya invested cash in her new business. What effect will this have? A) Decrease an asset and increase a liability. B) Increase an asset and decrease owner's equity. C) Increase an asset and increase a liability. D) Increase an asset and increase owner's equity.
28)
29) Which of the following transactions would cause one asset to increase and another asset to decrease? A) The business bought supplies for cash. B) The business paid a creditor. C) The business bought inventory on credit. D) The owner invested cash in the business.
29)
30) Accounting provides information to A) investors. C) managers.
30) B) government. D) All of these answers are correct
31) When services are rendered but payment is not made, which account would be increased? A) Revenue B) Expense C) Cash D) Accounts Payable
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31)
32) If beginning capital was $100,000, ending capital is $85,000, and the owner's withdrawals were $10,000, the amount of net income or net loss was A) net loss of $15,000. B) net loss of $5,000. C) net income of $15,000. D) net income of $5,000.
32)
33) An accounting report that shows the changes in capital during the accounting period is A) an income statement. B) a balance sheet. C) a statement of owner's equity. D) All of these answers are correct.
33)
34) A business paid $5,800 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to A) increase one asset, decrease another asset. B) increase an asset, increase owner's equity. C) increase an asset, increase a liability. D) decrease an asset, decrease a liability.
34)
35) Stephanie purchased $10,000 of new electronic equipment for her DJ Company on account. The effect on the basic accounting equation was to A) increase Cash $10,000 and increase Equipment $10,000. B) decrease Cash $10,000 and increase Accounts Payable $10,000. C) decrease Cash $10,000 and increase Equipment $10,000. D) increase Equipment $10,000 and increase Accounts Payable $10,000.
35)
36) Assets are equal to A) liabilities - revenues. C) liabilities - owner's equity.
36) B) revenues - expenses. D) liabilities + owner's equity.
37) Which of the following is a characteristic of a sole proprietorship? A) Easy to form B) Can continue indefinitely C) Each shareholder acts as an owner of the company D) Business owned by more than one person
37)
38) An accounting firm would be considered a A) service company. C) merchandise company.
38) B) manufacturer. D) None of the above are correct.
39) A legal firm would be considered a A) manufacturer. C) service company.
39) B) merchandise company. D) None of the above are correct.
40) If total liabilities are $22,000 and owner's equity is $17,000, the total assets must be A) $39,000. B) $20,000. C) $17,000. D) $5,000.
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40)
41) Victoria received $500 from customers in partial payment for accounting services performed previously. The recording of this transaction would A) decrease Accounts Receivable and increase Victoria's Capital $500. B) increase Cash and increase Accounts Receivable $500. C) increase Cash and Victoria's Capital $500. D) increase Cash and decrease Accounts Receivable $500.
41)
42) A sample of a liability account is A) Fees Earned. C) Accounts Receivable.
42) B) Supplies. D) Accounts Payable.
43) Farrah's investment of cash and equipment in her existing business will A) increase assets and liabilities. B) decrease assets and increase a liability. C) decrease assets and increase owner's equity. D) increase assets and owner's equity.
43)
44) A partnership is a business which is A) ends with the death of a partner. C) owned by more than one person.
44) B) easy to form. D) All of these answers are correct.
45) Not-for-profit organizations A) aim to improve society in some way. B) seek to maximize profits. C) usually obtain funding from donations and government grants. D) Both A and C are correct.
45)
46) If 'Ol Fashioned Toys' revenues are less than its expenses during the accounting period A) owner's withdrawals decrease net income. B) the business will incur a loss. C) net income causes liabilities to decrease. D) owner's withdrawals increase owner's equity.
46)
47) The claims of owners against the assets of a business are A) owner's equity. B) expenses. C) revenues. D) liabilities.
47)
48) Kal's Vegan Restaurant, with total assets of $80,000, borrows $25,000 from the bank. Which of the following is a TRUE statement upon borrowing the money? A) Total assets are now $80,000. B) Total assets are now $25,000. C) Total assets are now $55,000. D) Total assets are now $105,000.
48)
49) The purchase of a computer with on account was recorded as a cash purchase. Due to this error A) assets would be understated. B) owner's equity would be overstated. C) liabilities would be overstated. D) None of the above are correct.
49)
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50) If total liabilities increased by $10,000 and the assets increased by $4,000 during the accounting period, what is the change in the owner's equity amount? A) Decrease of $6,000 B) Decrease of $10,000 C) Increase of $6,000 D) Increase of $4,000
50)
51) A Hallmark store would be considered a A) service company. C) manufacturer.
51) B) merchandise company. D) None of the above are correct.
52) Which is an advantage of a sole proprietorship form of business? A) The owner makes all the decisions. B) The business can continue indefinitely. C) There is limited personal risk. D) All of these answers are correct.
52)
53) When the owner withdraws cash from the business, which of the following is true? A) Liabilities and Capital increase. B) Assets and Liabilities increase. C) Assets decrease and Withdrawals increase. D) None of the above are correct.
53)
54) This statement shows the financial position of a business on a particular date. A) Income Statement B) Accounting Equation C) Balance Sheet D) Expanded Accounting Equation
54)
55) If total liabilities increased by $20,000 and the assets increased by $25,000 during the accounting period, what is the change in the owner's equity amount? A) Decrease of $5,000 B) Decrease of $20,000 C) Increase of $25,000 D) Increase of $5,000
55)
56) Which of the following would result if the business purchased supplies on credit? A) Supplies would increase and Capital would increase. B) The purchase of supplies is not a business transaction. C) Supplies would increase and Cash would decrease. D) Supplies would increase and Accounts Payable would increase.
56)
57) Tori's Shop collects $250 of its accounts receivable. The expanded accounting equation impact is A) Cash and Revenue increase $250. B) Cash and Capital increase $250. C) Accounts Receivable decreases and Capital increases $250. D) Cash increases and Accounts Receivable decreases $250.
57)
58) Which of the following professional accounting designations has been replaced by "CPA"? A) CA B) CGA C) CMA D) All of the above
58)
59) The advantages of a corporation do NOT include A) limited personal risk. B) business decisions made by career administrators. C) easy to set up. D) can continue indefinitely.
59)
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60) Owner's withdrawals A) increase liabilities. C) decrease withdrawals.
60) B) decrease assets. D) increase expenses.
61) If total liabilities are $3,000 and total assets are $10,000, owner's equity must be A) $7,000. B) $13,000. C) $3,000. D) $10,000.
61)
62) The increase or decrease in the owner's equity is reported on the A) balance sheet. B) statement of owner's equity. C) income statement. D) All of these are correct.
62)
63) If total liabilities increased by $16,000 and the assets increased by $20,000 during the accounting period, what is the change in the owner's equity amount? A) Increase of $20,000 B) Decrease of $16,000 C) Increase of $4,000 D) Decrease of $4,000
63)
64) When services are rendered but payment is not made, which account would be increased? A) Accounts Receivable B) Cash C) Accounts Payable D) Withdrawal
64)
65) What three elements make up a balance sheet? A) Assets, liabilities, and revenues B) Assets, liabilities, and owner's equity C) Liabilities, expenses, and owner's equity D) Debts, assets, and cash
65)
66) Which two financial statements show results for a period of time? A) The Statement of Owner's Equity and the Income Statement B) Only one statement shows results for a period of time C) The Balance Sheet and the Income Statement D) The Balance Sheet and the Statement of Owner's Equity
66)
67) Which of the following transactions has no effect on owner's equity? A) Paying salaries expense B) Billing for services rendered C) A withdrawal D) Equipment purchase
67)
68) Expenses A) are costs the company incurs in carrying on operations. B) are a subdivision of owner's equity. C) record personal expenses not related to the business. D) Both A and B are correct.
68)
69) If the beginning capital was $14,000 and in a fiscal period there was revenue of $8,000, withdrawals of $3,000, and expenses of $1,500 then the ending capital would be A) $23,500. B) $20,500. C) $17,500. D) $26,500.
69)
70) A double line in a financial statement indicates at total and is called ________ a column. A) footing. B) tallying. C) adding. D) heading.
70)
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71) Which of the following statements is TRUE? A) Owner's withdrawals decrease owner's equity. B) Net income causes liabilities to decrease. C) Net losses cause liabilities to increase. D) Owner's withdrawals decrease net income.
71)
72) Stork Machining has total assets of $40,000. What are the total assets if new equipment is purchased for $10,000 cash? A) $60,000 B) $50,000 C) $55,000 D) $40,000
72)
73) Which of the following is NOT an asset? A) Truck C) Accounts Receivable
73) B) Accounts Payable D) Cash
74) Eileen's Corner Shoppe purchases a new computer for cash. This causes A) Computer Equipment to increase and Cash to decrease. B) Accounts Payable to increase and Capital to increase. C) Cash and Capital to increase. D) Computer Equipment and Cash to increase.
74)
75) Carrie billed her legal clients $5,000 for legal work completed during the month. This transaction will A) cause a $5,000 increase in assets and revenues. B) cause a $5,000 increase in revenues and a decrease in liabilities. C) cause a $5,000 increase in revenues and liabilities. D) not be recorded until the cash is collected.
75)
76) An obligation that is payable to creditors is A) a liability. C) an asset.
76) B) the owner's equity. D) an expense.
77) The purpose of the accounting process is to provide financial information about A) sole proprietorships. B) large corporations. C) small businesses. D) All of these answers are correct.
77)
78) The purchase of equipment with both cash and on account was recorded as only a credit purchase. Due to this error A) liabilities would be overstated. B) owner's equity would be overstated. C) assets would be understated. D) None of the above are correct.
78)
79) Bianca's Beverages purchases $2,500 worth of office equipment on account. This causes A) Office Equipment to decrease and Accounts Payable to increase. B) Accounts Payable to increase and Capital to decrease. C) Cash and Capital to decrease. D) Office Equipment and Accounts Payable to increase.
79)
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80) If a company's revenues are greater than its expenses, increasing its revenues and decreasing its expenses will A) not affect owner's equity. B) decrease assets. C) decrease net income. D) increase net income.
80)
81) Accounting reports are least helpful in answering which of the following questions? A) How much cash was available at the end of the last year? B) Did the company make a profit for the previous year? C) Can the company pay its debts on time? D) How well were the employees treated by management?
81)
82) The net income or net loss is calculated on the A) income statement. C) statement of owner's equity.
82) B) balance sheet. D) none of these.
83) A revenue should be recorded when A) payment is received. C) the invoice is sent to the customer.
B) it is earned. D) None of the above are correct.
83)
84) Which of the following items is NOT listed on the balance sheet? A) Equipment B) Revenue C) Accounts Receivable D) Accounts Payable
84)
85) The cash purchase of a truck was recorded as a purchase on credit. This error would mean A) liabilities were overstated. B) assets were overstated. C) Answers A and B are correct. D) None of the above are correct.
85)
86) Which of the following items are on both the balance sheet and the statement of owner's equity? A) Additional owner's investments B) Net loss C) Capital D) Owner's withdrawals
86)
87) The Sarbanes -Oxley Act in the United States and National Policies in Canada were passed to A) improve the accuracy of the company's financial reporting. B) replace all of the old accounting procedures with new ones. C) prevent fraud at public companies. D) Both A and C are correct.
87)
88) The payment of accounts payable would A) increase both assets and liabilities. C) decrease both assets and liabilities.
88) B) decrease assets and increase liabilities. D) increase assets and decrease liabilities.
89) Which of the following is NOT a type of business organization? A) Sole proprietorship B) Operation C) Corporation D) Partnership
89)
90) Which of the following will be recorded in the owner's equity column as an increase? A) An investment by the owner B) The purchase of an asset on credit C) An exchange of assets D) A withdrawal by the owner
90)
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91) If 'Ol Fashioned Toys' revenues are greater than its expenses during the accounting period A) the business will earn a net income. B) liabilities will increase more than assets. C) the business will incur a loss. D) assets will increase more than liabilities.
91)
92) The heading of an income statement (in correct order) would include A) who, what, when B) who, what, why C) who, where, when. D) why, what, where
92)
93) If a company's revenues are higher than its expenses, it will cause A) no effect on owner's equity. B) an increase in owner's equity. C) a decrease in owner's equity. D) an increase in assets.
93)
94) Which of the following would result if the owner invested cash in the business? A) Cash would increase and Capital would increase. B) Cash would decrease and Capital would increase. C) An investment by the owner is not a business transaction. D) Cash would increase and Capital would decrease.
94)
95) When the company buys supplies on account, which of the following is true? A) Assets and Liabilities increase. B) Assets and Capital increase. C) Liabilities and Capital increase. D) None of the above are correct.
95)
96) Sunrise Company has total assets of $25,000. If $2,000 cash is used to purchase a new computer, the total assets would be A) $22,000. B) $23,000. C) $25,000. D) $27,000.
96)
97) Which of the following would result if a business purchased Equipment paying a 50% down payment in cash? A) Accounts Payable would increase. B) Equipment would increase and Cash would decrease. C) Since the equipment has not been paid in full, there is nothing to record. D) Both A and B are correct.
97)
98) Which of the following will be recorded in the owner's equity column as a decrease? A) An investment by the owner B) A withdrawal by the owner C) An exchange of assets D) The purchase of an asset on credit
98)
99) Which of the following transactions would cause an asset to decrease and the owner's equity to decrease? A) The business bought supplies for cash. B) The owner withdrew cash from the business. C) The business bought supplies on account. D) The business provided services to a cash customer.
99)
100) Items owned by the business such as land, supplies and equipment are A) revenue. B) liabilities. C) owner's equity. D) assets.
100)
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101) Which financial statement is prepared first? A) Income Statement C) Statement of Owner's Equity
101) B) Balance Sheet D) None of the above
102) Putting the information into the accounting system would be called A) recording. B) classifying. C) summarizing. 103) A book store would be considered a A) merchandise company. C) manufacturer.
102) D) analyzing. 103)
B) service company. D) None of the above are correct.
104) Which of the following transactions would cause an asset to increase and the owner's equity to increase? A) The business bought supplies on account. B) The owner invested cash in the business. C) The owner withdrew cash from the business. D) The business incurred an expense on credit.
104)
105) Liam's Sporting Goods buys $35,000 of equipment on credit. Which of the following is a TRUE statement? A) Total assets are unchanged. B) Total assets increase. C) Total liabilities decrease. D) Total liabilities are unchanged.
105)
106) The financial statement that shows business results in terms of revenue and expenses is A) the expanded accounting equation. B) an income statement. C) a statement of owner's equity. D) a balance sheet.
106)
107) Legal services were provided to a credit customer. How would this affect the accounting equation? A) Accounts Receivable and Revenue increase. B) Accounts Payable and Capital increase. C) Cash and Accounts Receivable increase. D) None of the above are correct.
107)
108) Assets and Liabilities are reported on the A) income statement. C) statement of owner's equity.
108) B) balance sheet. D) none of these.
109) A corporation A) is owned by shareholders. C) can continue indefinitely.
109) B) has limited risk to shareholders. D) all of the above.
110) If total liabilities are $48,000 and assets are $52,000, the owner's equity must be A) $4,000. B) $100,000. C) $52,000. D) $48,000.
110)
111) Mark paid $500 cash to partially reduce the amount owed for equipment that was previously bought on account. This transaction would A) decrease both assets and liabilities. B) increase both assets and liabilities. C) increase assets and decrease liabilities. D) decrease assets and increase liabilities.
111)
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112) When the company provides services to a cash customer, which of the following is true? A) Assets and Revenue increase. B) Assets and Capital increase. C) Liabilities and Capital increase. D) None of the above are correct.
112)
113) Ryan withdrew cash from the business to pay his personal cell phone bill. The expanded accounting equation changes include A) decrease in both Cash and Withdrawal. B) decrease in Cash and increase in Withdrawal. C) increase in both Cash and Withdrawal. D) increase in Cash and decrease in Withdrawal.
113)
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. For each of the following financial statement users, identify if they would be considered an internal or an external stakeholder. 114) Auditor hired by CRA
114)
115) President of the local Garden Club
115)
116) The parliament member running for re -election
116)
117) Economical Life, the company that handles our employee benefit plan
117)
118) Canada Revenue Agency
118)
119) The Chief Financial Officer
119)
120) The bank who lends you money
120)
121) Fred Jones, who purchased shares in our corporation
121)
122) Day Shift Receptionist
122)
123) Manager of the Sales Department
123)
124) Your biggest customer
124)
125) The President and CEO
125)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 126) Creditors' claims against assets are called owner's equity.
126)
127) The parties that have claims against the assets of the business are called managers and customers.
127)
128) The statement of owner's equity is the link between the income statement and balance sheet.
128)
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129) Generally Accepted Accounting Principles are the underlying concepts that make up acceptable accounting practices.
129)
130) The income statement is prepared first so the information can be used to prepare the statement of owner's equity.
130)
131) On the Income Statement, the total of Expenses is always shown with a dollar sign ($).
131)
132) If liabilities are $10,000 and assets are $15,000, owner's equity will be $5,000.
132)
133) Revenue and cash will always be the same amount.
133)
134) Revenue and expenses will always be the same amount.
134)
135) Supplies are assets that have a longer life than equipment.
135)
136) The accounting equation states that total assets must always equal owner's equity.
136)
137) Managerial accountants primarily provide special-purpose reports to serve the needs of external users.
137)
138) The parties that have claims against the assets of the business are called creditors and owners.
138)
139) Accounts Receivable results from earning revenue when cash is not yet received.
139)
140) Profit increases drawings.
140)
141) Cash is an asset that would appear on the balance sheet.
141)
142) If expenses are more than revenue, a net loss is incurred.
142)
143) The purpose of accounting is to provide decision-makers with useful, accurate information.
143)
144) Revenue is an asset.
144)
145) Credit is the same thing as Liabilities.
145)
146) If the assets owned by a business total $75,000, owner's equity must also total $75,000.
146)
147) The three elements that make up a balance sheet are assets, liabilities and expenses.
147)
148) The four parts of owner's equity include capital, withdrawals, revenue, and expenses.
148)
149) On a Balance Sheet, both the total for Assets and the total of Liabilities plus Owner's Equity are shown with a dollar sign ($).
149)
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150) The income statement is a financial statement showing business results in terms of revenues and expenses.
150)
151) A disadvantage of a corporation is that shareholders are held personally liable for the corporation's debts.
151)
152) Not-for-profit businesses are not permitted to earn any revenue.
152)
153) If the assets owned by a business total $50,000 and liabilities total $30,000, then owner's equity totals $80,000.
153)
154) Canada has not yet adopted the IFRS rules for accounting.
154)
155) A transaction can occur which will affect only the assets side of the accounting equation.
155)
156) The accounting equation states that total assets must always equal total liabilities plus owner's equity.
156)
157) The statement of owners' equity is for a particular date.
157)
158) The balance sheet is for a particular date.
158)
159) Cash is the same thing as Capital.
159)
160) Expenses are recorded as costs of doing business whether cash was paid or not.
160)
161) The owner of a business paid personal rent with a company cheque. This payment reduces Cash as well as increases the expenses of the firm.
161)
162) The income statement is for a particular date.
162)
163) In a shift of assets, the composition of the assets changes but total assets do not change.
163)
164) Dollar signs must be used for every number on a Balance Sheet.
164)
165) The left side of the accounting equation shows what is owned by the business.
165)
166) To distinguish the total on a financial statement, use double underlines.
166)
167) The basic accounting equation is: Assets = Liabilities.
167)
168) The income statement is the first financial statement completed.
168)
169) Profit decreases equity.
169)
170) Cash investments by the owner increases both equity and assets.
170)
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171) Withdrawals are considered an expense of doing business.
171)
172) The new accounting designation for Canada is CGA.
172)
173) All Canadian companies must follow the IFRS rules for accounting.
173)
174) The balance sheet shows the company's financial position as of a particular date.
174)
175) The primary objective of a not-for-profit business is to maximize revenue.
175)
176) Cash withdrawals by the owner decrease both equity and assets.
176)
177) When expenses are greater than revenue, net income is the result.
177)
178) Double -underlining is used for every sub-section on a Balance Sheet.
178)
179) A sole proprietorship ends with the death of the owner.
179)
180) Total assets are included in the statement of owner's equity.
180)
181) The ending capital figure on the statement of owner's equity will be used on the balance sheet.
181)
182) The time period covered in a balance sheet is for a stated year.
182)
183) If the liabilities owed by a business total $150,000, then the assets must also total $150,000.
183)
184) A Statement of owner's equity shows the change in capital.
184)
185) Revenues generate an inflow of assets.
185)
186) The parties that have claims against the assets of the business are called managers and customers.
186)
187) In a financial statement a double line indicates a total.
187)
188) The balance sheet is prepared first so the information can be used to prepare the statement of owner's equity.
188)
189) The statement of owner's equity shows assets, liabilities and capital.
189)
190) The function of accounting includes analyzing, recording, classifying, summarizing, reporting, and interpreting financial information.
190)
191) Withdrawals are business expenses that are included on the balance sheet.
191)
192) The left side of the accounting equation must always equal the right side of the equation.
192)
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193) Revenue and drawings will always be the same amount.
193)
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 194) Fred Pentell Company completes the following transactions a. Mr. Pentell invests $5,500 cash in his company. b. The company purchases equipment on account, $1600. c. The company purchases additional equipment for cash, $600. d. The company makes a payment on account for the equipment, $1,000. Required: Record the above transactions in the basic accounting equation. Fred Pentell Company ASSETS Cash
+ Equipment
=
LIABILITIES OWNER'S EQUITY + Account F. Pentell, Payable Capital
a. b. c. d. Total:
195) Given the following account balances, determine the total liabilities. Cash $350, Accounts Receivable $275, Equipment $500 and Capital $900. 196) Calculate the total Liabilities if the company has: Assets totaling $500 and Capital of $250.
16
197) Katie's Wedding Planning Service completed the following transactions: a. Billed clients for service, $1,250. b. Completed work for clients who paid $500 cash. c. Received a bill for utilities to be paid later, $120. d. Collected cash on account from clients, $700. e. Paid the amount due for utilities. f. Withdrew $500 cash for personal use. Required: Record the above transactions in the expanded accounting equation. Note that the items have beginning balances. Katie's Wedding Planning Service ASSETS = LIAB. OWNER'S EQUITY Cash + Accts.Rec. = Accts Katie, +Rev. -Exp. -Katie, Payable Capital With. beg. $ 800 $ 85 = $300 $235 $ 900 $400 $150 a. b. c. d. e. f. T
198) Prepare the financial statements for H. Logan of Logan Motorcycles from the following account balances 1) an income statement, 2) a statement of owner's equity for the month ended October 31, 2023, and 3) a balance sheet at October 31, 2023. You will need to calculate the value of the Accounts Payable account (note: remember the basic accounting equation). Cash Accounts Receivable Equipment Accounts Payable Travis, Capital Revenue Expenses Travis, Withdrawal
$1,300 500 2,000 ??? 3,000 1,000 700 100
199) Indicate which Financial Report each the following would be reported on (1) Income Statement, (2) Statement of Owner's Equity, or (3) Balance Sheet: 1. ________ Merchandise Inventory 2. ________ Accounts Payable 3. ________ Additional Investments 4. ________ Cash 5. ________ Withdrawal 6. ________ Land 7. ________ Accounts Receivable 8. ________ Expense 9. ________ Equipment 10. ________ Revenue 17
200) Record the following transactions into the expanded accounting equation for the Mark's Accounting Firm. Note that all accounts have beginning balances. (You will need to determine the beginning capital balance.) a. Provided accounting services for cash, $2,400 b. Billed customers for services rendered, $4,800 c. Received and paid the monthly utility bill, $600 d. Collected $1,200 on account from customers e. Paid supplies expense, $500 f. Withdrew $600 cash for personal use
ASSETS
beg. a. b. c. d. e. f. T
Cash +
Accts.Rec.
$1,800
$200
Mark's Accounting Firm = LIAB. OWNER'S EQUITY = Accts Mark's +Rev. Payable Capital = $600 ??
-Exp
-Mark's Withdrawal
201) Calculate the total Assets if the company has: Cash $100, Accounts Receivable $300, Accounts Payable $500, Equipment $600.
18
202) Record the following transactions into the expanded accounting equation for the Bob Cann Company. Note that all accounts have beginning balances. (You will need to determine the beginning capital balance.) a. Rendered services for cash, $500. b. Billed customers for services rendered, $1,000. c. Received the monthly utility bill to be paid later, $250. d. Collected $600 on account from customers. e. Paid the utility bill recorded in c. f. Withdrew $500 cash for personal use. Cann Company ASSETS Cash + beg. a. b. c. d. e. f. T
$ 1,200
= LIAB.
Accts.Rec. = Accts Payable $ 500 = $700
OWNER'S EQUITY B. Cann, +Rev. Capital ? $ 1,500
203) Explain the purpose of the following: a. Income Statement b. Statement of Owner's Equity c. Balance Sheet 204) Record the following transactions in the basic accounting equation: a. Luke invests $25,000 cash to begin a financial planning service. b. The company buys office furniture for cash, $1,200. c. The company buys additional office furniture on account, $600. d. The company makes a payment on the office furniture, $400. Luke's Financial Planning ASSETS = LIABILITIES + Cash + Office = Accounts + Furniture Payable
OWNER'S EQUITY Luke's, Capital
a. b. c. d. Totals
19
-Exp. $800
-B. Cann, With. $300
205) Record the following transactions into the expanded accounting equation for the Gorkas Lawn Service. Note that all accounts have beginning balances. (You will need to determine the beginning capital balance.) a. Provided lawn services for cash, $800 b. Paid rent expense of $1,050 in cash c. Received and paid the monthly telephone bill, $100 d. Collected $250 on account from customers e. Billed customers for services rendered, $1,900 f. Withdrew $300 cash for personal use
ASSETS
beg. a. b. c. d. e. f. T
Cash +
Accts.Rec.
$3,800
$500
Gorkas Lawn Service = LIAB. OWNER'S EQUITY = Accts Gorkas +Rev. Payable Capital = $1,000 ??
-Exp
-Gorkas Withdrawal
206) Determine the beginning capital balance of a business having an ending capital balance of $10,900, no additional investments, withdrawals of $2,500, and a net income of $4,100. 207) List the 6 functions of accounting. 208) Record the following transactions in the basic accounting equation: a. Larry invests $250,000 cash to begin a machine shop. b. The company buys equipment for cash, $60,000. c. The company buys another machine on account, $45,000. d. The company makes a payment on the machine, $20,000. Larry's Machine Shop ASSETS = Cash + Equipment =
LIABILITIES + Accounts + Payable
a. b. c. d. Totals
20
OWNER'S EQUITY Larry's, Capital
209) Record the following transactions into the expanded accounting equation for the Jose Perez Company. Note that all accounts have beginning balances. (You will need to determine the beginning capital balance.) a. Rendered services for cash, $40. b. Billed customers for services rendered, $200. c. Received the monthly utility bill to be paid later, $30. d. Collected $60 on account from customers. e. Paid the utility bill recorded in c. f. Withdrew $30 cash for personal use.
Cash
ASSETS = + Accounts Receivable
Jose Perez Company LIABILITIES OWNER'S EQUITY + Accounts J. Perez, + Rev. - Exp J. Perez, Payable Capital Withdrawals
Beginning Balance: + 800
+ 50
=
+ 200
+?
+ 700 - 400
- 200
a. b. c. d. e. f. Totals:
210) Determine the ending capital balance of a business which had a beginning capital balance of $1,970, additional investments of $530, withdrawals of $750, revenue of $3,790, and expenses of $2,600. 211) Prepare a balance sheet in proper form for Georgia Ironworks at December 31, 2022. Use the following information: Accounts Payable $1,250 Accounts Receivable 1,600 Cash 3,400 Equipment 3,000 K. Creeper, Capital? 212) Discuss the advantages and disadvantages of sole proprietorships, partnerships and corporations.
21
213) Record the following transactions into the expanded accounting equation for the Frita's Hair Salon. Note that all accounts have beginning balances. (You will need to determine the beginning capital balance.) a. Provided hair cutting services for cash, $1,400 b. Billed customers for services rendered, $800 c. Received and paid the monthly rent, $1,600 d. Collected $200 on account from customers e. Paid supplies expense, $200 f. Withdrew $500 cash for personal use
ASSETS
beg. a. b. c. d. e. f. T
Cash +
Accts.Rec.
$2,000
$100
Frita's Hair Salon = LIAB. OWNER'S EQUITY = Accts Frita's +Rev. Payable Capital = $800 ??
-Exp
-Frita's Withdrawal
214) What is the difference between Financial and Managerial Accounting? 215) Use the following information to prepare 1) an income statement, 2) a statement of owner's equity for the month ended March 31, 2022, and 3) a balance sheet at March 31, 2022 for Bolthouse Company. J. Bolthouse, Capital (beg.) Revenue Expenses Withdrawals Cash Equipment Accounts Receivable Accounts Payable
$2,000 900 600 150 3,000 1,000 150 2,000
216) Prepare a balance sheet in proper form for Brampton Cleaners at December 31, 2022. Use the following information: Accounts Payable $2,500 Accounts Receivable 800 Cash 2,200 Equipment 4,000 K. Carson, Capital?
22
217) Indicate which Financial Report each the following would be reported on (1) Income Statement, (2) Statement of Owner's Equity, or (3) Balance Sheet: 1. ________ Sales Revenue 2. ________ Rent Expense 3. ________ Beginning Capital 4. ________ Salaries Expense 5. ________ Bank Loan 6. ________ Interest Receivable 7. ________ Interest Payable 8. ________ Interest Expense 9. ________ Office Equipment 10. ________ Net Income/Loss 218) Tessa's Interior Design completes the following transactions: a. Tessa invests $5,000 cash in her company. b. The company purchases equipment on account, $250. c. The company purchases additional equipment for cash, $100. d. The company makes a payment on account for the equipment, $150. Required: Record the above transactions in the basic accounting equation. Tessa's Interior Design ASSETS Cash + Equipment a. b. c. d. Totals
= LIABILITIES + = Accounts + Payable = = = = =
OWNER'S EQUITY Tessa's Capital
219) Indicate whether each of the following represents (1) Asset, (2) Liability, or (3) Owner's Equity: 1. ________ Merchandise Inventory 2. ________ Accounts Payable 3. ________ Capital 4. ________ Cash 5. ________ Withdrawal 6. ________ Land 7. ________ Accounts Receivable 8. ________ Expense 9. ________ Equipment 10. ________ Revenue
23
Answer Key Testname: CHAP 01_14CE
1) A 2) A 3) C 4) B 5) B 6) A 7) C 8) D 9) D 10) C 11) A 12) B 13) A 14) B 15) B 16) C 17) C 18) C 19) C 20) A 21) B 22) B 23) B 24) B 25) C 26) A 27) C 28) D 29) A 30) D 31) A 32) B 33) C 34) D 35) D 36) D 37) A 38) A 39) C 40) A 41) D 42) D 43) D 44) D 45) D 46) B 47) A 48) D 49) A 24
Answer Key Testname: CHAP 01_14CE
50) A 51) B 52) A 53) C 54) C 55) D 56) D 57) D 58) D 59) C 60) B 61) A 62) B 63) C 64) A 65) B 66) A 67) D 68) D 69) C 70) A 71) A 72) D 73) B 74) A 75) A 76) A 77) D 78) A 79) D 80) D 81) D 82) A 83) B 84) B 85) C 86) C 87) D 88) C 89) B 90) A 91) A 92) A 93) B 94) A 95) A 96) C 97) D 98) B 25
Answer Key Testname: CHAP 01_14CE
99) B 100) D 101) A 102) A 103) A 104) B 105) B 106) B 107) A 108) B 109) D 110) A 111) A 112) A 113) B 114) External 115) External 116) External 117) External 118) External 119) Internal 120) External 121) External 122) Internal 123) Internal 124) External 125) Internal 126) FALSE 127) FALSE 128) TRUE 129) TRUE 130) TRUE 131) FALSE 132) TRUE 133) FALSE 134) FALSE 135) FALSE 136) FALSE 137) FALSE 138) TRUE 139) TRUE 140) FALSE 141) TRUE 142) TRUE 143) TRUE 144) FALSE 145) TRUE 146) FALSE 147) FALSE 26
Answer Key Testname: CHAP 01_14CE
148) TRUE 149) TRUE 150) TRUE 151) FALSE 152) FALSE 153) FALSE 154) FALSE 155) TRUE 156) TRUE 157) FALSE 158) TRUE 159) FALSE 160) TRUE 161) FALSE 162) FALSE 163) TRUE 164) FALSE 165) TRUE 166) TRUE 167) FALSE 168) TRUE 169) FALSE 170) TRUE 171) FALSE 172) FALSE 173) FALSE 174) TRUE 175) FALSE 176) TRUE 177) FALSE 178) FALSE 179) TRUE 180) FALSE 181) TRUE 182) FALSE 183) FALSE 184) TRUE 185) TRUE 186) FALSE 187) TRUE 188) FALSE 189) FALSE 190) TRUE 191) FALSE 192) TRUE 193) FALSE
27
Answer Key Testname: CHAP 01_14CE
194)
Fred Pentell Company ASSETS Cash a. + 5,500 b. c. - 600 d. - 1,000 Total: +3,900
=
+ Equipment + 1,600 + 600 ________ + 2,200
=
= =
LIABILITIES OWNER'S EQUITY + Account F. Pentell, Payable Capital + 1,600 - 1,000 + 600
+
5,500
+
________ 5,500
195) $225 [$350 + $275 + $500 - $900] 196) $250 = $500 -$250 197) Katie's Wedding Planning Service ASSETS = LIAB. OWNER'S EQUITY Cash + Accts.Rec. = Accts Katie +Rev. Payable Capital beg. $ 800 $ 85 = $300 $235 $ 900 a. 1,250 = 1,250 b. 500 = 500 c.
=
d.
700
e. f. T
-120 -500 $1380
-700
=
$635
= = =
120
-Exp. $400
-Katie Withdr. $150
120
-120 $300
$235
$2650
28
$520
500 $650
Answer Key Testname: CHAP 01_14CE
198)
Logan Motorcycles INCOME STATEMENT For the Month ended October 31, 2023 Revenue Expenses Net Income
$1,000 700 $300
Logan Motorcycles STATEMENT OF OWNER'S EQUITY For the Month ended October 31, 2023 H. Logan, Capital, Oct. 1 Net Income Less Withdrawals
$3,000 $300 100
Increase in Capital
200
H. Logan, Capital, Oct. 31
$3,200
Logan Motorcycles BALANCE SHEET October 31, 2023 Assets Cash $1,300 Accounts Receivable 500 Equipment 2,000 Total Assets $3,800 199) 1. Balance Sheet 2. Balance Sheet 3. Statement of Owner's Equity 4. Balance Sheet 5. Statement of Owner's Equity 6. Balance Sheet 7. Balance Sheet 8. Income Statement 9. Balance Sheet 10. Income Statement
Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity H. Logan, Capital Total Liabilities & Owner's Equity
29
$ 600 3,200 $3,800
Answer Key Testname: CHAP 01_14CE
200) ASSETS
beg. a. b. c. d. e. f. T
Cash +
Accts.Rec.
$ 1,800 +2,400
$ 200 +4,800
-600 +1,200 -500 -600 $3,700
Mark's Accounting Firm = LIAB. OWNER'S EQUITY = Accts Mark's +Rev. Payable Capital = $600 $1,400 +2,400 +4,800
-Exp
-Mark's Withdrawal
+600 -1200 +500 $3,800
$600
$1,400
201) $1,000 = $100 + 300 + 600 202) Cann Company ASSETS LIABILITIES = + Accounts Accounts Cash + Receivable Payable
+
$7,200
+600 $1,100 $600
OWNER'S EQUITY B. Cann, Capital
B. Cann, + Rev. - Exp. -Withdrawals
Beginning Balance: + 1,200 + 500 + 500 + 1,000
+ 700 +600 + 1,500 - 800 - 300 = + 500 a. = + 1,000 b. = + 250 + 250 c. = + 600 600 d. = - 250 - 250 e. = 500 + 500 f. = Totals: +1,550 + 900 = + 700 +600 +3,000 -1,050 -800 2,450 = 2,450 203) a. The income statement is an accounting report that shows business results in terms of revenue and expenses. If revenue is greater than expenses, the result is net income (or profit). If expenses are greater than revenue, the result is a net loss. An income statement can cover any period of time, but is most often one year. Many "public" companies disclose their earnings or losses every three months. b. The statement of owner's equity shows for a certain time period the changes that occurred in the owner's equity. Increases are due to owner investments and net income, while decreases are due to owner withdrawals and net loss. c. The balance sheet, or statement of financial position, presents information from the ending balances of the company's assets, liabilities and owner's equity. It summarizes the business' financial position on a given date. Some have said that a balance sheet is like a flash photograph of where a company stands at one point in time and the analogy is a good one.
30
Answer Key Testname: CHAP 01_14CE
204)
Luke's Financial Planning ASSETS =
a. b. c. d. T
Cash + +$25,000 - 1,200 - 400 +$23,400
Office Furniture +$1,200 + 600 _______ +$1,800
205) ASSETS
beg. a. b. c. d. e. f. T
Cash +
Accts.Rec.
$ 3,800 +800 -1,050 -100 +250
$ 500
-300 $3,400
= = = = = =
- 20,000 +$170,000
Accounts Payable
+$25,000 +$600 - 400 +$200
________ +$25,000
-Exp
-Gorkas Withdrawal
+1,050 +100 -250 +1,900
+1,900
$2,150
$1,000
= Cash + +$250,000 - 60,000
OWNER'S EQUITY Luke's Capital
Gorkas Lawn Service = LIAB. OWNER'S EQUITY = Accts Gorkas +Rev. Payable Capital = $1,000 $3,300 +800
206) $9,300 [$10,900 - $4100 + $2500] 207) 1. Analyzing 2. Recording 3. Classifying 4. Summarizing 5. Reporting 6. Interpreting 208) Larry's Machine Shop ASSETS =
a. b. c. d. T
LIABILITIES
Equipment = +$60,000 = +45,000 = _______ = +$105,000 =
$3,300
LIABILITIES
$2,700
+300 $1,150 $300
OWNER'S EQUITY Larry's Capital
Accounts Payable
+$250,000 +$45,000 - 20,000 +$25,000
________ +$250,000
31
Answer Key Testname: CHAP 01_14CE
209)
Jose Perez Company ASSETS LIABILITIES = + + Accounts Accounts J. Perez, Cash + Receivable Payable Capital Beginning Balance: + 800 + 50 + 40 + 200
+ 200 = a. = b. = + 30 c. = + 60 60 d. = - 30 - 30 e. = 30 f. = Totals: +840 + 190 = + 200 1,030 = 1,030 210) $2,940 [$1,970 + $530 - $750 + $3,790 - $2,600] 211) GEORGIA IRONWORKS BALANCE SHEET December 31, 2022
Assets Cash Accounts Receivable Equipment
$3,400 1,600 3,000
OWNER'S EQUITY
+550
J. Perez, + Rev. - Exp. -Withdrawals + 700 + 40 + 200
- 400
- 200
+ 30
+ 30 + 550
Liabilities and Owner's Equity Liabilities Accounts Payable
+ 940
- 430
-230
$1,250
Owner's Equity K. Creeper, Capital 6,750 Total Assets $8,000 Total Liabilities & Owner's Equity $8,000 212) A sole proprietorship is a business that has one owner. The advantage of a sole proprietorship is that the owner makes all of the decisions for the business. Another advantage is ease of formation. A disadvantage is that if the business cannot pay its obligations, the business owner can be forced to pay them from personal assets. The business ends with the death of the owner or the closing of the business. A partnership is a business owned by more than one person. Its advantage is ease of formation. The disadvantages are that partners could lose personal assets to meet obligations of the partnership and a partnership ends with death of a partner or exit of a partner. Also, disagreements among the partners are sometimes hard to deal with, and can result in strained relationships, and mental trauma. A corporation is a business owned by shareholders. The advantages are that shareholders have limited personal risk which is limited to their investment in the company. Corporations also can have access to very large sums of money (if enough shares are issued). The corporation has unlimited life but the disadvantage is that a corporation is more difficult to form, and expenses to issue extra shares, especially to the general public, can be amazingly high. In general, all forms of business profits are taxed, but only the corporation is itself a tax-paying entity. Proprietorships and partnerships are not taxed, but any profits are "assigned" to the owner(s) and taxed in their hands.
32
Answer Key Testname: CHAP 01_14CE
213) ASSETS
beg. a. b. c. d. e. f. T
Cash +
Accts.Rec.
$ 2,000 +1,400
$ 100 +800
-1,600 +200 -200 -500 $1,300
Frita's Hair Salon = LIAB. OWNER'S EQUITY = Accts Frita's +Rev. Payable Capital = $800 $1,300 +1,400 +800
-Exp
-Frita's Withdrawal
+1,600 -200 +200 $700
$800
$1,300
$2,200
+500 $1,800 $500
214) Financial accounting serves the needs of EXTERNAL users by providing financial statements to help make decisions. Day-to-day activities include statement preparation and analysis, auditing, regulatory issues, and planning. Managerial accounting serves the needs of INTERNAL users by providing special-purpose reports. 215) Bolthouse Company INCOME STATEMENT For the Month ended March 31, 2022 Revenue $900 Expenses 600 Net Income $300 Bolthouse Company STATEMENT OF OWNER'S EQUITY For the Month ended March 31, 2022 J. Bolthouse, Capital, March 1 Net Income $300 Less Withdrawals 150
$2,000
Increase in Capital
150
J. Bolthouse Capital, March 31
$2,150
Bolthouse Company BALANCE SHEET March 31, 2022 Assets Cash $3,000 Accounts Receivable 150 Equipment 1,000 Total Assets $4,150
Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity J. Bolthouse, Capital Total Liabilities and Owner's Equity
33
$2,000 2,150 $4,150
Answer Key Testname: CHAP 01_14CE
216)
BRAMPTON CLEANERS BALANCE SHEET December 31, 2022
Assets Cash Accounts Receivable Equipment
$2,200 800 4,000
Total Assets $7,000 217) 1. Income Statement 2. Income Statement 3. Statement of Owner's Equity 4. Income Statement 5. Balance Sheet 6. Balance Sheet 7. Balance Sheet 8. Income Statement 9. Balance Sheet 10. Income Statement 218) Tessa's Interior Design ASSETS Cash +
Equipment
a. +$5,000 b. +$250 c. -100 +100 d. -150 ________ T +$4,750 +$350 219) 1. Asset 2. Liability 3. Owner's Equity 4. Asset 5. Owner's Equity 6. Asset 7. Asset 8. Owner's Equity 9. Asset 10. Owner's Equity
Liabilities and Owner's Equity Liabilities Accounts Payable
$2,500
Owner's Equity K. Carson, Capital Total Liabilities & Owner's Equity
4,500 $7,000
= LIABILITIES + OWNER'S EQUITY = Accounts + Tessa's Payable Capital = +$5,000 = +$250 = = -150 ________ = +$100 +$5,000
34
Exam
CHAPTER 2
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. A) aancomputer increase in the assetonComputer andresult an increase in the liability Accounts Payable. is bought account, the is 1) When B) a decrease in the asset Computer and a decrease in the liability Accounts Payable. C) a decrease in the asset Computer and an increase in the liability Accounts Payable. D) an increase in the asset Computer and a decrease in the liability Accounts Payable.
1)
2) What is X-cel Company's net income or net loss if it had Revenue of $1,800, Salary Expense of $500, Utility Expense of $250, and Withdrawals of $1,000 during October? A) $1,050 net loss B) $50 net income C) $50 net loss D) $1,050 net income
2)
3) A credit to an asset account was posted to a revenue account. This error would cause A) assets to be overstated. B) revenue to be overstated. C) expenses to be overstated. D) Both A and B are correct.
3)
4) Which of the following types of accounts has a normal credit balance? A) Expenses B) Withdrawals C) Assets
4)
5) The right side of any account is the A) footings. C) debit side.
D) Revenues 5)
B) ending balance. D) credit side.
6) Which type of account would NOT be reported on the income statement? A) Withdrawals B) Revenue C) Expenses D) None of these answers are correct.
6)
7) The left column of a financial statement is often used to A) subtotal numbers. B) show totals. C) show debits. D) show credits.
7)
8) A compound entry is A) a transaction involving more than one debit and/or credit. B) found on the income statement. C) the same as the chart of accounts. D) used to prepare the trial balance.
8)
9) Carrie flew to Toronto on a business trip. The purchase price of the ticket was $679 and it was bought from a travel agency on account. The entry to record the transaction is A) debit Accounts Payable, $679; credit Travel Expense, $679. B) debit Travel Expense, $679; credit Accounts Payable, $679. C) debit Travel Expense, $679; credit Cash, $679. D) debit Capital, $679; credit Accounts Payable, $679.
9)
1
10) A debit to an asset account was posted to an expense account. This error would cause A) liabilities to be overstated. B) expenses to be overstated. C) assets to be understated D) Both B and C are correct.
10)
11) The owner of Wolverines R Us paid his personal MasterCard bill using a company cheque. The correct entry to record the transaction is A) credit Cash; debit Supplies Expense. B) credit Cash; debit Capital. C) credit Cash; debit Withdrawals. D) credit Cash; debit Accounts Receivable.
11)
12) A term used for obtaining the balance of an account is A) crediting. B) debiting. C) footing.
12) D) adding.
13) The beginning balance in Cash was $3,500. Additional cash of $1,000 was received. Cheques were written totaling $1,500. The cash balance is A) $6,000 debit. B) $3,000 debit. C) $4,500 credit. D) $2,000 debit.
13)
14) Extreme Home bought painting equipment on account for $2,200. The entry would include A) debit to Supplies Expense, $2,200; credit to Cash, $2,200. B) debit to Equipment, $2,200; credit to Accounts Payable, $2,200. C) debit to Supplies Expense, $2,200; credit to Accounts Payable, $2,200. D) debit to Equipment, $2,200; credit to Cash, $2,200.
14)
15) Given the following list of accounts with normal balances, what are the trial balance totals of the debits and credits?
15)
Cash Equipment Accounts Payable Capital Service Fees Salaries Expense
$1000 500 250 1000 1000 750
A) $2,250 debit, $2,250 credit C) $4,500 debit, $4,500 credit
B) $3,250 debit, $3,250 credit D) $1,125 debit, $1,125 credit
16) The owner invested personal equipment in the business. To record this transaction, A) debit Equipment and credit Capital. B) credit Equipment and debit Capital. C) debit Accounts Payable and credit Equipment. D) debit Equipment and credit Accounts Payable.
16)
17) A debit may signify a(n) A) increase in liability accounts. C) increase in the capital account.
17) B) increase in asset accounts. D) decrease in expense accounts.
2
18) An account had a starting debit balance of $650. There were debit postings of $100 and credit postings of $700 during the month. The ending balance is A) $50 credit. B) $1,250 debit. C) $1,250 credit. D) $50 debit.
18)
19) An account had a starting credit balance of $650. There were debit postings of $100 and credit postings of $700 during the month. The ending balance is A) $1,250 credit. B) $50 credit. C) $1,250 debit. D) $50 debit.
19)
20) Which of the following entries records the investment of cash by John, owner of a sole proprietorship? A) Debit Cash; credit John, Capital B) Debit Cash; credit John, Withdrawals C) Debit John, Withdrawals; credit Cash D) Debit John, Capital; credit Cash
20)
21) An account is said to have a debit balance if A) its normal balance is debit without regard to the amounts or number of entries on the debit side. B) the last entry of the accounting period was posted on the debit side. C) the footing of the debits exceeds the footing of the credits. D) there are more entries on the debit side than on the credit side.
21)
22) An account that would be increased by a debit is A) Accounts Payable. C) Capital.
22) B) Fees Earned. D) Cash.
23) The first step in analyzing a transaction is A) to decide which accounts are affected. B) to decide where the amounts belong. C) to decide to which categories the accounts belong. D) to decide if the accounts are increasing or decreasing.
23)
24) A debit to an expense account was posted to a revenue account. This error would cause A) liabilities to be overstated. B) revenue to be understated. C) assets to be overstated. D) None of the above are correct.
24)
25) A debit to an asset account was posted to a liability account. This error would cause A) Capital to be overstated. B) assets to be understated. C) liabilities to be overstated. D) None of the above are correct.
25)
26) An account had a $500 credit starting balance. There were debit postings of $400 and credit postings of $150 during the month. The ending balance is A) $250 credit. B) $150 credit. C) $1050 credit. D) $750 debit.
26)
27) A credit may signify a(n) A) increase in capital. C) increase in assets.
27) B) decrease in liabilities. D) increase in withdrawals.
3
28) What is the proper entry to show the owner making an investment in the company? A) A debit to Cash and a credit to Capital B) A credit to Cash and a debit to Capital C) A debit to Cash and a credit to Revenue D) A credit to Cash and a debit to Revenue
28)
29) Dennis, owner of Dennis' Golf Center, withdrew $700 in cash from the business. Record the transaction by A) debiting Dennis, Withdrawals, $700; crediting Dennis, Capital, $700. B) debiting Accounts Receivable, $700; crediting Cash, $700. C) debiting Dennis, Withdrawals, $700; crediting Cash, $700. D) debiting Expense, $700; crediting Cash, $700.
29)
30) What is the James Long Company's net income or net loss if it had revenue of $1,200, salary expense of $300, utility expense of $500, and withdrawals of $500 during May? A) $400 B) ($100) C) $900 D) $100
30)
31) An asset would be debited and a liability credited if A) the business incurred an expense and paid it. B) the business bought supplies for cash. C) the business incurred an expense and did not pay for the expense immediately. D) the business bought equipment on account.
31)
32) Net income appears on which of the following financial reports? A) Trial balance B) Balance sheet and income statement C) Income statement and statement of owner's equity D) Balance sheet
32)
33) The business incurred an expense and paid it immediately. To record this, A) an expense is debited and an asset is credited. B) an expense is debited and a liability is credited. C) an expense is debited and Capital is credited. D) None of these are correct.
33)
34) The list of accounts in a Chart of Accounts is normally listed A) in chronological order. B) in the order in which they appear in the financial statements. C) in alphabetical order. D) none of the above.
34)
35) The entry to record Tom's payment of a home telephone bill is A) debit Tom's Withdrawals; credit Accounts Payable. B) debit Telephone Expense; credit Accounts Payable. C) debit Tom's Withdrawals; credit Cash. D) debit Telephone Expense; credit Cash.
35)
4
36) What would be the effect on accounts if the business received the telephone bill but did not pay it immediately? A) An asset would be debited and Capital credited. B) Capital would be debited and revenue credited. C) An expense would be debited and a liability credited. D) An expense would be debited and an asset credited.
36)
37) A list of all the accounts from the ledger with their ending balances is called a A) footing. B) normal balance. C) chart of accounts. D) trial balance.
37)
38) The income statement contains A) revenues. C) assets.
38) B) liabilities. D) Both B and C are correct.
39) A transaction that has more than one debit and one credit is called a A) chart of accounts. B) ledger. C) compound entry. D) credit entry.
39)
40) What is ABex Company's net income or net loss if it had Revenue of $5,000, Salary Expense of $2,650, Rent Expense of $950, and Insurance Expense of $500 during January? A) $900 net loss B) $900 net income C) $1,400 net loss D) $1,400 net income
40)
41) The left side of any account is the A) ending balance. C) footings.
41) B) debit side. D) credit side.
42) One asset would be debited and another credited if A) the business provided services to a credit customer. B) the business provided services to a cash customer. C) the business paid a creditor. D) the business bought supplies paying cash.
42)
43) Given the following list of accounts with normal balances, what are the trial balance totals of the debits and credits?
43)
Cash Accounts Receivable Capital Salaries Expense Service Revenue Rent Expense
$900 50 750 2,000 3,100 900
A) $3,850 debit, $3,850 credit C) $1,000 debit, $1,000 credit
B) $200 debit, $200 credit D) $200 debit, $1,000 credit
5
44) Which of the following types of accounts has a normal debit balance? A) Expenses B) Withdrawals C) Assets D) All of these answers are correct.
44)
45) What device is used to record the increases and decreases caused by business transactions to individual assets, liabilities, and owner's equity? A) Account B) Footings C) Chart of accounts D) Trial Balance
45)
46) Which of the following statements is NOT true? A) Footings are needed even if an account has only a single entry. B) Accounts are listed in order on the Trial Balance. C) A Trial Balance helps prove the accuracy of the ledger. D) Account balances are used to prepare a trial balance.
46)
47) The side that increases the account balance, by the rules of debit and credit, is said to be the A) normal balance. B) debit side. C) credit side. D) None of these answers are correct.
47)
48) Cash had a normal starting balance of $600. There were debit postings of $200 and credit postings of $300 during the month. The ending balance is A) $500 credit. B) $1,100 credit. C) $500 debit. D) $1,100 debit.
48)
49) Which of the following is prepared first? A) Income statement C) Balance sheet
49) B) Trial balance D) Statement of owner's equity
50) With respect to the balancing of an account, which one of these statements is FALSE? A) If the total on the debit side was the larger, the balance is a debit. B) Footings of each side of the account are needed to determine the balance. C) Dollar signs are always used to designate a balance amount. D) If the total on the credit side was the larger, the balance is a credit.
50)
51) On which financial statement would you find the ending Capital balance? A) Income statement B) Statement of owner's equity C) Balance Sheet D) Both B and C are correct.
51)
52) Given the following list of accounts with normal balances, what are the trial balance totals of the debits and credits?
52)
Cash Accounts Receivable Accounts Payable Capital Service Revenue Salary Expense
$600 550 300 150 1,700 1,000
A) $1,450 debit, $1,450 credit C) $900 debit, $900 credit
B) $700 debit, $1,000 credit D) $2,150 debit, $2,150 credit 6
53) What would be the effect on accounts if the business provided services to a customer on account? A) An asset would be debited and Capital credited. B) An asset would be debited and revenue credited. C) An asset would be debited and an expense credited. D) Capital would be debited and revenue credited.
53)
54) An account had a starting debit balance of $350. There were debit postings of $400 and credit postings of $200 during the month. The ending balance is A) $450 credit. B) $200 debit. C) $550 debit. D) $950 debit.
54)
55) The entry to record the Molly Company payment of $300 for repairs just completed to computer equipment it owns would include A) debit Accounts Payable, $300; credit Cash, $300. B) debit Repair Expense, $300; credit Accounts Payable, $300. C) debit Cash, $300; credit Repair Expense, $300. D) debit Repair Expense, $300; credit Cash, $300.
55)
56) Regarding the preparation of financial statements, which of the following is TRUE? A) The left column of the Income statement is used only to sub-total amounts. B) Each amount on the Balance Sheet can be found on the Trial Balance. (careful!) C) Financial statements have debit and credit columns. D) The Balance Sheet is prepared first.
56)
57) An account that would be increased by a credit is A) Utilities Expense. C) Cash.
57) B) Accounts Receivable. D) Accounts Payable.
58) The ledger is A) a group of accounts that records data from business transactions. B) a chronological record of the day's transactions. C) a tool used to make sure that all accounts have normal balances. D) a tool used to ensure that debits equal credits.
58)
59) A credit to an asset account was posted to the Capital account. This error would cause A) assets to be overstated. B) Capital to be understated. C) liabilities to be overstated. D) Both A and C are correct.
59)
60) Accounts Receivable has a normal balance of $1,000. After collecting $700, the balance in the account is A) debit $1,700. B) credit $300. C) debit $300. D) credit $1,700.
60)
61) Which type of account would be reported on the income statement? A) Liabilities B) Assets C) Expenses
61) D) Withdrawals
62) The word "debit" comes from which language? A) Italian B) French
D) Latin
62) C) Norsk
7
63) Office Supplies had a normal starting balance of $75. There were debit postings of $90 and credit postings of $70 during the month. The ending balance is A) $95 credit. B) $55 debit. C) $55 credit. D) $95 debit.
63)
64) Which of the statements of the rules of debit and credit is TRUE? A) Decrease Cash with a debit and the normal balance is a debit. B) Increase Accounts Payable with a credit and the normal balance is a credit. C) Decrease Accounts Receivable with a credit and the normal balance is a credit. D) Increase Capital with a debit and the normal balance is a debit.
64)
65) The business provided services to a cash customer. To record this, A) an expense is debited and Capital is credited. B) an asset is debited and a liability is credited. C) an asset is debited and a revenue is credited. D) None of these are correct.
65)
66) Accounts Receivable had a normal starting balance of $1000. There were debit postings of $800 and credit postings of $400 during the month. The ending balance is A) $2,200 debit. B) $600 credit. C) $1,400 credit. D) $1,400 debit.
66)
67) Accounts Payable had a normal starting balance of $750. There were debit postings of $600 and credit postings of $350 during the month. The ending balance is A) $1,000 debit. B) $500 debit. C) $1,000 credit. D) $500 credit.
67)
68) Which of the following errors would cause the trial balance to be out of balance? A) A debit is entered as $100 and the credit is entered at $1,000. B) An entry is not posted at all. C) An entry is posted twice. D) None of these answers are correct.
68)
69) The Accounts Receivable account is A) an asset, and it has a normal debit balance. B) a liability, and it has a normal credit balance. C) a revenue, and it has a normal debit balance. D) an expense, and it has a normal credit balance.
69)
70) Which of these statements about T accounts is FALSE? A) They are often used to help accountants make decisions. B) They are used extensively in computer accounting. C) Each account has a normal balance which is either a debit or a credit. D) They have both a left side and a right side.
70)
71) A debit to a liability account was posted to a revenue account. This error would cause A) liabilities to be understated. B) Capital to be overstated. C) revenues to be understated. D) None of the above are correct.
71)
8
72) The business bought supplies on account. To record this, A) an asset is debited and an asset is credited. B) an asset is debited and a liability is credited. C) an expense is debited and a liability is credited. D) None of these are correct.
72)
73) Which of the following groups of accounts have a normal debit balance? A) Assets, capital, and withdrawals B) Liabilities, expenses, and assets C) Assets, expenses, and withdrawals D) Revenue, liabilities, and capital
73)
74) What would be the effect on accounts if the business provided services to a customer collecting cash? A) An asset would be debited and revenue credited. B) Capital would be debited and revenue credited. C) An asset would be debited and Capital credited. D) An asset would be debited and an expense credited.
74)
75) Net income or net loss for a period is calculated by the following formula: A) total revenues - total withdrawals. B) total revenues - total expenses. C) total revenues - total expenses + capital. D) total revenues - total expenses - total withdrawals.
75)
76) The Accounts Receivable account has a zero opening balance, total debit postings of $1,700 and credit postings of $900. The balance of the account is A) $2,600 debit. B) $800 credit. C) $2,600 credit. D) $800 debit.
76)
77) The Accounts Payable account is A) a liability, and it has a normal credit balance. B) a liability, and it has a normal debit balance. C) a revenue, and it has a normal debit balance. D) an expense, and it has a normal credit balance.
77)
78) Which of the following groups of accounts have a normal credit balance? A) Revenue, liabilities, and capital B) Assets, expenses, and withdrawals C) Assets, capital, and withdrawals D) Liabilities, expenses, and assets
78)
79) The Office Supplies account is A) an asset, and it has a normal credit balance. B) a revenue, and it has a normal debit balance. C) an expense, and it has a normal credit balance. D) an asset, and it has a normal debit balance.
79)
80) The beginning balance in Cash was $400. Additional cash of $800 was received. Cheques were written for $700. The Cash balance is A) $900 debit. B) $500 debit. C) $800 credit. D) $500 credit.
80)
9
81) A formal account that has columns for date, explanation, post reference, debit, and credit is called the A) ledger. B) standard account form. C) T account. D) chart of accounts.
81)
82) A liability would be credited and an expense debited if A) the business paid a creditor. B) the business bought supplies for cash. C) the business incurred an expense and did not pay the expense immediately. D) the business bought supplies on account.
82)
83) When recording transactions in two or more accounts and the totals of the debits and credits are equal, it is called A) crediting. B) posting. C) debiting. D) double -entry bookkeeping.
83)
84) Given the following list of accounts with normal balances, what are the trial balance totals of the debits and credits?
84)
Cash Accounts Receivable Capital Withdrawals Service Fees Rent Expense
$1,200 700 1,900 500 1,000 500
A) $2,900 debit, $2,900 credit C) $1,200 debit, $1,200 credit
B) $2,000 debit, $2,000 credit D) $3,900 debit, $3,900 credit
85) Given the following list of accounts with normal balances, what are the trial balance totals of the debits and credits? Cash Accounts Receivable Capital Withdrawals Service Fees Rent Expense
85)
$500 100 200 100 700 200
A) $900 debit, $900 credit C) $800 debit, $800 credit
B) $800 debit, $1,000 credit D) $1,000 debit, $1,000 credit
86) Which of the following entries would be used to record the billing of fees earned? A) Debit Accounts Receivable and credit Rental Fees B) Debit Cash and credit Rental Fees C) Credit Cash and credit Rental Fees D) Debit Cash and debit Rental Fees
10
86)
87) Which of the following is prepared last? A) Balance Sheet C) Statement of Owner's Equity
87) B) Trial Balance D) Income Statement
88) A credit to a liability account was posted to an expense account. This error would cause A) liabilities to be overstated. B) expenses to be overstated. C) assets to be overstated. D) None of the above are correct.
88)
89) What is Burger Company's net income or net loss if it had Revenue of $3,000, Salary Expense of $2,900, Utility Expense of $450, and Withdrawals of $500 during July? A) $1,350 net loss B) $350 net loss C) $1,350 net income D) $350 net income
89)
90) One of the following statements does not help to explain the design of a T account: A) The account has a space for recording increases in the amount. B) The account has a title. C) The account has a space for recording decreases in the amount. D) The account has a balance.
90)
91) Chuck, the owner of Computer Sales Co., paid his personal VISA bill using a company cheque. The correct entry to record the transaction is A) credit Cash, debit Supplies Expense. B) credit Cash, debit Withdrawals. C) credit Cash, debit Capital. D) credit Cash, debit Accounts Receivable.
91)
92) The trial balance is prepared from A) the beginning balance in the ledger. B) a summary of all debit balance accounts. C) ending balances in the ledger. D) the transactions during the year.
92)
93) The Accounts Payable account has a zero opening balance, total debit postings of $800 and credit postings of $1,400. The balance is A) $2,200 credit. B) $600 credit. C) $600 debit. D) $2,200 debit.
93)
94) Accounts Payable would appear on which financial statement? A) Statement of Owner's equity B) Balance sheet C) Income statement D) None of these answers are correct.
94)
95) Which type of account would NOT be reported on the balance sheet? A) Revenue B) Accounts Payable C) Cash D) Accounts Receivable
95)
96) The chart of accounts A) can be expanded as the business grows. B) allows accounts to be balanced more accurately. C) is a numbered list of all of the business' accounts. D) A and C are correct.
96)
11
97) An account had a starting credit balance of $350. There were debit postings of $400 and credit postings of $200 during the month. The ending balance is A) $200 debit. B) $150 debit. C) $150 credit. D) $550 debit.
97)
98) The normal balance of an account is A) debit. C) the side that decreases.
98) B) the side that increases. D) credit.
99) When a car is bought using a bank loan and a cash payment, the result is A) a decrease in the asset Equipment and an increase in the liability Car Loan Payable. B) an increase in the asset Equipment and a decrease in the liability Car Loan Payable. C) an increase in the asset Equipment, a decrease in the asset Cash, and an increase in the liability Car Loan Payable. D) an increase in the asset Equipment, an increase in the asset Cash, and a decrease in the liability Car Loan Payable.
99)
100) The Beginning Capital account would appear on which financial statement? A) Statement of owner's equity B) Income statement C) Balance sheet D) None of these answers are correct.
100)
101) A debit to a liability account was posted to the Capital account. This error would cause A) Capital to be overstated. B) assets to be overstated. C) liabilities to be overstated. D) None of the above are correct.
101)
102) When speaking of the Standard Account Form, it is TRUE to say that A) All of a company's accounts together form a ledger. B) There is no Date column included in this form. C) It is not used in business records today. D) The form has no room for indicating either a debit or a credit.
102)
103) A credit to an asset account was posted to a liability account. This error would cause A) Capital to be understated. B) assets to be understated. C) liabilities to be overstated. D) None of the above are correct.
103)
104) A group of accounts for business is called a A) ledger. C) footing.
104) B) chart of accounts. D) trial balance.
105) Which of the following is NOT a financial statement? A) Statement of owner's equity B) Trial balance C) Income statement D) Balance sheet
105)
106) What would be the effect on accounts if the business purchased office supplies for cash? A) An asset would be debited and an asset credited. B) Capital would be debited and revenue credited. C) An asset would be debited and revenue credited. D) An asset would be debited and an expense credited.
106)
12
107) What would be the effect on accounts if the owner withdrew cash? A) An asset would be debited and Capital credited. B) An asset would be debited and a revenue credited. C) Withdrawals would be debited and an asset credited. D) An asset would be debited and an expense credited.
107)
108) When a production machine is bought using a bank loan, the result is A) an increase in the asset Equipment and an increase in the liability Machine Loan Payable. B) a decrease in the asset Equipment and an increase in the liability Machine Loan Payable. C) an increase in the asset Equipment and a decrease in the liability Machine Loan Payable. D) a decrease in the asset Equipment and a decrease in the liability Machine Loan Payable.
108)
109) A chart of accounts A) is a listing of all the accounts used by a company. B) is set up in alphabetical order. C) includes account balances. D) All of the above are correct.
109)
110) A ledger A) is the same as a chart of accounts. B) can replace the financial statements. C) is a group of accounts and their balances. D) None of these answers are correct.
110)
111) Accounts Payable had a normal starting balance of $600. There were debit postings of $350 and credit postings of $200 during the month. The ending balance is A) $750 debit. B) $750 credit. C) $450 debit. D) $450 credit.
111)
112) The Withdrawals account is A) an expense, and it has a normal credit balance. B) an owner's equity component, and it has a normal debit balance. C) a revenue, and it has a normal debit balance. D) a liability, and it has a normal debit balance.
112)
113) The beginning balance in the Computers account was $2,500. The company purchased an additional $500 worth of computers. The balance in the account is A) credit of $2,000. B) credit of $3,000. C) debit of $3,000. D) debit of $2,000.
113)
114) Which of the following accounts would be increased by a debit? A) Fees Earned B) Accounts Payable C) Capital D) Cash
114)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 115) Revenue increases on the debit side of the account.
115)
116) Double -entry accounting requires transactions to affect two or more accounts, and the total of the debits and credits must equal.
116)
13
117) A T account is used for demonstration purposes.
117)
118) Expenses are recorded when paid.
118)
119) A credit in accounting is always a decrease to an account.
119)
120) A debit means the left-hand side of an account and an increase for all accounts.
120)
121) A debit in accounting is always an increase to an account.
121)
122) The financial statements contain debit and credit columns.
122)
123) After deciding which accounts are affected, the next step in analyzing a transaction is to determine to which categories the accounts belong.
123)
124) The debit side is always the right side of the account.
124)
125) Cash is debited when the business makes a payment for utilities.
125)
126) A credit in accounting means a position on the right side of the account.
126)
127) Revenue has a normal credit balance, and increases are recorded on the credit side.
127)
128) Revenues are recorded as credits.
128)
129) A credit means the right-side of an account and a decrease for all accounts.
129)
130) Each part of a business transaction is recorded in the accounting equation under a specific account.
130)
131) The debit side of all accounts increases the balance and the credit side decreases all accounts.
131)
132) The trial balance is a financial statement.
132)
133) A debit in accounting means a position on the left side of the account.
133)
134) If credits do not equal debits in the trial balance the accountant can simply move on to making the remainder of the financial statements.
134)
135) A chart of accounts is a listing of the accounts and their ending balances.
135)
136) Dollar signs are not used in formal financial reports.
136)
137) The credit side is always the right side of the account.
137)
138) A trial balance is a formal report prepared after the balance sheet.
138)
14
139) When preparing a trial balance, it is not necessary to use dollar signs.
139)
140) Withdrawals increases on the debit side of the account.
140)
141) Capital and Assets are reported on the Statement of Owner's Equity.
141)
142) Accounts Payable indicates amounts we owe to our suppliers.
142)
143) Accounts Payable indicates monies owed to us by our clients or customers.
143)
144) Debits must always equal credits.
144)
145) When the owner invests computer equipment in the business, cash is increased.
145)
146) A compound entry is when more than one transaction occurs.
146)
147) Accounts Payable increases on the credit side of the account.
147)
148) Accounts Receivable appears on the income statement.
148)
149) Cash would be affected by any transaction that involves a withdrawal.
149)
150) Double underlines under final totals are used on a trial balance for clarity.
150)
151) The side of an account that increases the balance is always the same as the normal balance side.
151)
152) Accounts Receivable indicates amounts we owe to our customers.
152)
153) A footing must be used on every T account, even if there is only one entry.
153)
154) Accounts Receivable indicates amounts owed to us by our clients or customers.
154)
155) Salaries Expense appears on the balance sheet.
155)
156) Withdrawals and expenses are reported on the income statement.
156)
157) Cash increases on the debit side of the account.
157)
158) Debit and credit columns are not used on the financial reports.
158)
159) The Supplies account is increased by a debit.
159)
160) Equipment is an example of a liability.
160)
161) Accounts Payable is an asset account that is increased on the credit side.
161)
15
162) When cash is increased, the Cash account is debited.
162)
163) At least two accounts are affected in every transaction.
163)
164) A transaction that involves more than one credit or more than one debit is not permitted.
164)
165) Accounts Payable indicates amounts owed to us by our suppliers.
165)
166) Withdrawals increase on the debit side of the account.
166)
167) A transaction that involves more than one credit or more than one debit is called a compound entry.
167)
168) Investors will frequently use a trial balance to decide if a company is a good risk to put money into.
168)
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 169) Identify whether a debit or credit would be correct for each of the following account changes. Use a Dr. (debit) or Cr. (credit) in the space provided. ________ 1. Increase Delivery Van ________ 2. Decrease Accounts Receivable ________ 3. Decrease Accounts Payable ________ 4. Increase Salaries Expense ________ 5. Increase Service Fees Revenue ________ 6. Decrease Cash ________ 7. Increase S. McCrae, Capital ________ 8. Increase S. McCrae, Withdrawals ________ 9. Increase Rent Expense ________ 10. Decrease Equipment For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, and in Column 3 the financial statement that the account appears upon. Column 1
Column 2
Column 3
170) Installation Fees Earned
________
________
________
171) Gas Expense
________
________
________
16
172) Identify the normal balance for each of the following accounts by using a Dr. (debit) or a Cr. (credit). ________ 1. Salaries Expense ________ 2. R. Johns, Withdrawals ________ 3. R. Johns, Capital ________ 4. Accounting Fees Earned ________ 5. Cash ________ 6. Accounts Receivable ________ 7. Accounts Payable ________ 8. Rent Expense ________ 9. Equipment ________ 10. Advertising Expense 173) Following are the five steps in analyzing business transactions. Apply the five steps in analyzing the following transaction: Received the monthly utility expense to be paid later, $100. 1. Which accounts are affected? 2. To which categories do the accounts belong? 3. Are the accounts increasing or decreasing? How much? 4. What are the debit and credit rules? 5. On what side of the accounts do the amounts belong? 174) Below is a chart of accounts. Following is a series of transactions. Indicate for each transaction the accounts that should be debited and credited by inserting the proper account number in the space provided. 1100 1120 1210 2100 3100
Cash Accounts Receivable Computer Equipment Accounts Payable M. Martin, Capital
Debit ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
Credit ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
3200 4100 5110 5120 5130
M. Martin, Withdrawals Legal Fees Revenue Salaries Expense Rent Expense Advertising Expense
Transaction 1. Purchased computer equipment on account. 2. Paid salaries for the week. 3. Invested additional cash in the business. 4. Received cash for services performed. 5. Billed a client on account for services performed. 6. Paid accounts payable. 7. Collected accounts receivable. 8. Withdrew cash for personal use. 9. Paid advertising expense. 10. Paid rent expense for the month.
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, and in Column 3 the financial statement that the account appears upon.
175) Cleaning Expense
Column 1
Column 2
Column 3
________
________
________
17
176) Following are the five steps in analyzing business transactions. Apply the five steps in analyzing the following transaction: Earned $100 for interest on our bank account, to be paid later. 1. Which accounts are affected? 2. To which categories do the accounts belong? 3. Are the accounts increasing or decreasing? How much? 4. What are the debit and credit rules? 5. On what side of the accounts do the amounts belong? 177) Determine the ending owner's equity of a business having a beginning owner's equity of $ 9,500, additional investments of $450, withdrawals of $ 1,000, and net income of $ 1,400. 178) A chart of accounts is below. Following is a series of transactions. Indicate for each transaction the accounts that should be debited and credited by inserting the proper account number in the space provided. 111 Cash 112 Accounts Receivable 121 Delivery Equipment 211 Accounts Payable 311 C. Webster, Capital
312 C. Webster, Withdrawals 411 Delivery Fees Earned 511 Salaries Expense 512 Rent Expense 513 Advertising Expense 514 Gas Expense
Debit Credit Transaction ________ ________ 1. Invested cash in the business. ________ ________ 2. Received cash for delivery services performed. ________ ________ 3. Billed a customer for services performed. ________ ________ 4. Paid accounts payable. ________ ________ 5. Collected accounts receivable. ________ ________ 6. Withdrew cash for personal use. ________ ________ 7. Paid advertising expense. ________ ________ 8. Paid rent expense for the month. ________ ________ 9. Purchased delivery equipment on account. ________ ________ 10. Paid salaries for the week.
18
179) The following transactions occurred during January for Cindy's Designer Service: a. Cindy invested $5,000 in the design service from her personal savings account. b. Bought office equipment for cash, $1,000. c. Performed designer service for a customer on account, $800. d. Telephone expense due but unpaid, $80. e. Collected $100 from customer in transaction c. f. Cindy withdrew $70 for personal use. Required: 1. Record the above transactions in the following T accounts. (Place the letter of the transaction next to the entry.) 2. Foot the T accounts where appropriate. Cash
111
Accts. Rec. 112
Off. Equip. 121
Accts. Pay. 211
Cindy, Cap. 311
Cindy, With. 312
Design Fees 411
Telephone Exp. 512
180) Why is Revenue increased on the Credit side? (Explain as it pertains to the expanded accounting equation and its relationship to Owner's Equity.) For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, and in Column 3 the financial statement that the account appears upon.
181) Salaries Expense
Column 1
Column 2
Column 3
________
________
________
182) The following is a list of accounts and their balances for Myra's Company for the month ended May 31, 2022. Prepare a trial balance in good form. Cash Accounts Payable Office Equipment Myra, Capital
$1,380 500 2,260 3,965
Myra, Withdrawals Accounts Receivable Service Fees Rent Expense
19
$980 1,030 1,835 650
183) The following is a list of accounts and their balances for Blake's Company for the month ended May 31, 2022. Prepare a trial balance in good form. Cash $1,020 Machine Loan Payable 7,250 Equipment 15,340 Blake, Capital 8,505
Blake, Withdrawals Interest Receivable Delivery Revenue Salary Expense
$1,980 80 4,915 2,250
184) Below is a chart of accounts. Following is a series of transactions. Indicate for each transaction the accounts that should be debited and credited by inserting the proper account number in the space provided. 111 Cash 112 Accounts Receivable 121 Office Equipment 211 Accounts Payable 311 R. Andrews, Capital
312 R. Andrews, Withdrawals 411 Service Fees Revenue 511 Salaries Expense 512 Rent Expense 513 Advertising Expense
Debit Credit Transaction ________ ________ 1. Purchased office equipment on account. ________ ________ 2. Paid salaries for the week. ________ ________ 3. Invested additional cash in the business. ________ ________ 4. Received cash for services performed. ________ ________ 5. Billed a client on account for services performed. ________ ________ 6. Paid accounts payable. ________ ________ 7. Collected accounts receivable. ________ ________ 8. Withdrew cash for personal use. ________ ________ 9. Paid advertising expense. ________ ________ 10. Paid rent expense for the month. For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, and in Column 3 the financial statement that the account appears upon.
185) Cleaning Fees Earned
Column 1
Column 2
Column 3
________
________
________
186) Number the following types of accounts (1-6) as they would appear on the Trial Balance. ________ Assets ________ Capital ________ Revenue ________ Liabilities ________ Withdrawals ________ Expenses
20
187) A chart of accounts is below. Following is a series of transactions. Indicate for each transaction the accounts that should be debited and credited by inserting the proper account number in the space provided. 111 112 121 211 311
Cash Accounts Receivable Delivery Equipment Accounts Payable M. Tharp, Capital
Debit ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
Credit ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
312 411 511 512 513 514
M. Tharp, Withdrawals Delivery Fees Earned Salaries Expense Rent Expense Advertising Expense Gas Expense
Transaction 1. Invested cash in the business. 2. Received cash for delivery services performed. 3. Billed a customer for services performed. 4. Paid accounts payable. 5. Collected accounts receivable. 6. Withdrew cash for personal use. 7. Paid advertising expense. 8. Paid rent expense for the month. 9. Purchased delivery equipment on account. 10. Paid salaries for the week.
188) Following are the five steps in analyzing business transactions. Apply the five steps in analyzing the following transaction: Paid the monthly telephone expense, $100. 1. Which accounts are affected? 2. To which categories do the accounts belong? 3. Are the accounts increasing or decreasing? How much? 4. What are the debit and credit rules? 5. On what side of the accounts do the amounts belong? 189) Identify the normal balance for each of the following accounts by placing a Dr. (debit) or a Cr. (credit) in the space provided. ________ 1. Computer ________ 2. M. Bryant, Withdrawals ________ 3. M. Bryant, Capital ________ 4. Legal Fees Earned ________ 5. Cash ________ 6. Accounts Receivable ________ 7. Accounts Payable ________ 8. Rent Expense ________ 9. Office Equipment ________ 10. Supplies
21
190) Identify whether a debit or credit would be correct for each of the following account changes. Use a Dr. (debit) or Cr. (credit). ___Dr___ 0. Increase Accounts Receivable ________ 1. Increase Advertising Expense ________ 2. Increase Rental Revenue ________ 3. Increase in Inventory ________ 4. Increase in Interest Receivable ________ 5. Increase in Capital ________ 6. Decrease in Accounts Receivable ________ 7. Increase in Accounts Payable ________ 8. Increase in Travel Expense ________ 9. Increase in Cash ________ 10. Decrease in Inventory 191) Below is the Trial Balance for Benson Company for June 30, 2023. Trial Balance June 30, 2023
Cash Accounts Receivable Office Equipment Accounts Payable Benson, Capital Benson, Withdrawals Service Fees Advertising Expense Salaries Expense Utilities Expense Totals
Debit 370 1,600 900
Credit
770 1,500 500 2,730 600 630 400 5,000
5,000
Required: Prepare 1. An Income Statement for the month ended June 30, 2023 2. A Statement of Owner's Equity for the month ended June 30, 2023 3. A Balance Sheet, as of June 30, 2023
22
192) Identify whether a debit or credit would be correct for each of the following account changes. Use a Dr. (debit) or Cr. (credit). ___Dr___ 0. Increase Cash ________ 1. Increase Equipment ________ 2. Decrease Accounts Receivable ________ 3. Decrease in Accounts Payable ________ 4. Increase in Salaries Expense ________ 5. Increase in Service Fees Revenue ________ 6. Decrease in Cash ________ 7. Increase J. Russell, Capital ________ 8. Increase J. Russell, Withdrawals ________ 9. Increase Rent Expense ________ 10. Decrease Equipment 193) Following are the five steps in analyzing business transactions. Apply the five steps in analyzing the following transaction: Received $100 cash for services rendered. 1. Which accounts are affected? 2. To which categories do the accounts belong? 3. Are the accounts increasing or decreasing? How much? 4. What are the debit and credit rules? 5. On what side of the accounts do the amounts belong? 194) Determine the beginning owner's equity of a business having beginning assets of $12,000, ending liabilities of $5,000. During the year the liabilities decreased by $3,000. 195) List and explain the five steps in accounting analysis. 196) The following is a list of accounts and their balances for Benson Company for the month ended June 30, 2023. Prepare a trial balance in good form. Cash Accounts Payable Office Equipment Benson, Capital Benson, Withdrawals
$370 770 900 1,500 500
Accounts Receivable Advertising Expense Service Fees Salaries Expense Utilities Expense
23
1,600 600 2,730 630 400
197) The following transactions occurred during June for Campus Cycle Shop. Record the transactions below in the T accounts. Place the letter of the transaction next to the entry. Foot and calculate the ending balances of the T accounts where appropriate. a. Tyler invested $6,500 in the bike service from his personal savings account. b. Bought office equipment for cash, $900. c. Performed bike service for a customer on account, $1,000. d. Company cell phone bill received, but not paid, $80. e. Collected $300 from customer in transaction c. f. Tyler withdrew $100 for personal use. Cash
111
Office Equipment 112
Accounts Receivable 112
Accounts Payable 211
Tyler's Capital 311
Tyler's Withdrawals 312
Bike Fees 411
Telephone Expense
512
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, and in Column 3 the financial statement that the account appears upon.
198) Automobile
Column 1
Column 2
Column 3
________
________
________
24
199) A chart of accounts is below. Following is a series of transactions. Indicate for each transaction the accounts that should be debited and credited by inserting the proper account number in the space provided. 111 112 121 211 311
Cash Accounts Receivable Equipment Accounts Payable L. Noble, Capital
Debit ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
Credit ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
312 411 511 512 513 514
L. Noble, Withdrawals Service Fees Earned Salaries Expense Rent Expense Advertising Expense Gas Expense
Transaction 1. Invested cash in the business. 2. Received cash for services performed. 3. Billed a customer for services performed. 4. Paid accounts payable. 5. Collected accounts receivable. 6. Withdrew cash for personal use. 7. Paid gas expense. 8. Paid salaries expense for the month. 9. Purchased equipment on account. 10. Paid rent for the month.
200) Selected accounts from the ledger of Thomas Company appear below. For each account, indicate the following: a. In the first column at right, indicate the type of each account using the following abbreviations: Asset - A Revenue - R None of the above - N Liability - L Expense - E b. In the second column, indicate the normal balance of the account by inserting a Dr. or Cr. Account 1. Petty Cash 2. Accounts Receivable 3. Fees Earned 4. Thomas, Withdrawals 5. Accounts Payable 6. Salaries Expense 7. Thomas, Capital 8. Automobile 9. Equipment 10. Telephone Expense
Type of Account ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
25
Normal Balance ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
201) Phillip's Photography began business on July 1. Record the transactions in the T accounts. Place the letter of the transaction next to the entry. Foot the T accounts where appropriate. a. Phillip invested $6,000 in his business from his personal savings account. b. Bought photographic equipment on account, $1,200. c. Performed services for a customer on account, $800. d. Utilities expense due but unpaid, $80. e. Collected $100 from customer in transaction c. f. Phillip withdrew $70 for personal use. Cash
111
Accts. Rec. 112
Photo Equip. 121
Accts. Pay. 211
Phillip's Cap. 311
Phillip's With. 312
Photo Fees 411
Utilities Exp. 512
Advertising Exp. 513
202) Determine the beginning owner's equity of a business having an ending owner's equity of $3,500, additional investments of $500 withdrawals of $400, and net loss of $750. 203) Identify whether a debit or credit would be correct for each of the following account changes. Use a Dr. (debit) or Cr. (credit). ___Dr___ 0. Increase Cash ________ 1. Increase Inventory ________ 2. Decrease Cash ________ 3. Decrease in Bank Loan Payable ________ 4. Increase in Rent Expense ________ 5. Increase in Interest Revenue ________ 6. Decrease in Inventory ________ 7. Increase Service Revenue ________ 8. Increase in Office Supply Expense ________ 9. Increase Interest Expense ________ 10. Increase in Salaries Payable For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, and in Column 3 the financial statement that the account appears upon. Column 1
Column 2
Column 3
204) Office Supplies Expense
________
________
________
205) Lawn Care Fees Earned
________
________
________
26
206) Cleaning Equipment
________
________
________
207) Below is the Trial Balance for Puppers Company for January 31, 2023. Trial Balance January 31, 2023
Cash Accounts Receivable Equipment Accounts Payable Bank Loan Payable Puppers, Capital Puppers, Withdrawals Service Revenue Rent Expense Salaries Expense Utilities Expense Totals
Debit 900 1,850 28,000
Credit
570 14,000 14,748 990 9,722 1,600 4,950 750 39,040
39,040
Required: Prepare 1. An Income Statement for the month ended January 31, 2023 2. A Statement of Owner's Equity for the month ended January 31, 2023 3. A Balance Sheet, as of January 31, 2023 208) Identify the normal balance for each of the following accounts by placing a Dr. (debit) or a Cr. (credit) in the space provided. ________ 1. Company Truck ________ 2. Equipment ________ 3. Interest Payable ________ 4. Accounting Fee Revenue ________ 5. Inventory ________ 6. Land ________ 7. Bank Loan Payable ________ 8. Automobile Expense ________ 9. Repairs and Maintenance Expense ________ 10. Petty Cash
27
209) Following are the five steps in analyzing business transactions. Apply the five steps in analyzing the following transaction: Paid monthly rent expense, $900. 1. Which accounts are affected? 2. To which categories do the accounts belong? 3. Are the accounts increasing or decreasing? How much? 4. What are the debit and credit rules? 5. On what side of the accounts do the amounts belong? 210) The following is a list of accounts and their balances for McCall Company for the month ended June 30, 2023. Prepare a trial balance in good form. Cash Accounts Receivable Office Equipment McCall, Capital McCall, Withdrawals
$580 1,500 500 110 750
Accounts Payable Interest Expense Service Revenue Delivery Expense Rent Expense
1,600 80 1,599 130 900
211) Selected accounts from the ledger of Noble Company appear below. For each account, indicate the following: a. In the first column at right, indicate the type of each account using the following abbreviations: Asset - A Revenue - R None of the above - N Liability - L Expense - E b. In the second column, indicate the normal balance of the account by inserting a Dr. or Cr. Account 1. Inventory 2. Cash 3. Interest Earned 4. Noble, Withdrawals 5. Interest Payable 6. Interest Expense 7. Noble, Capital 8. Land 9. Interest Receivable 10. Office Supply Expense
Type of Account ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
212) Explain the difference between expenses and withdrawals.
28
Normal Balance ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
Answer Key Testname: CHAP 02_14CE
1) A 2) D 3) D 4) D 5) D 6) A 7) A 8) A 9) B 10) D 11) C 12) C 13) B 14) B 15) A 16) A 17) B 18) D 19) A 20) A 21) C 22) D 23) A 24) B 25) B 26) A 27) A 28) A 29) C 30) A 31) D 32) C 33) A 34) B 35) C 36) C 37) D 38) A 39) C 40) B 41) B 42) D 43) A 44) D 45) A 46) A 47) A 48) C 49) B 29
Answer Key Testname: CHAP 02_14CE
50) C 51) D 52) D 53) B 54) C 55) D 56) A 57) D 58) A 59) A 60) C 61) C 62) D 63) D 64) B 65) C 66) D 67) D 68) A 69) A 70) B 71) C 72) B 73) C 74) A 75) B 76) D 77) A 78) A 79) D 80) B 81) B 82) C 83) D 84) A 85) A 86) A 87) A 88) D 89) B 90) D 91) B 92) C 93) B 94) B 95) A 96) D 97) C 98) B 30
Answer Key Testname: CHAP 02_14CE
99) C 100) A 101) C 102) A 103) C 104) A 105) B 106) A 107) C 108) A 109) A 110) C 111) D 112) B 113) C 114) D 115) FALSE 116) TRUE 117) TRUE 118) FALSE 119) FALSE 120) FALSE 121) FALSE 122) FALSE 123) TRUE 124) FALSE 125) FALSE 126) TRUE 127) TRUE 128) TRUE 129) FALSE 130) TRUE 131) FALSE 132) FALSE 133) TRUE 134) FALSE 135) FALSE 136) FALSE 137) TRUE 138) FALSE 139) TRUE 140) TRUE 141) FALSE 142) TRUE 143) FALSE 144) TRUE 145) FALSE 146) FALSE 147) TRUE 31
Answer Key Testname: CHAP 02_14CE
148) FALSE 149) FALSE 150) TRUE 151) TRUE 152) FALSE 153) FALSE 154) TRUE 155) FALSE 156) FALSE 157) TRUE 158) TRUE 159) TRUE 160) FALSE 161) FALSE 162) TRUE 163) TRUE 164) FALSE 165) FALSE 166) TRUE 167) TRUE 168) FALSE 169) 1. Dr. 2. Cr. 3. Dr. 4. Dr. 5. Cr. 6. Cr. 7. Cr. 8. Dr. 9. Dr. 10. Cr. 170) Installation Fees Earned: revenue credit income statement 171) Gas Expense: expense debit income statement 172) 1. Dr. 2. Dr. 3. Cr. 4. Cr. 5. Dr. 6. Dr. 7. Cr. 8. Dr. 9. Dr. 10. Dr. 173) 1. Utility Expense and Accounts Payable 2. Utility Expense is a subcategory of owner's equity. Accounts Payable is a liability. 3. Utility Expense is increasing $100. Accounts Payable is increasing $100. 4. An increase in an expense account (Utility Expense) is a debit; an increase in a liability account (Accounts Payable) is a credit. 5. Utility Expense, left side; Accounts Payable, right side 32
Answer Key Testname: CHAP 02_14CE
174) 1. 1210, 2100 2. 5110, 1100 3. 1100, 3100 4. 1100, 4100 5. 1120, 4100 6. 2100, 1100 7. 1100, 1120 8. 3200, 1100 9. 5130, 1100 10. 5120, 1100 175) Cleaning Expense: expense debit income statement 176) 1. Accounts Receivable and Interest Revenue 2. Accounts Receivable is an asset. Interest Revenue is a subcategory of owner's equity. 3. Accounts Receivable is increasing $100. Interest Revenue is increasing $100. 4. An increase in an asset account (Accounts Receivable) is a debit; an increase in a revenue account (Interest Revenue) is a credit. 5. Accounts Receivable, left side; Interest Revenue, right side 177) $10,350 [ $9,500 + $450 - $1,000 + 1,400] 178) 111, 311 111, 411 112, 411 211, 111 111, 112 312, 111 513, 111 512, 111 121, 211 511, 111 179) Cash 111 Accts. Rec. 112 Off. Equip. 121 a. 5,000 c. 800 e. 100 b. 1,000 e. 100 b. 1,000 B 4,030 f. 70 B 700 Accts. Pay. 211 d. 80
Cindy, Cap. 311 a. 5,000
Design Fees 411 c. 800
Telephone Exp. 512 d. 80
Cindy, With. 312 f. 70
180) Revenue is an increase to owner's equity; Capital is increased on the credit side. 181) Salaries Expense: expense debit income statement
33
Answer Key Testname: CHAP 02_14CE
182)
Myra's Company Trial Balance May 31, 2022 Debit 1,380 1,030 2,260
Cash Accounts Receivable Office Equipment Accounts Payable Myra, Capital Myra, Withdrawals Service Fees Rent Expense Totals 183)
Credit
500 3,965 980 1,835 650 6,300 Blake's Company Trial Balance May 31, 2022
6,300
Debit 1,020 80 15,340
Credit
Cash Interest Receivable Equipment Machine Loan Payable Blake, Capital Blake, Withdrawals Delivery Revenue Salary Expense Totals 184) 121, 211 511, 111 111, 311 111, 411 112, 411 211, 111 111, 112 312, 111 513, 111 512, 111 185) Cleaning Fees Earned: 186) 1 Assets 3 Capital 5 Revenue 2 Liabilities 4 Withdrawals 6 Expenses
7,250 8,505 1,980 4,915 2,250 20,670
revenue
20,670
credit
income statement
34
Answer Key Testname: CHAP 02_14CE
187) 1. 111, 311 2. 111, 411 3. 112, 411 4. 211, 111 5. 111, 112 6. 312, 111 7. 513, 111 8. 512, 111 9. 121, 211 10. 511, 111 188) 1. Telephone Expense and Cash 2. Telephone Expense is a subcategory of owner's equity. Cash is an asset. 3. Telephone Expense is increasing $100. Cash is decreasing $100. 4. An increase in an expense account (Telephone Expense) is a debit; a decrease in an asset account (Cash) is a credit. 5. Telephone Expense, left side; Cash, right side 189) 1. Dr. 2. Dr. 3. Cr. 4. Cr. 5. Dr. 6. Dr. 7. Cr. 8. Dr. 9. Dr. 10. Dr. 190) 1. Dr. 2. Cr. 3. Dr. 4. Dr. 5. Cr. 6. Cr. 7. Cr. 8. Dr. 9. Dr. 10. Cr.
35
Answer Key Testname: CHAP 02_14CE
191) 1. Benson Company Income Statement For the Month Ended June 30, 2023 Service Fees Revenue Expenses: Advertising Salaries Utilities
$2,730 600 630 400
Net Income
1,630 $1,100
2. Benson Company Statement of Owner's Equity For the Month Ended June 30, 2023 Darryl Benson, Capital, June 1, 2023 Add Net Income for June 2023 Less Withdrawals
$1,500 $1,100 500
Darryl Benson, Capital, June 30, 2023
600 $2,100
3. Benson Company Balance Sheet June 30, 2023
Cash Accounts Receivable Office Equipment
Assets $370 1,600 900 $2,870
Liabilities & Owner's Equity Accounts Payable $770 Darryl Benson, Capital 2,100 $2,870
192) 1. Dr. 2. Cr. 3. Dr. 4. Dr. 5. Cr. 6. Cr. 7. Cr. 8. Dr. 9. Dr. 10. Cr. 193) 1. Cash and Service Revenue 2. Cash is an asset. Service Revenue is a subcategory of owner's equity. 3. Cash is increasing $100. Revenue is increasing $100. 4. An increase in an asset account (Cash) is a debit; an increase in a revenue account (Service Revenue) is a credit. 5. Cash, left side; Service Revenue, right side 36
Answer Key Testname: CHAP 02_14CE
194) $4,000 [$12,000 - ($5,000 + $3,000)] 195) Step 1 - Determine which accounts are affected. Step 2 - Determine which categories the accounts belong to Step 3 - Determine whether the accounts increase or decrease Step 4 - What do the rules of debits and credits say? Step 5 - What does the T account look like? Place amounts in the accounts on either the left or the right side depending on the rules. 196) Benson Company Trial Balance June 30, 2023 Debit 370 1,600 900
Cash Accounts Receivable Office Equipment Accounts Payable Benson, Capital Benson, Withdrawals Service Fees Advertising Expense Salaries Expense Utilities Expense
Credit
770 1,500 500 2,730 600 630 400
Totals
5,000
5,000
197) Cash a. 6,500 e. 300
111 b. 900 f. 100
Accounts Receivable 112 c. 1,000 e. 300 700
5,800 Office Equipment 112 b. 900
Accounts Payable 211 d. 80
Tyler's Capital 311 a. 6,500
Tyler's Withdrawals 312 f. 100
Bike Fees 411 c. 1,000
Telephone Expense d. 80
198) Automobile:
asset
512
debit
balance sheet
37
Answer Key Testname: CHAP 02_14CE
199) 1. 111, 311 2. 111, 411 3. 112, 411 4. 211, 111 5. 111, 112 6. 312, 111 7. 514, 111 8. 511, 111 9. 121, 211 10. 512, 111 200) Account 1. Petty Cash 2. Accounts Receivable 3. Fees Earned 4. Thomas, Withdrawals 5. Accounts Payable 6. Salaries Expense 7. Thomas, Capital 8. Automobile 9. Equipment 10. Telephone Expense Cash 111 201) a. 6,000 f. 70 e. 100 B 6,030 Accts. Pay. 211 b. 1,200 d. 80 B 1,280 Photo Fees 411 c. 800
Type of Normal Account Balance A Dr A Dr R Cr N Dr L Cr E Dr N Cr A Dr A Dr E Dr Accts. Rec. 112 Photo Equip. 121 c. 800 e. 100 b. 1,200 B
700 Phillip's Cap. 311 a. 6,000
Utilities Exp. 512 d. 80
202) $4,150 [$3,500 - $500 + $400 + $750] 203) 1. Dr. 2. Cr. 3. Dr. 4. Dr. 5. Cr. 6. Cr. 7. Cr. 8. Dr. 9. Dr. 10. Cr. 204) Office Supplies Expense: 205) Lawn Care Fees Earned: revenue
expense credit
Phillip's With. 312 f. 70
Advertising Exp. 513
debit income statement income statement 38
Answer Key Testname: CHAP 02_14CE
206) Cleaning Equipment: asset debit 207) 1. Puppers Company Income Statement For the Month Ended January 31, 2023 Service Revenue Expenses: Rent Salaries Utilities
balance sheet
$9,722 1,600 4,950 750
Net Income
7,300 $2,422
2. Puppers Company Statement of Owner's Equity For the Month Ended January 31, 2023 P. Puppers, Capital, January 1, 2023 Add Net Income for January 2023 Less Withdrawals
$14,748 $2,422 990
P. Puppers, Capital, January 31, 2023
1,432 $16,180
3. Puppers Company Balance Sheet January 31, 2023
Cash Accounts Receivable Equipment
Assets $900 1,850 28,000 $30,750
Liabilities & Owner's Equity Accounts Payable $570 Bank Loan Payable 14,000 Puppers, Capital 16,180 $30,750
208) 1. Dr. 2. Dr. 3. Cr. 4. Cr. 5. Dr. 6. Dr. 7. Cr. 8. Dr. 9. Dr. 10. Dr.
39
Answer Key Testname: CHAP 02_14CE
209) 1. Rent Expense and Cash 2. Rent Expense is a subcategory of owner's equity. Cash is an asset. 3. Rent Expense is increasing $900. Cash is decreasing $900. 4. An increase in an expense account (Rent Expense) is a debit; a decrease in an asset account (Cash) is a credit. 5. Rent Expense, left side; Cash, right side 210) McCall Company Trial Balance June 30, 2023
Cash Accounts Receivable Office Equipment Accounts Payable McCall, Capital McCall, Withdrawals Service Fees Interest Expense Delivery Expense Rent Expense
Debit 580 1,500 500
Credit
1,600 110 750 2,730 80 130 900
Totals 211) Account
4,440 4,440 Type of Normal Account Balance 1. Inventory A Dr 2. Cash A Dr 3. Interest Earned R Cr 4. Noble, Withdrawals N Dr 5. Interest Payable L Cr 6. Interest Expense E Dr 7. Noble, Capital N Cr 8. Land A Dr 9. Interest Receivable A Dr 10. Office Supply Expense E Dr 212) A withdrawal is used for recording the owner's withdrawal of company assets for personal use, and not related to the business. Expenses are costs the company incurs in carrying on operations in its effort to create revenue.
40
Exam
CHAPTER 3
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Owner's Equity decreases. 1) As A) Withdrawals increase, C) Owner's Equity increases.
B) Cash increases. D) Expense increases.
1)
2) Which of the following accounts would be credited in a proper journal entry? A) Capital when it is decreased B) Service Fees when it is increased C) Accounts Payable when it is decreased D) Cash when it is increased
2)
3) The first entry for Pat's Car Wash included debits to Cash, Office Equipment, and Building; as well as a credit to Pat Wagner, Capital. This entry would be called a A) final entry. B) complicated entry. C) compound entry. D) multiple entry.
3)
4) A debit to the Withdrawals account was posted to an expense account. This would cause A) assets to be overstated. B) withdrawals to be overstated. C) liabilities to be understated. D) expense to be understated.
4)
5) The entry to record the payment of office salaries would be A) Debit Salaries Expense; Credit Cash. B) Debit Cash; Credit Accounts Receivable. C) Debit Cash; Credit Salaries Expense. D) Debit Salaries Expense; Credit Capital.
5)
6) The posting reference column on the general journal A) shows which transactions have been posted to the ledger. B) allows us to cross reference to the general ledger. C) displays to which accounts the transactions have been posted. D) All of the above are correct.
6)
7) The twelve-month period a business chooses for its accounting period is a(n) A) accounting period. B) calendar year. C) accounting cycle. D) fiscal year.
7)
8) Which of the following statements is FALSE regarding a proper journal entry? A) Credits are always indented. B) Skip a line between transactions. C) Debits are always listed first in the entry. D) Always list the assets first.
8)
9) An example of a transposition error is A) debit to Equipment for $1,200 instead of $1,000. B) debit to Telephone Expense for $250 instead of $520. C) debit to Accounts Receivable for $2,000 instead of $200. D) debit to Rent Expense instead of a debit to Prepaid Rent for $200.
9)
1
10) Posting is performed by transferring information from the journal to the A) income statement. B) balance sheet. C) trial balance. D) ledger.
10)
11) Interim statements are prepared to A) allow management to make changes to the business before processing year-end financial statements. B) notify management of the company's current financial position. C) notify investors of the company's current financial position. D) All of the above are correct.
11)
12) The process of initially recording business transactions in a journal is called A) journalizing. B) transposing. C) posting.
12) D) sliding.
13) The journal entry to record an investment by the owner would most commonly include A) a debit to Fees Earned and a credit to Capital. B) a debit to Cash and a credit to Capital. C) a debit to Capital and a credit to Cash. D) a debit to Cash and a credit to Fees Earned.
13)
14) A credit to an asset account was posted to a liability account. This would cause A) capital to be overstated. B) assets to be understated. C) liabilities to be overstated. D) revenue to be overstated.
14)
15) A transaction completed by Norton Company caused a $4,000 increase in both the total assets and the total liabilities. This transaction could have been A) investment by the owner of an additional $4,000. B) purchase of office equipment, paying $4,000 cash, and $8,000 on account. C) purchase of office equipment for $12,000, paying $8,000 cash, with the rest on account. D) None of these answers are correct.
15)
16) If Accounts Payable has been credited, it is most likely that A) the company made a purchase on account. B) a service was provided to a cash customer. C) a collection from a customer was made. D) None of these are possible.
16)
17) Business transactions are first recorded in the A) balance sheet. B) ledger.
17) C) journal.
D) T account.
18) The posting reference column in the ledger is A) used to record the date. B) used to record the journal and page number the transactions originated from. C) used to record the ledger number. D) not used.
2
18)
19) When the trial balance includes a debit column total of $18,352 and a credit column total of $18,552, it is probable that A) a $100 debit was recorded twice. B) a $100 credit was recorded twice. C) a $100 debit was recorded as a credit. D) a transposition error occurred.
19)
20) To correct an error made in the journal (prior to posting in the ledger), A) line out the incorrect portion of the entry and write in the correction. B) ignore the error, it will correct itself in the next accounting period. C) erase the error and write the correct entry. D) write a new journal entry correcting the original entry.
20)
21) An $800 cheque written for supplies was journalized as $80. The entry to correct this error is A) debit Cash, $720; credit Supplies, $720. B) debit Cash, $80; credit Cash, $80. C) debit Supplies, $720; credit Cash, $720. D) debit Supplies, $80; credit Cash, $80.
21)
22) The general journal does not have a column titled A) Account Titles & Descriptions. C) Date.
22) B) Dr. and Cr. D) Balance.
23) How are credit descriptions distinguished from debit descriptions in the general journal? A) Indenting. B) A line separation. C) A different colour. D) There is no distinction.
23)
24) Which of the following entries records the acquisition of office supplies for cash? A) Equipment 4,000 Accounts Payable 4,000 B) Office Supplies 4,000 Cash 4,000 C) Office Supplies 4,000 Accounts Payable 4,000 D) Equipment 4,000 Accounts Receivable 4,000
24)
25) The posting reference column in the journal is used for A) recording the time when the entry was posted. B) recording the initials of the person who did the posting. C) recording the source documents identification number. D) recording the account number to which the entry was posted.
25)
26) An error resulting from adding or deleting zeros in writing numbers is called a A) double entry. B) missed entry. C) slide. D) transposition.
26)
27) Which of the following entries would record the payment of a utility bill? A) Utilities Expense, debit; Accounts Payable, credit. B) Accounts Payable, debit; Utilities Expense, credit. C) Utilities Expense, debit; Cash, credit. D) Cash, debit; Utilities Expense, credit.
27)
3
28) When the trial balance includes a debit column total of $14,350 and a credit column total of $15,350, it is probable that A) a $500 credit was recorded twice. B) a transposition error occurred. C) a $500 debit was recorded as a credit. D) a $500 debit was recorded twice.
28)
29) An error resulting from the accidental rearrangement of the digits of a number is called a A) missed entry. B) slide. C) transposition. D) double entry.
29)
30) Which of the following accounts would be debited in a proper journal entry? A) Capital when it is increased B) Accounts Payable when it is increased C) Accounts Receivable when it is increased D) Cash when it is decreased
30)
31) The process that begins with recording business transactions and includes the completion of the financial statements is the A) accounting cycle. B) fiscal year. C) natural business year. D) calendar year.
31)
32) If the Owner's Equity account increases during the year, most likely A) The owner made additional investment during the year. B) Equipment purchases were higher than average for the year. C) The company was promised a large and profitable contract for next year. D) Payment of liabilities was lower than average for the year.
32)
33) When recording a transaction in a journal, the account listed first is generally the A) decrease. B) credit. C) debit. D) increase.
33)
34) Transactions are entered in a journal by A) order of importance of company to our business. B) the order they appear on the accountant's desk. C) chronological order. D) company name in alphabetical order.
34)
35) The proper format for a journal entry includes all of the following EXCEPT A) listed in chronological order. B) skip a line between transactions. C) the credit portion of the transaction is always first. D) the total amounts of debits must equal the total amount of credits.
35)
36) The accounting cycle element that would benefit the most from using a computer is A) correcting errors. B) posting. C) summarizing. D) journalizing.
36)
4
37) Proof that the dollar amount of the debits equals the dollar amount of the credits in the ledger means A) only the ledger is accurate; the journal may be incorrect. B) all of the information from the journal was correctly transferred to the ledger. C) all accounts have their correct balances in the ledger. D) only that the debit dollar amounts equal the credit dollar amounts.
37)
38) A credit to an asset account was posted to an expense account. This would cause A) assets to be overstated. B) capital to be understated. C) liabilities to be understated. D) expenses to be overstated.
38)
39) A debit to the Withdrawals account was posted to a revenue account. This would cause A) liabilities to be overstated. B) assets to be understated. C) withdrawals to be overstated. D) revenue to be understated.
39)
40) A credit to a liability account was posted to an owner's equity account. This would cause A) owner's equity to be understated. B) net income to be overstated. C) liabilities to be understated. D) assets to be overstated.
40)
41) The general journal entry to record the earning of revenue would most commonly include A) a debit to Accounts Receivable and a credit to Capital. B) a debit to Accounts Receivable and a credit to Fees Earned. C) a debit to Cash and a credit to Capital. D) a debit to Fees Earned and a credit to Cash.
41)
42) A debit to a liability account was posted to an expense account. This would cause A) expenses to be overstated. B) liabilities to be understated. C) owner's equity to be overstated. D) assets to be overstated.
42)
43) Rent paid in advance is called a(n) A) expense. B) asset.
43) C) liability.
D) revenue.
44) A credit to an asset account was posted to a revenue account. This would cause A) assets to be understated. B) revenue to be overstated C) capital to be understated. D) liabilities to be understated.
44)
45) BNL completed a performance and collected revenue of $10,000 not previously billed or recorded. The journal entry to record the collection would be A) Accounts Receivable 10,000 B) Performance Fees 10,000 Cash 10,000 Cash 10,000 C) Accounts Receivable 10,000 D) Cash 10,000 Performance Fees 10,000 Performance Fees 10,000
45)
46) The time period for which the income statement is prepared is a(n) A) fiscal period. B) calendar year. C) accounting period. D) accounting cycle.
46)
5
47) If Capital has been credited, it is likely that A) services were provided to a charge customer. B) the owner made an investment. C) services were provided to a cash customer. D) All of these are possible.
47)
48) The balances for the individual accounts used to complete the Trial Balance are taken from the A) general ledger. B) chart of accounts. C) journal. D) invoices.
48)
49) The general ledger A) must be on loose leaf paper. B) is the book of final entry. C) is completed before the general journal. D) is the book of original entry.
49)
50) An overpayment was discovered in computing and paying the wages of a West Heights Country Club employee. When the employee returns the amount of the overpayment, West Heights should make which of the following entries? A) Wages Payable, debit; Wages Expense, credit B) Wages Expense, debit; Wages Payable, credit C) Wages Expense, debit; Cash, credit D) Cash, debit; Wages Expense, credit
50)
51) Which of the following errors would cause the trial balance to be out of balance? A) The payment of an account payable for $400 was recorded as a debit to Accounts Payable for $400 and a credit to Cash for $4,000. B) The collection of an account was not recorded. C) The payment of utilities expense was recorded as a debit to Rent Expense for $87 and a credit to Cash for $87. D) The payment of an account payable for $100 was recorded as a debit to Cash, $100, and a credit to Accounts Payable, $100.
51)
52) During the month of October, Ford advertised on the Internet. Ford received the bill for $600 in October, but waited until November to pay the advertising expense. The journal entry to record the payment in November is A) Advertising Expense debit; Accounts Payable credit. B) Accounts Payable debit; Cash credit. C) Advertising Expense debit; Cash credit. D) A journal entry is not made in November.
52)
53) B. Flat, CPA, collected fees of $650 not previously billed or recorded. The journal entry to record the collection would include A) debit Cash, $650; credit Accounting Fees, $650. B) debit Cash, $650, credit Accounts Receivable, $650. C) debit Accounts Receivable, $650; credit Accounting Fees, $650. D) debit Accounting Fees, $650; credit Accounting Fees, $650.
53)
6
54) A debit to an expense account was posted to an asset account. This would cause A) liabilities to be understated. B) assets to be understated. C) capital to be understated. D) expenses to be understated.
54)
55) If an error in a journal entry is detected after posting, you should A) do nothing in hopes it will go away. B) erase the incorrect entry. C) make a correcting entry. D) initial where the error was made.
55)
56) Riley's Book Review billed customers $350 for editing work completed this month. The journal entry to record this transaction is A) Accounts Receivable debit $350; Editing Revenue credit $350. B) Editing Revenue debit $350; Riley, Capital credit $350. C) Editing Revenue debit $350; Withdrawals credit $350. D) Accounts Payable debit $350; Editing Revenue credit $350.
56)
57) The general journal entry to record a payment to a creditor would most commonly include A) a debit to Accounts Payable and a credit to Cash. B) a debit to Cash and a credit to Accounts Payable. C) a debit to Supplies and a credit to Cash. D) a debit to Capital and a credit to Cash.
57)
58) The journal entry to record a withdrawal by the owner would most commonly include A) a debit to Wage Expense and a credit to Cash. B) a debit to Cash and a credit to Wage Expense. C) a debit to Capital and a credit to Cash. D) a debit to Withdrawals and a credit to Cash.
58)
59) The general journal A) is completed after the general ledger. C) is the book of original entry.
59) B) is the book of final entry. D) contains account balances.
60) When a computer is used for accounting, the journal may be stored in any of the following locations, EXCEPT A) the cloud. B) on a USB drive. C) on a hard drive. D) in a paper file folder.
60)
61) The purpose of posting is to A) list the transactions in chronological order in the journal. B) correct a previous entry. C) provide an explanation of the transaction. D) update the account balances in the ledger.
61)
62) The most logical reason to use a journal instead of T accounts is A) a journal consists of removable pages. B) it keeps all transactions categorized by type. C) only one book is needed for all of a firm's bookkeeping needs. D) it makes finding errors easier.
62)
7
63) If Accounts Payable has been debited, it is most likely that A) the company made a payment to a creditor. B) the company made a purchase on account. C) a customer made a payment. D) None of these are possible.
63)
64) Renzi's Volleyball Gym purchased equipment for $1,400. It made a down payment of $800 with the remainder on account. The journal entry to record this transaction is A) Supplies 1,400 Cash 800 Accounts Payable 600 B) Accounts Payable 600 Cash 800 Equipment 1,400 C) Cash 800 Accounts Receivable 800 D) Equipment 1,400 Accounts Payable 600 Cash 800
64)
65) The simplest form of a journal is a(n) A) interim journal. C) general journal.
65) B) accounting journal. D) special journal.
66) The trial balance lists the accounts A) alphabetically. C) all credits first and then debits.
B) all debits first and then credits. D) in the same order as in the ledger.
66)
67) The entry to record delivering a financial lecture and immediately collecting payment from the customer would be A) Lecture Fees 750 B) Cash 750 Accounts Payable 750 Accounts Payable 750 C) Cash 750 D) Lecture Fees 750 Lecture Fees 750 Cash 750
67)
68) Which of the following transactions would cause the trial balance to be out of balance? A) A credit to Cash and a debit to Supplies for the same amount B) A debit to Cash and a debit to Equipment for the same amount C) A debit to Accounts Receivable and a credit to Accounting Fees for the same amount D) All of these answers are correct.
68)
69) A trial balance difference divisible by 9 could indicate A) a slide or transposition. B) a journal entry error. C) a transposition only. D) a slide only.
69)
8
70) The proper sequence used in recording a business transaction is A) analyze, journalize, post, record the account balance, and complete the reference column in the journal. B) analyze, post, journalize, record the account balance, and complete the reference column in the journal. C) analyze, journalize, post, complete the reference column in the journal, and record the account balance. D) journalize, analyze, post, record the account balance, and complete the reference column in the journal.
70)
71) During the month of August, Our Town Hardware Store advertised an end-of-the -year sale in the local newspaper. Our Town Hardware Store received the bill for $60 in August, but waited until September to pay the advertising expense. The journal entry to record the bill in August is A) Advertising Expense 60 B) Advertising Expense 60 Accounts Payable 60 Accounts Receivable 60 C) Accounts Payable 60 D) No entry is made in August. Advertising Expense 60
71)
72) A debit to a revenue account was posted to an expense account. This would cause A) expenses to be overstated. B) capital to be overstated. C) revenue to be understated. D) expenses to be understated.
72)
73) The first step of the accounting cycle is A) posting to the ledger. C) analyzing business transactions.
73) B) preparing a trial balance. D) recording journal entries.
74) To find an explanation for a transaction, look in the A) trial balance. B) ledger.
74) C) journal.
D) balance sheet.
75) When the telephone bill for this period is paid, A) Telephone Expense is debited and Accounts Payable is credited. B) Accounts Payable is credited and Telephone Expense is debited. C) Telephone Expense is credited and Cash is debited. D) Telephone Expense is debited and Cash is credited.
75)
76) The general journal entry to record the purchase of an asset on account would include A) a debit to Equipment and a credit to Accounts Payable. B) a debit to Accounts Payable and a credit to Equipment. C) a debit to Supplies and a credit to Cash. D) a debit to Accounts Receivable and a credit to Fees Earned.
76)
77) If Accounts Payable has been credited, it is most likely that A) a correcting entry was made for the overstatement of the purchase of equipment on account. B) a purchase was made on account. C) a payment was made on account. D) None of these are possible.
77)
9
78) Antonio's catered a reception. The total price was $850. Their customer paid half of the fee in cash and agreed to pay the remainder later. The journal entry to record this transaction is A) Cash 850 Accounts Receivable 850 B) Cash 850 Catering Service Fees 850 C) Accounts Receivable 850 Cash 425 Catering Service Fees 425 D) Cash 425 Accounts Receivable 425 Catering Service Fees 850
78)
79) In preparing the trial balance of Frank's Gardening Service, the Revenue account (which had a normal balance in the general ledger) was mistakenly listed as a debit for $6,000. What will be the difference between the debit and credit sides of the trial balance? A) $2,000 B) $12,000 C) $6,000 D) $3,000
79)
80) If Rent Expense has been debited, it is likely that A) the rent is past due. C) a copy of the lease was received.
80) B) this month's rent was paid. D) All of these are possible.
81) Using a natural business year allows the business to count its year-end inventory when A) it is easiest. B) it is busiest. C) the calendar year ends. D) business activity is at a high point.
81)
82) Some businesses use "Cloud Computing" which means A) data collection is foggy. B) files are stored offsite and accessed over the internet. C) employees work outside on nice days. D) none of the above are true.
82)
83) Financial statements that are prepared for a period shorter than a year are called A) accounting period statements. B) journal statements. C) fiscal year statements. D) interim statements.
83)
84) How are explanations distinguished in the journal? A) They are underlined. B) They are written below the credit entries. C) They are in bold print. D) They are written along the margin, beside the debit and credit entries.
84)
85) If you debit Prepaid Insurance, you most likely will A) credit Insurance Expense. B) debit Cash. C) credit Fees Earned. D) credit Cash.
85)
86) The journal entry debiting Cash and crediting Capital would be a result of a(n) A) revenue. B) expense. C) withdrawal. D) investment.
86)
10
87) The journal entry to record an exchange of assets would include A) a debit to Supplies and a credit to Accounts Payable. B) a debit to Cash and a credit to Accounts Receivable. C) a debit to Fees Earned and a credit to Accounts Receivable. D) a debit to Cash and a credit to Fees Earned.
87)
88) Which of the following entries records the owner taking cash for personal use? A) Capital, debit; Cash, credit. B) No entry is necessary since the owner owns the cash and the entire business. C) Wage Expense, debit; Cash, credit. D) Withdrawals, debit; Cash, credit.
88)
89) If Accounts Payable has been debited, it is most likely that A) a purchase was made on account. B) a charge customer made a payment. C) a payment was made on account. D) None of these are possible.
89)
90) David journalized and posted an entry for $2,000 debit to Cash; and $2,000 credit to Service Fees. The correct amount on the billing was $200. The entry to correct this error is A) debit Service Fees, $200; credit Cash, $200. B) debit Service Fees, $2,800; credit Cash, $2,000. C) debit Cash, $1,800; credit Service Fees, $1,800. D) debit Service Fees, $1,800; credit Cash, $1,800.
90)
91) If Cash has been debited, it is likely that A) a charge customer made a payment. B) the business borrowed cash from the bank. C) the owner made an investment. D) All of these are possible.
91)
92) The informal listing of the ledger accounts and their balances in the ledger to aid in proving the equality of debits and credits is the A) ledger. B) trial balance. C) journal. D) income statement.
92)
93) A debit to a liability account was posted to a revenue account. This would cause A) revenue to be overstated. B) capital to be overstated. C) assets to be overstated. D) liabilities to be overstated.
93)
94) The normal accounting procedures that are performed over a period of time are called the A) natural business year. B) fiscal year. C) calendar year. D) accounting cycle.
94)
95) A fiscal year is A) any 12-month period that a business chooses for its accounting year. B) the 12-month period beginning with January. C) the period for when an interim financial statement would be completed. D) A and C are correct.
95)
11
96) A journal entry affecting three or more accounts is called a A) compound entry. B) simple entry. C) multi-step entry. D) multi-level entry.
96)
97) Posting is the transfer of information from A) the chart of accounts to the ledger. C) the general ledger to the journal.
97) B) the journal to the general ledger. D) the chart of accounts to the journal.
98) Conner Sales' total assets and total liabilities increased $500. The transaction could have been A) purchase of supplies for cash, $500. B) paid the rent for the month, $600. C) purchase of supplies for $600 with a down payment of $100 and the remainder on account. D) None of these answers are correct.
98)
99) Revenue is traditionally recognized in the accounting records when A) it is incurred. B) services are provided to the customer. C) cash is received. D) None of the answers are correct.
99)
100) A trial balance difference where the difference amounted to $400 could indicate A) a slide only. B) a transposition only. C) a $200 debit posted as a credit. D) a slide or transposition.
100)
101) Transferring information from the journal to the ledger is called A) journalizing. B) posting. C) ledgering.
101) D) footing.
102) The trial balance A) ensures that debits equal credits. B) includes all accounts with a balance in the ledger. C) includes assets, liabilities, capital, withdrawals, revenues and expenses. D) All of the above are correct.
102)
103) B. Flat, CPA, collected fees of $650 previously billed and recorded. The journal entry to record the collection would include A) debit Cash, $650, credit Accounts Receivable, $650. B) debit Accounting Fees, $650; credit Accounting Fees, $650. C) debit Cash, $650; credit Accounting Fees, $650. D) debit Accounts Receivable, $650; credit Accounting Fees, $650.
103)
104) If Prepaid Rent has been debited, it is likely that A) this month's rent was paid. B) the rent was paid for three months in advance. C) a bill for the past month's rent was received. D) All of these are possible.
104)
12
105) If a trial balance is not equal, you should first A) re -add the trial balance and calculate the difference. B) re -compute the ledger balances. C) look for missing transactions. D) trace all postings.
105)
106) During the month of January, Katelyn invested $10,000 in starting her legal practice. The proper journal entry would be A) Katelyn's Capital, debit $10,000; Cash, credit $10,000. B) Cash, debit $10,000; Revenue, credit $10,000. C) Cash, debit $10,000; Katelyn's Capital, credit $10,000. D) Katelyn's Withdrawals, debit $10,000; Cash, credit $10,000.
106)
107) If Fees Earned has been credited, it is most likely that A) the owner made an investment. B) a correcting entry for the overstatement of revenue was recorded. C) services were provided. D) All of these are possible.
107)
108) A calendar year is A) the period for when an interim financial statement would be completed. B) the 12-month period beginning with January. C) any 12-month period that a business chooses for its accounting year. D) All of these answers are correct.
108)
109) On July 1, Hill's Construction paid six months' insurance in advance. The journal entry to record this transaction is A) Debit Insurance Liability; Credit Cash. B) Debit Cash; Credit Insurance Expense. C) Debit Prepaid Insurance; Credit Cash. D) Debit Cash; Credit Prepaid Insurance.
109)
110) If the trial balance does not balance, which of the following is NOT a method used to detect the error. Checking to see if the difference is A) equal to the amount of one of the journal entries when the difference is divided by two. B) equal to the amount of one of the journal entries. C) 10, 100, etc. D) divisible by 7.
110)
111) If the business records a number as 176 and it should be 167, this error would be called A) transposition. B) slide. C) rearrangement. D) None of the above
111)
112) If the debit and credit totals of a trial balance are not equal, it could be due to the following type of error. A) Incorrectly adding the debit side of the trial balance. B) Failure to record a transaction. C) Recording the same erroneous amount for both the debit and the credit sides of a transaction. D) Recording the same transaction more than once.
112)
13
113) In preparing the trial balance of the K&L's Bridal Service, the Withdrawal account (which had a normal balance in the general ledger) was listed as a credit for $300. What will be the difference between the debit and credit sides of the trial balance? A) $150 B) $600 C) $200 D) $300
113)
114) The final step of posting is A) recording the account number in the PR column of the ledger. B) recording the account number in the PR column of the journal. C) listing the date in the journal. D) calculating the balance of the account.
114)
115) "PR" in the general journal and general ledger stands for A) prior receipt. B) posting reference. C) peer reviewer. D) None of the above are correct.
115)
116) During the month of June, Charles Green invested $5,000 in starting his company, Green Lawn Service. The proper journal entry would be A) Charles Green, Capital 5,000 Cash 5,000 B) Cash 5,000 Charles Green, Capital 5,000 C) Cash 5,000 Lawn Service Fees 5,000 D) Lawn Service Fees 5,000 Cash 5,000
116)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 117) The PR column of the journal should be completed as soon as the journal entry is written.
117)
118) All companies must use the same standardized chart of accounts.
118)
119) A business's fiscal year that ends at the same time as a slow seasonal period begins is the natural business year.
119)
120) The credit part of the transaction is recorded first in the journal entry.
120)
121) A ledger is called the book of final entry.
121)
122) The chart of accounts contains the same information as the journal.
122)
123) Rent paid in advance is a liability.
123)
124) When the total debits equal the total credits on the trial balance, this is proof that all transactions have been recorded properly.
124)
125) The process of transferring the data from the journal to the ledger accounts is called posting.
125)
126) The trial balance proves the equality of debits and credits.
126)
14
127) A company would review the general journal if an account balance was needed.
127)
128) A running balance is derived by taking the present balance in the account and adding or subtracting the next transaction as necessary to arrive at the new balance.
128)
129) The debit is indented in a journal entry.
129)
130) A company would review the chart of accounts if an account balance was needed.
130)
131) Posting is the process of entering amounts in the ledger.
131)
132) A chart of accounts is a list of the accounts and their balances.
132)
133) Transactions are listed in chronological order in the journal.
133)
134) Interim reports are usually prepared once a year.
134)
135) If the trial balance doesn't balance, it is time to panic.
135)
136) A Trial Balance would detect the following errors: An entry made twice or not posted.
136)
137) A fiscal year is always January 1 through December 31.
137)
138) An addition error could cause the total debit and total credit columns on the trial balance to show a difference of 100.
138)
139) Revenue is recorded only once the payment is received.
139)
140) Posting is the process of transferring information from the journal to the trial balance.
140)
141) Journalizing a transaction with both the debit and the credit for $75 instead of $57 will cause the trial balance to be out of balance.
141)
142) Recording the account number from the ledger in the posting reference column of the journal is called cross -referencing.
142)
143) The same information is contained in the journal and the ledger but in a different form.
143)
144) In a compound journal entry it is acceptable if the total credits do not equal the total debits as long as more than two accounts are used.
144)
145) If the trial balance is in balance, it proves that all transactions were properly recorded.
145)
146) Posting is the first step in recording transactions.
146)
147) Posting references are an unnecessary step.
147)
15
148) The trial balance clearly shows if there were any additional investments made by the owner during the period.
148)
149) A running balance is maintained in the ledger after each transaction is posted.
149)
150) A three -column account typically includes an empty column just for notes.
150)
151) If information is journalized or posted incorrectly, the trial balance will still be correct.
151)
152) A natural business year is always the same as a calendar year.
152)
153) The trial balance listing is in the same order as the chart of accounts.
153)
154) A compound journal entry affects only two accounts in the transaction.
154)
155) The dollar amount of the debits must be equal to the dollar amount of the credits for each transaction.
155)
156) Liabilities increase on the credit side of the account and decrease on the debit side.
156)
157) Posting is the transferring of information from the ledger to the chart of accounts.
157)
158) A fiscal year can be different than a calendar year.
158)
159) Revenue is recorded when earned.
159)
160) A journal is considered to be a book of final entry.
160)
161) Accountants often use a three -column account in the general ledger that includes a column for each account's running balance.
161)
162) Posting is the step in the accounting cycle where errors are most likely to happen.
162)
163) A slide error results in a difference that is evenly divisible by the number 9.
163)
164) A running balance is the total in the account from last period.
164)
165) To record rent paid in advance, Prepaid Rent would be debited.
165)
166) A compound journal entry affects more than two accounts in the transaction.
166)
167) Interim statements are statements that are usually prepared for a portion of the business' fiscal year.
167)
168) A calendar year is any twelve -month period.
168)
16
169) The first step of completing the journal is to fill in the post reference column.
169)
170) Mistakes found during the trial balance process can never be corrected.
170)
171) A fiscal year runs for any 12 consecutive months.
171)
172) A trial balance is only a list of the accounts and account numbers.
172)
173) A company would review the ledger if an account balance was needed.
173)
174) The accountant should check the chart of accounts to see what account titles should be used when journalizing.
174)
175) The order of the flow of accounting data is to (1) prepare a trial balance, (2) record in a journal, (3) post in a ledger.
175)
176) A trial balance contains identical information to the chart of accounts.
176)
177) Correctly posting a transaction twice will cause the trial balance totals to be unequal.
177)
178) The capital figure on the trial balance may not be the beginning capital figure.
178)
179) Omitting to post a transaction will cause the trial balance totals to be unequal.
179)
180) A slide is an error that results when zeros have been added or deleted when writing an amount. Example: 20,000 is written as 2,000.
180)
181) It is good practice to fill out the posting reference column immediately when you create the journal.
181)
182) The time period for which an income statement is prepared is called the accounting period.
182)
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 183) Blake Company began business in July. Prepare the following transactions for July. Omit explanations. July 2 Blake invested $5,000 cash and $2,000 equipment into her new business 12 Billed customer for services performed, $800 16 Purchased equipment on account, $900 20 Received one -half amount due from June 12 25 Blake withdrew cash for personal use, $1,000. 184) Discuss the concept of cross -referencing. Include in your discussion the benefits provided by cross-referencing.
17
185) Journalize, in proper form, the following transactions that occurred during November. Omit explanations. November 5 Barbara invested $20,000 cash and $13,000 of equipment into her new business 10 Paid three months' rent in advance, $3,200 23 Withdrew $800 from the business 24 Billed client for services rendered, $19,500 186) Define and discuss a calendar year, accounting period, and fiscal year. 187) What are interim financial statements? 188) All ten transactions for Bexon Consulting for August 2023, the first month of operation, are recorded in the following T accounts:
(1) 20,000 (7) 6,800 (9) 1,800 (10) 1,500
Cash (3) 4,500 (5) 5,000 (6) 2,500 (8) 3,000
Accounts Receivable (4) 3,500 (9) 1,800
Blake Bexon, Capital (1) 20,000
Blake Bexon, Withdrawals (8) 3,000
Supplies (3) 4,500
Fees Earned (4) 3,500 (7) 6,800 (10) 1,500
Equipment (2) 18,500
Operating Expense (6) 2,500
Accounts Payable (5) 5,000 (2) 18,500
Prepare a trial balance, listing the accounts and their balance in proper order. 189) Post the following transaction to the ledger of Savage Storage. The partial chart of accounts for the company is 110 Cash 120 Accounts Receivable 210 Accounts Payable 410 Storage Fees Earned GENERAL JOURNAL Date Acct. Titles and Description Jun 7 Accounts Receivable Storage Fees Earned Billed customer Jun
9 Accounts Payable
PR
Debit 8,000
Page 5 Credit 8,000
18
2,500
Jun
Cash Date May
9 Accounts Payable Cash Paid amount due
Explanation Opening Balance
2,500 2,500
Account 110 PR Debit 10,000
Accounts Receivable Date Explanation
Account 120 PR Debit
Accounts Payable Date Explanation May Opening Balance
Account 210 PR Debit
Storage Fees Earned Date Explanation
Account 410 PR Debit
Credit
Dr/Cr Dr
Balance 10,000
Credit
Dr/Cr
Balance
Credit 2,500
Dr/Cr Cr
Balance 2,500
Credit
Dr/Cr
Balance
190) Complete the following entries by using a "debit" or "credit". Received payment from a customer. Cash would have a: Owner makes an investment of equipment. Capital would have a:
________ ________
Paid rent in advance. Prepaid Rent would have a:
________
Billed a customer for services rendered. Revenue would have a:
________
Paid an advertising bill received last month. Cash would have a: ________ Owner withdrew cash. Withdrawals would have a:
19
________
191) Complete the following questions based on the journal entry below: GENERAL JOURNAL Date Acct. Titles and Description May 1 Cash Capital
PR 110 300
Date of Journal entry:
________
Name of account debited
________
Name of account credited:
________
Debit 14,000
Page 1 Credit 14,000
Provide an explanation for this entry: ________ Page of Journal:
________
Account number for Cash:
________
Account number for Capital:
________
192) Post the following transaction to the ledger of Safari Services. The partial chart of accounts for Safari Services is 111 Cash 121 Accounts Receivable 211 Accounts Payable 411 Service Fees Revenue GENERAL JOURNAL Date Acct. Titles and Description May 1 Accounts Receivable Service Fees Revenue Billed customer May
Cash Date
PR
Debit 14,000
Page 1 Credit 14,000
5 Accounts Payable Cash Paid amount due
3,000 3,000
Explanation
Account 111 PR Debit
Credit
Dr/Cr
Balance
Accounts Receivable Date Explanation
Account 121 PR Debit
Credit
Dr/Cr
Balance
Accounts Payable Date Explanation
Account 211 PR Debit
Credit
Dr/Cr
Balance
20
Service Fees Revenue Date Explanation
Account 411 PR Debit
Credit
Dr/Cr
Balance
193) Describe the difference in information contained in the general journal vs. the general ledger. 194) Journalize, in proper form, the following transactions that occurred during December. Omit explanations. December 4 Amelia invested $10,000 cash, $15,000 of equipment, and $5,000 of furniture into her new business 9 Paid three months' insurance in advance, $600 21 Billed client for services rendered, $1,500 23 Received utility bill to be paid later, $150 31 Recorded one month of insurance expense from the December 9 payment. 195) The following trial balance has been improperly completed. All the accounts have normal balances. Prepare a corrected trial balance in good form. Danielson Online Company Trial Balance March 31, 2022 Salaries Expense Rent Expense Accounts Receivable Equipment Danielson, Capital Danielson, Withdrawals Service Fees Accounts Payable Cash Totals
200 250 40 2,250 1,800 900 2,050 2,000 2,210 5,560
6,140
21
196) The following trial balance has been improperly recorded. All the accounts have normal balances. Prepare a corrected trial balance in good form. Home Town Cleaning Company Trial Balance March 31, 2023
Cash Salaries Expense Rent Expense Accounts Receivable Equipment K. Carlson, Capital K. Carlson, Withdrawals Service Fees Accounts Payable Totals
Debit 500
Credit 600 200 600
2,000 2,300 100 1,000 _____ 5,900
700 2,100
197) Post the following transactions to the ledger of Lanny Company. The partial chart of accounts of Lanny Company is as follows: 111 Cash 121 Equipment 211 Accounts Payable 311 Lanny, Capital GENERAL JOURNAL Date Acct. Titles and Description April 1 Cash Lanny, Capital Cash investment April
Cash Date
PR
Debit 41,000
PAGE 1 Credit 41,000
5 Equipment Cash Accounts Payable Purchased equipment
5,000 2,000 3,000
Account 111 Explanation
PR
Debit
Credit
Dr/Cr
Balance
Equipment Date Explanation
Account 121 PR
Debit
Credit
Dr/Cr
Balance
Debit
Credit
Dr/Cr
Balance
Accounts Payable Date Explanation
Account 211 PR
22
Lanny, Capital Date Explanation
Account 311 PR
Debit
Credit
Dr/Cr
Balance
198) Prepare journal entries for the following transactions that occurred during May. Omit explanations. May 7 Purchased a new $20,000 machine with a $5,000 cash payment and the remainder on account. 12 Paid May rent, $1,000. 17 Paid $5,000 towards equipment purchased on May 7. 23 Received utility bill, to be paid later, $250. 199) Karen Brown, a student in your class, is not sure the effect of the following unrelated situations would have on the accuracy of the financial statements. Identify the account(s) that are affected and if the trial balance would balance. (a) Equipment was purchased for $1,500 cash. The debit was recorded properly, but the credit was omitted. (b) A debit to cash for $69 was posted as $96; the credit was posted correctly. (c) A purchase of supplies on account for $300 was posted as a debit to equipment and a credit to cash. 200) Post the following transactions to the ledger of Rosemary Company. The partial chart of accounts of Rosemary Company is as follows: 111 Cash 121 Equipment 211 Accounts Payable 311 Rosemary Vopp, Capital GENERAL JOURNAL Date Acct. Titles and Description April 1 Cash Rosemary Vopp, Capital Cash investment April
Cash Date
PR
Debit 50,000
PAGE 1 Credit 50,000
5 Equipment Cash Accounts Payable Purchased equipment
7,000 4,000 3,000
Account 111 Explanation
PR
Debit
Credit
Dr/Cr
Balance
Equipment Date Explanation
Account 121 PR
Debit
Credit
Dr/Cr
Balance
Debit
Credit
Dr/Cr
Balance
Accounts Payable Date Explanation
Account 211 PR 23
Roesemary Vopp, Capital Date Explanation
Account 311 PR
Debit
Credit
Dr/Cr
Balance
201) Prepare in proper form journal entries for the following transactions. Omit explanations. October 2 Owner made a cash investment into the company $6,000 8 Bought supplies on account $100. 10 Paid salaries, $700 15 Paid for supplies purchased on October 8 21 Received company telephone bill, to be paid later, $50 202) Complete the following entries by using a "debit" or "credit". Paid a supplier. Cash would have a:
________
Completed services for a customer. Service Revenue would have a: Paid a portion of the bank loan. Bank Loan would have a:
________ ________
Received payment for customer balance owing. Accounts Receivable would have a: ________ Received payment for customer balance owing. Cash would have a:
________
Received telephone bill. Telephone expense would have a:
________
203) Leona James, a student in your class, is not sure the effect of the following unrelated situations would have on the accuracy of the financial statements. Identify the account(s) that are affected and if the trial balance would balance. (a) Equipment was purchased for $2,500 cash. The debit was recorded properly, but the credit was omitted. (b) A debit to cash for $37 was posted as $73; the credit was posted correctly. (c) A purchase of supplies on account for $200 was posted as a debit to equipment and a credit to cash.
24
204) All nine transactions for Ross Realty for June 2022, the first month of operation, are recorded in the following T accounts:
(1) 30,000 (7) 4,900 (9) 3,700
Cash (3) 7,500 (5) 2,000 (6) 4,500 (8) 2,000
Accounts Receivable (4) 4,100 (9) 3,700
Greg Ross, Capital (1) 30,000
Greg Ross, Withdrawals (8) 2,000
Supplies (3) 7,500
Fees Earned (4) 4,100 (7) 4,900
Equipment (2) 22,500
Operating Expense (6) 4,500
Accounts Payable (5) 2,000 (2) 22,500
Prepare a trial balance, listing the accounts and their balance in proper order. 205) Julie, a new employee, is not sure of the effect the following unrelated situations would have on the accuracy of the financial statements. Identify the account(s) that are affected and if the trial balance would balance. (a) Equipment was purchased for $1,000 cash. The debit was recorded properly, but the credit was omitted. (b) A debit to Cash for $250 was posted as $2,500; the credit was posted correctly. (c) A purchase of supplies on account for $75 was posted as a debit to Supplies and a credit to Cash. 206) Prepare journal entries for the following transactions that occurred during April. Omit explanations. Apr 7 Purchased supplies on account, $800. 12 Paid May salaries, $400. 17 Paid for supplies purchased on Apr 7. 23 Received telephone bill, to be paid later, $150. 207) Record the following selected transactions for January in a two-column journal, identifying each entry by letter: (a) Earned $8,000 fees on account. (b) Purchased equipment for $45,000, paying $20,000 in cash and the remainder on credit. (c) Paid $3,000 for rent for January. (d) Purchased $2,500 of supplies on account. (e) A. Allen $2,000 investment in the company. (f) Received $7,000 in cash for fees earned previously. (g) Paid $1,200 to creditors on account. (h) Paid wages of $6,250. (i) Received $7,150 from customers on account. (j) A. Allen withdrawal of $1,750.
25
208) Complete the following questions based on the journal entry below: GENERAL JOURNAL Date Acct. Titles and Description Apr 7 Accounts Receivable Dog Walking Revenue
PR 125 411
Date of Journal entry:
________
Name of account debited
________
Name of account credited:
________
Provide an explanation for this entry:
________
Page of Journal:
________
Account number for Accounts Receivable:
________
Account number for Dog Walking Revenue:
Debit 28,000
Page 52 Credit 28,000
________
209) Complete the following questions based on the journal entry below: GENERAL JOURNAL Date Acct. Titles and Description June 1 Prepaid Rent (June 1 - May 30) Cash Date of Journal entry:
________
Name of account debited
________
Name of account credited:
________
PR 125 110
Debit 12,000
Page 17 Credit 12,000
Provide an explanation for this entry: ________ Page of Journal:
________
Account number for Prepaid Rent:
________
Account number for Cash:
________
210) Journalize the following transactions that occurred during September. Omit explanations. Sep. 5 S. Richman invested $4,000 cash and $100 of equipment into his new business. 10 Paid three months' rent in advance, $1,500. 23 Purchased equipment on account, $2,000. 24 Billed client for services rendered, $1,000.
26
211) You have been hired to correct the following trial balance that was improperly recorded. All the accounts have normal balances. Prepare a corrected trial balance in good form. Gudas Com Company Trial Balance April 30, 2022
Cash Accounts Receivable Equipment Accounts Payable K. Gudas, Capital K. Gudas, Withdrawals Service Fees Rent Expense Salaries Expense Totals
Debit 1,200
Credit 600
2,000 700 3,000 100 1,000 200 600 5,700
3,700
212) Complete the following questions based on the journal entry below: GENERAL JOURNAL Date Acct. Titles and Description July 1 Rent Expense Prepaid Rent Date of Journal entry:
________
Name of account debited
________
Name of account credited:
________
PR 525 125
Debit 1,000
Page 22 Credit 1,000
Provide an explanation for this entry: ________ Page of Journal:
________
Account number for Rent Expense:
________
Account number for Prepaid Rent:
________
213) Jim is having some problems posting to the general ledger. He is not sure if the running balance should be a debit or a credit. Can you give him some advice? 214) Provide an explanation for the following journal entries: (a) Prepaid Rent debited, Cash credited (b) Office supplies debited, Accounts Payable credited (c) Cash debited, Capital credited (d) Withdrawals debited, Cash credited (e) Accounts Payable debited, Cash credited
27
Answer Key Testname: CHAP 03_14CE
1) A 2) B 3) C 4) B 5) A 6) D 7) D 8) D 9) B 10) D 11) D 12) A 13) B 14) C 15) C 16) A 17) C 18) B 19) C 20) A 21) C 22) D 23) A 24) B 25) D 26) C 27) C 28) C 29) C 30) C 31) A 32) A 33) C 34) C 35) C 36) B 37) D 38) A 39) D 40) C 41) B 42) A 43) B 44) B 45) D 46) C 47) B 48) A 49) B 28
Answer Key Testname: CHAP 03_14CE
50) D 51) A 52) B 53) A 54) D 55) C 56) A 57) A 58) D 59) C 60) D 61) D 62) D 63) A 64) D 65) C 66) D 67) C 68) B 69) A 70) A 71) A 72) A 73) C 74) C 75) D 76) A 77) B 78) D 79) B 80) B 81) A 82) B 83) D 84) B 85) D 86) D 87) B 88) D 89) C 90) D 91) D 92) B 93) D 94) D 95) A 96) A 97) B 98) C 29
Answer Key Testname: CHAP 03_14CE
99) B 100) C 101) B 102) D 103) A 104) B 105) A 106) C 107) C 108) B 109) C 110) D 111) A 112) A 113) B 114) B 115) B 116) B 117) FALSE 118) FALSE 119) TRUE 120) FALSE 121) TRUE 122) FALSE 123) FALSE 124) FALSE 125) TRUE 126) TRUE 127) FALSE 128) TRUE 129) FALSE 130) FALSE 131) TRUE 132) FALSE 133) TRUE 134) FALSE 135) FALSE 136) FALSE 137) FALSE 138) TRUE 139) FALSE 140) FALSE 141) FALSE 142) TRUE 143) TRUE 144) FALSE 145) FALSE 146) FALSE 147) FALSE 30
Answer Key Testname: CHAP 03_14CE
148) FALSE 149) TRUE 150) FALSE 151) FALSE 152) FALSE 153) TRUE 154) FALSE 155) TRUE 156) TRUE 157) FALSE 158) TRUE 159) TRUE 160) FALSE 161) TRUE 162) TRUE 163) TRUE 164) FALSE 165) TRUE 166) TRUE 167) TRUE 168) FALSE 169) FALSE 170) FALSE 171) TRUE 172) FALSE 173) TRUE 174) TRUE 175) FALSE 176) FALSE 177) FALSE 178) TRUE 179) FALSE 180) TRUE 181) FALSE 182) TRUE 183) July 2
12 16 20 25
Cash Equipment Blake, Capital Accounts Receivable Service Fees Equipment Accounts Payable Cash Accounts Receivable Blake, Withdrawals Cash
5,000 2,000 7,000 800 800 900 900 400 400 1,000 1,000
31
Answer Key Testname: CHAP 03_14CE
184) Cross -referencing is the recording in the post reference column of the journal the account number of the ledger account that was updated from the journal entry. Cross-referencing can tell which transactions have or have not been posted and also to which accounts they were posted. In the ledger the posting reference leads us back to the journal page number of the original transaction, so that we may see why the debit or credit was recorded and all other accounts affected. 185) November 5 Cash 20,000 Equipment 13,000 Barbara, Capital 33,000 10 Prepaid Rent 3,200 Cash 3,200 23 Barbara, Withdrawals 800 Cash 800 24 Accounts Receivable 19,500 Fees Earned 19,500 186) A calendar year runs from January 1 to December 31. An accounting period is the period of time for which an income statement is prepared. It could be a day, a month, a quarter of the year, or a year. A fiscal year is any 12-month period a business chooses for its accounting year. It could run, for example, from February 1 to January 31 or from October 1 to September 30. 187) Interim financial statements are prepared for a month, quarter or some other portion of the fiscal year. They provide information about the company's financial status to its management, investors, etc at a given point in time. Interim statements allow management to review the results and make changes prior to the fiscal year-end. 188) Blake Bexon Consulting Trial Balance August 31, 2023 Debit Credit Cash 15,100 Accounts Receivable 1,700 Equipment 18,500 Supplies 4,500 Accounts Payable 13,500 Bexon, Capital 20,000 Bexon, Withdrawals 3,000 Fees Earned 11,800 Operating Expense 2,500 Totals 45,300 45,300
32
Answer Key Testname: CHAP 03_14CE
189) Cash Date May Jun
Explanation Opening Balance 9
Account 110 PR Debit 10,000 GJ5
Credit
Dr/Cr Dr Cr
Balance 10,000 7,500
Credit
Dr/Cr Dr
Balance 8,000
Credit 2,500
Dr/Cr Cr Cr
Balance 2,500 0
2,500
Accounts Receivable Date Explanation Jun 7
Account 120 PR Debit GJ5 8,000
Accounts Payable Date Explanation May Opening Balance Jun 9
Account 210 PR Debit
Storage Fee Earned Date Explanation Jun 9
Account 410 PR Debit GJ5
Credit 8,000
Dr/Cr Cr
Balance 8,000
190) Debit Credit Debit Credit Credit Debit 191) May 1 Cash Capital Owner's cash investment Page 1 110 300 192) Cash Date Explanation May 5
Account 111 PR Debit GJ1
Credit 3,000
Dr/Cr Cr
Balance 3,000
Accounts Receivable Date Explanation May 1
Account 121 PR Debit GJ1 14,000
Credit
Dr/Cr Dr
Balance 14,000
Accounts Payable Date Explanation May 5
Account 211 PR Debit GJ1 3,000
Credit
Dr/Cr Dr
Balance 3,000
Service Fees Revenue Date Explanation May 1
Account 411 PR Debit GJ1
Credit 14,000
Dr/Cr CR
Balance 14,000
GJ5
2,500
33
Answer Key Testname: CHAP 03_14CE
193) The general journal provides a listing of day-to-day transactions listed in chronological order. It displays the date, titles of the account(s) that are debited, titles of account(s) that are credited, the respective amounts of those debits and credits and the explanation of the transaction. It also includes the post reference column so that you can verify that the transaction was posted to the ledger. The general ledger is a complete "book" of all accounts used by the company. The ledger account keeps a running balance of the specific account based on the transactions posted. It displays the date of transactions and amount of transaction. It also includes the post reference column which shows the journal and page number where the entry is journalized. 194) 3Novembe r Cash 10,000 4 Equipment 15,000 Furniture 5,000 Amelia, Capital 30,000 9
21
23
31 195)
Prepaid Insurance Cash
600
Accounts Receivable Service Revenue
1,500
Utilities Expense Accounts Payable
150
Insurance Expense Prepaid Insurance Danielson Online Company Trial Balance March 31, 2022
200
600
Cash Accounts Receivable Equipment Accounts Payable Danielson, Capital Danielson, Withdrawals Service Fees Rent Expense Salaries Expense
2,210 40 2,250
Totals
5,850
1,500
150
200
2,000 1,800 900 2,050 250 200 5,850
34
Answer Key Testname: CHAP 03_14CE
196)
Home Town Cleaning Company Trial Balance March 31, 2023
Cash Accounts Receivable Equipment Accounts Payable K. Carlson, Capital K. Carlson, Withdrawals Service Fees Rent Expense Salaries Expense Totals 197) Cash Date Explanation April 1 5
Debit 500 600 2,000
Credit
700 2,300 100 1,000 200 600 4,000 4,000 Account 111 PR Debit Credit GJ1 41,000 GJ1 2,000
Dr/Cr Dr Dr
Balance 41,000 39,000
Equipment Date Explanation April 5
Account 121 PR Debit GJ1 5,000
Credit
Dr/Cr Dr
Balance 5,000
Accounts Payable Date Explanation April 5
Account 211 PR Debit GJ1
Credit 3,000
Dr/Cr Cr
Balance 3,000
Lanny, Capital Date Explanation April 1
Account 311 PR Debit GJ1
Credit 41,000
Dr/Cr Cr
Balance 41,000
198) Apr 7
Equipment 20,000 Cash 5,000 Accounts Payable 15,000 12 Rent Expense 1,000 Cash 1,000 17 Accounts Payable 5,000 Cash 5,000 23 Utilities Expense 250 Accounts Payable 250 199) (a) Cash is overstated by $1,500; the debit side is $1,500 greater than the credit side on the trial balance. The trial balance would not balance. (b) Cash is overstated by $27; the debit side is $27 greater than the credit side on the trial balance. (c) Equipment is overstated and Supplies is understated by $300; Accounts Payable is understated and Cash is understated by $300. Trial balance is in balance.
35
Answer Key Testname: CHAP 03_14CE
200) Cash Date April
Explanation 1 5
Account 111 PR Debit GJ1 50,000 GJ1
Credit
Dr/Cr Dr Dr
Balance 50,000 46,000
Credit
Dr/Cr Dr
Balance 7,000
4,000
Equipment Date Explanation April 5
Account 121 PR Debit GJ1 7,000
Accounts Payable Date Explanation April 5
Account 211 PR Debit GJ1
Credit 3,000
Dr/Cr Cr
Balance 3,000
Rosemary Vopp, Capital Date Explanation April 1
Account 311 PR Debit GJ1
Credit 50,000
Dr/Cr Cr
Balance 50,000
201) October 2 8
10
15 21
Cash Capital Supplies Accounts Payable Salaries Expense Cash
6,000
Accounts Payable Cash Telephone Expense Accounts Payable
100
6,000 100 100 700 700
100 50 50
202) Credit Credit Debit Credit Dedit Debit 203) (a) Cash is overstated by $2,500; the debit side is $2,500 greater than the credit side on the trial balance. The trial balance would not balance. (b) Cash is overstated by $36; the debit side is $36 greater than the credit side on the trial balance. (c) Equipment is overstated and Supplies is understated by $200; Accounts Payable is understated and Cash is understated by $200. Trial balance is in balance.
36
Answer Key Testname: CHAP 03_14CE
204)
Cash Accounts Receivable Equipment Supplies Accounts Payable Ross, Capital Ross, Withdrawals Fees Earned Operating Expense Totals
Ross Realty Trial Balance June 30, 2022 Debit 22,600 400 22,500 7,500
Credit
20,500 30,000 2,000 9,000 4,500 59,500
59,500
205) (a) Cash is overstated by $1,000; the debit side is $1,000 greater than the credit side on the trial balance. The trial balance would not balance. (b) Cash is overstated by $2,250; the debit side is $2,250 greater than the credit side on the trial balance. The trial balance would not balance. (c) Accounts Payable and Cash are both understated by $75. The trial balance would balance. 206) Apr 7 Supplies 800 Accounts Payable 800 12 Salaries Expense 400 Cash 400 17 Accounts Payable 800 Cash 800 23 Telephone Expense 150 Accounts Payable 150
37
Answer Key Testname: CHAP 03_14CE
207) Item (a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Transaction Accounts Receivable Fees Earned
PR
Debit 8,000
Credit 8,000
Equipment Cash Accounts Payable
45,000
Rent Expense Cash
3,000
Supplies Accounts Payable
2,500
Cash Allen, Capital
2,000
Accounts Receivable Fees Earned
7,000
Accounts Payable Cash
1,200
Wages Expense Cash
6,250
Cash Accounts Receivable
7,150
Allen, Withdrawal Cash
1,750
20,000 25,000
3,000
2,500
2,000
7,000
1,200
6,250
7,150
1,750
208) Apr 7 Accounts Receivable Dog Walking Revenue Sold dog walking services on account. Page 52 125 411 209) June 1 Prepaid Rent Cash Paid one year of rent in advance. Page 17 125 110
38
Answer Key Testname: CHAP 03_14CE
210) Sep. 5
10 23 24 211)
Cash 4,000 Equipment 100 S. Richman, Capital Prepaid Rent 1,500 Cash Equipment 2,000 Accounts Payable Accts. Receivable 1,000 Fees Earned Gudas Com Company Trial Balance April 30, 2022
4,100 1,500 2,000 1,000
Debit Credit Cash 1,200 Accounts Receivable 600 Equipment 2,000 Accounts Payable 700 K. Gudas, Capital 3,000 K. Gudas, Withdrawals 100 Service Fees 1,000 Rent Expense 200 Salaries Expense 600 Totals 4,700 4,700 212) July 1 Rent Expense Prepaid Rent Record one month of rent incurred. Page 22 525 125 213) If the balance of the ledger account (Dr or Cr) is the same as the amount to be posted then the two amounts should be added to come up with a new balance and this new balance will have the same Dr or Cr as the original balance. However, if the balance and the amount to be posted are not both debit or both credit, then you must take the difference between the two and the Dr or Cr balance will be determined by whatever the balance is of the larger of the original balance and the amount posted. 214) (a) Paid rent in advance (b) Bought Supplies on account (c) Owner investment in the company (d) Owner withdrawal (e) Made payment on account
39
Exam
CHAPTER 4
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) When Income Statement credits exceed the debits on the worksheet, A) an error has been made. B) a net income has occurred. C) a net loss has occurred. D) Not enough information has been provided.
1)
2) Equipment with a cost of $150,000 has an accumulated depreciation of $50,000. What is the book value of the equipment? A) $100,000 B) $200,000 C) $150,000 D) $50,000
2)
3) Which of the following accounts would most likely NOT need to be adjusted at the end of the year? A) Cash B) Accumulated Depreciation C) Prepaid Rent D) Office Supplies
3)
4) Prepaid Advertising appeared as $2,400 on the trial balance and as $2,200 on the adjusted trial balance. The proper adjusting journal entry to reflect the change must have been A) Advertising Expense 200 Prepaid Advertising 200 B) Advertising Expense 200 Cash 200 C) Prepaid Advertising 200 Cash 200 D) Cash 200 Prepaid Advertising 200
4)
5) Ruel Records' weekly payroll of $500 is paid on Fridays. Assume that the last day of the month falls on Tuesday. Which of the following adjusting journal entries is needed on that date? A) Accrued Salaries 100 Salaries Expense 100 B) Salaries Expense 300 Cash 300 C) Salaries Expense 200 Accrued Salaries 200 D) Accrued Salaries 500 Cash 500
5)
6) Depreciation Expense would be found on which of the following financial statements? A) Balance sheet B) Income statement C) Depreciation report D) Statement of Owner's Equity
6)
7) Canada Revenue Agency uses the term Capital Cost Allowance which is almost identical to A) contra accounts. B) book value. C) salaries. D) depreciation.
7)
1
8) Which of the following would cause a contra-asset to be credited and an expense debited? A) Recording the building depreciation B) Recording an accrued expense C) Recording the consumption of supplies D) All of the above would have that effect.
8)
9) Adjusting journal entries A) are recorded before finishing the worksheet. B) are not recorded in the ledger. C) close the ledger. D) bring accounts up to date.
9)
10) The adjusted trial balance on the worksheet shows Accumulated Depreciation, $1,000, and Depreciation Expense, $700. What was the balance in the Accumulated Depreciation account before the adjustment? A) $700 B) $1,000 C) $300 D) $1,700
10)
11) Envy Automation has prepaid insurance on their truck for one year equal to $660. The adjusting journal entry for the month is A) Insurance Expense 55 Prepaid Insurance 55 B) Insurance Expense 660 Prepaid Insurance 660 C) Prepaid Insurance 55 Insurance Expense 55 D) Prepaid Insurance 660 Insurance Expense 660
11)
12) If a truck cost $13,000, has a residual value of $1,000, and has a useful life of 10 years, the depreciation for a month would be A) $1,300. B) $1,200. C) $100. D) $108.33.
12)
13) Juliet Dance Academy estimated depreciation on its building at $400. The adjusting entry for depreciation of the building would include A) a credit to Depreciation Expense for $400. B) a debit to Accumulated Depreciation for $400. C) a credit to Building for $400. D) a debit to Depreciation Expense for $400.
13)
14) As Prepaid Rent is used, the asset becomes a(n) A) liability. B) revenue.
14) C) contra-asset.
2
D) expense.
15) Benjamin's Lawn Service depreciation for the month is $800. The adjusting journal entry is A) Depreciation Expense 800 Accumulated Depreciation 800 B) Equipment 800 Accumulated Depreciation 800 C) Accumulated Depreciation 800 Depreciation Expense 800 D) Depreciation Expense 800 Equipment 800
15)
16) Huron Road Tours showed store supplies on hand to be $450. If at the end of the period supplies used were $100, the adjusting entry would include A) a debit to Supplies Expense for $100. B) a credit to Supplies Expense for $100. C) a credit to Supplies Expense for $350. D) a debit to Supplies Expense for $350.
16)
17) The adjusting entry for accrued salaries is to A) debit Cash; credit Salaries Expense. B) debit Salaries Expense; credit Cash. C) debit Salaries Expense; credit Salaries Payable. D) debit Salaries Payable; credit Salaries Expense.
17)
18) Total wages per week are $6,700. You need to accrue $4,020 of wages at period end. The adjusting entry would include which of the following? A) Credit Wages Expense, $4,020; debit Accrued Wages, $4,020 B) Debit Wages Expense, $2,680; credit Cash, $2,680 C) Debit Wages Expense, $2,680; credit Accrued Wages, $2,680 D) Debit Wages Expense, $4,020; credit Accrued Wages, $4,020
18)
19) Which of the following accounts would appear on the balance sheet? A) Depreciation Expense B) Fees Earned C) Accumulated Depreciation D) None of these are correct.
19)
20) An adjustment for Prepaid Rent would indicate A) the amount expired. C) the amount on hand.
20) B) the amount originally paid. D) the amount of the trial balance.
21) The cost of an asset less accumulated depreciation equals A) book value. B) residual value. C) depreciation expense. D) None of these answers are correct.
21)
22) The adjustment to record supplies used during the period would be A) debit Supplies; credit Cash. B) debit Supplies Expense; credit Supplies. C) debit Supplies; credit Supplies Expense. D) debit Supplies Expense; credit Cash.
22)
3
23) The capital balance amount shown in the balance sheet column of the worksheet represents A) the beginning capital plus net income. B) the beginning capital less withdrawals. C) the beginning capital plus net income less withdrawal. D) the beginning capital plus any investments to capital that occurred during the period.
23)
24) The adjustment for depreciation was credited to Equipment and debited to Depreciation Expense. This would A) understate the assets. B) overstate net income. C) overstate the assets. D) None of these are correct.
24)
25) At the start of this year 18 months rent was paid. Adjusted correctly, at the year's end, how will this affect the balance sheet? A) Liabilities will be increased. B) Owner's equity will be increased. C) Assets will be decreased. D) This has no effect on the period end balance sheet.
25)
26) The beginning capital balance used on the Statement of Owner's Equity is best obtained from A) the general ledger. B) the amount calculated on the statement of owner's equity. C) the worksheet in the income statement credit column. D) the worksheet in the balance sheet credit column.
26)
27) The estimated value of an item at the end of its useful life is A) depreciation expense. B) accumulated depreciation. C) residual value. D) None of these answers are correct.
27)
28) Which of the following would cause total assets to decrease and total expense to increase? A) Recording the depreciation of equipment B) Recording the expiration of prepaid rent C) Recording the consumption of supplies D) All of the above would have that effect.
28)
29) Liam's Skate Sharpening estimated depreciation for office equipment at $200. The adjusting entry would include A) a credit to Accumulated Depreciation for $200. B) a credit to Depreciation Expense for $200. C) a credit to Office Equipment for $200. D) a debit to Accumulated Depreciation for $200.
29)
30) The adjustment for wages earned, but not yet paid is A) Debit Accrued Wages, credit Cash. B) Debit Wages Expense, credit Accrued Wages. C) Debit Wages Expense, credit Cash. D) Debit Accrued Wages, credit Wages Expense.
30)
4
31) Which of the financial statements is prepared first from the worksheet? A) Statement of owner's equity B) Balance sheet C) Income statement D) None of these answers are correct.
31)
32) To record accrued salaries, you would A) debit Accrued Salaries and credit Salaries Expense. B) debit Salaries Expense and credit Accrued Salaries. C) debit Cash and credit Accrued Salaries. D) None of these answers are correct.
32)
33) Assuming that purchases of supplies were debited to the Supplies asset account when made, an adjustment for supplies would indicate A) the amount used up. B) the amount on the trial balance. C) the amount on hand. D) the amount bought.
33)
34) When historical cost is used to record equipment, it would appear as the A) original cost on the income statement. B) market value on the balance sheet. C) residual value on the balance sheet. D) original cost on the balance sheet.
34)
35) Which of the following transactions would result in an accrual? A) Equipment depreciated over the period B) Rent expired for the month C) Salary expense has been incurred but unpaid D) Supplies used during the accounting period
35)
36) Prepaid Rent is considered to be a(n) A) liability. B) asset.
36) C) revenue.
D) contra-asset.
37) Equipment with a cost of $150,000 has an accumulated depreciation of $50,000, and an estimated remaining life of 8 years. What is the annual straight-line depreciation expense for the equipment? A) $25,000 B) $12,500 C) $100,000 D) $50,000
37)
38) If Prepaid Rent for the period is not adjusted, A) assets will be overstated and expenses will be understated. B) assets will be understated and expenses will be overstated. C) assets will be understated and expenses will be understated. D) assets will be overstated and expenses will be overstated.
38)
39) If the balance of supplies on hand account at the end of the period was $550 and you counted $250 on hand, the amount for the adjustment for Supplies expense would be A) $800. B) $250. C) $300. D) $550.
39)
40) All of the following are reasons to adjust the account balances at the end of the period EXCEPT A) to accurately report the assets on the balance sheet. B) to correct any errors made during the period. C) to report all revenues earned during the period. D) to report all expenses incurred during the period.
40)
5
41) Adjusting the supplies on hand account will A) increase the total assets and increase the total expenses. B) decrease the total assets and increase the total expenses. C) increase the total assets and decrease the total expenses. D) decrease the total assets and decrease the total expenses.
41)
42) Adjusting entries affect A) the income statement. C) Neither of these answers is correct.
42) B) the balance sheet. D) Both A and B are correct.
43) Which of the following would cause a liability to be credited and an expense to be debited? A) Recording the accrual of salaries incurred B) Recording the adjustment for the expiration of rent C) Recording the depreciation of equipment D) Purchasing equipment
43)
44) LC Machining has one year of prepaid rent equal to $2,400. The adjusting journal entry for the month is A) Prepaid Rent 2,400 Rent Expense 2,400 B) Prepaid Rent 200 Rent Expense 200 C) Rent Expense 2,400 Prepaid Rent 2,400 D) Rent Expense 200 Prepaid Rent 200
44)
45) The adjusting entry to record the expired rent would be to A) debit Rent Expense; credit Prepaid Rent. B) debit Prepaid Rent; credit Cash. C) debit Cash; credit Prepaid Rent. D) debit Prepaid Rent; credit Rent Expense.
45)
46) In the business world, financial statements are prepared from the A) adjusted trial balance. B) trial balance. C) worksheet income statement and balance sheet columns. D) ledger.
46)
47) Linda's Flowers purchased a two-year insurance policy for $2,400. The adjusting journal entry for one month is A) Prepaid Insurance 200 Insurance Expense 200 B) Insurance Expense 200 Prepaid Insurance 200 C) Insurance Expense 100 Prepaid Insurance 100 D) Prepaid Insurance 100 Insurance Expense 100
47)
6
48) Walter's Windows showed supplies available during the year of $1,700. A count of the supplies on hand as of October 31 is $600. The adjusting entry for Store Supplies expense would include A) a debit to Store Supplies for $1,100. B) a debit to Store Supplies Expense for $1,100. C) a debit to Store Supplies Expense for $600. D) a credit to Store Supplies Expense for $600.
48)
49) If the Office Supplies account is not adjusted, A) assets will be overstated and expenses will be overstated. B) assets will be understated and expenses will be overstated. C) assets will be understated and expenses will be understated. D) assets will be overstated and expenses will be understated.
49)
50) Adjusting journal entries are A) the last step before starting the next year's transactions. B) prepared from the worksheet, entered in the general journal, then posted. C) prepared before the completion of the worksheet. D) not needed if a worksheet has been completed.
50)
51) If the balance of supplies asset account at the end of the period was $800 and you counted $100 on hand, the amount for the adjustment for Supplies asset would be A) $700 debit. B) $100 credit. C) $100 debit. D) $700 credit.
51)
52) When making the adjustment for prepaid insurance, instead of writing off only the time that has passed the entire policy was written off. This would A) understate net income. B) overstate the liabilities. C) overstate the assets. D) None of these are correct.
52)
53) Bringing account balances up to date before preparing financial reports is called A) journalizing. B) posting. C) analyzing. D) adjusting.
53)
54) The adjustment that is made to allocate the cost of a building over its expected life is called A) accumulated depreciation. B) depreciation. C) residual value. D) None of these answers are correct.
54)
55) Adjusting journal entries are prepared from A) the income statement. B) the balance sheet. C) the adjustments column of the worksheet. D) source documents.
55)
56) What type of account is Accrued Salaries? A) Asset C) Owner's equity
56) B) Expense D) Liability
57) Depreciation Expense would be found on which of the following financial statements? A) Interim Balance sheet B) Income statement C) Owner's equity statement D) Balance sheet
7
57)
58) On November 1, Juan paid $24,000 in advance for a year's rent. The November 30 adjusting entry for rent expense should include A) a credit Prepaid Rent, $24,000 B) a debit Rent Expense, $24,000. C) a credit Cash, $2,000. D) a debit Rent Expense, $2,000.
58)
59) After the adjustment for depreciation has been made, the original cost of the equipment A) decreases with a debit. B) is adjusted to market value. C) remains the same. D) increases with a credit.
59)
60) The depreciation of equipment will require an adjustment that results in A) total assets increasing and total expenses decreasing. B) total assets decreasing and total expenses increasing. C) total assets and expenses decreasing. D) total assets increasing and total expenses increasing.
60)
61) Accumulated Depreciation is found on which of the following financial statements? A) Balance sheet B) Statement of Owner's Equity C) Income statement D) All of these answers are correct.
61)
62) Bob's Bakery purchased an industrial oven for $22,000 with a residual value of $6,000 and a life expectancy of 8 years. Using straight-line depreciation, the amount of the depreciation adjustment for the first year would be A) $8,000. B) $4,000. C) $1,000. D) $2,000.
62)
63) Not recording the Prepaid Rent used causes A) assets to be too high. C) assets to be too low.
63) B) expenses to be too high. D) revenue to be too high.
64) Which of the following is prepared last? A) Worksheet C) Income statement
64) B) Balance sheet D) Statement of owner's equity
65) If the adjustment for Supplies used during the period was not made, A) revenue would be too high. B) assets would be too low. C) expenses would be too low. D) expenses would be too high.
65)
66) The ending figure for capital, used on the balance sheet, will be obtained from A) balance sheet credit column of the worksheet. B) credit column of the income statement. C) balance sheet debit column of the worksheet. D) the statement of owner's equity.
66)
8
67) Crystal's Hair Studio showed office supplies available of $1,400. A count of the supplies left on hand as of June 30 was $1,100. The adjusting journal entry is A) Office Supplies Expense 400 Office Supplies 400 B) Office Supplies Expense 300 Office Supplies 300 C) Office Supplies 300 Office Supplies Expense 300 D) Office Supplies 400 Office Supplies Expense 400
67)
68) Adjusting journal entries A) must be journalized and posted. B) need not be posted if the financial statements are prepared from the worksheet. C) are not needed if closing entries are prepared. D) need not be journalized since they appear on the worksheet.
68)
69) Each adjustment affects A) the income statement. C) the cash account.
69) B) the balance sheet. D) both A and B are correct.
70) Sophie's Bridal Shop bought a computer worth $2,150 with an expected life of 3 years and a residual value of $500. What is the adjusting journal entry after the first year? A) Computer 550 Depreciation Expense 550 B) Depreciation Expense 550 Accumulated Depreciation, Computer 550 C) Depreciation Expense 550 Computer 550 D) Computer 550 Accumulated Depreciation, Computer 550
70)
71) Online Service received its telephone bill for January, but is not going to pay the bill until February. What adjustment is needed to record the receipt of the bill? A) Debit Telephone Expense; credit Accounts Payable B) Debit Accounts Payable; credit Cash C) Debit Accounts Payable; credit Telephone Expense D) Debit Telephone Expense; credit Cash
71)
72) Bailey's received its electric bill for December on December 31 but did not pay nor record it in the general journal. This resulted in A) overstated net income. B) overstated liabilities. C) understated capital. D) understated assets.
72)
73) The amount for withdrawals, to be used on the Statement of Owner's Equity, would be obtained from A) the worksheet in the income statement credit column. B) the worksheet in the income statement debit column. C) the worksheet in the balance sheet credit column. D) the worksheet in the balance sheet debit column.
73)
9
74) Hope for the Homeless purchased kitchen equipment for $47,000 with a residual value of $17,000 and a life expectancy of 5 years. Using straight-line depreciation, the amount of the depreciation adjustment for the first year would be A) $6,000. B) $4,000. C) $6,400. D) $5,000.
74)
75) BC Tea Company's depreciation for the month is $150. The adjusting journal entry is A) Depreciation Expense 150 Accumulated Depreciation 150 B) Accumulated Depreciation 150 Depreciation Expense 150 C) Depreciation Expense 150 Equipment 150 D) Depreciation Expense 150 Depreciation Payable 150
75)
76) When Income Statement debits exceed the credits on the worksheet, A) an error has been made. B) a net income has occurred. C) a net loss has occurred. D) Not enough information has been provided.
76)
77) Which of the following will have a direct affect on the income statement? A) Buying an automobile on account B) Withdrawing money from the business C) Selling goods on account D) Receiving money on account
77)
78) These entries are prepared and posted to the ledger in order to update the ledger accounts before the next accounting period A) trial balance. B) general journal. C) adjusting entries. D) journalizing.
78)
79) The adjusted trial balance columns A) help to identify any errors that may have been made during adjustment. B) show updated account balances to aid in preparation of the financial statements. C) help to ensure the ledger is still in balance. D) All of the above are correct.
79)
80) When historical cost is used in the accounting records, the book value of the asset is A) the original cost. B) original cost less accumulated depreciation. C) the market value. D) original cost plus accumulated depreciation.
80)
81) A form used to organize and check data before preparing financial reports is known as a(n) A) income statement. B) trial balance. C) worksheet. D) balance sheet.
81)
82) Which of the following will have a direct affect on the Statement of owner's equity? A) Receiving money on account B) Buying an automobile on account C) Withdrawing money from the business D) Selling goods on account
82)
10
83) The accrual of an expense was not recorded. This would A) understate expenses and understate liabilities. B) overstate expenses and overstate liabilities. C) overstate expenses and understate liabilities. D) understate expenses and overstate liabilities.
83)
84) Sarah's Spices' accrued wages are $1,700. Which of the following is the required adjusting entry? A) Credit Salaries Expense, $1,700; debit Accrued Salaries, $1,700 B) Debit Salaries Expense, $1,700; credit Accrued Salaries, $1,700 C) Debit Accrued Salaries, $1,700; credit Cash, $1,700 D) Debit Cash, $1,700; credit Salaries Expense, $1,700
84)
85) After the adjustment for depreciation has been made, the original cost of the equipment A) remains the same. B) decreases with a debit. C) increases with a credit. D) None of these answers are correct.
85)
86) The entry to record the expiration of part of the prepaid rent will A) increase total assets and increase total expenses at the end of the month. B) decrease total assets and increase total expenses at the end of the month. C) decrease total assets and decrease total expenses at the end of the month. D) increase total assets and decrease total expenses at the end of the month.
86)
87) Kiran's Safety Training Academy purchased a one -year insurance policy for $3,600. The adjusting entry for one month would include A) a debit to Prepaid Insurance, $300. B) a credit to Cash, $300. C) a credit to Insurance expense, $300. D) a debit to Insurance Expense, $300.
87)
88) On a worksheet, the income statement debit column totals $10,000 and the credit column totals $9,800. Which of the following statements is CORRECT? A) The company had a net loss of $200. B) The company's revenues were greater than expenses. C) The company had a net income of $200. D) None of the above are correct.
88)
89) Fred's Plumbing Service purchased tools for $4,000. They have an expected life of 40 months and no residual value. The adjusting journal entry for the month is A) Accumulated Depreciation 100 Equipment 100 B) Depreciation Expense 100 Equipment 100 C) Accumulated Depreciation 100 Depreciation Expense 100 D) Depreciation Expense 100 Accumulated Depreciation 100
89)
90) Equipment with a cost of $150,000 has an accumulated depreciation of $50,000, and an estimated remaining life of 8 years. What is the historical cost of the equipment? A) $50,000 B) $150,000 C) $200,000 D) $100,000
90)
11
91) Accountants use the worksheet to organize and complete adjustments for all but one of the following events: A) Depreciation on equipment. B) Supplies on hand. C) Revenue earned and recorded in the current period. D) Rent paid in advance.
91)
92) Rent paid by your organization two months in advance is considered to be a(n) A) liability. B) contra asset. C) revenue. D) asset.
92)
93) The adjusting entry to record depreciation for the company automobile would be A) debit Accumulated Depreciation, Automobile; credit Depreciation Expense, Automobile. B) debit Depreciation Expense, Automobile; credit Automobile. C) debit Accumulated Depreciation, Automobile; credit Automobile. D) debit Depreciation Expense, Automobile; credit Accumulated Depreciation, Automobile.
93)
94) Which of the following would be an example of a contra-asset? A) Depreciation Expense B) Residual Value C) Supplies D) Accumulated Depreciation
94)
95) Withdrawals would most likely be found in which column of the worksheet? A) Adjustments B) Withdrawals would not appear on the work sheet. C) Income statement D) Balance sheet
95)
96) The accumulated depreciation will appear in which of the following worksheet statement columns? A) The Income Statement credit B) The Income Statement debit C) The Balance Sheet debit D) The Balance Sheet credit
96)
97) It is the year end, but not the pay period end. Adjusted correctly, how will this affect the balance sheet? A) This has no effect on the period end balance sheet. B) Assets will be increased. C) Liabilities will be increased. D) Owner's equity will be increased.
97)
98) The adjustment for accrued wages included the entire pay period, some of which occurs next month. This would A) overstate the liabilities. B) understate the liabilities. C) overstate net income. D) None of these are correct.
98)
99) On March 1, Rosetti Company paid in advance $7,000 for seven months' rent. The March 31 adjusting entry for rent expense should include A) debit Rent Expense, $2,000. B) debit Rent Expense, $2,500. C) credit Prepaid Rent, $3,500. D) debit Rent Expense, $1,000.
99)
12
100) The inside columns on the financial statements are used to A) show credits. B) show subtotals. C) show debits. D) None of these answers are correct.
100)
101) Morgan's Consulting bought a scanner worth $5,000 with an expected life of 7 years and a residual value of $1,500. What is the adjusting journal entry for the first year? A) Scanner 500 Depreciation Expense 500 B) Depreciation Expense 500 Accumulated Depreciation, Scanner 500 C) Depreciation Expense 500 Scanner 500 D) Scanner 500 Accumulated Depreciation, Computer 500
101)
102) The order of the steps to prepare the worksheet are A) complete the adjustments, prepare the adjusted trial balance, prepare the trial balance, extend the respective totals to the Income Statement and Balance Sheet columns. B) prepare the trial balance, complete adjustments, prepare the adjusted trial balance, extend the respective totals to the Income Statement and Balance Sheet columns. C) prepare the adjusted trial balance, complete the adjustments, prepare the trial balance, extend the respective totals to the Income Statement and Balance Sheet columns. D) extend the totals to the Income Statement and Balance Sheet columns, prepare the trial balance, complete the adjustments, prepare the adjusted trial balance.
102)
103) Which of the following accounts would appear on the Income Statement? A) Equipment B) Cash C) Depreciation Expense D) Accumulated Depreciation
103)
104) Matt's Engineering purchased a truck for $60,000 with a residual value of $17,000 and a life expectancy of 8 years. Using straight-line depreciation, the amount of the depreciation adjustment for the first year would be A) $2,687. B) $5,375. C) $2,125. D) $7,500.
104)
105) Journal entries that are needed in order to update account balances for internal business transactions (such as supplies and prepaid rent) at the end of the period are called A) closing entries. B) sales entries. C) adjusting entries. D) None of the above are correct.
105)
106) As accumulated depreciation is recorded, the book value A) is closed out. B) decreases. C) increases. D) remains the same.
106)
107) Historical cost is the same as A) accumulated depreciation. C) residual value.
107) B) original cost. D) book value.
13
108) It's the end of the accounting period and no electric bill has been received (but the expense has been incurred); you should record an entry that A) increases the total liabilities and increases the total expenses. B) increases the total assets and increases the total expenses. C) decreases the total liabilities and increases the total expenses. D) decreases the total assets and increases the total expenses.
108)
109) Residual value is the A) estimated value of the asset at the end of its useful life. B) cost of the asset. C) allocation of the cost. D) estimated value of the asset when it is purchased.
109)
110) On a worksheet, the balance sheet debit column total is $5,000 and the credit column total is $4,000. Which of the following statements is CORRECT? A) The company had a loss of $1,000. B) The company's expenses were greater than revenues. C) The company had a net income of $1,000. D) None of the above are correct.
110)
111) Which of the following is most likely to result in an adjusting entry at the end of the period? A) Payment of one month's rent B) Payment for routine maintenance on the company van C) Owner's withdrawals D) Payment of two months' insurance in advance
111)
112) If the balance of supplies asset account at the end of the period was $800 and you counted $100 on hand, the amount for the adjustment for Supplies expense would be A) $100 credit. B) $100 debit. C) $700 debit. D) $700 credit.
112)
113) Depreciation of equipment was recorded twice this period. This would A) overstate expenses and overstate assets. B) understate expenses and understate assets. C) overstate expenses and understate assets. D) understate expenses and overstate assets.
113)
114) The ending figure for capital is A) extended to the balance sheet columns. C) not on the worksheet.
114) B) indicated in the trial balance. D) revealed by the net income.
115) Deer and Fishing Company owns $6,000 of office furniture. Accumulated Depreciation had a balance of $3,000 before recording this year's depreciation. Depreciation Expense for the current year is $1,000. What is the book value at the end of the year? A) $2,000 B) $6,000 C) $1,000 D) $3,000
14
115)
116) On a worksheet, the income statement debit column totals $9,800 and the credit column totals $10,000. Which of the following statements is CORRECT? A) The company's expenses were greater than revenues. B) The company had a net income of $200. C) The company had a net loss of $200. D) None of the above are correct.
116)
117) Mavis Company took inventory and recorded the consumption of supplies. How will this affect the balance sheet? A) Assets will be decreased. B) Owner's equity will be increased. C) Liabilities will be increased. D) This will have no effect on the period-end balance sheet.
117)
118) Marty's Bakery has a daily payroll of $400, all employees work Monday to Friday and are paid at the end of day Friday for the five -day work week they just completed. Assume that the last day of the month falls on Wednesday. Which of the following adjusting journal entries is needed on that date? A) Salaries Expense 800 Cash 800 B) Salaries Expense 1,200 Accrued Salaries Payable 1,200 C) Salaries Expense 400 Accrued Salaries Payable 400 D) Accrued Salaries Payable 600 Salaries Expense 600
118)
119) Regarding the adjusted trial balance columns on a worksheet, all but one of the following statements are TRUE. A) Two debits on a line are added together. B) Two credits on a line are added together. C) Combining a debit and a credit amount means you place the resulting total on the side which is smallest. D) The adjusted trial balance columns result from a combination of original amounts and adjustments.
119)
120) Great Lakes Modeling Agency purchased $800 of scanning equipment at the beginning of the month. This account had no opening balance. Depreciation Expense on this item for the month is $200. What is the balance of the scanning equipment account at the end of the month? A) $1,000 B) $200 C) $800 D) $600
120)
121) Which of the following accounts would most likely be depreciated? A) Accounts Payable B) Cash C) Office Supplies D) Equipment
121)
122) A contra-asset is A) an account that increases the asset. B) an account with an opposite balance of a normal asset. C) an asset with a debit balance. D) in reality a liability.
122)
15
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 123) Ending capital is found by taking the beginning capital and adding the net loss and withdrawals.
123)
124) Since adjustments are being made it is acceptable if the adjusted trial balance total credits do not equal total debits.
124)
125) Adjusting entries bring the ledger accounts up to date.
125)
126) The ending figure for capital can be found on the worksheet.
126)
127) On the worksheet in the final two columns - the debits will always equal the credits before net income is added.
127)
128) A count of office supplies on hand is required in order to determine the amount to expense in the adjusting entries.
128)
129) The income statement acts as the accountants scratch pad.
129)
130) Straight-line is the only method of depreciation permitted under the Capital Cost Allowance rules .
130)
131) The worksheet is a tool used in preparing the financial statements for a business.
131)
132) The original cost of equipment is directly reduced by the amount of Depreciation Expense.
132)
133) If a debit adjustment is added to a debit amount, the result is a debit.
133)
134) If a credit adjustment is combined with a credit amount, the result is always a debit.
134)
135) Debits must equal credits on the Statement of Owner's equity.
135)
136) Each time depreciation expense is recorded, the corresponding asset account decreases.
136)
137) The balance in the Accumulated Depreciation account remains about the same each period, while Depreciation Expense increases annually.
137)
138) The worksheet contains a trial balance.
138)
139) Depreciation expense decreases net income.
139)
140) Withdrawals are reported on the balance sheet.
140)
141) Original cost of equipment is not adjusted on the worksheet.
141)
142) Supplies and prepaid rent are assumed to have a longer life than equipment.
142)
16
143) On the worksheet, the difference between the debits and credits in the income statement columns would be the net income or net loss for the period.
143)
144) The accounts added below the trial balance, on the worksheet, are always increasing.
144)
145) Salary expenses are only recorded once the amounts are paid to employees.
145)
146) Prepaid Rent is an asset with a normal balance of a debit.
146)
147) The worksheet is the first financial statement prepared.
147)
148) Every amount needed for the income statement can be found on the worksheet.
148)
149) Adjusting is the process of bringing accounts up to date at the end of the accounting period.
149)
150) Worksheets are released to the public as part of the annual statements.
150)
151) After posting adjusting entries, the balance sheet accounts will be set back to zero.
151)
152) The use of straight-line depreciation is permitted by the Canada Revenue Agency for all assets.
152)
153) Revenue is recorded when earned, and expenses are recorded only when paid.
153)
154) Accumulated Depreciation is a contra-asset account found on the balance sheet.
154)
155) The amount of supplies used during the period would be shown in the adjustment columns of the worksheet.
155)
156) The use of straight-line depreciation results in equal amounts of depreciation being taken over a period of time.
156)
157) The spreading or allocating of the cost of a long-term asset over time is called depreciation.
157)
158) Every amount needed for the balance sheet can be found on the worksheet.
158)
159) Cash is never used in an adjusting entry.
159)
160) The worksheet contains a debit and credit column for making adjustments to accounts that need updating.
160)
161) The worksheet does not need dollar signs or commas.
161)
162) Adjusting entries are necessary to update the Chart of Accounts before preparing Financial Statements.
162)
163) Adjustments can only be made to accounts already listed on the trial balance.
163)
17
164) The worksheet is a formal statement.
164)
165) On the formal income statement, there are no debit or credit columns.
165)
166) If a credit adjustment is added to a credit amount, the result is a credit.
166)
167) If an adjustment to Supplies is not made, the balance in the Supplies account will be too low.
167)
168) When an asset expires or is used up, it becomes an expense.
168)
169) It is not necessary to ensure that each adjusting entry balances.
169)
170) The Income Statement should be prepared before the worksheet.
170)
171) An important function of the worksheet is to assist the accountant in finding and correcting errors before the financial statements are prepared.
171)
172) After formal financial reports have been prepared, journal entries and posting must be completed before the ledger is updated.
172)
173) If a debit adjustment is combined with a credit amount, the result is always a debit.
173)
174) The accounts added below the trial balance, on the worksheet, are always decreasing.
174)
175) Once the unadjusted trial balance has been prepared the books are up to date and ready for the next cycle to begin.
175)
176) Book value of an asset is always the same as the residual value.
176)
177) The amount of the office supplies adjustment should be equal to what is on hand, not what is used.
177)
178) Book value of an asset is always the same as the market value.
178)
179) It is very unusual for the totals of the two Income Statement columns to be identical before net income is added.
179)
180) Depreciation Expense is debited when recording the depreciation for the period.
180)
181) To compute net income or net loss, the debit and credit columns of the income statement section of the worksheet are totaled, and the difference is placed on the smaller side.
181)
182) The outside column on the financial reports is used for subtotalling.
182)
183) The book value of an asset equals the cost of the asset minus the accumulated depreciation.
183)
18
184) The ending balances in the ledger after posting the adjusting entries, will be the same amounts that are found on the worksheet in the adjusted trial balance column.
184)
185) Additional investments made to capital during the period will always be found in the adjustments column of the trial balance.
185)
186) To compute net income or net loss, the debit and credit columns of the income statement section of the worksheet are totaled, and the difference is placed on the larger side.
186)
187) Accumulated Depreciation is an asset account.
187)
188) Rent expired at the end of an accounting period requires an adjustment.
188)
189) Every amount needed for the Statement of owner's equity can be found on the worksheet.
189)
190) Accumulated Depreciation is an expense account reported on the Income Statement.
190)
191) To see whether additional investments occurred for the period, you must check the capital account in the ledger.
191)
192) Adjustments are necessary to update account balances for internal transactions.
192)
193) On the formal income statement, the left column is the debit column, and the right column is the credit column.
193)
194) Ending capital is found by taking the beginning capital and adding the net income and withdrawals.
194)
195) The debits must equal credits on the adjusted trial balance columns of the worksheet.
195)
196) The income statement is the only statement affected when an adjustment is made.
196)
197) Adjusting entries are made after the Financial Statements are completed.
197)
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 198) Determine the ending owner's equity of a business having a beginning owner's equity of $3,700, withdrawals of $980, and net income of $1,500.
19
199) Given the trial balance and adjustment columns of the worksheet, complete the adjusted trial balance column for the company.
Accounts Cash Accts. Rec. Supplies Prepaid Rent Prepaid Ins.
Trial Adjusted Balance Adjustments Trial Balance DR CR DR CR DR CR 950 600 150 100 500 400 5,00 0
Equipment Accumulate d Depreciation 1,000 Accts. Pay 500 Capital 3,500 Fees Earned 3,000 Wages Exp. 400 Depreciation Expense Rent Expense Supplies Expense Insurance Expense Wages Payable Total 8,000 8,000
250 80
100
200 100 250 100 80
730
200 730
20
200) Provide the adjusting entries to account for the differences between the trial balance amounts and the adjusted trial balance amounts for the accounts shown. Only a partial trial balance is provided. Use the Adjustments column to show the entries. Adjusted Trial Balance Adjustments Trial Balance Debit Credit Debit Credit Debit Credit Supplies 500 250 Prepaid Rent 1,100 300 Equipment 10,000 10,000 Accum. Dep. - Equip 3,000 3,400 Service Fees 1,200 1,200 Depreciation Expense 400 Telephone Expense 50 50 Salaries Expense 500 600 Rent Expense 800 Supplies Expense 250
201) From the following data complete the worksheet for the month. Trial Balance Adjustments Adjusted TB DR CR DR CR DR CR DR Cash 500 Accounts 325 Receivable Supplies 800 350 Prepaid 660 220 Insurance Equipment 6,500 Acc. 500 275 Depreciatio n Accts. Payable 720 Salaries 300 Payable Capital 6,615 Fees Earned 1,200 Wages Expense 250 300 Supplies 350 Expense Depreciatio 275 n Expense Insurance 220 Expense Totals 9,035 9,035 1,145 1,145
Income Stmt. Balance Sheet CR DR CR
202) On the worksheet, the Income Statement debit column totaled $800 and the credit column totaled $1,200. What is the amount of Net Income? 21
203) Given the trial balance and adjustment columns of the worksheet, complete the adjusted trial balance column for the company.
Accounts Cash Accts. Rec. Supplies Prepaid Rent Equipment Accts. Pay Capital
Trial Adjusted Balance Adjustments Trial Balance DR CR DR CR DR CR 600 325 490 225 1,750 6,00 0
350
500 4,26 5 5,00 0
Fees Earned Wages Exp. 600 Depreciation Expense Accumulate d Depreciation Supplies Expense Rent Expense Wages Payable Total 9,765 9,765
125 100
100 225 350
800
125 800
22
204) Given the Income Statement columns and the Balance Sheet columns of the worksheet, prepare an income statement for the month ending July 31, 2023 for Vebal Company. Income Statement Debit Credit Cash Account Rec. Office Supplies F. Vebal, Capital F. Vebal, With. Repair Fees Salaries Exp. Rent Expense Office Sup. Exp. Salaries Payable
Balance Sheet Debit Credit 10,000 2,300 200 5,500 500
6,600 1,800 1,000 200 3,000 3,600 6,600
6,600
13,000
6,600
13,000
200 11,200 6,600 13,000
205) Given the income statement columns and the balance sheet columns of the worksheet, prepare a balance sheet dated December 31, 2022, for Centra Company.
Accounts Cash Accts. Rec. Supplies Prepaid Ins. Equipment Accts. Pay Capital Fees Earned Wages Exp. Totals Depreciation Expense Accumulate d Depreciation Supplies Expense Insurance
Trial Adjusted Income Balance Balance Adjustments Trial Balance Statement Sheet DR CR DR CR DR CR DR CR DR CR 750 750 750 400 400 400 b 250 175 75 75 c 400 100 300 300 7,00 7,00 0 7,000 0 900 900 900 6,00 6,000 0 6,000 2,00 2,000 0 2,000 d 100 300 400 400 8,90 8,90 0 0 a 250
250 a 250
b 175 c
250
250 175
250 175
23 100
100
Insurance Expense Wages Payable
c 100
Total
825
100 d 300 825
9,45 0
100 300 9,45 0
Net Income
925 2,000 8,525 1,07 5 8,52 2,000 2,000 5
300 7,45 0 1,07 5 8,52 5
206) For each account listed identify the category it belongs to, the normal balance (debit or credit), and the financial statement the account appears. Account
Category
0. Cash 1. Depreciation Expense 2. Accumulated Depreciation 3. Wages Expense 4. Office Supplies 5. Office Supplies Expense 6. Wages Payable 7. Prepaid Rent
Asset
Normal Balance Debit
Financial Statement Balance Sheet
207) On November 30, the balance in the Supplies account was $900. During December additional supplies were purchased of $200. On December 31, there was $700 worth of Supplies on hand. What would be the adjustment for the month of December for Supplies? 208) What is the purpose of adjusting entries? Discuss the effect of not preparing adjusting entries on various accounts.
24
209) Provide the adjusting entries to account for the differences between the trial balance amounts and the adjusted trial balance amounts for the accounts shown. Only a partial trial balance is provided. Use T accounts to show the adjustments. Adjusted Trial Balance Debit Credit 75 1,000 15,000 1,800 1,500 150 587 1,000 475 900
Trial Balance Debit Credit 550 2,000 15,000 900 1,500 150 492
Supplies Prepaid Rent Equipment Accum. Dep. Service Fees Telephone Exp. Salaries Exp. Rent Expense Supplies Expense Depreciation Expense
210) Discuss the benefits of the worksheet. Explain how the financial reports are prepared from the worksheet. 211) Given the adjustment columns of the worksheet, prepare the adjusting entries for the month of October 31, 2022, for Reese Company (omit descriptions)
Accounts Cash Accts. Rec. Supplies Equipment Accts. Pay Capital Withdrawal s Fees Earned Salary Exp. Totals Depreciation Expense Accumulate d Depreciation Salaries Payable Supplies Expense Totals
Trial Balance Adjustments DR CR DR CR 1,00 0 400 c 400
900 750
Adjusted Income Balance Trial Balance Statement Sheet DR CR DR CR DR CR 1,00 0 1,000 400 400 500 750
700
500 750 700 1,95 0
1,950 200
700 1,950
200 900
300 3,550 3,550
200 900
900
b 100
400
400
a 50
50
50
a 50 b 100 c 400 550
400 3,70 550
50
50
100
100 400
3,70 25 850
900 2,850 2,800
Totals Net Loss
550
550
3,70 0
3,70 0
850 50 900
900 2,850 2,800 50 900 2,850 2,850
212) Equipment was purchased for $20,000, residual value is $1,000 and it is expected that the useful life is 10 years. What is the amount in the Accumulated Depreciation account after 3 years assuming straight-line depreciation? 213) Determine the ending owner's equity of a business having a beginning owner's equity of $2,250, withdrawals of $675, and net loss of $500. 214) Equipment was purchased for $20,000, residual value is $1,000 and it is expected that the useful life is 10 years. What is the book value of the equipment after the first year assuming straight-line depreciation? 215) List the steps of the Accounting Cycle in their order of completion that we have learned about up to this point in the course. 216) Given the Income Statement columns and the Balance Sheet columns of the worksheet, prepare an income statement for the month ending March 31, 2022 for Nettles Company. Income Statement Debit Credit Cash Account Rec. Office Supplies V. Nettles, Capital V. Nettles, With. Consulting Fees Salaries Exp. Rent Expense Office Sup. Exp. Salaries Payable
Balance Sheet Debit Credit 5,000 3,600 300 7,400 900
4,300 1,200 800 200 2,200 2,100 4,300
4,300
9,800
4,300
9,800
26
300 7,700 2,100 9,800
217) Given the Income Statement columns and the Balance Sheet columns of the worksheet, prepare a Statement of Owner's Equity for the month ending July 31, 2023 for Vebal Company. Assume there were no additional investments of capital during the month. Income Statement Debit Credit Cash Account Rec. Office Supplies F. Vebal, Capital F. Vebal, With. Repair Fees Salaries Exp. Rent Expense Office Sup. Exp. Salaries Payable
Balance Sheet Debit Credit 10,000 2,300 200 5,500 500
6,600 1,800 1,000 200 3,000 3,600 6,600
6,600
13,000
6,600
13,000
200 11,200 6,600 13,000
218) A company pays wages of $3,000 per a traditional 5 day work week. The total expenses as of Friday, April 27 were $12,000. What would be the total expenses as of April 30? 219) Why is it necessary to make an adjusting entry for supplies at the end of the fiscal period, and why are we given the supplies on hand at the end of the period to help us make this entry? 220) Given the income statement columns and the balance sheet columns of the worksheet, prepare an income statement for the month of October 31, 2022, for Reese Company.
Accounts
Trial Balance Adjustments DR CR DR CR
Cash Accts. Rec.
1,000 400
Supplies Equipment Accts. Pay
900 750
Capital Withdrawal s Fees Earned Salary Exp. Totals
c 400
Adjusted Income Balance Trial Balance Statement Sheet DR CR DR CR DR CR 1,00 0 1,000 400 400 500 750
700
700
1,950
1,950
200
700 1,95 0
200 900
300 3,55 0
500 750
200 900
b 100
400
a 50
50
900 400
3,55 0
Depreciation 27
50
Expense Accumulate d Depreciation Salaries Payable Supplies Expense Totals Net Income
a 50
50 a 50 b 100
c 400 550
50
50
50
100
100
400 550 3,700 3,700
400 850 50 900
900 2,850 2,800 50 900 2,850 2,850
221) Provide the adjusting entries to account for the differences between the trial balance amounts and the adjusted trial balance amounts for the accounts shown. Only a partial trial balance is provided. Use T accounts to show the adjustments.
Supplies Prepaid Insurance Equipment Accum. Dep. Service Fees Depreciation Exp. Telephone Exp. Salaries Exp. Insurance Expense Supplies Expense
Adjusted Trial Balance Debit Credit 175 500 8,000 1,200 1,200 500 100 375 300 150
Trial Balance Debit Credit 325 800 8,000 700 1,200 100 375
222) From the following data, prepare the adjustments for the month and record the appropriate debits and credits in T accounts. (a) Office equipment costing $14,400 with no residual value has a life expectancy of 6 years. (b) Supplies account balance $950, supplies on hand $50. (c) Prepaid Rent for one year $24,000, one month has expired. 223) From the following data, prepare the adjustments for the month and record the appropriate debits and credits in T accounts. (a) Office furniture costing $3,000 with no residual value has a life expectancy of 60 months. (b) Supplies available $800, supplies on hand $500. (c) Prepaid Insurance balance $500, one -fifth has expired. 224) Equipment was purchased for $20,000, residual value is $1,000 and it is expected that the useful life is 10 years. What is the depreciation adjustment after the first year assuming straight-line depreciation?
28
225) Given the Income Statement columns and the Balance Sheet columns of the worksheet, prepare a balance sheet for January 31, 2023 for French Company. You will first need to calculate Owner's Equity. Income Statement Debit Credit Cash Account Rec. Office Supplies T. French, Capital T. French, With. Repair Fees Salaries Exp. Rent Expense Office Sup. Exp. Salaries Payable
Balance Sheet Debit Credit 10,000 2,300 200 11,000 500
3,300 900 500 100 1,500 1,800 3,300
3,300
13,000
3,300
13,000
200 11,200 1,800 13,000
226) Given the Income Statement columns and the Balance Sheet columns of the worksheet, prepare a Balance Sheet as of March 31, 2022 for Nettles Company. You will first need to calculate ending Owner's Equity. Income Statement Debit Credit Cash Account Rec. Office Supplies V. Nettles, Capital V. Nettles, With. Consulting Fees Salaries Exp. Rent Expense Office Sup. Exp. Salaries Payable
Balance Sheet Debit Credit 5,000 3,600 300 7,400 900
4,300 1,200 800 200 2,200 2,100 4,300
4,300
9,800
4,300
9,800
300 7,700 2,100 9,800
227) Discuss the benefits of the worksheet. Explain how the financial reports are prepared from the worksheet.
29
228) Using the following data, make the adjustments, and complete the worksheet for the month. (a) Equipment costing $750 with a residual value of $150 has an expected life of 12 months. (b) Accrued salaries of $100. (c) Supplies ledger balance $900, supplies used $400. Account
Trial Balance Adjustments Adj. Trial Bal Inc. St'ment Balance Sheet DR CR DR CR DR CR DR CR DR CR Cash 1,000 Accts. Rec. 400 Supplies 900 Equipment 750 Accts. Payable 700 Capital 1,950 Withdrawals. 200 Fees Earned 900 Sal. Expense 300 Totals 3,550 3,550
229) Show which columns would contain the adjusted balances by placing an "x" in the appropriate column. Assume all accounts have normal balances.
Cash (example) Accounts Receivable Office Supplies Prepaid Rent Word Processing Equipment Accounts Payable M. Bryant, Capital M. Bryant, Withdrawals Word Processing Fees Earned Office Salaries Expense Advertising Expense Accumulated Depreciation Rent Expense
Income Statement Balance Sheet Debit Credit Debit Credit ________ ________ ___x____ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
230) From the following data, journalize the adjusting entries in proper form for the quarter. Omit descriptions. (a) Equipment costing $2,120 with a residual value of $200 has an expected life of 48 months. (b) Accrued salaries of $250. (c) Supplies ledger balance $900, supplies on hand $100. 231) Given the adjustment columns of the worksheet, prepare the adjusting entries dated December 31, 2022, for Centra Company (omit descriptions).
Accounts Cash Accts. Rec.
Trial Adjusted Income Balance Balance Adjustments Trial Balance Statement Sheet DR CR DR CR DR CR DR CR DR CR 750 750 750 400 400 30 400
Accts. Rec.
400
Supplies
250
Prepaid Ins.
400 7,00 0
Equipment Accts. Pay
b 175 c 100
Fees Earned
2,000
Depreciation Expense Accumulate d Depreciation Supplies Expense Insurance Expense Wages Payable Total
75
75
300
300 7,00 0
900 6,000
Totals
400
7,000
Capital
Wages Exp.
400
100 8,90 0
900 6,00 0 2,00 0
900 6,000 2,000
d 300
400
400
a 250
250
250
8,90 0
a 250 b 175 c 100
250 175
175
100
100
d 300 825
825
250
9,45 0
300 9,45 0
Net Income
925 2,000 8,525 1,07 5 8,52 2,000 2,000 5
300 7,45 0 1,07 5 8,52 5
232) On the worksheet, the Balance Sheet debit column totaled $1,300 and the credit column totaled $1,400. What is the amount of Net Loss? 233) On January 1 the Prepaid Insurance account had a balance of $7,000 that represented 7 months' worth of advance payment. It is now the end of March and there have been no adjustments to the account balance. Determine the amount of expense to record at the end of March. 234) From the following data, journalize the adjusting entries in proper form for the month. Omit descriptions. (a) Equipment costing $2,120 with a residual value of $200 has an expected life of 48 months. (b) Accrued salaries of $100. (c) Supplies ledger balance $700, supplies on hand $200.
31
235) From the following data, make the following adjustments, and complete the worksheet for the month. (a) Depreciation Expense is $250. (b) Supplies available $250, supplies on hand $75. (c) Prepaid Insurance balance $400, $100 has expired. (d) Wages for the 5-day work-week are $500, the month ended on a Wednesday. DR Cash 750 Accts. 400 Receivable Supplies 250 Prepaid Ins. 400 Equipment 7,000 Accts. Payable Capital Fees Earned Wages Expense 100 Totals 8,900
CR
DR
CR
DR
CR
DR
CR
DR
CR
900 7,100 900
8,900
236) On January 1 the supplies account had a balance of $811. During the month, $9,917 worth of supplies were purchased. The January 31 physical count of supplies shows there are $3,602. Determine the amount of supplies expense for January. 237) On Friday, January 26 the Wages Expense account had a debit balance of $4,500 before the posting of the current week's wage of $1,500. Employees earn $1,500 for a five -day work week ending on Friday. They are then paid for that payroll. Determine the total wage expense for the month of January. 238) Determine the ending owner's equity of a business having a beginning owner's equity of $15,200, withdrawals of $2,420, and net income of $16,500. 239) From the following data, journalize the adjusting entries in proper form for the month. Omit descriptions. (a) Building with a cost of $200,000 and a residual value of $50,000 has an expected life of 10 years. (b) Wages for a week are $3,000 and 3 days must be accrued salaries. (c) Supplies ledger balance $1,500, supplies on hand $200. 240) What are the differences between depreciation expense and accumulated depreciation?
32
241) Given the trial balance and adjustment columns of the worksheet, complete the adjusted trial balance column for the company. Trial Adjusted Balance Adjustments Trial Balance Accounts DR CR DR CR DR CR Cash 750 Accts. Rec. 400 Supplies 250 175 Prepaid Ins. 400 100 Equipment 7,000 Accts. Pay 900 6,00 Capital 0 2,00 Fees Earned 0 Wages Exp. 100 300 Depreciation Expense 250 Accumulate d Depreciation 250 Supplies Expense 175 Insurance Expense 100 Wages Payable 300 Total 8,900 8,900 825 825
242) For each account listed, identify the category it belongs to, the normal balance (debit or credit), and the financial statement in which the account appears. Account
Category
0. Cash 1 Capital, Beginning 2. Salaries Expense 3. Salaries Payable 4. Accounts Receivable 5. Prepaid Insurance 6. Withdrawals 7. Service Fees Earned 8. Accounts Payable
Asset
Normal Balance Debit
Financial Statement Balance Sheet
243) What is the purpose of adjusting entries? Discuss the effect of not preparing adjusting entries on various accounts. 33
Answer Key Testname: CHAP 04_14CE
1) B 2) A 3) A 4) A 5) C 6) B 7) D 8) A 9) D 10) C 11) A 12) C 13) D 14) D 15) A 16) A 17) C 18) D 19) C 20) A 21) A 22) B 23) D 24) D 25) C 26) A 27) C 28) D 29) A 30) B 31) C 32) B 33) A 34) D 35) C 36) B 37) B 38) A 39) C 40) B 41) B 42) D 43) A 44) D 45) A 46) C 47) C 48) B 49) D 34
Answer Key Testname: CHAP 04_14CE
50) B 51) D 52) A 53) D 54) B 55) C 56) D 57) B 58) D 59) C 60) B 61) A 62) D 63) A 64) B 65) C 66) D 67) B 68) A 69) D 70) B 71) A 72) A 73) D 74) A 75) A 76) C 77) C 78) C 79) D 80) B 81) C 82) C 83) A 84) B 85) A 86) B 87) D 88) A 89) D 90) B 91) C 92) D 93) D 94) D 95) D 96) D 97) C 98) A 35
Answer Key Testname: CHAP 04_14CE
99) D 100) B 101) B 102) B 103) C 104) B 105) C 106) B 107) B 108) A 109) A 110) C 111) D 112) C 113) C 114) C 115) A 116) B 117) A 118) B 119) C 120) C 121) D 122) B 123) FALSE 124) FALSE 125) TRUE 126) FALSE 127) FALSE 128) TRUE 129) FALSE 130) FALSE 131) TRUE 132) FALSE 133) TRUE 134) FALSE 135) FALSE 136) FALSE 137) FALSE 138) TRUE 139) TRUE 140) FALSE 141) TRUE 142) FALSE 143) TRUE 144) FALSE 145) FALSE 146) TRUE 147) FALSE 36
Answer Key Testname: CHAP 04_14CE
148) TRUE 149) TRUE 150) FALSE 151) FALSE 152) FALSE 153) FALSE 154) TRUE 155) TRUE 156) TRUE 157) TRUE 158) FALSE 159) TRUE 160) TRUE 161) TRUE 162) FALSE 163) FALSE 164) FALSE 165) TRUE 166) TRUE 167) FALSE 168) TRUE 169) FALSE 170) FALSE 171) TRUE 172) TRUE 173) FALSE 174) FALSE 175) FALSE 176) FALSE 177) FALSE 178) FALSE 179) TRUE 180) TRUE 181) TRUE 182) FALSE 183) TRUE 184) TRUE 185) FALSE 186) FALSE 187) FALSE 188) TRUE 189) FALSE 190) FALSE 191) TRUE 192) TRUE 193) FALSE 194) FALSE 195) TRUE 196) FALSE 37
Answer Key Testname: CHAP 04_14CE
197) TRUE 198) $4,220 [$3,700 - $980 + $1,500] 199) Trial Adjusted Balance Adjustments Trial Balance Accounts DR CR DR CR DR CR Cash 950 950 Accts. Rec. 600 600 Supplies 150 100 50 Prepaid Rent 500 250 250 Prepaid Ins. 400 80 320 5,00 Equipment 0 5,000 Accumulate d 1,00 Depreciation 0 100 1,100 Accts. Pay 500 500 3,50 Capital 3,500 0 3,00 Fees Earned 3,000 0 Wages Exp. 400 200 600 Depreciation Expense 100 100 Rent Expense 250 250 Supplies Expense 100 100 Insurance Expense 80 80 Wages Payable 200 200 Total 8,000 8,000 730 730 8,300 8,300
38
Answer Key Testname: CHAP 04_14CE
200)
Supplies Prepaid Rent Equipment Accum. Dep. - Equip Service Fees Depreciation Expense Telephone Expense Salaries Expense Rent Expense Supplies Expense Accrued Salaries 201) Account
Trial Balance DR CR 500 325
Cash Accounts Receivable Supplies 800 Prepaid 660 Insurance Equipment 6,500 Acc. 500 Depreciation Accts. Payable 720 Salaries Payable Capital 6,615 Fees Earned 1,200 Wages Expense 250 Supplies Expense Depreciation Expense Insurance Expense Totals 9,035 9,035 Net Loss
Trial Balance Debit Credit 500 1,100 10,000 3,000 1,200
Adjusted Trial Balance Debit Credit 250 300 10,000 3,400 1,200 400 50 600 800 250 100
Adjustments Debit Credit 250 800 400 400
50 500
100 800 250 100
Adjustments Adjusted Income Stmt Trial Balance DR CR DR CR DR CR 500 325 350 220
Balance Sheet DR 500 325
450 440
450 440
6,500
6,500
275
300
CR
775
775
720
720
300
300
6,615 1,200
6,615 1,200
550
550
300 350
350
350
275
275
275
220
220
220
1,145 1,145 9,610 9,610 1,395 1,200 8,215 8,410 195 195 1,395 1,395 8,410 8,410
202) $400 = $1,200 - 800 39
Answer Key Testname: CHAP 04_14CE
203) Trial Adjusted Balance Adjustments Trial Balance Accounts DR CR DR CR DR CR Cash 600 600 Accts. Rec. 325 325 Supplies 490 225 265 Prepaid Rent 1,750 350 1,400 Equipment 6,000 6,000 Accts. Pay 500 500 4,26 Capital 4,265 5 5,00 Fees Earned 0 5,000 Wages Exp. 600 125 725 Depreciation Expense 100 100 Accumulate d Depreciation 100 100 Supplies Expense 225 225 Rent Expense 350 350 Wages Payable 125 125 9,76 9,76 9,99 9,99 Total 5 5 800 800 0 0 204)
Vebal Company Income Statement For the Month Ended July 31, 2023 Revenue Repair Fees Operating Expenses Salaries Expense Rent Expense Office Supplies Expense
$6,600
$1,800 1,000 200
Total Operating Expenses
3,000
Net Income
$6,600
40
Answer Key Testname: CHAP 04_14CE
205)
Centra Company Balance Sheet December 31, 2022 Assets Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation
$750 400 75 300 $7,000 250
Total Assets
6,750 $8,275
Liabilities Acct. Payable Wages Payable Total Liabilities
$900 300 $1,200
Owner's Equity Baur, Capital Total Liab. & Owner's Equity
7,075 $8,275
206) 1. 2. 3. 4. 5. 6. 7.
Category Expense Contra-asset Expense Asset Expense Liability Asset
Normal Balance Debit Credit Debit Debit Debit Credit Debit
Financial Statement Income Statement Balance Sheet Income Statement Balance Sheet Income Statement Balance Sheet Balance Sheet
207) $400 [$900 + 200 - 700 = $400] 208) The purpose of adjusting entries is to adjust the balances in the various accounts to better match revenues and expenses and to update the balances of the assets and liabilities. If adjustments are not prepared, assets might be overstated and expenses understated, or liabilities and expenses might be understated. For example, if an adjustment were not made for accrued salaries, Salaries Expense and Salaries Payable would be understated. Supplies Expense Supplies 209) 475 475
Rent Expense 1,000
Prepaid Rent 1,000
Depreciation Expense Accumulated Depreciation 900 900 41
Answer Key Testname: CHAP 04_14CE
210) An accountant uses a worksheet like a scratch pad to organize and check data before preparing the financial reports. Its most important function is to allow the accountant to find and correct errors before the financial statements are prepared. Data in the income statement and balance sheet columns can be used to prepare the financial statements without returning to the ledger. 211) a) Depreciation Expense 500 Accumulated Depreciation 500 b) Salary Expense 100 Salaries Payable 100 c) Supplies Expense 400 Supplies 400 212) $5,700 [$1,900 × 3 = $5,700] 213) $1,075 [$2,250 - $675 - $500] 214) $18,100 [$20,000 - $1,900] 215) 1. Analyze business transactions. 2. Journalize the business transactions into the journal. 3. Post those journal entries into the ledger. 4. Complete the trial balance columns of the worksheet using the balances of the ledger accounts. 5. Complete the remainder of the worksheet. 6. Using the worksheet, complete the financial statements (Income Statement, Statement of Owner's Equity, Balance Sheet). 216) Nettles Company Income Statement For the Month Ended March 31, 2022 Revenue Consulting Fees Operating Expenses Salaries Expense Rent Expense Office Supplies Expense Total Operating Expenses
$4,300
$1,200 800 200 2,200
Net Income 217)
$2,100 Vebal Company Statement of Owner's Equity For the Month Ended July 31, 2023
F. Vebal, Capital July 1, 2023 $5,500 Net Income from July 6,600 Less: Withdrawals for July 500 Increase in Capital 6,100 F. Vebal, Capital July 31, 2023 $11,600 218) $12,600 [($12,000 + (3,000/5) = $12,600]. Note that only April 30 is a work day.
42
Answer Key Testname: CHAP 04_14CE
219) We have to make an adjusting entry to show the value of the supplies used during the fiscal period. We are given the supplies on hand at the end of the fiscal period because we do not want to make a journal entry every time that a pen, pad of paper or paper clip, etc is used. It is much more efficient to take a look at the ledger to see the value of supplies recorded and then take a physical inventory to calculate the actual value of supplies on hand and then make an adjusting entry to bring the supplies account in the ledger up to date. 220) Reese Company Income Statement For the Month Ended October 31, 2022 Revenue: Revenue
$900
Operating Expenses: Salaries Expense Depreciation Expense Supplies Expense Total Operating Expenses Net Income 221)
Supplies Expense 150
Insurance Expense 300
$400 50 400 850 $50 Supplies 150
Prepaid Insurance 300
Depreciation Expense Accumulated Depreciation 500 500
222)
Depreciation Expense 200
Supplies Expense 900
Rent Expense 2000
Accumulated Depreciation 200
Supplies Asset 900
Prepaid Rent 2000
43
Answer Key Testname: CHAP 04_14CE
223)
Depreciation Expense 50
Accumulated Depreciation 50
Supplies Expense 300
Insurance Expense 100
Supplies 300
Prepaid Insurance 100
224) $1,900 [$20,000 - $1,000 = $19,000/10 years] 225) French Company Balance Sheet January 31, 2023 Assets Cash Accounts Receivable Office Supplies Total Assets Liabilities and Owner's Equity Liabilities Salaries Payable Owner's Equity T. French, Capital Total Liabilities and Owner's Equity
$10,000 2,300 200 $12,500
200
12,300 $12,500
(= $11,000 + NI of $1,800 - Withd. of $500)
44
Answer Key Testname: CHAP 04_14CE
226)
Nettles Company Balance Sheet March 31, 2022 Assets Cash Accounts Receivable Office Supplies Total Assets
$5,000 3,600 300 $8,900
Liabilities and Owner's Equity Liabilities Salaries Payable
300
Owner's Equity V. Nettles, Capital Total Liabilities and Owner's Equity
8,600 $8,900
(= $7,400 + NI of $2,100 - Withd. of $900)
227) An accountant uses a worksheet like a scratch pad in order to organize and check data before preparing the financial reports. Its most important function is to allow the accountant to find and correct errors before the financial statements are prepared. Data in the income statement and balance sheet columns can be used to prepare the financial statements without returning to the ledger. 228) Account Trial Balance Adjustments Adj. Trial Bal Inc. Stmt. Balance Sheet DR CR DR CR DR CR DR CR DR CR Cash 1,000 1,000 1,000 Accts. Rec. 400 400 400 Supplies 900 c 500 500 400 Equipment 750 750 750 Acct. Pay. 700 700 700 Capital 1,950 1,950 1,950 Withdrawals 200 200 200 Fees Earned 900 900 900 Sal. Exp. 300 b 400 400 100 Totals 3,550 3,550 Dep. Exp. Accm. Dep. Sal. Pay Supp. Exp. Totals Net Loss
a 50
50 a 50 b 100
c 400 550
50 50 100
50 100
400 550
400
3,700 3,700 850 50 900
45
900 900
2,850 2,800 50 2,850 2,850
Answer Key Testname: CHAP 04_14CE
229) Cash (example) Accounts Receivable Office Supplies Prepaid Rent Word Processing Equipment Accounts Payable M. Bryant, Capital M. Bryant, Withdrawals Word Processing Fees Earned Office Salaries Expense Advertising Expense Accumulated Depreciation Rent Expense
Income Statement Balance Sheet Debit Credit Debit Credit ________ ________ ___x____ ________ ________ ________ ___x____ ________ ________ ________ ___x____ ________ ________ ________ ___x____ ________ ________ ________ ___x____ ________ ________ ________ ________ ___x____ ________ ________ ________ ___x____ ________ ________ ___x____ ________ ________ ___x____ ________ ________ ___x____ ________ ________ ________ ___x____ ________ ________ ________ ________ ________ ________ ___x____ ___x____ ________ ________ ________
230) (a) Depreciation Expense 120 Accumulated Depreciation (b) Salaries Expense 250 Salaries Payable (c) Supplies Expense 800 Supplies 231) a) Depreciation Expense 250 Accumulated Depreciation 250 b) Supplies Expense 175 Supplies 175 c) Insurance Expense 100 Insurance 100 d) Wages Expense 300 Wages Payable 300 232) $100 ($1,400 - 1,300 = $100) 233) $3,000 [(7,000 / 7) x 3] 234) (a) Depreciation Expense 40 Accumulated Depreciation (b) Salaries Expense 100 Salaries Payable (c) Supplies Expense 500 Supplies
120 250 800
40 100 500
46
Answer Key Testname: CHAP 04_14CE
235) Account
Cash Accts. Receivable Supplies
Trial Balance DR CR 750 400 250
Prepaid Ins.
400
Equipment Accts. Pay. Hall Cap.
7,000
b 175 c 100
Totals
8,900 8,900
Totals Net Income
400 75
300
300
7,000
100
Accum Depreciation Supp. Exp. Ins. Expense Wages Payable
400 75
900 6,000
Fees Earned Wages Exp.
Dep. Exp
Adjustments Adjusted Income Stmt Balance Sheet Trial Balance DR CR DR CR DR CR DR CR 750 750
7,000 900 6,00 0 2,000
2,000
900 6,000 2,000
d 300
400
400
a 250
250
250
a 250 b 175 c 100
825
250 175 100
d 300 825
250 175 100
300
300
9,450 9,450 925 2,000 8,525 7,450 1,075 1,075 2,000 2,000 8,525 8,525
236) $7,126 ($811 + $9,917 - $3,602) 237) $6,900 [$4,500 + $1,500 = $6,000 + ($300 × 3) = $6,900] 238) $29,290 [$15,200 - $2,410 + $16,500] 239) (a) Depreciation Expense 1,250 Accumulated Depreciation 1,250 (b) Salaries Expense 1,800 Salaries Payable 1,800 (c) Supplies Expense 1,300 Supplies 1,300 240) The differences between depreciation expense and accumulated depreciation are: Depreciation expense is an expense account and appears on the income statement. It is used to record the depreciation amount for each period. Accumulated Depreciation is a contra-asset account and appears on the balance sheet. It maintains a running total of the depreciation amount.
47
Answer Key Testname: CHAP 04_14CE
241)
Accounts Cash Accts. Rec. Supplies Prepaid Ins. Equipment Accts. Pay Capital
Trial Adjusted Balance Adjustments Trial Balance DR CR DR CR DR CR 750 750 400 400 250 175 75 400 100 300 7,00 0 7,000 900 900 6,00 0 6,000 2,00 0 2,000 100 300 400
Fees Earned Wages Exp. Depreciation Expense Accumulate d Depreciation Supplies Expense Insurance Expense Wages Payable Total 8,900 8,900 242) 0. 1. 2. 3. 4. 5. 6. 7. 8.
Category Asset Capital Expense Liability Asset Asset Withdrawal Revenue Liability
250
250
250
250
175
175
100
100
825
300 825
300 9,450 9,450
Normal Balance Debit Credit Debit Credit Debit Debit Debit Credit Credit
Financial Statement Balance Sheet Statement of Owner's Equity Income Statement Balance Sheet Balance Sheet Balance Sheet Statement of Owner's Equity Income Statement Balance Sheet
243) The purpose of adjusting entries is to adjust the balances in the various accounts to better match revenue and expenses and update the balances of the assets and liabilities. If adjustments were not prepared, assets might be overstated, and expenses understated, or liabilities and expenses might be understated. For example, if an adjustment was not made for accrued salaries, Salaries Expense and Salaries Payable would be understated.
48
Exam
CHAPTER 5
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following accounts would NOT be considered a permanent account? A) Telephone Expense B) Cash C) Telephone Payable D) Equipment
1)
2) What is the proper sequencing of documents in an accounting cycle? A) Worksheet, source documents, journal, financial statements, ledger B) Source documents, ledger, journal, worksheet, financial statements C) Source documents, worksheet, journal, ledger, financial statements D) Source documents, journal, ledger, worksheet, financial statements
2)
3) The Income Summary account shows debits of $17,000 and credits of $12,000. This results in a A) net loss of $5,000. B) net income of $5,000. C) net income of $29,000. D) net loss of $29,000.
3)
4) Information for closing entries comes from A) the worksheet. C) the source documents.
4) B) the trial balance. D) the post-closing trial balance.
5) The entry to close the Withdrawal account was entered in reverse the Withdrawal account was debited and Capital credited. The result of this error is that A) before closing it, Income Summary will have a credit balance. B) the end of period capital will be overstated. C) the end of period capital will be understated. D) before closing it, Income Summary will have a debit balance.
5)
6) The correct order for closing accounts is A) revenue, capital, expenses, withdrawals. B) revenue, expenses, income summary, withdrawals. C) revenue, income summary, expenses, withdrawals. D) revenue, expenses, capital, withdrawals.
6)
7) When the balance of the Income Summary account is a debit, the entry to close this account is A) debit Capital; credit Income Summary. B) debit Revenue; credit Income Summary. C) debit Income Summary; credit Capital. D) debit Income Summary; credit Revenue.
7)
8) The final step in the accounting cycle is A) preparing the post-closing trial balance. B) journalizing the closing entries. C) journalizing the adjusting entries. D) preparing the financial statements.
8)
1
9) Closing entries will A) increase the Owner's Capital. B) either increase or decrease Owner's Capital. C) decrease the Owner's Capital balance. D) not affect the Owner's Capital balance.
9)
10) When revenue is closed, A) Owner's Capital will be debited. C) Income Summary will be credited.
10) B) Income Summary will be debited. D) None of these are correct.
11) How do you close a revenue account? A) Credit Capital; debit Revenue B) Debit Capital; credit Revenue C) Credit Income Summary; debit Revenue D) Debit Income Summary; credit Revenue
11)
12) Of the following accounts, which might appear in the adjusted trial balance, but not in the post-closing trial balance? A) Accumulated Depreciation B) Service Revenue C) Accounts Receivable D) Office Supplies
12)
13) The beginning capital balance is $4,350, there are no additional investments but the owner did withdraw $500 during the accounting period. The period's revenue is $5,000 and expenses total $6,500. What is the ending capital balance (after closing entries)? A) $5,850 B) $2,850 C) $5,350 D) $2,350
13)
14) The Income Summary account debited and the expense accounts credited would be the result of A) closing the expense accounts. B) closing the Income Summary accountsthere is a net loss. C) closing the Income Summary accountthere is a net income. D) closing the revenue accounts.
14)
15) Which of the following accounts should NOT be closed to Income Summary at the end of the fiscal year? A) Withdrawals B) Fees Earned C) Salaries Expense D) Utilities Expense
15)
16) The entry to close the expense account(s) was entered in reverse Income Summary was credited and the expense account(s) was/were debited. The result of this error is that A) before closing it, Income Summary will have a debit balance. B) the assets will be overstated. C) the liabilities will be overstated. D) before closing it, Income Summary will have a credit balance.
16)
2
17) The following normal account balances were found on the general ledger before closing entries were prepared: Revenue Expenses Capital
$700 $400 $7,500
Cash Accounts Receivable Withdrawals
17)
$500 $350 $1,000
After closing entries are posted, what is the balance in the Withdrawals account? A) $0 B) $300 C) $800 D) Closing entries do not affect the Withdrawals account. 18) The purpose of closing entries is to A) help in preparing financial statements. B) adjust the accounts in the ledger. C) set real account balances to zero to begin the next period. D) set nominal account balances to zero to begin the next period.
18)
19) The following normal account balances were found on the general ledger before closing entries were prepared:
19)
Revenue Expenses Capital
$700 $400 $7,500
Cash Accounts Receivable Withdrawals
$500 $350 $1,000
After closing entries are posted, what is the balance in the Cash account? A) $0 B) $300 C) $800 D) Closing entries do not affect the Cash account. 20) The balance in the Rent Expense account on the worksheet was $725. The journal entry to close the Rent Expense account is A) Income Summary 725 B) Rent Expense 725 Rent Expense 725 Prepaid Rent 725 C) Rent Expense 725 D) Rent Expense 725 Income Summary 725 Capital 725
20)
21) Closing entries A) must be journalized and posted. B) are not needed if adjusting entries are prepared. C) need not be journalized since they appear on the worksheet. D) need not be posted if the financial statements are prepared from the worksheet.
21)
22) A real account is the same as A) a nominal account. C) a permanent account.
22) B) a temporary account. D) an unusual account.
3
23) When the balance in the Income Summary account is a debit, the company has A) made an error in their closing entries. B) had more revenue than expenses. C) incurred a net income. D) incurred a net loss.
23)
24) Which of the following accounts is NOT a temporary account? A) Interest Expense B) Interest Payable C) Service Revenue D) Rent Expense
24)
25) The Income Summary account shows debits of $18,500 and credits of $11,275. This results in a A) net loss of $7,225. B) net income of $7,225. C) net income of $29,775. D) net loss of $29,775.
25)
26) The Income Summary account shows debits of $20,000 and credits of $22,000. This is a result of A) net income of $2,000. B) net income of $38,000. C) net loss of $2,000. D) net loss of $38,000.
26)
27) In the normal accounting cycle, the A) post-closing trial balance is prepared before the closing entries are posted. B) financial statements are prepared before the adjusting entries are posted. C) financial statements are prepared after the adjusting entries are posted. D) adjusting and closing entries are journalized before the financial statements are prepared.
27)
28) The revenue accounts debited and the Income Summary account credited would be the result of A) closing the revenue accounts. B) closing the expense accounts. C) closing the Income Summary accountthere is a net income. D) closing the Income Summary accountthere is a net loss.
28)
29) The business failed to close any of the revenue accounts. The result of this error is that A) capital will be understated. B) revenues will be understated. C) the liabilities will be overstated. D) the assets will be overstated.
29)
30) Which of the following is a real account? A) Income Summary C) Fees Earned
30) B) Utilities Expense D) Cash
31) The following normal account balances were found on the general ledger before closing entries were prepared: Revenue Expenses Capital
$700 $400 $7,500
Cash Accounts Receivable Withdrawals
$500 $350 $1,000
After closing entries are posted, what is the balance in the Revenue account? A) $0 B) $700 C) $300 D) Closing entries do not affect Revenue.
4
31)
32) The Capital account debited and the withdrawals credited would be the result of A) closing the Income Summary accountthere is a net loss. B) closing the Income Summary accountthere is a net income. C) closing the expense accounts. D) closing the withdrawal account.
32)
33) The entry to close Income Summary (net loss) was entered in reverse Income Summary was debited and Capital was credited. This error will cause A) the assets to be overstated. B) Income Summary to have a credit balance. C) the liabilities to be overstated. D) Income Summary to have a debit balance.
33)
34) Closing entries will affect A) Owner's Capital. C) Cash.
34) B) total Liabilities. D) total Assets.
35) Which of the following columns of the worksheet are referred to when preparing closing entries to the Income Summary? A) Adjustments columns B) Adjusted trial balance columns C) Income statement columns D) Balance sheet columns
35)
36) All permanent accounts can be found A) on the Statement of Owner's Equity. B) on the Balance Sheet. C) on the Income Statement. D) Permanent accounts do not appear on the financial statements.
36)
37) The income statement debit column of the worksheet showed the following expenses: Salary Expense $800 Rent Expense 700
37)
The journal entry to close the expense accounts is A) Capital 1,500 Salary Expense 800 Rent Expense 700 C) Income Summary 1,500 Salary Expense 800 Rent Expense 700
B) Income Summary Expenses
1,500
D) Salary Expense Rent Expense Income Summary
800 700
1,500
1,500
38) Income Summary A) is a temporary account. B) is a permanent account. C) summarizes revenue and expenses and transfers the balance to Capital. D) Both A and C are correct.
38)
39) Which of the following accounts would NOT be considered a permanent account? A) Accounts Receivable B) Accounts Payable C) Salaries Expense D) Office Supplies
39)
5
40) Income Summary is a temporary account located in the chart of accounts under A) Liabilities. B) Owner's Equity. C) Assets. D) Revenue.
40)
41) When Income Summary has a credit balance and the account is closed, A) Capital is decreased. B) Withdrawals is increased. C) Capital is increased. D) None of these are correct.
41)
42) The balance in the J. Higgins, Withdrawals account was $4,700. The entry to close the account would include a A) debit to J. Higgins, Withdrawals, $4,700. B) debit to J. Higgins, Capital, $4,700. C) credit to Income Summary, $4,700. D) debit to Income Summary, $4,700.
42)
43) The following normal account balances were found on the general ledger before closing entries were prepared:
43)
Revenue Expenses Capital
$700 $400 $7,500
Cash Accounts Receivable Withdrawals
$500 $350 $1,000
After closing entries are posted, what is the balance in the Expenses account? A) $300 B) $0 C) $800 D) Closing entries do not affect the Expenses account. 44) Which of the following accounts would appear on the post-closing trial balance? A) Wages Expense B) Owner's Capital C) Income Summary D) Fees Earned
44)
45) Which of the following sequence of actions describes the proper order in the accounting cycle? A) Analyze transactions, journalize, post, adjust, prepare financial statements, close. B) Prepare financial statements, journalize, post, adjust, analyze transactions, close. C) Journalize, post, close, prepare financial statements, adjust, and analyze transactions. D) Post, close, prepare financial statements, adjust, analyze transactions, and journalize.
45)
46) How do you close the expense accounts? A) Debit Capital; credit the expense accounts B) Credit Capital; debit the expense accounts C) Debit Income Summary; credit the expense accounts D) Credit Income Summary; debit the expense accounts
46)
47) The balance in the Insurance Expense account on the worksheet was $525. The journal entry to close the Rent Expense account is A) Insurance Expense 525 B) Insurance Expense 525 Capital 525 Prepaid Insurance 525 C) Insurance Expense 525 D) Income Summary 525 Income Summary 525 Insurance Expense 525
47)
6
48) On Flex Company's worksheet the revenue account had a normal balance of $4,100. The entry to close the account would include a A) credit to Income Summary for $4,100. B) credit to Revenue for $4,100. C) debit to Flex, Capital for $4,100. D) debit to Income Summary for $4,100.
48)
49) Which of the following is NOT a temporary account? A) Wages Expense. B) Rent Expense. C) Capital. D) Service Fees.
49)
50) Of the following accounts, which might appear in the adjusted trial balance, but not in the post-closing trial balance? A) Owner's Capital B) Interest Payable C) Unearned Revenue D) Depreciation Expense
50)
51) When the Withdrawals account is closed, A) Owner's Capital will be debited. C) Income Summary will be credited.
51) B) Income Summary will be debited. D) None of these are correct.
52) Canadian taxpayers must send their completed tax forms to the Canada Revenue Agency by ________ of each year. A) April 15. B) December 31. C) April 30. D) January 1.
52)
53) Which of the following accounts will be directly closed to Capital at the end of the fiscal year? A) Depreciation Expense B) Fees Revenue C) Withdrawals D) Salaries Expense
53)
54) After all the closing entries have been posted the Income Summary account will A) have a balance the same as the capital account. B) have a balance the same as the cash account. C) vary from company to company. D) have a zero balance.
54)
55) After closing the revenue, expense, and withdrawal accounts, the capital increased by $3,000. Which of the following situations could have occurred? A) The owner made a withdrawal. B) The company had a net income. C) The owner invested an additional amount. D) All of these answers are correct.
55)
56) When the expenses are closed, A) Owner's Capital will be debited. C) Income Summary will be credited.
56) B) Income Summary will be debited. D) None of these are correct.
57) After closing the revenue and expense accounts, Income Summary showed a debit balance of $2,500. Which of the following statements is TRUE? A) The company had a net income of $2,500. B) The company's cash increased $2,500. C) The company had a net loss of $2,500. D) None of these answers are correct.
7
57)
58) Closing entries are prepared A) at the end of the accounting period. C) to clear all temporary accounts to zero.
58) B) to update the Capital balance. D) All of the above are correct.
59) The income statement credit column of the worksheet showed the following revenues: Maintenance Fees $800 Professional Fees 700 The journal entry to close the revenue accounts is A) Income Summary 1,500 Maintenance Fees 800 Professional Fees 700 C) Maintenance Fees 800 Professional Fees 700 Income Summary 1,500
B) Maintenance Fees Professional Fees Capital D) Capital Income Summary
59)
800 700 1,500 1,500
60) When closing the Withdrawal account, A) Capital would remain the same. C) Capital would increase.
B) Capital would decrease. D) None of these are correct.
61) A nominal account is the same as A) an unusual account. C) a permanent account.
B) a temporary account. D) a real account.
1,500
60)
61)
62) When closing the Income Summary account when there is a net loss, A) Capital would remain the same. B) Capital would increase. C) Capital would decrease. D) None of these are correct.
62)
63) After posting the closing entries, which of the following accounts is most likely NOT to have a zero balance? A) J. Smith, Withdrawals B) Advertising Expense C) Prepaid Insurance D) Medical Fees
63)
64) To close the Fees Earned account, A) debit Capital; credit Fees Earned. B) debit Fees Earned; credit Capital. C) debit Fees Earned; credit Income Summary. D) debit Income Summary; credit Fees Earned.
64)
65) When the balance in the Income Summary account is a credit, the company has A) incurred a net income. B) made an error in their closing entries. C) incurred a net loss. D) had more expenses than revenue.
65)
66) Accounts in which the balances are carried over from one accounting period to the next are called A) real accounts. B) zero accounts. C) temporary accounts. D) nominal accounts.
66)
8
67) The income statement debit column of the worksheet showed the following expenses: Supplies Expense $250 Depreciation Expense 175 Salaries Expense 800
67)
The journal entry to close the expense accounts is A) Supplies Expense 250 Depreciation Expense 175 Salaries Expense 800 Income Summary 1,225 B) Income Summary 1,225 Capital 1,225 C) Income Summary 1,225 Supplies Expense 250 Depreciation Expense 175 Salaries Expense 800 D) Capital 1,225 Income Summary 1,225 68) The Rent Expense account had a normal balance of $2,725. The entry to close the account would include a A) credit to Income Summary, $2,725. B) debit to Rent Expense, $2,725. C) debit to Income Summary, $2,725. D) debit to Capital, $2,725.
68)
69) A temporary account in the ledger used for closing revenues and expenses is A) income summary. B) net income. C) capital. D) withdrawals.
69)
70) The entry to close the Fees Earned account would cause A) the Fees Earned account to decrease. B) the Capital account balance to decrease. C) the Capital account balance to increase. D) None of these are correct.
70)
71) The entry to close the Depreciation Expense account would cause A) the Depreciation Expense account balance to decrease. B) the Capital account balance to increase. C) the Capital account balance to decrease. D) None of these are correct.
71)
72) J. Oros showed a net loss of $3,250. The entry to close the Income Summary account would include a A) debit to Income Summary, $3,250. B) debit to Oros, Capital, $3,250. C) credit to Cash, $3,250. D) credit to Oros, Capital, $3,250.
72)
73) To close the Withdrawals account, A) debit Income Summary; credit Withdrawals. B) debit Withdrawals; credit Income Summary. C) debit Capital; credit Withdrawals. D) debit Withdrawals; credit Capital.
73)
9
74) When closing the Income Summary account when there is a net income A) Capital would remain the same. B) Capital would decrease. C) Capital would increase. D) None of these are correct.
74)
75) The entry to close Income Summary (net loss) to Capital was omitted. This error will cause A) no error in the ending capital balance. B) the ending capital to be understated. C) the ending capital to be overstated. D) None of these are correct.
75)
76) Which of the following accounting cycle steps comes after the others? A) Journalizing and posting closing entries B) Journalizing and posting adjusting entries C) Preparing the financial statements D) Preparing the worksheet
76)
77) Which of the following accounts is NOT a temporary account? A) Income Summary B) Cash C) Fees Earned D) Withdrawals
77)
78) When the balance of the Income Summary account is a credit, the entry to close this account is A) debit Revenue; credit Income Summary. B) debit Income Summary; credit Revenue. C) debit Capital, credit Income Summary. D) debit Income Summary; credit Capital.
78)
79) M. Smuts showed a net income of $5,250. The entry to close the Income Summary account would include a A) debit to M. Smuts Capital, $5,250. B) credit to M. Smuts Capital, $5,250. C) debit to Income Summary, $5,250. D) Both B and C are correct.
79)
80) The entry to close the revenue account(s) was entered in reverse Income Summary was debited and the revenue account(s) was/were credited. The result of this error is that A) before closing it, Income Summary will have a debit balance. B) before closing it, Income Summary will have a credit balance. C) the liabilities will be overstated. D) the assets will be overstated.
80)
81) An account in which the balance is not carried over from one accounting period to the next is called a A) real account. B) permanent account. C) temporary account. D) zero account.
81)
82) B. Benson's worksheet showed the revenue account, Rental Fees, $1,250. The journal entry to close the account is A) Rental Fees 1,250 B) Income Summary 1,250 Income Summary 1,250 Rental Fees 1,250 C) Rental Fees 1,250 D) Benson, Capital 1,250 Benson, Capital 1,250 Rental Fees 1,250
82)
10
83) The beginning capital balance is $1,000; there are no additional investments or withdrawals by the owner during the accounting period. The period's revenue is $500 and expenses total $450. What is the ending capital balance (after closing entries)? A) $1,050 B) $1,500 C) $50 D) $1,450
83)
84) The following normal account balances were found on the general ledger before closing entries were prepared:
84)
Revenue Expenses Capital
$700 $400 $7,500
Cash Accounts Receivable Withdrawals
$500 $350 $1,000
After closing entries are posted, what is the balance in the Capital account? A) $7,800 B) $6,800 C) $7,500 D) Closing entries do not affect the Capital account. TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 85) Closing entries are found in the adjustment columns of the worksheet.
85)
86) Each individual revenue account is debited when closing, and the total of all the revenue accounts is transferred to Income Summary.
86)
87) All closing entries must be posted before preparing the post-closing trial balance.
87)
88) Revenues and expenses are closed to the Income Summary account.
88)
89) A nominal account is the same as a permanent account.
89)
90) The balance in Income Summary after posting all revenues and expenses for the period is equal to net income/loss.
90)
91) Income Summary is a permanent account.
91)
92) When closing Income Summary, the balance is transferred to the Capital account.
92)
93) The first entry to close accounts is to debit Revenue and credit Income Summary.
93)
94) When the post-closing trial balance is prepared, the adjusting entries have not been made.
94)
95) The Post-Closing Trial Balance contains the Opening Balance of Capital.
95)
96) Temporary accounts are those accounts with balances that are brought forward to the next accounting period.
96)
97) The balances in temporary accounts are carried over from one fiscal year to another.
97)
11
98) The balances in permanent accounts are carried over from one fiscal year to another.
98)
99) The post-closing trial balance contains the true ending figure for Capital.
99)
100) Withdrawals must be transferred to Income Summary in the closing entry process.
100)
101) A real account is the same as a permanent account.
101)
102) Depreciation Expense is closed to Income Summary, but Accumulated Depreciation is not closed.
102)
103) Financial statements can only be prepared after the closing entries are prepared and posted.
103)
104) Each individual expense account is debited when closing, and the total of all the expense accounts is transferred to Income Summary.
104)
105) Nominal accounts are called temporary accounts because their balances are not carried forward to the next accounting period.
105)
106) Closing Entries are necessary before completing the Financial Statements.
106)
107) Income Summary does not have a normal balance.
107)
108) The Withdrawals account is closed to Income Summary.
108)
109) Income Summary is closed to Capital.
109)
110) Closing entries are normally prepared after the post-closing trial balance is prepared.
110)
111) The word "adjusting" or "closing" is written in the explanation column of the individual ledgers when closing entries are posted .
111)
112) Financial statements can only be prepared after the adjusting entries are prepared and posted.
112)
113) Real accounts are those accounts with balances that are brought forward to the next accounting period.
113)
114) There are 4 closing entries.
114)
115) The Depreciation Expense account is closed to the Owner's Capital account.
115)
116) The income statement and balance sheet sections of the worksheet provide the information needed to prepare the closing entries.
116)
117) The goal of closing is to clear all temporary accounts and update Capital.
117)
12
118) The trial balance prepared after all of the temporary accounts have been closed is called a post-closing trial balance.
118)
119) The balances in all asset and liability accounts are set to zero at the beginning of each fiscal year.
119)
120) The Income Summary account can be found on the worksheet.
120)
121) Closing entries will update the Capital account to the same figure that is on the balance sheet for that date.
121)
122) Worksheets allow the preparation of interim reports without the formal adjusting and closing of the books.
122)
123) All revenue, expenses, and withdrawals will have zero balances before closing.
123)
124) The post-closing trial balance is used to determine if the ledger is in balance after closing.
124)
125) Withdrawals are not business expenses and thus are not transferred to Income Summary.
125)
126) The Withdrawals account is closed to the Owner's Capital account.
126)
127) After posting closing entries, the Capital account will be set back to zero.
127)
128) Closing Entries are not needed if the company experiences a loss.
128)
129) The Withdrawals account is closed to Income Summary.
129)
130) The post-closing trial balance comes before the closing entries are posted.
130)
131) After posting adjusting entries, the temporary accounts will be set back to zero.
131)
132) Income summary normally has a debit balance.
132)
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 133) In the first space below, indicate whether each account is a real or nominal account using (R) Real Account and (N) Nominal Account. In the second space below, indicate by an (X) if the account should be closed. N X ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
0. Advertising Expense 1. Cash 2. Tennis Fees 3. Accounts Receivable 4. Accumulated Depreciation 5. Withdrawals 6. Prepaid Rent 7. Income Summary 8. Utilities Expense
13
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example: Cash 134) Depreciation Expense
Column 1 Asset
Column 2 Debit
Column 3 Balance Sheet
Column 4 Permanent
________
________
________
________
135) From the following items in the income statement columns of the worksheet of Bob's Barbershop at December 31, prepare the closing entries without explanation, assuming that a $500 withdrawal was made during the period.
Account Cutting Fees Wages Expense Rent Expense Supplies Expense Insurance Expense Net Income
Income Statement Debit 350 300 225 125 1,000 725 $1,725
Credit 1,725
_____ 1,725 _____ $1,725
136) From the following items in the income statement columns of the worksheet of Monaghan Company at December 31, prepare the closing entries without explanation, assuming that a $450 withdrawal was made during the period. Income Statement Account Debit Service Revenue Wages Expense 550 Rent Expense 250 Supplies Expense 100 Insurance Expense 50 950 Net Loss $950
Credit 900
900 50 $950
14
137) On the basis of the following data taken from the adjusted trial balance columns of the worksheet for the year ended December 31 for Painting the Perfect Picture, journalize the four closing entries in the proper order. Account Cash Accounts Receivable Supplies Equipment Accumulated Depreciation Accounts Payable Capital Withdrawals Fees Earned Salary Expense Rent Expense Depreciation Expense Supplies Expense Miscellaneous Expense Total
Debit 27,000 67,000 7,000 200,000
Credit
70,000 37,000 200,250 25,000 100,000 27,000 17,500 20,000 12,500 4,250 407,250
407,250
138) Determine the ending owner's equity of a business having a beginning owner's equity of $4,300, withdrawals of $1,500, and after closing the revenues and expenses Income Summary has a credit balance of $4,750. For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example: Cash
Column 1 Asset
Column 2 Debit
Column 3 Balance Sheet
Column 4 Permanent
139) Withdrawals
________
________
________
________
140) Determine the beginning assets of a business having ending liabilities of $4,000, the liabilities decreased by $1,500 during the year, an ending owner's equity of $10,700, additional investments of $2,000, withdrawals of $15,600, and after closing the revenues and expenses the Income Summary account has a credit balance of $6,800.
15
141) From the T accounts below, journalize the necessary closing entries in good form. Insurance Expense 1,000
Wages Expense 3,000
Depreciation Expense 2,000
C. Bent, Capital 15,000
Income Summary
Accounting Fees Earned 10,000
C. Bent, Withdrawals 2,200
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example: Cash
Column 1 Asset
Column 2 Debit
Column 3 Balance Sheet
142) Fees Earned
________
________
________
Column 4 Permanent ________
143) From the following accounts, prepare in proper form a post-closing trial balance for Blue Star Company on December 31, 2023. Accounts Receivable Accounts Payable Cash Salaries Payable Supplies Prepaid Insurance R. Blue, Capital
$2,200 2,000 1,000 1,200 300 2,000 2,300
144) Explain how the closing entry would be affected if there was a net loss instead of a net income. 145) Name the steps in the manual accounting cycle.
16
146) In the first space below, indicate whether each account is a real or nominal account using (R) Real Account and (N) Nominal Account. In the second space below, indicate by an (X) if the account should be closed. N X ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
0. Advertising Expense 1. Prepaid Insurance 2. Service Fees 3. Depreciation Expense 4. Accumulated Depreciation 5. Salaries Payable 6. Prepaid Rent 7. Income Summary 8. Insurance Expense
147) When using accounting software, is it still necessary to "close the books" at year-end? 148) What (if any) errors can you spot in the following post-closing trial balance for Luco Company on December 31, 2022? Luco Company Post-Closing Trial Balance December 31, 2022 Debit 2,200 1,000 2,300
Cash Accounts Receivable Prepaid Insurance Accounts Payable Salaries Payable R. Blue, Capital Fees Earned Totals
5,500
Credit
1,500 1,700 1,300 1,000 5,500
149) From the following accounts, prepare in proper form a post-closing trial balance for Everett Company on December 31, 2023. Accounts Receivable Accounts Payable Cash Salaries Payable Supplies Prepaid Insurance Everett, Capital
$4,600 2,290 7,450 1,660 500 1,200 9,800
17
150) What (if any) errors can you spot in the following post-closing trial balance for Blue Star Company on December 31, 2023? Blue Star Company Post-Closing Trial Balance December 31, 2023
Cash Accounts Receivable Prepaid Insurance Supplies Accounts Payable Salaries Payable R. Blue, Capital Totals
Debit 1,000 2,200 2,000 300
Credit
2,000 1,200 2,300 5,500
5,500
151) A summary of selected ledger accounts appear below for F. Yanko for the current calendar year. F. Yanko, Capital 12/31 6,500 1/1 27,000 12/31 4,250
F. Yanko, Withdrawals 3/31 2,000 10/31 3,00 12/31 6,500 12/22 1,500
Income Summary 12/31 12,750 12/31 17,000 12/31 4,250 Answer the following questions. 1. What was the total amount of withdrawals? 2. What was the net income? 3. What was the total revenue? 4. What were the total expenses? 152) From the following accounts, prepare in proper form a post-closing trial balance for Dave's Dog Watching on December 31, 2022. (Note: These balances are before closing.) Dave, Capital Cash Accumulated Depreciation Equipment Accounts Payable Dave, Withdrawals Wages Expense Supplies Expense Accounts Receivable Personal Trainer Fees
7,400 2,000 1,500 5,000 900 1,000 2,250 775 3,125 4,350
18
Identify which entries below are an adjusting entry (AE) or a closing entry (CE). 153) ________
Insurance Expense Prepaid Insurance
$1,200 $1,200
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example: Cash 154) Capital
Column 1 Asset
Column 2 Debit
Column 3 Balance Sheet
Column 4 Permanent
________
________
________
________
155) Why are certain accounts called temporary accounts? For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example: Cash 156) Supplies
Column 1 Asset
Column 2 Debit
Column 3 Balance Sheet
Column 4 Permanent
________
________
________
________
157) Determine the beginning owner's equity of a business having an ending owner's equity of $6,200, withdrawals of $2,250, and after closing the revenues and expenses, the Income Summary account has a debit balance of $3,500. Identify which entries below are an adjusting entry (AE) or a closing entry (CE). 158) ________
159) ________
160) ________
Capital Withdrawals
$1,000 $1,000
Income Summary Capital
$550
Depreciation Expense Accumulated Depreciation
$250
$550
$250
19
161) On the basis of the following data taken from the adjusted trial balance columns of the worksheet for the year ended December 31 for Pete's Pets, journalize the four closing entries in the proper order. Account Cash Accounts Receivable Supplies Equipment Accumulated Depreciation Accounts Payable Capital Withdrawals Service Revenue Salary Expense Rent Expense Depreciation Expense Interest Expense Insurance Expense Total
Debit 15,000 42,000 5,000 180,000
Credit
65,000 52,000 122,750 10,000 45,000 15,000 12,000 2,000 2,500 1,250 284,750
284,750
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example: Cash
Column 1 Asset
Column 2 Debit
Column 3 Balance Sheet
Column 4 Permanent
162) Accounts Payable
________
________
________
________
Identify which entries below are an adjusting entry (AE) or a closing entry (CE). 163) ________
Income Summary Utilities Expense
$700 $700
164) Why will the Income Summary account never appear on a financial statement? Identify which entries below are an adjusting entry (AE) or a closing entry (CE). 165) ________
166) ________
Unearned Revenue Fees Earned
$1,000
Wages Expense Wages Payable
$450
$1,000
$450
167) What are the major goals of the closing process?
20
168) On the basis of the following data taken from the adjusted trial balance columns of the worksheet for the year ended June 30 for Burrito Bob's, journalize the four closing entries in the proper order. Account Cash Accounts Receivable Supplies Equipment Accumulated Depreciation Accounts Payable Capital Withdrawals Service Revenue Salary Expense Rent Expense Depreciation Expense Interest Expense Insurance Expense Total
Debit 5,000 2,000 1,000 80,000
Credit
25,000 7,000 59,000 500 20,000 12,000 8,000 1,000 500 1,000 111,000
111,000
169) What (if any) errors can you spot in the following post-closing trial balance for Blue Star Company on December 31, 2023? Blue Star Company Post-Closing Trial Balance December 31, 2023
Cash Accounts Receivable Prepaid Insurance Accounts Payable Salaries Payable R. Blue, Capital Supplies Expense Totals
Debit 1,000 2,200 2,000
Credit
2,000 1,200 2,300 300 5,500
5,500
170) From the following accounts, prepare in proper form a post-closing trial balance for Vemer Company on December 31, 2022 Note: these balances are before closing. J. Vemer, Capital Cash Accumulated Depreciation Equipment Accounts Payable J. Vemer, Withdrawals Wages Expense Supplies Expense Accounts Receivable Janitor Fees
$5,500 1,000 2,000 6,000 500 700 5,000 300 2,000 7,000 21
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example: Cash 171) Accumulated Depreciation
Column 1 Asset
Column 2 Debit
Column 3 Balance Sheet
Column 4 Permanent
________
________
________
________
Identify which entries below are an adjusting entry (AE) or a closing entry (CE). 172) ________
173) ________
174) ________
Income Summary $12,000 Insurance Expense Income Summary Depreciation Expense Fees Earned Income Summary
$12,000 $250 $250
$17,000 $17,000
22
Answer Key Testname: CHAP 05_14CE
1) A 2) D 3) A 4) A 5) B 6) B 7) A 8) A 9) B 10) C 11) C 12) B 13) D 14) A 15) A 16) D 17) A 18) D 19) D 20) A 21) A 22) C 23) D 24) B 25) A 26) A 27) B 28) A 29) A 30) D 31) A 32) D 33) D 34) A 35) C 36) B 37) C 38) D 39) C 40) B 41) C 42) B 43) B 44) B 45) A 46) C 47) D 48) A 49) C 23
Answer Key Testname: CHAP 05_14CE
50) D 51) A 52) C 53) C 54) D 55) D 56) B 57) C 58) D 59) C 60) B 61) B 62) C 63) C 64) C 65) A 66) A 67) C 68) C 69) A 70) A 71) A 72) B 73) C 74) C 75) C 76) A 77) B 78) D 79) D 80) A 81) C 82) A 83) A 84) B 85) FALSE 86) TRUE 87) TRUE 88) TRUE 89) FALSE 90) TRUE 91) FALSE 92) TRUE 93) TRUE 94) FALSE 95) FALSE 96) FALSE 97) FALSE 98) TRUE 24
Answer Key Testname: CHAP 05_14CE
99) TRUE 100) FALSE 101) TRUE 102) TRUE 103) FALSE 104) FALSE 105) TRUE 106) FALSE 107) TRUE 108) FALSE 109) TRUE 110) FALSE 111) TRUE 112) FALSE 113) TRUE 114) TRUE 115) FALSE 116) TRUE 117) TRUE 118) TRUE 119) FALSE 120) FALSE 121) TRUE 122) TRUE 123) FALSE 124) TRUE 125) TRUE 126) TRUE 127) FALSE 128) FALSE 129) FALSE 130) FALSE 131) FALSE 132) FALSE 133) 1. R 2. N X 3. R 4. R 5. N X 6. R 7. N X 8. N X 134) Depreciation Expense:
expense
debit
income statement temporary
25
Answer Key Testname: CHAP 05_14CE
135) Cutting Fees Income Summary
1,725
Income Summary Wages Expense Rent Expense Supplies Expense Insurance Expense
1,000
1,725
350 300 225 125
Income Summary Bob, Capital
725
Bob, Capital Bob, Withdrawal 136) Service Revenue Income Summary
500
Income Summary Wages Expense Rent Expense Supplies Expense Insurance Expense
950
Monaghan, Capital Income Summary
50
725
500 900 900
550 250 100 50
50
Monaghan, Capital 450 Monaghan, Withdrawal 450 137) Fees Earned 100,000 Income Summary 100,000 Income Summary Salary Expense Rent Expense Depreciation Expense Supplies Expense Miscellaneous Expense
81,250
Income Summary Capital
18,750
27,000 17,500 20,000 12,500 4,250
18,750
Capital 25,000 Withdrawals 25,000 138) $7,550 [$4,300 - $1,500 + $4,750] 139) Withdrawals: withdrawals debit stmt of owner's equity temporary 140) $23,000 [($4,000 + $1,500) + ($10,700 - $2,000 + $15,600 - $6,800)]
26
Answer Key Testname: CHAP 05_14CE
141) Accounting Fees Earned Income Summary
10,000
Income Summary Insurance Expense Wages Expense Depreciation Expense
6,000
Income Summary C. Bent, Capital
4,000
10,000
1,000 3,000 2,000
4,000
C. Bent, Capital 2,200 C. Bent, Withdrawals 2,200 142) Fees Earned Revenue: credit income 143) Blue Star Company Post-Closing Trial Balance December 31, 2023 Debit 1,000 2,200 300 2,000
statement
temporary
Credit
Cash Accounts Receivable Supplies Prepaid Insurance Accounts Payable 2,000 Salaries Payable 1,200 R. Blue, Capital 2,300 Totals 5,500 5,500 144) If there was a net loss the capital account would be decreased, therefore, the capital account would have to be debited for the amount of the net loss and income summary would be credited for the same amount. This would be necessary for the capital to reflect the net loss and to close the income summary account, which would have a debit balance because the expenses would be a larger total than the revenues. 145) (a) source documents; example, a cheque (b) analyze and record business transactions into a journal (c) post from journal to ledger (d) prepare a trial balance (e) prepare a worksheet (f) prepare financial statements (g) journalize and post adjusting entries (h) journalize and post closing entries (i) prepare a post-closing trial balance 146) 1. R 2. N X 3. N X 4. R 5. R 6. R 7. N X 8. N X 27
Answer Key Testname: CHAP 05_14CE
147) Recall that the purpose of "closing the books" is to ready the temporary accounts (revenues, expenses, and withdrawals) so they can begin again to accumulate their annual amounts posted there during the accounting cycle (this includes any necessary adjustments, of course). Most accounting software manages this task easily and without a lot of fuss and bother - just a few simple keystrokes at the end of the year. Most software "closes" all revenue and expense accounts easily, but many of the less expensive packages do not do the withdrawal closing to owner's equity. A very few programs do not bother to "close the books" at all, relying on accurate dates to compute any period's amounts for a given account by using the power of the computer to generate each total when required. Many accountants are not comfortable with this approach - generally due to their relative unfamiliarity with computers in general, and the sheer speed of modern processors in particular. 148) A post-closing trial balance must be completed after closing entries are posted. Closing entries will close all temporary accounts. This post-closing trial balance shows there has been an error in closing as the Fees Earned account still has a balance but should have been set to zero during the closing process. 149) Everett Company Post-Closing Trial Balance December 31, 2023 Debit Cash 7,450 Accounts Receivable 4,600 Supplies 500 Prepaid Insurance 1,200 Accounts Payable Salaries Payable Everett, Capital Totals 13,750 150) No errors are apparent. 151) 1. $6,500 2. $4,250 3. $17,000 4. $12,750 152) Dave's Dog Watching Post-Closing Trial Balance December 31, 2022
Credit
2,290 1,660 9,800 13,750
Debit Credit Cash 2,000 Accounts Receivable 3,125 Equipment 5,000 Accumulated Depreciation 1,500 Accounts Payable 900 Logan, Capital 7,725 Totals 10,125 10,125 153) AE 154) Capital: capital credit stmt of owner's equity & balance sheet permanent 155) Temporary accounts balances are not carried over from one fiscal period to another. Their balances are set to zero at the beginning of each fiscal period so that we are able to summarize the financial details for the next period. 156) Supplies: asset debit balance sheet permanent 157) $11,950 [$6,200 + $2,250 + $3,500] 158) CE 28
Answer Key Testname: CHAP 05_14CE
159) CE 160) AE 161) Service Revenue Income Summary
45,000 45,000
Income Summary Salary Expense Rent Expense Depreciation Expense Interest Expense Insurance Expense
32,750
Income Summary Capital
12,250
15,000 12,000 2,000 2,500 1,250
12,250
Capital 10,000 Withdrawals 10,000 162) Accounts Payable: liability credit balance sheet permanent 163) CE 164) The Income Summary account is used during the closing process to summarize the revenue and expense accounts. The beginning balance is zero and when the net income/loss is closed to Capital, the balance is zero again. Therefore, since it has a zero balance, it does not appear on the financial statements. 165) AE 166) AE 167) Closing is a mechanical process that aids the accountant in recording transactions for the next period. Closing entries are usually done only at year-end. Interim reports can be prepared from worksheets, which are prepared monthly, quarterly, etc. When the closing journal entries are prepared, they reduce or clear all temporary accounts to a zero balance, and update the capital account to a new balance. 168) Service Revenue 20,000 Income Summary 20,000 Income Summary Salary Expense Rent Expense Depreciation Expense Interest Expense Insurance Expense
22,500
Capital Income Summary
2,500
12,000 8,000 1,000 500 1,000
2,500
Capital 500 Withdrawals 500 169) A post-closing trial balance must be completed after closing entries are posted. Closing entries will close all temporary accounts. This post-closing trial balance shows there has been an error in closing as the Supplies Expense account still has a balance but should have been set to zero during the closing process.
29
Answer Key Testname: CHAP 05_14CE
170)
Vemer Company Post-Closing Trial Balance December 31, 2022
Debit Cash 1,000 Accounts Receivable 2,000 Equipment 6,000 Accumulated Depreciation Accounts Payable J. Vemer, Capital Totals 9,000 171) Accumulated Depreciation: contra-asset 172) CE 173) CE 174) CE
Credit
2,000 500 6,500 9,000 credit balance sheet
30
permanent
Exam
CHAPTER 6
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which account is used by management to keep track of possible customer dissatisfaction? A) Sales Returns and Allowances B) Sales C) Sales Discount D) Cost of Goods Sold
1)
2) Accounts of a single type are kept in this ledger. A) additional ledger. C) subsidiary ledger.
2) B) supplemental ledger. D) None of these answers are correct.
3) What does a check mark in the PR column of a journal indicate? A) An amount has been posted to the general ledger. B) Nothing has to be posted until the end of the month for this transaction. C) During the month the subsidiary ledger is updated. D) An amount has been posted to the controlling account.
3)
4) The purpose of the accounts receivable subsidiary ledger includes all of the following except A) to provide information to help collect the customer's account. B) to provide supporting information for the general ledger control account. C) to keep a running balance of each customer's account. D) to keep a running balance of creditor's accounts.
4)
5) In a perpetual inventory system the inventory account A) is an asset account. B) is only updated at the end of period. C) is updated after every sale. D) both A and C are correct.
5)
6) Cost of goods sold is A) total cost of purchases less ending inventory. B) total cost of returns for the period. C) total cost of inventory purchases during the period. D) total cost of merchandise sold during the period.
6)
7) The main reason most businesses do not use only a General Journal is A) a General Journal is much too inefficient. B) a General Journal is prone to many errors. C) two or more clerks cannot use the General Journal at the same time. D) both A and C are correct.
7)
8) Lanny's Levers sold 50 levers at $45.00 each to a customer on account, terms 2/15, n/30. The levers cost Lanny's $20.00 each. Which entry is required to record the inventory adjustment for this transaction under a perpetual system? A) Debit Accounts Receivable for $1,000; credit Inventory for $1,000 B) Debit Inventory for $1,000; credit Lever Sales for $1,000 C) Debit Cost of Goods Sold for $980; debit Purchase Discounts for $20; credit Inventory $1,000 D) Debit Cost of Goods Sold for $1,000; credit Inventory for $1,000
8)
1
9) A customer returned merchandise for credit. This will be recorded with A) a credit to a liability account. B) a credit to an asset account. C) a debit to a liability account. D) None of these are correct.
9)
10) Gross profit is A) sales revenue less operating expenses. B) sales revenue less inventory. C) sales revenue less cost of goods sold. D) sales revenue less sales returns and allowances.
10)
11) When using a periodic inventory system, Cost of Goods Sold and the Inventory accounts are updated: A) when a sale is made. B) when a count is taken. C) when revenue is earned. D) when cash is received.
11)
12) The sales journal is used for A) recording credit sales. C) recording purchases of merchandise.
12) B) recording cash sales. D) recording cash receipts.
13) Kristi's pottery sold 250 tiles at $25.00 each to a charge customer, terms 1/10, n/30. The tiles cost Kristi's $10.00 each. Which entry is required to record the inventory adjustment for this transaction under a perpetual system? A) Debit Cost of Goods Sold for $2,500; credit Inventory for $2,500 B) Debit Inventory for $2,500; credit Tile Sales for $2,500 C) Debit Accounts Receivable for $2,500; credit Inventory for $2,500 D) Debit Cost of Goods Sold for $2,250; debit Purchase Discounts for $250; credit Inventory $2,500
13)
14) The collection on account within the 2/10 n/30 discount period was recorded using a 10% discount rather than a 2% discount in both the controlling and subsidiary accounts. This error will cause A) the assets to be overstated. B) the net income for the period to be overstated. C) the net income for the period to be understated. D) the control account to not agree with the subsidiary ledger.
14)
15) Lisa's Blankets and Bedding had a sale of $375 to a charge customer, terms 1/15, n/30. Lisa should record the sale portion of this transaction as follows: A) debit Accounts Receivable $371.25; debit Sales Discounts $3.75; credit Sales $375. B) debit Accounts Receivable $375; credit Sales $375. C) debit Cash $375; credit Sales $375. D) debit Sales $375; credit Accounts Receivable $375.
15)
16) If a credit memorandum is issued, what account will be decreased on the seller's books? A) Sales Returns and Allowances B) Accounts Receivable C) Sales Discount D) Accounts Payable
16)
2
17) Lanny's Levers sold 50 levers at $45.00 each to a customer on account, terms 2/15, n/30. The levers cost Lanny's $20.00 each. Which entry is required to record the sale portion of this transaction? A) Debit Accounts Receivable for $2,205; credit Lever Sales for $2,205 B) Debit Accounts Receivable for $2,205; debit Sales Discount for $45, and credit Lever Sales for $2,250 C) Debit Accounts Receivable for $2,250; credit Tile Sales for $2,250 D) Debit Cash for $2,250; credit Lever Sales for $2,250
17)
18) Which account is used by management to keep track of possible customer dissatisfaction? A) Sales Discount B) Sales Returns and Allowances C) Cost of Goods Sold D) Sales
18)
19) A record showing the activity and the balances owed by each customer is called the A) general ledger. B) cash receipts journal. C) accounts receivable subsidiary ledger. D) sales journal.
19)
20) Periodic inventory systems require updating of the inventory account A) on a daily basis. B) after each purchase. C) after each sale. D) only at the end of a period.
20)
21) A checkmark in the PR column in the general journal means A) the amount was posted to the controlling account. B) the entry was audited. C) the amount was recorded in the subsidiary ledger. D) the entry was recorded correctly.
21)
22) Net sales equal A) gross sales - sales returns and allowances. B) gross sales. C) sales discounts. D) gross sales - sales returns and allowances - sales discounts.
22)
23) A characteristic of a schedule of accounts receivable is that A) it contains a list of customers' names with balances. B) it is prepared at the end of the month. C) the total is equal to the accounts receivable control account at the end of the month. D) All of these answers are correct.
23)
24) The arrangements between buyer and seller as to when payments for merchandise are to be made are called A) cash on demand. B) gross cash. C) net cash. D) credit terms.
24)
3
25) Monica's Closet received payment in full for goods sold within the discount period on a $480 sales invoice, terms 2/10, n/30. Which entry records this transaction? A) Debit Cash for $470.40, debit Sales Discount for $9.60; and credit Accounts Receivable for $480 B) Debit Accounts Receivable; credit Sales for $480 C) Debit Cash; credit Accounts Receivable for $480 D) Debit Cash for $470.40, debit Sales Discount for $9.60; and credit Sales for $480
25)
26) Which of the following statements about subsidiary ledgers is most accurate? A) The accounts receivable subsidiary ledger is a book of accounts that provides supporting detail for Accounts Receivable. B) The subsidiary ledger accounts will equal the amount in the Sales account. C) The subsidiary ledger accounts will never equal the control account in the general ledger. D) All of these answers are correct.
26)
27) Fred Ach returned $272 of merchandise to Adventure Games. His original purchase was $500, with terms 1/15, n/30. If Fred pays the balance of his account after the discount period, how much should he pay? A) $495.00 B) $228.00 C) $230.72 D) $225.72
27)
28) Merchants who buy goods at distributor's prices for resale to their customers may be known as A) distributors. B) merchandisers. C) retailers. D) All of the above are correct.
28)
29) When merchandise is sold on account, it is usually recorded in the A) sales journal. B) cash payments journal. C) purchases journal. D) cash receipts journal.
29)
30) Credit terms of n/10, EOM means that A) if the bill is paid by the end of the month, a discount will be granted. B) the bill is due 10 days after the end of the month and no discount is allowed. C) if the bill is paid 10 days after the end of the month, a discount is allowed. D) the bill is due 10 days before the end of the month.
30)
31) Sold merchandise on account would be recorded with A) a debit to a liability account. B) a debit to an asset account. C) a debit to Capital. D) None of these are correct.
31)
32) Received payment, within the discount period, for merchandise sold previously. This will be recorded with A) a debit to a liability account. B) a debit to Capital. C) a credit to an asset account. D) None of these are correct.
32)
33) Credit terms of 1/10, n/30 mean that A) a discount is allowed if the bill is paid within 30 days. B) 1% discount is allowed if the bill is paid within 10 days, or the entire amount is due within 30 days. C) a discount is allowed if the bill is paid after 10 days. D) a 1% discount is allowed if the customer pays the bill within 30 days.
33)
4
34) Returning damaged products to a supplier A) reduces inventory. C) increases cost of goods sold.
34) B) increases inventory. D) reduces cost of goods sold.
35) The normal balance of the Sales Returns and Allowances account is A) a credit. B) zero. C) a debit. D) It doesn't have a normal balance.
35)
36) Gina's Flower Shop received payment in full for goods sold within the discount period on a $1,000 sales invoice, terms 1/10, n/30. Which entry records this transaction? A) Debit Cash for $990, debit Sales Discount for $10, and credit Accounts Receivable for $1,000 B) Debit Accounts Receivable, credit Flower Sales for $1,000 C) Debit Cash for $990, debit Sales Discount for $10, and credit Flower Sales for $1,000 D) Debit Cash, credit Accounts Receivable for $990
36)
37) The normal balance of the accounts receivable subsidiary ledger is A) debit. B) credit. C) It does not have a normal balance. D) Not enough information provided.
37)
38) Customer returns of product in new condition A) reduce cost of goods sold. C) increase inventory.
38) B) reduce inventory. D) both A and C are correct.
39) Lanny's Levers sold 50 levers at $45.00 each to a customer on account. The levers cost Lanny's $20.00 each. What is the gross profit on this transaction? A) $1,250 B) $1,000 C) $25 D) $20
39)
40) Payment for merchandise sold on credit for $50 subject to 2/10 n/30 was received within the discount period $49 was received. This was recorded with a debit to Sales Discounts for $1, a debit to Cash for $49, and a credit to Accounts Receivable $50, but no mention was made of the subsidiary ledger account. This error will cause A) the net income for the period to be understated. B) the assets to be overstated. C) the control account to not agree with the subsidiary ledger. D) the net income for the period to be overstated.
40)
41) The accounts receivable subsidiary ledger A) is not kept in the same book as Accounts Receivable. B) is organized in alphabetical order. C) should equal the controlling account in the general ledger. D) All of the above are correct.
41)
42) Accounts of a single type (i.e., Accounts Receivable) are kept in this form of ledger. A) subsidiary ledger B) general ledger C) supplemental ledger D) additional ledger
42)
5
43) Missy's Dresses received payment in full for goods sold within the discount period on a $620 sales invoice, terms 2/15, n/30. Which entry records this transaction? A) Debit Cash; credit Accounts Receivable for $620 B) Debit Cash for $607.60, debit Sales Discount for $12.40; and credit Accounts Receivable for $620 C) Debit Accounts Receivable; credit Sales for $620 D) Debit Cash for $607.60, debit Sales Discount for $12.40; and credit Sales for $620
43)
44) Entries to customers' accounts for credit sales are posted in the A) fixed asset subsidiary ledger. B) accounts receivable subsidiary ledger. C) accounts payable subsidiary ledger. D) cash subsidiary ledger.
44)
45) Which of the following statements about subsidiary ledgers is MOST accurate? A) The subsidiary ledger account will equal the amount in the sales account less sales discounts. B) The accounts receivable ledger is a book of accounts that provides supporting detail for Accounts Receivable. C) The subsidiary ledger accounts will never equal the control account in the general ledger. D) The subsidiary ledger accounts will equal the amount in the Sales account.
45)
46) Steps taken to reduce losses from credit sales do NOT include A) Allowing a cash discount for prompt payment. B) Reducing the number of purchases made each month. C) Investigating each customer's credit rating. D) Prompt follow up investigation when expected payments are not received.
46)
47) A credit memorandum is sent to a customer for the purpose of A) informing the customer they are terminated. B) informing the customer an amount has been deducted from their account. C) informing the customer an amount has been added to their account. D) to inform the customer their account limit is being increased.
47)
48) Zach returned $195 of merchandise to Secret Trails. His original purchase was $400, with terms 1/10, n/30. If Zach pays the balance of his account after the discount period, how much should he pay? A) $205.00 B) $400.00 C) $195.00 D) $202.95
48)
49) The return of merchandise by a credit customer was recorded with a debit to Accounts Payable and a credit to Accounts Receivable and the subsidiary ledger. This error will cause A) the control account to not agree with the subsidiary ledger. B) the net income for the period to be understated. C) the assets to be overstated. D) the net income for the period to be overstated.
49)
50) Which account is not used with a perpetual inventory system? A) Purchase Returns and Allowances B) Sales Returns and Allowances C) Cost of Goods Sold D) Inventory
50)
6
51) The cash payments journal is used for A) recording cash receipts. C) recording credit sales.
51) B) recording purchases on account. D) recording cash payments.
52) Logan's Art studio was moving and sold furniture that was no longer needed for cash. The entry would include A) a debit to Sales. B) a credit to Furniture. C) a debit to Furniture. D) a credit to Sales.
52)
53) A characteristic of Sales Returns and Allowances is that A) it is a contra-revenue account. B) it has a debit balance. C) it tracks returns from customers. D) All of these answers are correct.
53)
54) A sales discount correctly taken by the charge customer was debited to Sales at the time the entry was recorded. This error will cause A) the sales discount account to be understated. B) the sales account to be overstated. C) the net income for the period to be understated. D) the net income for the period to be overstated.
54)
55) If a credit memorandum is issued, what account will be increased on the seller's books? A) Accounts Receivable B) Accounts Payable C) Sales Returns and Allowances D) Sales Discount
55)
56) Which of the following is a TRUE statement concerning Credit Memorandums? A) Results in an increase in Sales Returns and Allowances B) Has no effect on net sales C) Results in a decrease in Sales Returns and Allowances D) Increases sales
56)
57) Credit terms of 2/15, n/30 mean that A) a 2% discount is allowed if the bill is paid after 15 days. B) a discount is allowed if the bill is paid within 30 days. C) a 2% discount is allowed if the customer pays the bill within 30 days. D) 2% discount is allowed if the bill is paid within 15 days, or the entire amount is due within 30 days.
57)
58) Every controlling account must have its own A) subsidiary ledger. C) journal.
58) B) general ledger. D) revenue ledger.
59) Collected a payment from a credit customer: This will be recorded with A) a credit to Capital. B) a credit to an asset account. C) a credit to a liability account. D) None of these are correct.
59)
60) What is the gross profit if 4 units are sold for $50 each and the cost of the sale is $40 per unit? A) $160 B) $40 C) $200 D) None of these answers are correct.
60)
7
61) The principal ledger containing all the balance sheet and income statement accounts is the A) general ledger. B) subsidiary ledger. C) creditors' ledger. D) customers' ledger.
61)
62) Medeco sold goods for $75 to a charge customer. The customer returned for credit $25 worth of goods. Terms of the sale were 1/10, n/30. If the customer pays the amount owed within the discount period, what is the amount the customer should pay? A) $50.00 B) $75.00 C) $69.25 D) $49.50
62)
63) Kristi's pottery sold 250 tiles at $25.00 each to a charge customer, terms 1/10, n/30. The tiles cost Kristi's $10.00 each. Which entry is required to record the sale portion of this transaction? A) Debit Cash for $6,250; credit Tile Sales for $6,250 B) Debit Accounts Receivable for $6,187.50; credit Tile Sales for $6,187.50 C) Debit Accounts Receivable for $6,250; credit Tile Sales for $6,250 D) Debit Accounts Receivable for $6,187.50; debit Sales Discount for $62.50, and credit Tile Sales for $6,250
63)
64) Recording to the accounts receivable ledger is done A) daily. C) monthly.
64) B) bi-weekly. D) when requested.
65) A customer returned merchandise having already paid for it within the cash discount period. The return will be recorded with A) a credit to Capital. B) a credit to a liability account. C) a credit to an asset account. D) None of these are correct.
65)
66) The sales journal is used for A) recording cash sales. C) recording credit sales.
66) B) recording cash receipts. D) recording purchases of merchandise.
67) The purchases journal is used for A) recording cash receipts. C) recording credit sales.
B) recording purchases on account. D) recording cash purchases.
68) The cash receipts journal is used for A) recording cash receipts. C) recording credit sales.
B) recording purchases on account. D) recording cash payments.
67)
68)
69) Which of the following is NOT a main type of Special Journal? A) Sales Journal B) Cash Receipts Journal C) Cash Payments Journal D) Personnel Journal
69)
70) When using a subsidiary ledger, the Accounts Receivable account in the general ledger is called the A) controlling account. B) subsidiary account. C) receivable account. D) master account.
70)
8
71) Stars sold goods for $93 to a charge customer. The customer returned for credit $20 worth of goods. Terms of the sale were 2/10, n/30. If the customer pays the amount owed within the discount period, what is the amount the customer should pay? A) $93.00 B) $91.14 C) $71.54 D) $63.00
71)
72) When a customer pays an account, the transaction would be recorded in the A) sales journal. B) cash payments journal. C) purchases journal. D) cash receipts journal.
72)
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. 73) Explain the difference between posting and recording.
73)
74) Explain the role of a controlling account.
74)
75) Explain the difference between a return and an allowance
75)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 76) When merchandise is sold on account, the transaction is recorded in the cash receipts journal.
76)
77) A special journal, like the Sales Journal, requires more posting than the general journal because the general journal has special column totals.
77)
78) Cash receipts are recorded in the Sales Journal.
78)
79) An example of a subsidiary ledger is the purchases account.
79)
80) A controlling account is a listing of all the customers and the account balances.
80)
81) Receipts of cash should generally be recorded in the Cash Receipts Journal.
81)
82) A special ledger for the controlling account in the general ledger would be called a subsidiary ledger.
82)
83) The Payroll Journal is not considered a special journal.
83)
84) The sundry accounts column in the cash receipts journal is a miscellaneous accounts column that provides flexibility for recording infrequent transactions.
84)
85) Accounts in the accounts receivable subsidiary ledger are listed in order of how much is owed.
85)
86) Posting to the general ledger from the special journals should be done at the end of the month.
86)
87) Posting to the general ledger from the special journals should be done at the end of each day.
87)
88) The sales journal for a company using a periodic inventory system would have a Cost of Goods Sold and Inventory column.
88)
9
89) The balance in the Accounts Receivable account is $2,100 debit. Therefore, the balances in the subsidiary ledger should be $2,100.
89)
90) Service companies must keep careful track of the cost of inventory.
90)
91) Terms of 2/10, n/30 means that a customer is allowed a 10% discount in 30 days.
91)
92) "SJ1" in the Sales Journal means that the accounts receivable subsidiary ledger has been updated.
92)
93) Individual credit customer accounts are kept in the general ledger.
93)
94) Sales discounts are not taken on returns.
94)
95) A checkmark is placed in the PR column to show an amount has been posted to a subsidiary account.
95)
96) Credit terms of 3/10 permit the customer to deduct 3% of the sale if payment is made within 10 days.
96)
97) Credit terms remain the same from company to company.
97)
98) The balance in the Accounts Receivable account is $2,100 debit. Therefore, the balances in the subsidiary ledger should be $2,100.
98)
99) Sales is a revenue account.
99)
100) The general ledger and the accounts receivable subsidiary ledger are the same book.
100)
101) Sales discounts are usually not an incentive for the customer to pay early.
101)
102) Contra-Revenue accounts are recorded on the Balance Sheet.
102)
103) The controlling account is found in the subsidiary ledger and it summarizes or controls the general ledger account.
103)
104) Recording in the accounts receivable subsidiary ledger is reserved until the end of the month.
104)
105) Gross Sales equals all the cash and credit sales made by a business for a specific period.
105)
106) An example of a subsidiary ledger is the accounts receivable ledger.
106)
107) The time a customer is granted to pay the bill is the discount period.
107)
108) The decision to allow a customer credit terms is sometimes risky.
108)
109) Credit terms whereby the customer is granted credit until the 10th day of the following month are n/10, EOM.
109)
10
110) When you record the entry to the subsidiary ledger and place the checkmark in the PR column, it is not necessary to post to the Accounts Receivable controlling account.
110)
111) Physical counts are not required when a perpetual inventory system is used as the inventory is perpetually up to date.
111)
112) Recording to the accounts receivable ledger should be performed at the end of the month.
112)
113) To show that you have posted to an account in the General Ledger, you use a checkmark.
113)
114) Gross Sales equals all the cash and credit sales made by a business for a specific period.
114)
115) The accounts receivable subsidiary ledger shows the amount owed from each customer.
115)
116) It is a requirement that all customers have identical credit terms.
116)
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 117) Refer to the Fruit & Company question above. What is the Gross Profit for the month? 118) Refer to the previous question. What is the amount credited to Sales for the month? 119) Refer to the Rowdy Ribbons question above. What is the Gross Profit for the month? 120) The following are selected transactions for P. Pratt Company. For each transaction, indicate the account(s) to be debited and the account(s) to be credited. Also indicate in which of the following journals each transaction will be recorded Sales Journal (S), Cash Receipts Journal (CR), or General Journal (GJ). Account(s) Debit ________ ________ ________
Account(s) Credit ________ ________ ________
Journal ________ ________ ________
________ ________
________ ________
________ ________
a. Sold merchandise on account to M. Mahar. b. P. Pratt invested additional cash in the business c. Received payment from M. Mahar. No discount was given. d. Made a cash sale. e. Issued a credit memo to B. Briggs. Goods returned to inventory.
121) Refer to the Fruit & Company question above. What amount would be debited to the AR control account for the month? 122) Refer to the Fruit & Company question above. What amount would the XYZ Company owe at month end, assuming no payments were received?
11
For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
123) Sales Discounts
Column 1
Column 2
Column 3
________
________
________
The Coral Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries using the perpetual inventory system. All sales are subject to credit terms of 1/10, n/30. 124) July 16 Sold merchandise with an invoice price of $6,000 and a cost of $4,500 to the Taylor Co. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 125) Determine the amount of cash collected on a credit sale with a price of $76,750 and credit terms of 1/10, n/30, assuming the payment was after the discount period had expired. The Coral Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries using the perpetual inventory system. All sales are subject to credit terms of 1/10, n/30. 126) July 25 Received full payment from Carter and Co. ________ ________ ________ ________ ________ ________ 127) July 28 Received full payment from Taylor Co. ________ ________ ________ ________ ________ ________ For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
128) Store Supplies
Column 1
Column 2
Column 3
________
________
________
129) Determine the amount of cash to be collected on a credit sale with a price of $81,639 and credit terms of 1/10, n/30, assuming the payment was after the discount period had expired. 130) Explain why, when a customer returns merchandise after it was paid for, he/she may or may not receive credit equal to the invoice value of the merchandise returned. 131) If cash flow is so important to merchandisers, why do they extend credit to their customers? 132) Define and compare the accounts receivable subsidiary ledger with the controlling account, Accounts Receivable.
12
133) Refer to the Rowdy Ribbons question above. What amount would the XYZ Company owe at month end, assuming no payments were received? 134) Refer to the previous question. What is the amount credited to Sales for the month? 135) Refer to the Rowdy Ribbons question above. What amount would the WMS Company owe at month end, assuming no payments were received? 136) Fruit & Company sells fruit in large quantities on account, uses a perpetual inventory system and a sales journal. Standard terms of sale are 2/10, n/30. Record the following transactions for the month of April, 2022 in the journal provided. Total the columns for the month. Transactions: April 2 Sold $300 of Apples and $500 of Oranges to ABC Company, cost $640. April 5 Sold $400 of Apples, $600 of Bananas plus $700 of Oranges to WMS Company, cost $1,445. April 10 Sold $200 of Apples plus $800 of Bananas to XYZ Company, cost $790. April 14 Sold $350 of Apples, $450 of Bananas plus $300 of Oranges to WMS Company, cost $935. April 21 Sold $150 of Apples and $750 of Oranges to ABC Company, cost $788. April 23 Sold $600 of Bananas plus $700 of Oranges to XYZ Company, cost $1105. April 28 Sold $800 of Apples, $500 of Bananas plus $900 of Oranges to WMS Company, cost $1,870. Here is the Sales Journal for April, 2022:
Date ________ ________ ________ ________ ________ ________ ________ ________ ________
Account Debited ________ ________ ________ ________ ________ ________ ________ ________ ________
Terms ________ ________ ________ ________ ________ ________ ________ ________ ________
Accts. Rec., Dr. Sales, Cr. ________ ________ ________ ________ ________ ________ ________ ________ ________
Cost of Goods Sold, Dr. Inventory, Cr. ________ ________ ________ ________ ________ ________ ________ ________ ________
The Coral Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries using the perpetual inventory system. All sales are subject to credit terms of 1/10, n/30. 137) July 20 Taylor Co. returned merchandise in good condition with an invoice price of $1,000 and a cost of $800. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 138) Compare and discuss a discount period versus a credit period. 139) Distinguish between a cash discount and a trade discount.
13
The Coral Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries using the perpetual inventory system. All sales are subject to credit terms of 1/10, n/30. 140) July 16 Sold merchandise with an invoice price of $3,500 and a cost of $2,000 to Carter and Co. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 141) What is the self check that a person should implement after creating the schedule of accounts receivable? For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
142) Sales Returns and Allowances
Column 1
Column 2
Column 3
________
________
________
143) Rowdy Ribbons sells ribbons in large quantities on account, uses a perpetual inventory system and a sales journal. Standard terms of sale are 1/15, n/30. Record the following transactions for the month of June, 2022 in the journal provided. Total the columns for the month. Transactions: June 1 Sold $200 of Red and $400 of Blue ribbons to ABC Company, cost $440. June 6 Sold $500 of Red, $500 of Pink plus $500 of Blue ribbon to WMS Company, cost $1,115. June 9 Sold $600 of Red plus $900 of Pink ribbon to XYZ Company, cost $1,290. June 13 Sold $250 of Red, $550 of Pink plus $250 of Blue ribbon to WMS Company, cost $825. June 21 Sold $350 of Red and $950 of Blue ribbon to ABC Company, cost $999. June 23 Sold $700 of Yellow plus $600 of Blue ribbon to XYZ Company, cost $1,205. June 30 Sold $500 of Red, $400 of Pink plus $900 of Blue ribbon to WMS Company, cost $1,670. Here is the Sales Journal for June, 2022:
Date ________ ________ ________ ________ ________ ________ ________ ________ ________
Account Debited ________ ________ ________ ________ ________ ________ ________ ________ ________
Terms ________ ________ ________ ________ ________ ________ ________ ________ ________
Accts. Rec., Dr. Sales, Cr. ________ ________ ________ ________ ________ ________ ________ ________ ________
Cost of Goods Sold, Dr. Inventory, Cr. ________ ________ ________ ________ ________ ________ ________ ________ ________
144) Refer to the Fruit & Company question above. What amount would the WMS Company owe at month end, assuming no payments were received?
14
For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
145) Sales
Column 1
Column 2
Column 3
________
________
________
146) The following are selected transactions for P. Quill Company. For each transaction, indicate the account(s) to be debited and the account(s) to be credited. Also indicate in which of the following journals each transaction will be recorded Sales Journal (S), Cash Receipts Journal (CR), or General Journal (GJ). Account(s) Debit ________ ________ ________
Account(s) Credit ________ ________ ________
Journal ________ ________ ________
________ ________
________ ________
________ ________
a. Sold inventory on account to T. Stark. b. P. Quill invested additional cash in the business c. T. Stark made payment. No discount was given. d. Made a sale on account to B. Banner. e. Issued a credit memo to B. Banner. Goods returned to inventory.
For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
147) Professional Fees Earned
Column 1
Column 2
Column 3
________
________
________
148) Determine the amount to be paid within the discount period for a previous sale with an invoice price of $10,500, subject to credit terms of 1/10, n/30. 149) Refer to the Fruit & Company question. What is the amount debited to Cost of Goods Sold for the month? 150) Refer to the Rowdy Ribbons question. What is the amount credited to Inventory for the month? 151) Determine the amount to be paid within the discount period for a previous sale with an invoice price of $12,128, subject to credit terms of 2/10, n/30. 152) Refer to the Rowdy Ribbons question above. What amount would be debited to the AR control account for the month? 153) Refer to the Fruit & Company question. What is the amount credited to Inventory for the month? 154) Refer to the Rowdy Ribbons question above. What amount would the ABC Company owe at month end, assuming no payments were received?
15
For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported. Column 1
Column 2
Column 3
155) Owner's Capital
________
________
________
156) Cleaning Expense
________
________
________
157) The following are transactions for Brian for the month of October. Indicate how the following transactions would be recorded by completing the necessary journal entries as appropriate using the perpetual inventory system (omit explanations). Oct. 1 Brian invested $15,000 in his business. Oct. 3 Sold $2,500 of merchandise on account to H. Holand, sales invoice No. 1, terms 1/10, n/30, cost $2,000. Oct. 5 Sold $1,200 of merchandise on account to T. Traer, sales invoice No. 2, terms 1/10, n/30, cost $1,000. Oct. 13 Received cash from H. Holand in payment for October 3 transaction, less the discount. Oct. 14 Issued credit memorandum No. 1 to T. Traer for $100 for merchandise returned in good condition from October 5 sale on account, cost $80. Oct. 15 Received cash from T. Traer for the amount due, less the discount. GENERAL JOURNAL Date Account Titles and Description
PR
16
Debit
Credit
GENERAL LEDGER Cash 101
Accounts Rec 102
Inventory 110
Sales 401
Sales Discount 402
Sales Ret.and All. 403
Brad. Cap 301
Cost of Goods Sold 501
SUBSIDIARY LEDGER H. Holand
T. Traer
158) Refer to the Fruit & Company question above. What amount would the ABC Company owe at month end, assuming no payments were received? For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
159) Store Rent Expense
Column 1
Column 2
Column 3
________
________
________
160) Refer to the Rowdy Ribbons question. What is the amount debited to Cost of Goods Sold for the month? 161) Explain why, when a customer returns merchandise after it was paid for, he/she may or may not receive credit equal to the invoice value of the merchandise returned.
17
Answer Key Testname: CHAP 06_14CE
1) A 2) C 3) C 4) D 5) D 6) D 7) D 8) D 9) B 10) C 11) B 12) A 13) A 14) C 15) B 16) B 17) C 18) B 19) C 20) D 21) C 22) D 23) D 24) D 25) A 26) A 27) B 28) D 29) A 30) B 31) B 32) C 33) B 34) A 35) C 36) A 37) A 38) D 39) A 40) C 41) D 42) A 43) B 44) B 45) B 46) B 47) B 48) A 49) D 18
Answer Key Testname: CHAP 06_14CE
50) A 51) D 52) B 53) D 54) B 55) C 56) A 57) D 58) A 59) B 60) B 61) A 62) D 63) C 64) A 65) C 66) C 67) B 68) A 69) D 70) A 71) C 72) D 73) The word "post" refers to information that is moved from the journal to the general ledger. The word "record" refers to information that is transferred from the journal into the individual customer's account in the subsidiary ledger. 74) A controlling account summarizes, or controls the subsidiary ledger based on it. At the end of the month the total of the individual accounts in the subledger must equal the balance in the controlling account. 75) In a return, the customer returns the item they purchased and their money is refunded. The item can be restocked into inventory if it is still in good condition. In an allowance, the customer keeps the item purchased but receives an after sale discount on the price. 76) FALSE 77) FALSE 78) FALSE 79) FALSE 80) FALSE 81) TRUE 82) TRUE 83) FALSE 84) TRUE 85) FALSE 86) TRUE 87) FALSE 88) FALSE 89) TRUE 90) FALSE 91) FALSE 92) FALSE 93) FALSE 94) TRUE 19
Answer Key Testname: CHAP 06_14CE
95) TRUE 96) TRUE 97) FALSE 98) TRUE 99) TRUE 100) FALSE 101) FALSE 102) FALSE 103) FALSE 104) FALSE 105) TRUE 106) TRUE 107) FALSE 108) TRUE 109) TRUE 110) FALSE 111) FALSE 112) FALSE 113) FALSE 114) TRUE 115) TRUE 116) FALSE 117) $1,427 118) $9,050 119) $1,506 120) Account(s) Account(s) Debit Credit Journal a. Accts. Rec./M. Mahar Sales S Cost of Goods Sold Inventory S b. Cash P. Pratt, Capital c. Cash Accts. Rec./M. Mahar CR d. Cash Sales CR Cost of Goods Sold Inventory CR e. Sales Returns and Allowances Accts. Rec./B. Briggs GJ Inventory Cost of Goods Sold GJ 121) $9,000 122) $2,300 123) Sales Discounts: contra-revenue debit income statement 124) Accounts Receivable - Taylor 6,000 Sales 6,000 Cost of Goods Sold 4,500 Inventory 4,500 125) $76,750 126) Cash 3,465 Sales Discounts 35 Accounts Receivable - Carter 3,500 127) Cash 5,000 Accounts Receivable - Taylor 5,000 128) Store Supplies: asset debit balance sheet 20
CR
Answer Key Testname: CHAP 06_14CE
129) $81,639 130) If the payment was made before the return and the payment was reduced by a cash discount then only the net will be credited to the customer's account. 131) A customer who is limited to making only cash purchases will buy less than when credit is available. 132) Accounts receivable subsidiary ledger is a group of accounts that contains, in alphabetical order, the individual records of amounts owed by various credit customers. Daily postings are made to the customer's account updating the current balances. Accounts Receivable controlling account, located in the general ledger, shows a company the total amount of money owed to it. Monthly postings are made to this account, although periodic postings are also made eg., when a credit memo is recorded in the General Journal. Both the accounts receivable subsidiary ledger and the controlling account, Accounts Receivable, are reconciled at the end of the month by preparing a schedule of accounts receivable. 133) $2,800 134) $9,000 135) $4,350 136) Account Accts. Rec. Dr. Cost of Goods Sold, Dr. Date Debited Terms Sales, Cr. Inventory, Cr April 2 ABC Company 2/10, n/30 800 640 April 5 WMS Company 2/10, n/30 1,700 1,445 April 10 XYZ Company 2/10, n/30 1,000 790 April 14 WMS Company 2/10, n/30 1 100 935 April 21 ABC Company 2/10, n/30 900 788 April 23 XYZ Company 2/10, n/30 1,300 1105 April 28 WMS Company 2/10, n/30 2,200 1,870 Totals 9,000 7,573 137) Sales Returns and Allowances 1,000 Accounts Receivable - Taylor 1,000 Inventory 800 Cost of Goods Sold 800 138) A credit period is the length of time allowed for payment of goods sold on account. Customers are encouraged to pay their bills within this time frame to maintain a good credit rating. A discount period is shorter than the credit period to encourage early payment of bills. Customers are given an incentive to make payments shortly after invoicing. Terms such as 2/10, n/30 demonstrates the discount period and the credit period. The discount period is 10 days and the credit period is 30 days. If the customer pays the bill within 10 days, the customer will receive a 2% discount, or the balance is due in full if the customer pays the bill within 30 days.
21
Answer Key Testname: CHAP 06_14CE
139) A cash discount is offered primarily as an incentive to a customer to pay invoices promptly. While the amount of discount may seem small (2% is very common), the annual interest rate is substantial and many customers will take advantage of it, thereby both speeding up collections, as well as minimizing losses due to bad debts. A trade discount on the other hand is a device often used to permit a seller to publish a price list of their "suggested" selling prices at retail, and then adjust the actual invoice prices to each customer as appropriate. For example - larger customers may be awarded a larger trade discount to recognize their more important status. It can also be used to accommodate special terms as for example often seen in dealings with governments and educational institutions. 140) Accounts Receivable - Carter 3,500 Sales 3,500 Cost of Goods Sold 2,000 Inventory 2,000 141) The total of the schedule of accounts receivable should be verified to be the same as the controlling account in the general ledger. That account, the accounts receivable account in the general ledger, equals the sum of the individual customer balances in the accounts receivable ledger. 142) Sales Returns and Allowances: contra-revenue debit income statement 143) Account Accts. Rec. Dr. Cost of Goods Sold, Dr. Date Debited Terms Sales, Cr. Inventory, Cr June 1 ABC Company 1/15, n/30 600 440 June 6 WMS Company 1/15, n/30 1,500 1,115 June 9 XYZ Company 1/15, n/30 1,500 1,290 June 13 WMS Company 1/15, n/30 1,050 825 June 21 ABC Company 1/15, n/30 1,300 999 June 23 XYZ Company 1/15, n/30 1,300 1,205 June 30 WMS Company 1/15, n/30 1,800 1,670 Totals 144) $5,000 145) Sales: revenue 146) Account(s) Debit a. Accts. Rec./T. Stark Costo of Goods Sold b. Cash c. Cash d. Accts. Rec./B. Banner Cost of Goods Sold e. Sales Returns and Allowances Inventory 147) Professional Fees Earned: revenue 148) $10,395.00 149) $7,573 150) $7,544 151) $11,885.44 152) $9,050 153) $7,573 154) $1,900
9,050
7,544
credit income statement Account(s) Credit Journal Sales S Inventory S P. Quill, Capital Accts. Rec./T. Stark CR Sales S Inventory S Accts. Rec./B. Banner GJ Cost of Goods Sold GJ income income statement
22
CR
Answer Key Testname: CHAP 06_14CE
155) Owner's Capital: owner's equity credit 156) Cleaning Expense: expense debit 157) GENERAL JOURNAL Date Oct
1
3
5
13
14
15
balance sheet income statement
Account Tiles and Description Cash Capital
PR 101 301
Debit 15,000
Accounts Receivable / H. Holand Sales
102/X 401
2,500
Cost of Goods Sold Inventory
501 140
2,000
Accounts Receivable/ T. Traer Sales
102/X 401
1,200
Cost of Goods Sold Inventory
501 140
1,000
Cash Sales Discount Accounts Receivable/ H. Holand
101 402 102/X
2,475 25
Sales Returns & Allowances Accounts Receivable/ T. Traer
403 102/X
100
Inventory Cost of Goods Sold
140 501
80
Cash Sales Discount Accounts Receivable/ T. Traer
101 402 102/X
1,089 11
Credit 15,000
2,500
2,000
1,200
1,000
2,500
100
80
1,100
GENERAL LEDGER Cash (101) 15,000 2,475 1,089 18,564
Inventory (140) 2,000 1,000 80 2,920
Sales Discount (402) 25 11 36 72
23
Brad. Cap (301) 15,000
Answer Key Testname: CHAP 06_14CE
Accounts Rec (102) 2,500 2,500 1,200 100 1,100 0
Sales (401) 2,500 1,200 3,700 7,400
Sales Ret.and All. 403 100
Cost of Goods Sold 501 2,000 1,000 2,920 80
SUBSIDIARY LEDGER H. Holand 2,500 2,500 0
T. Traer 1,200 100 1,100 2,200
158) $1,700 159) Store Rent Expense: expense debit income statement 160) $7,544 161) If the payment was made before the return and the payment was reduced by a cash discount then only the net will be credited to the customer's account.
24
Exam
CHAPTER 7
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The term F.O.B. means A) freight order billing. C) free on board.
B) found on base. D) freight or bill.
2) Accounts of a single type are kept in this ledger. A) supplemental ledger. C) additional ledger.
B) subsidiary ledger. D) None of these answers are correct.
1)
2)
3) What is the price of the merchandise if the list price is $800, trade discount is 40%, and the terms are 2/10, EOM? A) $480 B) $800 C) $580 D) $784
3)
4) Fred's Footwear started with $7,000 in Inventory and had the following transaction totals for the month of April: Sales $20,000 Sales Returns and Allowances 2,000 Cost of Goods Sold 8,000 Purchases 14,000 Freight 1,000 Purchases Returns and Allow. 2,000 Purchases Discounts ???
4)
If ending Inventory for the period is $11,000, what is the total of purchase discounts experienced? A) $2,000 B) $3,000 C) $1,000 D) $4,000 5) A trade discount would A) increase the amount of the purchase discount. B) need approval from senior management. C) have no effect on the books. D) decrease the amount of the purchase discount.
5)
6) On February 12, Clare purchased $350 of merchandise on account from Larsen's Accessories, terms 2/10, n/30. The goods were shipped F.O.B. destination. The freight charge was $40. The amount to be recorded in the Accounts Payable Subsidiary ledger is A) $390. B) $350. C) $383. D) $343.
6)
7) The value of inventory includes A) Purchases + Freight - Purchases Discount - Purchases Returns and Allowances. B) Purchases + Freight C) Purchases + Freight - Purchases Returns and Allowances. D) Purchases + Purchases Returns and Allowances.
7)
1
8) The term used when the seller is responsible for the cost of freight is A) F.O.B. purchaser. B) F.O.B. destination. C) F.O.B. seller. D) F.O.B. shipping point.
8)
9) Rest Up Mattresses had a purchase of $20,000, freight charges of $250, a purchase return of $9,750, and a purchase discount of $2,225. What is the impact on Inventory? A) $8,275 B) $18,025 C) $20,250 D) $8,025
9)
10) The entry to record a payment on a $500 account within the 2% discount period would include a A) credit to Purchases for $510. B) debit to Accounts Payable for $500. C) debit to Accounts Payable for $490. D) debit to Cash for $490.
10)
11) Which account is the controlling account for the amounts owed to individual creditors? A) Accounts Payable in the general ledger B) Accounts Payable in the subsidiary ledger C) Accounts Receivable in the general ledger D) Accounts Receivable in the subsidiary ledger
11)
12) The account used to record the buyer's shipping costs is A) Discounts. B) Accounts Payable. C) Inventory. D) Freight.
12)
13) C. Fong returned $200 of merchandise within the discount period. The entry to record the return is A) debit to Inventory for $200, credit Accounts Payable for $200. B) debit to Accounts Payable for $200, credit Inventory for $200. C) debit to Accounts Payable for $200, credit Cash for $200. D) debit to Inventory for $200, credit Cost of Goods Sold for $200.
13)
14) A form used in business to place an order for the buying of goods from a seller is A) purchase discount. B) purchases returns. C) purchase requisition. D) purchase order.
14)
15) The main reason most businesses do not use only a General Journal is A) a General Journal is much too inefficient. B) a General Journal is prone to many errors. C) two or more clerks cannot use the General Journal at the same time. D) both A and C are correct.
15)
16) Lisa purchased $600 of goods on Jan 8 and received credit terms of 3/10, n/30. How much did she pay if payment was made on Feb 21? A) $618 B) $582 C) $600 D) $510
16)
17) R&R Lumber reports a purchases of $40,000, a purchase return of $6,000, and a purchase discount of $1,500. What is the impact on Inventory? A) $38,500 B) $32,500 C) $47,500 D) $36,000
17)
2
18) When the term F.O.B. shipping point is used, title passes A) when goods reach the halfway point. B) when goods are shipped. C) when the buyer unpacks the goods. D) when goods reach the destination.
18)
19) Which of the following does NOT receive a copy of the Purchase Order? A) Supplier B) Department that initiated purchase requisition C) Customer D) Accounting department
19)
20) When using a subsidiary ledger, the Accounts Payable account in the general ledger is called the A) master account. B) receivable account. C) subsidiary account. D) controlling account.
20)
21) A form used with a business by the requesting department asking the purchasing department to buy specific goods is called a A) purchase requisition. B) purchase order. C) purchase invoice. D) debit memorandum.
21)
22) Jackson purchased $400 of goods and received credit terms of 2/10, n/30. How much did he pay if payment was made during the discount period? A) $400 B) $360 C) $408 D) $392
22)
23) Every transaction in a purchases journal includes A) a credit to Cash. C) a debit to Office Supplies.
23) B) a credit to Inventory. D) a credit to Accounts Payable.
24) How much money would Sanji Company have to pay if purchases on account were $600 plus $50 for freight and the debt was paid within the discount period with terms of 2/10, n/30? A) $639.00 B) $637.60 C) $637.40 D) $638.00
24)
25) Barnie's Cafe started with $4,000 in Inventory and had the following transaction totals for the month:
25)
Sales Sales Returns and Allowances Cost of Goods Sold Accounts Payable Purchases Purchases Returns and Allowances Purchases Discounts
$10,000 1,000 $4,000 5,500 7,000 1,000 700
Net purchases for the period are A) $5,800. B) $5,300.
C) $4,300.
3
D) $6,300.
26) Which of the following transactions will cause a liability to be credited and an asset account to be debited when the perpetual inventory system is in use? A) Recorded the adjustment for the consumption of supplies B) Recorded the adjustment for depreciation C) Purchased merchandise inventory on account D) Purchased office supplies for cash
26)
27) Jackson purchased $400 of goods on Feb 8 and received credit terms of 2/10, n/30. How much did he pay if payment was made on Feb 21? A) $400 B) $360 C) $392 D) $408
27)
28) A debit memorandum decreases which account on the purchaser's books? A) Accounts Payable B) Cost of Goods Sold C) Cash D) Accounts Receivable
28)
29) Hardware Restoration had a purchase of $40,000, a purchase return of $10,000, and a purchase discount of $1,500. What is the impact on Inventory? A) $30,000 B) $51,500 C) $38,500 D) $28,500
29)
30) Which of the following is NOT a main type of Special Journal? A) Cash Receipts Journal B) Purchases Journal C) Cash Payments Journal D) Personnel Journal
30)
31) Office Supplies (not used for resale) bought on account were returned for credit and recorded with a debit to Accounts Payable and a credit to Cost of Goods Sold. This error will cause A) total assets to be understated. B) net income to be overstated. C) net income to be understated. D) net income to not be affected.
31)
32) F.O.B. shipping point means A) the buyer pays for the freight. C) the title passes at time of shipment.
32) B) the seller pays for the freight. D) both A and C are correct.
33) A list of creditors with ending balances is called A) a list of suppliers. C) a Schedule of Accounts Payable.
B) a trade list. D) a Schedule of Accounts Receivable.
33)
34) Lisa purchased $600 of goods and received credit terms of 3/15, n/30. How much did she pay if payment was made during the discount period? A) $618 B) $600 C) $510 D) $582
34)
35) On June 15, the Greater Gravel Company purchased $700 of merchandise on account from the Digga Ditch Company, terms 4/10, n/30. The goods were shipped F.O.B. shipping point. The freight charge of $40 was paid by Digga Ditch Company and added to the invoice. The amount to record in the Inventory account is A) $672. B) $740. C) $712. D) $700.
35)
4
36) The entry to record a payment sent on a $900 account within the 1% discount period would include a A) debit to Accounts Payable for $891. B) debit to Cash for $891. C) credit to Inventory for $909. D) debit to Accounts Payable for $900.
36)
37) The entry to record a payment on a $900 account within the 3% discount period would include a A) debit to Accounts Payable for $873. B) debit to Accounts Payable for $900. C) debit to Cash for $873. D) credit to Purchases for $873.
37)
38) Ralph's Dairy started with $5,000 in Inventory and had the following transaction totals for the month:
38)
Sales Sales Returns and Allowances Cost of Goods Sold Purchases Freight Purchases Returns and Allowances Purchases Discounts
$10,000 1,000 5,500 7,000 500 1,000 700
Based on the above, ending Inventory for the period is A) $4,300. B) $5,300. C) $6,300.
D) $5,800.
39) Discounts which reduce the price for customers who buy items for resale or to produce other goods are A) trade discounts. B) purchase discounts. C) cash discounts. D) sale discounts.
39)
40) The term used when the purchaser is responsible for the cost of freight is A) F.O.B. shipping point. B) F.O.B. destination. C) F.O.B. purchaser. D) F.O.B. seller.
40)
41) On November 30, Janoch's Dog Kennel purchased $500 of merchandise on account from the Ganster Company. The goods were shipped F.O.B. shipping point. The freight charge of $40 was paid by Ganster Company and added to the invoice. The amount to record as payable is A) $550. B) $540. C) $500. D) $520.
41)
42) Accounts of a single type (i.e., Accounts Payable) are kept in this form of ledger. A) General ledger B) Subsidiary ledger C) Employee ledger D) Supplemental ledger
42)
43) Which special journal is used to record merchandise or other items bought on account? A) Cash Receipts journal B) Purchases journal C) Sales journal D) Cash Payments journal
43)
44) A list of creditors with balances owed is called A) a schedule of accounts payable. C) a schedule of accounts receivable.
44) B) a list of suppliers. D) a trade list.
5
45) Which of the following events does NOT require a journal entry to be made? A) A supplier's invoice is received. B) A purchase order is generated and delivered. C) A purchase requisition is completed. D) Both B and C are correct.
45)
46) The special journal used to record all transactions involving payment of cash is a A) Cash Receipts journal. B) Cash Payments journal. C) Purchases journal. D) Sales journal.
46)
47) When the term F.O.B. destination is used, title passes A) when goods reach the destination. B) when goods reach the halfway point. C) when goods are shipped. D) when the buyer unpacks the goods.
47)
48) The arrangements between buyer and seller as to when payments for merchandise are to be made are called A) cash on demand. B) net cash. C) credit terms. D) gross cash.
48)
49) To prove the subsidiary ledger agrees with the Accounts Payable controlling account balance, complete a A) purchase order. B) schedule of accounts receivable. C) schedule of accounts payable. D) debit memorandum.
49)
50) An entry to record the payment to a vendor was correctly recorded and posted to the general ledger but was not posted to the subsidiary ledger. This error will cause A) net income to be overstated. B) the accounts payable control account to not agree with the subsidiary ledger. C) net income to be understated. D) the accounts receivable control account to not agree with the subsidiary ledger.
50)
51) A characteristic of Cost of Goods Sold is that A) it has a debit normal balance. B) it reduces net income. C) it is used to record the purchase of merchandise to be resold. D) A and B are correct.
51)
52) Purchases Returns and Allowances A) have no effect on Inventory. C) decrease Inventory.
52) B) increase Inventory. D) Not enough information provided.
53) Medeco bought goods for $150 on credit. Medeco returned $50 worth of goods. Terms of the sale were 2/10, n/30. If Medeco pays the amount owed within the discount period, what is the amount they should pay? A) $98 B) $147 C) $150 D) $100
6
53)
54) Jackie's Online Service started with $7,000 in Inventory and had the following transaction totals for the month: Sales $20,000 Sales Returns and Allowances 2,000 Cost of Goods Sold 8,000 Purchases 14,000 Freight 1,000 Purchases Returns and Allow. 2,000 Purchases Discounts 1,400 Ending Inventory for the period is A) $10,600. B) $14,000.
C) $9,600.
54)
D) $12,600.
55) The entry to record a purchase of $2,000 on account, terms of 2/10, n/30, would include a A) credit to Cash for $2,000. B) debit to Inventory for $40. C) debit to Accounts Payable for $2,000. D) credit to Accounts Payable for $2,000.
55)
56) Inventory is a(n) A) asset.
56) B) liability.
C) revenue.
D) cost.
57) Amounts are posted to the Accounts Payable Subsidiary Ledger A) whenever the accountant has some spare time. B) daily. C) when financial statements are being prepared. D) at the end of the month.
57)
58) The principal ledger containing all the balance sheet and income statement accounts is the A) AR ledger. B) AP ledger. C) general ledger. D) employee ledger.
58)
59) A characteristic of Inventory is that A) it has a debit normal balance. B) it reduces net income. C) it is used to record the purchase of merchandise to be resold. D) A and C are correct.
59)
60) The purchases journal is used for A) recording cash payments. C) recording credit sales.
60) B) recording cash purchases. D) recording purchases of merchandise.
7
61) Marcel's Fashions started with $7,000 in Inventory and had the following transaction totals for the month of April: Sales $20,000 Sales Returns and Allowances 2,000 Cost of Goods Sold 8,000 Purchases ??? Freight 1,000 Purchases Returns and Allow. 2,000 Purchases Discounts 1,500
61)
If ending Inventory for the period is $14,000, what is the total amount of purchases during the month? A) $16,500 B) $18,500 C) $17,500 D) $15,500 62) Susie's Shoes had a purchase of $6,000, freight charges of $150, a purchase return of $750, and a purchase discount of $225. What is the impact on Inventory? A) $5,175 B) $5,775 C) $6,825 D) $4,875
62)
63) On March 30, Bailey's Dog Bakery purchased $1,000 of merchandise on account from the Williams Company. The goods were shipped F.O.B. shipping point. The freight charge of $80 was paid by Williams Company and added to the invoice. The amount to record in the Accounts Payable account is A) $1,080. B) $1,000. C) $990. D) $1,070.
63)
64) Tyler returned $400 of merchandise within the discount period. The entry to record the return is to A) debit to Accounts Payable/Suppliers Name for $400; credit Inventory for $400. B) debit Inventory for $400; credit Accounts Payable/Suppliers Name for $400. C) debit Inventory for $400; credit Cash for $400. D) debit to Accounts Payable/Suppliers Name for $400, credit Cash for $400.
64)
65) Medeco bought goods for $150 on credit. Medeco returned $50 worth of goods. Terms of the sale were 2/10, n/30. If Medeco pays the amount owed after the discount period, what is the amount they should pay? A) $98 B) $147 C) $100 D) $150
65)
66) Credit terms of 2/10, n/30 mean that A) a discount is allowed if the bill is paid within 30 days. B) a 2% discount is allowed if the customer pays the bill within 30 days. C) a discount is allowed if the bill is paid after 10 days. D) 2% discount is allowed if the bill is paid within 10 days, or the entire amount is due within 30 days.
66)
67) Purchased office supplies on account. This will be recorded with A) a debit to Supplies and a credit to Accounts Payable. B) a debit to Accounts Payable and a credit to Supplies. C) a credit to Supplies and a debit to Purchases. D) a debit to Supplies and a credit to Supplies Expense.
67)
8
68) On June 1, Amelia purchased $175 of merchandise on account from BlueBay, terms 2/10, n/30. The goods were shipped F.O.B. shipping point. The freight charge was $15. The amount to be recorded in the Inventory Account on purchase is A) $186.20. B) $171.50. C) $175. D) $190.
68)
69) Which is the correct order of buying merchandise from a company? A) Requisition, order, invoice, receiving report, approval for payment B) Approval for payment, requisition, order, invoice, receiving report C) Requisition, order, invoice, approval for payment, receiving report D) Approval for payment, order, requisition, invoice, receiving report
69)
70) A debit memo for the return of merchandise is usually recorded in the A) general journal. B) sales journal. C) cash payments journal. D) purchases journal.
70)
71) Credit terms of n/15, EOM means that A) if the bill is paid 10 days after the end of the month, a discount is allowed. B) if the bill is paid by the end of the month, a discount will be granted. C) the bill is due 15 days before the end of the month. D) the bill is due 15 days after the end of the month and no discount is allowed.
71)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 72) Purchases of merchandise for cash are recorded in the purchases journal.
72)
73) An invoice approval form is used by accounting to check the invoice before approving it for payment.
73)
74) The seller's sales invoice is the buyer's purchase invoice.
74)
75) A Schedule of Accounts Payable is an alphabetical list of all customers.
75)
76) The buyer issues a debit memorandum to indicate that a previous purchase amount is being reduced because goods were returned or an allowance was requested.
76)
77) Payment for merchandise should not be made until approval is given.
77)
78) A receiving report is used to notify the company of the quantity and condition of the goods received.
78)
79) The Accounts Receivable and Accounts Payable are both controlling accounts.
79)
80) The seller issues a debit memorandum when granting a reduction in price to a customer.
80)
81) Trade discounts are recorded in the cash payments journal along with purchases discounts.
81)
82) Invoices are simply paid as soon as they are received.
82)
9
83) The account Inventory includes the shipping costs charged by the vendor.
83)
84) Credit terms of 3/10, Net 30 permit a purchaser to deduct 3% of the invoice total if payment is made within 10 days.
84)
85) The accounts payable subsidiary ledger should equal the control account in the general ledger.
85)
86) The Inventory account normally has a credit balance.
86)
87) If a debit memorandum is issued, the buyer will reduce their accounts receivable.
87)
88) Purchases discounts are usually an incentive for the customer to pay early.
88)
89) The account Inventory includes the shipping costs to the customer.
89)
90) A list showing the ending balances owed to individual creditors is called a Schedule of Accounts Payable.
90)
91) The Schedule of Accounts Payable is listed alphabetically.
91)
92) The time a purchaser is granted to pay an invoice is the discount period.
92)
93) The seller's sales invoice is the buyer's purchase invoice.
93)
94) The accounts payable subsidiary ledger is organized in chronological order.
94)
95) The controlling account is found in the subsidiary ledger for all accounts payable.
95)
96) FOB is short for Free On Board.
96)
97) When the terms are F.O.B. shipping point, the purchaser is responsible for the cost of shipping from the seller's shipping point to the purchaser's location.
97)
98) The purchasing department issues purchase orders.
98)
99) Under the periodic system the Inventory account is not used for purchases.
99)
100) A purchase requisition form is completed by the accounts payable clerical staff.
100)
101) Payments of cash are recorded in the cash receipts journal.
101)
102) It is a requirement that all suppliers must provide identical credit terms.
102)
103) Terms of 2/10, n/30 means that a customer is allowed a 10% discount in 30 days.
103)
10
104) The accounts payable column total is posted to the accounts payable general ledger account at the end of the month.
104)
105) The accounts payable subsidiary ledger is organized from the highest to the lowest balance outstanding.
105)
106) A buyer may not receive both a trade discount and a cash discount.
106)
107) The account Inventory includes the shipping costs from the seller.
107)
108) A list showing the ending balances owed to individual vendors is called a Schedule of Accounts Payable.
108)
109) A cash disbursement journal and a cash payments journal are the same thing.
109)
ESSAY. Write your answer in the space provided or on a separate sheet of paper. Journalize the following transactions. All purchases are subject to terms of 2/10, n/30. The perpetual inventory method is used. 110) Nov. 7 Purchased merchandise with a price of $1,500 from the Montana Supply Co. ________ ________ ________ ________ ________ ________ 111) July 31 Paid the amount due to Eldorado Supply Co. ________ ________ ________ ________ ________ ________ 112) Given below are the transactions for G. Turner Company. For each transaction state the account(s) to be debited and account(s) to be credited and indicate the journal in which each transaction should be recorded. Indicate (P) for purchase journal, (CP) for cash payments journal, or (GJ) for general journal. Debit Supplies ________ ________ ________ ________ ________ ________ ________
Credit __Cash__ ________ ________ ________ ________ ________ ________ ________
Journal __CP___ ________ ________ ________ ________ ________ ________ ________
0. a. b. c. d. e. f. g.
Purchased supplies for cash Withdrew $500 in cash from the business. Paid salaries expense, $800. Purchased merchandise for cash, $2,500. Purchased merchandise on account, $4,000. Returned $1,000 of goods purchased in d. Paid two months' rent in advance, $600 Paid for purchases in d., less discount and return.
Journalize the following transactions. All purchases are subject to terms of 2/10, n/30. The perpetual inventory method is used. 113) July 10 Purchased merchandise with a price of $3,225 from the Eldorado Supply Co. ________ ________ ________ ________ ________ ________
11
114) May Flower Company has a starting Inventory of $14,600 and had the following transaction totals for the month. Use this information to answer the questions below. Sales Returns and Allowances Sales Discounts Purchases Sales Cost of Goods Sold Purchases Discount Freight
$300 200 3,000 8,000 6,600 300 600
Based on the above, ending Inventory is ________. Journalize the following transactions. All purchases are subject to terms of 2/10, n/30. The perpetual inventory method is used. 115) July 7 Purchased merchandise with a price of $2,000 from The Bunters. ________ ________ ________ ________ ________ ________ 116) Determine the amount to be paid to the vendor within the discount period for purchase with an invoice price of $2,500 and credit terms of 2/10, n/30 when $700 has already been returned for credit. The goods were purchased with freight terms of F.O.B shipping point and freight of $50 was included on the invoice. 117) Determine the amount of credit to be earned on a full return of merchandise purchased with an invoice price of $4,000 and credit terms of 2/10, n/30 when full payment was made within the discount period. 118) The following are selected transactions for P. Quill Company. For each transaction, indicate the account(s) to be debited and the account(s) to be credited. Also indicate in which of the following journals each transaction will be recorded Sales Journal (S), Cash Receipts Journal (CR), Purchases (P), Cash Payments (CP), or General Journal (GJ). Account(s) Debit ________ ________ ________
Account(s) Credit ________ ________ ________
Journal ________ ________ ________
________ ________
________ ________
________ ________
a. Purchased inventory on account from P. Parker. b. Received cash from the bank as a loan for the business c. Made payment to P. Parker. No discount was given. d. Made a sale on account to S. Rogers e. Issued a debit memo to T. Stark for return of faulty goods.
12
119) Match the following to the six journal entries. Each entry may have more than one number and each number can be used more than once. 1. 2. 3. 4. 5.
journalize to purchase journal journalize to cash payments journal record immediately to the subsidiary ledger journalize to general journal record and post immediately to the subsidiary and the general ledger
a. b. c. d. e. f.
________ ________ ________ ________ ________ ________
purchased merchandise on account bought equipment on account return merchandise purchased cash purchase withdrew money from the business paid invoice less discount
Journalize the following transactions. All purchases are subject to terms of 2/10, n/30. The perpetual inventory method is used. 120) July 9 Purchased merchandise from the Burgeroni Co. with a price of $1,500. ________ ________ ________ ________ ________ ________ 121) The following are selected transactions for P. Quill Company. For each transaction, indicate the account(s) to be debited and the account(s) to be credited. Also indicate in which of the following journals each transaction will be recorded Sales Journal (S), Cash Receipts Journal (CR), Purchases (P), Cash Payments (CP), or General Journal (GJ). Account(s) Debit ________ ________ ________
Account(s) Credit ________ ________ ________
Journal ________ ________ ________
________
________
________
________
________
________
a. Purchased inventory on account from Thanos. b. Paid cash to the bank to reduce the outstanding loan. c. Made payment to Thanos. A discount was given. d. Purchased inventory on account from Groot. Incurred a shipping charge. e. Returned defective goods to Groot.
Journalize the following transactions. All purchases are subject to terms of 2/10, n/30. The perpetual inventory method is used. 122) July 11 Paid the amount due to The Bunters. ________ ________ ________ ________ ________ ________ 123) Nov. 10 Paid the amount due to Bartkowski Inc. ________ ________ ________ ________ ________ ________
13
124) Determine the amount to be paid within the discount period for purchase with an invoice price of $3,000 and credit terms of 2/10, n/30 when $500 has already been returned for credit. 125) Below are listed several books of original entry. Indicate the journal in which each transaction should be recorded by placing the letters representing the appropriate journal in the space provided. CP Cash payments journal CR Cash receipts journal P Purchases journal S Sales Journal GJ General journal 0. a. b. c. d. e. f. g. h. i. j.
CP Paid weekly salaries. ________ Purchased merchandise on account. ________ Gave customer credit on account for merchandise returned. ________ Owner invested additional cash in the business. ________ Sold merchandise on account. ________ Received credit on account from a supplier for merchandise returned. ________ Purchased office equipment on account. ________ Sold merchandise for cash. ________ Paid for goods purchased in a. ________ Owner withdrew cash from the business. ________ Paid for advertising expense.
Journalize the following transactions. All purchases are subject to terms of 2/10, n/30. The perpetual inventory method is used. 126) Nov. 5 Purchased merchandise from the Thiesman and Co. with a price of $3,000. ________ ________ ________ ________ ________ ________ 127) Compare and contrast the controlling account Accounts Payable to the accounts payable ledger. Discuss why the balance of the controlling account, Accounts Payable, does not equal the sum of the accounts payable ledger during the month. Journalize the following transactions. All purchases are subject to terms of 2/10, n/30. The perpetual inventory method is used. 128) July 12 Paid the amount due to Burgeroni Co. ________ ________ ________ ________ ________ ________ 129) Nov. 23 Paid the amount due to Montana Supply Co. ________ ________ ________ ________ ________ ________ 130) What is the self check that a person should implement after creating the schedule of accounts payable?
14
131) On June 15, Paradise Park purchased merchandise for the race track. The invoice was for $4,500, terms 2/10, n/30. On June 20, Paradise Park returned $200 of merchandise for credit. On June 25, it paid the amount owed. Fill in the blanks below. a. The debit to Inventory on June 15 is ________. b. The credit to Accounts Payable on June 15 is ________. c. The credit to Inventory on June 20 is ________. d. The credit to Cash on June 25 is ________. e. The credit to Inventory on June 25 is ________. Journalize the following transactions. All purchases are subject to terms of 2/10, n/30. The perpetual inventory method is used. 132) Nov. 3 Purchased merchandise with a price of $1,000 from the Bartkowski Inc. ________ ________ ________ ________ ________ ________ 133) On May 6, R. Alexander purchased merchandise for his jewelry store. The invoice was for $80,000 plus freight of $1,500, terms 1/15, n/30. On May 10, R. Alexander returned merchandise for $15,000 credit. On May 19, R. Alexander paid the amount owed. Answer the following questions: a. The credit to Accounts Payable on May 6 is ________. b. The debit to Inventory on May 6 is ________. c. The debit to Accounts Payable on May 10 is ________. d. The credit to Inventory on May 19 is ________. e. The credit to Cash on May 19 is ________. 134) Explain the difference between F.O.B. shipping point and F.O.B. destination. 135) Defend the proposition that it is more important for a company to pay attention to its accounts receivable than to its accounts payable. 136) Given below are the transactions for B. Stern Company. For each transaction state the account(s) to be debited and account(s) to be credited and indicate the journal in which each transaction should be recorded. Indicate (P) for purchase journal, (CP) for cash payments, or (GJ) for general journal in the column headed journal. Debit Supplies ________ ________ ________ ________ ________ ________ ________
Credit Journal Accts. Pay. ___P___ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
0. Purchased supplies on account a. Purchased inventory on account. b. Paid utilities expense. c. Purchased inventory for cash. d. Returned half of inventory in a. e. Owners made a withdrawal of cash. f. Purchased store equipment on account. g. Paid for inventory in a., less return within the period.
15
137) Mary's Pie Company had a starting Inventory balance of $13,550 and the following transaction totals for the month. Use this information to answer the questions below. Sales Returns and Allowances Sales Discounts Purchases Sales Cost of Goods Sold Purchases Discount Freight
$300 200 3,000 8,000 5,500 300 600
Based on the above, ending Inventory is ________. 138) Determine the amount to be paid within the discount period for purchase with an invoice price of $7,000, subject to credit terms of 2/10, n/30. Journalize the following transactions. All purchases are subject to terms of 2/10, n/30. The perpetual inventory method is used. 139) Nov. 12 Paid the amount due to Thiesman and Co. ________ ________ ________ ________ ________ ________
16
Answer Key Testname: CHAP 07_14CE
1) C 2) B 3) A 4) C 5) C 6) B 7) A 8) B 9) A 10) B 11) A 12) C 13) B 14) D 15) D 16) C 17) B 18) B 19) C 20) D 21) A 22) D 23) D 24) D 25) B 26) C 27) A 28) A 29) D 30) D 31) B 32) D 33) C 34) D 35) B 36) D 37) B 38) B 39) A 40) A 41) B 42) B 43) B 44) A 45) D 46) B 47) A 48) C 49) C 17
Answer Key Testname: CHAP 07_14CE
50) B 51) D 52) C 53) A 54) A 55) D 56) A 57) B 58) C 59) D 60) D 61) C 62) A 63) A 64) A 65) C 66) D 67) A 68) D 69) A 70) A 71) D 72) FALSE 73) TRUE 74) TRUE 75) FALSE 76) TRUE 77) TRUE 78) TRUE 79) TRUE 80) FALSE 81) FALSE 82) FALSE 83) TRUE 84) TRUE 85) TRUE 86) FALSE 87) FALSE 88) TRUE 89) FALSE 90) TRUE 91) TRUE 92) FALSE 93) TRUE 94) FALSE 95) FALSE 96) TRUE 97) TRUE 98) TRUE 18
Answer Key Testname: CHAP 07_14CE
99) TRUE 100) FALSE 101) FALSE 102) FALSE 103) FALSE 104) TRUE 105) FALSE 106) FALSE 107) TRUE 108) FALSE 109) TRUE 110) Inventory 1,500 Accounts Payable - Montana 1,500 111) Accounts Payable - Eldorado 3,225 Cash 3,225 112) Debit Credit Journal a. Withdrawals Cash CP b. Salaries Exp. Cash CP c. Inventory Cash CP d. Inventory Accts. Pay. P e. Accts. Pay Inventory GJ f. Prepaid Rent Cash CP g. Accts. Pay. Inventory, Cash CP 113) Inventory 3,225 Accounts Payable - Eldorado 3,225 114) $11,300 115) Inventory 2,000 Accounts Payable - Bunters 2,000 116) $1,814 117) $3,920 118) Account(s) Account(s) Debit Credit Journal a. Inventory Accts. Pay./P. Parker P b. Cash Bank Loan c. Accts. Pay./P. Parker Cash CP d. Accts. Rec./S. Rogers Sales S Cost of Goods Sold Inventory S e. Accts. Pay/T. Stark Inventory GJ 119) a. 1, 3 b. 1 c. 4, 5 d. 2 e. 2 f. 2, 3 120) Inventory Accounts Payable - Burgeroni
1,500 1,500
19
CR
Answer Key Testname: CHAP 07_14CE
121)
Account(s) Debit a. Inventory b. Bank Loan c. Accts. Pay./Thanos Inventory d. Inventory e. Accts. Pay/Groot
Account(s) Credit Accts. Pay./Thanos Cash Cash Accts. Pay/Groot Inventory
Journal P CP CP CP P GJ
122) Accounts Payable - Bunters 2,000 Inventory 40 Cash 1,960 123) Accounts Payable - Bartkowski 1,000 Inventory 20 Cash 980 124) $2,450 125) a. P b. GJ c. CR d. S e. GJ f. P g. CR h. CP i. CP j. CP 126) Inventory 3,000 Accounts Payable - Thiesman 3,000 127) Both the control account, Accounts Payable, and the accounts payable ledger have normal credit balances and must be balanced to each other at the end of the month. They both represent the amount owed to creditors. The control account contains summary entries made at the month-end from the purchases journal, cash payments journal, and the general journal. The accounts payable ledger is a book or file that lists alphabetically the amounts owed to creditors from purchases on account. Information is posted daily from the purchases journal, cash payments, and general journal to provide the current status of the accounts balances. The control account and the accounts payable ledger balance will not agree during the month because the control account is posted from the totals of the purchases and cash payment journals, but the accounts payable ledger is posted daily to individual creditors. 128) Accounts Payable - Burgeroni 1,500 Inventory 30 Cash 1,470 129) Accounts Payable - Montana 1,500 Cash 1,500 130) The total of the schedule of accounts payable should be verified to be the same as the controlling account in the general ledger. That account, the accounts payable account in the general ledger, equals the sum of the individual customer balances in the accounts payable ledger.
20
Answer Key Testname: CHAP 07_14CE
131) a. $4,500 b. $4,500 c. $200 d. $4,214 e. $86 132) Inventory 1,000 Accounts Payable - Bartkowski 1,000 133) a. $81,500 b. $81,500 c. $15,000 d. $650 e. $65,850 134) F.O.B. destination means the seller pays or is responsible for the cost of freight to buyer's location or destination. Title to the merchandise changes hands at the buyer's location. F.O.B. shipping point means the buyer pays or is responsible for the shipping costs from the seller's shipping point to the buyer's location. Title to the merchandise changes hands at the seller's shipping point, and so is legally included in the purchaser's inventory, even if not actually received at period end. 135) To some extent this is true. When it comes to tardiness in paying amounts due, it does seem more important to first of all pay attention to amounts due to a company than to amounts the company may owe to others. After all, at seems accurate to observe that the company to which money is owed will do its best to ensure that it collects its receivables promptly. That said, however, it is also true that relations with suppliers are also important, and therefore attention should be paid to timely payment of amounts due, because the supplier also is in business, and counts on money being received in a predictable way. Also, proper cash management requires careful planning for both amounts coming in and going out. 136) Debit Credit Journal a. Inventory Accts. Pay. P b. Utilities Exp. Cash CP c. Inventory Cash CP d. Accts. Pay Inventory GJ e. Withdrawals Cash CP f. Store Equip. Accts. Pay. P g. Accts. Pay. Inventory, Cash CP 137) $11,350 138) $6,860 139) Accounts Payable - Thiesman 3,000 Inventory 60 Cash 2,940
21
Exam
CHAPTER 8
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) When the adjustment for Unearned Rent is made, A) liabilities decrease. C) assets decrease.
B) revenue increases. D) Both A and B are correct.
1)
2) Merchandise inventory is not A) a current asset on the balance sheet. B) an important item on a merchandise company's financial statements. C) a long term asset. D) goods a company plans to sell to its customers.
2)
3) In what category in a classified balance sheet is Mortgage Payable found? A) Capital Assets B) Current Liabilities C) Long-term Liabilities D) Both B and C are correct.
3)
4) Inventory Shrinkage results because of A) breakage. C) errors in recording transactions.
4) B) theft. D) All of the above are correct.
5) The Balance Sheet columns on the worksheet prepared for the Villeneuve Company had subtotals as follows debit column, $14,000, and credit column, $14,600. This information indicates that A) the company incurred a net income of $600. B) an error was made when preparing the adjustments in the worksheet. C) the company incurred a net loss of $600. D) a mathematical error was made in the worksheet.
5)
6) Which amount is not directly found on the worksheet? A) Gross Profit B) Inventory C) Cost of Goods Sold D) Sales
6)
7) The Inventory ledger account balance was $10,000 but the physical count at the end of period was $10,100. What adjustment is required to Cost of Goods Sold? A) -$100 B) $10,100 C) +$100 D) $0
7)
8) An item that can be converted into cash or used up during the normal operating cycle is A) a current asset. B) a current liability. C) a capital asset. D) a long-term liability.
8)
9) Joe received $4,000 in advance for renting part of his building. What is the entry to record the receipt of payment? A) Debit Cash; credit Prepaid Rent B) Debit Cash; credit Rental Income C) Debit Cash; credit Rent Expense D) Debit Cash; credit Unearned Rent
9)
1
10) Other Income is used to A) record income from sales. B) record all revenue. C) record owner investments. D) record any revenue from activities other than sales.
10)
11) Reversing entries occur at the beginning of the accounting period and A) help to reduce potential errors. B) reverse the adjusting entries. C) simplify the bookkeeping associated with accruals from the prior period. D) All of the above are correct.
11)
12) Debra paid $960 on a one -year insurance policy on March 1. The entry included a debit to Prepaid Insurance. The adjusting entry on December 31 would include a A) debit to Insurance Expense for $800; and a credit to Prepaid Insurance for $800. B) debit to Cash for $960; and credit to Prepaid Insurance for $960. C) debit to Insurance Expense for $960; and credit to Prepaid Insurance for $960. D) debit to Prepaid Insurance for $800; and a credit to Cash for $800.
12)
13) If Net Sales is $7,000, Cost of Goods Sold is $3,000, Gross Profit is $4,000 and Operating Expenses are $1,000, what is the Net Income from Operations? A) $3,000 B) $2,000 C) $1,000 D) $4,000
13)
14) The information to prepare the trial balance comes from the A) general ledger. B) adjustments columns on the worksheet. C) balance sheet columns on the worksheet. D) income statement columns on the worksheet.
14)
15) Which of the following items generally has a debit balance in the income statement columns of the worksheet? A) Inventory. B) Sales. C) Accumulated Depreciation. D) Sales Returns and Allowances.
15)
16) When using a perpetual inventory method, what account is increased when you determine the physical count of goods on hand is less than the inventory account balance? A) Merchandise Expense B) Inventory C) Cost of Goods Sold D) Prepaid Assets
16)
17) In what category in a classified balance sheet is Store Equipment found? A) Plant and Equipment B) Owner's Equity C) Current Liabilities D) Current Assets
17)
18) Merchandise Inventory would be found on the worksheet in the A) income statement debit column. B) income statement credit column. C) balance sheet debit column. D) balance sheet credit column.
18)
2
19) Gross profit less operating expenses equals A) Cost of Goods Sold. C) net sales.
19) B) net income. D) net revenue.
20) Which of the following could appear in an adjusting entry, closing entry, and reversing entry? A) Salary Expense B) Accumulated Depreciation, Buildings C) Depreciation Expense, Buildings D) Withdrawals
20)
21) Capital Assets includes which of the following? A) Accounts Receivable B) Cash C) Accumulated Depreciation on office machines D) All of these are correct.
21)
22) The ending merchandise inventory was understated. This error would cause A) net income to be overstated. B) assets to be overstated. C) assets to be understated. D) None of these are correct.
22)
23) What inventory method is used when the inventory balance is updated only at the end of the accounting period? A) Cost of Goods Sold B) Net Income C) Periodic D) Perpetual
23)
24) The physical count of inventory was incorrect which overstated the ending inventory. This would cause A) Cost of Goods Sold to be understated. B) net income to be understated. C) Cost of Goods Sold to be overstated. D) gross profit to be understated.
24)
25) Which of the following could be recorded as a reversing entry? A) Correction of an error B) Depreciation of building C) Accrual of interest expense D) Allocation of prepaid rent in the current period
25)
26) Rental income earned by a merchandise company is A) other income. B) included in gross sales. C) added to gross profit. D) subtracted from administrative expenses.
26)
27) When closing the expense account, which of the following accounts will also be closed? A) Rental Income B) Owner's Capital C) Merchandise Inventory D) Sales Returns and Allowances
27)
28) The income statement lists regular business expenses under the heading A) operating expenses. B) operating debts. C) current expenses. D) liabilities.
28)
3
29) As Unearned Rent is earned, it becomes A) a revenue. B) a liability.
29) C) an expense.
D) an asset.
30) The term used when the physical inventory count doesn't match the Inventory account balance at the end of the period is A) Inventory Degradation. B) Inventory Theft. C) Inventory Management. D) Inventory Shrinkage
30)
31) The income statement is prepared from the A) statement of owner's equity. C) balance sheet.
31) B) general journal. D) worksheet.
32) The second two columns of a worksheet are used for A) adjustments. B) the balance sheet. C) the trial balance. D) the income statement.
32)
33) Assuming a periodic system, the beginning inventory A) in the current period is the beginning inventory last period. B) in the current period is a periodic inventory. C) in the current period is a perpetual inventory. D) remains unchanged during the accounting period.
33)
34) The Inventory ledger account balance was $16,000 but the physical count at the end of period was $15,900. What adjustment is required to Cost of Goods Sold? A) -$100 B) $15,900 C) +$100 D) $0
34)
35) Which of the following is an operating expense? A) Postage Expense C) Interest Expense
35) B) Salaries Expense D) Both A and B are correct.
36) Selling expenses include A) Office Supplies Expense. C) Advertising Expense.
B) Rent Expense. D) All of the above are correct.
36)
37) To determine how much a company has discounted payments from its customers, it should review the A) Cost of Goods Sold account. B) Sales Returns & Allowances account. C) Inventory account. D) Sales Discounts account.
37)
38) When using a perpetual inventory method, what account is increased when you buy merchandise inventory? A) Prepaid Assets B) Merchandise Expense C) Cost of Goods Sold D) Inventory
38)
39) The next step in the accounting cycle after preparing an unadjusted trial balance is to A) journalize the adjusting entries in the general journal. B) complete the worksheet. C) prepare the financial statements. D) prepare the closing journal entries.
39)
4
40) Net Sales are A) Revenue - Sales Discounts + Sales Returns and Allowances. B) Gross Sales + Sales Discounts - Sales Returns and Allowances. C) Gross Sales + Sales Discounts + Sales Returns and Allowances. D) Gross Sales - Sales Discounts - Sales Returns and Allowances.
40)
41) Which of the following steps of the accounting cycle comes last? A) Prepare financial statements B) Journalize and post adjusting entries C) Journalize and post closing entries D) Post-closing trial balance
41)
42) The adjustment for depreciation expense was omitted; this would A) understate the period's expenses and overstate the period's assets. B) understate the period's expenses and understate the period's assets. C) overstate the period's expenses and understate the period end liabilities. D) overstate the period's expenses and overstate the period end liabilities.
42)
43) In the periodic inventory system the inventory balance is A) updated only at the end of the period. B) adjusted only every three months. C) updated at the beginning of the period. D) continually updated throughout the year.
43)
44) Current assets are A) cash and assets that will be converted or consumed during the normal operating cycle or one year, whichever is shorter. B) cash and other assets that will be converted or consumed during the normal operating cycle of the company or one year, whichever is longer. C) cash and other assets that will be used during the year. D) cash and other assets that will not be used during the year.
44)
45) The entry to adjust salaries was done twice. This error would cause A) Capital to be overstated. B) liabilities to be understated. C) liabilities to be overstated. D) expenses to be understated.
45)
46) The goal of closing entries is A) to update the Capital account balance. C) to clear the Withdrawal account.
46) B) to clear revenue and expense accounts. D) All of these answers are correct.
47) Unearned Rent is recorded when A) the fee is earned but not collected. B) the fee has been collected before the service has been provided. C) the fee has been paid, and the service is complete. D) no fee has been paid, but the service is complete. 48) Unearned Rent is what type of account? A) Liability B) Asset
47)
48) C) Expense
5
D) Revenue
49) When closing sales, which of the following accounts will also be closed? A) Owner's Capital B) Sales Returns and Allowances C) Rental Income D) Sales Discounts
49)
50) A classified balance sheet includes all of the following EXCEPT A) capital assets. B) current assets. C) revenues. D) current liabilities.
50)
51) The perpetual inventory system updates the record of goods on hand A) at the end of the accounting period. B) weekly. C) as transactions occur. D) daily.
51)
52) Capital assets are usually listed A) in alphabetical order. C) in order of liquidity.
52) B) by how long they will last. D) None of these are correct.
53) Capital Assets are A) long-lived assets used in the production or sales of goods or services. B) liabilities used to generate net income. C) cash and accounts receivable. D) cash and assets that will be converted or used during the normal operating cycle of the company or one year, whichever is longer.
53)
54) Which of the following adjustments may be reserved? A) The adjustment to Allocate Prepaid Insurance to the current period B) The adjustment to determine Supplies Expense for the period C) The adjustment to Record Depreciation Expense D) The adjustment to Accrue Salaries Payable
54)
55) The financial statement on which Rental Income would appear is the A) income statement. B) balance sheet. C) statement of owner's equity. D) operations statement.
55)
56) Prime Realty paid $1,800 rent on a building in advance for two years on May 1. The amount that should be recorded as rent expense as of December 31 is A) $600. B) $525. C) $1,800. D) $900.
56)
57) An account usually not used in an adjusting entry is A) Equipment. B) Interest Payable. C) Consulting Fees-Revenue. D) Accumulated Depreciation - Equipment.
57)
58) Which of the following items generally has a credit balance in the balance sheet columns of the worksheet? A) Accumulated Depreciation. B) Inventory. C) Sales Returns and Allowances. D) Sales.
58)
6
59) Inventory Shrinkage A) reduces the Cost of Goods Sold. C) adds to the Cost of Goods Sold.
B) depends on the circumstances. D) does not affect Cost of Goods Sold.
59)
60) Which of the following accounts is NOT a liability? A) Accounts Payable C) Salaries Payable
B) Unearned Rent D) All of the above answers are liabilities.
60)
61) The first step in the closing process is to A) transfer the balance of the Owner's Withdrawals Account to Capital. B) close all balances on the income statement credit column of the worksheet except Income Summary. C) transfer the balance from the Income Summary Account to the Capital Account. D) close all balances on the income statement debit column of the worksheet except Income Summary.
61)
62) When the adjustment for depreciation is made A) total expenses decrease. C) total assets decrease.
62) B) total liabilities increase. D) None of the answers are correct.
63) The closing entry for the $700 balance of Wages Expense includes A) a credit to Wages Payable for $700. B) a debit to Wages Expense for $700. C) a debit to Income Summary for $700. D) a credit to Income Summary for $700.
63)
64) What is the name of the revenue account used by merchandise companies? A) Merchandise Fees B) Sales C) Merchandise Inventory D) Capital
64)
65) Reversing entries are general journal entries that A) are the same as the adjusting entries. C) are the opposite of adjusting entries.
65) B) only affect balance sheet accounts. D) only affect income statement accounts.
66) Liquidity is A) how easily an asset can be converted to cash. B) how quickly Accounts Payable can be paid. C) how much cash a company has on its balance sheet. D) None of the above are correct.
66)
67) The balance sheet columns on the worksheet prepared for Boston Foods had subtotals as follows: debit column, $11,000, and credit column, $10,400. This information indicates that A) an error was made when preparing the adjustments in the worksheet. B) the company incurred a net income of $600. C) the company incurred a net loss of $600. D) a mathematical error was made in the worksheet.
67)
7
68) The reversing entry for Salaries is A) debit Salaries Payable; credit Salaries Expense. B) debit Salaries Expense; credit Salaries Payable. C) debit Salaries Payable; credit Income Summary. D) debit Salaries Expense; credit Cash.
68)
69) After the closing entries have been posted A) the Capital account includes the current net profit or loss. B) the post-closing trial balance is prepared. C) the temporary accounts are zeroed out. D) All of these answers are correct.
69)
70) The post-closing trial balance contains A) all accounts with balances. C) assets and liabilities.
70) B) only permanent accounts. D) All of these answers are correct.
71) Rental Income is what type of account? A) Asset B) Revenue
C) Liability
71) D) Expense
72) Which of the following accounts will appear on the post-closing trial balance? A) Sales B) Capital C) Withdrawals D) Cost of Goods Sold
72)
73) The adjustment for supplies used would be to A) debit Supplies; credit Accounts Payable. B) debit Supplies Expense; credit Supplies. C) debit Supplies; credit Supplies Expense. D) debit Supplies; credit Cash.
73)
74) Which of the following accounts will NOT appear on the post-closing trial balance? A) Capital B) Accounts Payable C) Withdrawals D) Cash
74)
75) A company paid next month's rent in advance. This would be classified as A) Revenue. B) a Current Asset. C) a Current Liability. D) Other Income.
75)
76) The trial balance columns on the worksheet are populated using the A) subsidiary ledger. B) general journal. C) general ledger. D) none of the above.
76)
77) The entry to close the Withdrawals account to Capital was omitted. This error would cause A) the Capital account to be overstated. B) net income to be understated. C) the Capital account to be understated. D) net income to be overstated.
77)
78) Inventory shrinkage A) does not affect Cost of Goods Sold. C) increases Cost of Goods Sold.
78) B) decreases Cost of Goods Sold. D) increases liabilities.
8
79) To determine how much merchandise a company has had returned from its customers, it should review the A) Sales Returns & Allowances account. B) Inventory account. C) Sales Discounts account. D) Cost of Goods Sold account.
79)
80) Which of the following transactions could cause the Income Summary to be debited and Capital to be credited? A) The business earned a net income for the period. B) The business earned a net loss for the period. C) Closed the Owner's Capital account D) None of these are correct.
80)
81) As the Unearned Rent is earned, A) the liability account is decreased and the revenue account is not affected. B) the liability account is decreased and the revenue account is increased. C) the liability account is not affected but the revenue account is decreased. D) the liability account is increased and the revenue account is decreased.
81)
82) The periodic inventory system updates the record of goods on hand A) at the end of the accounting period. B) weekly. C) daily. D) as transactions occur.
82)
83) When closing the expense accounts, which of the following accounts will also be closed? A) Sales Discounts B) Unearned Revenue C) Income Summary D) Interest Income
83)
84) The entry to adjust for Unearned Rent becoming earned includes A) a debit to Income Summary. B) a debit to Unearned Rent. C) a credit to Unearned Rent. D) None of these are correct.
84)
85) Mortgage Payable A) has a debit balance. B) has a credit balance. C) shows the amount owed on a mortgage. D) Both B and C are correct.
85)
86) At the end of the fiscal period the merchandise inventory account A) will have the same balance as the beginning inventory. B) will be reported as an expense on the income statement. C) will have a zero balance. D) will be compared to the results of the physical inventory count.
86)
87) If $4,000 was the beginning inventory, $10,000 in new inventory purchases were made and the cost of goods sold were $7,000, how much was ending inventory? A) $14,000 B) $7,000 C) $4,000 D) $3,000
87)
88) The normal balance of Rental Income is A) a credit. C) dependent on the circumstances.
88) B) zero. D) a debit.
9
89) The adjustment for salaries is necessary A) to recognize the expense in the period incurred. B) because the employer did not have enough cash to write the paycheques. C) to recognize the revenue in the period earned. D) None of the above answers are correct.
89)
90) Owner's Withdrawals would be found on the worksheet in the A) income statement debit column. B) income statement credit column. C) balance sheet debit column. D) balance sheet credit column.
90)
91) Mortgage Payable is what type of account? A) Capital B) Liability
91) C) Asset
92) Sales would be found on the worksheet in the A) income statement debit column. C) balance sheet debit column.
D) Expense 92)
B) income statement credit column. D) balance sheet credit column.
93) Income Summary, before closing to Capital, contains a debit balance of $86 and a credit balance of $100. What is the entry to close Income Summary to Capital? A) Debit Income Summary $14; credit Capital $14 B) Debit Income Summary $100; credit Capital $100 C) Debit Income Summary $86; credit Capital $86 D) Debit Capital $14; credit Income Summary $14
93)
94) The income statement columns on a worksheet have subtotals as follows: debit column, $9,500, and credit column, $9,000. This indicates that A) there was an error in the income statement columns. B) the company earned a net income of $500. C) the company incurred a net loss of $500. D) there was an error in the adjustments columns.
94)
95) Net Sales + Sales Discounts + Sales Returns and Allowances equals A) Gross Sales. B) Gross Profit. C) Net Loss. D) Net Income from Operations.
95)
96) Accounts payable is a(n) A) current liability. C) long-term liability.
96) B) operating expense. D) current asset.
97) What financial statement shows the amount for Cost of Goods Sold? A) Statement of Owner's Equity B) Income Statement C) Balance Sheet D) Statement of Cash Flows
97)
98) Freight-in is A) recorded as an asset. C) a Cost of Purchasing Goods.
98) B) a Cost of Selling Goods. D) recorded as an Operating Revenue.
10
99) A characteristic of a perpetual inventory method is that A) it keeps continual track of inventory. B) it records units sold immediately. C) it records units on hand at the beginning of the period. D) All of these answers are correct.
99)
100) Administrative Expenses include A) Delivery Expense. C) Depreciation Expense.
100) B) Insurance Expense. D) None of the above are correct.
101) The adjustment for unearned rent is recorded when A) rent is earned. B) cash is received. C) revenue is received. D) closing entries are prepared.
101)
102) How is Income Summary closed if the company had a net income? A) Debit Income Summary; credit Capital B) Debit Capital; credit Withdrawals C) Debit Withdrawals; credit Capital D) Debit Capital; credit Income Summary
102)
103) Net Income equals A) Sales - Sales Returns & Allowances - Sales Discount - Cost of goods sold - Operating Expenses. B) Net Sales - Cost of goods sold - Operating expenses. C) Gross Profit - Operating expenses. D) All of the above are correct.
103)
104) The adjustment for accrued wages was not done; this would cause A) net income to be understated. B) expenses to be overstated. C) liabilities to be understated. D) liabilities to be overstated.
104)
105) Gross Profit equals A) Sales - Sales Returns and Allowances - Sales Discounts - Cost of Goods Sold. B) Cost of Goods Sold - Other Expenses. C) Net sales - Other Expenses. D) Cost of Goods Sold - Operating Expenses.
105)
106) Payment discounts received on merchandise purchased for resale under the perpetual inventory method are subtracted from A) Inventory Expense. B) Sales. C) Sales Discounts. D) Merchandise Inventory.
106)
107) What inventory method is used when the inventory balance is updated at every purchase and sale? A) Net Income B) Perpetual C) Cost of Goods Sold D) Periodic
107)
108) In what category in a classified balance sheet is Accounts Receivable found? A) Current Assets B) Capital Assets C) Current Liabilities D) Owner's Equity
108)
11
109) The financial statement on which Unearned Rent would appear is A) the income statement. B) the statement of owner's equity. C) the balance sheet. D) Unearned Rent is not reported until earned.
109)
110) The entry to close the Cost of Goods Sold account will include which of the following? A) Debit to Capital B) Debit to Income Summary C) Debit to Cost of Goods Sold D) Credit to Income Summary
110)
111) The post-closing trial balance is prepared from A) the general ledger. B) the trial balance columns on the worksheet. C) the income statement columns on the worksheet. D) the balance sheet columns on the worksheet.
111)
112) Joe received $4,000 in advance for renting part of his building for 4 months. What is the entry to record the adjustment after one month has passed? A) Debit Cash $4,000; credit Rental Income $4,000 B) Debit Unearned Rent $1,000, credit Rental Income $1,000 C) Debit Cash $1,000; credit Rental Income $1,000 D) Debit Unearned Rent $4,000, credit Rental Income $4,000
112)
113) Owner's Capital would be found on the worksheet in the A) income statement debit column. B) income statement credit column. C) balance sheet debit column. D) balance sheet credit column.
113)
114) When closing sales, which of the following accounts will also be closed? A) Unearned Revenue B) Sales Discounts C) Interest Income D) Sales Returns and Allowances
114)
115) The adjustment for accrued salaries would be to A) debit Salaries Payable; credit Cash. B) debit Salaries Expense; credit Cash. C) debit Salaries Payable; credit Salaries Expense. D) debit Salaries Expense; credit Accrued Salaries.
115)
116) The adjusted trial balance on the worksheet A) contains balances for all accounts with balances. B) contains balances from the temporary accounts. C) contains balances from the permanent accounts. D) None of the above answers are correct.
116)
117) Which amount is not directly found on the worksheet? A) Sales Discounts B) Sales Returns C) Sales D) Net Sales
117)
12
118) Other Expense is used to record A) administrative expenses. C) non-operating expenses.
118) B) operating expenses. D) selling expenses.
119) The entry to close the Withdrawal account was entered in reverse the Withdrawal account was debited and Capital credited. This error would cause A) Withdrawals to be overstated. B) Capital to be understated. C) net income to be understated. D) net income to be overstated.
119)
120) The entry to adjust for Inventory Shrinkage includes A) a debit to Inventory. B) a credit to Cost of Goods Sold. C) a credit to Inventory. D) None of these are correct.
120)
121) The entry to close the expense account(s) was entered in reverse - Income Summary was credited and the expense account(s) was/were debited. This error would cause A) Capital account to be understated. B) liabilities to be overstated. C) Capital account to be overstated. D) assets to be overstated.
121)
122) The entry to adjust for Unearned Rent becoming earned includes A) a credit to Unearned Rent. B) a debit to Rent Revenue. C) a credit to Rent Revenue. D) None of these are correct.
122)
123) From the following items, which would most likely cause the recording of unearned revenue? A) Legal fees collected after work is performed B) Potential sale of merchandise C) Subscriptions collected in advance for a magazine D) Purchase of merchandise on account
123)
124) How is Income Summary closed if the company had a net loss? A) Credit Income Summary; debit Capital B) Debit Income Summary; credit Capital C) Debit Withdrawals; credit Capital D) Debit Capital; credit Withdrawals
124)
125) The correct worksheet columns to use for preparing the income statement are the A) income statement columns. B) adjustments columns. C) trial balance columns. D) adjusted trial balance columns.
125)
126) At the start of the year, Northern Lights had $7,000 worth of merchandise. This is called A) Ending Enventory. B) Beginning Inventory. C) Cost of Goods Sold. D) Shrinkage.
126)
127) As supplies are used, they become A) an expense. B) a liability.
127) C) a revenue.
128) Net Sales - Cost of Goods Sold is equal to A) Gross Expenses. C) Net Income from Operations.
B) Operating Expenses. D) Gross Profit.
D) an asset. 128)
13
129) Inventory shrinkage is $100. The income statement debit and credit columns of the worksheet total $2,500 and $2,500, respectively, not including the adjustment amounts for shrinkage. The net income or loss for the period is A) $150 net loss. B) $150 net income. C) $100 net loss. D) $100 net income.
129)
130) On December 1, Video Center received $2,400 for two years' rent in advance from Gaffey Company. The December 31 adjusting entry that Video Center should make is to A) debit Cash; credit Rental Income $1,200. B) debit Rental Income; credit Unearned Rent $1,200. C) debit Unearned Rent; credit Rent Expense $100. D) debit Unearned Rent; credit Rental Income $100.
130)
131) Closing entries A) can be done before adjusting entries. C) are done to update Cash.
131) B) are posted to the general ledger. D) All of the above are correct.
132) Recording the adjustment for supplies will A) decrease the total assets and increase the total expenses. B) increase the total assets and increase the total liabilities. C) increase the total assets and increase the total expenses. D) decrease the total assets and decrease the total expenses.
132)
133) When counting supplies, several boxes were missed. This would cause A) Supplies Expense to be overstated. B) Net Income to be overstated. C) Supplies to be overstated. D) All of the above are correct.
133)
134) Which of the following items generally has a credit balance in the income statement columns of the worksheet? A) Sales B) Inventory C) Accumulated Depreciation D) Sales Returns and Allowances
134)
135) Adjusting entries from the worksheet A) are posted directly to the ledger. B) affect only balance sheet accounts. C) are closed to the Income Summary account. D) are journalized and posted to the ledger.
135)
136) When completing a worksheet, A) the inventory amount appears in the balance sheet debit column of the worksheet. B) the inventory amount appears in the unadjusted trial balance debit column of the worksheet. C) the inventory amount appears in the income statement debit column. D) the inventory amount appears in the adjustment credit column.
136)
14
137) Interest Expense is A) included in the "Other Expenses" on the income statement. B) has a normal debit balance. C) a cost of borrowing money. D) All of the above are correct.
137)
138) Merchandise purchased for resale under the perpetual inventory method is added to A) Sales. B) Merchandise Inventory. C) Sales Discounts. D) Cost of Goods Sold.
138)
139) The entry to close the owner's Withdrawal account will include which of the following? A) A debit to Income Summary B) A credit to Withdrawals C) A debit to Withdrawals D) A credit to Income Summary
139)
140) In which section does Interest Revenue appear in the Income Statement? A) Administrative Expenses B) Other Expense C) Selling Expenses D) Other Income
140)
141) The normal balance for Unearned Rent is A) a debit. C) a credit.
141) B) zero. D) dependent on circumstances.
142) Which of the following is NOT an operating expense? A) Interest Expense B) Maintenance Expense C) Postage Expense D) Salaries Expense
142)
143) Accumulated Depreciation-Buildings should be shown on the A) statement of owner's equity. B) income statement. C) balance sheet. D) The account does not appear on a financial statement since it is a temporary account.
143)
144) If gross profit exceeds expenses, the company A) broke even. C) had a net loss.
144) B) had a net income. D) Not enough information given
145) Which of the following is an operating expense? A) Interest expense C) Interest revenue
B) Inventory D) Salaries expense
145)
146) The capital account in the ledger agrees with the balance sheet A) after the adjusting entries have been posted. B) after the income statement has been prepared. C) after the closing entries have been posted. D) after posting the reversing entries.
15
146)
147) Which of the following is NOT under the heading Capital Assets on a classified balance sheet? A) Accumulated Depreciation on Office Machines B) Store Equipment C) Office Machines D) Office Supplies
147)
148) Cost of Goods Sold includes A) Net Sales. C) Freight-in.
148) B) Other Income. D) Freight-out.
149) When the adjustment for depreciation is made A) total assets increase. C) total expenses increase.
B) total liabilities increase. D) None of the answers are correct.
149)
150) The ending merchandise inventory was overstated. This error would cause A) net income to be overstated. B) assets to be understated. C) net income to be understated. D) None of these are correct.
150)
151) To calculate gross profit, A) subtract cost of goods sold from net sales. B) add freight to net purchases. C) subtract Freight-In from net purchases. D) subtract ending inventory from cost of goods available for sale.
151)
152) The dollar amount determined by a physical count of merchandise on hand at the end of the period is called A) periodic inventory. B) ending inventory. C) beginning inventory. D) perpetual inventory.
152)
153) During the preparation of the worksheet, the $400 balance of the Dennis, Withdrawal account was extended as a debit to the income statement columns. This error will A) understate net income $800. B) understate net income $400. C) overstate net income $400. D) overstate net income $800.
153)
154) The last four columns of a worksheet are used for A) the cash flow statement. B) adjustments. C) the trial balance. D) the income statement and balance sheet.
154)
155) The first two columns of a worksheet are used for A) journalizing. C) adjustments.
155) B) posting. D) the trial balance.
156) If no adjustments are needed for the Frances Company A) the trial balance, adjusted trial balance, and post-closing trial balance will be identical. B) the adjusted trial balance will be identical to its post-closing trial balance. C) the post-closing trial balance will be identical to its trial balance. D) the trial balance will be identical to its adjusted trial balance.
16
156)
157) The entry to close the Income Summary to Capital was omitted, there was a net income. This error would cause A) net income to be overstated. B) the Capital account to be understated. C) net income to be understated. D) the Capital account to be overstated.
157)
158) The Balance Sheet columns on a worksheet have subtotals as follows debit column, $1,000, and credit column, $900. This indicates that A) the company earned a net income of $100. B) there was an error in the Adjustments columns. C) there was an error in the Balance Sheet columns. D) the company incurred a net loss of $100.
158)
159) A classified balance sheet provides more information about the company to A) suppliers. B) owners. C) creditors. D) All of the above answers are correct.
159)
160) The perpetual inventory method is A) used by companies with small amounts of inventory. B) used by companies with high amounts of inventory. C) does not ever require a physical count of inventory. D) not used by many companies today.
160)
161) Gross Profit is calculated on the A) Trial Balance. C) Balance Sheet.
161) B) Income Statement. D) Statement of Owner's Equity.
162) A merchandise company's interest expense is a(n) A) selling expense. C) administrative expense.
B) contra-revenue. D) other expense.
162)
163) Depreciation on equipment was recorded twice this period. This would cause A) expenses to be overstated and total assets to be overstated B) expenses to be overstated and total assets to be understated. C) expenses to be understated and total assets to be understated. D) expenses to be understated and total assets to be overstated.
163)
164) The goods a company has available to sell to customers are called A) Merchandise Inventory. B) Cost of Goods Sold. C) Supplies. D) Sales.
164)
165) To determine how much merchandise was returned from a company's customers, the company should review the A) Inventory Account. B) Cost of Goods Sold Account. C) Sales Discounts Account. D) Sales Returns and Allowances Account.
165)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 166) Adjustments are journalized before recording them in the worksheet. 17
166)
167) Reversing entries are mandatory for all Canadian corporations.
167)
168) An adjustment to Prepaid Insurance would not normally be made until the end of two years.
168)
169) Mortgage Payable is an expense account.
169)
170) The Gross Profit figure used on the income statement is copied as is from the worksheet.
170)
171) Land is listed first under Capital Assets.
171)
172) On the worksheet, the Unearned Rent Revenue account is found on the Balance Sheet columns.
172)
173) Under the accrual system, expenses are recorded when paid.
173)
174) The category Other Income can be used to report rental income.
174)
175) Merchandise Inventory appears on both the Income Statement and the Balance Sheet.
175)
176) The formal income statement can be prepared from the income statement columns of the worksheet.
176)
177) Reversing entries are done when assets or liabilities are increasing and have no previous balance.
177)
178) When the adjustment is made for depreciation, both the Depreciation Expense account and Accumulated Depreciation account are increased.
178)
179) The inside columns on the financial reports are used for subtotalling rather than debits and credits.
179)
180) A perpetual inventory system is an inventory system that keeps continual track of inventory. It is used by companies with a high unit cost and a low volume.
180)
181) The left and right columns on the financial statements are used for debits and credits.
181)
182) The adjusting entry to record rental income that is earned would be a debit to Rental Income and a credit to Unearned Rent.
182)
183) An adjustment can be made on the worksheet when the perpetual inventory system is used if the physical count of inventory differs from the records.
183)
184) The ending inventory figure is shown on the balance sheet.
184)
185) Net income is added to the worksheet credit column of the balance sheet.
185)
186) Store Equipment would normally be classified as a current asset.
186)
18
187) The Statement of Owner's Equity is the same for a service business as for a merchandise business.
187)
188) Salaries Payable is found on the income statement.
188)
189) The ending inventory in Year 1 is the beginning inventory in Year 2.
189)
190) Gross profit minus cost of goods sold equals net sales.
190)
191) The post-closing trial balance would include Sales and Cost of Goods Sold.
191)
192) Unearned Rent is the only type of unearned revenue.
192)
193) The amount for Cost of Goods Sold is found on the worksheet.
193)
194) Not all adjusting entries are reversed.
194)
195) Mortgage Payable is found on the income statement.
195)
196) Unearned Revenue is a liability account used to record rent fees received in advance.
196)
197) Reversing entries are recorded on the first day of the new accounting period.
197)
198) In closing entries, the Income Summary account is left with a Credit balance equal to the amount of net income.
198)
199) After the closing process, the permanent accounts are set back to zero.
199)
200) Net income from operations plus other income minus other expenses equals net income.
200)
201) To record the adjustment for supplies on the worksheet, a credit is made to Supplies for the beginning supply balance, and a debit for the same amount is made to Income Summary.
201)
202) In closing entries, the Income Summary account is closed to the Capital account after Withdrawals.
202)
203) Reversing entries are the opposite of adjusting entries.
203)
204) Adjusting journal entries still need to be made after the worksheet; otherwise the account balances will not be correct.
204)
205) Prepaid Insurance would be classified as a current asset.
205)
206) On the worksheet, Cost of Goods Sold appear in the balance sheet columns.
206)
207) The Net Sales figure used on the income statement is copied as is from the worksheet.
207)
19
208) The entry to record the adjustment for depreciation on equipment would be a debit to Depreciation Expense -Equipment and a credit to Equipment.
208)
209) After the closing process, the temporary accounts are set back to zero.
209)
210) Merchandise Inventory would be classified as a current asset.
210)
211) The amount of supplies used causes a decrease in Supplies and an increase in expense.
211)
212) A balance sheet where assets and liabilities are broken down into more detail is called a comprehensive balance sheet.
212)
213) All adjusting entries can be reversed.
213)
214) Adjustments are journalized before recording them in the worksheet.
214)
215) The Income Summary account is used to adjust for Inventory Shrinkage.
215)
216) The Merchandise Inventory is found on the worksheet in the balance sheet columns.
216)
217) In the perpetual inventory system, it is not necessary to take a physical inventory at the end of the period.
217)
218) The general ledger balances are used to prepare the post-closing trial balance.
218)
219) Interest Payable is found on the income statement.
219)
220) The post-closing trial balance would not include temporary accounts.
220)
221) Administrative expenses are also called general expenses.
221)
222) The statement of owner's equity ending capital is equal to the capital on the worksheet.
222)
223) Non-operating expenses are found in the Cost of Goods Sold section of the income statement.
223)
224) Unearned Rent is one type of unearned revenue.
224)
225) The Prepaid Asset and Cost of Goods Sold accounts are combined to come up with the balance sheet inventory amount.
225)
226) Operating expenses that are not related to the selling of goods are administrative expenses.
226)
227) Mortgage Payable is a liability account.
227)
228) Since adjustments are listed on the worksheet, there is no need to record the entries in the general journal.
228)
20
229) Adjusting journal entries are not needed if a worksheet is used.
229)
230) The average time it takes to buy and sell merchandise and collect Accounts Receivable is the normal operating cycle for a business.
230)
231) There is no point in physically counting inventory when the perpetual inventory system is used since nothing can be done if the physical count of inventory differs from the records.
231)
232) Salaries Payable is an expense account.
232)
233) When calculating Gross Profit on the Income Statement, the Net Sales and Cost of Goods Sold values are both required.
233)
234) The final balance in the Capital Account on the Balance Sheet can be taken directly from the worksheet.
234)
235) Every figure reported on the income statement comes directly from the worksheet, without any additional calculations required.
235)
236) Accounts Payable would be classified as a current liability.
236)
237) The physical inventory count is not needed to validate Cost of Goods Sold.
237)
238) Sales Discount is used when calculating Inventory.
238)
239) Gross profit minus Operating Expenses equals Net Income.
239)
240) Unearned Rent is a balance sheet account.
240)
241) The Balance Sheet will show the Capital asset "Land" less its accumulated depreciation.
241)
242) Differences in the ending physical count of inventory are added to the cost of goods sold.
242)
243) Reversing entries help reduce potential errors and simplify the record-keeping process.
243)
244) Interest Payable is an expense account.
244)
245) If a physical count is not completed and shrinkage has occurred, beginning inventory will be overstated in the next period.
245)
246) The Inventory account balance is assumed to be accurate; therefore, a physical count of goods is not required.
246)
21
ESSAY. Write your answer in the space provided or on a separate sheet of paper. Calculate the missing figures (a-k) in each of the following independent scenarios. 247) Sales
64
Merchandis Physical e Inventory Inventory Count
Unadjusted Cost of Goods Sold
20
52
18
Inventor y Shrinkag e a)
Adjuste Gross d Cost of Profit Goods Sold b) c)
a) ________ b) ________ c) ________ For each of the following identify in Column 1 the balance the account will have in the adjusted trial balance columns (debit or credit), in Column 2 the financial statement column(s) in which the account balance will be found (income statement or balance sheet), and in Column 3 the effect the account will have on the determination of net income (increase, decrease, or none).
248) Prepaid insurance
Column 1
Column 2
Column 3
________
________
________
249) Noble Magazine's unadjusted trial balance includes the following: Cash Unearned Magazine Fees Magazine Fees Revenue
$1,250 300 3,125
The accounting department has been notified that magazines in the amount of $150 have been delivered to clients who had previously paid in advance. Prepare the appropriate adjusting entry. For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the account's nature (permanent/temporary).
250) Sales Returns & Allow.
Column 1
Column 2
Column 3
Column 4
________
________
________
________
22
251) The following amounts are on the Riley's Clothing worksheet for the month ended March 30. Required: Calculate the following: a. Net sales b. Gross profit c. Operating expenses d. Other revenue e. Net income Account Sales Sales Returns and Allowances Sales Discounts Cost of Goods Sold Salaries Expense Rent Expense Depreciation Expense Interest Revenue
Income Statement Debit Credit 35 4 2 10 8 5 2 2
252) Prepare the general journal entry to record the adjustment for inventory: Merchandise Inventory account balance $4,975 Physical Count of inventory 4,995 253) Determine the ending Capital balance of a business having: Beginning Capital of $40,000 No investments or withdrawals Inventory of $10,000 Cost of Goods Sold of $90,000 Prepaid Insurance of $12,000 Operating expenses of $72,000 Net sales $180,000 254) Discuss the purpose of a detailed income statement. Briefly describe the major kinds of business activities covered on a detailed income statement. 255) Determine the ending Capital balance of a business having: Beginning Capital of $20,000 Withdrawals of $3,000 Inventory of $15,000 Cost of Goods Sold of $60,000 Prepaid Insurance of $1,000 Operating expenses of $50,000 Net sales $120,000
23
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the account's nature (permanent/temporary).
256) Wages Expense
Column 1
Column 2
Column 3
Column 4
________
________
________
________
For each of the following identify in Column 1 the balance the account will have in the adjusted trial balance columns (debit or credit), in Column 2 the financial statement column(s) in which the account balance will be found (income statement or balance sheet), and in Column 3 the effect the account will have on the determination of net income (increase, decrease, or none). Column 1
Column 2
Column 3
257) Wages payable
________
________
________
258) Depreciation expense
________
________
________
259) The following accounts are on the Balance Sheet section of Pickton Company worksheet for the month ended August 31, 2023. Required: Prepare a classified balance sheet.
ACCOUNT Cash Accounts Receivable Prepaid Insurance Merchandise Inventory Store Equipment Accum. Dep., Store Equip. Accounts Payable Unearned Revenue Mortgage Payable (due in 10 years) Pickton, Capital
BALANCE SHEET Debit Credit 5 3 2 15 14 7 12 5 8 3
Additional information Withdrawals for the period are $1, and Net Income is $5. Calculate the missing figures (a-k) in each of the following independent scenarios. 260) Sales
800
Merchandis Physical e Inventory Inventory Count
Unadjusted Cost of Goods Sold
750
700
725
Inventor y Shrinkag e a)
a) ________ b) ________ c) ________
24
Adjuste Gross d Cost of Profit Goods Sold b) c)
For each of the following identify in Column 1 the balance the account will have in the adjusted trial balance columns (debit or credit), in Column 2 the financial statement column(s) in which the account balance will be found (income statement or balance sheet), and in Column 3 the effect the account will have on the determination of net income (increase, decrease, or none).
261) Sales returns and allowances
Column 1
Column 2
Column 3
________
________
________
262) Katelyn Marie's Law Firm's unadjusted trial balance includes the following: Cash Unearned Legal Fees Legal Fees Revenue
$4,200 1,200 14,400
Using the above data, record the adjusting entry for $1,000 of the unearned legal fees earned. 263) Identify the category(s) of each of the accounts below. Current Asset Capital Asset Current Liabilities Long-Term Liabilities Item 0. Cash a. Accts. Receivable b. Accts. Payable c. Mortgage Payable d. Office Equipment e. Prepaid Insurance
Category Current Asset ________ ________ ________ ________ ________
Calculate the missing figures (a-k) in each of the following independent scenarios. 264) Sales
32
Merchandis Physical e Inventory Inventory Count
Unadjusted Cost of Goods Sold
Inventor y Shrinkag e
10
26
a)
9
a) ________ b) ________ c) ________
25
Adjuste d Cost of Goods Sold b)
Gross Profit
c)
For each of the following identify in Column 1 the balance the account will have in the adjusted trial balance columns (debit or credit), in Column 2 the financial statement column(s) in which the account balance will be found (income statement or balance sheet), and in Column 3 the effect the account will have on the determination of net income (increase, decrease, or none).
265) Sales discounts
Column 1
Column 2
Column 3
________
________
________
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the account's nature (permanent/temporary). Column 1
Column 2
Column 3
Column 4
266) Sales
________
________
________
________
267) Depreciation Expense
________
________
________
________
268) Discuss the reasons a company would consider using a periodic inventory system. 269) Prepare the adjusting journal entries from the following items on the Pedersen Company worksheet. ADJUSTMENTS Debit Interest Receivable (a) 5 Cost of Goods Sold (c) 4 Supplies Rental Fees Earned Interest Income Supplies Expense (b) 2 Inventory Unearned Rental Fees (d) 7
Credit
(b) 2 (d) 7 (a) 5 (c) 4
For each of the following identify in Column 1 the balance the account will have in the adjusted trial balance columns (debit or credit), in Column 2 the financial statement column(s) in which the account balance will be found (income statement or balance sheet), and in Column 3 the effect the account will have on the determination of net income (increase, decrease, or none). Column 1
Column 2
Column 3
270) Insurance expense
________
________
________
271) Wages expense
________
________
________
26
272) Calculate (a) net sales, (b) cost of goods sold, (c) gross profit, and (d) net income from the following: Sales $2,200 Sales Discount 50 Sales Returns and Allowances 25
Merchandise Inventory Cost of Goods Sold Operating Expenses
$65 1,320 360
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the account's nature (permanent/temporary).
273) Accounts Receivable
Column 1
Column 2
Column 3
Column 4
________
________
________
________
274) Use the following information to complete the partial worksheet for Bill's Company. Record the appropriate adjusting entries using the data below and extend the balances over to the adjusted trial balance columns. Merchandise Inventory - physical count Store supplies on hand Depreciation on store equipment Accrued salaries
$10 3 2 1
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the account's nature (permanent/temporary).
275) Cash
Column 1
Column 2
Column 3
Column 4
________
________
________
________
27
276) Use the following information to complete the partial worksheet for Rosemary's Company. Record the appropriate adjusting entries using the data below and extend the balances over to the adjusted trial balance columns. Merchandise Inventory - physical count Store supplies on hand Depreciation on store equipment Accrued salaries
$59 8 5 3
For each of the following identify in Column 1 the balance the account will have in the adjusted trial balance columns (debit or credit), in Column 2 the financial statement column(s) in which the account balance will be found (income statement or balance sheet), and in Column 3 the effect the account will have on the determination of net income (increase, decrease, or none). Column 1
Column 2
Column 3
277) Cash
________
________
________
278) Accumulated Depreciation Equip.
________
________
________
279) Indicate the normal balance of each of the following accounts: a) Unearned Rent Revenue b) Merchandise Inventory c) Cost of Goods Sold d) Sales Discount e) Unearned Revenue
28
280) Use the following information to complete the partial worksheet for Roxanne's Company. Record the appropriate adjusting entries using the data below and extend the balances over to the adjusted trial balance columns. Merchandise Inventory - physical count Store supplies on hand Depreciation on store equipment Accrued salaries
$84 15 2 5
For each of the following identify in Column 1 the balance the account will have in the adjusted trial balance columns (debit or credit), in Column 2 the financial statement column(s) in which the account balance will be found (income statement or balance sheet), and in Column 3 the effect the account will have on the determination of net income (increase, decrease, or none).
281) Merchandise Inventory
Column 1
Column 2
Column 3
________
________
________
282) Discuss the purpose of a classified balance sheet. Include a description of the major balance sheet classifications including: current assets, capital assets, current liabilities, and long-term liabilities. 283) Weir Company's adjusting entries included the following items: Interest Expense Interest Payable
200
Depreciation Expense Accumulated Depreciation
50
Interest Receivable Interest Income
90
200
50
90
Required: Prepare the appropriate reversing entries.
29
284) Indicate the financial statement(s) on which you would find the following items: a) Cost of Goods Sold b) Unearned Rent Revenue c) Rental Revenue d) Merchandise Inventory e) Sales Discount For each of the following identify in Column 1 the balance the account will have in the adjusted trial balance columns (debit or credit), in Column 2 the financial statement column(s) in which the account balance will be found (income statement or balance sheet), and in Column 3 the effect the account will have on the determination of net income (increase, decrease, or none).
285) Cost of Goods Sold
Column 1
Column 2
Column 3
________
________
________
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the account's nature (permanent/temporary). Column 1
Column 2
Column 3
Column 4
286) Unearned Revenue
________
________
________
________
287) Cost of Goods Sold
________
________
________
________
288) The following accounts are on the Balance Sheet section of Great Lakes Camping worksheet for the month ended January 31, 2023. Required: Prepare a classified balance sheet. Account Balance Sheet Debit Balance Sheet Credit Cash 2 Accounts Receivable 4 Merchandise Inventory 2 Store Equipment 6 Accumulated Depreciation 2 - Store Equipment Accounts Payable 3 Mortgage Payable 6 Great Lakes, Capital 2 Additional information: Withdrawals for the period are $2, and Net Income is $3.
30
289) The following amounts are on the Bear Sporting Goods worksheet for the month ended October 31. Required: Calculate the following: a. Net sales b. Gross profit c. Operating expenses d. Other revenue e. Net income Account Sales Sales Returns and Allowances Sales Discounts Cost of Goods Sold Salaries Expense Rent Expense Depreciation Expense Interest Expense Interest Revenue
Income Statement Debit Credit 45 6 2 23 4 3 1 1 1
290) The following accounts are on the Balance Sheet section of Appleton Company worksheet for the month ended July 31, 2023. Required: Prepare a classified balance sheet.
ACCOUNT Cash Accounts Receivable Merchandise Inventory Store Equipment Accum. Dep., Store Equip. Accounts Payable Mortgage Payable (due in 7 years) Appleton, Capital
BALANCE SHEET Debit Credit 3 5 7 15 3 7 12 4
Additional information Withdrawals for the period are $2, and Net Income is $6. For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the account's nature (permanent/temporary). Column 1
Column 2
Column 3
Column 4
291) Interest Expense
________
________
________
________
292) Sales Discounts
________
________
________
________
31
293) Calculate: (a) net sales, (b) inventory shrinkage, (c) gross profit, and (d) net income from the following: Sales Sales Discount Sales Returns and Allowances
$3,000 50
Cost of Goods Sold (unadjusted) Merchandise Inventory Physical Inventory Count Operating Expenses
80
$ 2,000 1,400 1,350 300
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the account's nature (permanent/temporary).
294) Wages Payable
Column 1
Column 2
Column 3
Column 4
________
________
________
________
For each of the following identify in Column 1 the balance the account will have in the adjusted trial balance columns (debit or credit), in Column 2 the financial statement column(s) in which the account balance will be found (income statement or balance sheet), and in Column 3 the effect the account will have on the determination of net income (increase, decrease, or none).
295) Petty Cash
Column 1
Column 2
Column 3
________
________
________
296) Prepare compound closing entries from the following information on the Thamesford Storage Company income statement columns from the worksheet.
Sales Sales Ret. and Allow. Cost of Goods Sold Interest Revenue Sales Salaries Expense Office Salaries Expense
INCOME STATEMENT Debit Credit 34 2 22 3 5 2
297) Prepare the general journal entry to record the adjustment for inventory: Merchandise Inventory account balance $4,975 Physical Count of inventory 4,955
32
Calculate the missing figures (a-k) in each of the following independent scenarios. 298) Sales
400
Merchandis Physical e Inventory Inventory Count
Unadjusted Cost of Goods Sold
125
325
130
Inventor y Shrinkag e a)
Adjuste Gross d Cost of Profit Goods Sold b) c)
a) ________ b) ________ c) ________ For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the account's nature (permanent/temporary).
299) Prepaid Insurance
Column 1
Column 2
Column 3
Column 4
________
________
________
________
300) Camping is Fun has a Merchandise Inventory account balance of $2,000 and an unadjusted Cost of Goods Sold of $2,200. Calculate the cost of goods sold under the following different situations: a) Physical count shows $2,000 of Merchandise Inventory on hand. b) Physical count shows $2,250 of Merchandise Inventory on hand. c) Physical count shows $1,980 of Merchandise Inventory on hand. For each of the following identify in Column 1 the balance the account will have in the adjusted trial balance columns (debit or credit), in Column 2 the financial statement column(s) in which the account balance will be found (income statement or balance sheet), and in Column 3 the effect the account will have on the determination of net income (increase, decrease, or none).
301) Earned Revenue
Column 1
Column 2
Column 3
________
________
________
302) Prepare the general journal entry to record the adjustment for inventory: Merchandise Inventory account balance $5,000 Physical Count of inventory 4,995
33
303) Identify the category(s) of each of the accounts below. Current Asset Capital Asset Current Liabilities Long-Term Liabilities Item 0. Cash a. Accounts Payable b. Accumulated Depreciation c. Mortgage Payable d. Unearned Revenue e. Merchandise Inventory
Category Current Asset ________ ________ ________ ________ ________
304) Indicate the normal balance of each of the following accounts: a. Sales Returns and Allowances b. Merchandise Inventory c. Cost of Goods Sold d. Payroll Tax Expense e. Unearned Rent f. Sales Discount g. Canada Pension Plan Payable h. Unearned Revenue For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the account's nature (permanent/temporary).
305) Merchandise Inventory
Column 1
Column 2
Column 3
Column 4
________
________
________
________
306) Prepare the closing entries from the following information on the PC Pros Company worksheet income statement columns. Income Statement Debit Credit Sales 17 Sales Ret. and Allow. 1 Cost of Goods Sold 11 Insurance Expense 3 Office Salaries Expense 1 Rental Fees Earned 2
34
307) The following accounts are on the Balance Sheet section of Scents Galore worksheet for the period ending November 30, 2022. Required: Prepare a classified Balance Sheet for the company as of Nov. 30, 2022. Additional information: Withdrawals for the period are $4, and Net Income is $12. Account Balance Sheet Debit Balance Sheet Credit Cash 6 Accounts Receivable 10 Merchandise Inventory 14 Store Equipment 30 Accumulated Depreciation - Store 6 Equipment Accounts Payable 14 Mortgage Payable 24 Scents Galore, Capital 8
308) The following accounts are on the Balance Sheet section of Marble Company worksheet for the month ended August 31, 2022. Required: Prepare a classified balance sheet. BALANCE SHEET ACCOUNT Debit Credit Cash 4 Accounts Receivable 7 Merchandise Inventory 4 Store Equipment 12 Accum. Dep., Store Equip. 4 Accounts Payable 5 Mortgage Payable (due in 5 years) 13 Marble, Capital 3 Additional information Withdrawals for the period are $4, and Net Income is $6. For each of the following identify in Column 1 the balance the account will have in the adjusted trial balance columns (debit or credit), in Column 2 the financial statement column(s) in which the account balance will be found (income statement or balance sheet), and in Column 3 the effect the account will have on the determination of net income (increase, decrease, or none).
309) Unearned Rent
Column 1
Column 2
Column 3
________
________
________
35
310) Calculate: (a) net sales, (b) cost of goods sold, (c) gross profit, and (d) net income from the following: Sales Sales Discount Sales Returns and Allowances
$1,300 5
Beginning Inventory Net Purchases Ending Inventory Operating Expenses
15
$11 1,050 16 100
311) Sue Hacker's Computer Security Firm's unadjusted trial balance includes the following: Cash Unearned Security Fees Security Fees Revenue
$1,220 1,500 9,025
Using the above data, record the adjusting entry for $500 of the unearned security fees earned. 312) Brady Company's unadjusted trial balance includes the following: Cash Unearned Legal Fees Legal Fees Revenue
$2,100 600 7,200
The accounting department has been notified that legal services in the amount of $400 have been performed for clients who had previously paid in advance. Prepare the appropriate adjusting entry. 313) Prepare closing entries from the following information on the Warner Books worksheet income statement columns. Additional information: Withdrawals equal $20 for the period. Income Statement Debit Credit 80 8 42 8 12 4
Sales Sales Ret. and Allow. Cost of Good Sold Interest Revenue Sales Salaries Expense Office Salaries Expense
314) Rob Dacker's Accounting Firm's unadjusted trial balance includes the following: Cash Unearned Accounting Fees Accounting Fees Revenue
$3,750 2,950 11,100
Using the above data, record the adjusting entry for $950 of the unearned accounting fees earned. 315) Calculate: (a) net sales, (b) inventory shrinkage, (c) gross profit, and (d) net income from the following: Sales Sales Discount Sales Returns and Allowances
$1,300 5 15
Cost of Goods Sold (unadjusted) Merchandise Inventory Physical Inventory Count Operating Expenses 36
$ 1,061 900 884 100
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the account's nature (permanent/temporary). Column 1
Column 2
Column 3
Column 4
316) Prepaid Rent
________
________
________
________
317) Equipment
________
________
________
________
318) Determine the ending Capital amount of a business having: Beginning Capital amount of $25,000 Withdrawals of $1,500 Net sales of $150,000 Cost of Goods Sold of $80,000 Interest expense of $1,500 Prepaid rent of $6,000 Payroll liabilities of $7,000 Operating expenses of $32,000 For each of the following identify in Column 1 the balance the account will have in the adjusted trial balance columns (debit or credit), in Column 2 the financial statement column(s) in which the account balance will be found (income statement or balance sheet), and in Column 3 the effect the account will have on the determination of net income (increase, decrease, or none). Column 1
Column 2
Column 3
319) Sales
________
________
________
320) Earned Rent
________
________
________
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the account's nature (permanent/temporary). Column 1
Column 2
Column 3
Column 4
321) Accumulated Dep., Equip.
________
________
________
________
322) Interest Revenue
________
________
________
________
323) Accounts Payable
________
________
________
________
37
324) Myla Company's adjusting entries included the following items: Interest Receivable Interest Income
150 150
Depreciation Expense 475 Accumulated Depreciation
475
Interest Expense Interest Payable
75
75
Required: Prepare the appropriate reversing entries. 325) Identify the expense category (Selling or Adminstrative) of each of the accounts below. Item 0. Sales Salaries Expense a. Supplies Expense b. Delivery Expense c. Office Equipment Depreciation Expense d. Commission Expense e. Advertising Expense
Category Selling ________ ________ ________ ________ ________
326) Identify the expense category (Selling or Adminstrative) of each of the accounts below. Item 0. Sales Salaries Expense a. Advertising Expense b. Rent Expense c. Store Equipment Depreciation Expense d. Utilities Expense e. Office Salaries Expense
Category Selling ________ ________ ________ ________ ________
38
327) Use the following information to complete the partial worksheet for Pamela's Company. Record the appropriate adjusting entries using the data below and extend the balances over to the adjusted trial balance columns. Merchandise Inventory - physical count Store supplies on hand Depreciation on store equipment Accrued salaries
$30 6 4 2
39
Answer Key Testname: CHAP 08_14CE
1) D 2) C 3) D 4) D 5) C 6) A 7) A 8) A 9) D 10) D 11) D 12) A 13) A 14) A 15) D 16) C 17) A 18) C 19) B 20) A 21) C 22) C 23) C 24) A 25) C 26) A 27) D 28) A 29) A 30) D 31) D 32) A 33) D 34) C 35) D 36) C 37) D 38) D 39) B 40) D 41) D 42) A 43) A 44) B 45) C 46) D 47) B 48) A 49) C 40
Answer Key Testname: CHAP 08_14CE
50) C 51) C 52) B 53) A 54) D 55) A 56) A 57) A 58) A 59) C 60) D 61) B 62) C 63) C 64) B 65) C 66) A 67) B 68) A 69) D 70) D 71) B 72) B 73) B 74) C 75) B 76) C 77) A 78) C 79) A 80) A 81) B 82) A 83) A 84) B 85) D 86) D 87) B 88) A 89) A 90) C 91) B 92) B 93) A 94) C 95) A 96) A 97) B 98) C 41
Answer Key Testname: CHAP 08_14CE
99) D 100) D 101) A 102) A 103) D 104) C 105) A 106) D 107) B 108) A 109) C 110) B 111) A 112) B 113) D 114) C 115) D 116) A 117) D 118) C 119) A 120) C 121) C 122) C 123) C 124) A 125) A 126) B 127) A 128) D 129) C 130) D 131) B 132) A 133) A 134) A 135) D 136) A 137) D 138) B 139) B 140) D 141) C 142) A 143) C 144) B 145) D 146) C 147) D 42
Answer Key Testname: CHAP 08_14CE
148) C 149) C 150) A 151) A 152) B 153) B 154) D 155) D 156) D 157) B 158) A 159) D 160) B 161) B 162) D 163) B 164) A 165) D 166) FALSE 167) FALSE 168) FALSE 169) FALSE 170) FALSE 171) TRUE 172) TRUE 173) FALSE 174) TRUE 175) FALSE 176) TRUE 177) TRUE 178) TRUE 179) TRUE 180) TRUE 181) FALSE 182) FALSE 183) TRUE 184) TRUE 185) TRUE 186) FALSE 187) TRUE 188) FALSE 189) TRUE 190) FALSE 191) FALSE 192) FALSE 193) TRUE 194) TRUE 195) FALSE 196) TRUE 43
Answer Key Testname: CHAP 08_14CE
197) TRUE 198) FALSE 199) FALSE 200) TRUE 201) FALSE 202) FALSE 203) TRUE 204) TRUE 205) TRUE 206) FALSE 207) FALSE 208) FALSE 209) TRUE 210) TRUE 211) TRUE 212) FALSE 213) FALSE 214) FALSE 215) FALSE 216) TRUE 217) FALSE 218) TRUE 219) FALSE 220) TRUE 221) TRUE 222) FALSE 223) FALSE 224) TRUE 225) FALSE 226) TRUE 227) TRUE 228) FALSE 229) FALSE 230) TRUE 231) FALSE 232) FALSE 233) TRUE 234) FALSE 235) FALSE 236) TRUE 237) FALSE 238) FALSE 239) TRUE 240) TRUE 241) FALSE 242) TRUE 243) TRUE 244) FALSE 245) TRUE 44
Answer Key Testname: CHAP 08_14CE
246) FALSE 247) a) $2 b) $54 c) $10 248) Prepaid insurance: debit balance sheet none 249) Unearned Magazine Fees 150 Magazine Fees Revenue 150 250) Sales Returns & Allow.: revenue debit income statement temporary 251) a. $29 b. $19 c. $15 d. $2 e. $6 252) Merchandise Inventory 20 Cost of Goods Sold 20 253) $58,000 254) A detailed income statement provides information as to how well the business has performed. It reports the company's net sales, merchandise returned by customers, the cost of goods sold versus the selling price, goods returned to suppliers, and cost of freight. It also breaks down expenses into those directly related to selling activities and those related to administrative or office activity. Income and expenses not directly related to the business's main activities are shown in separate categories. 255) $27,000 256) Wages Expense: expense debit income statement temporary 257) Wages payable: credit balance sheet none 258) Depreciation expense: debit income statement decrease
45
Answer Key Testname: CHAP 08_14CE
259)
PICKTON COMPANY Balance Sheet August 31, 2023 Assets Current Assets Cash Accounts Receivable Prepaid Insurance Merchandise Inventory Total Current Assets Capital Assets Store Equipment Less Accumulated Dep. Total Assets Liabilities Current Liabilities Accounts Payable Unearned Revenue Total Current Liabilities Long-Term Liabilities Total Liabilities
$5 3 2 15 $25
$14 7
7 $32
$12 5 $17 8 $25
Owner's Equity Appleton, Capital 7 Total Liabilities and Owner's Equity $32 260) a) $25 b) $725 c) $75 261) Sales returns and allowances: debit income statement decrease 262) Unearned Legal Fees 1,000 Legal Fees Revenue 1,000 263) Item Category a. Current Asset b. Current Liabilities c. Current Liabilities / Long-term Liabilities d. Capital Asset e. Current Asset 264) a) $1 b) $27 c) $5 265) Sales discounts:: debit income statement decrease 266) Sales: revenue credit income statement temporary 267) Depreciation Expense: expense debit income statement temporary
46
Answer Key Testname: CHAP 08_14CE
268) Companies selling a variety of merchandise with low unit prices often use the periodic inventory system. The record-keeping aspects of a periodic system are relatively simple. A firm records costs and quantities purchased which are later compared to the quantities remaining on hand at the end of the accounting period. In this way, the cost of the units sold during the period can be calculated. 269) (a) Interest Receivable 5 Interest Income 5 (b) Supplies Expense 2 Supplies 2 (c) Cost of Goods Sold 4 Inventory 4 (d) Unearned Rental Fees 7 Rental Fees Earned 7 270) Insurance expense: debit income statement decrease 271) Wages expense:: debit income statement decrease 272) Sales $2,200 Deduct: Sales Discounts $50 Sales Returns and Allowances 25 75 Net Sales $2,125 Deduct: Cost of Goods Sold 1,320 Gross Profit on Sales $805 Less: Operating Expense Net Income 273) Accounts Receivable: 274)
275) Cash:
360 $445 asset
debit
balance sheet
permanent
asset
debit
balance sheet
permanent
47
Answer Key Testname: CHAP 08_14CE
276)
277) Cash: debit 278) Accumulated Depreciation Equip.: credit 279) a) Credit b) Debit c) Debit d) Debit e) Credit 280)
balance sheet balance sheet
none none
281) Merchandise Inventory debit balance sheet none 282) A classified balance sheet provides more detail about the firm's assets and liabilities. The major categories included for assets are current assets, and capital assets. Current assets are cash and other assets that will be converted into cash or used up during the normal operating cycle or one year, whichever is longer. Capital assets are long-lived assets that are used in the production or sale of goods or services. The major categories included for liabilities are current liabilities and long-term liabilities. Current liabilities are debts or obligations that must be satisfied within one year or one operating cycle, whichever is longer. Long-term liabilities are debts that are not due for a comparatively long period, usually for more than one year or one operating cycle, whichever is longer. 283) Interest Payable 200 Interest Expense 200 Interest Income Interest Receivable
90 90 48
Answer Key Testname: CHAP 08_14CE
284) a) Income Statement b )Balance Sheet c) Income Statement d) Balance Sheet e) Income Statement 285) Purchases: debit 286) Unearned Revenue: liability 287) Purchases: expense 288) Great Lakes Camping Balance Sheet January 31, 2023 Assets Current Assets: Cash Accounts Receivable Merchandise Inventory Total Current Assets Capital Assets: Store Equipment Less: Accumulated Dep. Total Assets Liabilities Current Liabilities: Accounts Payable Long-Term Liabilities Mortgage Payable Total Liabilities Owner's Equity Great Lakes, Capital Total Liabilities and Owner's Equity 289) a. $37 b. $14 c. $8 d. $1 e. $6
credit debit
income statement decrease balance sheet permanent income statement temporary
$2 4 2 $8
$6 2
4 $12
$3 6 $9
3 $12
49
Answer Key Testname: CHAP 08_14CE
290)
APPLETON COMPANY Balance Sheet July 31, 2023 Assets Current Assets Cash Accounts Receivable Merchandise Inventory Total Current Assets
$3 5 7 $15
Capital Assets Store Equipment Less Accumulated Dep. Total Assets
$15 3
Liabilities Current Liabilities Accounts Payable Long-Term Liabilities Total Liabilities
$7 12 $19
Owner's Equity Appleton, Capital Total Liabilities and Owner's Equity 291) Interest Expense: expense 292) Sales Discounts: revenue 293) a) $2,870 b) $50 c) $820 d) $520 294) Wages Payable: liability 295) Petty Cash: debit 296) Sales 34 Interest Revenue 3 Income Summary Income Summary Sales Salaries Expense Office Salaries Expense Cost of Goods Sold Sales Returns and Allow. Income Summary Capital 297) Cost of Goods Sold Merchandise Inventory
12 $27
8 $27 debit debit
credit
income statement income statement
temporary temporary
balance sheet permanent balance sheet none
37
31 5 2 22 2 6 6 20 20
50
Answer Key Testname: CHAP 08_14CE
298) a) $(5) b) $320 c) $80 299) Prepaid Insurance: asset debit balance sheet permanent 300) a) $2,200 b) $1,950 c) $2,220 301) Earned Revenue: credit income statement increase 302) Cost of Goods Sold 5 Merchandise Inventory 5 303) Item Category a. Current Liabilities b. Capital Asset c. Current Liabilities / Long-term Liabilities d. Current Liabilities e. Current Asset 304) a. Debit b. Debit c. Debit d. Debit e. Credit f. Debit g. Credit h. Credit 305) Merchandise Inventory: asset debit balance sheet permanent 306) Sales 17 Rental Fees Earned 2 Income Summary 19 Income Summary Insurance Expense Office Salaries Expense Cost of Goods Sold Sales Returns and Allow.
16
Income Summary PC Pros, Capital
3
3 1 11 1
3
51
Answer Key Testname: CHAP 08_14CE
307)
Scents Galore Balance Sheet November 30, 2022 Assets Current Assets: Cash Accounts Receivable Merchandise Inventory Total Current Assets Capital Assets: Store Equipment Less: Accumulated Dep. Total Assets
$6 10 14 $30
$30 6
24 $54
Liabilities Current Liabilities: Accounts Payable Long-Term Liabilities Mortgage Payable Total Liabilities
24 $38
Owner's Equity Scents Galore, Capital Total Liabilities and Owner's Equity
16 $54
$14
52
Answer Key Testname: CHAP 08_14CE
308)
MARBLE COMPANY Balance Sheet August 31, 2022 Assets Current Assets Cash Accounts Receivable Merchandise Inventory Total Current Assets Capital Assets Store Equipment Less Accumulated Dep. Total Assets
$4 7 4 $15 $12 4
Liabilities Current Liabilities Accounts Payable Long-Term Liabilities Total Liabilities
8 $23
$5 13 $18
Owner's Equity Marble, Capital Total Liabilities and Owner's Equity 309) Unearned Rent: credit 310) a) $1,280 b) $1,045 c) $235 d) $135 311) Unearned Security Fees 950 Security Fees Revenue 950 312) Unearned Legal Fees 400 Legal Fees Revenue 400 313) Sales 80 Interest Revenue 8 Income Summary 88 Income Summary Sales Salaries Expense Office Salaries Expense Cost of Goods Sold Sales Returns and Allow.
66
Income Summary Warner, Capital
22
Warner, Capital Warner, Withdrawals
20
$5 $23 balance sheet
12 4 42 8
22
20 53
none
Answer Key Testname: CHAP 08_14CE
314) Unearned Accounting Fees 950 Accounting Fees Revenue 950 315) a) $1,280 b) $16 c) $203 d) $103 316) Prepaid Rent: asset debit 317) Equipment: asset debit 318) $60,000 319) credit 320) credit 321) Accumulated Dep., Equip.: asset credit 322) Interest Revenue: revenue credit 323) Accounts Payable: liability credit 324) Interest Income 150 Interest Receivable 150 Interest Payable Interest Expense 325) Item Category a. Adminstrative b. Selling c. Administrative d. Selling e. Selling 326) Item Category a. Selling b. Adminstrative c. Selling d. Administrative e. Administrative 327)
balance sheet balance sheet
permanent permanent
income statement increase income statement increase balance sheet permanent income statement temporary balance sheet permanent
75 75
54
Exam
CHAPTER 9
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Company policy for internal control should include all of the following EXCEPT A) one employee should have the total responsibility for approving purchases, authorizing payments, and signing cheques. B) at time of payment, all supporting invoices or documents will be stamped "paid." C) all cheques are signed by the owner (or responsible employee) after receiving authorization to pay from the departments concerned. D) employees will be rotated through a variety of assignments.
1)
2) The person or company to whom a cheque is payable is called the A) payee. B) payer. C) drawee.
2) D) drawer.
3) Petty cash disbursements for expenses should be reported daily in the A) not recorded. B) ledger. C) auxiliary record. D) journal.
3)
4) An example of electronic funds transfer is A) the same as a deposit in transit. B) a transfer of funds by writing a cheque. C) a transfer of funds without the use of paper cheques. D) All of these are correct.
4)
5) A payment for $32 is incorrectly recorded on the chequebook stub as $23. The $9 error should be shown on the bank reconciliation as A) added to the balance per bank statement. B) deducted from the balance per bank statement. C) added to the balance per books. D) deducted from the balance per books.
5)
6) When the bank pays a cheque written by the company, it would A) debit the customer's bank account. B) credit the customer's bank account. C) debit the cash account on the company's books. D) No increase or decrease is made to the company's bank account.
6)
7) Cash Short and Over is A) a Miscellaneous Expense account. B) a Miscellaneous Revenue account. C) a Miscellaneous Expense or Miscellaneous Revenue account depending on the balance in the account. D) neither a Miscellaneous Expense nor a Miscellaneous Revenue.
7)
8) Which of the following bank reconciliation items would NOT be reflected in a journal entry? A) Outstanding cheques B) NSF customer cheque C) Bank service charges D) Collection of a note by the bank
8)
1
9) The Petty Cash account is debited when A) the custodian pays for postage from petty cash. B) the account balance is being decreased. C) the account is being replenished. D) the account balance is being increased.
9)
10) A nonsufficient funds cheque was returned to your company. How does the bank treat this on your bank statement? A) It is shown as a debit memo. B) It is added to the bank balance. C) It is shown as a credit memo. D) None of these answers are correct.
10)
11) Vanessa's Gymnastics' cash register tapes do not agree with cash receipts. The facts are: total cash register tapes $300; total coins and currency $304. The summary journal entry to record the day's transactions would include a A) $300 debit to Cash and $300 credit to Sales. B) $304 debit to Cash and $304 credit to Sales. C) $300 debit to Cash; $4 debit to Cash Short/Over; and $304 credit to Sales. D) $304 debit to Cash; $4 credit to Cash Short/Over; and $300 credit to Sales.
11)
12) The entry to replenish the petty cash fund debited Insurance Expense for postage. This would cause A) Petty Cash to be understated. B) Insurance Expense to be overstated. C) Postage Expense to be overstated. D) Petty Cash to be overstated.
12)
13) From the bank reconciliation no entry was recorded for deposits in transit. This would cause A) assets to be understated. B) no impact since deposits are not recorded on the books. C) assets to be overstated. D) no impact since deposits in transit are already included in the balance per books.
13)
14) The May bank statement for Accounting Services shows a balance of $6,300, but the balance per books shows a cash balance of $7,980. Other information includes
14)
1. A cheque for $200 to pay the electric bill was recorded on the books as $20. 2. Included on the bank statement was a note collected by the bank for $300 plus interest of $30. 3. Cheques outstanding totaled $360. 4. Bank service charges were $50. 5. Deposits in transit were $2,140. Which item(s) will require a journal entry to update the balance in the Cash account? A) Bank service charges, note collected by the bank, and error made by Accounting Services B) Bank service charges, note collected by the bank, and deposits in transit C) Cheques outstanding and deposits in transit D) None of these answers are correct. 15) The petty cash overage was not recorded. This would cause A) expenses to be understated. B) expenses to be overstated. C) revenues to be overstated. D) revenues to be understated.
2
15)
16) The credit recorded in the journal to replenish the petty cash fund is to A) Petty Cash. B) Cash. C) Accounts Receivable. D) Accounts Payable.
16)
17) A petty cash fund is set up A) for the owner to withdraw money for personal use conveniently. B) to pay for small expenses. C) to pay for large expenses. D) None of these answers are correct.
17)
18) The journal entry to reverse the entry of a customer's nonsufficient funds cheque would include a A) debit to Accounts Payable. B) credit to Accounts Receivable. C) credit to Cash. D) debit to Cash.
18)
19) The June bank statement for Paul's Plumbing shows a balance of $3,150, but the balance per books shows a cash balance of $3,990. Other information includes
19)
1. Cheques outstanding totaled $970. 2. Bank service charges were $25. 3. A cheque for $100 to pay the telephone bill was recorded on the books as $10. 4. Included on the bank statement was an NSF cheque for $150 plus an NSF fee of $15. 5. Deposits in transit were $1,115. The adjusted cash balance at the end of June should be A) $4,405. B) $4,040. C) $3,990.
D) $3,710.
20) If a business deposits a customer's cheque and later learns that it is an insufficient funds cheque, the A) general ledger balance will be less than the bank balance. B) business will receive a debit memorandum from the bank. C) bank will try to collect the amount. D) business will receive a credit memorandum from the bank.
20)
21) When a company transfers funds among parties electronically, without the use of paper cheques it is called A) automated reconciliation. B) electronic funds transfer. C) e -commerce. D) cheque truncation.
21)
3
22) The May bank statement for Accounting Services shows a balance of $6,300, but the balance per books shows a cash balance of $7,980. Other information includes
22)
1. A cheque for $200 to pay the electric bill was recorded on the books as $20. 2. Included on the bank statement was a note collected by the bank for $300 plus interest of $30. 3. Cheques outstanding totaled $360. 4. Bank service charges were $50. 5. Deposits in transit were $2,140. Which item(s) should be subtracted from the balance per books? A) Bank service charge and the note collected by the bank B) Bank service charge C) Cheques outstanding and bank service charge D) None of the above are correct. 23) The bank added another company's deposit to our account. This would be included on the bank reconciliation as a(n) A) subtraction from the balance per books. B) addition to the balance per bank. C) addition to the balance per books. D) subtraction from the balance per bank.
23)
24) The journal entry to adjust the records from Nothin' But Organization bank reconciliation would include A) correction of any errors or omissions on the bank statement. B) deposits in transit. C) notification from the bank of a customer's NSF cheque. D) the total of outstanding cheques.
24)
25) The drawee is the A) person to whom the cheque is payable. C) bank that drawer has an account with.
25) B) person who writes the cheque. D) person who reconciles the account.
26) When a company sets up a change fund account it would be considered a(n) A) withdrawal. B) liability. C) expense. D) asset.
26)
27) The entry to replenish a $200 petty cash fund, which has cash of $40 and valid receipts for $148, would include A) a credit to Cash for $160. B) a credit to Petty Cash for $148. C) a debit to Petty Cash for $160. D) a credit to Cash for $148.
27)
28) Outstanding cheques A) have not been presented to the bank for payment and have not been subtracted from the company's ledger account. B) have not been presented to the bank for payment but have been subtracted in the ledger account. C) have been returned to the business for nonpayment. D) have been subtracted on the bank records but not the chequebook records.
28)
4
29) Information on the Maritime Mining Company bank reconciliation included the following items: Bank service charges Deposits in transit Outstanding cheques
29)
$ 20 700 600
The journal entry to record the above items would include a A) credit to the Cash account for $600. B) credit to the Cash account for $20. C) debit to the Cash account for $20. D) debit to the Cash account for $720. 30) The entry to replenish the petty cash fund included a debit to Equipment instead of Supplies for the purchase of supplies. This would cause A) petty cash to be understated. B) supplies to be understated. C) assets to be overstated. D) petty cash to be overstated.
30)
31) The bank charged another company's cheque against our account, this would be included on the bank reconciliation as a(n) A) subtraction from the balance per bank. B) addition to the balance per bank. C) subtraction from the balance per books. D) addition to the balance per books.
31)
32) From the bank reconciliation no entry was recorded for a debit memo for a new cheque fee expense. This would cause A) expenses to be overstated. B) liabilities to be understated. C) expenses to be understated. D) liabilities to be overstated.
32)
33) Bank statements show all the following EXCEPT A) the beginning and ending balances shown on the depositor's general ledger. B) the beginning and ending balances shown on the bank's records. C) items debited and credited to the chequing account. D) deposits received and cheques paid.
33)
34) The cheque is written and signed by the A) drawee. B) payer.
34) C) drawer.
D) payee.
35) Which item is NOT an example of an advantage of Online Banking? A) Manage all accounts from one secure site B) Phishing C) Transactions confirmed quickly D) Perform bank reconciliation more often than monthly
35)
36) The entry establishing a $150 petty cash fund would include a A) credit to Petty Cash for $150. B) debit to Petty Cash for $150. C) debit to Cash for $150. D) debit to Miscellaneous Expense for $150.
36)
5
37) The May bank statement for Lawn Services shows a balance of $6,300, but the balance per books shows a cash balance of $7,980. Other information includes
37)
1. A cheque for $200 to pay the electric bill was recorded incorrectly on the books as $20. 2. Included on the bank statement was a note collected by the bank for $300 plus interest of $30. 3. Cheques outstanding totaled $360. 4. Bank service charges were $50. 5. Deposits in transit were $2,140. The adjusted cash balance at the end of May should be A) $9,810. B) $7,620. C) $8,080.
D) $7,980.
38) Calculate from the following information accumulated by Linda Lee the adjusted bank balance at the end of August 2022. Bank statement ending cash balance General ledger cash balance ending Bank monthly service charge Deposits in transit Outstanding cheques NSF cheque returned with bank statement A) $2,500
38)
$2,500 2,750 20 1,400 1,235 65
B) $2,435
C) $2,665
D) $2,750
39) The objectives of internal control are to ensure efficient operations and provide reasonable assurance of all of the following EXCEPT A) assets are safeguarded and used for business purposes. B) profits are maximized while minimizing spending. C) business information is accurate. D) employees and managers comply with laws and regulations.
39)
40) Internal control over a company's assets should include the following policy: A) All cash payments will be made by cheque (except petty cash). B) All cash receipts will be deposited into the bank the same day they arrive. C) Responsibilities and duties of employees will be divided. D) All of these answers are correct.
40)
41) The debit recorded in the journal to establish the petty cash fund is to A) Accounts Receivable. B) Cash. C) Petty Cash. D) Accounts Payable.
41)
42) A company would use a change fund if A) they want to pay the postage expense without writing a cheque. B) the owner wants to make personal withdrawals easily. C) there are cash transactions daily. D) None of these are correct.
42)
6
43) The August bank statement for Jenn's Nursing Service shows a balance of $8,900, but the balance per the ledger account shows a cash balance of $8,310. Other information includes
43)
1. A cheque for $10 was recorded on the books as $100. 2. Included on the bank statement was a note collected by the bank for $600 plus $40 interest. 3. Cheques outstanding totalled $480. 4. Bank service charges were $20. 5. Deposits in transit were $600. The adjusted cash balance at the end of August should be A) $8,770. B) $9,020. C) $9,660.
D) $8,840.
44) Calculate, from the following information accumulated by Vera Freese, the adjusted cash balance at the end of April. Bank statement ending cash balance General ledger cash balance ending Bank monthly service charge Deposits in transit Outstanding cheques NSF cheque returned with bank statement A) $5,500
44)
$3,000 4,250 45 2,500 1,500 205
B) $3,000
C) $4,250
D) $4,000
45) Marcella Industries received a credit memorandum from the bank. During the bank reconciliation they should A) increase the ending cash balance on the bank statement. B) decrease the ending cash balance on the bank statement. C) decrease their cash account on the company's books. D) increase their cash account on the company's books.
45)
46) When reconciling the ending bank balance per the company records to the correct adjusted bank balance, outstanding cheques are A) added to the company's records balance. B) added to the bank statement balance. C) subtracted from the bank statement balance. D) subtracted from the company's records balance.
46)
47) A payment for $49 is incorrectly recorded in the accounting records as $94. The $45 error should be shown on the bank reconciliation as A) added to the balance per bank statement. B) deducted from the balance per bank statement. C) added to the balance per books. D) deducted from the balance per books.
47)
48) Bank service charges would be shown on a bank reconciliation as A) added to the balance per bank statement. B) deducted from the balance per bank statement. C) added to the balance per books. D) deducted from the balance per books.
48)
7
49) Cheques that have been processed by the bank and are no longer negotiable are A) cheques in process. B) outstanding cheques. C) canceled cheques. D) blank cheques.
49)
50) Deposits not yet added into the bank balance are called A) deposits on hold. B) outstanding deposits. C) deposits in transit. D) late deposits.
50)
51) The change fund is what type of account? A) Liability B) Asset
51) C) Expense
D) Revenue
52) Haliburton Hotel's $200 Petty Cash fund has a shortage of $8. The facts are $160 in valid receipts for expenses; $32 in coins and currency. The journal entry to replenish the petty cash fund would include a A) credit to Cash for $160. B) credit to Cash Short and Over for $8. C) credit to Petty Cash for $168. D) debit to Cash Short and Over for $8.
52)
53) Which of the following would NOT be shown on the bank statement? A) Deposit in transit B) Bank service charge C) NSF cheque D) Cancelled cheques
53)
54) Information to calculate the adjusted cash balance for Everest Climbing Gear is as follows:
54)
Cash balance per general ledger Customer's cheque returned--NSF Bank service charges Deposits in transit Outstanding cheques Customer's note collected by bank A) $5,260
$4,000 150 80 1,000 1,400 1,290
B) $5,060
C) $4,660
D) $4,860
55) The entry to establish the petty cash fund was not completed. This would cause A) assets to be understated. B) cash to be overstated. C) cash to be understated. D) assets to be overstated.
55)
56) Information to calculate the adjusted cash balance for Fran's Food Services is as follows:
56)
Cash balance per general ledger Customer's cheque returned--NSF Bank service charges Deposits in transit Outstanding cheques Customer's note collected by bank A) $2,630
$2,000 75 40 500 700 645
B) $2,330
C) $2,430
8
D) $2,530
57) SWIFT codes are used for A) making certain any cheques written are cleared as soon as possible. B) speeding up deposits. C) identifying a payee in another country. D) identifying a particular branch of a bank worldwide.
57)
58) Technological controls can include all of the following EXCEPT A) using personal identification scanners. B) restricting social media access at work. C) requiring passwords on all systems. D) using digital keycards for access.
58)
59) If the owner of Kelly Legal Services forgot to deduct a withdrawal from the balance per books, what entry would be necessary? A) Debit Cash; credit Withdrawals B) Debit Revenue; credit Cash C) Debit cash; credit Revenue D) Debit Withdrawals; credit Cash
59)
60) Endorsing a cheque A) guarantees payment. B) cancels the transaction. C) transfers the right to deposit or transfer cash. D) All of these answers are correct.
60)
61) How would outstanding cheques be handled when reconciling the ending cash balance per the bank statement to the correct adjusted cash balance? A) They would be ignored. B) They would be added to the balance of the bank statement. C) They would be added to the balance per books. D) They would be subtracted from the balance of the bank statement.
61)
62) Red's Rentals entry to establish a $50 petty cash fund for the office would include a A) credit to Petty Cash for $50. B) debit to Office Expense for $50. C) debit to Cash for $50. D) credit to Cash for $50.
62)
63) The entry to establish the petty cash fund debited Misc. Expense. This would cause A) expenses to be overstated. B) revenues to be overstated. C) revenues to be understated. D) expenses to be understated.
63)
64) An example of an internal control is A) the use of bank account. B) all cheques written must have reference source documents. C) all cheques are prenumbered. D) All of these answers are correct.
64)
65) A deposit received by the bank will include A) a credit to the company's bank account. B) no increase or decrease is made to the company's bank account. C) a credit to the cash account on the company's books. D) a debit to the company's bank account.
65)
9
66) The entry to replenish a $100 petty cash fund which has cash of $20 and valid receipts for $76 would include A) a debit to Cash for $76. B) a credit to Cash for $80. C) a credit to Cash for $76. D) a credit to Petty Cash for $80.
66)
67) The bank statement included bank charges. On the bank reconciliation, the item is A) a deduction from the balance per bank statement. B) an addition to the balance per company books. C) a deduction from the balance per company books. D) an addition to the balance per bank statement.
67)
68) A bank service charge would be included on the bank reconciliation as a(n) A) subtraction from the balance per bank. B) addition to the balance per books. C) subtraction from the balance per books. D) addition to the balance per bank.
68)
69) The bank statement shows A) the cheques the bank has paid and any deposits received. B) any other charges or additions to the bank balance. C) the beginning bank balance of the cash at the start of the month. D) All of these answers are correct.
69)
70) What type of an account is the petty cash fund? A) Liability B) Revenue
70) C) Asset
D) Expense
71) The original amount of the petty cash fund should equal A) the total payments made during the day. B) cash on hand at the end of the day. C) the cash received plus the cash in the petty cash box. D) the sum of the petty cash on hand and the paid petty cash vouchers.
71)
72) Which of the following accounts would most likely be debited in the replenishment of petty cash? A) Withdrawals B) Postage Expense C) Petty Cash D) Cash
72)
73) The replenishment of the petty cash fund was recorded twice. This would cause A) petty cash to be understated. B) expenses to be overstated. C) petty cash to be overstated. D) expenses to be understated.
73)
74) Phil's Training Service's $100 petty cash fund has a shortage of $4. The facts are: $80 in valid receipts for expenses; $16 in coins and currency. The journal entry to replenish the petty cash fund would include a A) debit to Cash Short/Over for $4. B) credit to Petty Cash for $84. C) credit to Cash Short/Over for $4. D) credit to Cash for $80.
74)
10
75) Calculate, from the following information accumulated by Bob Verna, the adjusted cash balance at the end of July. Bank statement ending cash balance General ledger cash balance ending Bank monthly service charge Deposits in transit Outstanding cheques NSF cheque returned with bank statement A) $8,500
75)
$6,000 8,500 90 5,000 3,000 410
B) $8,000
C) $6,000
D) $11,000
76) Which of the following transactions would be recorded in an auxiliary petty cash record? A) Owner Withdrawal B) Payment of Salaries Expense C) Purchase of a $20,000 piece of Equipment D) Purchase of first aid supplies
76)
77) Advantages of online banking include A) effectiveness. C) transaction speed.
77) B) convenience. D) All of the above are correct.
78) On a bank reconciliation, deposits added to the bank statement side are called A) deposits in transit. B) outstanding deposits. C) late deposits. D) deposits on hold.
78)
79) A $50 petty cash fund has cash of $20 and valid receipts for $30. The entry to replenish the fund would include a A) debit to Petty Cash for $30. B) debit to Cash for $30. C) credit to Petty Cash for $30. D) credit to Cash for $30.
79)
80) The May bank statement for Accounting Services shows a balance of $6,300, but the balance per books shows a cash balance of $7,980. Other information includes
80)
1. A cheque for $200 to pay the electric bill was recorded on the books as $20. 2. Included on the bank statement was a note collected by the bank for $300 plus interest of $30. 3. Cheques outstanding totaled $360. 4. Bank service charges were $50. 5. Deposits in transit were $2,140. Which item should be added to the company's book balance during the bank reconciliation? A) Bank service charge B) Cheque outstanding C) Note collected by the bank D) Deposit in transit 81) Which of the following bank reconciliation items would be reflected in a general journal entry? A) Deposits in transit B) The bank service charges for the period C) Outstanding cheques D) The bank incorrectly charges another company's cheque to your account.
11
81)
82) Determine the adjusted cash balance per bank for Egg Packaging on April 30, from the following information: Cash balance on the bank statement Customer's cheque returned–NSF Customer's note collected by the bank Deposits in transit, April 30 Outstanding cheques, April 30 A) $1,250
82)
$2,500 500 600 1,400 2,650
B) $1,350
C) $1,100
D) $1,550
83) When a cheque is presented for payment, the bank will A) debit the depositor's account. B) hold the cheque until deposits are cleared. C) print more cheques for the depositor's use. D) credit the depositor's account.
83)
84) Which of the following transactions would most likely NOT be recorded in an auxiliary petty cash record? A) Purchase of first aid supplies B) Purchase of postage stamps C) Payment of gas for the company vehicle D) Payment on a $700 utility bill
84)
85) Bank interest earned on a chequing account would be shown on a bank reconciliation as A) added to the balance per bank statement. B) deducted from the balance per bank statement. C) added to the balance per books. D) deducted from the balance per books.
85)
86) The credit recorded in the journal entry to establish the petty cash fund is to A) Withdrawals. B) Petty Cash. C) Postage Expense. D) Cash.
86)
87) Compute the adjusted bank balance on May 31, 2023 from the following information:
87)
Chequebook balance on May 31 Outstanding cheques NSF cheque returned Deposits in transit Service charges Note collected by bank A) $7,200
$7,200 500 100 250 10 250
B) $7,340
C) $7,560
D) $6,615
88) An error in recording a $51 deposit as $15 would be included on the bank reconciliation as a(n) A) addition to the balance per bank. B) subtraction from the balance per books. C) subtraction from the balance per bank. D) addition to the balance per books. 12
88)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 89) Banks have no way of knowing a deposit is coming until they receive it.
89)
90) A Cash Short and Over account is a temporary account closed at the end of the accounting cycle.
90)
91) All banks use the same format for their bank statements.
91)
92) When a bank debits your account, it is decreasing the balance.
92)
93) When a bank debits your account, it is decreasing the balance.
93)
94) All entries made on the bank side of a bank reconciliation will require a journal entry.
94)
95) Deposits that have been added to the bank balance but not the General Ledger balance are called deposits in transit.
95)
96) When a deposit is completed it should also be recorded on the current cheque stub.
96)
97) If there is an overage in the petty cash fund it would be considered other income.
97)
98) The use of physical cash in the business environment is increasing.
98)
99) A cheque stub is used to record journal entries and keep track of bank balances.
99)
100) Cancelled cheques are negotiable at the bank for the face value.
100)
101) Debit cards can be used in many locations in exactly the same manner as a credit card.
101)
102) Transferring money without paper cheques is called electronic funds transfer.
102)
103) Theft is the only reason a Petty Cash account will ever have a shortage.
103)
104) The Petty Cash account should always be debited when the fund is replenished.
104)
105) Banks must record deposits as soon as a customer records a journal entry impacting cash.
105)
106) A deposit receipt usually separates cheques deposited from coin and currency deposited.
106)
107) Petty Cash is an asset shown on the balance sheet.
107)
108) Interac Flash (or "tap") debit cards slow down purchases and lead to increased incidences of skimming and fraud.
108)
109) Banks routinely return cancelled cheques with bank statements.
109)
13
110) External control includes control over the assets as well as ways of monitoring the company's operations.
110)
111) If a cheque marked NSF is returned from the bank, an adjusting entry crediting cash is needed.
111)
112) The Auxiliary Petty Cash Record is a required financial statement under GAAP.
112)
113) A signature card is kept in the bank files so that possible forgeries could be spotted.
113)
114) Rounding cash transactions to the nearest nickel may create overages or shortages in the Petty Cash account.
114)
115) The auxiliary petty cash record is posted to the ledger daily.
115)
116) Using correct cash handling procedures, deposits should be made every half hour.
116)
117) Deposits in transit result because of a timing difference between the bank records and Ledger records.
117)
118) The Petty Cash account should be credited every time it is used to pay for small expenses.
118)
119) If the petty cash fund is too large, the Petty Cash Fund account should be increased.
119)
120) A change fund is a liability on the balance sheet.
120)
121) The Petty Cash account is used to pay for small items such as postage stamps and supplies.
121)
122) If the petty cash fund is always full of cash, the float amount should be increased.
122)
123) The drawee of the cheque is the person receiving the money.
123)
124) When a bank credits your account, it is increasing the balance.
124)
125) Using correct cash handling procedures, deposits should be made by the end of the week.
125)
126) Accounting can only record transactions using paper money.
126)
127) The balance in the change fund at the end of the day is included with the daily deposits to the bank.
127)
128) Bonding assures that employees have experience with bank reconciliations.
128)
129) NSF is an abbreviation for Not Satisfactory Funding.
129)
130) NSF cheques fees are paid by the bank.
130)
14
131) When a credit card is used to pay for a purchase the amount is deducted directly from your chequing account.
131)
132) If the ending balance in the Cash Short/Over account is a credit, it indicates that cash shortages have exceeded cash overages for the period.
132)
133) The auxiliary petty cash record is not a journal.
133)
134) The drawee of a cheque is normally the bank.
134)
135) A credit to petty cash is made to replenish the fund.
135)
136) The Auxiliary Petty Cash Record is a special journal used by merchandising companies.
136)
137) Petty Cash is used to provide cash to pay some small items quickly.
137)
138) Any adjustment to the depositor's records because of an item on the bank statement requires a journal entry.
138)
139) When adjustments are made to the bank balance when completing a bank reconciliation, a journal entry is needed to bring the bank balance up to date.
139)
140) The drawer writes the cheque.
140)
141) If the records are properly updated, the cash balance per the bank statement will always equal the balance in the cash ledger account without any adjustments.
141)
142) When adjustments are made to the General Ledger balance in preparing a bank reconciliation, a journal entry is needed to bring the ledger up to date.
142)
143) Electronic funds transfers are a growing trend in Canada.
143)
144) Anyone can sign at the bank as there is no way of confirming the authorized signatures for the account.
144)
145) Every employee in a business must be bonded to comply with GAAP.
145)
146) A bank statement reports the beginning balance, deposits in transit, cancelled cheques, and outstanding cheques for the month.
146)
147) The normal balance of the Petty Cash account is a credit.
147)
148) Petty Cash could be used to purchase a box of paper clips if required.
148)
149) When a debit card is used to pay for a purchase the amount is deducted directly from your chequing account.
149)
15
150) An employee assigned the responsibility for overseeing the petty cash fund is called the custodian.
150)
151) S.W.I.F.T. codes in modern banking make moving funds internationally a quick and accurate process.
151)
152) Once an effective internal control system is in place, monitoring employees and systems is no longer required.
152)
153) On a bank reconciliation, outstanding cheques are deducted from the balance per books.
153)
154) Interact Flash technology eliminates the need for the merchant to use a terminal or reader at their place of business.
154)
155) A Cash Short and Over account can be reported as either a revenue or an expense on the income statement, depending on if it has a credit or a debit balance.
155)
156) If the ending balance in the Cash Short/Over account is a debit, it indicates that cash shortages have exceeded cash overages for the period.
156)
157) Postings must be completed from the Auxiliary Petty Cash Record to the General Ledger.
157)
158) Internal controls are unnecessary as long as you have a signed signature card stored at the bank.
158)
159) A change fund is an expense on the income statement.
159)
160) One internal control safeguard is to assign all the duties of receiving, depositing, and recording cash to one employee.
160)
161) A shift in assets occurs when a petty cash account is established.
161)
162) Endorsements can be made using a rubber stamp instead of a handwritten signature.
162)
163) There is no need to keep track of deposits on the cheque stub since the bank creates a statement every month.
163)
164) A signature card shows the signature of only the person who authorizes others in the company to sign cheques.
164)
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 165) Prepare the required journal entries from the bank reconciliation below as of the end of April: The balance per general ledger is $550 There is a debit memo for interest expense, $50 There is a credit memo for an EFT payment for an outstanding receivable $85 Outstanding cheques amount to $230 This month's service charge amounts to $30 Deposits in transit amount to $110 16
166) Construct a bank reconciliation for Mike's DJ Services as of June 30, 2023, from the following information: Ending general ledger balance Ending bank statement balance Deposits in transit Outstanding cheques Bank service charge (debit memo)
$950 899 333 295 13
167) Construct the bank reconciliation for Evitus Company as of July 31, 2022 from the following information: a. Balance per bank statement b. Deposit in transit c. General Ledger balance d. Outstanding cheques e. NSF cheque (debit memo) f. Service charges g. Interest earned on account
$10,150 705 10,250 800 220 115 140
Indicate which effect(s) each situation will have: 1. New cheque written 2. Recorded in the general journal 3. Recorded in auxiliary petty cash record 4. Petty cash voucher prepared 168) ________ Replenishment of petty cash 169) Prepare journal entries for the following petty cash fund transactions: Nov. 1 15 30
Established a $50 petty cash fund. Increased the petty cash fund to have a new balance of $100. Replenished the petty cash fund. Currency and coins remaining were $20. Approved paid vouchers were: $10 donation expense; $16 postage expense; $30 office supplies expense; and $20 misc. expense.
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example: 170) Change Fund
Column 1 Asset ________
Column 2 Debit
Column 3 Balance Sheet
________
________
17
Column 4 Permanent ________
171) Prepare journal entries for the following petty cash fund transactions: Nov. 1 15 30
Established a $50 petty cash fund. Increased the petty cash fund to have a new balance of $100. Replenished the petty cash fund. Currency and coins remaining were $24. Approved paid vouchers were: $10 donation expense; $16 postage expense; $30 office supplies expense; and $20 misc. expense.
172) Prepare the required journal entries from the bank reconciliation below as of the end of January: The balance per general ledger is $200 There is a debit memo for interest expense, $100 There is a debit memo for a customer's NSF cheque $375 Outstanding cheques amount to $2,000 This month's service charge amounts to $50 Deposits in transit amount to $1,500 Indicate which effect(s) each situation will have: 1. New cheque written 2. Recorded in the general journal 3. Recorded in auxiliary petty cash record 4. Petty cash voucher prepared 173) ________ Bought Equipment on account 174) ________ Bought a book of stamps For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example: 175) Petty Cash
Column 1 Asset ________
Column 2 Debit
Column 3 Balance Sheet
________
________
Column 4 Permanent ________
176) List the various steps and procedures included in the bank reconciliation process. What are the advantages in preparing a monthly bank reconciliation? 177) Construct a bank reconciliation for Players Sporting Goods as of July 31, 2022, from the following information: Ending general ledger balance Ending bank statement balance Deposits in transit Outstanding cheques Bank service charge (debit memo)
$420 320 220 155 35
18
178) Construct a bank reconciliation for Philip's Guided Tours as of September 30, 2023, from the following information: Ending general ledger balance $795 Ending bank statement balance 880 Deposits in transit 575 Outstanding cheques 230 Bank Error (will issue a debit memo) 180 EFT payment from customer (credit memo) 330 Bank interest charge (debit memo) 20 Bank service charge (debit memo) 60 179) Produce the entry to replenish petty cash using the following information: Cash in box Balance of petty cash account Valid receipts in box Postage Office Supplies Withdrawals by owner Invoice from courier Cash shortage
$20 200 45 60 50 20 5
180) List at least five company policies that would be included in an internal control system. For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example: 181) Misc. Expense
Column 1 Asset ________
Column 2 Debit
Column 3 Balance Sheet
________
________
Column 4 Permanent ________
182) What is the purpose of internal control? 183) Determine the reconciled bank balance given the following: The balance per bank statement is $108 The balance per general ledger is $105 There is a credit memo for a note collected, $408 There is a credit memo for interest earned, $25 There is a debit memo for a customer's NSF cheque $350 Deposits in transit, $850 Outstanding cheques amount to $845 This month's service charge amounts to $50 There is a debit memo for cheque printing fees, $25 184) What is the difference between a debit and credit memorandum? 185) List and describe some of the electronic conveniences that we are now provided when doing our banking. 19
Indicate which effect(s) each situation will have: 1. New cheque written 2. Recorded in the general journal 3. Recorded in auxiliary petty cash record 4. Petty cash voucher prepared 186) ________ Owner withdrew money from the company for personal use 187) What would a company gain by using a petty cash fund? 188) Why is the petty cash account not credited if you add up the vouchers in the petty cash box and they equal $72.00? Indicate which effect(s) each situation will have: 1. New cheque written 2. Recorded in the general journal 3. Recorded in auxiliary petty cash record 4. Petty cash voucher prepared 189) ________ Filled up the company's van with gas 190) From the following information, prepare the bank reconciliation for Erin's Hair Studio for June 30, 2023. Ending General Ledger balance Ending bank statement balance Deposits in transit Outstanding cheques Service Charge
$190 130 90 40 10
191) Prepare journal entries for the following petty cash fund transactions: Aug. 1 31
Established a $100 petty cash fund. Replenished the petty cash fund. Currency and coins remaining were $7. Approved paid vouchers were $10 advertising expense, $15 shipping expense, $30 parking expense, $34 meals expense, and $5 miscellaneous expense.
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example: 192) Cash Short & Over
Column 1 Asset
Column 2 Debit
________
Column 3 Balance Sheet ________
20
Column 4 Permanent
________
________
193) Prepare the required journal entries from the bank reconciliation below as of the end of September: The balance per general ledger is $795 There is a debit memo for interest expense, $20 There is a credit memo for an EFT payment for a new sale $330 Outstanding cheques amount to $230 This month's service charge amounts to $60 Deposits in transit amount to $575 194) Prepare journal entries for the following petty cash fund transactions: Aug. 1 31
Established a $50 petty cash fund. Replenished the petty cash fund. Currency and coins remaining were $8. Approved paid vouchers were $6 donation expense, $9 postage expense, $12 office supplies expense, and $13 miscellaneous expense.
195) Indicate what effect each situation will have on the bank reconciliation process. Place the number of your choice beside the items listed. 1. Add to bank balance 2. Deduct from bank balance 3. Add to chequebook balance 4. Deduct from chequebook balance ________ a. Deposit in transit ________ b. Bank service charge ________ c. NSF cheque ________ d. Cheque written for $98 recorded as $89 ________ e. Outstanding cheques ________ f. Cheque written for $50 recorded as $500 ________ g. Cheque printing charges ________ h. Interest earned on chequing account 196) Prepare journal entries for the following petty cash fund transactions: Sept. 1 30
Established a $100 petty cash fund. Replenished the petty cash fund. Currency and coins remaining was $28; approved paid vouchers were: $12 donation expense; $18 postage; $24 office supplies expense; and $26 miscellaneous expense.
197) Prepare journal entries for the following petty cash fund transactions: Jul. 1 9 31
Established a $75 petty cash fund. Increased the petty cash fund to $100. Replenished the petty cash fund. Currency and coins remaining were $20. Approved paid vouchers were $12 donation expense, $21 postage expense, $30 office supplies expense and $15 miscellaneous expense.
21
198) Construct a bank reconciliation for Savannah's Printing as of April 30, 2023, from the following information: Ending general ledger balance $550 Ending bank statement balance 675 Deposits in transit 110 Outstanding cheques 230 EFT payment from customer (credit memo) 85 Bank interest charge (debit memo) 50 Bank service charge (debit memo) 30 199) Determine the cash short (-) or over (+) given the following: The balance per the Petty Cash account $75. The count of coin and currency amounts to $22. There are receipts: for gas of $9, for office supplies of $18, for first aid supplies $14. 200) Determine the unadjusted balance per bank statement given the following: The balance per general ledger is $200 There is a credit memo for a note collected, $450 There is a debit memo for interest expense, $100 There is a debit memo for a customer's NSF cheque $375 Outstanding cheques amount to $2,000 This month's service charge amounts to $50 Deposits in transit amount to $1,500 201) When completing a bank reconciliation, explain why all adjustments to the general ledger balance require journal entries? 202) Discuss reasons why a manager would be concerned about developing a system of internal control over the cash receipts and cash payments of the business. Describe at least five company policies that would be included in an internal control system. 203) Construct a bank reconciliation for Bark Zoo as of April 30, 2023, from the following information: Ending general ledger balance $5,500 Ending bank statement balance $5,300 Deposit in transit $2,000 Outstanding cheques $1,030, $79, $500 and $100 Bank collected a note from Zebra Co. $ 300 Recorded cheque as $89 instead of $98 on cheque stub. Correct amount on cheque. Wolf Co. cheque for $200 came back because of insufficient funds 204) Prepare journal entries for the following petty cash fund transactions: Jul. 1 9 31
Established a $75 petty cash fund. Increased the petty cash fund to $100. Replenished the petty cash fund. Currency and coins remaining were $20. Approved paid vouchers were $12 donation expense, $21 postage expense, $30 office supplies expense and $17 miscellaneous expense.
22
205) Produce the entry to replenish petty cash using the following information: Cash in box Balance of petty cash account Valid receipts in box Postage Office Supplies Withdrawals by owner Invoice from courier
$25 200 45 60 50 20
206) Indicate which adjustments would require a journal entry during the completion of the bank reconciliation. Place an "X" on the respective line(s). ________ a. Deposit in transit ________ b. Bank service charge ________ c. NSF cheque ________ d. Cheque written for $19 recorded as $91 ________ e. Outstanding cheques ________ f. Cheque written for $42 recorded as $4 ________ g. Cheque printing charge ________ h. Note collected by bank. Indicate which effect(s) each situation will have: 1. New cheque written 2. Recorded in the general journal 3. Recorded in auxiliary petty cash record 4. Petty cash voucher prepared 207) ________ Establishment of petty cash 208) Construct the bank reconciliation for Zone Training, as of October 31, from the following information: Ending General Ledger balance Ending bank statement balance Deposits in transit Outstanding cheques Bank service charge (debit memo)
$840 640 440 280 40
209) Determine the cash short (-) or over (+) given the following: The balance per the petty cash account $100. The count of coin and currency amounts to $23. There are receipts: for telephone costs of $25, for supplies of $6, for transportation $6, for funeral flowers $38. 210) Prepare journal entries for the following petty cash fund transactions: Aug. 1 31
Established a $50 petty cash fund. Replenished the petty cash fund. Currency and coins remaining were $10. Approved paid vouchers were $6 donation expense, $9 postage expense, $12 office supplies expense, and $13 miscellaneous expense. 23
211) Prepare journal entries for the following petty cash fund transactions: Sept. 1 30
Established a $100 petty cash fund. Replenished the petty cash fund. Currency and coins remaining was $20; approved paid vouchers were: $12 donation expense; $18 postage; $24 office supplies expense; and $26 miscellaneous expense.
For each of the following identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example: 212) Delivery Expense
Column 1 Asset ________
Column 2 Debit ________
Column 3 Balance Sheet
Column 4 Permanent
________
________
213) Prepare a bank reconciliation from the following information: a. Balance per bank statement of September b. General Ledger balance c. Collection of note by bank d. Service charges e. Deposit in transit f. Outstanding cheques
$5,325 5,750 500 110 2,140 1,325
214) Explain why only the general ledger side of the bank reconciliation must be journalized.
24
Answer Key Testname: CHAP 09_14CE
1) A 2) A 3) C 4) C 5) D 6) A 7) C 8) A 9) D 10) A 11) D 12) B 13) D 14) A 15) D 16) B 17) B 18) C 19) D 20) B 21) B 22) B 23) D 24) C 25) C 26) D 27) A 28) B 29) B 30) B 31) B 32) C 33) A 34) C 35) B 36) B 37) C 38) C 39) B 40) D 41) C 42) C 43) B 44) D 45) D 46) C 47) C 48) D 49) C 25
Answer Key Testname: CHAP 09_14CE
50) C 51) B 52) D 53) A 54) B 55) B 56) D 57) D 58) B 59) D 60) C 61) D 62) D 63) A 64) D 65) A 66) B 67) C 68) C 69) D 70) C 71) D 72) B 73) B 74) A 75) B 76) D 77) D 78) A 79) D 80) C 81) B 82) A 83) A 84) D 85) C 86) D 87) B 88) D 89) TRUE 90) TRUE 91) FALSE 92) TRUE 93) TRUE 94) FALSE 95) FALSE 96) TRUE 97) TRUE 98) FALSE 26
Answer Key Testname: CHAP 09_14CE
99) TRUE 100) FALSE 101) FALSE 102) TRUE 103) FALSE 104) FALSE 105) FALSE 106) TRUE 107) TRUE 108) FALSE 109) FALSE 110) FALSE 111) TRUE 112) FALSE 113) TRUE 114) TRUE 115) FALSE 116) FALSE 117) TRUE 118) FALSE 119) FALSE 120) FALSE 121) TRUE 122) FALSE 123) FALSE 124) TRUE 125) FALSE 126) FALSE 127) FALSE 128) FALSE 129) FALSE 130) FALSE 131) FALSE 132) FALSE 133) TRUE 134) TRUE 135) FALSE 136) FALSE 137) TRUE 138) TRUE 139) FALSE 140) TRUE 141) FALSE 142) TRUE 143) TRUE 144) FALSE 145) FALSE 146) FALSE 147) FALSE 27
Answer Key Testname: CHAP 09_14CE
148) TRUE 149) TRUE 150) TRUE 151) TRUE 152) FALSE 153) FALSE 154) FALSE 155) TRUE 156) TRUE 157) FALSE 158) FALSE 159) FALSE 160) FALSE 161) TRUE 162) TRUE 163) FALSE 164) FALSE 165) April 30 April 30 April 30 166)
Interest Expense 50 Cash 50 Cash 85 Accounts Receivable 85 Service Charge Expense 30 Cash 30 MIKE'S DJ SERVICES BANK RECONCILIATION AS OF JUNE 30, 2023
G/L Balance Ending Ledger Bal.
Deduct: Service Charge Reconciled Balance
$950
Balance per Bank Ending Bank Balance Add: Deposits in Transit
$899 333 1,232
13
Deduct: Outstanding cheques
295
$937
Reconciled Balance
$937
28
Answer Key Testname: CHAP 09_14CE
167)
Evitus Company Bank Reconciliation as of July 31, 2022 G/L Balance Ending G/L Balance Add: Interest Earned
Deduct: Service Charge NSF Cheque Reconciled Balance 168) 1, 2, 3 169) Date Transaction Nov. 1 Petty Cash Cash
15
Balance per Bank Ending Bank Stat. Bal. Add: Deposit in Transit
$10,250 140 $10,390
Deduct: Outstanding Cheques
115 220 $10,055
Reconciled Balance PR
Debit 50
50
Petty Cash Cash
Donation Expense Postage Expense Office Supplies Expense Miscellaneous Expense Cash Short/Over Cash 170) Change Fund: asset debit 171) Date Transaction Nov.1 Petty Cash Cash
50 50
30
15
Credit
10 16 30 20 4 balance sheet PR Debit 50
80 permanent Credit 50
Petty Cash Cash
50
Donation Expense Postage Expense Office Supplies Expense Miscellaneous Expense Cash 172) January 31 Interest Expense Cash January 31 Accounts Receivable Cash January 31 Service Charge Expense Cash 173) 2
10 16 30 20
50
30
76 100 100 375 375 50 50 29
$10,150 705 $10,855
800 $10,055
Answer Key Testname: CHAP 09_14CE
174) 3, 4 175) Petty Cash: asset debit balance sheet permanent 176) 1. Enter the cash balance according to your general ledger ending balance in your Cash account 2. Add credit memos that have not been recorded 3. Deduct debit memos that have not been recorded 4. Identify any errors made by the bookkeeper 5. Determine the adjusted balance by adding Step 2 and deducting Step 3 from Step 1 numbers 6. Verify that the adjusted balances in steps 5 and 10 (below) are equal 7. Enter the bank balance according to the bank from the ENDING cash balance on the bank statement 8. Add deposits not recorded by the bank (deposits in transit) 9. Deduct outstanding cheques that have not been paid by the bank (outstanding cheques) 10. Identify any errors made by the bank 11. Determine the adjusted balance by adding Step 8 and deducting Step 9 to Step 7 numbers The advantage of preparing a monthly bank reconciliation is to verify the amount of cash in the company's account and it may uncover any irregularities such as employee theft of funds. 177) PLAYERS SPORTING GOODS BANK RECONCILIATION AS OF JULY 31, 2022 G/L Balance Ending Ledger Bal.
Deduct: Service Charge Reconciled Balance 178)
G/L Balance Ending Ledger Bal. Add: EFT Payment
Deduct: Interest Charge Service Charge Reconciled Balance
$420
35
Balance per Bank Ending Bank Bal. Stat. Add: Deposits in Transit
Deduct: Outstanding cheques
$385 Reconciled Balance PHILIP'S GUIDED TOURS BANK RECONCILIATION AS OF SEPTEMBER 30, 2023
$795 330 1,125
20 60 $1,045
Balance per Bank Ending Bank Balance Add: Deposits in Transit
$320 220 540
155 $385
$880 575 1,455
Deduct: Bank Error Outstanding cheques
180 230
Reconciled Balance
$1,045
30
Answer Key Testname: CHAP 09_14CE
179) Cash Short and over 5 Postage expense 45 Office supplies 60 Withdrawals 50 Delivery expense 20 Cash 180 180) 1. Responsibilities and duties of employees will be divided. 2. All cash receipts will be deposited into the bank daily. 3. All cash payments except petty cash will be made by cheque. 4. Employees will be rotated. 5. All cheques will be authorized. 6. All documents upon payment will be stamped paid. 7. All cheques will be pre -numbered. 8. Monthly bank statements will be sent to and reconciled by someone other than the employees who handle, record or deposit cash. 181) Misc. Expense: expense debit income statement temporary 182) Internal control helps a company protect their assets (i.e. Cash) and monitor its ongoing operations. 183) $113 [$108 + 850 - $845] 184) A debit memoranda is received from the bank when they have decreased the customer's account balance for reasons such as: returning an NSF cheque, bank service charges, etc. A credit memoranda is received from the bank when they have increased the customer's account balance for reasons such as: collection of a note, interest revenue, etc. 185) ATM Automated Teller Machines enable the user to withdraw money at any time up to a specified amount. Online banking allows us to pay bills, reconcile our account, transfer funds, at the touch of a finger. Available any time day or night. SWIFT codes used for rapid and reliable transfer of money worldwide. Credit Card Integration More businesses are issuing their employees with company credit cards in order to simplify record-keeping and speed up reimbursement. Direct Payroll Deposit Rather than issue cheques to their employees, companies may transfer funds directly into employees' bank accounts. 186) 2 187) A company would use a petty cash fund for convenience and to save time. It would not be feasible to journalize and post every minute transaction. A lot of time is saved when the total of these vouchers is summarized in an auxiliary petty cash record and only one journal transaction is entered and posted. It also provides convenience so that someone other than the accountant can disburse funds for those small day-to-day transactions that are commonplace to most businesses. 188) The petty cash account would become smaller if you were to credit the account. The petty cash account will only be used when we are setting up the petty cash fund or changing the amount of money to be kept in the petty cash box. When we replenish the petty cash we are actually putting cash back into the box to bring the fund back up to its original balance. 189) 3, 4
31
Answer Key Testname: CHAP 09_14CE
190)
Erin's Hair Studio Bank Reconciliation as of June 30, 2023 G/L Balance Ending G/L Balance
Deduct: Service Charge
Reconciled Balance 191) Aug.1 Petty Cash Cash
Balance per Bank $190
10
$180
Ending Bank Stat. Bal. Add: Deposits in Transit
Deduct: Outstanding Cheques Reconciled Balance 100 100
Advertising Expense 10 Shipping Expense 15 Parking Expense 30 Meals Expense 34 Miscellaneous Expense 5 Cash Short and Over 1 Cash 93 192) Cash Short & Over: expense/Revenue debit/credit 193) September 30 Interest Expense 20 Cash 20 September 30 Cash 330 Sales Revenue 330 September 30 Service Charge Expense 60 Cash 60 194) Aug.1 Petty Cash 50 Cash 50
$130 90 $220
40 $180
Aug. 31
Aug. 31
195) a. b. c. d. e. f. g. h.
Donation Expense Postage Expense Office Supplies Expense Miscellaneous Expense Cash Short and Over Cash
6 9 12 13 2 42
1 4 4 4 2 3 4 3 32
income statement
temporary
Answer Key Testname: CHAP 09_14CE
196) Date Sept.1
Transaction
PR
Debit
Petty Cash Cash 30
197) Jul. 1
Jul. 9
Jul. 31
198)
Credit
100 100
Donation Expense Postage Expense Office Supplies Expense Miscellaneous Expense Cash Short/Over Cash Petty Cash Cash Petty Cash Cash
12 18 24 26 8 72 75 75 25 25
Donation Expense 12 Postage Expense 21 Supplies Expense 30 Miscellaneous Expense 15 Cash Short and Over 2 Cash 80 SAVANNAH'S PRINTING BANK RECONCILIATION AS OF APRIL 30, 2023
G/L Balance Ending Ledger Bal. Add: EFT Payment
Deduct: Interest Charge Service Charge
$550 85 635
Balance per Bank Ending Bank Balance Add: Deposits in Transit
$675 110 785
Deduct: 50 30
Outstanding cheques
230
Reconciled Balance $555 Reconciled Balance $555 199) $12 short [($75 - $22) - $9 - $18 - $14] 200) $625 [($200 + 450 - $100 - $375 - $50) - $1,500 + $2,000] 201) Journal entries are required for all reconciling items affecting the ledger balance in order to update the cash account balance in the ledger to the correct amount.
33
Answer Key Testname: CHAP 09_14CE
202) a) To safeguard the company's incoming cash receipts and cash payments from unauthorized transactions. b) To promote honesty and ethics among company employees and remove "temptation." c) To maximize net income by reducing cash losses. Policies: a) Separate the various aspects of transactions among several employees. b) Deposit all cash receipts in the bank on a daily basis. c) Monthly bank reconciliation to be prepared by employees who do not have access to cash transactions. d) Provide adequate paperwork backup for all transactions. e) Make all payments over a threshold amount by cheque. f) Restrict and bond persons authorized to sign cheques. g) Establish a controlled petty cash system. 203) BARK ZOO BANK RECONCILIATION AS OF APRIL 30, 2023 G/L Balance Ending Ledger Bal. Add: Proceeds from a note
Deduct: Error in recording cheque NSF Cheque Reconciled Balance 204) Jul. 1 Petty Cash Cash Jul. 9
Balance per Bank Ending Bank Stat. Bal. Add: Deposit in Transit
$5,500 300 $5,800
2,000 $7,300
1,709
Reconciled Balance
$5,591
9 200
Deduct: Outstanding cheques
$5,591 75
75
Petty Cash Cash
25
Donation Expense Postage Expense Supplies Expense Miscellaneous Expense Cash 205) Postage expense 45 Office supplies 60 Withdrawals 50 Delivery expense 20 Cash 175
12 21 30 17
Jul. 31
$5,300
25
80
34
Answer Key Testname: CHAP 09_14CE
206) _________ ____X____ ____X____ ____X____ _________ ____X____ ____X____ ____X____ 207) 1, 2, 3 208)
a. Deposit in transit b. Bank service charge c. NSF cheque d. Cheque written for $19 recorded as $91 e. Outstanding cheques f. Cheque written for $42 recorded as $4 g. Cheque printing charge h. Note collected by bank. Zone Training Bank Reconciliation as of October 31
G/L Balance
Balance per Bank
Ending G/L Balance
Deduct: Service Charge
$840
Ending Bank Stat. Bal. Add: Deposits in Transit
40
$640 440 $1,080
Deduct: Outstanding Cheques Reconciled Balance $800 Reconciled Balance 209) $2 short [($100 - $23) - $25 - $6 - $6 - $38] 210) Aug.1 Petty Cash 50 Cash 50 Aug. 31
211) Date Sept.1
Donation Expense Postage Expense Office Supplies Expense Miscellaneous Expense Cash Transaction Petty Cash Cash
30
Donation Expense Postage Expense Office Supplies Expense Miscellaneous Expense Cash 212) Delivery Expense: expense debit
280 $800
6 9 12 13 40 PR
Debit
Credit
100 100 12 18 24 26 80 income statement temporary
35
Answer Key Testname: CHAP 09_14CE
213)
Bank Reconciliation as of September 30 G/L Balance Ending G/L Balance Add: Note Collected by Bank
Deduct: Service Charge
Balance per Bank 5,750 500 $6,250
110
Ending Bank Stat. Bal. Add: Deposits in Transit
Deduct: Outstanding Cheques
$5,325 2,140 $7,465
1,325
Reconciled Balance $6,140 Reconciled Balance $6,140 214) The G/L side of the reconciliation lists those things that we do not know about and therefore have not been journalized. All of these items must be journalized and then posted to our ledger to update our books.
36
Exam
CHAPTER 10
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The amount of CPP to be deducted from an employee with earnings this week of $800 and cumulative earnings for the year before this week of $57,400 would be A) $37.37. B) $0.00. C) $796.57. D) $40.80.
1)
2) Carrie Stein's hourly wage is $40.00, and she worked 43 hours during the week. Assuming an overtime rate of time and a half over 40 hours, Carrie's gross pay is? A) $1,600 B) $1,780 C) $2,580 D) $1,720
2)
3) The law requires all employees to complete and sign TD1 exemption forms A) at the beginning of employment. B) every year. C) whenever there is a change in circumstances. D) both A and C are correct.
3)
4) The amount of EI to be deducted from an employee with weekly earnings of $400.00 would be (calculate using the rates provided in your text) A) $6.48. B) $0.00. C) $20.40. D) $6.32.
4)
5) The amount of EI to be deducted from an employee with earnings of $800 this weekly period would be (calculate using the rates provided in your text) A) $12.64. B) $24.73. C) $12.96. D) $15.09.
5)
6) Workers' compensation A) is based on the total estimated payroll. B) insures employees against losses they may incur due to injury or death while on the job. C) is paid for by the employer. D) All of the above are correct.
6)
7) Gross Earnings are the same as A) regular earnings + overtime earnings. C) net earnings + overtime earnings.
7) B) regular earnings only. D) net earnings.
8) Todd earns an hourly rate of $20 and had taxes, CPP, and EI withheld totaling $200. What would his net earnings be if he worked 46 hours (assuming double time over 40 hours)? A) $840 B) $860 C) $780 D) $720
8)
9) Which of the following is a law that has no effect on payroll net earnings? A) Federal Income Tax B) Canada Savings Bond C) Provincial Income Tax D) Minimum Wage
9)
10) Net pay is the same as A) before taxes pay. C) pay before deductions.
10) B) gross pay. D) take -home pay.
1
11) Blue's Tax Service has two types of employees, management and clerical support. The company estimates that it will pay the clerical support $240,000 next year and the managers $315,000. For every $100, the company pays $0.14 into the workers' compensation insurance. Calculate the amount of worker's compensation insurance. A) $336 B) $441 C) $777 D) None of the above are correct.
11)
12) Francis works 44 hours at a rate of pay of $20 per hour. He receives double pay over 40 hours. What is his gross pay? A) $960 B) $880 C) $800 D) $900
12)
13) The amount of Gross Earnings, Income Tax, CPP and EI deducted is reported to the employee at the end of the year on a(n) A) Employee Earnings Record. B) Record of Employment. C) Payroll Summary. D) T4.
13)
14) Which of the following pays no CPP premiums this month? A) A person earning less than $200 this month B) A person over 70 years of age C) A person under 18 years of age D) All of the above.
14)
15) The form used to determine an employee's net claim code is called a A) Employee Earnings Record. B) T4. C) TD1. D) Record of Employment.
15)
16) The payroll register does NOT contain A) net pay. B) payroll information for the payroll period. C) gross pay. D) all cumulative payroll information for each individual employee.
16)
17) Net pay equals A) regular earnings. B) gross pay less all deductions. C) regular earnings + overtime earnings. D) net earnings + overtime earnings greater than the amount withheld from the employee.
17)
18) Which of the following not a statutory payroll deduction? A) Employment Insurance B) Income Taxes C) Registered Retirement Savings Plans D) Canada Pension Plan
18)
19) To examine in detail the weekly payroll for all employees, one would look at A) form T4. B) the employee earnings record. C) the payroll register. D) form TD1.
19)
2
20) The Office Salaries Expense account would be used to record A) gross earnings for the office workers. B) a credit for the amount owed to the office workers. C) a debit for the amount of net pay owed to the office workers. D) net earnings for the office workers.
20)
21) The amount of EI to be deducted from an employee with earnings this week of $800 and cumulative earnings for the year before this week of $53,100 would be A) $12.96. B) $0.00. C) $37.37. D) $860.22.
21)
22) Kim received $1,780 for working 40 regular hours. What was Kim's rate of pay per hour? A) $44.00 B) $40.00 C) $45.00 D) $44.50
22)
23) The employee earnings record provides a summary of all of the following for a single employee EXCEPT A) earnings. B) net pay. C) performance ratings. D) withholding taxes.
23)
24) The amount deducted for CPP is reported at the end of the year to the employee on a(n) A) TD1. B) Record of Employment. C) T4. D) Payroll Register.
24)
25) The actual tax Bram pays for the year will be affected by A) any deductible tuition he has paid. B) the amount of earnings he makes from all sources. C) his charitable donations made. D) All of the above.
25)
26) All payroll registers include sections for recording A) gross pay, deductions and net pay. B) accrued expenses, unearned revenue and net pay. C) assets, liabilities, equity, revenue and expenses. D) trade accounts receivable and short-term notes receivable.
26)
27) Workers' compensation provides insurance for employees who are A) unemployed due to a plant closing. B) unemployed due to an economic downturn. C) injured while on the job. D) not paid enough.
27)
28) Derek works 48 hours at a rate of pay of $15 per hour. He receives double pay over 40 hours. What is his gross pay? A) $780 B) $840 C) $720 D) $800
28)
29) The payroll register A) is a worksheet. B) shows all employee information related to an entire pay period. C) keeps track of an individual employee's payroll history for a calendar year. D) Both A and B are correct.
29)
3
30) Bob Hill's hourly rate is $25.00, and he worked 39 regular hours during the week. What is his gross pay for the week? A) $780 B) $975 C) $950 D) $1,000
30)
31) If Reed Bar's hourly wage is $8.00 and he worked 35 hours during the week with no overtime, what is his gross pay for the week? A) $300 B) $280 C) $250 D) $320
31)
32) A pay period is defined as A) bi-weekly. C) weekly.
32) B) monthly. D) All of the above are correct.
33) The amount of CPP to be deducted from an employee with earnings this week of $800 and cumulative earnings for the year of $21,000 would be A) $0.00. B) $40.80. C) $37.37. D) $796.57.
33)
34) The automatic increase of claim amounts that account for inflation is called A) deductions. B) indexing. C) cost of living increases. D) increments.
34)
35) Georgia Ally's hourly rate is $10.00, and she worked 44 hours during the week. Assuming an overtime rate of time and a half over 40 hours, Georgia's gross pay is A) $430. B) $460. C) $350. D) $400.
35)
36) Blue's Tax Service has two types of employees, management and clerical support. The company estimates that it will pay the clerical support $240,000 next year and the managers $315,000. For every $100, the company pays $0.14 into the workers' compensation insurance. Calculate the amount of worker's compensation insurance paid by the employees. A) $336 B) $441 C) $777 D) None of the above are correct.
36)
37) Which report would an employer review if they wanted to check how much an employee has earned to date? A) T-4 form B) Employee earnings record C) Payroll register D) None of these answers are correct.
37)
38) All of the following are statutory payroll deductions EXCEPT A) Income Tax. B) Employment Insurance. C) Canada Pension Plan. D) Canada Savings Bond Payments.
38)
39) Gross pay is the same as A) net pay. C) pay before deductions.
39) B) take -home pay. D) after taxes pay.
40) A summary record of each person's earnings, deductions, and net pay is called a(n) A) T-4. B) employee earnings record. C) payroll register. D) general journal.
4
40)
41) The payroll register does NOT contain A) net pay. C) ledger accounts for payroll.
41) B) deductions. D) gross pay.
42) What liability account is reduced when the employees are paid? A) Income Tax Payable, CPP Payable, EI Payable B) Wages and Salaries Expense C) Payroll Taxes Payable D) Wages and Salaries Payable 43) What type of account is EI Payable? A) Revenue B) Liability
42)
43) C) Asset
D) Expense
44) If Sheila worked 12 hours on Tuesday and 5 hours on Wednesday this week, how many hours of overtime will Sheila earn if overtime is more than 8 hours a day? A) 0 B) 17 C) 4 D) 12
44)
45) The amount of EI deducted is reported at the end of the year on a(n) A) Record of Employment. B) Payroll Register. C) TD1. D) T4.
45)
46) The employee earnings record A) shows all employee information related to an entire pay period. B) is one of two primary records used to track payroll information. C) keeps track of an individual employee's payroll history for a calendar year. D) Both B and C are correct.
46)
47) If the employee has $40 withheld from their cheque for CPP, what is the amount that the employer would need to pay for CPP? A) $400 B) $40 C) $100 D) $200
47)
48) The amount of EI to be deducted from an employee with earnings this week of $1,000 and cumulative earnings for the year before this week of $15,000 would be A) $16.20. B) $860.22. C) $0.00. D) $49.50.
48)
49) Payroll periods can be A) 12 pay periods/year. C) 52 pay periods/year.
49) B) 26 pay periods/year. D) All of the above are correct.
50) CRA stands for A) Civil Revenue Agency. C) Canada Revenue Agency.
50) B) Canadian Revenue Association. D) Canadian Revenue and Affiliates.
51) If Sheila worked 8 hours a day for a total of 40 hours this week, how many hours of overtime will Sheila earn? A) 0 B) 1 C) 5 D) 9
5
51)
52) Income tax deduction amounts for employees in all provinces and territories in Canada (except Quebec) must be calculated based on A) both Federal and Provincial/Territorial Tax rates. B) the TONI Tax tables. C) Provincial/Territorial Tax rates only. D) Federal Tax rates only.
52)
53) Valerie Chandler works 46 hours as a coffee barista and earns $12 per hour. Compute her weekly pay assuming an overtime (more than 40 hours) rate of 1.5. A) $588 B) $480 C) $624 D) $552
53)
54) What type of account is CPP Payable? A) Asset B) Expense
54) C) Revenue
D) Liability
55) Which of the following is an optional payroll deduction? A) Income Taxes B) Canada Pension Plan C) Employment Insurance D) Charitable Contributions
55)
56) One benefit of using computer software to complete a payroll is NOT: A) It speeds up the payroll process. B) It creates fewer calculation errors. C) It is preferred by Revenue Canada. D) It makes year-end reporting much easier.
56)
57) A TD1 Form A) is used to complete your income tax return. B) is sent to each employee annually. C) specifies the claim code for each employee. D) calculates the maximum CPP an employee has to pay.
57)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 58) Net pay is the amount that the employee takes home.
58)
59) The employer is responsible for verifying the claims made by employees on TD1 Forms.
59)
60) If a TD1 exemption form is not filed the employee is treated as if he or she has a claim code of 1.
60)
61) All provinces use the same percent for their income tax rate.
61)
62) Net pay and gross pay mean the same.
62)
63) The payroll information for a pay period is found in the payroll register.
63)
64) A TD1 Claim Code represents a certain amount of a person's income that will be considered tax exempt.
64)
65) If a company pays out a bonus at year end, no income tax is deducted from it.
65)
6
66) The use of a payroll register to record a company's payroll is optional.
66)
67) The formula for computing EI Premiums to be deducted from an employee's weekly pay is Gross Pay × 1.62%, maximum $67.30.
67)
68) Payroll Tax Payable is credited for the amount of net pay.
68)
69) The T4 contains information about the employee's earnings, statutory deductions and social insurance number.
69)
70) The CPP premium rate is currently 5.2% of gross earnings.
70)
71) CPP, EI and Income Tax are statutory deductions.
71)
72) The EI premium rate is currently 1.88% of gross earnings.
72)
73) Employees must complete and sign TD1 exemption forms at the beginning of every year.
73)
74) The T4 is the single most important document in the Employment Insurance program.
74)
75) Computing payroll for employees can sometimes be quite complicated.
75)
76) Like CPP, Federal Income Tax has a cut-off point where there is no longer Income Tax withheld.
76)
77) Union dues are a deduction that is usually matched by the employer.
77)
78) The higher the TD1 code a person claims, the less income tax is paid.
78)
79) The EI premium rate will be the same every year.
79)
80) The taxable earnings column of the payroll register records the tax due.
80)
81) A maximum limit is set for all income tax deductions.
81)
82) The Record of Employment is issued by the employee on the leaving of an employee.
82)
83) The Income Tax, EI and CPP tables are found on the Canada Revenue Agency website.
83)
84) Maximum contributions for CPP, EI, and Income Tax change on an annual basis.
84)
85) Employees must complete and sign TD1 exemption forms every time the basic personal amount is changed by the government.
85)
86) All employees must contribute to provincial and federal income tax.
86)
87) Like EI, CPP has a maximum deduction per year.
87)
7
88) Each province is responsible for administering an employment insurance program.
88)
89) The EI premium rate is currently 1.62% of gross earnings.
89)
90) The Record of Employment is the single most important document in the Employment Insurance program.
90)
91) Income Taxes have no maximum amount.
91)
92) Gross pay is the amount that the employee takes home.
92)
93) All provinces use the same rates for Income Taxes.
93)
94) The CPP premium rate is currently 1.62% of gross earnings.
94)
95) The CPP premium rate is currently 5.10% of gross earnings.
95)
96) The EI premium rate is currently 5.10% of gross earnings.
96)
97) The employee's earnings record contains the information about an employee's gross earnings, deductions, and net pay for each payroll period.
97)
98) The CPP premium rate will be the same every year.
98)
99) The Record of Employment is issued by the employer on the leaving of an employee.
99)
100) Net pay is equal to gross pay less deductions.
100)
101) Regular earnings are equal to total earnings less deductions.
101)
102) Workers' Compensation insurance is paid for by the employees of a business.
102)
103) Regular earnings are equal to total earnings less deductions.
103)
104) Like CPP, Employment Insurance has a cut-off point where there is no longer Employment Insurance withheld.
104)
105) The T4 is issued by the employer on the leaving of an employee.
105)
106) The T4 is issued by the employee on leaving an employer.
106)
107) The formula for computing CPP Premiums to be deducted from an employee's weekly pay is (Gross Pay - 67.30) × 5.10%, subject to maximum premium per year.
107)
108) Companies can choose different pay periods for hourly workers versus salary workers.
108)
8
109) An employee pays no CPP premiums once past $57,400 in gross earnings for 2019.
109)
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 110) From the following information, complete the chart for gross earnings for the week. Assume an overtime rate of time and a half over 40 hours. Hourly Rate Kurt Nelson Sabrina Schmitz Kirk Seifker
$14 $16 $18
No. of Hours Worked 44 35 43
Gross Earnings ________ ________ ________
111) From the following information, please complete the chart by calculating the Canada Pension Plan premium to be deducted for each employee based on the gross earnings for the week. Assume a CPP rate of 5.10% and an annual exemption of $3500. (No employee has earned more than $40,000 so far this year). Gross Pay EI Deduction Bob Roberts $750.00 ________ Jeff Jeffery $200.00 ________ Doug Douglas $50.00 ________ 112) Why is it important for an employee to complete a TD1 form? 113) From the following information, please complete the chart for gross earnings for the week. Assume an overtime rate of time and a half over 40 hours. Hourly Rate No. of Hours Bob Roberts $14 41 Jeff Jeffery $15 30 Doug Douglas $16 42
Gross Earnings ________ ________ ________
114) Explain what is meant by the cumulative gross earnings. 115) Explain the purpose of workers' compensation, and discuss the premium cost to the employer. 116) Given the following payroll summary for January, 2019, make the necessary journal entry to record it: Gross Income Department Employee Pay Tax CPP EI Net Office Sales Sara W. 400 60.00 16.97 6.48 316.55 400 Howard R. 300 45.00 11.87 4.86 238.27 300 Pinder C. 500 75.00 22.07 8.10 394.83 500 1,200 180.00 50.91 19.44 949.65 400 800
9
117) From the following information, please complete the chart by calculating the Canada Pension Plan premium to be deducted for each employee based on the gross earnings for the week. Assume a CPP rate of 5.10% and an annual exemption of $3500. (No employee has earned more than $40,000 so far this year). Gross Pay Bob Roberts $581.00 Jeff Jeffery $450.00 Doug Douglas $688.00
EI Deduction ________ ________ ________
118) The employees collectively earn a gross wage of $85,000 for the pay period. But the employer says that they cost $92,000. Discuss the discrepancy. 119) Using the Payroll Register below, produce the General Journal entry to record the payroll for the week ending December 13, 2019.
Employee Sharon Gavin Theresa Steve
Gross Pay 1,050 999 1,750 500 4,299
Income Tax 210 199 350 100 859
CPP 50.12 47.52 85.82 22.07 205.53
EI 17.01 16.18 28.35 8.10 69.64
Department Net Office 772.87 1,050 787.51 999 1,285.83 369.83 3,164.83 2,049
Sales
1,750 500 2,250
120) Calculate the total wages earned for each employee (assume an overtime rate of time and a half over 40 hours): a) Dave earns $22 per hour and worked 47 hours in one week. b) Jeff earns $18 per hour and worked 41 hours in one week. 121) Prepare a general journal payroll entry for Fine Foods using the following information:
Vera Salerd Saul Marriand Burt Javal
Cumulative Earnings 35,000 30,000 66,000
Weekly Gross Salary 900 1,100 2,000
Department Office Sales Office
Assume the following: a) CPP 5.10% (exemption of $67.30); EI 1.62% b) Income Tax (including Federal and Provincial Income Tax) is 22% of gross pay c) Each employee pays $10 per week for medical insurance. 122) From the following information, please complete the chart by calculating the Employment Insurance premium to be deducted for each employee based on the gross earnings for the week. Assume an EI rate of 1.62%. (No employee has earned more than $40,000 so far this year). Gross Pay Bob Roberts $581.00 Jeff Jeffery $450.00 Doug Douglas $688.00
EI Deduction ________ ________ ________
10
123) For the week below, please complete the chart for gross earnings for the week. Assume an overtime rate of time and a half over 40 hours.
Ron Jhamal J.C. Latour Jerry Chan
Hourly Rate No. of Hours $21 44 $24 35 $27 43
Gross Earnings ________ ________ ________
124) What are statutory deductions and which ones apply in Canada? 125) Using the following information, complete the Payroll Register (Payroll Summary) for the week ending January 17, 2019. Assume a tax rate of 15%, CPP of 5.10% (exemption of $67.30), and EI of 1.62%. Employee Sara W. Howard R. Pinder C.
Type Office Sales Sales
Gross Pay $400 300 500
126) Employees are often surprised that their take -home pay is different from their gross pay. How would you explain this discrepancy to them? 127) Prepare a general journal payroll entry for Manitoba Market using the following information:
Sam Schmidt Marianne Saul Jay Bachal
Cumulative Earnings 35,000 40,000 55,000
Weekly Gross Salary 700 800 1,000
Department Office Sales Office
Assume the following: a) CPP 5.10% (exemption of $67.30); EI 1.62% b) Income Tax (including Federal and Provincial Income Tax) is 22% of gross pay c) Each employee pays $10 per week for medical insurance. 128) Using the Payroll Register below, produce the General Journal entry to record the payroll for the week ending November 22, 2019.
Employee Simone George Tanya Steve
Gross Pay 800 700 600 700 2,800
Income Tax 116 93 75 93 377
CPP 37.37 32.27 27.17 32.27 129.08
EI 12.96 11.34 9.72 11.34 45.36
Department Net Office 633.67 800 563.39 700 488.11 563.39 2,248.56 1,500
Sales
600 700 1,300
129) Calculate the total wages earned for each employee (assume an overtime rate of time and a half over 40 hours). a) Deon Brown earns $12 per hour and worked 42 hours in one week. b) Gerald Cornelius earns $16 per hour and worked 48 hours in one week. 11
130) Appealing Apparel Company pays its sales employees an hourly rate, plus time and a half for any hours over 35 per week. Complete the calculation of gross pay for the following three persons the week below:
April Jenkins Tim Hansman Penny Leung
Hourly Rate Hours Worked $17 44 $18 36 $19 20
Gross Pay
131) Why are more companies using software programs to complete their payroll? 132) Using the Payroll Register below, produce the General Journal entry to record the payroll for the week ending April 5, 2019.
Employee Susan Geoffrey Tessa Stanley
Gross Pay 900 1,100 2,000 700 4,700
Income Tax 198 242 440 154 1,034
CPP 42.47 52.67 98.57 32.27 225.98
EI 14.58 17.82 32.40 11.34 76.14
Department Net Office 644.95 900 787.51 1,100 1,429.03 502.39 3,363.88 2,000
Sales
2,000 700 2,700
133) From the following information, please complete the chart by calculating the Canada Pension Plan premium to be deducted for each employee based on the gross earnings for the week. Assume a CPP rate of 5.10% and an annual exemption of $3500. (Each employee has earned more than $60,000 so far this year). Gross Pay Bob Roberts $581.00 Jeff Jeffery $450.00 Doug Douglas $688.00
EI Deduction ________ ________ ________
134) Name and describe the special form that must be filled out by the employing company and returned to the federal government when an employee leaves that company's employ. 135) Using the following information, compute this week's take home pay and deductions for each employee. Use an Income Tax rate of 15% for Letitia and Paulo; an Income Tax rate of 22% for Steve and Catriona. Calculate EI using a rate of 1.62% and CPP using a rate of 5.10% and a weekly exemption of $67.30.
Employee Letitia Paulo Steve Catriona
Earnings YTD 20,000 16,000 36,000 53,825
Earnings this Week 800 400 900 1,075
Medical Premiums 10 10 10 0
12
136) Each spring the Northern Forest Management Company needs extra tree fallers. This means that each spring 50 temporary workers are hired for a 12-week period, working 40 hours per week at $14 per hour, and then they are laid off. Please give your thoughts on whether there is any advantage to asking 200 of the 500 permanent employees of Northern Forest Management who make $18 per hour to work 2 hours of overtime each workday of that 12 weeks, rather than hiring the temporary workers. 137) Calculate the number of hours of overtime paid to each of the following employees if they are paid overtime for hours over 40 per week or over 8 hours per day. Monday Jim 8 Janet 12 Delbert 7
Tuesday 7 9 4
Wednesday 9 2 15
Thursday 6 4 14
Friday 5 11 12
Saturday 3 2
138) From the following information, please complete the chart by calculating the Canada Pension Plan premium to be deducted for each employee based on the gross earnings for the week. Assume a CPP rate of 5.10% and an annual exemption of $3500. (Each employee has earned more than $60,000 so far this year). Gross Pay Bob Roberts $581.00 Jeff Jeffery $450.00 Doug Douglas $688.00
EI Deduction ________ ________ ________
139) From the following information, please complete the chart by calculating the Employment Insurance premium to be deducted for each employee based on the gross earnings for the week. Assume an EI rate of 1.62%. (No employee has earned more than $40,000 so far this year). Gross Pay Bob Roberts $750.00 Jeff Jeffery $200.00 Doug Douglas $50.00
EI Deduction ________ ________ ________
13
Answer Key Testname: CHAP 10_14CE
1) B 2) B 3) D 4) A 5) C 6) D 7) A 8) A 9) B 10) D 11) C 12) A 13) D 14) D 15) C 16) D 17) B 18) C 19) C 20) A 21) B 22) D 23) C 24) C 25) D 26) A 27) C 28) B 29) D 30) B 31) B 32) D 33) C 34) B 35) B 36) D 37) B 38) D 39) C 40) B 41) C 42) D 43) B 44) C 45) D 46) D 47) B 48) A 49) D 14
Answer Key Testname: CHAP 10_14CE
50) C 51) A 52) A 53) A 54) D 55) D 56) C 57) C 58) TRUE 59) FALSE 60) TRUE 61) FALSE 62) FALSE 63) TRUE 64) TRUE 65) FALSE 66) FALSE 67) FALSE 68) FALSE 69) TRUE 70) FALSE 71) TRUE 72) FALSE 73) FALSE 74) FALSE 75) TRUE 76) FALSE 77) FALSE 78) TRUE 79) FALSE 80) FALSE 81) FALSE 82) FALSE 83) TRUE 84) FALSE 85) FALSE 86) TRUE 87) TRUE 88) FALSE 89) TRUE 90) TRUE 91) TRUE 92) FALSE 93) FALSE 94) FALSE 95) TRUE 96) FALSE 97) TRUE 98) FALSE 15
Answer Key Testname: CHAP 10_14CE
99) TRUE 100) TRUE 101) FALSE 102) FALSE 103) FALSE 104) TRUE 105) FALSE 106) FALSE 107) TRUE 108) TRUE 109) TRUE 110) Kurt Nelson $644 Sabrina Schmitz $560 Kirk Seifker $801 111) Bob Roberts CPP Deduction = $34.82 Jeff Jeffery CPP Deduction = $6.77 Doug Douglas CPP Deduction = $0.00 112) The TD1 form allows the employer to figure your exemption status so that your net claim code can be ascertained. Your net claim code is used to calculate how much income tax is to be deducted from employees. If the net claim code was not used then you would have some employees paying too much income tax all year and getting a refund from CRA. Other employees could end up not paying enough income tax all year and would have to come up with money to pay CRA when they file their income tax. Overall the TD1 provides for consistency of take home pay for employees. 113) Bob Roberts gross pay = $581.00 Jeff Jeffery gross pay = $450.00 Doug Douglas gross pay = $688.00 114) Cumulative earnings represent the total earned earlier in the year prior to the current period's earnings. 115) Workers' Compensation is insurance provided by an employer to protect its employees against loss due to injury or death related to employment. The premium of workers' compensation insurance is based on the total estimated gross payroll, and the rate is determined by past injury experience in that type of position. The rate stated per $100 of payroll is then multiplied by the estimated gross payroll. At the end of the year, if the estimated amount is not equal to the actual amount, an adjustment is made. 116) Office Salaries Expense 400.00 Sales Salaries Expense 800.00 Income Tax Payable 180.00 CPP Payable 50.91 EI Payable 19.44 Salaries Payable 949.65 117) Bob Roberts CPP Deduction = $26.20 Jeff Jeffery CPP Deduction = $19.52 Doug Douglas CPP Deduction = $31.66 118) The employees only consider their gross earnings while the employer also must pay his or her share of CPP, employment insurance, workers' compensation and sometimes other costs (like pension plans, etc.).
16
Answer Key Testname: CHAP 10_14CE
119) Office Salaries Expense 2049.00 Sales Salaries Expense 2250.00 Income Tax Payable 859.00 CPP Payable 205.53 EI Payable 69.64 Wages & Salaries Payable 3164.83 To record the payroll for week ending December 13, 2019. 120) a) $1,111 b) $747 121) Office Salaries Expense 1,100 Sales Salaries Expense 2,900 CPP Payable 95.14 EI Payable 32.40 Income Tax Payable 880.00 Medical Insurance Payable 30.00 Salaries Payable 2,962.46 122) Bob Roberts EI Deduction = $9.41 Jeff Jeffery EI Deduction = $7.29 Doug Douglas EI Deduction = $11.15 123) Ron Jhamal gross pay = $966.00 J.C. Latour gross pay = $840.00 Jerry Chan gross pay = $1,201.50 124) Statutory deductions are amounts required to be withheld from employee's gross pay and paid to the appropriate tax authority. In Canada the statutory deductions are: - Federal and provincial income tax - Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) in Quebec - Employment Insurance (EI) - Quebec Parental Insurance Plan (QPIP) in Quebec only 125) Gross Income Department Employee Pay Tax CPP EI Net Office Sales Sara W. 400 60.00 16.97 6.48 316.55 400 Howard R. 300 45.00 11.87 4.86 238.27 300 Pinder C. 500 75.00 22.07 8.10 394.83 500 1,200 180.00 50.91 19.44 949.65 400 800 126) The Canadian government makes it mandatory for certain payroll deductions to be taken at source. This means that the amounts must be deducted from employee paycheques before they receive their wages. Specifically, in Canada employers must deduct CPP, EI and taxes. This means that the gross pay will always be a higher number than the take -home pay. 127) Office Salaries Expense 1,700 Sales Salaries Expense 800 CPP Payable 117.21 EI Payable 40.50 Income Tax Payable 550.00 Medical Insurance Payable 30.00 Salaries Payable 1,762.29
17
Answer Key Testname: CHAP 10_14CE
128) Office Salaries Expense 1500.00 Sales Salaries Expense 1300.00 Income Tax Payable 377.00 CPP Payable 129.08 EI Payable 45.36 Wages & Salaries Payable 2,248.56 To record the payroll for week ending November 22, 2019. 129) a) $516 b) $832 130) Hourly Rate Hours Worked Gross Pay April Jenkins $17 44 $824.50 Tim Hansman $18 36 $657.00 Penny Leung $19 20 $380.00 131) The software programs provide fewer chances for error and save a lot of time. The software can be easily updated each year to reflect the changes in CPP, EI, and Income Tax. Such programs also make it easy to produce year-end forms for employees and the government. 132) Office Salaries Expense 2000.00 Sales Salaries Expense 2700.00 Income Tax Payable 1034.00 CPP Payable 225.98 EI Payable 76.14 Wages & Salaries Payable 3363.88 To record the payroll for week ending April 5, 2019. 133) Bob Roberts CPP Deduction = $0.00 Jeff Jeffery CPP Deduction = $0.00 Doug Douglas CPP Deduction = $0.00 134) The Record of Employment is filled out when an employee leaves a company. It states his/her name, address, first and last day of work for that company, pay, insurable earnings, total insurable hours worked. The original of the Record of Employment is kept by the employee and a copy must be sent to the federal government. The contents of this form are used by the government when the employee files for Employment Insurance income benefits. The employer can now submit the Records of Employment electronically to the federal government. Therefore, the employee does not have to have a paper copy of the Record of Employment. Both the employee and employer can view the Record of Employment on the Internet. 135) Employee Gross Tax CPP EI Medical Net Pay Letitia 800 120.00 37.37 12.96 10 619.67 Paulo 400 60.00 16.97 6.48 10 306.55 Steve 900 198.00 42.47 14.58 10 634.95 Catriona 1,075 236.50 51.39 0 0 787.11 3,175 614.50 148.20 34.02 30 2,348.28
18
Answer Key Testname: CHAP 10_14CE
136) 1) Hiring the temporary workers for the 12-week period would be less costly for Northern Forest Management Company. Even before calculating overtime pay, the permanent employees would be paid $96,000 more than the temps. (It is the same amount of time, but 2 hours at $18/hour × 5 days × 12 weeks × 200 employees = $432,000. Temps would receive 40 hours × 12 weeks × $14/hour x 50 employees = $336,000.) 2) Possibly the permanent employees would not want to work overtime each day. It might not be safe for them to do dangerous work like this longer than 8 hours per day. 3) A consideration would be skills needed to do the work of tree falling. The permanent employees are already skilled to do the work. How difficult would it be to hire 50 temporary workers who have the skills needed? If there was training, what would be the cost? 4) Would a temporary agency handle the payroll for the temporary workers? Or would there be extra work in accounting for the permanent employees? 137) Jim - 1 hour overtime Janet - 8 hours overtime Delbert - 17 hours overtime 138) Bob Roberts CPP Deduction = $0.00 Jeff Jeffery CPP Deduction = $0.00 Doug Douglas CPP Deduction = $0.00 139) Bob Roberts EI Deduction = $12.15 Jeff Jeffery EI Deduction = $3.24 Doug Douglas EI Deduction = $0.81
19
Exam
CHAPTER 11
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The journal entry to record the estimated advance premium payment for workers' compensation is A) Workers' Compensation Insurance Payable Cash B) Cash Prepaid Insurance, Workers' Compensation C) Prepaid Insurance, Workers' Compensation Cash D) Workers' Compensation Insurance Expense Cash
1)
2) The employer records deductions from the employee's paycheque A) as debits to asset accounts until paid. B) as credits to capital accounts. C) as debits to expense accounts. D) as credits to liability accounts until paid.
2)
3) A T4 Summary is filed A) monthly. C) annually.
3) B) depends on the amount owed. D) quarterly.
4) When remitting EI, the entry would be A) debit EI Expense, credit Cash. C) debit EI Payable, credit Cash.
B) debit Cash, credit EI Expense. D) debit Cash, credit EI Payable.
4)
5) The employer pays EI premiums in what ratio to employee EI deductions? A) 2 times employee EI deductions B) 1.4 times employee EI deductions C) 4 times employee EI deductions D) Does not contribute
5)
6) Which of the following is NOT a form required by CRA in the payroll process? A) T4 B) PD7A C) T4X D) T4 Summary
6)
7) Prepaid Worker's Compensation Insurance is what type of account? A) Expense B) Liability C) Revenue
7) D) Asset
8) Employment Insurance premiums are paid by A) the employee. C) both the employer and employee.
8) B) the Provincial Government. D) the employer.
9) Employers must send employees their T4 by A) February 28. B) February 1.
C) April 30.
9)
1
D) December 31.
10) The T4 Summary form is filed A) with the T4s. B) with the Statement of Account for Current Source Deductions. C) monthly. D) quarterly.
10)
11) As the Prepaid Workers Compensation is recognized, the amount will transfer to A) Workers Compensation Insurance Payable. B) Workers Compensation Insurance Expense. C) Payroll Tax Expense. D) Cash.
11)
12) The journal entry to record the EHT amount owing for the year is A) Employer Health Tax Payable B) Workers' Compensation Expense Employer Health Tax Expense Workers' Compensation Payable C) Employer Health Tax Payable D) Employer Health Tax Expense Cash Employer Health Tax Payable
12)
13) Wages and Salaries Expense is A) equal to gross pay. C) equal to net pay.
13) B) equal to the employer's taxes. D) None of the above are correct.
14) An employer might agree to pay a portion of the following items to which the employees contribute. A) Union dues B) Medical plan C) Federal tax D) Provincial tax
14)
15) Why would a company use a separate payroll cash account? A) Determine whether or not the employee has cashed their cheque B) Provides for better internal control C) Ease of account reconciliation D) All of the above are correct.
15)
16) If Wages and Salaries Payable is debited, what account would most likely be credited? A) Payroll Expense B) CPP Payable C) Wages and Salaries Expense D) Cash
16)
17) The debit amount to Employee Benefits Expense represents A) the employer's and employees' portion of the payroll taxes. B) the employer's portion of the payroll taxes. C) the employees' portion of the payroll taxes. D) None of the above are correct.
17)
18) The employer pays CPP premiums in what ratio to employee CPP deductions? A) 1.4 times employee CPP deductions B) Matching employee CPP deductions C) 1/2 employee CPP deductions D) 1/4 of employee CPP deductions
18)
19) What is the threshold at which employers would be required to send in their remittance more often than monthly? A) $12,000 B) $1,000 C) $10,000 D) $15,000
19)
2
20) The employer's remittance to CRA includes A) income tax, CPP, and EI B) CPP, EI, and extended health care. C) income tax, CPP, EI, and Workers Compensation. D) income tax, CPP, EI, and extended health care.
20)
21) The Wages and Salaries Payable account would be used to record A) gross earnings of the employees. B) cumulative earnings of the employees. C) net earnings of the employees not yet paid. D) the paid portion of the earnings.
21)
22) In completing the annual T4 Summary, which of the following is NOT true? A) The T4 Summary must contain your Canada Revenue Agency Account Number. B) The T4 must be sent out by December 31. C) The total of all T4's CPP, EI and tax deductions must agree with the totals on the T4 Summary. D) The T4 Summary must be filed each year by February 28.
22)
23) When remitting CPP, the entry would be A) debit Cash, credit CPP Expense. C) debit Cash, credit CPP Payable.
23) B) debit CPP Payable, credit Cash. D) debit CPP Expense, credit Cash.
24) If Geharty Company had deducted $2,000 Income tax, $200 CPP, and $120 EI from the employee's cheques, then the Employee Benefits Expense would be A) $320. B) $2,320. C) $400. D) $368.
24)
25) If the employees' EI deductions for the week total $500, the employer's EI contribution will be A) $20. B) $700. C) $50. D) $500.
25)
26) The journal entry to record the payment of the EHT liability for the year is A) Cash B) Workers' Compensation Payable Employer Health Tax Expense Cash C) Employer Health Tax Expense D) Employer Health Tax Payable Employer Health Tax Payable Cash
26)
27) If the employees' CPP deductions for the week total $500, the employer's CPP contribution will be A) $20. B) $500. C) $50. D) $700.
27)
28) If the employees' EI deductions for the week total $300, the employer's EI contribution will be A) $300. B) $420. C) $0. D) $30.
28)
29) The employer pays employee Income Tax premiums in what ratio to employee deductions? A) 2 times employee deductions B) 1.4 times employee deductions C) Matches employee deductions D) Does not contribute
29)
3
30) If the employees' CPP deductions for the week total $300, the employer's CPP contribution will be A) $300. B) $30. C) $0. D) $420.
30)
31) If the employees had $250 CPP, $350 EI and $450 Income Tax deducted from their paycheques, then the Employer's Benefits expense would be A) $1,050. B) $740. C) $600. D) $1,790.
31)
32) Personal Income Tax rates A) are set by the Municipal Government annually. B) vary from province to province. C) vary according to the employee's cash on hand. D) are the same in every province.
32)
33) If the employees had $250 CPP, $350 EI and $450 Income Tax deducted from their paycheques, then the total amount to be remitted to the Receiver General would be A) $600. B) $740. C) $1,050. D) $1,790.
33)
34) If the employees have had $200 in CPP contributions and $300 in EI contributions deducted from their paycheques, then the Employer's Benefits Expense would be A) $580. B) $620. C) $500. D) $700.
34)
35) Which of the following is an amount paid by both employee and employer? A) EI only B) Income Tax C) CPP only
35) D) CPP & EI
36) The Wages and Salaries Expense account would be used to record A) a credit to the amount owed to the office workers. B) net earnings for the office workers. C) a debit for the amount of net pay owed to the office workers. D) gross earnings for the office workers.
36)
37) In addition to CPP and EI, employers often share the expense of A) health care plans. B) savings plans. C) income tax. D) garnishees.
37)
38) The form that contains information about gross earnings given to each employee by February 28 of the year following is the A) T4. B) TD1. C) ROE. D) T4 Summary.
38)
39) If the employees had $200 CPP, $300 EI and $400 Income Tax deducted from their paycheques, the employer would remit A) $1,520. B) $1,920. C) $900. D) $1,120.
39)
40) The information needed to make the journal entries to record the wages and salaries expense comes from A) the look-back period. B) the payroll register. C) form TD1-A. D) form PD7A.
40)
4
41) Workers' Compensation Insurance A) ensures employees their wages if they were reduced due to a cut in hours worked. B) protects employers against employee's fraudulent acts. C) ensures employees their wage if they were to be laid off as a result of new technology. D) insures employees against losses due to workplace injury or death.
41)
42) The entry to record the employee benefits expense would include A) a credit to Taxes Payable. B) a credit to EI Payable and CPP Payable. C) a credit to Wages Payable. D) a credit to Federal Income Taxes Expense.
42)
43) The forms T4 and T4-T4A Summary must be submitted to the employees and Federal Government respectively by A) when an employee leaves a job. B) April 30 of the year following. C) February 28 of the year following. D) the 15th of the month following.
43)
44) What type of an account is Wages and Salaries Payable? A) Revenue B) Expense C) Liability
44) D) Asset
45) The 'entry' to record payment of statutory payroll deductions is generally recorded first in the A) general or cash payments journal. B) general ledger. C) chart of accounts. D) worksheet.
45)
46) The general journal entry to record payroll benefits and taxes generally includes A) a debit to Employee Benefits Expense. B) a debit to Sales Tax Expense. C) a debit to Salaries Expense. D) a credit to Salaries Payable.
46)
47) The T4 Summary A) is sent in quarterly. B) must equal the total of the year's T4 Forms. C) is sent in monthly. D) is completed for each employee.
47)
48) The employer records deductions from the employee's paycheque A) as credits to liability accounts until paid. B) as credits to capital accounts. C) as debits to asset accounts until paid. D) as debits to expense accounts.
48)
49) Employers share with their employees the total cost of A) EI and income tax. B) income tax. C) CPP, EI, and income tax. D) CPP and EI.
49)
50) If the employee's income tax deductions for the week total $300, the employer's income tax contribution will be A) $0. B) $420. C) $300. D) $30.
50)
5
51) The form that contains information about gross earnings given to the CRA by February 28 of the year following is the A) TD1. B) T4. C) ROE. D) T4 Summary.
51)
52) The last step in the payroll process for the year is A) mailing the record of employment. B) mail the T4 Summary and the T4 Supplementary. C) completing the payroll register. D) calculating gross pay.
52)
53) What type of account is Employee Benefits Expense? A) Expense B) Asset C) Liability
53) D) Revenue
54) If the employees have had $300 in CPP contributions and $400 in EI contributions deducted from their paycheques, then the amount to be remitted to the Receiver General would be (excluding income taxes) A) $1,520. B) $700. C) $1,560. D) $860.
54)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 55) After sending the monthly payroll remittance, CPP Payable would decrease.
55)
56) If the employer calendar year ends on September 30th the T4 Summary will still be filed for the calendar year from January 1 to December 30.
56)
57) The payroll tax expense is recorded at the same time the payroll is recorded.
57)
58) The premium rate for workers' compensation is based on the type of work performed.
58)
59) The account credited for all payroll deductions is Employee Benefits Expense.
59)
60) "Remitted" means money has been sent to the government.
60)
61) The amount of employment insurance paid by employers can be reduced if the employer has an approved wage-loss replacement plan.
61)
62) The premium rate for workers' compensation is the same for all employees, regardless of the type of work they do.
62)
63) Businesses with payroll deductions under $15,000 must remit payroll withholdings quarterly.
63)
64) Employers can recover the cost of CPP deducted for employees who have reached the maximum deductions with a previous employer in the same calendar year.
64)
65) The employer must contribute 1.4 times the employee's CPP contributions.
65)
66) The cost of workers' compensation insurance must be estimated and paid in advance by the employer.
66)
6
67) Employers should use a PD7A form to remit monthly employee deductions to the Canada Revenue Agency.
67)
68) If an employee leaves an employer during the year, the employer must issue a T4 within 30 days of the request.
68)
69) The cheque to remit CPP, EI and Income Tax would be remitted to CRA by the 15th of the following month.
69)
70) Employers should use a T4 Summary form to remit monthly employee deductions to the Canada Revenue Agency.
70)
71) Fines for late payroll remittances are deductible as a business expense for tax purposes.
71)
72) For a weekly payroll, the journal entry to record the employer's portions should also be done weekly.
72)
73) Most smaller companies must send in their remittance every week if they have a weekly pay period.
73)
74) CPP Payable normally has a credit balance.
74)
75) Many companies will use an account called Due to CRA instead of three separate liability accounts to record payroll liabilities.
75)
76) Business numbers are automatically assigned to new businesses once they begin operations.
76)
77) "Remitted" means money has been paid to employees.
77)
78) The cheque to remit Workers Compensation, Health Taxes and Income Tax would be remitted to CRA by the 15th of the following month.
78)
79) Payroll Tax Expense or Employee Benefits Expense are possible account titles employers use for the employer's portion of CPP and EI.
79)
80) If the employer calendar year ends on September 30th the T4 Summary will be filed for the period from January 1 to September 30.
80)
81) Every business with employees must have a unique identification number issued by the Canada Revenue Agency.
81)
82) Employers should use a Statement of Account for Current Source Deductions to remit monthly employee deductions to the Canada Revenue Agency.
82)
83) The employer's and the employee's contributions to CPP, EI and Income Tax must be remitted by all employers to the Provincial Government monthly.
83)
7
84) The Employee Benefits Expense entry is recorded at the time the payroll is recorded.
84)
85) Employers must apply for a Business Number to handle their responsibilities for payroll correctly.
85)
86) The employer must match the employee's Income Tax deductions.
86)
87) Remittance due dates are based on the frequency of pay dates in a calendar year.
87)
88) The premium for worker's compensation insurance is based on the total estimated gross payroll.
88)
89) The individual employee earnings are reported on Form T4.
89)
90) An employer must always use a calendar year for payroll purposes.
90)
91) The employer's EI contribution is based on the employee's EI deductions.
91)
92) Premiums for worker's compensation insurance may be adjusted based on actual payroll amounts at the end of the year.
92)
93) Hiring employees who have reached the CPP maximum with a previous employer can save the new employer the costs of CPP for the current year.
93)
94) The employee's T4 must be sent to the employee by February 28 of the year following.
94)
95) A Form PD7A is used to remit EI, CPP and Income Taxes.
95)
96) Worker's Compensation premiums are paid directly to the Federal Government by the employer.
96)
97) A T4 Summary must be issued to every employee each year.
97)
98) The totals of EI, CPP and Income Tax reported on the T4 Summary must agree with the total of the deductions of CPP, EI and Income Tax reported on the employees T4s.
98)
99) Companies have a business number given by the federal government that uniquely identifies them.
99)
100) The account credited for the employer's portion of CPP is CPP Payable.
100)
101) The employer's EI contribution is 1.4 times that of the employee's deduction.
101)
102) The employer must contribute 1.4 times the employee's Income Tax contributions.
102)
103) The balance in the Wages and Salaries Expense account is equal to net pay.
103)
104) Different remittance rules apply to employers based on the amount collected and owed by that employer.
104)
8
105) Employees can recover the cost of CPP deducted by a new employer if they have already reached the maximum deduction with a previous employer in the same calendar year.
105)
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 106) Explain the formula used to compute EI deductions. Is it easier or more difficult to calculate than the CPP deduction? 107) What is the purpose of the Canada Pension Plan and how are the employer's contributions calculated? 108) Using the information below, determine the amount of the payroll benefits expense for Quinn's Quizzes.
J. Gross P. James Q. Quan
Employee Gross Pay 1,000 500 600
CPP Deducted 47.57 22.07 27.17
EI Deducted 16.20 8.10 9.72
109) The payroll register for Marty's Marlin Boat reads as follows: Name John Marty
Gross Pay 300 250 550
CPP 11.87 9.32 21.19
EI 4.86 4.05 8.91
Inc Tax 11.86 0.00 11.86
Union 10.00 10.00 20.00
Medical 15.00 15.00 30.00
Net Pay 246.41 211.63 458.04
The company matches the employee's medical plan contributions on a one -to-one basis. Produce the general journal entry to record the employer's portions. 110) Why are the employee deductions recorded as payables on the employer's books? 111) The Soup Company had made the following entry to record the payroll: Salaries Expense 20,000.00 CPP Payable EI Payable Income Tax Payable Wages & Salaries Payable
770.00 324.00 4180.00 14,726.00
Produce the entry to record the employer's contributions. 112) What is the purpose of the T4-T4A Summary and when is it to be submitted? 113) The employees collectively earn a gross wage of $98,000 for the pay period, but the employer says that they cost $123,300. Discuss the discrepancy. 114) Why should employers make every effort to submit the necessary deductions to CRA on or before the appropriate deadline?
9
115) The following information from the payroll register of Orville's Oil Spray is available: Name Joachim Yourself Steve
Gross Pay 800 850 900 2550
CPP 37.37 0.00 42.47 79.84
EI 12.96 13.77 14.58 41.31
Inc Tax 130.81 146.19 162.02 439.02
Net Pay 618.86 690.04 680.93 1989.83
Produce the general journal entry to record the employer's contributions. 116) The Super Sandwich Company had made the following entry to record the payroll: Salaries Expense 10,000.00 CPP Payable EI Payable Income Tax Payable Wages & Salaries Payable
385.00 162.00 2,090.00 7,363.00
Produce the entry to record the employer's contributions. 117) Jungwirth Mechanical has five payrolls for the month. Each payroll had $9,000 salary, $1,800 income tax, $430 CPP, $165 EI, $300 Health Plan, and $6,305 net pay. What amount would the company send to the CRA as the remittance from this month? 118) The following entry has been made by the bookkeeper of Walter's Windows: Salaries Expense 8,000.00 CPP Payable EI Payable Medical Plan Payable Income Tax Payable Wages and Salaries Payable To Record the Payroll
200.00 110.00 80.00 1,000.00 6,610.00
Calculate the amount of the Employee Benefits Expense related to the payroll. Walter's Windows matches its employee's medical plan contribution. 119) Noble Machinery has two payrolls for the month. Each payroll had $20,000 salary, $4,000 income tax, $900 CPP, $324 EI, $776 Health Plan, $528 Workers Compensation, and $14,000 net pay. What amount would the company send to the CRA as the remittance from this month? 120) Why is income tax NOT considered an expense of the employer?
10
Answer Key Testname: CHAP 11_14CE
1) C 2) D 3) C 4) C 5) B 6) C 7) D 8) C 9) A 10) A 11) B 12) D 13) A 14) B 15) D 16) D 17) B 18) B 19) D 20) A 21) C 22) B 23) B 24) D 25) B 26) D 27) B 28) B 29) D 30) A 31) B 32) B 33) D 34) B 35) D 36) D 37) A 38) A 39) A 40) B 41) D 42) B 43) C 44) C 45) A 46) A 47) B 48) A 49) D 11
Answer Key Testname: CHAP 11_14CE
50) A 51) D 52) B 53) A 54) C 55) TRUE 56) TRUE 57) TRUE 58) TRUE 59) FALSE 60) TRUE 61) TRUE 62) FALSE 63) FALSE 64) FALSE 65) FALSE 66) TRUE 67) TRUE 68) FALSE 69) TRUE 70) FALSE 71) FALSE 72) TRUE 73) FALSE 74) TRUE 75) TRUE 76) FALSE 77) FALSE 78) FALSE 79) TRUE 80) FALSE 81) TRUE 82) TRUE 83) FALSE 84) TRUE 85) TRUE 86) FALSE 87) FALSE 88) TRUE 89) TRUE 90) TRUE 91) TRUE 92) TRUE 93) FALSE 94) TRUE 95) TRUE 96) FALSE 97) FALSE 98) TRUE 12
Answer Key Testname: CHAP 11_14CE
99) TRUE 100) TRUE 101) TRUE 102) FALSE 103) FALSE 104) TRUE 105) TRUE 106) Currently, the EI is simply 1.62% of the amount earned in a period. It does not matter what the period is (month, week, etc.). In calculating CPP deductions, there is a $3,500 annual exemption, so this is different for a week (3,500 ÷ 52 = $67.30) or a month (3,500 ÷ 12 = $291.66). This means that CPP is more difficult to arrive at. There are a number of tables for CPP (weekly, bi-weekly, monthly, etc.), but only one table for EI. Both CPP and EI have maximum amounts per year, but though they are different, there is no added complexity for either one. 107) The Canada Pension Plan is intended to provide an income to Canadians after retirement. Certain other benefits are also funded by CPP. The employer contributes an amount equal to the employee's contribution. If the employee does not pay premiums this period, the employer does not contribute. 108) CPP 96.81 × 1 = 96.81 EI 34.02 × 1.4 = 47.63 144.44 109) Employee Benefits Expense 63.66 CPP Payable 21.19 EI Payable 12.47 Medical Plan Payable 30.00 110) The employer collects the amounts from the employees by withholding them from their paycheques of its employees and then makes the payments to the government, insurance company, etc on the employees' behalf. 111) Employee Benefits Expense 1,223.60 CPP Payable 770.00 EI Payable 453.60 112) The T4-T4A Summary is used to verify the information reported on all individual T4s and to summarize them for filing with the Canada Revenue Agency. The forms are to be submitted to the Canada Revenue Agency by February 28 of the year following. It also serves to verify the organization's payroll deductions remitted to the Canada Revenue Agency and to identify any over or under-payment. 113) The employees only consider the gross earnings. The employer has to pay the employees their wages, remit their source deductions to the federal government, and also remit the employer portion of the Canada Pension Plan and Employment Insurance. The employer pays the entire amount for workers' compensation, insuring the employees against accidents. Also, employers often pay a portion of health care, pension and insurance, etc. costs for employees. 114) First, because it is the law of the land. More importantly, perhaps is that there are serious penalties for submitting deductions later than the relevant deadline, and these penalties are not considered an expense of doing business, and so are not generally deductible for tax purposes. 115) Employee Benefits Expense 137.67 CPP Payable 79.84 EI Payable 57.83 116) Employee Benefits Expense 611.80 CPP Payable 385.00 EI Payable 226.80 13
Answer Key Testname: CHAP 11_14CE
117)
$1,800 × 1 = $1,800 430 × 2 = 860 165 × 2.4 = 396 Remittance = $3,056 × 5 payrolls = $15,280 118) CPP 200.00 EI 154.00 Medical 80.00 434.00 119) $4,000 × 1 = $4,000 900 × 2 = 1,800 324 × 2.4 = 777.60 Remittance = $6,577.60 × 2 payrolls = $13,155.20 120) Income tax is only paid by the employee. The employer is merely acting as a transfer agent by deducting the employee's income tax from their paycheque and then submitting that income tax to CRA on behalf of the employee.
14
Exam
CHAPTER 12
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following is a contra-revenue account? A) Allowance for Doubtful Accounts B) Accounts Receivable C) Bad Debts Expense D) None of these answers is correct.
1)
2) Sigma reports net credit sales of $480,000. There is a credit balance of $1,700 in the Allowance for Doubtful Accounts. Uncollectible accounts are estimated to be 4% of net credit sales. Under the income statement approach, the adjusting entry would require a debit to Bad Debts Expense for: (Round your calculations to the nearest whole dollar.) A) $17,500. B) $19,132. C) $19,200. D) some other number.
2)
3) What general ledger account is credited to write off a customer's account as uncollectible if using the allowance method for uncollectible receivables? A) Bad Debts Expense B) Bad Debts Recovered C) Accounts Receivable D) Allowance for Doubtful Accounts
3)
4) The allowance method requires A) None of these answers is correct. B) a known uncollectible amount to write off bad debts. C) a known individual account to write off bad debts. D) an estimated entry to Bad Debts Expense.
4)
5) Joe's Auto Repair estimates that approximately 3% of net credit sales are uncollectible. Joe's calculates Bad Debts Expense using the A) balance sheet method. B) income statement method. C) gross method. D) direct write-off method.
5)
6) Mercury Holdings estimates it will collect $4,200 of the $5,620 owed by customers. The $4,200 is A) the Allowance for Doubtful Accounts. B) the Gross Accounts Receivable. C) the Bad Debts Expense. D) the Net Realizable Value.
6)
7) The balance in the Allowance for Doubtful Accounts is ignored under which of the following approaches? A) Income statement approach B) Direct write -off approach C) Balance sheet approach D) All three approaches
7)
8) A detailed analysis of Accounts Receivable to determine how long each account has been outstanding is called A) analyzing the Accounts Receivable. B) aging the uncollectible accounts. C) taking a percentage of sales on account. D) aging the Accounts Receivable.
8)
1
9) What general ledger account is debited to write off a customer's account as uncollectible if using the allowance method for uncollectible receivables? A) Accounts Receivable B) Allowance for Doubtful Accounts C) Bad Debts Recovered D) Bad Debts Expense
9)
10) Gross Accounts Receivable is $57,000. Allowance for Doubtful Accounts as a credit balance of $900. Net credit sales for the year are $350,000. The company follows the balance sheet approach, using a rate of 5% of outstanding accounts receivable to estimate the Bad Debt Expense for the year. What would be the adjusted balance of the Allowance account under the balance sheet approach? A) $17,500 B) $2,850 C) $16,600 D) $1,950
10)
11) Before the accounts are adjusted and closed at the end of the year, Accounts Receivable has a normal balance of $550,000 and Allowance for Doubtful Accounts has a credit balance of $20,000. What is the net realizable value of the accounts receivable? A) $570,000 B) $550,000 C) $530,000 D) $540,000
11)
12) Sonny's Service Bureau is able to collect an amount previously written off last year under the direct write-off method. The journal entry will A) increase Bad Debts Recovered. B) decrease Bad Debts Expense. C) decrease Cash. D) decrease Accounts Receivable.
12)
13) An entry reinstating an account that was previously written off under the allowance method would show a(n) A) decrease to Bad Debts Expense and an increase to Allowance for Doubtful Accounts. B) decrease to Bad Debts Expense and a decrease to Accounts Receivable. C) increase to Accounts Receivable and a decrease to Allowance for Doubtful Accounts. D) increase to Accounts Receivable and an increase to Allowance for Doubtful Accounts.
13)
14) Gross Accounts Receivable is $39,000. Allowance for Doubtful Accounts has a credit balance of $300. Net credit sales for the year are $190,000. In the past, 2% of credit sales had proved uncollectible. What would be the adjusted balance of the Allowance account under the income statement approach? A) $4,100 B) $3,500 C) $4,880 D) $3,800
14)
15) Milling Direct uses the aging of Accounts Receivable balance sheet approach to estimate uncollectibles. The total percentage of not yet due accounts deemed uncollectible are $930, 1-30 days past due accounts deemed uncollectible are $1,210, and over 30 days past due accounts deemed uncollectible are $710. If the company has a credit balance in Allowance for Doubtful Accounts of $850, what is the bad debts expense adjusting entry amount? A) $2,000 B) $850 C) $2,850 D) $3,700
15)
2
16) A company uses the allowance method and has estimated $28,000 as uncollectible. The journal entry to record the estimated bad debts is A) Allowance for Doubtful Accounts $28,000 Bad Debts Expense $28,000 B) Allowance for Doubtful Accounts
$28,000
Accounts Receivable C) Bad Debts Expense
$28,000 $28,000
Allowance for Doubtful Accounts D) Accounts Receivable
16)
$28,000 $28,000
Allowance for Doubtful Accounts
$28,000
17) In the direct write-off method, writing off an account causes A) an increase in expense and a decrease in an asset. B) a decrease in the Allowance account and a decrease in expense. C) a decrease in expense and an increase in an asset. D) an increase in Accounts Receivable and a decrease to revenue.
17)
18) Gross Accounts Receivable is $21,000. Allowance for Doubtful Accounts has a credit balance of $600. Net credit sales for the year are $132,000. In the past, 3% of credit sales had proved uncollectible, and an aging of the receivables indicates $1,800 is doubtful. Under the balance sheet approach, Bad Debts Expense for the year is A) $3,960. B) $1,200. C) $4,560. D) $2,400.
18)
19) An expense incurred as a result of sales on credit or on account is A) Bad Debts Expense B) Insurance Expense C) Prepaid Rent D) Allowance for Doubtful Accounts
19)
20) A company is not able to reasonably estimate its bad debts expense. The method it may use is A) aging method. B) income statement method. C) direct write-off method. D) net realizable value method.
20)
21) Net Realizable Value can be defined as A) the Gross Accounts Receivable. B) the amount of Accounts Receivable you do not expect to collect. C) the Gross Accounts Receivable minus the Allowance for Doubtful Accounts. D) the Current Bad Debts Expense.
21)
22) Aircraft Engine Parts' Allowance for Doubtful Accounts had an unadjusted credit balance of $680. The manager estimates that $700 of the Accounts Receivable is uncollectible. Using the balance sheet approach, the year-end adjusting entry for Bad Debts Expense A) includes a debit to the Bad Debts Expense account for $700. B) includes a credit to the Bad Debts Expense account for $20. C) includes a debit to the Bad Debt Expense account for $20. D) includes a credit to the Bad Debts Expense account for $1,380.
22)
3
23) Current assets listed on the balance sheet include A) Buildings. C) Allowance for Doubtful Accounts.
23) B) Sales. D) Land.
24) Before the accounts are adjusted and closed at the end of the year, Accounts Receivable has a normal balance of $510,000 and Allowance for Doubtful Accounts has a credit balance $3,000. What is the net realizable value of the accounts receivable? A) $510,000 B) $507,000 C) $504,000 D) $513,000
24)
25) Bad Debts Expense is A) considered an expense matched with revenues. B) not included in Cost of Goods Sold. C) listed on the income statement. D) All of the above.
25)
26) Which of the following is considered a temporary account? A) Allowance for Doubtful Accounts B) Accounts Receivable C) Merchandise Inventory D) Bad Debts Expense
26)
27) Gross Accounts Receivable is $18,000. Allowance for Doubtful Accounts has a credit balance of $300. Net credit sales for the year are $150,000. In the past, 2% of credit sales had proved uncollectible, and an aging of the receivables indicates $2,100 as uncollectible. What would be the adjusted balance of the Allowance account under the balance sheet approach? A) $2,100 B) $3,300 C) $1,800 D) $2,400
27)
28) Gross Accounts Receivable is $57,000. Allowance for Doubtful Accounts as a credit balance of $900. Net credit sales for the year are $350,000. The company follows the balance sheet approach, using a rate of 5% of outstanding accounts receivable to estimate the Bad Debt Expense for the year. What would be the Bad Debt Expense for the current year under the balance sheet approach? A) $1,950 B) $16,600 C) $2,850 D) $17,500
28)
29) The journal entry to write off an uncollectible account under the allowance method would include a credit to A) Sales. B) Accounts Receivable. C) Bad Debts Expense. D) Allowance for Doubtful Accounts.
29)
30) A company uses the allowance method and has determined that a customer's bill for $2,000 will not be paid and must be written off. The journal entry to record the write off is A) Allowance for Doubtful Accounts $2,000 Accounts Receivable $2,000 B) Bad Debts Expense $2,000 Accounts Receivable $2,000 C) Accounts Receivable $2,000 Allowance for Doubtful Accounts $2,000 D) Bad Debts Expense $2,000 Allowance for Doubtful Accounts $2,000
30)
4
31) Which of the following is considered a permanent account? A) Allowance for Doubtful Accounts B) Bad Debts Expense C) Sales Returns and Allowances D) Sales
31)
32) Open Range Foods writes off a bad debt of $400 on a specific customer account. The journal entry for this transaction under the direct write off method would include A) a credit to Allowance for Doubtful Accounts. B) a debit to Allowance for Doubtful Accounts. C) a debit to Bad Debts Expense. D) a credit to Bad Debts Expense.
32)
33) Uncollectible accounts could A) be a major cost of selling goods on account. B) decrease cash shortages. C) affect accounts payable. D) ease credit restrictions.
33)
34) A company uses the allowance method and has estimated $2,000 of their Accounts Receivable as uncollectible. The journal entry to record the estimated uncollectible amount is: A) Accounts Receivable $2,000 Allowance for Doubtful Accounts $2,000 B) Bad Debts Expense $2,000 Accounts Receivable $2,000 C) Allowance for Doubtful Accounts $2,000 Bad Debts Expense $2,000 D) Bad Debts Expense $2,000 Allowance for Doubtful Accounts $2,000
34)
35) What type of account is Bad Debts Expense? A) Contra Asset B) Liability
35) C) Asset
D) Expense
36) The method based on the Accounts Receivable amount and the aging process is called A) balance sheet approach. B) income statement approach. C) direct write off method. D) None of these answers is correct.
36)
37) Using the aging method, estimated uncollectible accounts are $3,200. If the balance of Allowance for Doubtful Accounts is $550 credit before adjustment, what is a Bad Debts Expense for the period? A) $3,750 B) $3,200 C) $550 D) $2,650
37)
38) The Accounts Receivable subsidiary ledger is A) updated when a debt is identified as uncollectible. B) credited when a debt is identified as uncollectible. C) debited when a debt is identified as uncollectible. D) Both A and B
38)
5
39) When a specific customer account is written off under the allowance method, Bad Debts Expense is A) debited. B) credited. C) not affected. D) None of these answers is correct.
39)
40) When a year-end adjustment is made for estimated bad debts A) net assets increase. B) net income is increased. C) liabilities increase. D) net assets decrease.
40)
41) The direct write -off method prescribes that a previously written off account will reopen when the customer A) pays the collection bureau. B) sends the full amount to pay off the account. C) sends any amount to pay on their account. D) None of the above
41)
42) Open Range Foods writes off a bad debt of $400 on a specific customer account. The journal entry for this transaction under the allowance method would include A) a debit to Allowance for Doubtful Accounts. B) a credit to Bad Debts Expense. C) a credit to Allowance for Doubtful Accounts. D) a debit to Bad Debts Expense.
42)
43) Mercury Holdings estimates it will collect $8,930 of the $10,000 owed by customers. The difference of $1,070 represents the A) Value of the Current Unpaid Receivables. B) the Net Realizable Value. C) Allowance for Doubtful Accounts. D) Gross Accounts Receivable.
43)
44) Canteen Depot estimated uncollectible accounts in the amount of $900 for the period. There is a credit balance in the allowance account of $400. Under the aging of receivables method, the entry to record bad debts expense is: A) debit Allowance for Doubtful Accounts $900; credit Bad Debts Expense $900. B) debit Bad Debts Expense $500; credit Accounts Receivable $500. C) debit Allowance for Doubtful Accounts $900; credit Accounts Receivable $900. D) debit Bad Debts Expense $500; credit Allowance for Doubtful Accounts $500.
44)
45) Ellen's Candies estimates that approximately $2.15 out of every $100 of credit sales proves to be uncollectible. Ellen's Candies calculates Bad Debts Expense using the A) direct write-off method. B) income statement approach. C) aging of Accounts Receivable approach. D) balance sheet approach.
45)
46) The net realizable value of a company's Accounts Receivables is A) decreased at the time of a specific write -off. B) unchanged at the time of a specific write -off. C) the guaranteed amount the company will collect from its customers. D) increased at the time of a specific write -off.
46)
6
47) Molten Manufacturing collects $350 on an account that had been directly written off in the previous year in the amount of $630. The journal entry to record the transaction would include a A) $630 debit to Accounts Receivable. B) $630 credit to Accounts Receivable. C) $350 credit to Bad Debts Recovered. D) $350 credit to Bad Debts Expense.
47)
48) Gross Accounts Receivable is $57,000. Allowance for Doubtful Accounts as a credit balance of $900. Net credit sales for the year are $350,000. The company follows the income statement approach, using a rate of 1.5% of credit sales to estimate the Bad Debt Expense for the year. What would be the Bad Debt Expense for the current year under the income statement approach? A) $855 B) $5,250 C) $6,150 D) $900
48)
49) Gross Accounts Receivable is $23,000. Allowance for Doubtful Accounts has a credit balance of $500. Net credit sales for the year are $140,000. In the past, 3% of credit sales had proved uncollectible, and an aging of the receivables indicates $1,700 is doubtful. Under the income statement approach, Bad Debts Expense for the year is A) $4,200. B) $4,700. C) $2,200. D) $1,200.
49)
50) Gross Accounts Receivable is $57,000. Allowance for Doubtful Accounts as a credit balance of $900. Net credit sales for the year are $350,000. The company follows the income statement approach, using a rate of 1.5% of credit sales to estimate the Bad Debt Expense for the year. What would be the adjusted balance of the Allowance account under the income statement approach? A) $5,250 B) $6,150 C) $900 D) $855
50)
51) Jones Consulting estimates uncollectibles to be $820. There is a credit balance in the allowance account of $390. The adjusting entry amount under the aging of receivable balance sheet approach is A) $430. B) $390. C) $1,210. D) $820.
51)
52) When a customer's account is written off A) net realizable value of the Accounts Receivable increases. B) net realizable value of the Accounts Receivable decreases. C) net realizable value of the Accounts Receivable remains the same. D) None of the above
52)
53) To record receipt of money after an account has been written off in the previous year, using the direct method you would need to A) debit the allowance account. B) credit Bad Debts Recovered. C) credit cash. D) credit Sales.
53)
54) Ontario Company uses the Allowance for Doubtful Accounts Method. When Ontario writes off an uncollectible account, there is A) a decrease in Accounts Receivable. B) an increase in the Allowance Account. C) an increase in Accounts Receivable. D) None of these answers is correct.
54)
7
55) When writing off a specific customer account using the income statement approach under the allowance method A) Accounts Receivable increases and Allowance for Doubtful Accounts increases. B) Allowance for Doubtful Accounts decreases and Bad Debts Expense increases. C) Allowance for Doubtful Accounts decreases and Accounts Receivable decreases. D) Bad Debts Expense increases and Accounts Receivable decreases.
55)
56) As the past due time increases for an account, the likelihood of collecting that account A) usually goes down. B) Time does not affect collectibility. C) usually goes up. D) None of the above
56)
57) Which financial statement reports Allowance for Doubtful Accounts? A) None of these answers is correct. B) Balance Sheet C) Income statement D) Statement of owner's equity
57)
58) City Tours collected $190 on an account that had been directly written off the previous year. The journal entry to record the transaction would include A) a debit to Bad Debts Recovered. B) a debit to Allowance for Doubtful Accounts. C) a credit to Bad Debts Expense. D) a credit to Bad Debts Recovered.
58)
59) A customer pays on a specific account that the company had previously written off as uncollectible. The journal entry to record the reinstatement under the allowance method includes a(n) A) decrease to Bad Debts Expense. B) increase to Allowance for Doubtful Accounts. C) decrease to Cash. D) decrease to Sales.
59)
60) The process of classifying accounts of individual customers by age group, where age is the number of days elapsed from due date, is specifically called A) aging of Accounts Receivable approach. B) direct write-off method. C) balance sheet approach. D) income statement approach.
60)
61) In which section would the Bad Debts Recovered account appear on the income statement? A) Other revenue B) Operating expenses C) Other expenses D) Sales revenue
61)
62) Ray Lumber Company collects $500 on an account that had been directly written off earlier the same year in the amount of $1,000. The journal entry to record the reinstatement transaction would include a A) $1,000 debit to Bad Debts Expense. B) $500 debit to Bad Debts Recovered. C) $500 debit to Accounts Receivable. D) $1,000 debit to Accounts Receivable.
62)
8
63) The two methods of accounting for uncollectible receivables are the direct write-off method and the A) equity method. B) interest method. C) cash method. D) allowance method.
63)
64) The Bad Debts Recovered account would be reported on the A) would not be reported on a financial statement. B) statement of owners' equity. C) balance sheet. D) income statement.
64)
65) A method that estimates the amount of Bad Debts Expense based on a percentage of net credit sales for the period is called A) balance sheet approach. B) income statement approach. C) direct write off method. D) None of these answers is correct.
65)
66) Last year, Plants Unlimited had net credit sales of $696,000 and it had uncollectible accounts of $32,000. Based on last year, what would the percent of estimated uncollectible accounts be this year? A) 4.40% B) 45.98% C) 4.82% D) 4.60%
66)
67) What would be the basis for the following entry on a firm's records?
67)
Bad Debt Expense Allowance for Doubtful Accounts
300 300
A) The firm is using the allowance method for estimating bad debt. B) The firm is writing off an uncollectible account. C) The firm is using the direct write -off method. D) None of these answers is correct. 68) The journal entry to record the estimate of uncollectible accounts includes a A) debit Allowance for Doubtful Accounts; credit Bad Debts Expense. B) debit Bad Debts Expense; credit Allowance for Doubtful Accounts. C) debit Sales; credit Bad Debts Expense. D) debit Bad Debts Expense; credit Accounts Receivable.
9
68)
69) A company uses the allowance method and has determined a customer's bill for $6,000 must be written off. The journal entry to record the write off is A) Accounts Receivable $6,000 Allowance for Doubtful Accounts $6,000 B) Allowance for Doubtful Accounts
$6,000
Bad Debts Expense C) Allowance for Doubtful Accounts
$6,000 $6,000
Accounts Receivable D) Bad Debts Expense
69)
$6,000 $6,000
Allowance for Doubtful Accounts
$6,000
70) The Allowance for Doubtful Accounts is adjusted A) each time a customer's debt is satisfied. B) each time a customer is granted credit. C) within one year of granting credit to a customer. D) at the end of each accounting period.
70)
71) Barry Waterhouse uses the aging of Accounts Receivable balance sheet approach to estimate uncollectibles. Not yet due accounts are $470,000, with an estimated uncollectible percentage of 1.5%. 1-30 days past due accounts are $100,000, with an estimated uncollectible percentage of 3%. Over 30 days past due accounts are $3,900 with an estimated uncollectible percentage of 10%. If the company has a debit balance in Allowance for Doubtful Accounts of $950, what is the bad debts expense adjusting entry amount? (Round any intermediate calculations and your final answer to the nearest dollar.) A) $11,390 B) $2,440 C) $9,490 D) $10,440
71)
72) At December 31, 2021, Aaron's Produce unadjusted Allowance for Doubtful Accounts showed a credit balance of $520. An aging of the Accounts Receivable indicates probable uncollectible accounts of $4,000. The year-end adjusting entry for Bad Debts Expense A) includes a credit to the Allowance account for $4,520. B) includes a debit to the Allowance account for $520. C) includes a debit to the Allowance account for $4,000. D) includes a credit to the Allowance account for $3,480.
72)
73) Milling Direct uses the aging of Accounts Receivable balance sheet approach to estimate uncollectibles. The total percentage of not yet due accounts deemed uncollectible are $1,000, 1-30 days past due accounts deemed uncollectible are $1,220, and over 30 days past due accounts deemed uncollectible are $730. If the company has a debit balance in Allowance for Doubtful Accounts of $800, what is the bad debts expense adjusting entry amount? A) $3,750 B) $800 C) $2,150 D) $2,950
73)
10
74) Town and Country Saddle learns the account receivable for a customer is uncollectible. The journal entry under the allowance method to write off an account is to A) debit Sales; credit Allowance for Doubtful Accounts. B) debit Allowance for Doubtful Accounts; credit Accounts Receivable. C) debit Bad Debts Expense; credit Accounts Receivable. D) debit Allowance for Doubtful Accounts; credit Bad Debts Expense.
74)
75) What type of account is an Allowance for Doubtful Accounts? A) Contra-asset B) Contra-revenue C) Revenue D) Asset
75)
76) If the direct write -off method is used, the debit account to write off an uncollectible is A) Bad Debt Expense. B) Allowance for Doubtful Accounts. C) Sales. D) Accounts Receivable.
76)
77) In what situation would the following journal entry would appear on Arial Company's records? Arial uses the allowance method.
77)
Allowance for Doubtful Accounts Accounts Receivable–Ellen Gibbons
320 320
A) It is a reversing entry. B) The firm is making a collection of a previously written-off account. C) The firm is writing off a specific account. D) The firm is estimating its uncollectible accounts. 78) Harp Brewing received a bankruptcy notice from their customer Jerry. If using an allowance method, the entry to write-off his balance of $1,300 would be A) Allowance for Doubtful Accounts $1,300 Accounts Receivable/Jerry $1,300 B) Bad Debts Expense
$1,300
Allowance for Doubtful Accounts C) Accounts Receivable/Jerry
78)
$1,300 $1,300
Bad Debts Expense
$1,300
D) None of the above 79) Barry Waterhouse uses the aging of Accounts Receivable balance sheet approach to estimate uncollectibles. Not yet due accounts are $260,000, with an estimated uncollectible percentage of 1%. 1-30 days past due accounts are $38,000, with an estimated uncollectible percentage of 5%. Over 30 days past due accounts are $10,700, with an estimated uncollectible percentage of 12%. If the company has a credit balance in Allowance for Doubtful Accounts of $1,000, what is the bad debts expense adjusting entry amount? (Round any intermediate calculations and your final answer to the nearest dollar.) A) $4,784 B) $6,784 C) $5,784 D) $2,184
11
79)
80) Which financial statement reports Bad Debts Expense? A) Balance sheet B) Statement of owner's equity C) Income statement D) None of these answers are correct
80)
81) Before the accounts are adjusted and closed at the end of the year, Accounts Receivable has a normal balance of $600,000 and Allowance for Doubtful Accounts has a debit balance of $40,000. What is the net realizable value of accounts receivable? A) $600,000 B) $560,000 C) $640,000 D) $40,000
81)
82) June Cleary estimates uncollectibles to be $2,300. There is a debit balance in the allowance account of $520. The adjusting entry amount under the aging of receivable balance sheet approach is A) $2,300. B) $1,780. C) $520. D) $2,820.
82)
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. 83) The general ledger controlling account for Accounts Receivable shows a debit balance of $222,000. The Allowance for Doubtful Accounts has a credit balance of $7,320. An aging report of accounts receivable accounts resulted in an estimate of $42,000 of uncollectible accounts receivable. Calculate the amount of the adjustment, for the allowance for doubtful accounts, using the balance sheet approach.
83)
Amount of the adjustment ________ 84) Determine the amount of the adjustment for bad debts given: Bad debts are estimated to be 6% of receivables Accounts receivable balance $85,000 Allowance for bad debts, balance (debit) $240 Net Sales $750,000 $ ________
84)
85) The Allowance for Doubtful Accounts has a credit balance of $5,000. Net credit sales for the year were $900,000. Four percent is the estimated uncollectible based on net credit sales. Calculate the amount of the adjustment, for the allowance for doubtful accounts, using the income statement approach.
85)
Amount of the adjustment ________ 86) Determine the amount of the adjustment for bad debts given: Bad debts are estimated to be 11% of credit sales Accounts receivable balance $810,000 Allowance for bad debts balance (debit) $1,900 Net Credit Sales $470,000 $ ________
86)
87) Why is it necessary to estimate the amount of Bad Debts that will be incurred during an accounting period?
87)
12
88) Determine the amount of the adjustment for bad debts given: Bad debts are estimated to be 3% of credit sales Accounts receivable balance $600,000 Allowance for bad debts balance (credit) $200 Net Credit Sales $215,000 $ ________
88)
89) Determine the amount of the adjustment for bad debts given: Bad debts are estimated to be 7% of receivables Accounts receivable balance $112,000 Allowance for bad debts, balance (debit) $0 Net Sales $593,000 $ ________
89)
90) Determine the amount of the adjustment for bad debts given: Bad debts are estimated to be 8% of receivables Accounts receivable balance $97,000 Allowance for bad debts, balance (credit) $550 Net Credit Sales $660,000 $ ________
90)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 91) The normal balance of the Allowance for Doubtful Accounts account is a debit.
91)
92) When a journal entry is recorded to estimate an Allowance for Doubtful Accounts, the Accounts Receivable subsidiary ledger must be updated immediately.
92)
93) Using the balance sheet approach, the balance in Allowance for Doubtful Accounts is taken into consideration when finding the adjustment.
93)
94) Bad Debts Expense is recorded in the year the sale was earned when using the income statement approach.
94)
95) If there were an uncollectible write off reversal in the same year as the write off, Bad Debts Recovered would be used rather than Bad Debts Expense.
95)
96) Bad Debts Expense is a contra-revenue account.
96)
97) Companies that feel aging is too time -consuming may estimate Bad Debts based on a percentage of total Accounts Receivable.
97)
98) When using the allowance method, writing off an account receivable will increase expenses in the current period.
98)
99) Bad Debts Recovered is a revenue account usually reported in Other Income on the Income Statement.
99)
13
100) Using the income statement approach, the balance in Allowance for Doubtful Accounts is taken into consideration when finding the adjustment.
100)
101) The direct write -off method violates the matching principle.
101)
102) The aging of Accounts Receivable is a balance sheet approach.
102)
103) For tax purposes, the law does not permit the allowance for doubtful accounts reserve method of deducting bad debts.
103)
104) A debit balance in Allowance for Doubtful Accounts indicates the estimate for Bad Debts was too low.
104)
105) The adjusting entry for uncollectible receivables is based on an estimate.
105)
106) Under the balance sheet approach, bad debts expense is $1,000 if the estimated amount of uncollectible accounts is $1,200 and the Allowance for Doubtful Accounts has a credit balance of $200.
106)
107) The percentages applied to the balance in the aging categories in a balance sheet approach calculation of bad debt expense are typically based on previous experience.
107)
108) Under the balance sheet approach, bad debts expense is $1,500 if the estimated amount of uncollectible accounts is $1,000 and the Allowance for Doubtful Accounts has a debit balance of $500.
108)
109) The longer a bill has been due and not paid, the more likely it is that collection will occur very soon.
109)
110) Under the allowance method, the entry to record a specific uncollectible account write off is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable for the specific customer.
110)
111) When an account receivable is written off as uncollectible using the direct write off method, it increases Bad Debts Expense.
111)
112) The income statement approach estimates a percentage of Accounts Receivable that is uncollectible.
112)
113) The normal balance of the Bad Debts Expense account is a debit.
113)
114) Allowance for Doubtful Accounts is closed at the end of every accounting period.
114)
115) Receiving a payment for an account receivable previously written off requires both a debit and a credit to accounts receivable.
115)
116) The Allowance for Doubtful Accounts is shown on the balance sheet as a contra-asset.
116)
14
117) Allowance for Doubtful Accounts is a contra-asset account.
117)
118) When a specific account receivable is written off as uncollectible under the direct write off method, it decreases the Allowance for Doubtful Accounts.
118)
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 119) Use the following information to calculate the Bad Debt Expense and record the adjusting journal entry for Ethan's company for the current year using the balance sheet - aging of accounts receivable method. The Allowance For Doubtful Accounts account currently has a credit balance of $500.
120) Prepare the adjusting journal entry for Bad Debts Expense from the following information using the balance sheet approach. The Allowance for Doubtful Accounts has a credit balance of $3,000.
121) On December 31, 2021, Balloon Buddies had a balance in Accounts Receivable of $39,000. Net credit sales for the year were $334,000. The Allowance for Doubtful Accounts has a debit balance of $700. Journalize the recording of the bad debts expense under the income statement approach if 1.4% of net credit sales is deemed uncollectible. 122) Prepare general journal entries to record the following transactions for Smith Company. (The company uses the balance sheet approach for recording bad debts expense.) 2021 Dec. 2022 Jan. Mar. Jul. Aug. Nov.
31 Recorded Bad Debts Expense, $900 3 4 5 19 7
Wrote off Jal's account as uncollectible, $260 Wrote off Hall's account as uncollectible, $95 Recovered $55 from Hall Wrote off M. Wilson's account as uncollectible, $50 Recovered $45 from Jal
15
123) On December 31, 2021, Balloon Buddies had a balance in Accounts Receivable of $39,000. Net credit sales for the year were $334,000. The Allowance for Doubtful Accounts has a debit balance of $700. Journalize the recording of the bad debts expense under the balance sheet approach if $1,360 is the estimated amount of uncollectible accounts. 124) Prepare a partial balance sheet for Tangiers Industries at December 31, 2022, from the following information: Accounts Receivable Sales Revenue Prepaid Rent Prepaid Insurance Bad Debt Expense Allowance for Doubtful Accounts Cash Merchandise Inventory
$10,400 22,970 640 450 3,290 1,500 19,320 5,222
125) Prepare a partial balance sheet for the Swanson Company at December 31, 2022, from the following information Accounts Receivable Prepaid Rent Allowance for Doubtful Accounts Bad Debts Expense Cash Merchandise Inventory
$8,560 800 750 2,000 12,500 3,700
126) Army Supply uses the allowance method of accounting for uncollectible accounts. Record journal entries for the transactions listed below: April 2 April 12 April 17
Received $1,400 from Billie in payment of her $2,000 account. Wrote off the balance of Billie's account. Received $250 from Jason to pay off his account in full.
127) Use the following information to calculate the Bad Debt Expense and record the adjusting journal entry for Hannah's company for the current year using the balance sheet - aging of accounts receivable method. The Allowance For Doubtful Accounts account currently has a debit balance of $1,000.
16
128) Use the following information to calculate the Bad Debt Expense and record the adjusting journal entry for Tony's company for the current year using the balance sheet - aging of accounts receivable method. The Allowance For Doubtful Accounts account currently has a credit balance of $1,500.
129) Evaluate the differences of the effect on the financial statements between the income statement approach and the balance sheet approach for estimating bad debts expense on the financial statement presentation. 130) On December 31, 2021, Balloon Buddies had a balance in Accounts Receivable of $39,000. Net credit sales for the year were $334,000. The Allowance for Doubtful Accounts has a credit balance of $700. Journalize the recording of the bad debts expense under the income statement approach if 2.5% of net credit sales is deemed uncollectible. For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, in column 3 the financial statement in which the account balance is reported, and in column 4 the account's nature. 131)
Column 1
Column 2
Column 3
Column 4
Bad debts recovered
132) Use the following information to calculate the Bad Debt Expense and record the adjusting journal entry for Hannah's company for the current year using the balance sheet - aging of accounts receivable method. The Allowance For Doubtful Accounts account currently has a credit balance of $3,000.
17
133) Use the following information to calculate the Bad Debt Expense and record the adjusting journal entry for Ethan's company for the current year using the balance sheet - aging of accounts receivable method. The Allowance For Doubtful Accounts account currently has a debit balance of $500.
134) Canadian Contractors uses the direct write -off method for uncollectible accounts. Record the following transactions in general journal form. Feb 11 Mar 8 Apr 10 May 3
Sold merchandise on account to Leslie Noonan for $8,400. The cost to Canadian for the merchandise is $4,500. Received $2,650 cash payment from Leslie Noonan on her account. Wrote off the balance due on Leslie's account as uncollectible. Unexpectedly received $3,900 cash payment from Leslie Noonan on her account. Payment was received in the same period as the write off.
For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, in column 3 the financial statement in which the account balance is reported, and in column 4 the account's nature. 135)
Column 1
Column 2
Column 3
Column 4
Allowance for doubtful accounts
136) On December 31, 2021, Balloon Buddies had a balance in Accounts Receivable of $39,000. Net credit sales for the year were $334,000. The Allowance for Doubtful Accounts has a credit balance of $700. Journalize the recording of the bad debts expense under the balance sheet approach if $1,360 is the estimated amount of uncollectible accounts. 137) Describe and contrast the procedures for estimating uncollectible accounts under the (a) income statement approach, (b) the balance sheet approach, and (c) the direct write-off approach.
18
138) Plumbing Unlimited uses the direct write-off method for uncollectible accounts. Record the following transactions in general journal form. Aug 15 Sold merchandise on account to Maureen Townsend for $3,500. The cost to Plumbing Unlimited for the merchandise is $1,000. Sept 15 Received $1,200 cash payment from Maureen Townsend on her account. Sept 30 Received $800 cash payment from Maureen Townsend on her account. Oct 15 Wrote off the balance due on Maureen's account as uncollectible. For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, in column 3 the financial statement in which the account balance is reported, and in column 4 the account's nature. 139)
Column 1
Column 2
Column 3
Column 4
Bad debts expense
140) Prepare general journal entries to record the following transactions for Elliott Consulting. (The company uses the income statement approach for recording bad debts expense.) 2020 Dec. 2021 Jan. Mar. Jul. Aug.
31 Recorded Bad Debts Expense, $ 2,010 9 Wrote off Summer's account as uncollectible, $435 12 Wrote off Manny's account as uncollectible, $650 8 Recovered $100 from Manny 19 Wrote off Jared's account as uncollectible, $215
141) Prepare the adjusting journal entry for Bad Debts Expense from the following information using the balance sheet approach. The Allowance for Doubtful Accounts has a debit balance of $4,000.
19
142) Use the following information to calculate the Bad Debt Expense and record the adjusting journal entry for Tony's company for the current year using the balance sheet - aging of accounts receivable method. The Allowance For Doubtful Accounts account currently has a debit balance of $100.
20
Answer Key Testname: CHAP 12_14CE
1) D 2) C 3) C 4) D 5) B 6) D 7) A 8) D 9) B 10) B 11) C 12) A 13) D 14) A 15) A 16) C 17) A 18) B 19) A 20) C 21) C 22) C 23) C 24) B 25) D 26) D 27) A 28) A 29) B 30) A 31) A 32) C 33) A 34) D 35) D 36) A 37) D 38) D 39) C 40) D 41) C 42) A 43) C 44) D 45) B 46) B 47) C 48) B 49) A 21
Answer Key Testname: CHAP 12_14CE
50) B 51) A 52) C 53) B 54) A 55) C 56) A 57) B 58) D 59) B 60) A 61) A 62) C 63) D 64) D 65) B 66) D 67) A 68) B 69) C 70) D 71) A 72) D 73) A 74) B 75) A 76) A 77) C 78) A 79) A 80) C 81) C 82) D 83) $34,680 84) $5,340 85) $36,000 86) $51,700 87) Accrual accounting requires that entries are made to match earned revenue with the expenses that have been inc in producing that revenue during an accounting period. When credit is issued to customers who will ultimately not pay, a bad debt expense needs to be recorded. The problem is that companies don't know which accounts will go unpaid at the time the credit is offered. Estimating the amount that will go unpaid and recording a Bad Debt Expense during the period in which the sale is made satisfies the matching principle and provides a mechanism through which the cost can be recorded before it is known which customers will default on their payments. 88) $6,450 89) $7,840 90) $7,210 91) FALSE 92) FALSE 93) TRUE 22
Answer Key Testname: CHAP 12_14CE
94) TRUE 95) FALSE 96) FALSE 97) TRUE 98) FALSE 99) TRUE 100) FALSE 101) TRUE 102) TRUE 103) FALSE 104) TRUE 105) TRUE 106) TRUE 107) TRUE 108) TRUE 109) FALSE 110) TRUE 111) TRUE 112) FALSE 113) TRUE 114) FALSE 115) TRUE 116) TRUE 117) TRUE 118) FALSE 119) Bad Debt Expense Total $4088.68
Not Due $57.00
1-30 $79.68
31-60 $750.00
Journal Entry: Dec 31, 2022 Bad Debt Expense $3,588.68 Allowance For Doubtful Accounts 120) Bad Debts Expense 11,246 Allowance for Doubtful Accounts 121) Dec 31 Bad Debts Expense Allowance for Doubtful Accounts
23
61-90 $630.00
Over 90 $2572.00
$3,588.68 11,246 4,676 4,676
Answer Key Testname: CHAP 12_14CE
122) 2021 Dec. 31 Bad Debts Expense Allowance for Doubtful Accounts 2022 Jan. 3
Mar. 4
Jul. 5
900 900
Allowance for Doubtful Accounts Accounts Receivable, Jal
260
Allowance for Doubtful Accounts Accounts Receivable, Hall
95
Accounts Receivable, Hall Allowance for Doubtful Accounts
55
260
95
55
Cash
55 55
Accounts Receivable, Hall Aug. 19 Allowance for Doubtful Accounts Accounts Receivable, M. Wilson
50
Nov. 7
45
50
Accounts Receivable, Jal Allowance for Doubtful Accounts
45
Cash 123) Dec 31 124)
45 45
Accounts Receivable, Jal Bad Debts Expense Allowance for Doubtful Accounts Tangiers Industries Balance Sheet December 31, 2022
Assets Cash Accounts Receivable Less: Allow. for Doubtful Accts. Merchandise Inventory Prepaid Insurance Prepaid Rent Current Assets
2,060 2,060
$19,320 $10,400 1,500
8,900 5,222 450 640 $34,532
24
Answer Key Testname: CHAP 12_14CE
125)
Swanson Company Balance Sheet December 31, 2022 Assets Cash Accounts Receivable Less: Allow. for Doubtful Accts. Merchandise Inventory Prepaid Rent
$12,500 $8,560 750
Current Assets 126) April 2 Cash Accounts Receivable -Billie April 12 Allowance for Doubtful Accounts Accounts Receivable -Billie April 17 Cash Accounts Receivable -Jason 127) Bad Debt Expense Total Not Due 1-30 $9400.00 $1530.00 $70.00
7,810 3,700 800 $24,810 1,400 1,400 600 600 250 250 31-60 $120.00
61-90 $4010.00
Over 90 $3670.00
Journal Entry: Dec 31, 2022 Bad Debt Expense $10,400.00 Allowance For Doubtful Accounts $10,400.00 128) Bad Debt Expense Total Not Due 1-30 31-60 61-90 $1863.72 $84.00 $84.72 $120.00 $900.00
Over 90 $675.00
Journal Entry: Dec 31, 2022 Bad Debt Expense $363.72 Allowance For Doubtful Accounts $363.72 129) The income statement approach places its major emphasis on the matching principle. This approach calculates the amount of bad debts expense for the year based on a percentage of net credit sales. The balance in Allowance for Doubtful Accounts is ignored. A carryover balance in the Allowance account represents a carryover of potential bad debts from prior years. The balance sheet approach places its major emphasis on values reported on the balance sheet and the principle of conservatism. It is assumed that the longer an account has been due and not paid, the more likely it is that it is not going to be paid. The net realizable value of the receivables is estimated by an analysis of the accounts according to how many days they are past due and applying percentages based on previous loss or collection experience. 130) Dec 31 Bad Debts Expense 8,350 Allowance for Doubtful Accounts 8,350 131) Column 1 Column 2 Column 3 Column 4 Bad debts income recovered revenue credit statement temporary
25
Answer Key Testname: CHAP 12_14CE
132) Bad Debt Expense Total $9400.00
Not Due $1530.00
1-30 $70.00
31-60 $120.00
61-90 $4010.00
Over 90 $3670.00
Journal Entry: Dec 31, 2022 Bad Debt Expense $6,400.00 Allowance For Doubtful Accounts $6,400.00 133) Bad Debt Expense Total Not Due 1-30 31-60 61-90 $4088.68 $57.00 $79.68 $750.00 $630.00
Over 90 $2572.00
Journal Entry: Dec 31, 2022 Bad Debt Expense $4,588.68 Allowance For Doubtful Accounts $4,588.68 134) Feb 11 Accounts Receivable -Noonan 8,400 Sales 8,400 Feb 11
Mar 8
Cost of Goods Sold Merchandise Inventory
4,500
Cash
2,650
4,500
Accounts Receivable -Noonan Apr 10
May 3
May 3
2,650
Bad Debts Expense Accounts Receivable -Noonan
5,750
Accounts Receivable -Noonan Bad Debt Expense
3,900
Cash
3,900
5,750
3,900
Accounts Receivable -Noonan Column 1 Column 2
135) Allowance for doubtful accounts 136) Dec 31
contra-asset
credit
Column 3
3,900 Column 4
balance sheet
permanent
Bad Debts Expense Allowance for Doubtful Accounts
26
660 660
Answer Key Testname: CHAP 12_14CE
137) (a) Under the income statement approach, bad debts expense is associated with the current year's sales. Based on the past several years, a company will calculate the average bad debts expense as a percent of net credit sales. It will then apply this percentage to the current year's sales to estimate its future bad debt losses. (b) Under the balance sheet approach, the firm uses accounts receivable on the balance sheet as its basis to estimate bad debts expense. It is assumed the longer an account has been due and not paid, the more likely it is that it is not going to be collected. The procedure includes preparing a schedule based on an analysis of Accounts Receivable according to how many days past due the accounts are. This is called aging the Accounts Receivable. A sliding scale of percentages, based on previous experience, is applied to the total amount of receivables due in each time period. The calculation then serves as the basis for the total amount required in the Allowance for Doubtful Accounts account. (c) Under the direct write -off approach, an account that is determined to be uncollectible is directly written off to the current year's Bad Debts Expense account without regard to when the original sale was made. 138) Aug 15 Accounts Receivable -Townsend 3,500 Sales 3,500 Aug 15 Cost of Goods Sold 1,000 Merchandise Inventory 1,000 Sept 15 Cash 1,200 Accounts Receivable -Townsend 1,200 Sept 30 Cash 800 Accounts Receivable -Townsend 800 Oct 15 Bad Debts Expense 1,500 Accounts Receivable -Townsend 1,500 139) Column 1 Column 2 Column 3 Column 4 Bad debts income expense expense debit statement temporary
27
Answer Key Testname: CHAP 12_14CE
140) 2020 Dec. 31 Bad Debts Expense Allowance for Doubtful Accounts 2021 Jan. 9
2,010 2,010
Allowance for Doubtful Accounts Accounts Receivable, Summer
435
Mar. 12 Allowance for Doubtful Accounts Accounts Receivable, Manny
650
Jul. 8
Accounts Receivable, Manny Allowance for Doubtful Accounts
100
Cash
100
435
650
100
Accounts Receivable, Manny
100
Aug. 19 Allowance for Doubtful Accounts 215 Accounts Receivable, Jared 215 141) Bad Debts Expense 18,246 Allowance for Doubtful Accounts 18,246 142) Bad Debt Expense Total Not Due 1-30 31-60 61-90 Over 90 $1863.72 $84.00 $84.72 $120.00 $900.00 $675.00 Journal Entry: Dec 31, 2022 Bad Debt Expense $1,963.72 Allowance For Doubtful Accounts
28
$1,963.72
Exam
CHAPTER 13
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Heidi's Accessories bought 40 necklaces for $10 each on account. The invoice included 5% GST and payment terms of 2/10, n/30. In addition, 5 necklaces were returned prior to payment. The entry to record the return would include A) a debit to Accounts Payable for $50.00. B) a debit to Accounts Payable for $52.50. C) a debit to Inventory for $52.50. D) a debit to Inventory for $50.00.
1)
2) The liability account used to record GST owed is A) GST Payable. C) Prepaid Taxes.
2) B) Sales Tax Expense. D) Sales.
3) Sold merchandise subject to HST at 13%, accepting cash. This will be recorded with A) a credit to a liability account. B) a credit to Capital. C) a credit to an expense account. D) None of these are correct.
3)
4) Unlimited Materials sold goods for $1,800 plus 5% GST to a charge customer, terms n/30. Which entry is required to record this transaction (exclude the entry to Cost of Goods Sold and Inventory)? A) Debit Cash for $1,890; credit Sales for $1,890 B) Debit Accounts Receivable $1,890; credit Sales, $1,890 C) Debit Accounts Receivable for $1,800; credit Sales for $1,800 D) Debit Accounts Receivable for $1,890; credit GST Payable $90 and credit Sales for $1,800
4)
5) A debit memorandum decreases which account on the buyer's books? A) Accounts Payable B) Inventory C) Accounts Receivable D) Sales Returns and Allowances
5)
6) A credit memorandum decreases which account on the seller's books? A) Purchases Returns and Allowances B) Sales Returns and Allowances C) Accounts Receivable D) Accounts Payable
6)
7) Entries to customers' accounts for sales made with 13% HST are recorded in the A) fixed asset subsidiary ledger. B) accounts payable subsidiary ledger. C) cash subsidiary ledger. D) accounts receivable subsidiary ledger.
7)
8) Bruno's Fashions bought 60 nose -rings for $20 each on account. The invoice included $60 GST (5%) and payment terms of 2/10, n/30. Ten nose -rings were returned prior to payment. The entry to record the payment (within the discount period) would include A) a credit to Accounts Receivable for $1,200. B) a credit to Inventory for $1,000. C) a credit to Cash for $1,050. D) a credit to Cash for $1,030.
8)
1
9) Which of the following statements about subsidiary ledgers is most accurate? A) The subsidiary ledger accounts will total the amount in the Sales account. B) The subsidiary ledger accounts will show details of any HST billed. C) The accounts receivable subsidiary ledger is a book of accounts that provides supporting detail for Accounts Receivable. D) All of these answers are correct.
9)
10) If Rosie sends back damaged merchandise for credit, to Rosie it would be a A) Debit to Inventory. B) Credit to Sales Discount. C) Debit to Sales Return and Allowance. D) Credit to Inventory.
10)
11) Jackson purchased $400 plus 13% HST of goods and received credit terms of 2/10, n/30. How much did he pay if payment was made during the discount period? A) $400 B) $392 C) $444 D) $452
11)
12) Heidi's Accessories bought 40 necklaces for $10 each on account. The invoice included 5% GST and payment terms of 2/10, n/30. In addition, 5 necklaces were returned prior to payment. The entry to record the original purchase would include A) a debit to Inventory for $420.00. B) a credit to Accounts Payable for $400.00. C) a credit to Accounts Payable for $420.00. D) a debit to HST Payable for $20.00.
12)
13) Bruce's Jewelry bought 50 rings for $10 each on account. The invoice included 13% HST and payment terms of 2/10, n/30. In addition, five rings were later returned prior to payment. The entry to record the original purchase would include A) a debit to Inventory for $500.00. B) a debit to Accounts Payable for $500.00. C) a debit to Inventory for $565.00. D) a debit to Accounts Payable for $565.00.
13)
14) An entry for a purchase return will include A) a debit to Sales Returns and Allowances. B) a credit to Sales Returns and Allowances. C) a credit to Inventory. D) a debit to Inventory.
14)
15) The basic concept of the quick method of accounting for GST/HST is best described as follows: A) A smaller company will remit about as much tax as they would if detailed records were maintained. B) Only small companies with total sales of less then $150,000 can use the quick method. C) The quick method allows a small company to pay as little tax as possible. D) A small company with large capital purchases should always avoid using the quick method.
15)
2
16) Secret Trails received payment in full within the credit period for boarding for $800 plus 13% HST. Terms of the sale were 2/10, n/30. Which entry is required to record this transaction? A) Debit Accounts Receivable, $800; credit Sales, $800 B) Debit Cash, $904; credit Sales, $904 C) Debit Cash, $888; credit Accounts Receivable, $888 D) Debit Cash, $784; credit Sales, $784
16)
17) Sue's Jewelry sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewelry was $15. The invoice included a 5% provincial sales tax and payment terms of 2/10, n/30. Five necklaces were returned prior to payment. The entry to record the payment if it was received after the discount period would include A) a debit to Cash for $500.00. B) a credit to Accounts Receivable for $525.00. C) a credit to Cash for $555.00. D) a credit to Accounts Receivable for $515.00.
17)
18) The total of all cash and credit sales, net of HST, equals A) gross sales. B) input tax credit. C) net sales. D) sales returns and allowances.
18)
19) Harmonized Sales Tax Payable is a A) liability account with a debit balance. B) contra-asset account with a debit balance. C) liability account with a credit balance. D) contra-asset account with a credit balance.
19)
20) The collection of an invoice for $5,000 plus HST of 13% within the 2/10 n/30 discount period was recorded using a 3% discount rather than a 2% discount in both the controlling and subsidiary accounts. This error will cause A) the net income for the period to be overstated. B) the assets to be overstated. C) the net income for the period to be understated. D) the control account to not agree with the subsidiary ledger.
20)
21) What type of account is HST Payable? A) Contra revenue C) Liability
21) B) Contra cost/expense D) Contra asset
22) Sue's Jewelry sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewelry was $15 plus 5% GST. The invoice included a 6% provincial sales tax, 5% GST, and payment terms of 2/10, n/30. Five necklaces were returned prior to payment. The entry to record the original sale would include A) a credit to Sales for $693.75. B) a debit to Sales for $625. C) a debit to Accounts Receivable for $693.75. D) a debit to Accounts Receivable for $625.
3
22)
23) Sue's Jewelry sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewelry was $15 plus 13% HST. The invoice included HST at 13% and payment terms of 2/10, n/30. Five necklaces were returned prior to payment. The entry to record the return would include A) a debit to Sales Returns and Allowances for $125.00. B) a credit to Sales Tax Payable for $16.25. C) a debit to Sales Returns and Allowances for $141.25. D) a debit to Accounts Receivable for $141.25.
23)
24) Sue's Jewelry sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewelry was $15. The invoice included a 5% provincial sales tax and payment terms of 2/10, n/30. Five necklaces were returned prior to payment. The entry to record the payment if it was received during the discount period would include A) a credit to Accounts Receivable for $656.25. B) a debit to Cash for $515.00. C) a credit to Accounts Receivable for $643.13. D) a debit to Cash for $525.00.
24)
25) The credit that a company receives for the GST/HST it pays is called A) Output Tax Credit. B) Input Tax Credit. C) Payroll Tax Credit. D) Business Tax Credit.
25)
26) Lee's Golf Shop on May 31 has the following transaction totals:
26)
Sales HST Collected Sales Returns and Allowances Opening Inventory HST Paid Cost of Freight In Purchases during the period Purchases discounts received Cost of Goods Sold
$11,000 1,600 1,000 8,000 1,090 500 1,000 600 2,500
Based on the above, ending Inventory for the period is A) $8,900. B) $6,400. C) $6,910.
D) $12,600.
27) PST Payable is a A) contra revenue account with a debit balance. B) liability account. C) cost of goods sold account with a debit balance. D) revenue account with a credit balance.
27)
28) Bruce's Jewelry bought 50 rings for $10 each on account. The invoice included 13% HST and payment terms of 2/10, n/30. In addition, five rings were later returned prior to payment. The entry to record the final payment (within the discount period) would include A) a debit to Accounts Payable for $499.50. B) a credit to Cash for $499.50. C) a credit to Cash for $508.50. D) a credit to Accounts Payable for $508.50.
28)
4
29) Sold Merchandise for Cash subject to a provincial sales tax. This will be recorded with A) a debit to a liability account. B) a credit to an expense account. C) a credit to Capital. D) None of these are correct.
29)
30) The normal balance of the HST Collected is A) a debit. B) positive.
30) C) zero.
D) a credit.
31) When a debit memorandum for returned merchandise for Moore Co. is recorded, the entry is A) debit Accounts Payable, credit Purchases. B) debit Accounts Payable Moore Co. in the accounts payable subsidiary ledger, debit Accounts Payable in the general ledger, credit Purchases Returns and Allowances. C) debit Purchases Returns and Allowances, credit Accounts Payable in the general ledger. D) debit Purchases, credit Accounts Payable.
31)
32) The accounts payable subsidiary ledger A) has a controlling account in the general ledger. B) lists accounts alphabetically. C) lists accounts with which the company does business on a regular basis. D) All of the above are correct.
32)
33) Singh Company received payment in full within the discount period for goods sold for $400 plus 13% HST. Terms of the sale were 2/10, n/30. Which entry records this transaction? A) Debit Cash, $444, debit Sales Discounts $8, credit Accounts Receivable, $452 B) Debit Cash, $452, credit Accounts Receivable, $452 C) Debit Cash, $442.96, debit Sales Discounts $9.04, credit Accounts Receivable, $452 D) Debit Cash, $444, credit Accounts Receivable, $444
33)
34) On March 30, Francine's Bakery purchased $1,000, plus 13% HST, of merchandise on account from Smithers Company. The goods were shipped F.O.B. shipping point. The freight charge of $80 (includes HST) was paid by Smithers Company and added to the invoice. The amount to record in the Accounts Payable account is A) $1,300. B) $1,210. C) $1,130. D) $1,000.
34)
35) Fiona's Bistro on May 31 has the following transaction totals for the month:
35)
Sales HST Collected Sales Returns and Allowances Accounts Payable Purchases made during the period HST Paid Inventory Returns and Allowances Discounts received on purchases Cost of Goods Sold
$78,000 2,410 1,500 9,400 42,000 875 2,200 1,850 5,000
Net change in Inventory for the period is A) $32,950. B) $36,125.
C) $46,400.
5
D) $37,875.
36) What type of account is Prepaid HST? A) Contra liability C) Contra asset
36) B) Contra revenue D) Liability
37) On March 30, Francine's Bakery purchased $1,000, plus 13% HST, of merchandise on account from Smithers Company. The goods were shipped F.O.B. shipping point. The freight charge of $80 (includes HST) was paid by Smithers Company and added to the invoice. The amount to record in the Inventory account is A) $1,080. B) $1,210. C) $1,130. D) $1,000.
37)
38) Sold merchandise subject to GST, accepting cash. This will be recorded with A) a credit to a liability account. B) a credit to an expense account. C) a debit to an owner's equity account. D) None of these are correct.
38)
39) Provincial Sales Tax Payable is a A) contra-asset account with a credit balance. B) liability account with a credit balance. C) liability account with a debit balance. D) contra-asset account with a debit balance.
39)
40) Goods and Services Tax Payable is a A) liability account with a credit balance. B) liability account with a debit balance. C) contra-asset account with a debit balance. D) contra-asset account with a credit balance.
40)
41) All controlling accounts must have a A) subsidiary ledger. C) journal.
41) B) revenue ledger. D) general ledger.
42) Flat Tire Company sold tires to a charge customer, including PST and GST. What entry is required to record this transaction? A) Debit Accounts Receivable, credit Sales, Debit Cost of Goods Sold, Credit Inventory B) Debit Cash, credit Sales, Debit Cost of Goods Sold, Credit Inventory C) Debit Accounts Receivable, credit Sales, credit GST Payable, credit PST Payable, Debit Cost of Goods Sold, Credit Inventory D) Debit Cash, credit Sales, credit GST Payable, credit PST Payable, Debit Cost of Goods Sold, Credit Inventory
42)
43) Canada's tax legislation allows the use of the quick method of accounting for GST/HST because A) it wants to collect tax revenue quicker. B) Canada's free trade agreement with the US requires that the option exist. C) it was forced to allow this by the Canadian Small Business Association. D) it wants to simplify tax handling for some smaller companies.
43)
44) Sales discounts are usually allowed only on A) freight. C) credit sales to customers.
44) B) credit sales plus PST. D) credit sales plus GST/HST.
6
45) Bruce's Jewelry bought 50 rings for $10 each on account. The invoice included 13% HST and payment terms of 2/10, n/30. In addition, five rings were later returned prior to payment. The entry to record the return would include A) a debit to Accounts Payable for $50.00. B) a credit to Accounts Payable for $56.50. C) a credit to Inventory for $56.50. D) a credit to Inventory for $50.00.
45)
46) Cynthia's Crystals sold $1,000 worth of crystal plus 5% GST and 8% PST to a charge customer with terms 2/10, n/30. The invoice was paid within terms. The entry to record receipt of payment is A) Debit cash $1,297.60, debit Cash discounts $22.40, credit Accounts Receivable $1,120. B) Debit cash $1,130, credit Accounts Receivable $1,130. C) Debit Cash $1,110, debit Cash Discounts $20, credit Accounts Receivable $1,130. D) Debit Cash $1,080, debit Cash Discounts $20, credit Accounts Receivable $1,000, credit GST Payable $50, credit PST Payable $80.
46)
47) Sue's Jewelry sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewelry was $15. The invoice included a 5% provincial sales tax and payment terms of 2/10, n/30. Five necklaces were returned prior to payment. The entry to record the payment if it was received during the discount period would include A) a credit to Accounts Receivable for $656.25. B) a credit to Accounts Receivable for $525.00. C) a credit to Accounts Receivable for $643.13. D) a credit to Accounts Receivable for $515.00.
47)
48) Singh Company received payment in full within the credit period for goods sold for $400 plus 13% HST. Terms of the sale were n/30. Which entry records this transaction? A) Debit Accounts Receivable $420, credit Sales, $420 B) Debit Cash, $452, credit Sales, $452 C) Debit Cash, $452, credit Accounts Receivable, $452 D) Debit Cash, $400, credit Accounts Receivable, $400
48)
49) The contra-revenue accounts include A) HST Payable. C) Sales Discount.
49) B) Sales Returns and Allowances. D) Both B and C are correct.
50) Molly's Craft Shop sold goods for $450 plus PST at 5% to a charge customer. The customer returned $100 worth of goods for credit. Terms of the sale were 2/10, n/30. If the customer pays the amount within the discount period, what amount should the customer pay? A) $367.50 B) $372.50 C) $350.00 D) $360.50
50)
51) Sue's Jewelry sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewelry was $15 plus 5% GST. The invoice included a 6% provincial sales tax, 5% GST, and payment terms of 2/10, n/30. Five necklaces were returned prior to payment. The entry to record the return would include A) a credit to Inventory for $75. B) a debit to Sales Returns and Allowances for 84.75. C) a credit to Inventory for $84.75. D) a debit to Sales Returns and Allowances for $75.
51)
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52) Sales discounts are NOT taken on which of the following? A) Merchandise returned B) HST added C) Freight D) Sales Discounts are not taken on any of the above.
52)
53) The normal balance for Inventory is A) zero. C) a debit.
53) B) a credit. D) It does not have a normal balance.
54) The liability account used to record HST owed is A) Prepaid Taxes. C) Sales.
B) HST Payable. D) Sales Tax Expense.
54)
55) A characteristic of a schedule of accounts receivable is that A) it contains a list of vendor names with balances. B) it is prepared at the end of the month. C) the total is equal to the accounts receivable control account at the end of the month. D) Both B and C are correct.
55)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 56) The purpose of the quick method of accounting for GST/HST is to save money.
56)
57) HST collected by the seller increases the seller's total revenue.
57)
58) Sales discounts are always given on taxes such as PST and HST.
58)
59) Trade discounts are not subject to HST.
59)
60) PST Payable is a Liability Account.
60)
61) Discounts for early payment also reduce the amount of GST/HST owing.
61)
62) Companies using the quick method of accounting for GST/HST can still claim GST/HST back on major capital expenditures.
62)
63) The normal balance of Provincial Sales Tax Payable is a credit.
63)
64) GST Collected is an owner's equity account with a debit balance.
64)
65) Provincial Sales Tax Payable represents an asset on the books of the seller.
65)
66) Net Sales equals Gross Sales plus HST, less Sales Returns & Allowances, less Sales Discounts.
66)
67) Individual invoice amounts, including HST, are recorded during the month to the accounts payable ledger.
67)
8
68) Customers can take cash discounts on GST and PST when terms are 2/10, n/30.
68)
69) Purchases discounts are usually not taken on PST or HST.
69)
70) Customers who return their full purchase will also receive a refund for the sales tax paid.
70)
71) A cash payments journal and a cash disbursements journal are the same thing.
71)
72) The Accounts Receivable subsidiary ledger will exclude HST from the balances.
72)
73) A list showing the ending balances owed to individual suppliers includes any HST paid.
73)
74) Using the quick method of accounting for GST/HST will always result in lower taxes payable.
74)
75) The Prepaid HST account normally has a credit balance and is a Contra Cost account.
75)
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 76) Determine the amount of revenue to record at the time of making a sale of $2,999 worth of merchandise subject to a 6% provincial sales tax plus 5% GST. For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
77) Store Rent Expense
Column 1
Column 2
Column 3
________
________
________
78) Why isn't there an entry to HST when a vendor gets paid for an outstanding invoice? 79) Determine the amount to be paid within the discount period for purchase with an invoice price of $7,000 plus 13% HST, subject to credit terms of 2/10, n/30. For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
80) HST Payable
Column 1
Column 2
Column 3
________
________
________
81) On June 15, K. Finch purchased merchandise for her furniture store. The invoice was for $10,500 plus GST, $525, terms 3/10, n/30. On June 20, K. Finch returned $300 of merchandise for credit. On June 30, K. Finch paid the amount owed. Answer the following questions. a) The debit to Inventory on June 15 is ________. b) The credit to Accounts Payable on June 15 is ________. c) The credit to Inventory on June 20 is ________. d) The credit to Cash on June 30 is ________. e) The credit to Inventory on June 30 is ________. 9
82) Determine the amount of credit to be earned on a full return of merchandise purchased with an invoice price of $4,000 plus HST at 13% and credit terms of 2/10, n/30. The Dairy Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to a 13% HST. 83) April 13 Sold merchandise priced at $400 to Jan Ellsworth on account. The cost of goods was $300. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 84) Zinck Furniture Company of Ontario sold K. Daniels a bedroom set for $2,500 plus 8% PST and 5% GST. The furniture originally cost $1,700. Terms of the sale are 1/10, n/30. The date of the sale was May 23 and the date of the payment was June 1. Required: Determine the amount K. Daniels should pay Zinck Furniture on June 1. Show your computations. 85) Chan Company sold $500.00 of goods to Abdel Company on account, terms 2/10, n/30, and 5% PST. What was the amount of the invoice? (Show your computations.) 86) On May 6, R. Rosen purchased merchandise for his camping store. The invoice was for $100,000 plus HST at 13%, terms 2/10, n/30. On May 10, R. Rosen returned merchandise costing $15,000 for credit. On May 15, R. Rosen paid the amount owed, taking all available discounts. Answer the following: a) The credit to Accounts Payable on May 6 is ________. b) The debit to HST Paid on May 6 is ________. c) The debit to Accounts Payable on May 10 is ________. d) The credit to Inventory on May 15 is ________. e) The credit to Cash on May 15 is ________. 87) Following is the Schedule of Accounts Payable for London Warehouse. Considering GST of 5% is charged on each invoice, what is a breakdown of Inventory and GST Paid for each creditor? Schedule of Accounts Payable J. Bentley $1,575.00 P. Anders 2,429.70 N. Cassels 5,008.50 Total $9,013.20 88) Determine the amount of cash collected at the time of making a cash sale of $9,220 worth of merchandise subject to 13% HST. 89) Determine the amount to be paid to the vendor within the discount period for purchase with an invoice price of $2,500 plus HST at 13% and credit terms of 2/10, n/30 when $700 (before HST) has already been returned for credit. The goods were purchased with freight terms of F.O.B shipping point and freight of $50 (before HST) was included on the invoice.
10
90) Calculate gross sales: Net sales = $75,000 HST charged = $14,300 Sales returns and allowances - $15,000 Sales discounts - $20,000 Accounts receivable - $12,000 91) Determine the amount to be paid within the discount period for purchase with an invoice price of $3,000 plus GST at 5% and credit terms of 2/10, n/30 when $500 (before GST) has already been returned for credit. 92) On September 6, Mark purchased merchandise for his electronic games store. The invoice was for $35,000 plus freight of $750, plus HST at 13%, terms 2/15, n/30. The freight was included on the invoice. On September 10, Mark returned merchandise that cost $5,000 for credit. On September 19, Mark paid the amount owed. Fill in the blanks below. a) The credit to Accounts Payable on September 6 is ________. b) The debit to Inventory on September 6 is ________. c) The debit to Accounts Payable on September 10 is ________. d) The credit to Inventory on September 19 is ________. e) The credit to Cash on September 19 is ________. 93) Use the following information to answer the questions below: Sales HST Collected Sales Discount Sales Returns and Allowances Delivery Expense
$73,400 9,542 1,500 900 700
The Net Sales are ________.
11
94) Match the following terms with their definitions or descriptions. 1. ________ Accounts receivable subsidiary ledger 2. ________ Cash receipts journal 3. ________ Controlling account - Accounts Receivable 4. ________ Credit memorandum 5. ________ Credit period 6. ________ Crossfooting 7. ________ Discount period 8. ________ Gross sales 9. ________ Sales Returns and Allowances 10. ________ Sales Tax Payable a. b. c. d. e. f. g. h. i. j.
The revenue earned from the sale of merchandise to customers. The process of proving the total debit and credit columns of a special journal. A business form sent to a customer indicating the seller is reducing the amount owed. A special journal that records all receipts of cash. A period shorter than the credit period to encourage early payment by customers. Length of time allowed for payment of goods sold on account. The Accounts Receivable account in the general ledger. A book or file of the individual records of amounts owed by credit customers. Contra revenue account that records adjustments granted to customers for returns. An account that accumulates sales tax owed.
95) Why isn't it a normal practice to give discounts on taxes? The Dairy Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to a 13% HST. 96) April 20 The customer of April 14 returned $40 worth of merchandise for a cash refund. The cost of goods sold was $22. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
97) Sales Returns and Allowances
Column 1
Column 2
Column 3
________
________
________
98) Determine the amount of revenue to record at the time of making a cash sale of $9,220 worth of merchandise subject to 13% HST.
12
99) J. Frumm Co. has the following transaction totals for the month. Use this information to answer the question below. Cost of Freight-In Discounts received on purchases Value of Inventory Returns and Allowances Purchases of Inventory HST Paid Beginning Inventory Cost of Goods Sold
$150 750 900 7,000 1,620 1,200 1,350
Based on the above, Ending Inventory is ________. 100) Determine the amount to be paid within the discount period for purchase with an invoice price of $10,000 plus 13% HST, subject to credit terms of 2/10, n/30. 101) Determine the payment required for a purchase paid for within the discount period with an invoice price of $5,000 plus 13% HST and credit terms of 2/10, n/30 when $1,500 (before HST) has already been returned for credit. The goods were purchased with freight terms of F.O.B shipping point and freight of $80, which was invoiced and paid separately. The Dairy Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to a 13% HST. 102) April 14 Sold merchandise priced at $300 to a cash customer. The cost of goods was $175. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 103) April 16 Sold merchandise priced at $600 to a cash customer. The cost of goods sold was $420. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Electronic Accessories Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to HST at 13% and have 2/10, n/30 discount terms. 104) February 10 Sold merchandise priced at $192 to a cash customer. The cost of goods was $150. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
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105) Determine the amount of cash collected on a credit sale in the amount of $4,300, subject to 13% HST when $500 worth of merchandise has already been returned for credit, and the invoice was paid within the discount period which allowed a 2% discount. Electronic Accessories Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to HST at 13% and have 2/10, n/30 discount terms. 106) December 4 Sold merchandise priced at $105 to a cash customer. The cost of goods was $79. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
107) Sales Discounts
Column 1
Column 2
Column 3
________
________
________
Electronic Accessories Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to HST at 13% and have 2/10, n/30 discount terms. 108) February 9 Sold merchandise priced at $125 to Connor Beuter on account. The cost of goods was $80. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 109) Determine the amount of cash collected at the time of making a sale of $1,200 worth of merchandise subject to a 6% provincial sales tax plus 5% GST. 110) Morris Jewellery Store sold R. Alexander a diamond engagement ring for $2,000 plus 5% PST and 5% GST. The ring cost Morris Jewellery Store $925. Terms of the sale are n/30. Date of the sale was April 12, date of the payment was May 12. On April 15, R. Alexander received an allowance for a flaw in the ring, $500. Required: Determine the amount R. Alexander should pay Morris Jewellery Store, May 12. Show your computations. 111) Determine the amount of cash collected: Gross sales = $250,000 HST collected = $27,300 Sales Discounts = $6,000 Sales Returns and Allowances = $40,000
14
The Dairy Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to a 13% HST. 112) April 25 Received full payment from Dana Carter. ________ ________ ________ ________ ________ ________ Electronic Accessories Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to HST at 13% and have 2/10, n/30 discount terms. 113) December 10 Payment from Cathy Norton received. ________ ________ ________ ________ ________ ________ ________ ________ ________ For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
114) Owner's Capital
Column 1
Column 2
Column 3
________
________
________
115) Determine the amount of cash collected at the time of making a cash sale of $7,450 worth of merchandise subject to 13% HST. For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
116) Cleaning Expense
Column 1
Column 2
Column 3
________
________
________
117) Explain why the account Provincial Sales Tax Payable is credited when a sale is made subject to that tax? Electronic Accessories Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to HST at 13% and have 2/10, n/30 discount terms. 118) February 15 Payment from Francis Fast received. ________ ________ ________ ________ ________ ________ ________ ________ ________ 119) December 2 Sold merchandise priced at $85 to Cathy Norton on account. The cost of goods was $60. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
15
120) February 12 Payment from Connor Beuter received. ________ ________ ________ ________ ________ ________ ________ ________ ________ 121) Following is the Schedule of Accounts Payable for Sam's Supplies. Considering HST of 13% is charged on each invoice, what is a breakdown of Inventory and HST Paid for each creditor? Schedule of Accounts Payable S. Over $2,260.00 B. Danders 1,695.00 R. Deals 904.00 Total $4,859.00 122) Determine the amount of cash collected at the time of making a sale of $2,999 worth of merchandise subject to a 6% provincial sales tax plus 5% GST. 123) What should always be done after creating the schedule of accounts receivable? Electronic Accessories Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to HST at 13% and have 2/10, n/30 discount terms. 124) February 11 Sold merchandise priced at $185 to a Francis Fast on account. The cost of goods was $120. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 125) Martha's Rug Company has the following transaction totals for the month. Use this information to answer the question below. Sales Returns and Allowances Sales Discounts Inventory purchased HST Paid Sales HST Collected Discounts on purchases Purchases Returns and Allowances Cost of Freight-In Beginning Inventory Cost of Goods Sold
$1,300 1,100 15,000 720 42,000 2,415 1,020 1,400 920 7,650 10,120
Based on the above, Ending Inventory is ________.
16
126) On June 30, Fred purchased merchandise for his pet store. The invoice was for $22,000 plus freight of $150, plus HST at 13%, terms 2/15, n/30. The freight was included on the invoice. On July 5, Fred returned merchandise that cost $2,000 for credit. On July 10, Fred paid the full amount owed. Fill in the blanks below. a) The credit to Accounts Payable on June 30 is ________. b) The debit to Inventory on June 30 is ________. c) The debit to Accounts Payable on July 5 is ________. d) The credit to Inventory on July 10 is ________. e) The credit to Cash on July 10 is ________. For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.
127) Professional Fees Earned
Column 1
Column 2
Column 3
________
________
________
The Dairy Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to a 13% HST. 128) April 15 Sold merchandise priced at $160 to Dana Carter on account. The cost of goods was $112. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 129) Joe's Garage performed repairs to a customer's car. The repairs came to $1,600 plus 13% HST and the parts and labour cost Joe's Garage $800. If terms are 2/10, n/30, how much must the customer pay if paying in 9 days? (Show your computations.) Electronic Accessories Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to HST at 13% and have 2/10, n/30 discount terms. 130) December 16 cash customer returned $35 worth of merchandise. The cost of goods was $27. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ For each of the following identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported. Column 1
Column 2
Column 3
131) Store Supplies
________
________
________
132) Sales
________
________
________
17
Electronic Accessories Co. had the following transactions involving the sale of merchandise. You are to prepare the necessary general journal entries. All sales are subject to HST at 13% and have 2/10, n/30 discount terms. 133) February 13 Francis Fast returned $50 worth of merchandise. The cost of goods was $30. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
18
Answer Key Testname: CHAP 13_14CE
1) B 2) A 3) A 4) D 5) A 6) C 7) D 8) D 9) C 10) D 11) C 12) C 13) A 14) C 15) A 16) C 17) B 18) A 19) C 20) C 21) C 22) C 23) A 24) B 25) B 26) B 27) B 28) B 29) D 30) D 31) B 32) D 33) A 34) B 35) A 36) A 37) A 38) A 39) B 40) A 41) A 42) C 43) D 44) C 45) D 46) C 47) B 48) C 49) D 19
Answer Key Testname: CHAP 13_14CE
50) D 51) A 52) D 53) C 54) B 55) D 56) FALSE 57) FALSE 58) FALSE 59) TRUE 60) TRUE 61) FALSE 62) TRUE 63) TRUE 64) FALSE 65) FALSE 66) FALSE 67) TRUE 68) FALSE 69) TRUE 70) TRUE 71) TRUE 72) FALSE 73) TRUE 74) FALSE 75) FALSE 76) $2,999 (PST and GST are not revenue) 77) expense debit income statement 78) When a vendor is paid on account that means that the original purchase was recorded in the Purchases Journal and the HST would have been recorded at that time. If a second entry was made, it would inadvertently double the amount of HST on the purchase or reduce the amount of HST to zero. The only accounts affected when there is a payment on account would be Accounts Payable, Cash, and Inventory if terms are met. 79) $7,770 ($7,000 × 1.13 - $140) 80) liability credit balance sheet 81) a) $10,500 b) $11,025 c) $300 d) $10,710 e) $0 82) $4,520 ($4,000 × 1.13) 83) Accounts Receivable - Jan Ellsworth 452.00 Sales 400.00 HST Payable 52.00 Cost of Goods Sold 300.00 Inventory 300.00 84) $2,800 (2,500 + 200 (PST) + 125 (GST) - 25 (discount) = 2,800) 85) $525 (500 × 1.05 = 525) 20
Answer Key Testname: CHAP 13_14CE
86) a) $100,000 b) $13,000 c) $16,950 d) $1,700 e) $94,350 87) J. Bentley P. Anders N. Cassels
Inventory GST $1,500.00 $75.00 2,314.00 115.70 4,770.00 238.50 $8,584.00 $429.20 88) $10,418.60 ($9,220 * 1.13) 89) $2,054.50 (($2,500 - $700) × 1.13) less ($1,800 × 2%) plus ($50 × 1.13) 90) $110,000 91) $2,575 (($3,000 - $500) × 1.05) less (2% × $2,500) 92) a) $40,300 ($35,000 × 1.13 + $750) b) $35,750 ($35,000 + 750) c) $5,650 ($5,000 × 1.13) d) $600 (2% × $30,000) e) $34,050 ($40,300 - $5,650 - $600) 93) $71,000 94) 1. h 2. d 3. g 4. c 5. f 6. b 7. e 8. a 9. i 10. j 95) The company is just collecting the money on behalf of the government and they have to pay the government the total of all taxes collected. Companies usually just give discounts on the money that they made. If they also started to give discounts on taxes, it would cut their profits. 96) Sales Returns and Allowances 40.00 HST Payable 5.20 Cash 45.20 Inventory 22.00 Cost of Goods Sold 22.00 97) revenue debit income statement 98) $9,220 (HST is not revenue) 99) $5,350 100) $11,100 ($10,000 × 1.13 -( $10,000 x 2%)) 101) $3,885 (($5,000 - $1500) × 1.13) less (2% × $3,500) 102) Cash 339.00 Sales 300.00 HST Payable 39.00 Cost of Goods Sold 175.00 Inventory 175.00 21
Answer Key Testname: CHAP 13_14CE
103) Cash 678.00 Sales 600.00 HST Payable 78.00 Cost of Goods Sold 420.00 Inventory 420.00 104) Cash 216.96 Sales 192.00 Sales Tax Payable 24.96 Cost of Goods Sold 150.00 Inventory 150.00 105) $4,218 (($4,300 - 500)*1.13) less (2% × $3,800) 106) Cash 118.65 Sales 105.00 Sales Tax Payable 13.65 Cost of Goods Sold 79.00 Inventory 79.00 107) revenue debit income statement 108) Accounts Receivable - Connor Beuter 141.25 Sales 125.00 Sales Tax Payable 16.25 Cost of Goods Sold 80.00 Inventory 80.00 109) $1,332 ($1,200 * 1.11) 110) $1,650 (2,000 - 500) + ((2,000 - 500) × .05) + ((2,000 - 500) × .05) = 1,650) 111) $231,300 (250,000 - 40,000) * 1.13 - 6,000 112) Cash 180.80 Accounts Receivable - Dana Carter 180.80 113) Cash 94.35 Sales Discount 1.70 Accounts Receivable - Cathy Norton 96.05 114) owner's equity credit balance sheet 115) $8,418.50 ($7,450 * 1.13) 116) expense debit income statement 117) Provincial Sales Tax Payable is a liability account and it is increasing until the company makes the payment to the province for sales taxes that they have collected. 118) Cash 149.85 Sales Discount 2.70 Accounts Receivable - Francis Fast 152.55 119) Accounts Receivable - Cathy Norton 96.05 Sales 85.00 Sales Tax Payable 11.05 Cost of Goods Sold 65.00 Inventory 65.00 120) Cash 138.75 Sales Discount 2.50 Accounts Receivable - Connor Beuter 141.25
22
Answer Key Testname: CHAP 13_14CE
121)
Inventory HST $2,000.00 $260.00 1,500.00 195.00 800.00 104.00 $4,300.00 $559.00 122) $3,328.89 ($2,999 * 1.11) 123) The total of the schedule of accounts receivable should be verified to be the same as the controlling account in the general ledger. That account, the accounts receivable account in the general ledger, equals the sum of the individual customer balances in the accounts receivable ledger. 124) Accounts Receivable - Francis Fast 209.05 Sales 185.00 Sales Tax Payable 24.05 Cost of Goods Sold 120.00 Inventory 120.00 125) $11,030 126) a) $25,029.50 ($22,000 + $150) × 1.13 b) $22,150 ($22,000 + 150) c) $2,260 ($2,000 × 1.13) d) $400 (2% × $20,000) e) $22,369.50 ($25,029.50 - $2,260 - 400) 127) revenue credit income statement 128) Accounts Receivable - Dana Carter 180.80 Sales 160.00 HST Payable 20.80 Cost of Goods Sold 112.00 Inventory 112.00 129) $1,776 ((1,600 × 1.13) - 32 = 1,776) 130) Sales Returns and Allowances 35.00 Sales Tax Payable 4.55 Cash 39.55 Inventory 27.00 Cost of Goods Sold 27.00 131) asset debit balance sheet 132) revenue credit income statement 133) Sales Returns and Allowances 50.00 Sales Tax Payable 6.50 Accounts Receivable - Francis Fast 56.50 Inventory 30.00 Cost of Goods Sold 30.00 S. Over B. Danders R. Deals
23