TEST BANK FOR College Accounting A Practical Approach, 15th Canadian Edition By Jeffrey Slater, Mike by StudyGuide

College Accounting A Practical Approach, 15th Canadian Edition By Jeffrey Slater, Mike Deschamps, Debra Good (Test Bank All Chapters, 100% Original Verified, A+ Grade) Answers At The End Of Each Chapter

Chapter 1 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A book store would be considered a A) merchandise company. C) service company.

B) manufacturer. D) None of the above are correct.

2) 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) no change to the overall accounting equation. B) decreasing assets and increasing owner's equity. C) decreasing assets and decreasing liabilities. D) decreasing liabilities and increasing owner's equity.

3) Ryan withdrew cash from the business to pay his personal cell phone bill. The expanded accounting equation changes include A) decrease in Cash and increase in Withdrawal. B) decrease in both Cash and Withdrawal. C) increase in Cash and decrease in Withdrawal. D) increase in both Cash and Withdrawal.

4) Putting the information into the accounting system would be called A) classifying. B) analyzing. C) summarizing.

D) recording.

5) Which is an advantage of a sole proprietorship form of business? A) The business can continue indefinitely. B) There is limited personal risk. C) The owner makes all the decisions. D) All of these answers are correct.

6) Which of the following transactions would cause an asset to increase and the owner's equity to increase? A) The business incurred an expense on credit. B) The owner withdrew cash from the business. C) The business bought supplies on account. D) The owner invested cash in the business.

7) Revenue, expenses, and withdrawals are subdivisions of A) owner's equity. B) assets. C) liabilities. D) All of these answers are correct.

8) Tori's Shop collects $250 of its accounts receivable. The expanded accounting equation impact is A) Accounts Receivable decreases and Capital increases $250. B) Cash and Capital increase $250. C) Cash and Revenue increase $250. D) Cash increases and Accounts Receivable decreases $250.

9) The payment of accounts payable would A) increase assets and decrease liabilities. C) increase both assets and liabilities.

B) decrease assets and increase liabilities. D) decrease both assets and liabilities. 1

10) Bianca's Beverages purchases $2,500 worth of office equipment on account. This causes A) Accounts Payable to increase and Capital to decrease. B) Cash and Capital to decrease. C) Office Equipment to decrease and Accounts Payable to increase. D) Office Equipment and Accounts Payable to increase.

10)

11) A purchase of a vehicle for cash would have what effect on the accounting equation? A) Total liabilities decrease. B) Total asset amount remains the same. C) Total owner's equity increases. D) Both A and B are correct.

11)

12) Which of the following would result if the business purchased supplies on credit? A) The purchase of supplies is not a business transaction. B) Supplies would increase and Cash would decrease. C) Supplies would increase and Accounts Payable would increase. D) Supplies would increase and Capital would increase.

12)

13) When services are rendered and payment is made, which account would be increased? A) Cash B) Accounts Payable C) Accounts Receivable D) Expense

13)

14) A boutique clothing store would be considered a A) merchandise company. C) service company.

B) manufacturer. D) None of the above are correct.

14)

15) A sample of a liability account is A) Supplies. C) Fees Earned.

B) Accounts Payable. D) Accounts Receivable.

16) A Toyota plant would be considered a A) merchandise company. C) service company.

B) manufacturer. D) None of the above are correct.

15)

16)

17) Which of the following transactions would cause one asset to increase and another asset to decrease? A) The business bought inventory on credit. B) The business paid a creditor. C) The owner invested cash in the business. D) The business bought supplies for cash.

17)

18) If total liabilities are $48,000 and assets are $52,000, the owner's equity must be A) $52,000. B) $4,000. C) $48,000. D) $100,000.

18)

19) Which of the following statements is TRUE? A) Net income causes liabilities to decrease. B) Owner's withdrawals decrease owner's equity. C) Owner's withdrawals decrease net income. D) Net losses cause liabilities to increase.

19)

20) Stephanie purchased $10,000 of new electronic equipment for her DJ Company on account. The effect on the basic accounting equation was to A) decrease Cash $10,000 and increase Equipment $10,000. B) increase Cash $10,000 and increase Equipment $10,000. C) increase Equipment $10,000 and increase Accounts Payable $10,000. D) decrease Cash $10,000 and increase Accounts Payable $10,000.

20)

21) Which two financial statements show results for a period of time? A) The Statement of Owner's Equity and the Income Statement B) The Balance Sheet and the Statement of Owner's Equity C) The Balance Sheet and the Income Statement D) Only one statement shows results for a period of time

21)

22) An acceptable variation of the accounting equation is A) Assets = Liabilities - Owner's Equity. B) Assets + Owner's Equity = Liabilities. C) Assets - Liabilities = Owner's Equity. D) All of these answers are correct.

22)

23) 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) $23,000. B) $22,000. C) $27,000. D) $25,000.

23)

24) 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.

24)

25) If total liabilities are $15,000 and owner's equity is $7,000, the total assets must be A) $15,000. B) $22,000. C) $7,000. D) $8,000.

25)

26) Go Blue Retail Store collected $12,000 of its accounts receivable. The expanded accounting equation changes include A) Cash increases and Accounts Receivable decreases $12,000. B) Accounts Receivable decreases and Capital increases $12,000. C) Cash and Capital increase, $12,000. D) Cash and Revenue increase $12,000.

26)

27) 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 $10,000 B) Increase of $4,000 C) Increase of $6,000 D) Decrease of $6,000

27)

28) Which of the following is a liability? A) Accounts Payable C) Accounts Receivable

28)

B) Cash D) Supplies Expense

29) The purchase of a computer with on account was recorded as a cash purchase. Due to this error A) liabilities would be overstated. B) assets would be understated. C) owner's equity would be overstated. D) None of the above are correct.

29)

30) Which of the following will be recorded in the owner's equity column as a decrease? A) An investment by the owner B) An exchange of assets C) A withdrawal by the owner D) The purchase of an asset on credit

30)

31) 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) How well were the employees treated by management? D) Can the company pay its debts on time?

31)

32) A legal firm would be considered a A) merchandise company. C) service company.

32)

B) manufacturer. D) None of the above are correct.

33) If total assets are $30,000 and total liabilities are $8,000, Capital must equal A) $30,000. B) $22,000. C) $38,000. 34) The claims of creditors against the assets of a business are A) revenues. B) liabilities. C) assets.

D) $8,000.

D) expenses.

33)

34)

35) 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.

35)

36) If total liabilities are $22,000 and owner's equity is $17,000, the total assets must be A) $5,000. B) $17,000. C) $39,000. D) $20,000.

36)

37) A Hallmark store would be considered a A) merchandise company. C) service company.

B) manufacturer. D) None of the above are correct.

37)

38) A partnership is a business that A) is owned by more than one person. C) ends with the death of a partner.

B) is easy to form. D) All of these answers are correct.

38)

39) When the owner withdraws cash from the business, which of the following is TRUE? A) Assets and Liabilities increase. B) Liabilities and Capital increase. C) Assets decrease and Withdrawals increase. D) None of the above are correct.

39)

40) What three elements make up a balance sheet? A) Assets, liabilities, and revenues C) Assets, liabilities, and owner's equity

40)

B) Debts, assets, and cash D) Liabilities, expenses, and owner's equity

41) The advantages of a corporation do NOT include A) limited personal risk. B) can continue indefinitely. C) easy to set up. D) business decisions made by career administrators.

41)

42) Stork Machining has total assets of $40,000. What are the total assets if new equipment is purchased for $10,000 cash? A) $40,000 B) $60,000 C) $55,000 D) $50,000

42)

43) Caterpillar Construction Machinery and Equipment Company would be considered a A) merchandise company. B) manufacturer. C) service company. D) None of the above are correct.

43)

44) If total assets are $20,000 and owner's equity is $7,000, the total liabilities must be A) $27,000. B) $7,000. C) $13,000. D) $3,000.

44)

45) The purchase of supplies for cash would affect which account category? A) Liabilities B) Assets C) Expense

45)

D) Capital

46) Eileen's Corner Shoppe purchases a new computer for cash. This causes A) Cash and Capital to increase. B) Accounts Payable to increase and Capital to increase. C) Computer Equipment to increase and Cash to decrease. D) Computer Equipment and Cash to increase.

46)

47) When services are rendered but payment is not made, which account would be increased? A) Revenue B) Accounts Payable C) Cash D) Expense

47)

48) When the company buys equipment 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.

48)

49) 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 $105,000. B) Total assets are now $55,000. C) Total assets are now $80,000. D) Total assets are now $25,000.

49)

50) Which of the following will be recorded in the owner's equity column as a decrease? A) A withdrawal by the owner B) An investment by the owner C) The purchase of an asset on credit D) An exchange of assets

50)

51) This statement shows the financial position of a business on a particular date. A) Statement of Owners' Equity B) Balance Sheet C) Income Statement D) Accounting Equation

51)

52) The basic accounting equation is A) Assets = Revenues - Expenses. C) Assets = Liabilities - Owner's Equity.

52)

B) Assets = Owner's Equity - Liabilities. D) Assets = Liabilities + Owner's Equity. 5

53) The financial statement that shows business results in terms of revenue and expenses is A) a balance sheet. B) the expanded accounting equation. C) an income statement. D) a statement of owner's equity.

53)

54) A double line in a financial statement indicates at total and is called ________ a column. A) adding. B) tallying. C) heading. D) footing.

54)

55) Assets and Liabilities are reported on the A) balance sheet. C) statement of owner's equity.

55)

B) income statement. D) none of these.

56) Which of the following transactions would cause an asset to decrease and the owner's equity to decrease? A) The business bought equipment for cash. B) The business bought equipment on account. C) The owner withdrew cash from the business. D) The business provided services to a cash customer.

56)

57) 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.

57)

58) Items owned by the business such as land, supplies and equipment are A) revenue. B) liabilities. C) owner's equity.

58)

D) assets.

59) Legal services were provided to a credit customer. How would this affect the accounting equation? A) Cash and Accounts Receivable increase. B) Accounts Receivable and Revenue increase. C) Accounts Payable and Capital increase. D) None of the above are correct.

59)

60) Which of the following is a characteristic of a sole proprietorship? A) Can continue indefinitely B) Each shareholder acts as an owner of the company C) Easy to form D) Business owned by more than one person

60)

61) If 'Ol Fashioned Toys' revenues are less than its expenses during the accounting period A) the business will incur a loss. B) owner's withdrawals increase owner's equity. C) owner's withdrawals decrease net income. D) net income causes liabilities to decrease.

61)

62) 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) Increase of $25,000 B) Decrease of $5,000 C) Decrease of $20,000 D) Increase of $5,000

62)

63) Accounting provides information to A) government. C) managers.

B) investors. D) All of these answers are correct.

63)

64) 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 an asset, increase a liability. B) increase one asset, decrease another asset. C) increase an asset, increase owner's equity. D) decrease an asset, decrease a liability.

64)

65) Sonya invested cash in her new business. What effect will this have? A) Increase an asset and decrease owner's equity. B) Decrease an asset and increase a liability. C) Increase an asset and increase owner's equity. D) Increase an asset and increase a liability.

65)

66) Assets are equal to A) liabilities - revenues. C) liabilities + owner's equity.

66)

B) revenues - expenses. D) liabilities - owner's equity.

67) When services are rendered but payment is not made, which account would be increased? A) Withdrawal B) Cash C) Accounts Receivable D) Accounts Payable

67)

68) 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.

68)

69) How does the purchase of equipment on account affect the accounting equation? A) Assets increase; liabilities increase. B) Liabilities increase; owner's equity decreases. C) Assets increase; liabilities decrease. D) Assets increase; owner's equity increases.

69)

70) 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) $20,500. B) $23,500. C) $26,500. D) $17,500.

70)

71) Hazy Shades received and paid a utility bill for $725 for the month of March. This transaction will A) increase Utility Expense and decrease Withdrawal. B) increase Cash and decrease Utility Expense. C) decrease Cash and increase Utility Expense. D) increase Cash and increase Utility Expense.

71)

72) An accounting report that shows the changes in capital during the accounting period is A) a statement of owner's equity. B) an income statement. C) a balance sheet. D) All of these answers are correct.

72)

73) Carrie received $5,000 for legal work completed last year. This transaction will A) cause no change in total assets and revenues. B) cause a $5,000 increase in revenues. C) cause a $5,000 increase in total assets. D) not be recorded since the work was already completed.

73)

74) A corporation A) has limited risk to shareholders. C) is owned by shareholders.

74)

B) can continue indefinitely. D) all of the above.

75) If a company's revenues are higher than its expenses, it will cause A) an increase in owner's equity. B) no effect on owner's equity. C) a decrease in owner's equity. D) an increase in assets.

75)

76) Which of the following is NOT a type of business organization? A) Partnership B) Corporation C) Sole proprietorship D) Operation

76)

77) A revenue should be recorded when A) payment is received. B) it is earned. C) the customer requests a copy of the invoice. D) None of the above are correct.

77)

78) If a company's revenues are lower than its expenses, it will cause A) no effect on owner's equity. B) an increase in owner's equity. C) an increase in assets. D) a decrease in owner's equity.

78)

79) The heading of a balance sheet (in correct order) would include A) who, where, when. B) who, what, why. C) why, what, where. D) who, what, when.

79)

80) The financial statement that shows revenue and expenses for a period of time is the A) statement of owner's equity. B) income statement. C) statement of cash flows. D) balance sheet.

80)

81) 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 $4,000 B) Decrease of $16,000 C) Increase of $20,000 D) Decrease of $4,000

81)

82) The heading of an income statement (in correct order) would include A) who, where, when. B) who, what, why. C) why, what, where. D) who, what, when.

82)

83) Which of the following items are on both the balance sheet and the statement of owner's equity? A) Additional owner's investments B) Owner's withdrawals C) Net loss D) Capital

83)

84) Expenses A) are a subdivision of owner's equity. B) are costs the company incurs in carrying on operations. C) record personal expenses not related to the business. D) Both A and B are correct.

84)

85) Boxes R' Us paid $2,000 in salaries and wages for February. This transaction will A) decrease assets and increase expenses. B) increase expenses and increase liabilities. C) increase expenses and decrease revenue. D) decrease assets and expenses.

85)

86) Owner's withdrawals A) decrease withdrawals. C) increase liabilities.

86)

B) increase expenses. D) decrease assets.

87) The claims of owners against the assets of a business are A) owner's equity. B) revenues. C) expenses. 88) Which of the following is NOT an asset? A) Truck C) Accounts Receivable

D) liabilities.

88)

B) Cash D) Accounts Payable

89) Which of the following would be considered a subdivision of owner's equity? A) Cash B) Assets C) Liabilities

87)

D) Expenses

89)

90) Liam's Sporting Goods buys $35,000 of equipment on credit. Which of the following is a TRUE statement? A) Total liabilities decrease. B) Total assets increase. C) Total assets are unchanged. D) Total liabilities are unchanged.

90)

91) Which of the following transactions has no effect on owner's equity? A) Equipment purchase B) A withdrawal C) Paying salaries expense D) Billing for services rendered

91)

92) Which of the following professional accounting designations has been replaced by "CPA"? A) CGA B) CMA C) CA D) All of the above

92)

93) If 'Ol Fashioned Toys' revenues are greater than its expenses during the accounting period A) the business will incur a loss. B) the business will earn a net income. C) assets will increase more than liabilities. D) liabilities will increase more than assets.

93)

94) The total increase or decrease in the owner's equity is reported on the A) statement of owner's equity. B) balance sheet. C) income statement. D) All of these are correct.

94)

95) The balance sheet contains A) assets, liabilities and owner's equity. C) expenses, assets and cash.

95)

B) assets, liabilities and revenues. D) liabilities, expenses and capital.

96) 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) Both A and B are correct. D) None of the above are correct.

96)

97) Carrie billed her legal clients $5,000 for legal work completed during the month. This transaction will A) cause a $5,000 increase in revenues and a decrease in liabilities. B) cause a $5,000 increase in assets and revenues. C) not be recorded until the cash is collected. D) cause a $5,000 increase in revenues and liabilities.

97)

98) The Sarbanes-Oxley Act in the United States and national policies in Canada were passed to A) help prevent future attempts to defraud the public. B) replace all of the old accounting procedures with new ones. C) increase the focus on internal controls. D) Both A and C are correct.

98)

99) When the company pays salaries, which of the following is TRUE? A) Liabilities and Capital increase. B) Assets and Capital increase. C) Assets and Expenses increase. D) None of the above are correct.

99)

100) Which of the following items is NOT listed on the balance sheet? A) Accounts Payable B) Revenue C) Accounts Receivable D) Equipment

100)

101) The net income or net loss is calculated on the A) income statement. C) balance sheet.

101)

B) statement of owner's equity. D) none of these.

102) This type of business organization is not subject to income tax but owners must pay tax on income earned. A) Partnership B) Sole proprietorship C) Corporation D) Both A and B are correct

102)

103) An accounting firm would be considered a A) merchandise company. C) service company.

103)

B) manufacturer. D) None of the above are correct.

104) 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 net income. C) decrease assets. D) increase net income.

104)

105) 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.

105)

106) Farrah's investment of cash and equipment in her existing business will A) increase assets and liabilities. B) increase assets and owner's equity. C) decrease assets and increase a liability. D) decrease assets and increase owner's equity.

106)

107) This type of business organization is subject to income tax. A) Corporation B) Partnership C) Sole proprietorship D) All of the above

107)

108) The heading of a statement of owners' equity (in correct order) would include A) who, where, when. B) who, what, why. C) why, what, where. D) who, what, when.

108)

109) 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.

109)

110) The purchase of equipment with both cash and on account was recorded as only a credit purchase. Due to this error A) owner's equity would be overstated. B) assets would be understated. C) liabilities would be overstated. D) None of the above are correct.

110)

111) 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.

111)

112) 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 increase and Capital would decrease. C) An investment by the owner is not a business transaction. D) Cash would decrease and Capital would increase.

112)

113) Which of the following would result if a business purchased Equipment paying a 50% down payment in cash? A) Equipment would increase and Cash would decrease. B) Accounts Payable would increase. C) Since the equipment has not been paid in full, there is nothing to record. D) Both A and B are correct.

113)

114) An expense should be recorded when A) the expense is incurred. C) the vendor asks to pay the bill.

114)

B) the bill is paid. D) None of the above are correct.

115) 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. 11

115)

116) Mark paid $500 cash to partially reduce the amount owed for equipment that was previously bought on account. This transaction would A) increase assets and decrease liabilities. B) decrease assets and increase liabilities. C) decrease both assets and liabilities. D) increase both assets and liabilities.

116)

117) An obligation that is payable to creditors is A) an expense. C) an asset.

117)

B) the owner's equity. D) a liability.

118) If total liabilities are $3,000 and total assets are $10,000, owner's equity must be A) $13,000. B) $10,000. C) $7,000. D) $3,000.

118)

119) Which of the following will be recorded in the owner's equity column as an increase? A) An exchange of assets B) A withdrawal by the owner C) An investment by the owner D) The purchase of an asset on credit

119)

120) Which financial statement is prepared first? A) Statement of Owner's Equity C) Balance Sheet

120)

B) Income Statement D) None of the above

121) Victoria received $500 from customers in partial payment for accounting services performed previously. The recording of this transaction would A) increase Cash and decrease Accounts Receivable $500. B) increase Cash and Victoria's Capital $500. C) increase Cash and increase Accounts Receivable $500. D) decrease Accounts Receivable and increase Victoria's Capital $500.

121)

122) Which of the following would have claims against the assets of the business? A) Cash and Equipment B) Equipment and liabilities C) Liabilities and owner's equity D) Cash and liabilities

122)

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.

123) Your biggest customer

123)

124) President of the local Garden Club

124)

125) Day Shift Receptionist

125)

126) The parliament member running for re-election

126)

127) Economical Life, the company that handles our employee benefit plan

127)

128) Manager of the Sales Department

128)

129) The Chief Financial Officer

129)

130) Fred Jones, who purchased shares in our corporation

130)

131) Canada Revenue Agency

131)

132) The President and CEO

132)

133) The bank who lends you money

133)

134) Auditor hired by Canada Revenue Agency

134)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 135) The statement of owners' equity is for a particular date.

135)

136) A sole proprietorship ends with the death of the owner.

136)

137) Revenue is an asset.

137)

138) The statement of owner's equity is the link between the income statement and balance sheet.

138)

139) A disadvantage of a corporation is that shareholders are held personally liable for the corporation's debts.

139)

140) Expenses are recorded as costs of doing business whether cash was paid or not.

140)

141) Profit decreases equity.

141)

142) The left side of the accounting equation must always equal the right side of the equation.

142)

143) A transaction can occur which will affect only the assets side of the accounting equation.

143)

144) Losses decrease withdrawals.

144)

145) If liabilities are $10,000 and assets are $15,000, owner's equity will be $5,000.

145)

146) When expenses are greater than revenue, net income is the result.

146)

147) Revenue and withdrawals will always be the same amount.

147)

148) On the Income Statement, the total of Expenses is always shown with a dollar sign ($).

148)

149) The balance sheet is for a period of time.

149)

150) Creditors' claims against assets are called owner's equity.

150)

151) All Canadian companies must follow the IFRS rules for accounting.

151)

152) Cash withdrawals by the owner decrease both equity and assets.

152)

153) The beginning capital figure on the statement of owner's equity will be used on the balance sheet.

153)

154) In a financial statement, a double line indicates a total.

154)

155) In a shift of assets, the composition of the assets changes but total assets do not change.

155)

156) The Sarbanes-Oxley Act in the United States and national policies in Canada have increased costs to public companies.

156)

157) Total assets are included in the statement of owner's equity.

157)

158) If the assets owned by a business total $50,000 and liabilities total $30,000, then owner's equity totals $80,000.

158)

159) Accounts Receivable is an asset that would appear on the balance sheet.

159)

160) A CPA designation can be obtained with no practical experience.

160)

161) Cash is the same thing as Capital.

161)

162) Double-underlining is used for every sub-section on a Balance Sheet.

162)

163) Withdrawals are considered an expense of doing business.

163)

164) The three elements that make up a balance sheet are assets, liabilities and expenses.

164)

165) Cash investments by the owner increases both equity and assets.

165)

166) On a Balance Sheet, both the total for Assets and the total of Liabilities plus Owner's Equity are shown with a dollar sign ($).

166)

167) The balance sheet is prepared first so the information can be used to prepare the statement of owner's equity.

167)

168) The statement of owner's equity shows assets, liabilities and capital.

168)

169) Revenue and expenses will always be the same amount.

169)

170) The owner of a business paid personal rent with a company cheque. This payment reduces Cash as well as increases Withdrawals.

170)

171) Revenue and cash will always be the same amount.

171)

172) Not-for-profit businesses are not permitted to earn any revenue.

172)

173) Profit increases withdrawals.

173)

174) The four parts of owner's equity include capital, withdrawals, revenue, and expenses.

174)

175) The parties that have claims against the assets of the business are called managers and customers.

175)

176) The income statement is a snapshot of a particular date.

176)

177) Revenues generate an inflow of assets.

177)

178) The primary objective of a not-for-profit business is to maximize revenue.

178)

179) To distinguish the total on a financial statement, use double underlines.

179)

180) If expenses are more than revenue, a net loss is incurred.

180)

181) Withdrawals are business expenses that are included on the balance sheet.

181)

182) Generally Accepted Accounting Principles are the underlying concepts that make up acceptable accounting practices.

182)

183) Losses decrease equity.

183)

184) A Statement of owner's equity shows the change in capital.

184)

185) Supplies are assets that have a longer life than equipment.

185)

186) The parties that have claims against the assets of the business are called creditors and owners.

186)

187) The income statement is a financial statement showing business results in terms of revenues and expenses.

187)

188) The income statement is prepared first so the information can be used to prepare the statement of owner's equity.

188)

189) If the liabilities owed by a business total $150,000, then the assets must also total $150,000.

189)

190) Buying something on credit creates a liability.

190)

191) The accounting equation states that total assets must always equal total liabilities plus owner's equity.

191)

192) If the assets owned by a business total $75,000, owner's equity must also total $75,000.

192)

193) The accounting equation states that total assets must always equal owner's equity.

193)

194) Canada has not yet adopted the IFRS rules for accounting.

194)

195) The left side of the accounting equation shows what is owned by the business.

195)

196) The balance sheet shows the company's financial position as of a particular date.

196)

197) The basic accounting equation is: Assets = Liabilities.

197)

198) The purpose of accounting is to provide decision-makers with useful, accurate information.

198)

199) The income statement is the first financial statement completed.

199)

200) The balance sheet is a snapshot of a particular date.

200)

201) 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.

201)

202) The Balance Sheet is like a snapshot of the business's financial position at a particular point in time.

202)

203) The new accounting designation for Canada is CGA.

203)

204) Managerial accountants primarily provide special-purpose reports to serve the needs of external users.

204)

205) Accounts Receivable results from earning revenue when cash is not yet received.

205)

206) A transaction can occur which will affect only the liabilities side of the accounting equation.

206)

207) A corporation ends with the death of the shareholders.

207)

208) The statement of owners' equity is prepared first so the information can be used to prepare the income statement.

208)

209) The function of accounting includes analyzing, recording, classifying, summarizing, reporting, and interpreting financial information.

209)

210) The ending capital figure on the statement of owner's equity will be used on the balance sheet.

210)

211) The parties that have claims against the owners' equity of the business are called managers and customers.

211)

212) The time period covered in a balance sheet is for a stated year.

212)

213) Dollar signs must be used for every number on an income statement.

213)

214) Cash is an asset that would appear on the balance sheet.

214)

215) The four parts of owner's equity include capital, assets, liabilities, and expenses.

215)

216) A dollar sign must be repeated every time a figure appears on a financial statement.

216)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 217) 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. 218) 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.

beg. a. b. c. d. e. f. T

Cash + $ 800

Katie's Wedding Planning Service OWNER'S ASSETS LIAB. EQUITY = Accts Katie, +Rev. Accts.Rec. = Payable Capital $ 85 $235 $ 900 = $300

-Exp. $400

-Katie, With. $150

219) Prepare a balance sheet in proper form for Georgia Ironworks at December 31, 20XX. Use the following information: Accounts Payable Accounts Receivable Cash Equipment K. Georgia, Capital

$1,250 1,600 3,400 3,000 ?

220) 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

221) Calculate the total Assets if the company has: Cash $100, Accounts Receivable $300, Accounts Payable $500, Equipment $600. 222) List the elements that make up the Balance Sheet.

223) 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.

ASSETS = + Accounts Cash 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:

224) Use the following information to prepare 1) an income statement, 2) a statement of owner's equity for the month ended March 31, 20XX, and 3) a balance sheet at March 31, 20XX 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

225) 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 226) Prepare a balance sheet in proper form for Brampton Cleaners at December 31, 20XX. Use the following information: Accounts Payable Accounts Receivable Cash Equipment K. Carson, Capital

$2,500 800 2,200 4,000 ?

227) Describe the 6 functions of accounting. 228) 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 229) List the 6 functions of accounting. 230) Explain the purpose of the following: a. Income Statement b. Statement of Owner's Equity c. Balance Sheet

231) 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. Paid the monthly rent, $1,600 d. Collected $200 on account from customers e. Paid telephone expense, $200 f. Withdrew $500 cash for personal use

ASSETS

beg. a. b. c. d. e. f. T

Cash + $2,000

Accts.Rec. $100

Frita's Hair Salon OWNER'S EQUITY = LIAB. Accts Frita's = Payable +Rev. Capital ?? = $800

-Exp

-Frita's Withdrawal

232) 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.

ASSETS

beg. a. b. c. d. e. f. T

Cash + $ 1,200

Accts.Rec. $ 500

Cann Company OWNER'S EQUITY = LIAB. Accts B. Cann, = Payable +Rev. Capital ? $ 1,500 = $700

233) What information is provided in the heading of the Balance Sheet?

-Exp. $800

-B. Cann, With. $300

234) 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. 235) 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

236) 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:

237) 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 LIABILITIES + OWNER'S EQUITY = Cash + Equipment Accounts + Larry's, Capital = Payable a. b. c. d. Totals

238) Calculate the total Liabilities if the company has: Assets totaling $500 and Capital of $250. 239) Discuss the advantages and disadvantages of sole proprietorships, partnerships and corporations. 240) 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 salary expense, $500 f. Withdrew $600 cash for personal use

ASSETS

beg. a. b. c. d. e. f. T

Cash + $1,800

Accts.Rec. $200

Mark's Accounting Firm OWNER'S EQUITY = LIAB. Accts Mark's = Payable +Rev. Capital ?? = $600

-Exp

-Mark's Withdrawal

241) 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 + $3,800

Accts.Rec. $500

Gorkas Lawn Service OWNER'S EQUITY = LIAB. Accts Gorkas = Payable +Rev. Capital ?? = $1,000

-Exp

-Gorkas Withdrawal

242) Given the following account balances, determine the total liabilities. Cash $350, Accounts Receivable $275, Equipment $500 and Capital $900. 243) 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, 20XX, and 3) a balance sheet at October 31, 20XX. 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

244) What is the difference between Financial and Managerial Accounting?

245) 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

Answer Key Testname: CHAPTER 1 1) A 2) A 3) A 4) D 5) C 6) D 7) A 8) D 9) D 10) D 11) B 12) C 13) A 14) A 15) B 16) B 17) D 18) B 19) B 20) C 21) A 22) C 23) D 24) B 25) B 26) A 27) D 28) A 29) B 30) C 31) C 32) C 33) B 34) B 35) A 36) C 37) A 38) D 39) C 40) C 41) C 42) A 43) B 44) C 45) B 46) C 47) A 48) A 49) A 50) A 26

Answer Key Testname: CHAPTER 1 51) B 52) D 53) C 54) D 55) A 56) C 57) D 58) D 59) B 60) C 61) A 62) D 63) D 64) D 65) C 66) C 67) C 68) B 69) A 70) D 71) C 72) A 73) A 74) D 75) A 76) D 77) B 78) D 79) D 80) B 81) A 82) D 83) D 84) D 85) A 86) D 87) A 88) D 89) D 90) B 91) A 92) D 93) B 94) A 95) A 96) C 97) B 98) D 99) D 100) B 27

Answer Key Testname: CHAPTER 1 101) A 102) D 103) C 104) D 105) D 106) B 107) A 108) D 109) B 110) C 111) A 112) A 113) D 114) A 115) C 116) C 117) D 118) C 119) C 120) B 121) A 122) C 123) External 124) External 125) Internal 126) External 127) External 128) Internal 129) Internal 130) External 131) External 132) Internal 133) External 134) External 135) FALSE 136) TRUE 137) FALSE 138) TRUE 139) FALSE 140) TRUE 141) FALSE 142) TRUE 143) TRUE 144) FALSE 145) TRUE 146) FALSE 147) FALSE 148) FALSE 149) FALSE 150) FALSE 28

Answer Key Testname: CHAPTER 1 151) FALSE 152) TRUE 153) FALSE 154) TRUE 155) TRUE 156) TRUE 157) FALSE 158) FALSE 159) TRUE 160) FALSE 161) FALSE 162) FALSE 163) FALSE 164) FALSE 165) TRUE 166) TRUE 167) FALSE 168) FALSE 169) FALSE 170) TRUE 171) FALSE 172) FALSE 173) FALSE 174) TRUE 175) FALSE 176) FALSE 177) TRUE 178) FALSE 179) TRUE 180) TRUE 181) FALSE 182) TRUE 183) TRUE 184) TRUE 185) FALSE 186) TRUE 187) TRUE 188) TRUE 189) FALSE 190) TRUE 191) TRUE 192) FALSE 193) FALSE 194) FALSE 195) TRUE 196) TRUE 197) FALSE 198) TRUE 199) TRUE 200) TRUE 29

Answer Key Testname: CHAPTER 1 201) FALSE 202) TRUE 203) FALSE 204) FALSE 205) TRUE 206) TRUE 207) FALSE 208) FALSE 209) TRUE 210) TRUE 211) FALSE 212) FALSE 213) FALSE 214) TRUE 215) FALSE 216) FALSE 217) $9,300 [$10,900 - $4100 + $2500] Katie's Wedding Planning Service 218) OWNER'S = LIAB. ASSETS EQUITY Accts Katie Cash + Accts.Rec. = Payable Capital +Rev. = $300 beg. $ 800 $ 85 $235 $ 900 a. 1,250 1,250 = = b. 500 500 = c. 120 d. 700 -700 = -120 = -120 e. f. -500 = = $300 T $1380 $635 $235 $2650 219)

-Exp. $400

-Katie Withdr. $150

120

$520

500 $650

GEORGIA IRONWORKS BALANCE SHEET December 31, 20XX

Assets Cash Accounts Receivable Equipment

$3,400 1,600 3,000

Total Assets

$8,000

Liabilities and Owner's Equity Liabilities Accounts Payable

$1,250

Owner's Equity K. Creeper, Capital Total Liabilities & Owner's Equity

6,750 $8,000

Answer Key Testname: CHAPTER 1 220)

a. b. c. d. T

Luke's Financial Planning ASSETS Cash + Office Furniture +$25,000 - 1,200 +$1,200 + 600 _______ - 400 +$23,400 +$1,800

= = = = = = =

LIABILITIES OWNER'S EQUITY Accounts Payable Luke's Capital +$25,000 +$600 - 400 +$200

________ +$25,000

221) $1,000 = $100 + 300 + 600 222) Assets, Liabilities, Owner's Equity Jose Perez Company 223) ASSETS LIABILITIES = + Accounts J. Perez, + Accounts Cash + Receivable Payable Capital Beginning Balance: + 800 + 50 + 40 + 200

a. b. c. + 60 d. - 30 e. - 30 f. Totals: +840

+ 190

= + 200 = = + 30 = = - 30 = = = + 200 1,030 = 1,030

+550

OWNER'S EQUITY

J. Perez, + Rev. - Exp. -Withdrawals + 700 + 40 + 200

- 400

- 200

+ 30

+ 30 + 550

+ 940

- 430

-230

Answer Key Testname: CHAPTER 1 224)

Bolthouse Company INCOME STATEMENT For the Month ended March 31, 20XX Revenue Expenses Net Income

$900 600 $300 Bolthouse Company STATEMENT OF OWNER'S EQUITY For the Month ended March 31, 20XX

J. Bolthouse, Capital, March 1 Net Income Less Withdrawals

$2,000

$300 150

Increase in Capital

150

J. Bolthouse Capital, March 31

$2,150

Bolthouse Company BALANCE SHEET March 31, 20XX Assets Cash $3,000 Accounts Receivable 150 Equipment 1,000 Total Assets $4,150 225) 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 J. Bolthouse, Capital Total Liabilities and Owner's Equity

$2,000 2,150 $4,150

Answer Key Testname: CHAPTER 1 226)

BRAMPTON CLEANERS BALANCE SHEET December 31, 20XX

Assets Cash Accounts Receivable Equipment

$2,200 800 4,000

Liabilities and Owner's Equity Liabilities Accounts Payable

$2,500

Owner's Equity K. Carson, Capital 4,500 Total Assets $7,000 Total Liabilities & Owner's Equity $7,000 227) Analyzing: Looking at what happened and how the business was affected. Recording: Putting the information into the accounting system. Classifying: Grouping all of the same activities (e.g., all purchases) together. Summarizing: Creating totals by category and/or date, which are used in the next two functions. Reporting: Issuing the reports that tell the results of the previous functions. Interpreting: Examining the reports to determine how the various pieces of information they contain relate to each other and providing feedback to the users of the information. 228) 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 229) 1. Analyzing 2. Recording 3. Classifying 4. Summarizing 5. Reporting 6. Interpreting 230) 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.

Answer Key Testname: CHAPTER 1 231) ASSETS

beg. a. b. c. d. e. f. T

232)

Cash + $ 2,000 +1,400

Accts.Rec. $ 100 +800

-1,600 +200 -200 -500 $1,300

Frita's Hair Salon OWNER'S = LIAB. EQUITY Accts Frita's Capital = Payable +Rev. = $800 $1,300 +1,400 +800

-Exp

-Frita's Withdrawal

+1,600 -200 +200 $700

$800

$1,300

$2,200

Cann Company ASSETS LIABILITIES = + Accounts B. Cann, + Accounts Cash + Receivable Payable Capital Beginning Balance: + 1,200 + 500 + 500 + 1,000

+500 $1,800 $500

OWNER'S EQUITY

B. Cann, + Rev. - Exp. -Withdrawals

+600 + 1,500 - 800 - 300 = + 700 + 500 a. = + 1,000 b. = + 250 c. = + 250 600 600 + d. = - 250 e. = - 250 - 500 + 500 = f. + 900 = + 700 +600 +3,000 -1,050 -800 Totals: +1,550 2,450 = 2,450 233) The company name, the name of the report (Balance Sheet), the date at which the report is presented. 234) $2,940 [$1,970 + $530 - $750 + $3,790 - $2,600] Tessa's Interior Design 235)

ASSETS Cash + a. +$5,000 b. c. -100 d. -150 T +$4,750

Equipment

+$250 +100 ________ +$350

= LIABILITIES + OWNER'S EQUITY Tessa's = Accounts + Payable Capital = +$5,000 = +$250 = ________ = -150 = +$100 +$5,000

Answer Key Testname: CHAPTER 1 236)

Fred Pentell Company ASSETS Cash a. + 5,500 b. - 600 c. - 1,000 d. Total: +3,900

237)

a. b. c. d. T

+ Equipment

LIABILITIES OWNER'S EQUITY + Account F. Pentell, Payable Capital

= + 1,600 + 600 ________ = + 2,200 =

Larry's Machine Shop ASSETS Cash + Equipment +$250,000 - 60,000 +$60,000 +45,000 - 20,000 _______ +$170,000 +$105,000

+ 1,600 - 1,000 + 600

= = = = = = =

5,500

________ 5,500

LIABILITIES Accounts Payable

+$45,000 - 20,000 +$25,000

OWNER'S EQUITY Larry's Capital +$250,000

________ +$250,000

238) $250 = $500 -$250 239) 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.

Answer Key Testname: CHAPTER 1 240) ASSETS

beg. a. b. c. d. e. f. T

Cash + $ 1,800 +2,400

Accts.Rec. $ 200 +4,800

-600 +1,200 -500 -600 $3,700

-300 $3,400

-Mark's Withdrawal

+600 +500 $3,800

ASSETS

beg. a. b. c. d. e. f. T

-Exp

-1200

241)

Cash + $ 3,800 +800 -1,050 -100 +250

Mark's Accounting Firm OWNER'S = LIAB. EQUITY Accts Mark's Capital = Payable +Rev. = $600 $1,400 +2,400 +4,800

Accts.Rec. $ 500

$600

$1,400

$7,200

Gorkas Lawn Service OWNER'S = LIAB. EQUITY Accts Gorkas Capital = Payable +Rev. = $1,000 $3,300 +800

+600 $1,100 $600

-Exp

-Gorkas Withdrawal

+1,050 +100 -250 +1,900 $2,150

+1,900 $1,000

$3,300

$2,700

242) $225 [$350 + $275 + $500 - $900]

+300 $1,150 $300

Answer Key Testname: CHAPTER 1 243)

Logan Motorcycles INCOME STATEMENT For the Month ended October 31, 20XX Revenue Expenses Net Income

$1,000 700 $300

Logan Motorcycles STATEMENT OF OWNER'S EQUITY For the Month ended October 31, 20XX H. Logan, Capital, Oct. 1 Net Income Less Withdrawals

$300 100

$3,000

Increase in Capital H. Logan, Capital, Oct. 31

200 $3,200 Logan Motorcycles BALANCE SHEET October 31, 20XX

Assets

Liabilities and Owner's Equity Liabilities Cash $1,300 Accounts Payable $ 600 Accounts Receivable 500 Owner's Equity Equipment 2,000 H. Logan, Capital 3,200 Total Assets $3,800 Total Liabilities & Owner's Equity $3,800 244) 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. 245) 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

Exam

Chapter 2

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which type of account would be reported on the Statement of Owner's Equity? A) Expenses B) Liabilities C) Withdrawals D) Assets

2) Which of the following entries records the investment of cash by John, owner of a sole proprietorship? A) Debit John, Capital; credit Cash B) Debit John, Withdrawals; credit Cash C) Debit Cash; credit John, Capital D) Debit Cash; credit John, Withdrawals

3) Which of the following groups of accounts have a normal credit balance? A) Assets, expenses, and withdrawals B) Revenue, liabilities, and capital C) Liabilities, expenses, and assets D) Assets, capital, and withdrawals

4) A debit to a liability account was posted to the Capital account. This error would cause A) Capital to be overstated. B) liabilities to be overstated. C) assets to be overstated. D) None of the above are correct.

5) Net income or net loss for a period is calculated by the following formula: A) total revenues - total expenses - total withdrawals. B) total revenues - total withdrawals. C) total revenues - total expenses. D) total revenues - total expenses + capital.

6) The left column of a financial statement is often used to A) show credits. B) show totals. C) subtotal numbers. D) show debits.

7) 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.

8) The left side of any account is the A) footings. B) credit side.

C) ending balance.

D) debit side.

9) What is Brown Company's net income or net loss if it had Revenue of $4,000, Vehicle Expense of $650, Materials Expense of $1,625, and Labour Expense of $1,000 during October? A) $725 net income B) $725 net loss C) $2,350 net income D) $2,350 net loss

10) 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) the form has no room for indicating either a debit or a credit. C) there is no Date column included in this form. D) it is not used in business records today.

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 Accounts Receivable. B) credit Cash; debit Withdrawals. C) credit Cash; debit Supplies Expense. D) credit Cash; debit Capital.

11)

12) Which of the following is NOT a financial statement? A) Income statement B) Statement of owner's equity C) Balance sheet D) Trial balance

12)

and 13) Given the following list of accounts with normal balances, what are the trial balance totals of the debits13) credits? Cash Equipment Accounts Payable Capital Service Fees Salaries Expense

$1,000 500 250 1,000 1,000 750

A) $2,250 debit, $2,250 credit C) $1,125 debit, $1,125 credit

B) $4,500 debit, $4,500 credit D) $3,250 debit, $3,250 credit

14) The normal balance of an account is A) credit. C) the side that increases.

B) the side that decreases. D) debit.

14)

15) 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) $50 debit. B) $50 credit. C) $1,250 debit. D) $1,250 credit.

15)

16) A credit to an asset account was posted to a revenue account. This error would cause A) revenue to be overstated. B) assets to be overstated. C) expenses to be overstated. D) Both A and B are correct.

16)

17) Which type of account would NOT be reported on the balance sheet? A) Accounts Payable B) Revenue C) Accounts Receivable D) Cash

17)

18) The beginning balance in the Computers account was $2,500. The company disposed of $500 worth of computers. The balance in the account is A) credit of $2,000. B) credit of $3,000. C) debit of $2,000. D) debit of $3,000.

18)

19) Which type of account would NOT be reported on the Statement of Owner's Equity? A) Capital B) Assets C) Withdrawals D) None of these answers are correct.

19)

and 20) Given the following list of accounts with normal balances, what are the trial balance totals of the debits20) credits? Cash Accounts Receivable Capital Consulting Fees Salaries Expense Insurance Expense

$500 1,500 1,950 1,000 750 200

A) $2,950 debit, $2,950 credit C) $5,900 debit, $5,900 credit

B) $3,000 debit, $3,000 credit D) $2,000 debit, $2,000 credit

21) The beginning balance in Cash was $400. Additional cash of $800 was received. Cheques were written for $700. The Cash balance is A) $800 credit. B) $500 credit. C) $500 debit. D) $900 debit.

21)

and 22) Given the following list of accounts with normal balances, what are the trial balance totals of the debits22) credits? Cash Accounts Receivable Capital Withdrawals Service Fees Rent Expense

$500 100 200 100 700 200

A) $800 debit, $800 credit C) $1,000 debit, $1,000 credit

B) $800 debit, $1,000 credit D) $900 debit, $900 credit

23) An account had a starting debit balance of $550. There were debit postings of $100 and credit postings of $700 during the month. The ending balance is A) $50 debit. B) $50 credit. C) $1,250 debit. D) $1,250 credit.

23)

24) The side that decreases 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.

24)

25) Which of the following types of accounts has a normal credit balance? A) Revenues B) Withdrawals C) Assets

25)

D) Expenses

26) The Beginning Capital account would appear on which financial statement? A) Balance sheet B) Statement of owner's equity C) Income statement D) None of these answers are correct.

26)

27) 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) $550 debit. C) $150 debit. D) $150 credit.

27)

28) A debit to a liability account was posted to a revenue account. This error would cause A) liabilities to be understated. B) revenues to be understated. C) Capital to be overstated. D) None of the above are correct.

28)

29) An account had a $200 credit starting balance. There were debit postings of $800 and credit postings of $250 during the month. The ending balance is A) $350 credit. B) $750 credit. C) $350 debit. D) $750 debit.

29)

30) 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 Dennis, Withdrawals, $700; crediting Cash, $700. C) debiting Accounts Receivable, $700; crediting Cash, $700. D) debiting Expense, $700; crediting Cash, $700.

30)

31) 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) $4,500 credit. B) $2,000 debit. C) $3,000 debit. D) $6,000 debit.

31)

32) The Fees Earned account is A) a liability, and it has a normal credit balance. B) a revenue, and it has a normal debit balance. C) a revenue, and it has a normal credit balance. D) a liability, and it has a normal debit balance.

32)

33) Which type of account would be reported on the income statement? A) Liabilities B) Expenses C) Withdrawals

D) Assets

33)

34) 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 Cash. C) debit Telephone Expense; credit Accounts Payable. D) debit Tom's Withdrawals; credit Cash.

34)

35) What would be the effect on accounts if the business received the telephone bill and paid it immediately? A) Capital would be debited and revenue credited. B) An asset would be debited and Capital credited. C) An expense would be debited and a liability credited. D) An expense would be debited and an asset credited.

35)

36) A debit to an expense account was posted to a revenue account. This error would cause A) revenue to be understated. B) liabilities to be overstated. C) assets to be overstated. D) None of the above are correct.

36)

37) A debit to an asset account was posted to an expense account. This error would cause A) liabilities to be overstated. B) assets to be understated C) expenses to be overstated. D) Both B and C are correct.

37)

38) 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.

38)

39) What would be the effect on accounts if the business purchased office equipment for cash? A) An asset would be debited and revenue credited. B) An asset would be debited and an asset credited. C) Capital would be debited and revenue credited. D) An asset would be debited and an expense credited.

39)

40) On which financial statement would you find the ending Capital balance? A) Income statement B) Balance Sheet C) Statement of owner's equity D) Both B and C are correct.

40)

41) 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.

41)

42) Extreme Home bought painting equipment on account for $2,200. The entry would include A) debit to Equipment, $2,200; credit to Cash, $2,200. B) debit to Supplies Expense, $2,200; credit to Accounts Payable, $2,200. C) debit to Supplies Expense, $2,200; credit to Cash, $2,200. D) debit to Equipment, $2,200; credit to Accounts Payable, $2,200.

42)

43) Capital had a normal starting balance of $800. There were debit postings of $150 and credit postings of $400 during the month. The ending balance is A) $1,050 debit. B) $1,050 credit. C) $550 credit. D) $550 debit.

43)

44) The trial balance is prepared from A) the beginning balance in the ledger. C) the transactions during the year.

B) a summary of all debit balance accounts. D) ending balances in the ledger.

44)

45) The right side of any account is the A) ending balance. B) credit side.

C) debit side.

D) footings.

45)

46) 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 Withdrawals. B) credit Cash, debit Capital. C) credit Cash, debit Supplies Expense. D) credit Cash, debit Accounts Receivable.

46)

47) A formal account that has columns for date, explanation, post reference, debit, and credit is called the A) chart of accounts. B) T account. C) standard account form. D) ledger.

47)

48) Which of the following is prepared last? A) Balance Sheet C) Trial Balance

B) Statement of Owner's Equity D) Income Statement

48)

49) 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) $950 debit. C) $550 debit. D) $200 debit.

49)

50) 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 revenue is credited. C) an asset is debited and a liability is credited. D) None of these are correct.

50)

51) The business bought equipment on account. To record this, A) an asset is debited and an asset is credited. B) an expense is debited and a liability is credited. C) an asset is debited and a liability is credited. D) None of these are correct.

51)

52) What device is used to record the increases and decreases caused by business transactions to individual assets, liabilities, and owner's equity? A) Footings B) Trial Balance C) Chart of accounts D) Account

52)

53) 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 debit. B) $500 credit. C) $1,100 credit. D) $1,100 debit.

53)

54) 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 Capital, $679; credit Accounts Payable, $679. B) debit Travel Expense, $679; credit Accounts Payable, $679. C) debit Travel Expense, $679; credit Cash, $679. D) debit Accounts Payable, $679; credit Travel Expense, $679.

54)

55) A term used for obtaining the balance of an account is A) adding. B) crediting. C) footing.

55)

D) debiting.

56) What would be the effect on accounts if the owner withdrew cash? A) An asset would be debited and a revenue credited. B) An asset would be debited and Capital credited. C) Withdrawals would be debited and an asset credited. D) An asset would be debited and an expense credited.

56)

57) 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.

57)

58) The first step in analyzing a transaction is A) to decide if the accounts are increasing or decreasing. B) to decide where the amounts belong. C) to decide which accounts are affected. D) to decide to which categories the accounts belong.

58)

59) 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 debit. B) $50 credit. C) $1,250 debit. D) $1,250 credit.

59)

60) The Accounts Payable account is A) a liability, and it has a normal credit balance. B) an expense, and it has a normal debit balance. C) a liability, and it has a normal debit balance. D) an expense, and it has a normal credit balance.

60)

and 61) Given the following list of accounts with normal balances, what are the trial balance totals of the debits61) credits? 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) $2,150 debit, $2,150 credit D) $700 debit, $1,000 credit

62) When a computer is bought on account, the result is A) an increase in the asset Computer and a decrease in the liability Accounts Payable. B) a decrease in the asset Computer and an increase in the liability Accounts Payable. C) a decrease in the asset Computer and a decrease in the liability Accounts Payable. D) an increase in the asset Computer and an increase in the liability Accounts Payable.

62)

63) A transaction that has more than one debit and one credit is called a A) ledger. B) compound entry. C) credit entry. D) chart of accounts.

63)

64) 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 ensure that debits equal credits. D) a tool used to make sure that all accounts have normal balances.

64)

65) Which type of account would NOT be reported on the income statement? A) Expenses B) Withdrawals C) Revenue D) None of these answers are correct.

65)

66) A credit may signify a(n) A) increase in withdrawals. C) increase in assets.

B) increase in capital. D) decrease in liabilities.

66)

67) 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) $800 debit. B) $2,600 debit. C) $800 credit. D) $2,600 credit.

67)

68) The owner invested personal equipment in the business. To record this transaction, A) credit Equipment and debit Capital. B) debit Equipment and credit Accounts Payable. C) debit Accounts Payable and credit Equipment. D) debit Equipment and credit Capital.

68)

69) A debit may signify a(n) A) increase in asset accounts. C) decrease in expense accounts.

69)

B) increase in liability accounts. D) increase in the capital account.

70) 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) $2,200 debit. D) $600 debit.

70)

71) What would be the effect on accounts if the business received the telephone bill but did not pay it immediately? A) An expense would be debited and a liability credited. B) An asset would be debited and Capital credited. C) Capital would be debited and revenue credited. D) An expense would be debited and an asset credited.

71)

72) A group of accounts for business is called a A) ledger. C) chart of accounts.

72)

B) trial balance. D) footing.

73) Which one of the following statements does not help to explain the design of a T account? A) The account has a balance. B) The account has a space for recording decreases in the amount. C) The account has a title. D) The account has a space for recording increases in the amount.

73)

74) Which of the following errors would cause the trial balance to be out of balance? A) An entry is posted twice. B) A debit is entered as $100 and the credit is entered at $1,000. C) An entry is not posted at all. D) None of these answers are correct.

74)

75) 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) $500 debit. B) $500 credit. C) $1,000 credit. D) $1,000 debit.

75)

76) An account that would be increased by a credit is A) Accounts Receivable. C) Utilities Expense.

B) Accounts Payable. D) Cash.

76)

77) 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 Capital is credited. C) an expense is debited and a liability is credited. D) None of these are correct.

77)

78) When a production machine is bought using a bank loan, the result is A) an increase in the asset Equipment and a decrease in the liability Machine Loan Payable. B) a decrease in the asset Equipment and a decrease in the liability Machine Loan Payable. C) a decrease in the asset Equipment and an increase in the liability Machine Loan Payable. D) an increase in the asset Equipment and an increase in the liability Machine Loan Payable.

78)

79) What would be the effect on accounts if the business provided services to a customer collecting cash? A) Capital would be debited and revenue credited. B) An asset would be debited and an expense credited. C) An asset would be debited and revenue credited. D) An asset would be debited and Capital credited.

79)

80) The chart of accounts A) is a numbered list of all of the business' accounts. B) allows accounts to be balanced more accurately. C) can be expanded as the business grows. D) Both A and C are correct.

80)

81) 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) $95 debit. C) $55 debit. D) $55 credit.

81)

82) What would be the effect on accounts if the business provided services to a customer on account? 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.

82)

83) One asset would be debited and another credited if A) the business bought equipment paying cash. B) the business provided services to a credit customer. C) the business provided services to a cash customer. D) the business paid a creditor.

83)

84) Which of these statements about T accounts is FALSE? A) They are often used to help accountants make decisions. B) They are a teaching tool only and not used in business. C) They have both a left side and a right side. D) Each account has a normal balance which is either a debit or a credit.

84)

85) The Equipment account is A) an asset, and it has a normal debit balance. B) a revenue, and it has a normal debit balance. C) an asset, and it has a normal credit balance. D) an expense, and it has a normal credit balance.

85)

86) A compound entry is A) a transaction involving more than one debit and/or credit. B) found on the income statement. C) used to prepare the trial balance. D) the same as the chart of accounts.

86)

87) Which of the following is prepared first? A) Statement of owner's equity C) Balance sheet

87)

B) Trial balance D) Income statement

88) The list of accounts in a Chart of Accounts is normally listed A) in alphabetical order. B) in the order in which they appear in the financial statements. C) in chronological order. D) none of the above.

88)

89) Which of the following groups of accounts have a normal debit balance? A) Revenue, liabilities, and capital B) Assets, expenses, and withdrawals C) Assets, capital, and withdrawals D) Liabilities, expenses, and assets

89)

90) The entry to record Tom's payment of a business telephone bill is A) debit Tom's Withdrawals; credit Accounts Payable. B) debit Telephone Expense; credit Cash. C) debit Telephone Expense; credit Accounts Payable. D) debit Tom's Withdrawals; credit Cash.

90)

91) An account is said to have a debit balance if A) the footing of the debits exceeds the footing of the credits. B) the last entry of the accounting period was posted on the debit side. C) its normal balance is debit without regard to the amounts or number of entries on the debit side. D) there are more entries on the debit side than on the credit side.

91)

92) An asset would be debited and a liability credited if A) the business incurred an expense but did not pay the bill immediately. B) the business bought equipment for cash. C) the business bought equipment on account. D) the business incurred an expense and paid it.

92)

93) When recording transactions in two or more accounts and the totals of the debits and credits are equal, it is called A) double-entry bookkeeping. B) posting. C) debiting. D) crediting.

93)

94) The beginning balance in Cash was $5,200. Additional cash of $500 was received. Cheques were written totaling $2,900. The cash balance is A) $2,800 credit. B) $2,800 debit. C) $7,600 debit. D) $8,600 debit.

94)

95) Which of the following statements is NOT true? A) A Trial Balance helps prove the accuracy of the ledger. B) Account balances are used to prepare a trial balance. C) Accounts are listed in order on the Trial Balance. D) Footings are needed even if an account has only a single entry.

95)

96) Regarding the preparation of financial statements, which of the following is TRUE? A) The Balance Sheet is prepared first. 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 left column of the Income statement is used only to sub-total amounts.

96)

97) 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) Increase Capital with a debit and the normal balance is a debit. D) Decrease Accounts Receivable with a credit and the normal balance is a credit.

97)

98) The income statement contains A) liabilities. C) revenues.

98)

B) assets. D) Both B and C are correct.

99) The side that increases the account balance, by the rules of debit and credit, is said to be the A) debit side. B) normal balance. C) credit side. D) None of these answers are correct.

99)

100) 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) If the total on the credit side was the larger, the balance is a credit. C) Dollar signs are always used to designate a balance amount. D) Footings of each side of the account are needed to determine the balance.

100)

101) 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) $1,400 net income B) $900 net income C) $1,400 net loss D) $900 net loss

101)

102) Accounts Receivable has a normal balance of $1,000. After collecting $700, the balance in the account is A) debit $300. B) credit $1,700. C) debit $1,700. D) credit $300.

102)

and 103) Given the following list of accounts with normal balances, what are the trial balance totals of the debits103) credits? Cash Accounts Receivable Capital Withdrawals Service Fees Rent Expense

$1,200 700 1,900 500 1,000 500

A) $2,000 debit, $2,000 credit C) $1,200 debit, $1,200 credit

B) $3,900 debit, $3,900 credit D) $2,900 debit, $2,900 credit

104) 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) $1,050 net income D) $50 net loss

104)

105) 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) $750 debit. B) $150 credit. C) $250 credit. D) $1,050 credit.

105)

106) Accounts Payable 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) $500 debit. C) $700 debit. D) $700 credit.

106)

107) The Accounts Receivable account is A) a liability, and it has a normal credit balance. B) an expense, and it has a normal credit balance. C) an asset, and it has a normal debit balance. D) a revenue, and it has a normal debit balance.

107)

108) When a car is bought using a bank loan and a cash payment, the result is A) an increase in the asset Equipment, a decrease in the asset Cash, and an increase in the liability Car Loan Payable. B) a decrease in the asset Equipment and an increase in the liability Car Loan Payable. C) an increase in the asset Equipment, an increase in the asset Cash, and a decrease in the liability Car Loan Payable. D) an increase in the asset Equipment and a decrease in the liability Car Loan Payable.

108)

109) What is the proper entry to show the owner making an investment in the company? A) A debit to Cash and a credit to Revenue B) A debit to Cash and a credit to Capital C) A credit to Cash and a debit to Revenue D) A credit to Cash and a debit to Capital

109)

110) 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.

110)

111) Net income appears on which of the following financial reports? A) Trial balance B) Balance sheet and income statement C) Balance sheet D) Income statement and statement of owner's equity

111)

112) The Withdrawals account is A) a revenue, and it has a normal debit balance. B) a liability, and it has a normal debit balance. C) an expense, and it has a normal credit balance. D) an owner's equity component, and it has a normal debit balance.

112)

113) 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 income C) $350 net loss D) $1,350 net income

113)

114) The Petty Cash account is A) a revenue, and it has a normal credit balance. B) an asset, and it has a normal debit balance. C) a revenue, and it has a normal debit balance. D) an asset, and it has a normal credit balance.

114)

115) 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.

115)

116) 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) $450 credit. B) $450 debit. C) $750 debit. D) $750 credit.

116)

117) A ledger A) is the same as a chart of accounts. C) can replace the financial statements.

B) is a group of accounts and their balances. D) None of these answers are correct.

117)

118) An account that would be increased by a debit is A) Capital. C) Fees Earned.

B) Accounts Payable. D) Cash.

119) A list of all the accounts from the ledger with their ending balances is called a A) chart of accounts. B) footing. C) trial balance. D) normal balance.

118)

119)

and 120) Given the following list of accounts with normal balances, what are the trial balance totals of the debits120) credits? Cash Accounts Receivable Capital Salaries Expense Service Revenue Rent Expense

$900 50 750 2,000 3,100 900

A) $1,000 debit, $1,000 credit C) $200 debit, $200 credit

B) $200 debit, $1,000 credit D) $3,850 debit, $3,850 credit

121) 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) $1,400 credit. B) $1,400 debit. C) $2,200 debit. D) $600 credit.

121)

122) Which of the following entries would be used to record the billing of fees earned? A) Debit Cash and credit Rental Fees B) Credit Cash and credit Rental Fees C) Debit Accounts Receivable and debit Rental Fees D) Debit Accounts Receivable and credit Rental Fees

122)

123) The Salaries Expense account is A) a liability, and it has a normal credit balance. B) an expense, and it has a normal credit balance. C) an expense, and it has a normal debit balance. D) a liability, and it has a normal debit balance.

123)

124) Which of the following accounts would be increased by a debit? A) Capital B) Cash C) Accounts Payable D) Fees Earned

124)

125) 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) ($100) B) $100 C) $900 D) $400

125)

126) A credit to an asset account was posted to a liability account. This error would cause A) liabilities to be overstated. B) Capital to be understated. C) assets to be understated. D) None of the above are correct.

126)

127) A chart of accounts A) includes account balances. B) is set up in alphabetical order. C) is a listing of all the accounts used by a company. D) All of the above are correct.

127)

128) 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 $3,000. B) debit of $3,000. C) debit of $2,000. D) credit of $2,000.

128)

129) A liability would be credited and an expense debited if A) the business bought supplies on account. B) the business paid a creditor. C) the business bought supplies for cash. D) the business incurred an expense but did not pay the bill immediately.

129)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 130) Liabilities increase on the debit side of the account.

130)

131) Accounts Receivable indicates amounts owed to us by our clients or customers.

131)

132) The debit side of all accounts increases the balance and the credit side decreases for all accounts.

132)

133) Accounts Payable is an asset account that is increased on the credit side.

133)

134) A footing must be used on every T account, even if there is only one entry.

134)

135) Bank Loan is an example of a liability.

135)

136) A trial balance is a formal report prepared after the balance sheet.

136)

137) If credits do not equal debits in the trial balance the accountant can simply move on to making the remainder of the financial statements.

137)

138) A T account is used for demonstration purposes.

138)

139) Double-entry accounting requires transactions to affect two or more accounts, and the total of the debits and credits must equal.

139)

140) The credit side is always the right side of the account.

140)

141) When preparing a trial balance, it is not necessary to use dollar signs.

141)

142) A chart of accounts is a listing of the accounts and their ending balances.

142)

143) The financial statements contain debit and credit columns.

143)

144) Cash would be affected by any transaction that involves a withdrawal.

144)

145) The debit side is always the left side of the account.

145)

146) Debit and credit columns are not used on the financial reports.

146)

147) When cash is increased, the Cash account is debited.

147)

148) Withdrawals increase on the debit side of the account.

148)

149) Footings are not needed if there is only one entry in the T account.

149)

150) The trial balance is a financial statement.

150)

151) A credit in accounting is always a decrease to an account.

151)

152) Cash is debited when the business makes a payment for utilities.

152)

153) When the owner invests computer equipment in the business, cash is increased.

153)

154) Salaries Expense appears on the balance sheet.

154)

155) Revenue increases on the debit side of the account.

155)

156) Accounts Receivable indicates amounts we owe to our customers.

156)

157) A debit means the left-hand side of an account and an increase for all accounts.

157)

158) A credit in accounting means a position on the right side of the account.

158)

159) There can only be one debit and one credit for each transaction.

159)

160) A debit in accounting is always an increase to an account.

160)

161) A transaction that involves more than one credit or more than one debit is not permitted.

161)

162) Revenue has a normal credit balance, and increases are recorded on the credit side.

162)

163) Each part of a business transaction is recorded in the accounting equation under a specific account.

163)

164) Accounts Payable indicates amounts we owe to our suppliers.

164)

165) After deciding which accounts are affected, the next step in analyzing a transaction is to determine to which categories the accounts belong.

165)

166) A debit in accounting means a position on the left side of the account.

166)

167) Accounts Payable indicates amounts owed to us by our suppliers.

167)

168) At least two accounts are affected in every transaction.

168)

169) Expenses are recorded when paid.

169)

170) A transaction that involves more than one credit or more than one debit is called a compound entry.

170)

171) A credit means the right-side of an account and a decrease for all accounts.

171)

172) Investors will frequently use a trial balance to decide if a company is a good risk to put money into.

172)

173) The debit side is always the right side of the account.

173)

174) Capital and Assets are reported on the Statement of Owner's Equity.

174)

175) Revenues are recorded as credits.

175)

176) Equipment is an example of a liability.

176)

177) Withdrawals and expenses are reported on the income statement.

177)

178) Only two accounts are affected in every transaction.

178)

179) Dollar signs are not used in formal financial reports.

179)

180) The side of an account that increases the balance is always the same as the normal balance side.

180)

181) A compound entry is when more than one transaction occurs.

181)

182) Accounts Receivable appears on the income statement.

182)

183) Withdrawals increases on the debit side of the account.

183)

184) Debits must always equal credits.

184)

185) Accounts Payable increases on the credit side of the account.

185)

186) Expenses are recorded as credits.

186)

187) Cash increases on the debit side of the account.

187)

188) Double underlines under final totals are used on a trial balance for clarity.

188)

189) Accounts Payable indicates monies owed to us by our clients or customers.

189)

190) The Supplies account is increased by a debit.

190)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 191) 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 CreditTransaction ________ ________ 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. Column 1

Column 2

Column 3

192) Cleaning Equipment

________

193) Office Supplies Expense

________

194) Identify the normal balance for each of the following accounts by placing a Dr. (debit) or a Cr. (credit) in the space provided. ________ 1. Production Machine ________ 2. Petty Cash ________ 3. Fees Earned ________ 4. Bank Loan Payable ________ 5. Office Supplies ________ 6. Truck ________ 7. Utilities Expense ________ 8. Machine Loan Payable ________ 9. Shop Equipment ________ 10. Insurance Expense

195) 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.

196) 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

197) 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

198) 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?

199) 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?

200) 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. 201) 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 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________

Normal Balance ________ ________ ________ ________ ________ ________ ________ ________ ________ ________

202) Selected accounts from the ledger of Jessa 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. Cash 2. Computers 3. Service Revenue 4. Jessa, Withdrawals 5. Bank Loan Payable 6. Insurance Expense 7. Jessa, Capital 8. Office Furniture 9. Truck 10. Utilities Expense

Type of Account ________ ________ ________ ________ ________ ________ ________ ________ ________ ________

Normal Balance ________ ________ ________ ________ ________ ________ ________ ________ ________ ________

203) 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 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________

Normal Balance ________ ________ ________ ________ ________ ________ ________ ________ ________ ________

204) 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 205) Number the following types of accounts (1-6) as they would appear on the Trial Balance. ________ Assets ________ Capital ________ Revenue ________ Liabilities ________ Withdrawals ________ Expenses

206) 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.

207) 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

208) Cleaning Fees Earned

________

209) Salaries Expense

________

210) Automobile

________

211) 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.

212) 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?

213) 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

214) Explain the difference between expenses and withdrawals. 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.

215) Installation Fees Earned

Column 1

Column 2

Column 3

________

216) The following is a list of accounts and their balances for ED Company for the month ended October 31, 20XX. Prepare a trial balance in good form. Cash Accounts Receivable Office Supplies Office Equipment ED, Capital

$500 750 250 1,200 1,650

ED, Withdrawals Interest Revenue Service Revenue Rent Expense Vehicle Expense

$500 100 3,000 1,250 300

217) Gas Expense

Column 1

Column 2

Column 3

________

218) 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.

219) Below is the Trial Balance for Puppers Company for January 31, 20XX. Trial Balance January 31, 20XX

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

990 1,600 4,950 750 39,040

Credit

570 14,000 14,748 9,722

39,040

Required: Prepare 1. An Income Statement for the month ended January 31, 20XX 2. A Statement of Owner's Equity for the month ended January 31, 20XX 3. A Balance Sheet, as of January 31, 20XX

220) 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 Expense 221) 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?

222) The following is a list of accounts and their balances for Blake's Company for the month ended May 31, 20XX. 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

223) 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 224) 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. 225) List and explain the five steps in accounting analysis. 226) 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?

227) The following is a list of accounts and their balances for McCall Company for the month ended June 30, 20XX. 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

228) Lawn Care Fees Earned

Column 1

Column 2

Column 3

________

229) 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 230) Why is Revenue increased on the Credit side? (Explain as it pertains to the expanded accounting equation and its relationship to Owner's Equity.) 231) Below is the Trial Balance for Benson Company for June 30, 20XX. Trial Balance June 30, 20XX

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

500 600 630 400 5,000

Credit

770 1,500 2,730

5,000

Required: Prepare 1. An Income Statement for the month ended June 30, 20XX 2. A Statement of Owner's Equity for the month ended June 30, 20XX 3. A Balance Sheet, as of June 30, 20XX

232) Cleaning Expense

Column 1

Column 2

Column 3

________

233) 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 234) 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 Computers 211 Accounts Payable 311 J. Brown, Capital

312 J. Brown, Withdrawals 411 Consulting Fees Revenue 511 Utilities Expense 512 Insurance Expense 513 Accounting Expense

Debit Credit Transaction ________ ________ 1. Purchased office computers on account. ________ ________ 2. Paid insurance for the month. ________ ________ 3. Received cash for consulting work performed. ________ ________ 4. Billed a client on account for services performed. ________ ________ 5. Paid accounts payable. ________ ________ 6. Collected accounts receivable. ________ ________ 7. Withdrew cash for personal use. ________ ________ 8. Paid the accountant for the month. ________ ________ 9. Paid utilities for the month. ________ ________ 10. Invested additional cash in the business.

235) 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.

236) 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 237) 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 Cash ________ 2. Decrease Petty Cash ________ 3. Decrease Bank Loan Payable ________ 4. Increase Accounts Payable ________ 5. Decrease Equipment ________ 6. Increase Consulting Revenue ________ 7. Increase Land ________ 8. Increase Computer Expense ________ 9. Decrease Accounts Receivable ________ 10. Increase Telephone Expense

238) The following is a list of accounts and their balances for Myra's Company for the month ended May 31, 20XX. 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

$980 1,030 1,835 650

239) The following is a list of accounts and their balances for Benson Company for the month ended June 30, 20XX. 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

1,600 600 2,730 630 400

Answer Key Testname: CHAPTER 2 1) C 2) C 3) B 4) B 5) C 6) C 7) D 8) D 9) A 10) A 11) B 12) D 13) A 14) C 15) A 16) D 17) B 18) C 19) B 20) A 21) C 22) D 23) A 24) B 25) A 26) B 27) D 28) B 29) C 30) B 31) C 32) C 33) B 34) D 35) D 36) A 37) D 38) D 39) B 40) D 41) D 42) D 43) B 44) D 45) B 46) A 47) C 48) A 49) C 50) B 33

Answer Key Testname: CHAPTER 2 51) C 52) D 53) A 54) B 55) C 56) C 57) B 58) C 59) A 60) A 61) B 62) D 63) B 64) A 65) B 66) B 67) A 68) D 69) A 70) B 71) A 72) A 73) A 74) B 75) B 76) B 77) A 78) D 79) C 80) D 81) B 82) A 83) A 84) B 85) A 86) A 87) B 88) B 89) B 90) B 91) A 92) C 93) A 94) B 95) D 96) D 97) B 98) C 99) B 100) C 34

Answer Key Testname: CHAPTER 2 101) B 102) A 103) D 104) C 105) C 106) D 107) C 108) A 109) B 110) A 111) D 112) D 113) C 114) B 115) B 116) A 117) B 118) D 119) C 120) D 121) B 122) D 123) C 124) B 125) D 126) A 127) C 128) B 129) D 130) FALSE 131) TRUE 132) FALSE 133) FALSE 134) FALSE 135) TRUE 136) FALSE 137) FALSE 138) TRUE 139) TRUE 140) TRUE 141) TRUE 142) FALSE 143) FALSE 144) FALSE 145) TRUE 146) TRUE 147) TRUE 148) TRUE 149) TRUE 150) FALSE 35

Answer Key Testname: CHAPTER 2 151) FALSE 152) FALSE 153) FALSE 154) FALSE 155) FALSE 156) FALSE 157) FALSE 158) TRUE 159) FALSE 160) FALSE 161) FALSE 162) TRUE 163) TRUE 164) TRUE 165) TRUE 166) TRUE 167) FALSE 168) TRUE 169) FALSE 170) TRUE 171) FALSE 172) FALSE 173) FALSE 174) FALSE 175) TRUE 176) FALSE 177) FALSE 178) FALSE 179) FALSE 180) TRUE 181) FALSE 182) FALSE 183) TRUE 184) TRUE 185) TRUE 186) FALSE 187) TRUE 188) TRUE 189) FALSE 190) TRUE 191) 121, 211 511, 111 111, 311 111, 411 112, 411 211, 111 111, 112 312, 111 513, 111 512, 111 36

Answer Key Testname: CHAPTER 2 192) Cleaning Equipment: asset debit 193) Office Supplies Expense: expense debit 194) 1. Dr. 2. Dr. 3. Cr. 4. Cr. 5. Dr. 6. Dr. 7. Dr. 8. Cr. 9. Dr. 10. Dr. 195) 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, 111 196) Cash 111 Accounts Receivable 112 a. 6,500 b. 900 c. 1,000 e. 300 e. 300 f. 100 700

balance sheet income statement

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 512 d. 80

Answer Key Testname: CHAPTER 2 197)

Cash 111 a. 5,000 e. 100 b. 1,000 B 4,030 f. 70

Accts. Rec. 112 c. 800 e. 100 B

Off. Equip. 121 b. 1,000

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

198) 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 199) 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 200) $4,150 [$3,500 - $500 + $400 + $750] 201) Account 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

Answer Key Testname: CHAPTER 2 202)

203)

Account 1. Cash 2. Computers 3. Service Revenue 4. Jessa, Withdrawals 5. Bank Loan Payable 6. Insurance Expense 7. Jessa, Capital 8. Office Furniture 9. Truck 10. Utilities Expense 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 204) 1. Dr. 2. Cr. 3. Dr. 4. Dr. 5. Cr. 6. Cr. 7. Cr. 8. Dr. 9. Dr. 10. Cr. 205) 1 Assets 3 Capital 5 Revenue 2 Liabilities 4 Withdrawals 6 Expenses

Type of Account A A R N L E N A A E

Normal Balance Dr Dr Cr Dr Cr Dr Cr Dr Dr Dr

Type of Account A A R N L E N A A E

Normal Balance Dr Dr Cr Dr Cr Dr Cr Dr Dr Dr

Answer Key Testname: CHAPTER 2 206) 111, 311 111, 411 112, 411 211, 111 111, 112 312, 111 513, 111 512, 111 121, 211 511, 111 207) 1. Dr. 2. Cr. 3. Dr. 4. Dr. 5. Cr. 6. Cr. 7. Cr. 8. Dr. 9. Dr. 10. Cr. 208) Cleaning Fees Earned: revenue credit income statement 209) Salaries Expense: expense debit income statement 210) Automobile: asset debit balance sheet 211) 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 212) 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

Answer Key Testname: CHAPTER 2

213)

Cash 111 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

Accts. Rec. 112 c. 800 e. 100 B

Photo Equip. 121 b. 1,200

700 Phillip's Cap. 311 a. 6,000

Phillip's With. 312 f. 70

Utilities Exp. 512 d. 80

Advertising Exp. 513

214) 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. 215) Installation Fees Earned: revenue credit income statement 216) ED Company Trial Balance October 31, 20XX

Cash Accounts Receivable Office Supplies Office Equipment ED, Capital ED, Withdrawals Interest Revenue Service Revenue Rent Expense Vehicle Expense

Debit 500 750 250 1,200 500

1,250 300

Totals 4,750 217) Gas Expense: expense 218) $4,000 [$12,000 - ($5,000 + $3,000)]

Credit

1,650 100 3,000

4,750 debit

income statement

Answer Key Testname: CHAPTER 2 219) 1.

Puppers Company Income Statement For the Month Ended January 31, 20XX

Service Revenue Expenses: Rent Salaries Utilities

$9,722 1,600 4,950 750

Net Income 2.

7,300 $2,422

Puppers Company Statement of Owner's Equity For the Month Ended January 31, 20XX

P. Puppers, Capital, January 1, 20XX Add Net Income for January 20XX Less Withdrawals

$14,748

$2,422 990

1,432

P. Puppers, Capital, January 31, 20XX 3.

Cash Accounts Receivable Equipment

$16,180

Puppers Company Balance Sheet January 31, 20XX 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

220) 1. Dr. 2. Dr. 3. Cr. 4. Cr. 5. Dr. 6. Dr. 7. Cr. 8. Dr. 9. Dr. 10. Dr. 221) 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 42

Answer Key Testname: CHAPTER 2 222)

Blake's Company Trial Balance May 31, 20XX

Cash Interest Receivable Equipment Machine Loan Payable Blake, Capital Blake, Withdrawals Delivery Revenue Salary Expense

Debit 1,020 80 15,340

1,980 2,250

Credit

7,250 8,505 4,915

Totals 20,670 20,670 223) 1. Dr. 2. Dr. 3. Cr. 4. Cr. 5. Dr. 6. Dr. 7. Cr. 8. Dr. 9. Dr. 10. Dr. 224) $10,350 [ $9,500 + $450 - $1,000 + 1,400] 225) 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. 226) 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

Answer Key Testname: CHAPTER 2 227)

McCall Company Trial Balance June 30, 20XX

Cash Accounts Receivable Office Equipment Accounts Payable McCall, Capital McCall, Withdrawals Service Fees Interest Expense Delivery Expense Rent Expense

Debit 580 1,500 500

750 80 130 900

Credit

1,600 110 2,730

Totals 4,440 4,440 228) Lawn Care Fees Earned: revenue credit income statement 229) 1. Dr. 2. Cr. 3. Dr. 4. Dr. 5. Cr. 6. Cr. 7. Cr. 8. Dr. 9. Dr. 10. Cr. 230) Revenue is an increase to owner's equity; Capital is increased on the credit side.

Answer Key Testname: CHAPTER 2 231) 1.

Benson Company Income Statement For the Month Ended June 30, 20XX

Service Fees Revenue Expenses: Advertising Salaries Utilities

$2,730 600 630 400

Net Income 2.

1,630 $1,100

Benson Company Statement of Owner's Equity For the Month Ended June 30, 20XX

Darryl Benson, Capital, June 1, 20XX Add Net Income for June 20XX Less Withdrawals

$1,500

$1,100 500

600

Darryl Benson, Capital, June 30, 20XX 3.

Cash Accounts Receivable Office Equipment

232) Cleaning Expense: 233) 1. Dr. 2. Cr. 3. Dr. 4. Dr. 5. Cr. 6. Cr. 7. Cr. 8. Dr. 9. Dr. 10. Cr.

$2,100

Benson Company Balance Sheet June 30, 20XX Assets $370 1,600 900 $2,870 expense

Liabilities & Owner's Equity Accounts Payable $770 Darryl Benson, Capital 2,100 $2,870 income statement

debit

Answer Key Testname: CHAPTER 2 234) 121, 211 512, 111 111, 411 112, 411 211, 111 111, 112 312, 111 513, 111 512, 111 111, 311 235) 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, 111 236) 1. Dr. 2. Dr. 3. Cr. 4. Cr. 5. Dr. 6. Dr. 7. Cr. 8. Dr. 9. Dr. 10. Dr. 237) 1. Dr. 2. Cr. 3. Dr. 4. Cr. 5. Cr. 6. Cr. 7. Dr. 8. Dr. 9. Cr. 10. Dr.

Answer Key Testname: CHAPTER 2 238)

Myra's Company Trial Balance May 31, 20XX

Cash Accounts Receivable Office Equipment Accounts Payable Myra, Capital Myra, Withdrawals Service Fees Rent Expense Totals

239)

Debit 1,380 1,030 2,260

Credit

500 3,965

980

1,835

650 6,300

6,300

Benson Company Trial Balance June 30, 20XX

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

500 600 630 400 5,000

Credit

770 1,500 2,730

5,000

Exam

Chapter 3

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The first step of the accounting cycle is A) preparing a trial balance. C) posting to the ledger.

B) recording journal entries. D) analyzing business transactions.

2) Riley's Book Review billed customers $350 for editing work completed this month. The journal entry to record this transaction is A) Accounts Payable debit $350; Editing Revenue credit $350. B) Editing Revenue debit $350; Withdrawals credit $350. C) Accounts Receivable debit $350; Editing Revenue credit $350. D) Editing Revenue debit $350; Riley, Capital credit $350.

3) A credit to an asset account was posted to a revenue account. This would cause A) liabilities to be understated. B) assets to be understated. C) revenue to be overstated D) capital to be understated.

4) The entry to record delivering a financial lecture and immediately collecting payment from the customer would be 750 750 A) Lecture Fees B) Accounts Receivable Cash 750 Lecture Fees 750 750 750 C) Cash D) Cash Lecture Fees 750 Accounts Receivable750

5) 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.

6) If the business records a number as 176 and it should be 167, this error would be called A) rearrangement. B) slide. C) transposition. D) None of the above

7) A trial balance difference divisible by 9 could indicate A) a journal entry error. B) a slide or transposition. C) a slide only. D) a transposition only.

8) The entry to record the payment of office salaries would be A) Debit Salaries Expense; Credit Cash. B) Debit Salaries Expense; Credit Capital. C) Debit Cash; Credit Salaries Expense. D) Debit Cash; Credit Accounts Receivable.

9) 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.

10) If Prepaid Rent has been debited, it is likely that A) a bill for the past month's rent was received. B) the rent was paid for three months in advance. C) this month's rent was paid. D) All of these are possible.

10)

11) The process of initially recording business transactions in a journal is called A) posting. B) journalizing. C) transposing.

D) sliding.

11)

12) The posting reference column in the ledger is A) not used. B) used to record the ledger number. C) used to record the date. D) used to record the journal and page number the transactions originated from.

12)

13) Transferring information from the journal to the ledger is called A) posting. B) ledgering. C) footing.

13)

D) journalizing.

14) "PR" in the general journal and general ledger stands for A) prior receipt. B) peer reviewer. C) posting reference. D) None of the above are correct.

14)

15) The proper format for a journal entry includes all of the following EXCEPT A) the total amounts of debits must equal the total amount of credits. B) listed in chronological order. C) the credit portion of the transaction is always first. D) skip a line between transactions.

15)

16) The most logical reason to use a journal instead of T accounts is A) it makes finding errors easier. B) a journal consists of removable pages. C) it keeps all transactions categorized by type. D) only one book is needed for all of a firm's bookkeeping needs.

16)

17) 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 60 60 A) Accounts Payable B) Advertising Expense Advertising Expense 60 Accounts Payable 60 60 C) Advertising Expense D) No entry is made in August. Accounts Receivable 60

17)

18) Rent paid in advance is called a(n) A) expense. B) liability.

18)

C) revenue.

19) Transactions are entered in a journal by A) chronological order. B) order of importance of company to our business. C) the order they appear on the accountant's desk. D) company name in alphabetical order. 2

D) asset.

19)

20) A debit to a revenue account was posted to an expense account. This would cause A) expenses to be overstated. B) expenses to be understated. C) capital to be overstated. D) revenue to be understated.

20)

21) How are explanations distinguished in the journal? A) They are underlined. B) They are written along the margin, beside the debit and credit entries. C) They are written below the credit entries. D) They are in bold print.

21)

22) A credit to an asset account was posted to an expense account. This would cause A) capital to be understated. B) expenses to be overstated. C) assets to be overstated. D) liabilities to be understated.

22)

23) During the month of January, Katelyn invested $10,000 in starting her legal practice. The proper journal entry would be A) Cash, debit $10,000; Revenue, credit $10,000. B) Cash, debit $10,000; Katelyn's Capital, credit $10,000. C) Katelyn's Capital, debit $10,000; Cash, credit $10,000. D) Katelyn's Withdrawals, debit $10,000; Cash, credit $10,000.

23)

24) The simplest form of a journal is a(n) A) general journal. C) interim journal.

24)

B) special journal. D) accounting journal.

25) 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.

25)

26) BNL completed a performance and collected revenue of $10,000 not previously billed or recorded. The journal entry to record the collection would be 10,000 10,000 A) Performance Fees B) Cash Cash 10,000 Performance Fees 10,000 10,000 10,000 C) Accounts Receivable D) Accounts Receivable Cash 10,000 Performance Fees 10,000

26)

27) The time period for which the income statement is prepared is a(n) A) accounting period. B) accounting cycle. C) fiscal period. D) calendar year.

27)

28) 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.

28)

29) As Withdrawals increase, A) Owner's Equity increases. C) Owner's Equity decreases.

29)

B) Expense increases. D) Cash increases.

30) 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 for $12,000, paying $8,000 cash, with the rest on account. C) purchase of office equipment, paying $4,000 cash, and $8,000 on account. D) None of these answers are correct.

30)

31) 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) journalize, analyze, post, record the account balance, and complete the reference column in the journal. D) analyze, journalize, post, complete the reference column in the journal, and record the account balance.

31)

32) 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) trial balance. B) ledger. C) journal. D) income statement.

32)

33) Which of the following transactions would cause the trial balance to be out of balance? A) A debit to Cash and a debit to Equipment for the same amount B) A debit to Accounts Receivable and a credit to Accounting Fees for the same amount C) A credit to Cash and a debit to Supplies for the same amount D) All of these answers are correct.

33)

34) Revenue is traditionally recognized in the accounting records when A) services are provided to the customer. B) cash is received. C) it is incurred. D) None of the answers are correct.

34)

35) Posting is performed by transferring information from the journal to the A) ledger. B) income statement. C) trial balance. D) balance sheet.

35)

36) 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.

36)

37) The process that begins with recording business transactions and includes the completion of the financial statements is the A) calendar year. B) fiscal year. C) natural business year. D) accounting cycle.

37)

38) An example of a slide error is A) debit to Rent Expense instead of a debit to Prepaid Rent for $200. B) debit to Telephone Expense for $250 instead of $520. C) debit to Equipment for $1,200 instead of $1,000. D) debit to Accounts Receivable for $2,000 instead of $200.

38)

39) If the Owner's Equity account increases during the year, most likely A) the company was promised a large and profitable contract for next year. B) payment of liabilities was lower than average for the year. C) the owner made additional investment during the year. D) equipment purchases were higher than average for the year.

39)

40) If an error in a journal entry is detected after posting, you should A) do nothing in hopes it will go away. B) initial where the error was made. C) erase the incorrect entry. D) make a correcting entry.

40)

41) The purpose of posting is to A) provide an explanation of the transaction. B) correct a previous entry. C) list the transactions in chronological order in the journal. D) update the account balances in the ledger.

41)

42) If you debit Prepaid Insurance, you most likely will A) credit Fees Earned. C) credit Insurance Expense.

42)

B) credit Cash. D) debit Cash.

43) A calendar year is A) the 12-month period beginning with January. B) any 12-month period that a business chooses for its accounting year. C) the period for when an interim financial statement would be completed. D) All of these answers are correct.

43)

44) 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 $500 debit was recorded as a credit. C) a $500 debit was recorded twice. D) a transposition error occurred.

44)

45) The journal entry debiting Cash and crediting Fees Earned would be a result of a(n) A) withdrawal. B) expense. C) investment. D) revenue.

45)

46) The general journal entry to record a payment to a creditor would most commonly include A) a debit to Supplies and a credit to Cash. B) a debit to Accounts Payable and a credit to Cash. C) a debit to Cash and a credit to Accounts Payable. D) a debit to Capital and a credit to Cash.

46)

47) Conner Sales' total assets and total liabilities increased $500. The transaction could have been A) purchase of supplies for $600 with a down payment of $100 and the remainder on account. B) purchase of supplies for cash, $500. C) paid the rent for the month, $600. D) None of these answers are correct.

47)

48) The trial balance lists the accounts A) in the same order as in the ledger. C) all credits first and then debits.

48)

B) all debits first and then credits. D) alphabetically.

49) A debit to an expense account was posted to an asset account. This would cause A) expenses to be understated. B) assets to be understated. C) capital to be understated. D) liabilities to be understated.

49)

50) Interim statements are prepared to A) allow management to make changes to the business before processing year-end financial statements. B) notify investors of the company's current financial position. C) notify management of the company's current financial position. D) All of the above are correct.

50)

51) Financial statements that are prepared for a period shorter than a year are called A) fiscal year statements. B) interim statements. C) journal statements. D) accounting period statements.

51)

52) 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.

52)

53) A credit to an asset account was posted to a liability account. This would cause A) liabilities to be overstated. B) capital to be overstated. C) revenue to be overstated. D) assets to be understated.

53)

54) Business transactions are first recorded in the A) journal. B) T account.

54)

C) balance sheet.

D) ledger.

55) An error resulting from the accidental rearrangement of the digits of a number is called a A) missed entry. B) transposition. C) double entry. D) slide.

55)

56) The general journal entry to record the earning of revenue would most commonly include A) a debit to Fees Earned and a credit to Cash. B) a debit to Cash and a credit to Capital. C) a debit to Accounts Receivable and a credit to Capital. D) a debit to Accounts Receivable and a credit to Fees Earned.

56)

57) Posting is the transfer of information from A) the chart of accounts to the journal. C) the general ledger to the journal.

57)

B) the chart of accounts to the ledger. D) the journal to the general ledger. 6

58) If a trial balance is not equal, you should first A) re-compute the ledger balances. B) trace all postings. C) look for missing transactions. D) re-add the trial balance and calculate the difference.

58)

59) 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 transposition error occurred. B) a $100 credit was recorded twice. C) a $100 debit was recorded twice. D) a $100 debit was recorded as a credit.

59)

60) B. Flat, CPA, collected fees of $650 previously billed and recorded. The journal entry to record the collection would include A) debit Accounting Fees, $650; credit Accounting Fees, $650. B) debit Accounts Receivable, $650; credit Accounting Fees, $650. C) debit Cash, $650; credit Accounting Fees, $650. D) debit Cash, $650, credit Accounts Receivable, $650.

60)

61) An $800 cheque written for supplies was journalized as $80. The entry to correct this error is A) debit Cash, $80; credit Cash, $80. B) debit Cash, $720; credit Supplies, $720. C) debit Supplies, $720; credit Cash, $720. D) debit Supplies, $80; credit Cash, $80.

61)

62) The accounting cycle element that would benefit the most from using a computer is A) posting. B) summarizing. C) correcting errors. D) journalizing.

62)

63) When a computer is used for accounting, the journal may be stored in any of the following locations, EXCEPT A) on a hard drive. B) in a paper file folder. C) the cloud. D) on a USB drive.

63)

64) Which of the following statements is FALSE regarding a proper journal entry? A) Credits are always indented. B) Skip a line between transactions. C) Always list the assets first. D) Debits are always listed first in the entry.

64)

65) The twelve-month period a business chooses for its accounting period is a(n) A) accounting cycle. B) fiscal year. C) calendar year. D) accounting period.

65)

66) 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) $6,000 C) $12,000 D) $3,000

66)

67) If Accounts Payable has been debited, it is most likely that A) a customer made a payment. B) the company made a payment to a creditor. C) the company made a purchase on account. D) None of these are possible.

67)

68) An error resulting from adding or deleting zeros in writing numbers is called a A) slide. B) transposition. C) missed entry. D) double entry.

68)

69) A trial balance difference where the difference amounted to $400 could indicate A) a slide only. B) a transposition only. C) a slide or transposition. D) a $200 debit posted as a credit.

69)

70) 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) Recording the same transaction more than once. C) Recording the same erroneous amount for both the debit and the credit sides of a transaction. D) Failure to record a transaction.

70)

71) The general journal entry to record the receipt of payment on an account would include A) a debit to Accounts Receivable and a credit to Fees Earned. B) a debit to Accounts Receivable and a credit to Cash. C) a credit to Accounts Receivable and a debit to Fees Earned. D) a credit to Accounts Receivable and a debit to Cash.

71)

72) The general ledger A) is the book of original entry. C) must be on loose leaf paper.

72)

B) is completed before the general journal. D) is the book of final entry.

73) Which of the following accounts would be credited in a proper journal entry? A) Capital when it is decreased B) Cash when it is increased C) Accounts Receivable when it is increased D) Accounts Payable when it is increased

73)

74) When recording a transaction in a journal, the account listed first is generally the A) credit. B) increase. C) decrease. D) debit.

74)

75) During the month of June, Charles Green invested $5,000 in starting his company, Green Lawn Service. The proper journal entry would be 5,000 A) Cash Charles Green, Capital 5,000 5,000 B) Lawn Service Fees Cash 5,000 5,000 C) Charles Green, Capital Cash 5,000 5,000 D) Cash Lawn Service Fees 5,000

75)

76) 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) $300 B) $600 C) $150 D) $200

76)

77) If Cash has been debited, it is likely that A) the business borrowed cash from the bank. B) the owner made an investment. C) a customer made a payment. D) All of these are possible.

77)

78) If Capital has been credited, it is likely that A) the owner made an investment. B) services were provided to a cash customer. C) services were provided to a charge customer. D) All of these are possible.

78)

79) Which of the following entries records the acquisition of office supplies for cash? 4,000 A) Equipment Accounts Payable 4,000 4,000 B) Office Supplies Cash 4,000 4,000 C) Equipment Accounts Receivable 4,000 4,000 D) Office Supplies Accounts Payable 4,000

79)

80) A journal entry affecting three or more accounts is called a A) multi-step entry. B) compound entry. C) multi-level entry. D) simple entry.

80)

81) The normal accounting procedures that are performed over a period of time are called the A) accounting cycle. B) natural business year. C) fiscal year. D) calendar year.

81)

82) The posting reference column in the journal is used for A) recording the source documents identification number. B) recording the initials of the person who did the posting. C) recording the account number to which the entry was posted. D) recording the time when the entry was posted.

82)

83) The general journal A) contains account balances. C) is the book of final entry.

B) is completed after the general ledger. D) is the book of original entry.

83)

84) If you credit Prepaid Insurance, you most likely will A) debit Cash. C) debit Fees Earned.

B) debit Office Supplies. D) debit Insurance Expense.

85) A debit to the Withdrawals account was posted to an expense account. This would cause A) withdrawals to be understated. B) liabilities to be understated. C) assets to be overstated. D) expenses to be understated.

84)

85)

86) 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 850 850 A) Cash B) Cash Accounts Receivable 850 Catering Service Fees 850 C) Accounts Receivable Cash Catering Service Fees

850

D) Cash Accounts Receivable Catering Service Fees

425 425

86)

850

87) 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 1,400 A) Supplies Cash 800 Accounts Payable 600 Cash 800 B) Accounts Receivable 800 600 C) Accounts Payable Cash 800 Equipment 1,400 Equipment 1,400 D) Accounts Payable 600 Cash 800

87)

88) The trial balance A) ensures that debits equal credits. B) includes assets, liabilities, capital, withdrawals, revenues and expenses. C) includes all accounts with a balance in the ledger. D) All of the above are correct.

88)

89) B. Flat, CPA, collected fees of $650 not previously billed or recorded. The journal entry to record the collection would include A) debit Accounting Fees, $650; credit Accounting Fees, $650. B) debit Accounts Receivable, $650; credit Accounting Fees, $650. C) debit Cash, $650, credit Accounts Receivable, $650. D) debit Cash, $650; credit Accounting Fees, $650.

89)

90) If Fees Earned has been credited, it is most likely that A) the owner made an investment. B) services were provided. C) a correcting entry for the overstatement of revenue was recorded. D) All of these are possible.

90)

91) The journal entry to record an exchange of assets would include A) a debit to Fees Earned and a credit to Accounts Receivable. B) a debit to Cash and a credit to Accounts Receivable. C) a debit to Supplies and a credit to Accounts Payable. D) a debit to Cash and a credit to Fees Earned.

91)

92) 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) divisible by 7. B) equal to the amount of one of the journal entries when the difference is divided by two. C) 10, 100, etc. D) equal to the amount of one of the journal entries.

92)

93) Which of the following accounts would be debited in a proper journal entry? A) Capital when it is increased B) Cash when it is decreased C) Accounts Receivable when it is increased D) Accounts Payable when it is increased

93)

94) 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 Expense, debit; Wages Payable, credit B) Wages Expense, debit; Cash, credit C) Cash, debit; Wages Expense, credit D) Wages Payable, debit; Wages Expense, credit

94)

95) Proof that the dollar amount of the debits equals the dollar amount of the credits in the ledger means A) only that the debit dollar amounts equal the credit dollar amounts. B) all accounts have their correct balances in the ledger. C) only the ledger is accurate; the journal may be incorrect. D) all of the information from the journal was correctly transferred to the ledger.

95)

96) If Rent Expense has been debited, it is likely that A) the rent is past due. C) a copy of the lease was received.

96)

B) this month's rent was paid. D) All of these are possible.

97) The final step of posting is A) recording the account number in the PR column of the journal. B) calculating the balance of the account. C) listing the date in the journal. D) recording the account number in the PR column of the ledger.

97)

98) On July 1, Hill's Construction paid six months' insurance in advance. The journal entry to record this transaction is A) Debit Cash; Credit Insurance Expense. B) Debit Cash; Credit Prepaid Insurance. C) Debit Prepaid Insurance; Credit Cash. D) Debit Insurance Liability; Credit Cash.

98)

99) The general journal entry to record the purchase of an asset on account would include A) a debit to Accounts Payable and a credit to Equipment. B) a debit to Supplies and a credit to Cash. C) a debit to Equipment and a credit to Accounts Payable. D) a debit to Accounts Receivable and a credit to Fees Earned.

99)

100) To find an explanation for a transaction, look in the A) balance sheet. B) journal.

100)

C) ledger.

D) trial balance.

101) 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 payment was made on account. C) a purchase was made on account. D) None of these are possible.

101)

102) 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 payment of utilities expense was recorded as a debit to Rent Expense for $87 and a credit to Cash for $87. C) The collection of an account was not recorded. D) The payment of an account payable for $100 was recorded as a debit to Cash, $100, and a credit to Accounts Payable, $100.

102)

103) 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.

103)

104) Which of the following accounts would be credited in a proper journal entry? A) Service Fees when it is increased B) Cash when it is increased C) Accounts Payable when it is decreased D) Capital when it is decreased

104)

105) To correct an error made in the journal (prior to posting in the ledger), A) erase the error and write the correct entry. B) ignore the error, it will correct itself in the next accounting period. C) write a new journal entry correcting the original entry. D) line out the incorrect portion of the entry and write in the correction.

105)

106) The journal entry to record an investment by the owner would most commonly include A) a debit to Cash and a credit to Capital. B) a debit to Capital and a credit to Cash. C) a debit to Cash and a credit to Fees Earned. D) a debit to Fees Earned and a credit to Capital.

106)

107) 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) Accounts Payable debit; Cash credit. B) Advertising Expense debit; Cash credit. C) Advertising Expense debit; Accounts Payable credit. D) A journal entry is not made in November.

107)

108) The journal entry to record a withdrawal by the owner would most commonly include A) a debit to Capital and a credit to Cash. B) a debit to Withdrawals and a credit to Cash. C) a debit to Cash and a credit to Wage Expense. D) a debit to Wage Expense and a credit to Cash.

108)

109) The entry to record delivering a financial lecture and collecting payment from the customer at a later date would be 750 750 A) Cash B) Cash Accounts Receivable750 Lecture Fees 750 750 750 C) Lecture Fees D) Accounts Receivable Accounts Receivable750 Lecture Fees 750

109)

110) Which of the following entries records the owner taking cash for personal use? A) Capital, debit; Cash, credit. B) Wage Expense, debit; Cash, credit. C) No entry is necessary since the owner owns the cash and the entire business. D) Withdrawals, debit; Cash, credit.

110)

111) BNL completed a performance and billed the customer $10,000 not previously billed or recorded. The journal entry to record the invoicing would be 10,000 10,000 A) Accounts Receivable B) Performance Fees Cash 10,000 Accounts Receivable 10,000 10,000 10,000 C) Accounts Receivable D) Cash Performance Fees 10,000 Performance Fees 10,000

111)

112) When the telephone bill for this period is paid, A) Telephone Expense is debited and Cash is credited. B) Telephone Expense is debited and Accounts Payable is credited. C) Telephone Expense is credited and Cash is debited. D) Accounts Payable is credited and Telephone Expense is debited.

112)

113) A credit to a liability account was posted to an owner's equity account. This would cause A) liabilities to be understated. B) net income to be overstated. C) owner's equity to be understated. D) assets to be overstated.

113)

114) The journal entry crediting Cash and debiting the Withdrawals account would be a result of a(n) A) business expense. B) business revenue. C) owner's investment. D) owner's withdrawal.

114)

115) Insurance paid in advance is called a(n) A) liability. B) asset.

115)

C) revenue.

D) expense.

116) A fiscal year is A) any 12-month period that a business chooses for its accounting year. B) the period for when an interim financial statement would be completed. C) the 12-month period beginning with January. D) All of these answers are correct.

116)

117) The journal entry crediting Cash and debiting Salaries would be a result of a(n) A) withdrawal. B) expense. C) investment. D) revenue.

117)

118) The journal entry debiting Cash and crediting Capital would be a result of a(n) A) withdrawal. B) expense. C) investment. D) revenue.

118)

119) If Accounts Payable has been debited, it is most likely that A) a payment was made on account. B) a customer made a payment. C) a purchase was made on account. D) None of these are possible.

119)

120) Which of the following entries would record the payment of a utility bill? A) Utilities Expense, debit; Accounts Payable, credit. B) Cash, debit; Utilities Expense, credit. C) Accounts Payable, debit; Utilities Expense, credit. D) Utilities Expense, debit; Cash, credit.

120)

121) If the business records a number as 176 and it should be 1.76, this error would be called A) a slide. B) a rearrangement. C) a transposition. D) None of the above

121)

122) Using a natural business year allows the business to count its year-end inventory when A) it is busiest. B) it is easiest. C) business activity is at a high point. D) the calendar year ends.

122)

123) Bexon Machining purchased a CNC Mill for $100,000. It made a down payment of $25,000 with the remainder on account. The journal entry to record this transaction is 75,000 A) Accounts Payable Cash 25,000 Equipment 100,000 100,000 B) Equipment Cash 75,000 Accounts Payable 25,000 25,000 C) Cash Accounts Receivable 75,000 100,000 D) Equipment Accounts Payable 75,000 Cash 25,000

123)

124) An example of a transposition error is A) debit to Rent Expense instead of a debit to Prepaid Rent for $200. B) debit to Equipment for $1,200 instead of $1,000. C) debit to Telephone Expense for $250 instead of $520. D) debit to Accounts Receivable for $2,000 instead of $200.

124)

125) 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.

125)

126) The general journal does not have a column titled A) Balance. C) Date.

126)

B) Account Titles & Descriptions. D) Dr. and Cr.

127) 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 Cash, $1,800; credit Service Fees, $1,800. B) debit Service Fees, $1,800; credit Cash, $1,800. C) debit Service Fees, $200; credit Cash, $200. D) debit Service Fees, $2,800; credit Cash, $2,000.

127)

128) 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) revenue to be understated. D) withdrawals to be overstated.

128)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 129) The time period for which an income statement is prepared is called the accounting period.

129)

130) A running balance is the total in the account from last period.

130)

131) The trial balance clearly shows if there were any additional investments made by the owner during the period.

131)

132) A fiscal year can be different than a calendar year.

132)

133) The credit is indented in a journal entry.

133)

134) A slide error results in a difference that is evenly divisible by the number 9.

134)

135) A trial balance would detect the following error: An entry made twice.

135)

136) Interim statements are statements that are usually prepared for a portion of the business' fiscal year.

136)

137) If your trial balance does not balance, it is best to ignore the issue and continue creating the financial statements.

137)

138) Posting is the step in the accounting cycle where errors are most likely to happen.

138)

139) 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.

139)

140) Accountants often use a three-column account in the general ledger that includes a column for each account's running balance.

140)

141) A transposition is an error that results when zeros have been added or deleted when writing an amount. 141) Example: 20,000 is written as 2,000. 142) A three-column account typically includes an empty column just for notes.

142)

143) If information is journalized or posted incorrectly, the trial balance will still be correct.

143)

144) The PR column of the journal should be completed as soon as the journal entry is written.

144)

145) A journal is considered to be a book of final entry.

145)

146) The debit is indented in a journal entry.

146)

147) Liabilities increase on the credit side of the account and decrease on the debit side.

147)

148) The trial balance proves the equality of debits and credits.

148)

149) A trial balance would detect the following error: An entry not posted.

149)

150) A running balance is maintained in the ledger after each transaction is posted.

150)

151) If the trial balance is in balance, it proves that all transactions were properly recorded.

151)

152) The process of transferring the data from the journal to the ledger accounts is called posting.

152)

153) The credit part of the transaction is recorded first in the journal entry.

153)

154) If the trial balance is not in balance and you have checked all of your work, it is time to take a break and try again from the beginning or have someone else check your work.

154)

155) The chart of accounts contains the same information as the journal.

155)

156) A trial balance would detect the following error: An entry made to the wrong account.

156)

157) The capital figure on the trial balance may not be the beginning capital figure.

157)

158) The trial balance listing is in the same order as the chart of accounts.

158)

159) 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.

159)

160) If the trial balance doesn't balance, it is time to panic.

160)

161) A trial balance contains identical information to the chart of accounts.

161)

162) If information is journalized to the wrong accounts, the trial balance will still balance.

162)

163) Omitting to post a transaction will cause the trial balance totals to be unequal.

163)

164) It is good practice to fill out the posting reference column immediately when you create the journal.

164)

165) A ledger is called the book of final entry.

165)

166) A calendar year is any twelve-month period.

166) 16

167) Posting is the process of entering amounts in the ledger.

167)

168) A company would review the chart of accounts if an account balance was needed.

168)

169) Revenue is recorded only once the payment is received.

169)

170) The time period for which an income statement is prepared must always be a calendar year.

170)

171) 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.

171)

172) A fiscal year is always January 1 through December 31.

172)

173) The debit part of the transaction is recorded first in the journal entry.

173)

174) A fiscal year runs for any 12 consecutive months.

174)

175) The accountant may use any account titles they like when journalizing, even if they are not included in the chart of accounts.

175)

176) A running balance is maintained in the general journal after each transaction is entered.

176)

177) Posting is the first step in recording transactions.

177)

178) Mistakes found during the trial balance process must be corrected before creating the financial statements.

178)

179) All companies must use the same standardized chart of accounts.

179)

180) A business's fiscal year that ends at the same time as a slow seasonal period begins is the natural business year.

180)

181) Revenue is recorded when earned.

181)

182) The total dollar amount of the debits must be equal to the total dollar amount of the credits for each transaction.

182)

183) The first step of completing the journal is to fill in the post reference column.

183)

184) An addition error could cause the total debit and total credit columns on the trial balance to show a difference of 100.

184)

185) A company would review the ledger if an account balance was needed.

185)

186) Rent paid in advance is a liability.

186)

187) Posting is the process of transferring information from the journal to the trial balance.

187)

188) 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.

188)

189) 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.

189)

190) Transactions are listed in chronological order in the journal.

190)

191) To record rent paid in advance, Prepaid Rent would be debited.

191)

192) Recording the account number from the ledger in the posting reference column of the journal is called cross-referencing.

192)

193) A trial balance is only a list of the accounts and account numbers.

193)

194) Mistakes found during the trial balance process can never be corrected.

194)

195) Correctly posting a transaction twice will cause the trial balance totals to be unequal.

195)

196) The accountant should check the chart of accounts to see what account titles should be used when journalizing.

196)

197) Posting is the transferring of information from the ledger to the chart of accounts.

197)

198) When the total debits equal the total credits on the trial balance, this is proof that all transactions have been recorded properly.

198)

199) Revenue can be recorded when paid or when completed, whichever is easiest.

199)

200) A fiscal year must be different than a calendar year.

200)

201) Interim reports are usually prepared once a year.

201)

202) A compound journal entry affects only two accounts in the transaction.

202)

203) A natural business year is always the same as a calendar year.

203)

204) A company would review the general journal if an account balance was needed.

204)

205) A compound journal entry affects more than two accounts in the transaction.

205)

206) The same information is contained in the journal and the ledger but in a different form.

206)

207) Posting references are an unnecessary step.

207)

208) A chart of accounts is a list of the accounts and their balances.

208)

209) Posting references are used on the Income Statement.

209)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 210) 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:

________

Provide an explanation for this entry:

________

Page of Journal:

________

Account number for Cash:

________

Account number for Capital:

________

Debit 14,000

Page 1 Credit 14,000

211) What are interim financial statements? 212) 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, 20XX

Cash Accounts Receivable Equipment Accounts Payable K. Gudas, Capital K. Gudas, Withdrawals Service Fees Rent Expense Salaries Expense Totals

Debit 1,200 2,000 700 100 1,000 200 600 5,700

Credit 600

3,000

3,700

213) 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.

214) 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:

________

215) 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 July 12 25 Blake withdrew cash for personal use, $1,000.

216) Complete the following questions based on the journal entry below: GENERAL JOURNAL Date Acct. Titles and Description July 1 Rent Expense Prepaid Rent

PR 525 125

Date of Journal entry:

________

Name of account debited

________

Name of account credited:

________

Provide an explanation for this entry:

________

Page of Journal:

________

Account number for Rent Expense:

________

Account number for Prepaid Rent:

________

Debit 1,000

Page 22 Credit 1,000

217) All nine transactions for Ross Realty for June 20XX, the first month of operation, are recorded in the following T accounts: Cash (1) 30,000 (3) 7,500 (7) 4,900 (5) 2,000 (9) 3,700 (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.

218) 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

Debit 50,000

PAGE 1 Credit 50,000

5 Equipment Cash Accounts Payable Purchased equipment

7,000 4,000 3,000

Account 111 Explanation

Debit

Credit

Dr/Cr

Balance

Equipment Date Explanation

Account 121 PR

Debit

Credit

Dr/Cr

Balance

Accounts Payable Date Explanation

Account 211 PR

Debit

Credit

Dr/Cr

Balance

Rosemary Vopp, Capital Date Explanation

Account 311 PR

Debit

Credit

Dr/Cr

Balance

219) Discuss the concept of cross-referencing. Include in your discussion the benefits provided by cross-referencing. 220) 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. 221) 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. 222) 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

Debit 41,000

PAGE 1 Credit 41,000

5 Equipment Cash Accounts Payable Purchased equipment

5,000 2,000 3,000

Account 111 Explanation

Debit

Credit

Dr/Cr

Balance

Equipment Date Explanation

Account 121 PR

Debit

Credit

Dr/Cr

Balance

Accounts Payable Date Explanation

Account 211 PR

Debit

Credit

Dr/Cr

Balance

Lanny, Capital Date Explanation

Account 311 PR

Debit

Credit

Dr/Cr

Balance

223) 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:

________

Provide an explanation for this entry:

________

Page of Journal:

________

Account number for Prepaid Rent:

________

Account number for Cash:

________

PR 125 110

224) Explain why posting references are helpful.

Debit 12,000

Page 17 Credit 12,000

225) 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

Cash Date May

8,000

9 Accounts Payable Cash Paid amount due

Explanation Opening Balance

Debit 8,000

Page 5 Credit

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

226) Define and discuss a calendar year, accounting period, and fiscal year.

227) 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: ________

228) 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. 229) 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, 20XX

Cash Salaries Expense Rent Expense Accounts Receivable Equipment K. Carlson, Capital K. Carlson, Withdrawals Service Fees Accounts Payable Totals

Debit 500

2,000 2,300 100 1,000 _____ 5,900

Credit 600 200 600

700 2,100

230) All ten transactions for Bexon Consulting for August 20XX, the first month of operation, are recorded in the following T accounts: Cash (1) 20,000 (3) 4,500 (7) 6,800 (5) 5,000 (9) 1,800 (6) 2,500 (10) 1,500 (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.

231) 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.

232) 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. (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.

233) 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:

________

Debit 28,000

Page 52 Credit 28,000

Account number for Accounts Receivable: ________ Account number for Dog Walking Revenue: ________

234) Journalize the following transactions that occurred during September. Omit explanations. Sep. 5S. 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. 235) 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

236) 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?

237) 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

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

Service Fees Revenue Date Explanation

Account 411 PR Debit

Credit

Dr/Cr

Balance

238) 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

239) Describe the difference in information contained in the general journal vs. the general ledger.

240) 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. 241) 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, 20XX

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

242) 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

Answer Key Testname: CHAPTER 3 1) D 2) C 3) C 4) C 5) A 6) C 7) B 8) A 9) C 10) B 11) B 12) D 13) A 14) C 15) C 16) A 17) B 18) D 19) A 20) A 21) C 22) C 23) B 24) A 25) A 26) B 27) A 28) D 29) C 30) B 31) A 32) A 33) A 34) A 35) A 36) B 37) D 38) D 39) C 40) D 41) D 42) B 43) A 44) B 45) D 46) B 47) A 48) A 49) A 50) D 30

Answer Key Testname: CHAPTER 3 51) B 52) A 53) A 54) A 55) B 56) D 57) D 58) D 59) D 60) D 61) C 62) A 63) B 64) C 65) B 66) C 67) B 68) A 69) D 70) A 71) D 72) D 73) D 74) D 75) A 76) B 77) D 78) A 79) B 80) B 81) A 82) C 83) D 84) D 85) A 86) D 87) D 88) D 89) D 90) B 91) B 92) A 93) C 94) C 95) A 96) B 97) A 98) C 99) C 100) B 31

Answer Key Testname: CHAPTER 3 101) C 102) A 103) D 104) A 105) D 106) A 107) A 108) B 109) D 110) D 111) C 112) A 113) A 114) D 115) B 116) A 117) B 118) C 119) A 120) D 121) A 122) B 123) D 124) C 125) A 126) A 127) B 128) C 129) TRUE 130) FALSE 131) FALSE 132) TRUE 133) TRUE 134) TRUE 135) FALSE 136) TRUE 137) FALSE 138) TRUE 139) FALSE 140) TRUE 141) FALSE 142) FALSE 143) FALSE 144) FALSE 145) FALSE 146) FALSE 147) TRUE 148) TRUE 149) FALSE 150) TRUE 32

Answer Key Testname: CHAPTER 3 151) FALSE 152) TRUE 153) FALSE 154) TRUE 155) FALSE 156) FALSE 157) TRUE 158) TRUE 159) TRUE 160) FALSE 161) FALSE 162) TRUE 163) FALSE 164) FALSE 165) TRUE 166) FALSE 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) TRUE 182) TRUE 183) FALSE 184) TRUE 185) TRUE 186) FALSE 187) FALSE 188) FALSE 189) FALSE 190) TRUE 191) TRUE 192) TRUE 193) FALSE 194) FALSE 195) FALSE 196) TRUE 197) FALSE 198) FALSE 199) FALSE 200) FALSE 33

Answer Key Testname: CHAPTER 3 201) FALSE 202) FALSE 203) FALSE 204) FALSE 205) TRUE 206) TRUE 207) FALSE 208) FALSE 209) FALSE 210) May 1 Cash Capital Owner's cash investment Page 1 110 300 211) 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. Gudas Com Company 212) Trial Balance April 30, 20XX Debit 1,200 600 2,000

Cash Accounts Receivable Equipment Accounts Payable K. Gudas, Capital K. Gudas, Withdrawals 100 Service Fees Rent Expense 200 Salaries Expense 600 Totals 4,700 Equipment 20,000 213) Apr 7 Cash Accounts Payable 12 Rent Expense 1,000 Cash 17 Accounts Payable 5,000 Cash 23 Utilities Expense 250 Accounts Payable 214) Debit Credit Debit Credit Credit Debit

Credit

700 3,000 1,000

4,700

5,000 15,000 1,000 5,000 250

Answer Key Testname: CHAPTER 3 215) July 2 Cash 5,000 Equipment 2,000 Blake, Capital 12 Accounts Receivable 800 Service Fees 16 Equipment 900 Accounts Payable 20 Cash 400 Accounts Receivable 25 Withdrawals, Blake 1,000 Cash 216) July 1 Rent Expense Prepaid Rent Record one month of rent incurred. Page 22 525 125 Ross Realty 217) Trial Balance June 30, 20XX Debit Cash 22,600 Accounts Receivable 400 Equipment 22,500 Supplies 7,500 Accounts Payable Ross, Capital Ross, Withdrawals 2,000 Fees Earned Operating Expense 4,500 Totals 59,500

7,000 800 900 400 1,000

Credit

20,500 30,000 9,000 59,500

Answer Key Testname: CHAPTER 3 218) 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

219) 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. 220) (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. 221) (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.

Answer Key Testname: CHAPTER 3 222) Cash Date April

Explanation 1 5

Account 111 PR Debit GJ1 41,000 GJ1

Credit

Dr/Cr Dr Dr

Balance 41,000 39,000

Credit

Dr/Cr Dr

Balance 5,000

2,000

Equipment Date Explanation April 5

Account 121 PR Debit GJ1 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

223) June 1 Prepaid Rent Cash Paid one year of rent in advance. Page 17 125 110 224) Posting references are very helpful. The PR column in the journal tells us if the transactions have been posted and to which accounts. The posting references in the ledger tell us which page the original transaction came from in the journal so we can trace back to the original transaction and see why the debit or credit was recorded and which other accounts were affected. 225) Cash Account 110 Date Explanation PR Debit Credit Dr/Cr Balance May Opening Balance 10,000 Dr 10,000 Jun 9 GJ5 2,500 Cr 7,500 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

GJ5

Credit

Dr/Cr Dr

Balance 8,000

Credit 2,500

Dr/Cr Cr Cr

Balance 2,500 0

Credit 8,000

Dr/Cr Cr

Balance 8,000

2,500

Answer Key Testname: CHAPTER 3 226) 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. 227) Credit Credit Debit Credit Debit Debit 228) (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. Home Town Cleaning Company 229) Trial Balance March 31, 20XX Debit Cash 500 Accounts Receivable 600 Equipment 2,000 Accounts Payable K. Carlson, Capital K. Carlson, Withdrawals 100 Service Fees Rent Expense 200 Salaries Expense 600 Totals 4,000 Blake Bexon Consulting 230) Trial Balance August 31, 20XX Debit Cash 15,100 Accounts Receivable 1,700 Equipment 18,500 Supplies 4,500 Accounts Payable Bexon, Capital Bexon, Withdrawals 3,000 Fees Earned Operating Expense 2,500 Totals 45,300

Credit

700 2,300 1,000

4,000

Credit

13,500 20,000 11,800 45,300

Answer Key Testname: CHAPTER 3 231) November 4 Cash Equipment Furniture Amelia, Capital 9 Prepaid Insurance Cash 21 Accounts Receivable Service Revenue 23 Utilities Expense Accounts Payable 31 Insurance Expense Prepaid Insurance 232) Item Transaction (a) Accounts Receivable Fees Earned

10,000 15,000 5,000

30,000

600

1,500

150

200 PR

200 Debit 8,000

(b)

Equipment Cash Accounts Payable

45,000

(c)

Rent Expense Cash

3,000

(d)

Supplies Accounts Payable

2,500

(e)

Cash Allen, Capital

2,000

(f)

Accounts Receivable Fees Earned

7,000

(g)

Accounts Payable Cash

1,200

(h)

Wages Expense Cash

6,250

(i)

Cash Accounts Receivable

7,150

(j)

Allen, Withdrawal Cash

1,750

Credit 8,000

20,000 25,000

3,000

2,500

2,000

7,000

1,200

6,250

7,150

1,750

Answer Key Testname: CHAPTER 3 233) Apr 7 Accounts Receivable Dog Walking Revenue Sold dog walking services on account. Page 52 125 411 Cash 4,000 234) Sep. 5 Equipment 100 S. Richman, Capital 4,100 10 Prepaid Rent 1,500 Cash 1,500 23 Equipment 2,000 Accounts Payable 2,000 24 Accts. Receivable 1,000 Fees Earned 1,000 235) October 2 Cash 6,000 Capital 6,000 8 Supplies 100 Accounts Payable 100 10 Salaries Expense 700 Cash 700 15 Accounts Payable 100 Cash 100 21 Telephone Expense 50 Accounts Payable 50 236) 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. 237) Cash Account 111 Date Explanation PR Debit Credit Dr/Cr Balance May 5 GJ1 3,000 Cr 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 14,000

Credit

Dr/Cr Cr

Balance 14,000

Answer Key Testname: CHAPTER 3 238) 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 19,500 239) 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. Supplies 800 240) Apr 7 Accounts Payable 800 12 Salaries Expense 400 Cash 400 17 Accounts Payable 800 Cash 800 23 Telephone Expense 150 Accounts Payable 150 Danielson Online Company 241) Trial Balance March 31, 20XX Cash 2,210 Accounts Receivable 40 Equipment 2,250 Accounts Payable 2,000 Danielson, Capital 1,800 Danielson, Withdrawals 900 Service Fees 2,050 Rent Expense 250 Salaries Expense 200 Totals 5,850 242) (a) Paid rent in advance (b) Bought Supplies on account (c) Owner investment in the company (d) Owner withdrawal (e) Made payment on account

5,850

Exam

Chapter 4

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following would be an example of a contra-asset? A) Residual Value B) Accumulated Depreciation C) Supplies D) Depreciation Expense

2) What type of account is Accrued Salaries? A) Expense B) Liability

C) Asset

D) Owner's equity

3) 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 assets and increases the total expenses. B) decreases the total liabilities and increases the total expenses. C) decreases the total assets and increases the total expenses. D) increases the total liabilities and increases the total expenses.

4) Which of the following is prepared last? A) Worksheet C) Statement of owner's equity

B) Income statement D) Balance sheet

5) When Income Statement credits exceed the debits on the worksheet, A) a net loss has occurred. B) an error has been made. C) a net income has occurred. D) Not enough information has been provided.

6) Regarding the adjusted trial balance columns on a worksheet, all but one of the following statements are TRUE. A) Two credits on a line are added together. B) The adjusted trial balance columns result from a combination of original amounts and adjustments. C) Combining a debit and a credit amount means you place the resulting total on the side which is smallest. D) Two debits on a line are added together.

7) Not recording the Prepaid Rent used causes A) revenue to be too high. C) expenses to be too high.

B) assets to be too high. D) assets to be too low.

8) Which of the following transactions would result in an accrual? A) Salary expense has been incurred but unpaid B) Supplies used during the accounting period C) Rent expired for the month D) Equipment depreciated over the period

9) As accumulated depreciation is recorded, the book value A) decreases. B) increases. C) remains the same. D) is closed out.

10) Which of the financial statements is prepared first from the worksheet? A) Balance sheet B) Statement of owner's equity C) Income statement D) None of these answers are correct.

10)

11) The depreciation of equipment will require an adjustment that results in A) total assets decreasing and total expenses increasing. B) total assets and expenses decreasing. C) total assets increasing and total expenses decreasing. D) total assets increasing and total expenses increasing.

11)

12) Accumulated Depreciation is found on which of the following financial statements? A) Statement of Owner's Equity B) Balance sheet C) Income statement D) All of these answers are correct.

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 Building for $400. B) a debit to Depreciation Expense for $400. C) a credit to Depreciation Expense for $400. D) a debit to Accumulated Depreciation for $400.

13)

14) 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) extend the totals to the Income Statement and Balance Sheet columns, prepare the trial balance, complete the adjustments, prepare the adjusted trial balance. 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) prepare the trial balance, complete adjustments, prepare the adjusted trial balance, extend the respective totals to the Income Statement and Balance Sheet columns.

14)

15) The adjusting entry to record the expired rent would be to A) debit Prepaid Rent; credit Cash. B) debit Rent Expense; credit Prepaid Rent. C) debit Prepaid Rent; credit Rent Expense. D) debit Cash; credit Prepaid Rent.

15)

16) An adjustment for Prepaid Rent would indicate A) the amount expired. C) the amount of the trial balance.

16)

B) the amount on hand. D) the amount originally paid.

17) The adjustment for wages earned, but not yet paid is A) Debit Wages Expense, credit Accrued Wages. B) Debit Wages Expense, credit Cash. C) Debit Accrued Wages, credit Wages Expense. D) Debit Accrued Wages, credit Cash.

17)

18) 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 1,100 A) Office Supplies Expense Office Supplies 1,100 1,100 B) Office Supplies Office Supplies Expense 1,100 300 C) Office Supplies Expense Office Supplies 300 300 D) Office Supplies Office Supplies Expense 300

18)

19) 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 Cash B) Debit Accounts Payable; credit Telephone Expense C) Debit Accounts Payable; credit Cash D) Debit Telephone Expense; credit Accounts Payable

19)

20) Equipment with a cost of $150,000 has an accumulated depreciation of $50,000. What is the book value of the equipment? A) $200,000 B) $100,000 C) $50,000 D) $150,000

20)

21) 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's revenues were greater than expenses. B) The company had a net loss of $200. C) The company had a net income of $200. D) None of the above are correct.

21)

22) 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? 200 A) Salaries Expense Accrued Salaries 200 100 B) Accrued Salaries Salaries Expense 100 500 C) Accrued Salaries Cash 500 300 D) Salaries Expense Cash 300

22)

23) LC Machining has one year of prepaid rent equal to $2,400. The adjusting journal entry for the month is 2,400 A) Rent Expense Prepaid Rent 2,400 200 B) Rent Expense Prepaid Rent 200 2,400 C) Prepaid Rent Rent Expense 2,400 200 D) Prepaid Rent Rent Expense 200

23)

24) Adjusting the supplies on hand account will A) decrease the total assets and increase the total expenses. B) decrease the total assets and decrease the total expenses. C) increase the total assets and decrease the total expenses. D) increase the total assets and increase the total expenses.

24)

25) The ending figure for capital, used on the balance sheet, will be obtained from A) credit column of the income statement. B) the statement of owner's equity. C) balance sheet debit column of the worksheet. D) balance sheet credit column of the worksheet.

25)

26) The beginning capital balance used on the Statement of Owner's Equity is best obtained from A) the worksheet in the income statement credit column. B) the worksheet in the balance sheet credit column. C) the general ledger. D) the amount calculated on the statement of owner's equity.

26)

27) These entries are prepared and posted to the ledger in order to update the ledger accounts before the next accounting period. A) Adjusting entries B) General journal C) Journalizing D) Trial balance

27)

28) 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 understated. C) assets will be understated and expenses will be overstated. D) assets will be overstated and expenses will be understated.

28)

29) Sarah's Spices' accrued wages are $1,700. Which of the following is the required adjusting entry? A) Debit Salaries Expense, $1,700; credit Accrued Salaries, $1,700 B) Debit Cash, $1,700; credit Salaries Expense, $1,700 C) Credit Salaries Expense, $1,700; debit Accrued Salaries, $1,700 D) Debit Accrued Salaries, $1,700; credit Cash, $1,700

29)

30) 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 $350. C) a debit to Supplies Expense for $350. D) a credit to Supplies Expense for $100.

30)

31) The adjustment for depreciation was credited to Equipment and debited to Depreciation Expense. This would A) overstate the assets. B) overstate net income. C) understate the assets. D) None of these are correct.

31)

32) When historical cost is used to record equipment, it would appear as the A) residual value on the balance sheet. B) market value on the balance sheet. C) original cost on the balance sheet. D) original cost on the income statement.

32)

33) 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 100 A) Accumulated Depreciation Equipment 100 100 B) Depreciation Expense Accumulated Depreciation 100 100 C) Depreciation Expense Equipment 100 100 D) Accumulated Depreciation Depreciation Expense 100

33)

34) A contra-asset is A) a liability with a debit balance. B) an account that decreases the asset value. C) an account with the same balance of a normal asset. D) an asset with a debit balance.

34)

35) 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) $700 debit. B) $100 debit. C) $700 credit. D) $100 credit.

35)

36) Adjusting journal entries A) are recorded before finishing the worksheet. B) bring accounts up to date. C) are not recorded in the ledger. D) close the ledger.

36)

37) 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 Expense for $600. B) a debit to Store Supplies for $1,100. C) a debit to Store Supplies Expense for $1,100. D) a credit to Store Supplies Expense for $600.

37)

38) If the balance of supplies on hand account at the end of the period was $900 and you counted $100 on hand, the amount for the adjustment for Supplies expense would be A) $900. B) $100. C) $800. D) $300.

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) $550. D) $300.

39)

40) As Prepaid Rent is used, the asset becomes a(n) A) expense. B) contra-asset.

40)

C) revenue.

D) liability.

41) Which of the following will have a direct effect on the income statement? A) Withdrawing money from the business B) Selling goods on account C) Receiving money on account D) Buying an automobile on account

41)

42) Liam's Skate Sharpening estimated depreciation for office equipment at $200. The adjusting entry would include A) a debit to Accumulated Depreciation for $200. B) a credit to Office Equipment for $200. C) a credit to Accumulated Depreciation for $200. D) a credit to Depreciation Expense for $200.

42)

43) 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) not used in Canadian accounting.

43)

44) The adjusting entry for accrued salaries is to A) debit Salaries Expense; credit Salaries Payable. B) debit Salaries Expense; credit Cash. C) debit Cash; credit Salaries Expense. D) debit Salaries Payable; credit Salaries Expense.

44)

45) On a worksheet, the income statement 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 net loss of $1,000. B) The company's revenues were greater than expenses. C) The company had a net income of $1,000. D) None of the above are correct.

45)

46) 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 Insurance Expense, $300. B) a debit to Prepaid Insurance, $300. C) a credit to Cash, $300. D) a credit to Insurance expense, $300.

46)

47) Benjamin's Lawn Service depreciation for the month is $800. The adjusting journal entry is 800 A) Depreciation Expense Accumulated Depreciation 800 Equipment 800 B) Accumulated Depreciation 800 800 C) Accumulated Depreciation Depreciation Expense 800 800 D) Depreciation Expense Equipment 800

47)

48) 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) $2,000. B) $1,000. C) $8,000. D) $4,000.

48)

49) If the adjustment for supplies used during the period was not made, A) revenue would be too low. B) expenses would be too high. C) assets would be too high. D) assets would be too low.

49)

50) If the adjustment for supplies used during the period was not made, A) assets would be too low. B) expenses would be too low. C) revenue would be too high. D) expenses would be too high.

50)

51) 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 200 A) Advertising Expense Prepaid Advertising 200 200 B) Advertising Expense Cash 200 200 C) Cash Prepaid Advertising 200 200 D) Prepaid Advertising Cash 200

51)

52) 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? 550 A) Depreciation Expense Accumulated Depreciation, Computer 550 550 B) Computer Depreciation Expense 550 550 C) Computer Accumulated Depreciation, Computer 550 550 D) Depreciation Expense Computer 550

52)

53) Adjusting entries affect A) the balance sheet. C) Neither of these answers is correct.

53)

B) the income statement. D) Both A and B are correct.

54) 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? 800 A) Salaries Expense Cash 800 400 B) Salaries Expense Accrued Salaries Payable 400 1,200 C) Salaries Expense Accrued Salaries Payable 1,200 600 D) Accrued Salaries Payable Salaries Expense 600

54)

55) Depreciation Expense would be found on which of the following financial statements? A) Owner's equity statement B) Income statement C) Interim Balance sheet D) Balance sheet

55)

56) The adjusted trial balance columns A) help to ensure the ledger is still in balance. B) show updated account balances to aid in preparation of the financial statements. C) help to identify any errors that may have been made during adjustment. D) All of the above are correct.

56)

57) Accumulated Depreciation is considered to be a(n) A) liability. B) asset.

57)

C) contra-asset.

D) revenue.

58) 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, $1,000. B) debit Rent Expense, $2,500. C) debit Rent Expense, $2,000. D) credit Prepaid Rent, $3,500.

58)

59) BC Tea Company's depreciation for the month is $150. The adjusting journal entry is 150 A) Depreciation Expense Depreciation Payable 150 150 B) Depreciation Expense Accumulated Depreciation 150 150 C) Depreciation Expense Equipment 150 150 D) Accumulated Depreciation Depreciation Expense 150

59)

60) Walter's Windows showed supplies available during the year of $1,700. If at the end of the period the supplies used were $600, the adjusting entry for store supplies expense would include A) a debit to Store Supplies Expense for $600. B) a debit to Store Supplies for $1,100. C) a credit to Store Supplies Expense for $600. D) a debit to Store Supplies Expense for $1,100.

60)

61) 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) $1,700 B) $700 C) $1,000 D) $300

61)

62) When historical cost is used in the accounting records, the book value of the asset is A) the original cost. B) original cost plus accumulated depreciation. C) the market value. D) original cost less accumulated depreciation.

62)

63) In the business world, financial statements are prepared from the A) trial balance. B) worksheet income statement and balance sheet columns. C) ledger. D) adjusted trial balance.

63)

64) Rent paid by your organization two months in advance is considered to be a(n) A) contra asset. B) revenue. C) liability. D) asset.

64)

65) 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) $108.33. B) $1,200. C) $1,300. D) $100.

65)

66) Equipment is considered to be a(n) A) liability. B) asset.

66)

C) contra-asset.

D) revenue.

67) A form used to organize and check data before preparing financial reports is known as a(n) A) worksheet. B) cash flow statement. C) income statement. D) balance sheet.

67)

68) 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

68)

69) Envy Automation has prepaid insurance on their truck for one year equal to $660. The adjusting journal entry for the month is 55 A) Insurance Expense Prepaid Insurance 55 660 B) Insurance Expense Prepaid Insurance 660 660 C) Prepaid Insurance Insurance Expense 660 55 D) Prepaid Insurance Insurance Expense 55

69)

70) Matt's Engineering purchased a truck for $60,000 with a residual value of $16,800 and a life expectancy of 8 years. Using straight-line depreciation, the amount of the depreciation adjustment for the first month would be A) $5,400. B) $625. C) $450. D) $7,500.

70)

71) After the adjustment for depreciation has been made, the original cost of the equipment A) decreases with a debit. B) increases with a credit. C) is adjusted to market value. D) remains the same.

71)

72) Depreciation of equipment was recorded twice this period. This would A) understate expenses and overstate assets. B) understate expenses and understate assets. C) overstate expenses and understate assets. D) overstate expenses and overstate assets.

72)

73) The adjustment for accrued wages included the entire pay period, some of which occurs next month. This would A) overstate net income. B) understate the liabilities. C) overstate the liabilities. D) None of these are correct.

73)

74) 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 debit Rent Expense, $24,000. B) a credit Prepaid Rent, $24,000. C) a credit Cash, $2,000. D) a debit Rent Expense, $2,000.

74)

75) After the adjustment for depreciation has been made, the original cost of the equipment A) increases with a credit. B) remains the same. C) decreases with a debit. D) None of these answers are correct.

75)

76) Mavis Company took inventory and recorded the consumption of supplies. How will this affect the balance sheet? A) Liabilities will be increased. B) Assets will be decreased. C) Owner's equity will be increased. D) This will have no effect on the period-end balance sheet.

76)

77) Which of the following is most likely to result in an adjusting entry at the end of the period? A) Owner's withdrawals B) Payment of one month's rent C) Payment of two months' insurance in advance D) Payment for routine maintenance on the company van

77)

78) If the balance of prepaid rent at the end of the period was $3,000, which represented the cost of three months' rent, and one month had passed, the amount for the adjustment for rent expense would be A) $2000. B) $3000. C) $0. D) $1000.

78)

79) Not recording the Prepaid Rent used causes A) expenses to be too low. C) revenue to be too low.

79)

B) expenses to be too high. D) assets to be too low.

80) Which of the following would cause a contra-asset to be credited and an expense debited? A) Recording the consumption of supplies B) Recording the building depreciation C) Recording an accrued expense D) All of the above would have that effect.

80)

81) An adjustment for Supplies Expense would indicate A) the amount used. C) the amount on hand.

81)

B) the amount of the trial balance. D) the amount originally paid.

82) Assuming that purchases of supplies were debited to the Supplies asset account when made, an adjustment for supplies would indicate A) the amount on hand. B) the amount on the trial balance. C) the amount used up. D) the amount bought.

82)

83) 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) $5,375. B) $2,125. C) $7,500. D) $2,687.

83)

84) 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 credit. B) $100 credit. C) $100 debit. D) $700 debit.

84)

85) Which of the following accounts would appear on the Income Statement? A) Equipment B) Depreciation Expense C) Cash D) Accumulated Depreciation

85)

86) Which of the following accounts would most likely NOT need to be adjusted at the end of the year? A) Accumulated Depreciation B) Cash C) Prepaid Rent D) Office Supplies

86)

87) Bringing account balances up to date before preparing financial reports is called A) posting. B) journalizing. C) adjusting. D) analyzing.

87)

88) 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) understated assets. C) overstated liabilities. D) understated capital.

88)

89) The adjustment that is made to allocate the cost of a building over its expected life is called A) residual value. B) depreciation. C) historical cost. D) None of these answers are correct.

89)

90) As Office Supplies are used, the asset becomes a(n) A) expense. B) contra-asset.

90)

C) revenue.

D) liability.

91) Withdrawals would most likely be found in which column of the worksheet? A) Adjustments B) Balance sheet C) Income statement D) Withdrawals would not appear on the worksheet.

91)

92) 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.

92)

93) Adjusting journal entries A) need not be posted if the financial statements are prepared from the worksheet. B) need not be journalized since they appear on the worksheet. C) are not needed if closing entries are prepared. D) must be journalized and posted.

93)

94) Which of the following would cause total assets to decrease and total expense to increase? A) Recording the expiration of prepaid rent B) Recording the consumption of supplies C) Recording the depreciation of equipment D) All of the above would have that effect.

94)

95) Sally's Flowers purchased a truck for $50,000 with a residual value of $22,400 and a life expectancy of 5 years. Using straight-line depreciation, the amount of the depreciation adjustment for the first year would be A) $5,520. B) $833. C) $460. D) $10,000.

95)

96) Office Supplies is considered to be a(n) A) liability. B) asset.

C) contra-asset.

D) revenue.

96)

97) 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 balance sheet credit column. C) the worksheet in the income statement debit column. D) the worksheet in the balance sheet debit column.

97)

98) Each adjustment affects A) the balance sheet. C) the cash account.

98)

B) the income statement. D) both A and B are correct.

99) The estimated value of an item at the end of its useful life is A) accumulated depreciation. B) depreciation expense. C) residual value. D) None of these answers are correct.

99)

100) 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 month would be A) $783. B) $6,000. C) $5,000. D) $500.

100)

101) The adjustment to record rent expense during the period would be A) debit Cash, credit Prepaid Rent. B) debit Prepaid Rent; credit Rent Expense. C) debit Rent Expense; credit Prepaid Rent. D) debit Cash, credit Rent Expense.

101)

102) The accrual of an expense was not recorded. This would A) understate expenses and understate liabilities. B) overstate expenses and understate liabilities. C) overstate expenses and overstate liabilities. D) understate expenses and overstate liabilities.

102)

103) All of the following are reasons to adjust the account balances at the end of the period EXCEPT A) to report all revenues earned during the period. B) to report all expenses incurred during the period. C) to correct any errors made during the period. D) to accurately report the assets on the balance sheet.

103)

104) Prepaid Rent is considered to be a(n) A) liability. B) asset.

104)

C) contra-asset.

D) revenue.

105) 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) $600 B) $800 C) $1,000 D) $200

105)

106) 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) adjusting entries. B) sales entries. C) closing entries. D) None of the above are correct.

106)

107) If Prepaid Rent for the period is not adjusted, A) assets will be understated and expenses will be understated. B) assets will be overstated and expenses will be overstated. C) assets will be understated and expenses will be overstated. D) assets will be overstated and expenses will be understated.

107)

108) Accountants use the worksheet to organize and complete adjustments for all but one of the following events: A) Revenue earned and recorded in the current period. B) Supplies on hand. C) Rent paid in advance. D) Depreciation on equipment.

108)

109) Residual value is the A) allocation of the cost. B) estimated value of the asset when it is purchased. C) estimated value of the asset at the end of its useful life. D) cost of the asset.

109)

110) If the balance of prepaid rent at the end of the period was $8,000, which represented the cost of four month's rent, and one month had passed, the amount for the adjustment for rent expense would be A) $1000. B) $2000. C) $8000. D) $4000.

110)

111) Adjusting journal entries are A) prepared from the worksheet, entered in the general journal, then posted. B) prepared before the completion of the worksheet. C) the last step before starting the next year's transactions. D) not needed if a worksheet has been completed.

111)

112) 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) Debit Wages Expense, $2,680; credit Cash, $2,680 B) Debit Wages Expense, $2,680; credit Accrued Wages, $2,680 C) Debit Wages Expense, $4,020; credit Accrued Wages, $4,020 D) Credit Wages Expense, $4,020; debit Accrued Wages, $4,020

112)

113) Linda's Flowers purchased a two-year insurance policy for $2,400. The adjusting journal entry for one month is 100 A) Insurance Expense Prepaid Insurance 100 200 B) Insurance Expense Prepaid Insurance 200 100 C) Prepaid Insurance Insurance Expense 100 200 D) Prepaid Insurance Insurance Expense 200

113)

114) Bob's Bakery purchased an industrial oven for $22,000 with a residual value of $2,800 and a life expectancy of 8 years. Using straight-line depreciation, the amount of the depreciation adjustment for the first month would be A) $230. B) $2,750. C) $2,400. D) $200.

114)

115) 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.

115)

116) On a worksheet, the income statement debit column total is $4,000 and the credit column total is $5,000. Which of the following statements is CORRECT? A) The company had a net loss of $1,000. B) The company had a net income of $1,000. C) The company's expenses were greater than revenues. D) None of the above are correct.

116)

117) Depreciation Expense is found on which of the following financial statements? A) Statement of Owner's Equity B) Balance Sheet C) Cash Flow Statement D) None of these answers are correct.

117)

118) Sally's Flowers purchased a truck for $50,000 with a residual value of $22,400 and a life expectancy of 5 years. Using straight-line depreciation, the amount of the depreciation adjustment for the first month would be A) $10,000. B) $5,520. C) $460. D) $833.

118)

119) Which of the following would cause a liability to be credited and an expense to be debited? A) Purchasing equipment B) Recording the accrual of salaries incurred C) Recording the depreciation of equipment D) Recording the adjustment for the expiration of rent

119)

120) 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) overstate the liabilities. B) overstate the assets. C) understate net income. D) None of these are correct.

120)

121) To record accrued salaries, you would A) debit Salaries Expense and credit Accrued Salaries. B) debit Cash and credit Accrued Salaries. C) debit Accrued Salaries and credit Salaries Expense. D) None of these answers are correct.

121)

122) It is the year end, but not the pay period end. Adjusted correctly, how will this affect the balance sheet? A) Owner's equity will be increased. B) Assets will be increased. C) Liabilities will be increased. D) This has no effect on the period end balance sheet.

122)

123) 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) increase total assets and decrease total expenses at the end of the month. C) decrease total assets and decrease total expenses at the end of the month. D) decrease total assets and increase total expenses at the end of the month.

123)

124) Which of the following will have a direct effect on the Statement of owner's equity? A) Receiving money on account B) Buying an automobile on account C) Selling goods on account D) Withdrawing money from the business

124)

125) 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) $1,000 B) $6,000 C) $2,000 D) $3,000

125)

126) 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.

126)

127) Adjusting journal entries are prepared from A) source documents. C) the balance sheet.

127)

B) the income statement. D) the adjustments column of the worksheet.

128) Depreciation Expense would be found on which of the following financial statements? A) Income statement B) Statement of Owner's Equity C) Balance sheet D) Depreciation report

128)

129) 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? 500 A) Scanner Depreciation Expense 500 500 B) Depreciation Expense Scanner 500 500 C) Scanner Accumulated Depreciation, Computer 500 500 D) Depreciation Expense Accumulated Depreciation, Scanner 500

129)

130) 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) $100,000 B) $200,000 C) $50,000 D) $150,000

130)

131) 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) Owner's equity will be increased. B) Liabilities will be increased. C) Assets will be decreased. D) This has no effect on the period end balance sheet.

131)

132) When Income Statement debits exceed the credits on the worksheet, A) a net income has occurred. B) an error has been made. C) a net loss has occurred. D) Not enough information has been provided.

132)

133) Canada Revenue Agency uses the term Capital Cost Allowance which is almost identical to A) book value. B) depreciation. C) contra accounts. D) salaries.

133)

134) The cost of an asset less accumulated depreciation equals A) depreciation expense. B) residual value. C) book value. D) None of these answers are correct.

134)

135) Huron Road Tours showed store supplies on hand to be $450. A count of the supplies on hand as of the end of the period is $100. The adjusting entry for store supplies expense would include A) a debit to Supplies Expense for $350. B) a credit to Supplies Expense for $350. C) a debit to Supplies Expense for $100. D) a credit to Supplies Expense for $100.

135)

136) The adjusting entry to record depreciation for the company automobile would be A) debit Depreciation Expense, Automobile; credit Automobile. B) debit Accumulated Depreciation, Automobile; credit Automobile. C) debit Depreciation Expense, Automobile; credit Accumulated Depreciation, Automobile. D) debit Accumulated Depreciation, Automobile; credit Depreciation Expense, Automobile.

136)

137) Which of the following accounts would most likely be depreciated? A) Equipment B) Cash C) Accounts Payable D) Office Supplies

137)

138) The ending figure for capital is A) revealed by the net income. C) indicated in the trial balance.

138)

B) extended to the balance sheet columns. D) not on the worksheet.

139) 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) $50,000 B) $12,500 C) $25,000 D) $100,000

139)

140) 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.

140)

141) Historical cost is the same as A) original cost. C) book value.

141)

B) accumulated depreciation. D) residual value.

142) 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) $4,000. B) $6,400. C) $5,000. D) $6,000.

142)

143) 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.

143)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 144) If a debit adjustment is added to a debit amount, the result is a debit.

144)

145) To see whether additional investments occurred for the period, you must check the capital account in the ledger.

145)

146) On the formal income statement, the left column is the debit column, and the right column is the credit column.

146)

147) Ending capital is found by taking the beginning capital and adding the net loss and withdrawals.

147)

148) Adjusting entries are made after the Financial Statements are completed.

148)

149) The worksheet must have dollar signs entered for each figure.

149)

150) If an adjustment to Supplies is not made, the balance in the Supplies account will be too low.

150)

151) If a credit adjustment is combined with a credit amount, the result is always a debit.

151)

152) 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.

152)

153) Since adjustments are being made it is acceptable if the adjusted trial balance total credits do not equal total debits.

153)

154) The spreading or allocating of the cost of a long-term asset over time is called depreciation.

154)

155) The worksheet contains a debit and credit column for making adjustments to accounts that need updating.

155)

156) The Balance Sheet section's totals on the worksheet do not usually match the totals on the formal Balance Sheet.

156)

157) Debits must equal credits on the Statement of Owner's equity.

157)

158) The worksheet is a formal statement.

158)

159) After formal financial reports have been prepared, journal entries and posting must be completed before the ledger is updated.

159)

160) Salary expenses are only recorded once the amounts are paid to employees.

160)

161) There are no commas on a worksheet.

161)

162) The worksheet should be prepared before the financial statements.

162)

163) Original cost of equipment is not adjusted on the worksheet.

163)

164) Depreciation Expense is debited when recording the depreciation for the period.

164)

165) After posting adjusting entries, the balance sheet accounts will be set back to zero.

165)

166) Depreciation expense decreases net income.

166)

167) The amount of the office supplies adjustment should be equal to what is on hand, not what is used.

167)

168) The ending figure for capital can be found on the worksheet.

168)

169) Worksheets are released to the public as part of the annual statements.

169)

170) The process of completing the worksheet updates all of the required accounts so no further journal entries are needed once the financial statements are created.

170)

171) It is very unusual for the totals of the two Income Statement columns to be identical before net income is added.

171)

172) On the formal income statement, there are no debit or credit columns.

172)

173) The accounts added below the trial balance, on the worksheet, are always decreasing.

173)

174) The Balance Sheet section's total debits on the worksheet will always equal the total assets on the Balance Sheet.

174)

175) Every amount needed for the income statement can be found on the worksheet.

175)

176) The Balance Sheet should be prepared before the worksheet.

176)

177) Cash is never used in an adjusting entry.

177)

178) 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.

178)

179) Adjusting entries do not need to be posted.

179)

180) The income statement is the only statement affected when an adjustment is made.

180)

181) The amount of supplies used during the period would be shown in the adjustment columns of the worksheet.

181)

182) Additional investments made to capital during the period will always be found in the adjustments column of the trial balance.

182)

183) Prepaid Rent is an asset with a normal balance of a debit.

183)

184) Adjustments can only be made to accounts already listed on the trial balance.

184)

185) If the debits do not equal credits on the adjusted trial balance columns of the worksheet, move on to the next step in the accounting cycle.

185)

186) Revenue is recorded when earned, and expenses are recorded only when paid.

186)

187) The worksheet contains a trial balance.

187)

188) 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.

188)

189) Every amount needed for the balance sheet can be found on the worksheet.

189)

190) When an asset expires or is used up, it becomes an expense.

190)

191) The income statement acts as the accountant's scratch pad.

191)

192) If a credit adjustment is added to a credit amount, the result is a credit.

192)

193) Book value of an asset is always the same as the market value.

193)

194) The debits must equal credits on the adjusted trial balance columns of the worksheet.

194)

195) Each time depreciation expense is recorded, the corresponding asset account decreases.

195)

196) The worksheet is the first financial statement prepared.

196)

197) The outside column on the financial reports is used for subtotalling.

197)

198) The use of straight-line depreciation results in equal amounts of depreciation being taken each period.

198)

199) It is not necessary to ensure that each adjusting entry balances.

199)

200) If a debit adjustment is combined with a credit amount, the result is always a debit.

200)

201) The Income Statement should be prepared before the worksheet.

201)

202) An important function of the worksheet is to assist the accountant in finding and correcting errors before the financial statements are prepared.

202)

203) The use of straight-line depreciation is permitted by the Canada Revenue Agency for all assets.

203)

204) Book value of an asset is always the same as the residual value.

204)

205) The worksheet is a tool used in preparing the financial statements for a business.

205)

206) A count of office supplies on hand is required in order to determine the amount to expense in the adjusting entries.

206)

207) When using straight-line depreciation, the balance in the Depreciation Expense account remains about the same each period, while Accumulated Depreciation increases annually.

207)

208) The amount of supplies remaining on hand at the end of the period would be shown in the adjustment columns of the worksheet.

208)

209) Straight-line is the only method of depreciation permitted under the Capital Cost Allowance rules.

209)

210) Withdrawals are reported on the balance sheet.

210)

211) Accumulated Depreciation is an asset account.

211)

212) The book value of an asset equals the cost of the asset minus the accumulated depreciation.

212)

213) Supplies and prepaid rent are assumed to have a longer life than equipment.

213)

214) On the formal balance sheet, the left column is the debit column, and the right column is the credit column.

214)

215) The original cost of equipment is directly reduced by the amount of Depreciation Expense.

215)

216) Ending capital is found by taking the beginning capital and adding the net income and withdrawals.

216)

217) Adjusting entries bring the ledger accounts up to date.

217)

218) When using straight-line depreciation, the balance in the Accumulated Depreciation account remains about the same each period, while Depreciation Expense increases annually.

218)

219) The accounts added below the trial balance, on the worksheet, are always increasing.

219)

220) On the worksheet in the final two columns, the debits will always equal the credits before net income is added.

220)

221) Accumulated Depreciation is an expense account reported on the Income Statement.

221)

222) Adjusting entries are necessary to update the Chart of Accounts before preparing Financial Statements.

222)

223) Adjusting is the process of bringing accounts up to date at the end of the accounting period.

223)

224) 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.

224)

225) The worksheet does not need dollar signs or commas.

225)

226) Rent expired at the end of an accounting period requires an adjustment.

226)

227) Adjustments are necessary to update account balances for internal transactions.

227)

228) Every amount needed for the Statement of owner's equity can be found on the worksheet.

228)

229) Once the unadjusted trial balance has been prepared the books are up to date and ready for the next cycle to begin.

229)

230) Accumulated Depreciation is a contra-asset account found on the balance sheet.

230)

231) To compute net income or net loss, the debit and credit columns of the adjustment section of the worksheet are totaled, and the difference is placed on the larger side.

231)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 232) What is the purpose of adjusting entries? Discuss the effect of not preparing adjusting entries on various accounts. 233) 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. 234) 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. 235) 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.

236) 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, 20XX for Vebal Company. Assume there were no additional investments of capital during the month.

Cash Account Rec. Office Supplies F. Vebal, Capital F. Vebal, With. Repair Fees Salaries Exp. Rent Expense Office Sup. Exp. Salaries Payable

Income Statement Debit Credit

1,800 1,000 200 3,000 3,600 6,600

Balance Sheet Debit Credit 10,000 2,300 200 5,500 500

6,600

13,000

6,600

13,000

200 11,200 6,600 13,000

237) What are the differences between depreciation expense and accumulated depreciation? 238) 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 250 239) List the steps of the Accounting Cycle in their order of completion that we have learned about up to this point in the course. 240) 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.

241) Given the Income Statement columns and the Balance Sheet columns of the worksheet, prepare a balance sheet for January 31, 20XX for French Company. You will first need to calculate Owner's Equity.

Cash Account Rec. Office Supplies T. French, Capital T. French, With. Repair Fees Salaries Exp. Rent Expense Office Sup. Exp. Salaries Payable

Income Statement Debit Credit

900 500 100 1,500 1,800 3,300

Balance Sheet Debit Credit 10,000 2,300 200 11,000 500

3,300

13,000

3,300

13,000

200 11,200 1,800 13,000

242) Given the adjustment columns of the worksheet, prepare the adjusting entries for the month of October 31, 20XX, for Reese Company (omit explanations)

Accounts Cash Accts. Rec. Supplies Equipment Accts. Pay Capital Withdrawals Fees Earned Salary Exp. Totals Depreciation Expense Accumulated Depreciation Salaries Payable Supplies Expense Totals Net Loss

Trial Adjusted Income Balance Balance Adjustments Trial Balance Statement Sheet DR CR DR CR DR CR DR CR DR CR 1,000 1,000 1,000 400 400 400 900 c 400 500 500 750 750 750 700 700 700 1,950 1,950 1,950 200 200 200 900 900 900 300 b 100 400 400 3,550 3,550

a 50

c 400 550

a 50

b 100

100

400 550 3,700 3,700

400 850 50 900

900 2,850 2,800 50 900 2,850 2,850

243) From the following data complete the worksheet for the month. Trial BalanceAdjustments Adjusted TB Income Stmt. Balance Sheet DR CR DR CR DR CR DR CR Cash 500 Accounts Receivable 325 Supplies 800 350 Prepaid Insurance 660 220 Equipment 6,500 Acc. Depreciation 500 275 Accts. Payable 720 Salaries Payable 300 Capital 6,615 Fees Earned 1,200 Wages Expense 250 300 Supplies Expense 350 Depreciation Expense 275 Insurance Expense 220 Totals 9,035 9,035 1,145 1,145

244) 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? 245) 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? 246) 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. 247) If the supplies asset had a normal balance of $600 and the adjusting entry was a $300 credit, what would the adjusted trial balance show for this account?

248) 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

249) 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. 250) On the worksheet, the Income Statement debit column totaled $800 and the credit column totaled $1,200. What is the amount of Net Income? 251) 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 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

Adjustments Adj. Trial Bal Inc. St'ment DR CR DR CR DR CR

Balance Sheet DR CR

252) Discuss the benefits of the worksheet. Explain how the financial reports are prepared from the worksheet. 253) 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.

254) 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 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

Category Asset

Normal Balance Debit

Financial Statement Balance Sheet

255) 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? 256) If the Prepaid Rent asset had a normal balance of $1,500 and the adjusting entry was a $500 credit, what would the adjusted trial balance show for this account? 257) 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 Fees Earned Wages Exp. Depreciation Expense Accumulated Depreciation Supplies Expense Rent Expense Wages Payable Total

Trial Adjusted Balance Adjustments Trial Balance DR CR DR CR DR CR 600 325 490 225 1,750 350 6,000 500 4,265 5,000 600 125 100 100 225 350

9,765 9,765

800

125 800

258) 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? 259) 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. 260) What is the purpose of adjusting entries? Discuss the effect of not preparing adjusting entries on various accounts. 261) 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? 262) 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 Ins. Equipment Accts. Pay Capital Fees Earned Wages Exp. Depreciation Expense Accumulated Depreciation Supplies Expense Insurance Expense Wages Payable Total

Trial Adjusted Balance Adjustments Trial Balance DR CR DR CR DR CR 750 400 250 175 400 100 7,000 900 6,000 2,000 100 300 250 250 175 100

8,900 8,900

825

300 825

263) Given the income statement columns and the balance sheet columns of the worksheet, prepare a balance sheet dated December 31, 20XX, for Centra Company.

Accounts Cash Accts. Rec. Supplies Prepaid Ins. Equipment Accts. Pay Capital Fees Earned Wages Exp. Totals Depreciation Expense Accumulated Depreciation Supplies Expense Insurance Expense Wages Payable Total Net Income

Trial Balance DR CR 750 400 250 400 7,000 900 6,000 2,000 100 8,900 8,900

Adjusted Income Balance Adjustments Trial Balance Statement Sheet DR CR DR CR DR CR DR CR 750 750 400 400 b 175 75 75 c 100 300 300 7,000 7,000 900 900 6,000 6,000 2,000 2,000 d 300 400 400

a 250

250 a 250

250 250

250

b 175

175

c 100

100

825

d 300 300 825 9,450 9,450

300 925 2,000 8,525 7,450 1,075 1,075 2,000 2,000 8,525 8,525

264) Given the Income Statement columns and the Balance Sheet columns of the worksheet, prepare an income statement for the month ending March 31, 20XX for Nettles Company.

Cash Account Rec. Office Supplies V. Nettles, Capital V. Nettles, With. Consulting Fees Salaries Exp. Rent Expense Office Sup. Exp. Salaries Payable

Income Statement Debit Credit

1,200 800 200 2,200 2,100 4,300

Balance Sheet Debit Credit 5,000 3,600 300 7,400 900

4,300

9,800

4,300

9,800

300 7,700 2,100 9,800

265) 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 Asset 1. Depreciation Expense 2. Accumulated Depreciation 3. Wages Expense 4. Office Supplies 5. Office Supplies Expense 6. Wages Payable 7. Prepaid Rent

Normal Balance Financial Statement Debit Balance Sheet

266) Given the adjustment columns of the worksheet, prepare the adjusting entries dated December 31, 20XX, for Centra Company (omit explanations).

Trial Balance DR CR 750 400 250 400 7,000 900 6,000 2,000 100 8,900 8,900

Adjusted Income Balance Trial Balance Statement Sheet DR CR DR CR DR CR 750 750 400 400 b 175 75 75 c 100 300 300 7,000 7,000 900 900 6,000 6,000 2,000 2,000 400 400

Adjustments DR CR

d 300

a 250

250 a 250

250 250

250

b 175

175

c 100

100

d 300 825

300

825 9,450 9,450

925 2,000 8,525 7,450 1,075 1,075 2,000 2,000 8,525 8,525

267) 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 $1,500. 268) Equipment was purchased for $20,000, residual value is $800 and it is expected that the useful life is 10 years. What is the depreciation adjustment after the first month assuming straight-line depreciation?

269) Given the Income Statement columns and the Balance Sheet columns of the worksheet, prepare a Balance Sheet as of March 31, 20XX for Nettles Company. You will first need to calculate ending Owner's Equity.

Cash Account Rec. Office Supplies V. Nettles, Capital V. Nettles, With. Consulting Fees Salaries Exp. Rent Expense Office Sup. Exp. Salaries Payable

Income Statement Debit Credit

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

270) Given the income statement columns and the balance sheet columns of the worksheet, prepare an income statement for the month of October 31, 20XX, for Reese Company. Trial Adjusted Income Balance Balance Adjustments Trial Balance Statement Sheet Accounts 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 400 500 500 Equipment 750 750 750 Accts. Pay 700 700 700 Capital 1,950 1,950 1,950 Withdrawals 200 200 200 Fees Earned 900 900 900 Salary Exp. 300 b 100 400 400 Totals 3,550 3,550 Depreciation Expense Accumulated Depreciation Salaries Payable Supplies Expense Totals Net Income

a 50

b 100

100

c 400

400

550

550 3,700 3,700

850 50 900

900 2,850 2,800 50 900 2,850 2,850

271) Determine the ending owner's equity of a business having a beginning owner's equity of $5,500, withdrawals of $250, and net income of $750. 272) 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? 273) Discuss the benefits of the worksheet. Explain how the financial reports are prepared from the worksheet. 274) 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 Rent Equipment Accum. Dep. Service Fees Telephone Exp. Salaries Exp. Rent Expense Supplies Expense Depreciation Expense

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

275) 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?

276) 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.

Cash Accts. Receivable Supplies Prepaid Ins. Equipment Accts. Payable Capital Fees Earned Wages Expense Totals

DR 750

400 250 400 7,000 900 7,100 900 100 8,900

8,900

277) 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 5-day work week are $3,000 and 3 days must be accrued salaries. (c) Supplies ledger balance $1,500, supplies on hand $200. 278) Given the Income Statement columns and the Balance Sheet columns of the worksheet, prepare an income statement for the month ending July 31, 20XX for Vebal Company.

Cash Account Rec. Office Supplies F. Vebal, Capital F. Vebal, With. Repair Fees Salaries Exp. Rent Expense Office Sup. Exp. Salaries Payable

Income Statement Debit Credit

1,800 1,000 200 3,000 3,600 6,600

Balance Sheet Debit Credit 10,000 2,300 200 5,500 500

6,600

13,000

6,600

13,00013,000

200 11,200 6,600

279) 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. Equipment Accumulated Depreciation Accts. Pay Capital Fees Earned Wages Exp. Depreciation Expense Rent Expense Supplies Expense Insurance Expense Wages Payable Total

Trial Adjusted Balance Adjustments Trial Balance DR CR DR CR DR CR 950 600 150 100 500 250 400 80 5,000 1,000 500 3,500 3,000 400

100

200 100 250 100 80

8,000 8,000

730

200 730

280) 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.

281) 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____ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________

Answer Key Testname: CHAPTER 4 1) B 2) B 3) D 4) D 5) C 6) C 7) B 8) A 9) A 10) C 11) A 12) B 13) B 14) D 15) B 16) A 17) A 18) C 19) D 20) B 21) B 22) A 23) B 24) A 25) B 26) C 27) A 28) D 29) A 30) A 31) D 32) C 33) B 34) B 35) A 36) B 37) C 38) C 39) D 40) A 41) B 42) C 43) B 44) A 45) A 46) A 47) A 48) A 49) C 50) B 36

Answer Key Testname: CHAPTER 4 51) A 52) A 53) D 54) C 55) B 56) D 57) C 58) A 59) B 60) A 61) D 62) D 63) B 64) D 65) D 66) B 67) A 68) D 69) A 70) C 71) D 72) C 73) C 74) D 75) B 76) B 77) C 78) D 79) A 80) B 81) A 82) C 83) A 84) A 85) B 86) B 87) C 88) A 89) B 90) A 91) B 92) B 93) D 94) D 95) A 96) B 97) D 98) D 99) C 100) D 37

Answer Key Testname: CHAPTER 4 101) C 102) A 103) C 104) B 105) B 106) A 107) D 108) A 109) C 110) B 111) A 112) C 113) A 114) D 115) D 116) B 117) D 118) C 119) B 120) C 121) A 122) C 123) D 124) D 125) C 126) B 127) D 128) A 129) D 130) D 131) C 132) C 133) B 134) C 135) A 136) C 137) A 138) D 139) B 140) C 141) A 142) D 143) B 144) TRUE 145) TRUE 146) FALSE 147) FALSE 148) TRUE 149) FALSE 150) FALSE 38

Answer Key Testname: CHAPTER 4 151) FALSE 152) FALSE 153) FALSE 154) TRUE 155) TRUE 156) TRUE 157) FALSE 158) FALSE 159) TRUE 160) FALSE 161) TRUE 162) TRUE 163) TRUE 164) TRUE 165) FALSE 166) TRUE 167) FALSE 168) FALSE 169) FALSE 170) FALSE 171) TRUE 172) TRUE 173) FALSE 174) FALSE 175) TRUE 176) FALSE 177) TRUE 178) TRUE 179) FALSE 180) FALSE 181) TRUE 182) FALSE 183) TRUE 184) FALSE 185) FALSE 186) FALSE 187) TRUE 188) TRUE 189) FALSE 190) TRUE 191) FALSE 192) TRUE 193) FALSE 194) TRUE 195) FALSE 196) FALSE 197) FALSE 198) TRUE 199) FALSE 200) FALSE 39

Answer Key Testname: CHAPTER 4 201) FALSE 202) TRUE 203) FALSE 204) FALSE 205) TRUE 206) TRUE 207) TRUE 208) FALSE 209) FALSE 210) FALSE 211) FALSE 212) TRUE 213) FALSE 214) FALSE 215) FALSE 216) FALSE 217) TRUE 218) FALSE 219) FALSE 220) FALSE 221) FALSE 222) FALSE 223) TRUE 224) TRUE 225) TRUE 226) TRUE 227) TRUE 228) FALSE 229) FALSE 230) TRUE 231) FALSE 232) 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. 233) $4,220 [$3,700 - $980 + $1,500] 234) $7,126 ($811 + $9,917 - $3,602)

Answer Key Testname: CHAPTER 4 235)

Depreciation Expense 50

Supplies Expense 300

Insurance Expense 100

236)

Accumulated Depreciation 50

Supplies

300

Prepaid Insurance 100

Vebal Company Statement of Owner's Equity For the Month Ended July 31, 20XX

F. Vebal, Capital July 1, 20XX $5,500 Net Income from July 6,600 Less: Withdrawals for July 500 Increase in Capital 6,100 F. Vebal, Capital July 31, 20XX $11,600 237) 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. 238) Adjusted Trial Balance Adjustments Trial Balance Debit Credit Debit Credit Debit Credit Supplies 500 250 250 Prepaid Rent 1,100 800 300 Equipment 10,000 10,000 Accum. Dep. - Equip 3,000 400 3,400 Service Fees 1,200 1,200 Depreciation Expense 400 400 Telephone Expense 50 50 Salaries Expense 500 100 600 Rent Expense 800 800 Supplies Expense 250 250 Accrued Salaries 100 100 239) 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).

Answer Key Testname: CHAPTER 4 240) (a) Depreciation Expense Accumulated Depreciation (b) Salaries Expense Salaries Payable (c) Supplies Expense Supplies 241) French Company Balance Sheet January 31, 20XX

120 250 800

Assets Cash Accounts Receivable Office Supplies Total Assets

800

200

Owner's Equity T. French, Capital Total Liabilities and Owner's Equity

a) Depreciation Expense Accumulated Depreciation b) Salary Expense Salaries Payable c) Supplies Expense Supplies

250

$10,000 2,300 200 $12,500

Liabilities and Owner's Equity Liabilities Salaries Payable

242)

120

500 100 400

12,300(= $11,000 + NI of $1,800 - Withd. of $500) $12,500

500 100 400

Answer Key Testname: CHAPTER 4 243)

Account

Trial Balance DR CR 500

Cash Accounts Receivable 325 Supplies 800 Prepaid Insurance 660 Equipment 6,500 Acc. Depreciation 500 Accts. Payable 720 Salaries Payable Capital Fees Earned Wages Expense 250 Supplies Expense Depreciation Expense Insurance Expense Totals Net Loss

Adjustments Adjusted Income Stmt Balance Sheet Trial Balance DR CR DR CR DR CR DR CR 500 500

350 220

325 450

440 6,500

275

775 720

300

300 6,615 1,200

300 6,615

6,615 1,200

1,200

300

550

350

275

220 220 220 9,035 9,035 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

244) $1,900 [$20,000 - $1,000 = $19,000/10 years] 245) 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. 246) $1,075 [$2,250 - $675 - $500] 247) $300 Debit ($600 - $300)

Answer Key Testname: CHAPTER 4 248)

Supplies Expense 150

Supplies 150

Insurance Expense 300

Prepaid Insurance 300

Depreciation Expense 500

Accumulated Depreciation 500

249) $6,900 [$4,500 + $1,500 = $6,000 + ($300 × 3) = $6,900]. Note that January has 31 days. 250) $400 = $1,200 - 800 251) Account Trial Balance AdjustmentsAdj. 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 400 500 500 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 100 400 400 Totals 3,550 3,550 Dep. Exp. Accm. Dep. Sal. Pay Supp. Exp. Totals Net Loss

a 50

50 a 50 b 100

c 400 550 550

50 50 100

50 100

400 400 3,700 3,700 850 50 900

900 900

2,850 2,800 50 2,850 2,850

252) 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. 253) $3,000 [(7,000 / 7) × 3]

Answer Key Testname: CHAPTER 4 254) 0. 1. 2. 3. 4. 5. 6. 7. 8.

Category Asset Capital Expense Liability Asset Asset Withdrawal Revenue Liability

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

255) $12,600 [($12,000 + (3,000/5) = $12,600]. Note that only April 30 is a work day. 256) $1,000 Debit ($1,500 - $500) 257) 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 Capital 4,265 4,265 Fees Earned 5,000 5,000 Wages Exp. 600 125 725 Depreciation Expense 100 100 Accumulated Depreciation 100 100 Supplies Expense 225 225 Rent Expense 350 350 Wages Payable 125 125 Total 9,765 9,765 800 800 9,990 9,990 258) $18,100 [$20,000 - $1,900 annual deprecation calculated as [$20,000 - $1,000 = $19,000/10 years]]

Answer Key Testname: CHAPTER 4 259)

Depreciation Expense 200

Supplies Expense 900

Rent Expense 2000

Accumulated Depreciation 200

Supplies Asset 900

Prepaid Rent 2000

260) 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. 261) $5,700 [$1,900 annual deprecation calculated as [$20,000 - $1,000 = $19,000/10 years] × 3 years = $5,700] 262) Trial Adjusted Balance Adjustments Trial Balance Accounts DR CR DR CR DR CR Cash 750 750 Accts. Rec. 400 400 Supplies 250 175 75 Prepaid Ins. 400 100 300 Equipment 7,000 7,000 Accts. Pay 900 900 Capital 6,000 6,000 Fees Earned 2,000 2,000 Wages Exp. 100 300 400 Depreciation Expense 250 250 Accumulated Depreciation 250 250 Supplies Expense 175 175 Insurance Expense 100 100 Wages Payable 300 300 Total 8,900 8,900 825 825 9,450 9,450

Answer Key Testname: CHAPTER 4 263)

Centra Company Balance Sheet December 31, 20XX

Assets Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation

$7,000 250

$750 400 75 300

Total Assets

6,750 $8,275

Liabilities Acct. Payable Wages Payable Total Liabilities

$900 300 $1,200

Owner's Equity Baur, Capital 7,075 Total Liab. & Owner's Equity $8,275 Nettles Company 264) Income Statement For the Month Ended March 31, 20XX Revenue Consulting Fees

$4,300

Operating Expenses Salaries Expense Rent Expense Office Supplies Expense

$1,200 800 200

Total Operating Expenses

2,200

Net Income

$2,100

265) 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

Answer Key Testname: CHAPTER 4 250 266) a) Depreciation Expense Accumulated Depreciation 250 b) Supplies Expense 175 Supplies 175 c) Insurance Expense 100 Insurance 100 d) Wages Expense 300 Wages Payable 300 267) $14,280 [$15,200 - $2,420 + $1,500] 268) $60 [$20,000 - $800 = $19,200/10 years = $1,920 per year/12 months] 269) Nettles Company Balance Sheet March 31, 20XX Assets Cash Accounts Receivable Office Supplies Total Assets Liabilities and Owner's Equity Liabilities Salaries Payable

270)

$5,000 3,600 300 $8,900

300

Owner's Equity V. Nettles, Capital 8,600 (= $7,400 + NI of $2,100 - Withd. of $900) Total Liabilities and Owner's Equity $8,900 Reese Company Income Statement For the Month Ended October 31, 20XX Revenue: Revenue

$900

Operating Expenses: Salaries Expense $400 Depreciation Expense 50 Supplies Expense 400 Total Operating Expenses 850 Net Income $50 271) $6,000 [$5,500 - $250 + $750] 272) $400 [$900 + 200 - 700 = $400] 273) 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.

Answer Key Testname: CHAPTER 4 274)

Supplies Expense 475

Supplies 475

Rent Expense 1,000

Prepaid Rent 1,000

Depreciation Expense 900

Accumulated Depreciation 900

275) $100 ($1,400 - 1,300 = $100) 276) Account Trial Adjustments Adjusted Income Stmt Balance Sheet Balance Trial Balance DR CR DR CR DR CR DR CR DR CR Cash 750 750 750 Accts. Receivable 400 400 400 Supplies 250 b 175 75 75 Prepaid Ins. 400 c 100 300 300 Equipment 7,000 7,000 7,000 Accts. Pay. 900 900 900 Hall Cap. 6,000 6,000 6,000 Fees Earned 2,000 2,000 2,000 Wages Exp. 100 d 300 400 400 Totals 8,900 8,900 Dep. Exp Accum Depreciation Supp. Exp. Ins. Expense Wages Payable Totals Net Income

a 250

250 a 250

b 175 c 100 825

277) (a) Depreciation Expense Accumulated Depreciation (b) Salaries Expense Salaries Payable (c) Supplies Expense Supplies

250 250

175 100 d 300 825

1,250 1,800 1,300

250 175 100

300 9,450 9,450 925 2,000 8,525 1,075 2,000 2,000 8,525

1,250 1,800 1,300

300 7,450 1,075 8,525

Answer Key Testname: CHAPTER 4 278)

Vebal Company Income Statement For the Month Ended July 31, 20XX Revenue Repair Fees

$6,600

Operating Expenses Salaries Expense Rent Expense Office Supplies Expense

$1,800 1,000 200

Total Operating Expenses

3,000

Net Income

$6,600

279)

Trial Adjusted Balance Adjustments Trial Balance DR CR DR CR DR CR 950 950 600 600 150 100 50 500 250 250 400 80 320 5,000 5,000 1,000 500 3,500 3,000 400

8,000 8,000

100

1,100 500 3,500 3,000

200

600

100 250

100

730

280) (a) Depreciation Expense Accumulated Depreciation (b) Salaries Expense Salaries Payable (c) Supplies Expense Supplies

200 730

200 8,300 8,300

40 100 500

Answer Key Testname: CHAPTER 4 281) 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____ ________ ________ ________

Exam

Chapter 5

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) When revenue is closed, A) Owner's Capital will be debited. C) Income Summary will be credited.

B) Income Summary will be debited. D) None of these are correct.

2) J. Oros showed a net loss of $3,250. The entry to close the Income Summary account would include a A) credit to Oros, Capital, $3,250. B) debit to Income Summary, $3,250. C) debit to Oros, Capital, $3,250. D) credit to Cash, $3,250.

3) Which of the following is a real account? A) Fees Earned C) Utilities Expense

B) Income Summary D) Cash

4) Which of the following accounts will be directly closed to Capital at the end of the fiscal year? A) Salaries Expense B) Fees Revenue C) Depreciation Expense D) Withdrawals

5) After posting the closing entries, which of the following accounts is most likely NOT to have a zero balance? A) Prepaid Insurance B) Advertising Expense C) Medical Fees D) J. Smith, Withdrawals

6) Which of the following accounts would appear on the post-closing trial balance? A) Income Summary B) Fees Earned C) Wages Expense D) Owner's Capital

7) A real account is the same as A) an unusual account. C) a nominal account.

B) a temporary account. D) a permanent account.

8) The correct order for closing accounts is A) revenue, capital, expenses, withdrawals. B) revenue, expenses, capital, withdrawals. C) revenue, expenses, income summary, withdrawals. D) revenue, income summary, expenses, withdrawals.

9) Which of the following accounting cycle steps comes after the others? A) Preparing the worksheet B) Journalizing and posting closing entries C) Preparing the financial statements D) Journalizing and posting adjusting entries

10) When the balance in the Income Summary account is a credit, the company has A) made an error in their closing entries. B) incurred a net income. C) had more expenses than revenue. D) incurred a net loss.

10)

11) Closing entries will A) decrease the Owner's Capital balance. B) not affect the Owner's Capital balance. C) increase the Owner's Capital. D) either increase or decrease Owner's Capital.

11)

12) The following normal account balances were found on the general ledger before closing entries were 12) prepared: Revenue Expenses Capital

$1,500 $800 $5,000

Cash Accounts Receivable Withdrawals

$1,000 $470 $600

After closing entries are posted, what is the balance in the Expenses account? A) $0 B) $1,500 C) $800 D) Closing entries do not affect the Expenses account.

13) Of the following accounts, which might appear in the adjusted trial balance, but not in the post-closing trial balance? A) Unearned Revenue B) Owner's Capital C) Interest Payable D) Depreciation Expense

13)

14) The entry to close the Accumulated Depreciation account would cause A) the Income Summary account balance to decrease. B) the Capital account balance to increase. C) the Capital account balance to decrease. D) None of these are correct.

14)

15) The Income Summary account shows debits of $17,000 and credits of $12,000. This results in a A) net income of $5,000. B) net loss of $29,000. C) net income of $29,000. D) net loss of $5,000.

15)

16) The income statement credit column of the worksheet showed the following revenues: Maintenance Fees $800 Professional Fees 700

16)

The journal entry to close the revenue accounts is 1,500 A) Income Summary Maintenance Fees 800 Professional Fees 700 800 C) Maintenance Fees Professional Fees 700 Capital 1,500

B) Maintenance Fees Professional Fees Income Summary D) Capital Income Summary

800 700

1,500

17) 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 loss of $29,775. D) net income of $29,775.

17)

18) 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.

18)

19) 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.

19)

20) 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.

20)

21) The business failed to close any of the revenue accounts. The result of this error is that A) the assets will be overstated. B) capital will be understated. C) revenues will be understated. D) the liabilities will be overstated.

21)

22) When closing the Income Summary account when there is a net loss, A) Capital would increase. B) Capital would remain the same. C) Capital would decrease. D) None of these are correct.

22)

23) 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) Income Summary to have a debit balance. B) the liabilities to be overstated. C) the assets to be overstated. D) Income Summary to have a credit balance.

23)

24) Canadian taxpayers must send their completed tax forms to the Canada Revenue Agency by ________ of each year. A) January 1 B) April 30 C) December 31 D) April 15

24)

25) To close the Fees Earned account, A) debit Fees Earned; credit Capital. B) debit Income Summary; credit Fees Earned. C) debit Capital; credit Fees Earned. D) debit Fees Earned; credit Income Summary.

25)

26) The following normal account balances were found on the general ledger before closing entries were 26) 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 Withdrawals account? A) $0 B) $800 C) $300 D) Closing entries do not affect the Withdrawals account.

27) 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) debit to Flex, Capital for $4,100. C) credit to Revenue for $4,100. D) debit to Income Summary for $4,100.

27)

28) The income statement debit column of the worksheet showed the following expenses: Salary Expense $800 Rent Expense 700

28)

The journal entry to close the expense accounts is 1,500 A) Capital Salary Expense 800 Rent Expense 700 1,500 C) Income Summary Salary Expense 800 Rent Expense 700

B) Income Summary Expenses

1,500

D) Salary Expense Rent Expense Income Summary

800 700

1,500

29) The following normal account balances were found on the general ledger before closing entries were 29) prepared: Revenue Expenses Capital

$1,500 $800 $5,000

Cash Accounts Receivable Withdrawals

$1,000 $470 $600

After closing entries are posted, what is the balance in the Withdrawals account? A) $600 B) $5,000 C) $0 D) Closing entries do not affect the Withdrawals account.

30) Which of the following accounts would NOT be considered a permanent account? A) Accounts Receivable B) Accounts Payable C) Salaries Expense D) Office Supplies

30)

31) The revenue accounts debited and the Income Summary account credited would be the result of A) closing the expense accounts. B) closing the Income Summary account–there is a net income. C) closing the Income Summary account–there is a net loss. D) closing the revenue accounts.

31)

32) 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 debit balance. B) before closing it, Income Summary will have a credit balance. C) the end of period capital will be understated. D) the end of period capital will be overstated.

32)

33) In the normal accounting cycle, the A) financial statements are prepared before the adjusting entries are posted. B) adjusting and closing entries are journalized before the financial statements are prepared. C) post-closing trial balance is prepared before the closing entries are posted. D) financial statements are prepared after the adjusting entries are posted.

33)

34) 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's cash increased $2,500. B) The company had a net income of $2,500. C) The company had a net loss of $2,500. D) None of these answers are correct.

34)

35) The balance in the Insurance Expense account on the worksheet was $525. The journal entry to close the Insurance Expense account is 525 525 A) Insurance Expense B) Insurance Expense Capital 525 Income Summary 525 525 525 C) Insurance Expense D) Income Summary Prepaid Insurance 525 Insurance Expense 525

35)

36) Of the following accounts, which might appear in the adjusted trial balance, but not in the post-closing trial balance? A) Accumulated Depreciation B) Accounts Receivable C) Office Supplies D) Service Revenue

36)

37) 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) the assets will be overstated. B) the liabilities will be overstated. C) before closing it, Income Summary will have a credit balance. D) before closing it, Income Summary will have a debit balance.

37)

38) Which of the following accounts should NOT be closed to Income Summary at the end of the fiscal year? A) Salaries Expense B) Withdrawals C) Fees Earned D) Utilities Expense

38)

39) The Rent Expense account had a normal balance of $2,725. The entry to close the account would include a A) debit to Capital, $2,725. B) credit to Income Summary, $2,725. C) debit to Income Summary, $2,725. D) debit to Rent Expense, $2,725.

39)

40) When closing the Income Summary account when there is a net income A) Capital would decrease. B) Capital would increase. C) Capital would remain the same. D) None of these are correct.

40)

41) The beginning capital balance is $2,500, there are no withdrawals but the owner did invest $1,000 during the accounting period. The period's revenue is $5,050 and expenses total $4,900. What is the ending capital balance (after closing entries)? A) $3,500 B) $1,650 C) $2,650 D) $3,650

41)

42) Which of the following accounts is NOT a temporary account? A) Rent Expense B) Interest Expense C) Interest Payable D) Service Revenue

42)

43) Which of the following columns of the worksheet are referred to when preparing closing entries to the Income Summary? A) Trial balance columns B) Adjustments columns C) Income statement columns D) Adjusted trial balance columns

43)

44) How do you close a revenue account? A) Credit Capital; debit Revenue C) Debit Income Summary; credit Revenue

44)

B) Debit Capital; credit Revenue D) Credit Income Summary; debit Revenue

45) The following normal account balances were found on the general ledger before closing entries were 45) prepared: Revenue Expenses Capital

$1,500 $800 $5,000

Cash Accounts Receivable Withdrawals

$1,000 $470 $600

After closing entries are posted, what is the balance in the Accounts Receivable account? A) $0 B) $1,470 C) $1,970 D) Closing entries do not affect the Accounts Receivable account.

46) The following normal account balances were found on the general ledger before closing entries were 46) prepared: Revenue Expenses Capital

$6,000 $7.250 $3,770

Cash Accounts Receivable Withdrawals

$12,250 $5,220 $550

After closing entries are posted, what is the balance in the Capital account? A) $1,970 B) $4,470 C) $5,570 D) Closing entries do not affect the Capital account.

47) The balance in the Rent Expense account on the worksheet was $725. The journal entry to close the Rent Expense account is 725 725 A) Rent Expense B) Income Summary Income Summary 725 Rent Expense 725 725 725 C) Capital D) Prepaid Rent Rent Expense 725 Rent Expense 725

47)

48) The entry to close the Fees Earned account would cause A) the Capital account balance to decrease. B) the Capital account balance to increase. C) the Fees Earned account to decrease. D) None of these are correct.

48)

49) The following normal account balances were found on the general ledger before closing entries were 49) prepared: Revenue Expenses Capital

$1,500 $800 $5,000

Cash Accounts Receivable Withdrawals

$1,000 $470 $600

After closing entries are posted, what is the balance in the Capital account? A) $5,100 B) $5,700 C) $5,000 D) Closing entries do not affect the Capital account.

50) The final step in the accounting cycle is A) journalizing the closing entries. C) preparing the financial statements.

B) journalizing the adjusting entries. D) preparing the post-closing trial balance.

50)

51) A temporary account in the ledger used for closing revenues and expenses is A) net income. B) capital. C) withdrawals. D) income summary.

51)

52) 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 loss of $38,000. C) net loss of $2,000. D) net income of $38,000.

52)

53) The entry to close the Depreciation Expense account would cause A) the Capital account balance to decrease. B) the Depreciation Expense account balance to decrease. C) the Capital account balance to increase. D) None of these are correct.

53)

54) A nominal account is the same as A) an unusual account. C) a permanent account.

54)

B) a temporary account. D) a real account.

55) The following normal account balances were found on the general ledger before closing entries were 55) 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 Capital account? A) $6,800 B) $7,800 C) $7,500 D) Closing entries do not affect the Capital account.

56) When the balance of the Income Summary account is a debit, the entry to close this account is A) debit Revenue; credit Income Summary. B) debit Income Summary; credit Capital. C) debit Income Summary; credit Revenue. D) debit Capital; credit Income Summary.

56)

57) What is the proper sequencing of documents in an accounting cycle? A) Source documents, journal, ledger, worksheet, financial statements B) Source documents, worksheet, journal, ledger, financial statements C) Worksheet, source documents, journal, financial statements, ledger D) Source documents, ledger, journal, worksheet, financial statements

57)

58) When the balance in the Income Summary account is a debit, the company has A) incurred a net income. B) made an error in their closing entries. C) incurred a net loss. D) had more revenue than expenses.

58)

59) The following normal account balances were found on the general ledger before closing entries were 59) 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 Expenses account? A) $0 B) $300 C) $800 D) Closing entries do not affect the Expenses account.

60) 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) $1,500 B) $1,050 C) $1,450 D) $50

60)

61) The adjusted trial balance columns of the worksheet included the following balances: Depreciation Expense $250 Accumulated Depreciation 775 Salaries Expense 900 Accrued Salaries 500

61)

The journal entry to close the expense accounts is 2,425 A) Income Summary Depreciation Expense 250 Accumulated Depreciation 775 Salaries Expense 900 Accrued Salaries 500 1,150 B) Income Summary Depreciation Expense 250 Salaries Expense 900 250 C) Depreciation Expense Salaries Expense 900 Income Summary 1,150 250 D) Depreciation Expense Accumulated Depreciation 775 Salaries Expense 900 Accrued Salaries 500 Income Summary 2,425

62) 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) debit to Income Summary, $5,250. C) credit to M. Smuts Capital, $5,250. D) Both B and C are correct.

62)

63) To close the Withdrawals account, A) debit Withdrawals; credit Income Summary. B) debit Withdrawals; credit Capital. C) debit Income Summary; credit Withdrawals. D) debit Capital; credit Withdrawals.

63)

64) The Capital account debited and the withdrawals credited would be the result of A) closing the Income Summary account–there is a net loss. B) closing the expense accounts. C) closing the Income Summary account–there is a net income. D) closing the withdrawal account.

64)

65) The income statement debit column of the worksheet showed the following expenses: Supplies Expense $250 Depreciation Expense 175 Salaries Expense 800

65)

The journal entry to close the expense accounts is 250 A) Supplies Expense Depreciation Expense 175 Salaries Expense 800 Income Summary 1,225 1,225 B) Income Summary Supplies Expense 250 Depreciation Expense 175 Salaries Expense 800 1,225 C) Capital Income Summary 1,225 1,225 D) Income Summary Capital 1,225

66) When Income Summary has a credit balance and the account is closed, A) Withdrawals is increased. B) Capital is decreased. C) Capital is increased. D) None of these are correct.

66)

67) After all the closing entries have been posted the Income Summary account will A) have a balance the same as the cash account. B) have a zero balance. C) vary from company to company. D) have a balance the same as the capital account.

67)

68) 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 invested an additional amount. B) The company had a net income. C) The owner withdrew less than the amount of net income. D) All of these answers are correct.

68)

69) Which of the following accounts is NOT a temporary account? A) Cash B) Withdrawals C) Income Summary D) Fees Earned

69)

70) Information for closing entries comes from A) the trial balance. C) the post-closing trial balance.

70)

B) the source documents. D) the worksheet.

71) 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) zero account. D) temporary account.

71)

72) Closing entries A) are not needed if adjusting entries are prepared. B) must be journalized and posted. 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.

72)

73) Closing entries will affect A) Cash. C) total Assets.

73)

B) total Liabilities. D) Owner's Capital.

74) The following normal account balances were found on the general ledger before closing entries were 74) prepared: Revenue Expenses Capital

$5,000 $5,250 $1,000

Cash Accounts Receivable Withdrawals

$9,000 $700 $100

After closing entries are posted, what is the balance in the Capital account? A) $1,150 B) $650 C) $1,250 D) Closing entries do not affect the Capital account.

75) 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) $2,350 C) $2,850 D) $5,350

75)

76) All permanent accounts can be found A) Permanent accounts do not exist. B) Permanent accounts do not appear on the financial statements. C) on the Income Statement. D) on the Balance Sheet.

76)

77) The following normal account balances were found on the general ledger before closing entries were 77) prepared: Revenue Expenses Capital

$10,250 $9.000 $1,500

Cash Accounts Receivable Withdrawals

$15,000 $6,700 $1,000

After closing entries are posted, what is the balance in the Capital account? A) $1,750 B) $2,750 C) $1,250 D) Closing entries do not affect the Capital account.

78) 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) before closing it, Income Summary will have a credit balance. C) the liabilities will be overstated. D) the assets will be overstated.

78)

79) The beginning capital balance is $5,000, there are no additional investments but the owner did withdraw $1,250 during the accounting period. The period's revenue is $7,250 and expenses total $5,900. What is the ending capital balance (after closing entries)? A) $7,600 B) $6,350 C) $5,100 D) $2,400

79)

80) The purpose of closing entries is to A) set nominal account balances to zero to begin the next period. B) help in preparing financial statements. C) set real account balances to zero to begin the next period. D) adjust the asset and liability accounts in the ledger.

80)

81) When the expenses are closed, A) Owner's Capital will be debited. C) Income Summary will be credited.

81)

B) Income Summary will be debited. D) None of these are correct.

82) 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.

82)

83) The entry to close Income Summary (net loss) to Capital was omitted. This error will cause A) the ending capital to be understated. B) the ending capital to be overstated. C) no error in the ending capital balance. D) None of these are correct.

83)

84) Accounts in which the balances are carried over from one accounting period to the next are called A) nominal accounts. B) temporary accounts. C) zero accounts. D) real accounts.

84)

85) Which of the following sequence of actions describes the proper order in the accounting cycle? A) Post, close, prepare financial statements, adjust, analyze transactions, and journalize. B) Journalize, post, close, prepare financial statements, adjust, and analyze transactions. C) Prepare financial statements, journalize, post, adjust, analyze transactions, close. D) Analyze transactions, journalize, post, adjust, prepare financial statements, close.

85)

86) Closing entries are prepared A) at the end of the accounting period. C) to update the Capital balance.

86)

B) to clear all temporary accounts to zero. D) All of the above are correct.

87) How do you close the expense accounts? A) Credit Income Summary; debit the expense accounts B) Debit Income Summary; credit the expense accounts C) Credit Capital; debit the expense accounts D) Debit Capital; credit the expense accounts

87)

88) B. Benson's worksheet showed the revenue account, Rental Fees, $1,250. The journal entry to close the account is 1,250 1,250 A) Rental Fees B) Benson, Capital Income Summary 1,250 Rental Fees 1,250 1,250 1,250 C) Income Summary D) Rental Fees Rental Fees 1,250 Benson, Capital 1,250

88)

89) The following normal account balances were found on the general ledger before closing entries were 89) 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 Cash account? A) $0 B) $800 C) $300 D) Closing entries do not affect the Cash account.

90) Income Summary is a temporary account located in the chart of accounts under A) Owner's Equity. B) Liabilities. C) Revenue. D) Assets.

90)

91) The Income Summary account debited and the expense accounts credited would be the result of A) closing the Income Summary accounts–there is a net loss. B) closing the revenue accounts. C) closing the expense accounts. D) closing the Income Summary account–there is a net income.

91)

92) When the Withdrawals account is closed, A) Owner's Capital will be debited. C) Income Summary will be credited.

92)

B) Income Summary will be debited. D) None of these are correct.

93) Which of the following accounts would NOT be considered a permanent account? A) Telephone Payable B) Equipment C) Cash D) Telephone Expense

93)

94) Which of the following is NOT a temporary account? A) Service Fees B) Capital C) Rent Expense

94)

D) Wages Expense

95) The following normal account balances were found on the general ledger before closing entries were 95) 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) $300 B) $0 C) $700 D) Closing entries do not affect Revenue.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 96) Closing entries are normally prepared after the post-closing trial balance is prepared.

96)

97) Financial statements can only be prepared after the closing entries are prepared and posted.

97)

98) All revenue, expenses, and withdrawals will have zero balances before closing.

98)

99) When the post-closing trial balance is prepared, the adjusting entries have not been made.

99)

100) Closing Entries are not needed if the company experiences a gain.

100)

101) Income Summary normally has a credit balance.

101)

102) All closing entries must be posted before preparing the post-closing trial balance.

102)

103) A real account is the same as a permanent account.

103)

104) Nominal accounts are called temporary accounts because their balances are not carried forward to the next accounting period.

104)

105) The balances in permanent accounts are carried over from one fiscal year to another.

105)

106) Income Summary is a permanent account.

106)

107) A nominal account is the same as a permanent account.

107)

108) Financial statements can only be prepared after the adjusting entries are prepared and posted.

108)

109) The Depreciation Expense account is closed to the Owner's Capital account.

109)

110) The Withdrawals account is closed to Income Summary.

110)

111) The Withdrawals account is closed to Income Summary.

111)

112) The Withdrawals account is closed to the Owner's Capital account.

112)

113) Each individual expense account is debited when closing, and the total of all the expense accounts is transferred to Income Summary.

113)

114) The balances in temporary accounts are carried over from one fiscal year to another.

114)

115) The balances in all asset and liability accounts are set to zero at the beginning of each fiscal year.

115)

116) Temporary accounts are those accounts with balances that are brought forward to the next accounting period.

116)

117) If a temporary account is listed in the post-closing trial balance, an error has been made.

117)

118) There are 4 closing entries.

118)

119) When closing Income Summary, the balance is transferred to the Capital account.

119)

120) Closing Entries are not needed if the company breaks even.

120)

121) The trial balance prepared after all of the temporary accounts have been closed is called a post-closing trial balance.

121)

122) Withdrawals must be transferred to Income Summary in the closing entry process.

122)

123) Depreciation Expense is closed to Income Summary, but Accumulated Depreciation is not closed.

123)

124) Income Summary does not have a normal balance.

124)

125) Revenues and expenses are closed to the Income Summary account.

125)

126) The income statement and balance sheet sections of the worksheet provide the information needed to 126) prepare the closing entries.

127) Income Summary is closed to Capital.

127)

128) The post-closing trial balance is also the opening trial balance for the next period.

128)

129) Real accounts are those accounts with balances that are brought forward to the next accounting period.

129)

130) After posting adjusting entries, the temporary accounts will be set back to zero.

130)

131) Worksheets allow the preparation of interim reports without the formal adjusting and closing of the books.

131)

132) Closing entries will update the Capital account to the same figure that is on the balance sheet for that date.

132)

133) After posting closing entries, the Capital account will be set back to zero.

133)

134) The word "adjusting" or "closing" is written in the explanation column of the individual ledgers when closing entries are posted.

134)

135) The Income Summary account can be found on the worksheet.

135)

136) The post-closing trial balance contains the true ending figure for Capital.

136)

137) The post-closing trial balance comes before the closing entries are posted.

137)

138) The Accumulated Depreciation account is closed to Income Summary.

138)

139) The first entry to close accounts is to debit Revenue and credit Income Summary.

139)

140) Closing Entries are not needed if the company experiences a loss.

140)

141) The balance in Income Summary after posting all revenues and expenses for the period is equal to net income/loss.

141)

142) Withdrawals are not business expenses and thus are not transferred to Income Summary.

142)

143) Each individual revenue account is debited when closing, and the total of all the revenue accounts is transferred to Income Summary.

143)

144) The Capital figure in the post-closing trial balance excludes the adjustments for net income and withdrawals for the period.

144)

145) Closing entries are found in the adjustment columns of the worksheet.

145)

146) Closing Entries are necessary before completing the Financial Statements.

146)

147) The goal of closing is to clear all temporary accounts and update Capital.

147)

148) The post-closing trial balance is used to determine if the ledger is in balance after closing.

148)

149) The post-closing trial balance contains the opening balance of Capital.

149)

150) Income Summary normally has a debit balance.

150)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. Identify which entries below are an adjusting entry (AE) or a closing entry (CE).

151) ________ Fees Earned Income Summary

$17,000

152) What (if any) errors can you spot in the following post-closing trial balance for Blue Star Company on December 31, 20XX? Blue Star Company Post-Closing Trial Balance December 31, 20XX Debit 1,000 2,200 2,000

Cash Accounts Receivable Prepaid Insurance Accounts Payable Salaries Payable R. Blue, Capital Supplies Expense Totals

Credit

2,000 1,200 2,300

300 5,500

5,500

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). Column 1 Asset

Example: Cash

153) Interest Payable ________

________

Column 2 Debit

________

Column 3 Balance Sheet

Column 4 Permanent

________

154) Why are certain accounts called temporary accounts? Identify which entries below are an adjusting entry (AE) or a closing entry (CE).

155) ________ Insurance Expense Prepaid Insurance

$1,200

Example: Cash

156) Accounts Payable 157) Fees Earned

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).

158) ________ Unearned Revenue Fees Earned

$1,000

________

159) Determine the beginning owner's equity of a business having an ending 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. 160) Determine the ending owner's equity of a business having a beginning 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. 161) 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. Identify which entries below are an adjusting entry (AE) or a closing entry (CE).

162) ________ Wages Expense Wages Payable

$450

163) 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

Example: Cash

164) Supplies

Column 1 Asset

Column 2 Debit

Column 3 Balance Sheet

Column 4 Permanent

________

165) A summary of selected ledger accounts appears 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?

Identify which entries below are an adjusting entry (AE) or a closing entry (CE).

166) ________ Income Summary Utilities Expense

$700

167) ________ Income Summary Capital

$550

$700

$550

Column 2 Debit

Column 3 Balance Sheet

Column 4 Permanent

168) Depreciation Expense

________

169) Withdrawals

________

Example: Cash

170) Name the steps in the manual accounting cycle. 171) 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

172) 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

Identify which entries below are an adjusting entry (AE) or a closing entry (CE).

173) ________ Income Summary Depreciation Expense

$250

174) 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

175) What (if any) errors can you spot in the following post-closing trial balance for Red Sun Company on December 31, 20XX? Red Sun Company Post-Closing Trial Balance December 31, 20XX

Cash Accounts Receivable Prepaid Insurance Supplies Accounts Payable Salaries Payable R. Blue, Capital Totals

Debit 1,000 2,200 2,000 300

5,500

Credit

2,000 1,200 2,300 5,500

Example: Cash

176) Capital

Column 1 Asset

________

Column 2 Debit

Column 3 Balance Sheet

________

Identify which entries below are an adjusting entry (AE) or a closing entry (CE).

177) ________ Capital Withdrawals

$1,000

178) ________ Income Summary Insurance Expense

$12,000

$1,000

$12,000

179) Why will the Income Summary account never appear on a financial statement?

Column 4 Permanent

________

180) What (if any) errors can you spot in the following post-closing trial balance for Luco Company on December 31, 20XX? Luco Company Post-Closing Trial Balance December 31, 20XX

Cash Accounts Receivable Prepaid Insurance Accounts Payable Salaries Payable R. Blue, Capital Fees Earned Totals

Debit 2,200 1,000 2,300

5,500

Credit

1,500 1,700 1,300 1,000 5,500

181) From the following accounts, prepare in proper form a post-closing trial balance for Vemer Company on December 31, 20XX 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

182) 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

Example: Cash

183) Interest Revenue________

________

Column 2 Debit

________

Column 3 Balance Sheet

Column 4 Permanent

________

184) What are the major goals of the closing process? 185) When using accounting software, is it still necessary to "close the books" at year-end? 186) 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 Debit

Account Service Revenue Wages Expense Rent Expense Supplies Expense Insurance Expense Net Loss

550 250 100 50 950 $950

Credit 900

900 50 $950

187) 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. 188) 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. 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

189) Accumulated Depreciation

Column 1 Asset

Column 2 Debit

Column 3 Balance Sheet

Column 4 Permanent

________

190) From the following accounts, prepare in proper form a post-closing trial balance for Everett Company on December 31, 20XX. 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

Identify which entries below are an adjusting entry (AE) or a closing entry (CE). $250 191) ________ Depreciation Expense Accumulated Depreciation

$250

Example: Cash

192) Interest Receivable ________

Column 1 Asset

________

Column 2 Debit

________

Column 3 Balance Sheet

Column 4 Permanent

________

193) 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

194) From the following accounts, prepare in proper form a post-closing trial balance for Dave's Dog Watching on December 31, 20XX. (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

195) 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. Interest Receivable 2. Interest Revenue 3. Salaries Expense 4. Prepaid Property Taxes 5. Interest Payable 6. Equipment 7. Interest Expense 8. Insurance Expense

196) 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

Income Statement Debit

Net Income

350 300 225 125 1,000 725 $1,725

Credit 1,725

_____ 1,725 _____ $1,725

197) From the following accounts, prepare in proper form a post-closing trial balance for Blue Star Company on December 31, 20XX. 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

198) Explain how the closing entry would be affected if there was a net loss instead of a net income. 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

199) Interest Expense ________

Column 1 Asset

________

Column 2 Debit

________

Column 3 Balance Sheet

Column 4 Permanent

Answer Key Testname: CHAPTER 5 1) C 2) C 3) D 4) D 5) A 6) D 7) D 8) C 9) B 10) B 11) D 12) A 13) D 14) D 15) D 16) B 17) A 18) B 19) D 20) D 21) B 22) C 23) A 24) B 25) D 26) A 27) A 28) C 29) C 30) C 31) D 32) D 33) A 34) C 35) D 36) D 37) D 38) B 39) C 40) B 41) D 42) C 43) C 44) D 45) D 46) A 47) B 48) C 49) A 50) D 27

Answer Key Testname: CHAPTER 5 51) D 52) A 53) B 54) B 55) A 56) D 57) A 58) C 59) A 60) B 61) B 62) D 63) D 64) D 65) B 66) C 67) B 68) D 69) A 70) D 71) D 72) B 73) D 74) B 75) B 76) D 77) A 78) B 79) C 80) A 81) B 82) B 83) B 84) D 85) D 86) D 87) B 88) A 89) D 90) A 91) C 92) A 93) D 94) B 95) B 96) FALSE 97) FALSE 98) FALSE 99) FALSE 100) FALSE 28

Answer Key Testname: CHAPTER 5 101) FALSE 102) TRUE 103) TRUE 104) TRUE 105) TRUE 106) FALSE 107) FALSE 108) FALSE 109) FALSE 110) FALSE 111) FALSE 112) TRUE 113) FALSE 114) FALSE 115) FALSE 116) FALSE 117) TRUE 118) TRUE 119) TRUE 120) FALSE 121) TRUE 122) FALSE 123) TRUE 124) TRUE 125) TRUE 126) TRUE 127) TRUE 128) TRUE 129) TRUE 130) FALSE 131) TRUE 132) TRUE 133) FALSE 134) TRUE 135) FALSE 136) TRUE 137) FALSE 138) FALSE 139) TRUE 140) FALSE 141) TRUE 142) TRUE 143) TRUE 144) FALSE 145) FALSE 146) FALSE 147) TRUE 148) TRUE 149) FALSE 150) FALSE 29

Answer Key Testname: CHAPTER 5 151) CE 152) 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. 153) Interest Payable:liability credit balance sheet permanent 154) 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. 155) AE 156) Accounts Payable: liability credit balance sheet permanent 157) Fees Earned: revenue credit income statement temporary 158) AE 159) $1,050 [$4,300 + $1,500 - $4,750] 160) $450 [$6,200 - $2,250 - $3,500] 161) $23,000 [($4,000 + $1,500) + ($10,700 - $2,000 + $15,600 - $6,800)] 162) AE 163) 1. R 2. N X 3. R 4. R 5. N X 6. R 7. N X 8. N X 164) Supplies: asset debit balance sheet permanent 165) 1. $6,500 2. $4,250 3. $17,000 4. $12,750 166) CE 167) CE 168) Depreciation Expense: expense debit income statement temporary 169) Withdrawals: withdrawals debit stmt of owner's equity temporary 170) (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 171) 1. R 2. N X 3. N X 4. R 5. R 6. R 7. N X 8. N X 30

Answer Key Testname: CHAPTER 5 172) Service Revenue Income Summary

20,000

Income Summary Salary Expense Rent Expense Depreciation Expense Interest Expense Insurance Expense

22,500

Capital Income Summary

2,500

Capital Withdrawals 173) CE 174) Service Revenue Income Summary

500

45,000

Income Summary Salary Expense Rent Expense Depreciation Expense Interest Expense Insurance Expense

32,750

Income Summary Capital

12,250

20,000

12,000 8,000 1,000 500 1,000

2,500

500

45,000

15,000 12,000 2,000 2,500 1,250

12,250

Capital 10,000 Withdrawals 10,000 175) No errors are apparent. 176) Capital: capital credit stmt of owner's equity & balance sheet permanent 177) CE 178) CE 179) 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. 180) 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.

Answer Key Testname: CHAPTER 5 181)

Vemer Company Post-Closing Trial Balance December 31, 20XX

Cash Accounts Receivable Equipment Accumulated Depreciation Accounts Payable J. Vemer, Capital Totals 182) Accounting Fees Earned Income Summary

Debit 1,000 2,000 6,000

9,000 10,000 10,000

Income Summary Insurance Expense Wages Expense Depreciation Expense

6,000

Income Summary C. Bent, Capital

4,000

Credit

2,000 500 6,500 9,000

1,000 3,000 2,000

4,000

C. Bent, Capital 2,200 C. Bent, Withdrawals 2,200 183) Interest Revenue:revenuecredit income statement temporary 184) 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. 185) 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.

Answer Key Testname: CHAPTER 5 186) Service Revenue Income Summary

900

Income Summary Wages Expense Rent Expense Supplies Expense Insurance Expense

950

Monaghan, Capital Income Summary

900

550 250 100 50

Monaghan, Capital 450 Monaghan, Withdrawal 450 187) $7,550 [$4,300 - $1,500 + $4,750] 188) $11,950 [$6,200 + $2,250 + $3,500] 189) Accumulated Depreciation: contra-asset credit Everett Company 190) Post-Closing Trial Balance December 31, 20XX

Cash Accounts Receivable Supplies Prepaid Insurance Accounts Payable Salaries Payable Everett, Capital Totals 191) AE 192) Interest Receivable: asset 193) Fees Earned Income Summary

Debit 7,450 4,600 500 1,200

13,750

balance sheet

Credit

2,290 1,660 9,800 13,750

debit balance sheet 100,000 100,000

Income Summary Salary Expense Rent Expense Depreciation Expense Supplies Expense Miscellaneous Expense

81,250

Income Summary Capital

18,750

Capital Withdrawals

25,000

permanent

27,000 17,500 20,000 12,500 4,250

18,750

25,000

permanent

Answer Key Testname: CHAPTER 5 194)

Dave's Dog Watching Post-Closing Trial Balance December 31, 20XX

Debit Cash 2,000 Accounts Receivable 3,125 Equipment 5,000 Accumulated Depreciation Accounts Payable Logan, Capital Totals 10,125 195) 1. R 2. N X 3. N X 4. R 5. R 6. R 7. N X 8. N X 196) Cutting Fees 1,725 Income Summary 1,725 Income Summary Wages Expense Rent Expense Supplies Expense Insurance Expense

1,000

Income Summary Bob, Capital

725

Credit

1,500 900 7,725 10,125

350 300 225 125

725

Bob, Capital 500 Bob, Withdrawal 500 Blue Star Company 197) Post-Closing Trial Balance December 31, 20XX

Cash Accounts Receivable Supplies Prepaid Insurance Accounts Payable Salaries Payable R. Blue, Capital Totals

Debit 1,000 2,200 300 2,000

5,500

Credit

2,000 1,200 2,300 5,500

Answer Key Testname: CHAPTER 5 198) 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. 199) Interest Expense:expense debit income statement temporary

Chapter 6 Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following is a TRUE statement concerning Credit Memorandums? A) Results in a decrease in Sales Returns and Allowances B) Results in an increase in Sales Returns and Allowances C) Has no effect on net sales D) Increases sales

2) What is the gross profit if 10 units are sold for $100 each and the cost of the sale is $50 per unit? A) $1,000 B) $0 C) $500 D) None of these answers are correct.

3) 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 Cost of Goods Sold for $2,250; debit Purchase Discounts for $250; credit Inventory $2,500 C) Debit Accounts Receivable for $2,500; credit Inventory for $2,500 D) Debit Inventory for $2,500; credit Tile Sales for $2,500

4) 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) $400.00 B) $202.95 C) $195.00 D) $205.00

5) 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.

6) 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 $2,250; credit Tile Sales for $2,250 B) Debit Accounts Receivable for $2,205; credit Lever Sales for $2,205 C) Debit Accounts Receivable for $2,205; debit Sales Discount for $45, and credit Lever Sales for $2,250 D) Debit Cash for $2,250; credit Lever Sales for $2,250

7) When using a periodic inventory system, the Inventory account is updated A) when cash is received. B) when revenue is earned. C) when a sale is made. D) when a count is taken.

8) The accounts receivable subsidiary ledger A) should equal the controlling account in the general ledger. B) is not kept in the same book as Accounts Receivable. C) is organized in alphabetical order. D) All of the above are correct.

9) If a credit memorandum is issued, what account will be increased on the seller's books? A) Sales Discount B) Sales Returns and Allowances C) Accounts Receivable D) Accounts Payable

10) Credit terms of 1/10, n/30 mean that A) a 1% discount is allowed if the bill is paid within 10 days, or the entire amount is due within 30 days. B) a discount is allowed if the bill is paid after 10 days. C) a discount is allowed if the bill is paid within 30 days. D) a 1% discount is allowed if the customer pays the bill within 30 days.

10)

11) When using a perpetual inventory system, Cost of Goods Sold and the Inventory accounts are updated: A) at the end of the period. B) when service revenue is earned. C) when cash is received. D) when a sale is made.

11)

12) Entries to customers' accounts for credit sales are posted in the A) fixed asset subsidiary ledger. B) accounts receivable subsidiary ledger. C) cash subsidiary ledger. D) accounts payable subsidiary ledger.

12)

13) Browine sold goods for $180 to a charge customer. The customer returned for credit $15 worth of goods. Terms of the sale were 2/10, n/15. If the customer pays the amount owed within the discount period, what is the amount the customer should pay? A) $180.00 B) $176.40 C) $161.70 D) $165.00

13)

14) Customer returns of product in new condition A) reduce cost of goods sold. C) increase inventory.

B) reduce inventory. D) both A and C are correct.

14)

15) Returning damaged products to a supplier A) increases inventory. C) reduces cost of goods sold.

B) increases cost of goods sold. D) reduces inventory.

15)

16) 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 periodic system? A) Debit Cost of Goods Sold for $2,500; credit Inventory for $2,500 B) Debit Accounts Receivable for $2,500; credit Inventory for $2,500 C) No inventory adjustment is made at the time of sale. D) Debit Inventory for $2,500; credit Tile Sales for $2,500

16)

17) Which account is used by management to keep track of possible customer dissatisfaction? A) Sales Returns and Allowances B) Cost of Goods Sold C) Sales D) Sales Discounts

17)

18) The principal ledger containing all the balance sheet and income statement accounts is the A) customers' ledger. B) creditors' ledger. C) general ledger. D) subsidiary ledger.

18)

19) The cash payments journal is used for A) recording cash receipts. C) recording purchases on account.

B) recording cash payments. D) recording credit sales.

20) The sales journal is used for A) recording cash receipts. C) recording purchases of merchandise.

B) recording cash sales. D) recording credit sales.

19)

20)

21) If a credit memorandum is issued, what account will be increased on the seller's books? A) Accounts Receivable B) Sales Discount C) Sales Returns and Allowances D) Accounts Payable

21)

22) A checkmark in the PR column in the general journal means A) the amount was recorded in the subsidiary ledger. B) the entry was audited. C) the entry was recorded correctly. D) the amount was posted to the controlling account.

22)

23) 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) $25 B) $20 C) $1,250 D) $1,000

23)

24) 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 Accounts Receivable subsidiary ledger. B) the assets to be overstated. C) the net income for the period to be overstated. D) the net income for the period to be understated.

24)

25) Steps taken to reduce losses from credit sales do NOT include A) allowing a cash discount for prompt payment. B) investigating each customer's credit rating. C) reducing the number of purchases made each month. D) prompt follow up investigation when expected payments are not received.

25)

26) 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 Accounts Receivable; credit Sales for $480 B) Debit Cash for $470.40, debit Sales Discount for $9.60; and credit Sales for $480 C) Debit Cash for $470.40, debit Sales Discount for $9.60; and credit Accounts Receivable for $480 D) Debit Cash; credit Accounts Receivable for $480

26)

27) Which account is used by management to keep track of possible customer dissatisfaction? A) Sales Returns and Allowances B) Cost of Goods Sold C) Sales Discount D) Sales

27)

28) In a perpetual inventory system, the inventory account A) is updated after every sale. B) is only updated at the end of period. C) is an asset account. D) both A and C are correct.

28)

29) The purpose of the accounts receivable subsidiary ledger includes all of the following except A) to provide supporting information for the general ledger control account. B) to keep a running balance of each customer's account. C) to provide information to help collect the customer's account. D) to keep a running balance of creditor's accounts.

29)

30) When a customer pays an account, the transaction would be recorded in the A) sales journal. B) cash receipts journal. C) purchases journal. D) cash payments journal.

30)

31) 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 Inventory for $1,000; credit Lever Sales for $1,000 B) Debit Accounts Receivable for $1,000; credit Inventory for $1,000 C) Debit Cost of Goods Sold for $1,000; credit Inventory for $1,000 D) Debit Cost of Goods Sold for $980; debit Purchase Discounts for $20; credit Inventory $1,000

31)

32) The cash receipts journal is used for A) recording purchases on account. C) recording credit sales.

32)

B) recording cash receipts. D) recording cash payments.

33) Every controlling account must have its own A) journal. C) revenue ledger.

B) subsidiary ledger. D) general ledger.

33)

34) Net sales equal A) gross sales - sales returns and allowances. B) gross sales. C) gross sales - sales returns and allowances - sales discounts. D) sales discounts.

34)

35) Accounts of a single type (i.e., Accounts Receivable) are kept in this form of ledger. A) Subsidiary ledger B) Supplemental ledger C) General ledger D) Additional ledger

35)

36) Which account is not used with a perpetual inventory system? A) Purchase Returns and Allowances B) Inventory C) Sales Returns and Allowances D) Cost of Goods Sold

36)

37) Credit terms of 2/5, n/15 mean that A) a discount is allowed if the bill is paid within 15 days. B) a discount is allowed if the bill is paid after 5 days. C) a 2% discount is allowed if the customer pays the bill within 15 days. D) 2% discount is allowed if the bill is paid within 5 days, or the entire amount is due within 15 days.

37)

38) 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 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.

38)

39) A record showing the activity and the balances owed by each customer is called the A) accounts receivable subsidiary ledger. B) general ledger. C) sales journal. D) cash receipts journal.

39)

40) 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) $230.72 C) $228.00 D) $225.72

40)

41) 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.

41)

42) What does a check mark in the PR column of a journal indicate? A) An amount has been posted to the controlling account. B) An amount has been posted to the general ledger. C) Nothing has to be posted until the end of the month for this transaction. D) During the month the subsidiary ledger is updated.

42)

43) Periodic inventory systems require updating of the inventory account A) after each purchase. B) on a daily basis. C) after each sale. D) only at the end of a period.

43)

44) Gross profit is A) sales revenue less inventory. B) sales revenue less operating expenses. C) sales revenue less cost of goods sold. D) sales revenue less sales returns and allowances.

44)

45) 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 for $607.60, debit Sales Discount for $12.40; and credit Accounts Receivable for $620 B) Debit Cash for $607.60, debit Sales Discount for $12.40; and credit Sales for $620 C) Debit Accounts Receivable; credit Sales for $620 D) Debit Cash; credit Accounts Receivable for $620

45)

46) Sold merchandise on account would be recorded with A) a debit to Capital. B) a debit to an asset account. C) a debit to a liability account. D) None of these are correct.

46)

47) 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 never equal the control account in the general ledger. C) The subsidiary ledger accounts will equal the amount in the Sales account. D) All of these answers are correct.

47)

48) 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 Sales $375; credit Accounts Receivable $375. B) debit Accounts Receivable $371.25; debit Sales Discounts $3.75; credit Sales $375. C) debit Cash $375; credit Sales $375. D) debit Accounts Receivable $375; credit Sales $375.

48)

49) If a credit memorandum is issued, what account will be decreased on the seller's books? A) Accounts Payable B) Sales Discount C) Accounts Receivable D) Sales Returns and Allowances

49)

50) Which of the following statements about subsidiary ledgers is MOST accurate? A) The accounts receivable 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) The subsidiary ledger account will equal the amount in the sales account less sales discounts.

50)

51) 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 Accounts Receivable 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 $6,187.50; debit Sales Discount for $62.50, and credit Tile Sales for $6,250 D) Debit Cash for $6,250; credit Tile Sales for $6,250

51)

52) Accounts of a single type are kept in this ledger. A) subsidiary ledger. C) additional ledger.

52)

B) supplemental ledger. D) None of these answers are correct.

53) When using a subsidiary ledger, the Accounts Receivable account in the general ledger is called the A) master account. B) receivable account. C) controlling account. D) subsidiary account.

53)

54) 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.

54)

55) 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 2% discount is allowed if the customer pays the bill within 30 days. C) a discount is allowed if the bill is paid within 30 days. D) a 2% discount is allowed if the bill is paid within 15 days, or the entire amount is due within 30 days.

55)

56) A characteristic of Sales Returns and Allowances is that A) it has a debit balance. B) it is a contra-revenue account. C) it tracks returns from customers. D) All of these answers are correct.

56)

57) The purchases journal is used for A) recording cash receipts. C) recording purchases on account.

57)

B) recording cash purchases. D) recording credit sales.

58) 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 net income for the period to be overstated. B) the sales discount account to be understated. C) the net income for the period to be understated. D) the sales account to be overstated.

58)

59) Cost of goods sold is A) total cost of merchandise sold during the period. B) total cost of purchases less opening inventory. C) total cost of inventory purchases during the period. D) total cost of returns for the period.

59)

60) Merchants who buy goods at distributor's prices for resale to their customers may be known as A) retailers. B) distributors. C) merchandisers. D) All of the above are correct.

60)

61) 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 Cash for $990, debit Sales Discount for $10, and credit Flower Sales for $1,000 C) Debit Cash, credit Accounts Receivable for $990 D) Debit Accounts Receivable, credit Flower Sales for $1,000

61)

62) The arrangements between buyer and seller as to when payments for merchandise are to be made are called A) gross cash. B) net cash. C) cash on demand. D) credit terms.

62)

63) Amelia's Pet Supplies received payment in full for goods sold within the discount period on a $650 sales invoice, terms 3/10, n/30. Which entry records this transaction? A) Debit Cash for $630.50, debit Sales Discount for $19.50; and credit Sales for $650 B) Debit Cash; credit Accounts Receivable for $650 C) Debit Accounts Receivable; credit Sales for $650 D) Debit Cash for $630.50, debit Sales Discount for $19.50; and credit Accounts Receivable for $650

63)

64) Logan's Art studio was moving and sold furniture that was no longer needed for cash. The entry would include A) a credit to Sales. B) a debit to Furniture. C) a credit to Furniture. D) a debit to Sales.

64)

65) 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) $63.00 B) $71.54 C) $93.00 D) $91.14

65)

66) A credit memorandum is sent to a customer for the purpose of A) informing the customer an amount has been added to its account. B) informing the customer it is terminated. C) informing the customer its account limit is being increased. D) informing the customer an amount has been deducted from its account.

66)

67) What is the gross profit if 4 units are sold for $50 each and the cost of the sale is $40 per unit? A) $40 B) $200 C) $160 D) None of these answers are correct.

67)

68) A merchandiser 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.

68)

69) The sales journal is used for A) recording cash receipts. C) recording cash sales.

69)

B) recording credit sales. D) recording purchases of merchandise.

70) 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 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.

70)

71) Kenny returned $120 of merchandise to Red Sun. His original purchase was $300, with terms 3/10, n/15. If Kenny pays the balance of his account after the discount period, how much should he pay? A) $180.00 B) $174.60 C) $291.00 D) $300.00

71)

72) A merchandiser received payment, within the discount period, for merchandise sold previously. This will be recorded with A) a debit to Capital. B) a debit to a liability account. C) a credit to an asset account. D) None of these are correct.

72)

73) What is the gross profit if 6 units are sold for $75 each and the cost of the sale is $20 per unit? A) $330 B) $120 C) $450 D) None of these answers are correct.

73)

74) 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) $75.00 B) $49.50 C) $50.00 D) $69.25

74)

75) The normal balance of the Sales Returns and Allowances account is A) a debit. B) zero. C) a credit. D) It doesn't have a normal balance.

75)

76) 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.

76)

77) Recording to the accounts receivable ledger is done A) when requested. C) monthly.

77)

B) daily. D) bi-weekly.

78) Which of the following is NOT a main type of Special Journal? A) Personnel Journal B) Sales Journal C) Cash Payments Journal D) Cash Receipts Journal

78)

79) 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.

79)

80) 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.

80)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 81) Terms of 2/10, n/30 means that a customer is allowed a 2% discount if the bill is paid within 10 days.

81)

82) The Payroll Journal is not considered a special journal.

82)

83) 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.

83)

84) Gross Sales equals all the cash and credit sales made by a business for a specific period.

84)

85) The sundry accounts column in the cash receipts journal is used by accountants when they don't have time to determine which account should be used in a transaction.

85)

86) Gross Sales equals all the cash and credit sales made by a business for a specific period.

86)

87) Accounts in the accounts receivable subsidiary ledger are listed in order of how much is owed.

87)

88) A special ledger for the controlling account in the general ledger would be called a subsidiary ledger.

88)

89) Credit terms of 3/10 permit the customer to deduct 3% of the sale if payment is made within 10 days.

89)

90) Sales discounts are not taken on returns.

90)

91) An example of a subsidiary ledger is the accounts receivable ledger.

91)

92) Recording in the accounts receivable subsidiary ledger is reserved until the end of the month.

92)

93) Receipts of cash should generally be recorded in the Cash Receipts Journal.

93)

94) The controlling account is found in the subsidiary ledger and it summarizes or controls the general ledger account.

94)

95) The time a customer is granted to pay the bill is the discount period.

95)

96) When merchandise is sold for cash, the transaction is recorded in the cash receipts journal.

96)

97) The decision to allow a customer credit terms is sometimes risky.

97)

98) An example of a special journal is the accounts receivable ledger.

98)

99) Recording to the accounts receivable ledger should be performed at the end of the month.

99)

100) To show that you have recorded an amount in the subsidiary ledger, you use a checkmark.

100)

101) A checkmark is placed in the PR column to show an amount has been posted to a subsidiary account.

101)

102) Physical inventory counts are not required when a perpetual inventory system is used as the inventory is perpetually up to date.

102)

103) "SJ1" in the Sales Journal means that the accounts receivable subsidiary ledger has been updated.

103)

104) Cash receipts are recorded in the Sales Journal.

104)

105) The sundry accounts column in the cash receipts journal is a miscellaneous accounts column that provides flexibility for recording infrequent transactions.

105)

106) The sales journal for a company using a periodic inventory system would have a Cost of Goods Sold and Inventory column.

106)

107) Individual credit customer accounts are kept in the general ledger.

107)

108) Credit terms remain the same from company to company.

108)

109) Physical counts are not required when a periodic inventory system is used as the inventory is never up to date.

109)

110) Contra-Revenue accounts are recorded on the Balance Sheet.

110)

111) Posting to the general ledger from the special journals should be done at the end of the month.

111)

112) Sales discounts are usually not an incentive for the customer to pay early.

112)

113) To show that you have posted to an account in the General Ledger, you use a checkmark.

113)

114) An example of a subsidiary ledger is the payroll journal.

114)

115) A special journal, like the Sales Journal, requires more posting than the general journal because the general journal has special column totals.

115)

116) Posting to the general ledger from the special journals should be done at the end of each day.

116)

117) The balance in the Accounts Receivable account is $2,100 debit. Therefore, the balances in the subsidiary ledger should total $2,100.

117)

118) An example of a subsidiary ledger is the purchases account.

118)

119) The accounts receivable subsidiary ledger shows the amount owed from each customer.

119)

120) The general ledger and the accounts receivable subsidiary ledger are the same book.

120)

121) The balance in the Accounts Receivable account is a $4,500 debit. Therefore, the total balance in the subsidiary ledger should be $4,500.

121)

122) When merchandise is sold on account, the transaction is recorded in the cash receipts journal.

122)

123) It is a requirement that all customers have identical credit terms.

123)

124) Terms of 2/10, n/30 means that a customer is allowed a 10% discount in 30 days.

124)

125) The sales journal for a company using a perpetual inventory system would have a Cost of Goods Sold and Inventory column.

125)

126) A controlling account is a listing of all the customers and the account balances.

126)

127) Service companies must keep careful track of the cost of inventory.

127)

128) Sales is a revenue account.

128)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 129) Refer to the Rowdy Ribbons question above. What amount would be debited to the AR control account for the month? 130) July 16 Sold merchandise with an invoice price of $3,500 and a cost of $2,000 to Carter and Co. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 131) Refer to the Rowdy Ribbons question. What is the amount credited to Inventory for the month? 132) Distinguish between a cash discount and a trade discount. 133) July 28 Received full payment from Taylor Co. ________ ________ ________ ________ ________ ________ 134) Explain the difference between a return and an allowance. 135) Refer to the Rowdy Ribbons question above. What amount would the WMS Company owe at month end, assuming no payments were received? 136) 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 within the discount period. 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.

137) Owner's Capital

Column 1

Column 2

Column 3

________

138) 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. b. c.

________ ________

d. e.

Sold inventory on account to T. Stark. P. Quill invested additional cash in the business T. Stark made payment. No discount was given. Made a sale on account to B. Banner. 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.

139) Professional Fees Earned

Column 1

Column 2

Column 3

________

140) Refer to the Fruit & Company question above. What amount would the ABC Company owe at month end, assuming no payments were received? 141) Compare and discuss a discount period versus a credit period. 142) July 16 Sold merchandise with an invoice price of $6,000 and a cost of $4,500 to the 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.

143) Sales Discounts

Column 1

Column 2

Column 3

________

144) 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. Column 1

Column 2

Column 3

145) Store Supplies

________

146) Sales Returns and Allowances

________

147) Refer to the previous question. What is the amount credited to Sales for the month? 148) 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 20XX 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 20XX:

Date ________ ________ ________ ________ ________ ________ ________ ________ ________

Account Debited ________ ________ ________ ________ ________ ________ ________ ________ ________

Terms ________ ________ ________ ________ ________ ________ ________ ________ ________

Accts. Rec., Dr. Sales, Cr. ________ ________ ________ ________ ________ ________ ________ ________ ________

Cost of Goods Sold, Dr. Inventory, Cr. ________ ________ ________ ________ ________ ________ ________ ________ ________

149) Define and compare the accounts receivable subsidiary ledger with the controlling account, Accounts Receivable. 150) Refer to the Rowdy Ribbons question above. What is the Gross Profit for the month? 151) Refer to the Rowdy Ribbons 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.

152) Sales

Column 1

Column 2

Column 3

________

153) Refer to the Fruit & Company question above. What amount would be debited to the AR control account for the month? 154) Determine the amount to be paid after the discount period has expired for a previous sale with an invoice price of $10,500, subject to credit terms of 1/10, n/30.

155) 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. 156) Refer to the Rowdy Ribbons question above. What amount would the XYZ Company owe at month end, assuming no payments were received? 157) Refer to the Fruit & Company question above. What amount would the WMS Company owe at month end, assuming no payments were received? 158) 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. 159) 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, 20XX 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 $1,105. 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, 20XX:

Date ________ ________ ________ ________ ________ ________ ________ ________ ________

Account Debited ________ ________ ________ ________ ________ ________ ________ ________ ________

Terms ________ ________ ________ ________ ________ ________ ________ ________ ________

Accts. Rec., Dr. Sales, Cr. ________ ________ ________ ________ ________ ________ ________ ________ ________

Cost of Goods Sold, Dr. Inventory, Cr. ________ ________ ________ ________ ________ ________ ________ ________ ________

160) Refer to the Rowdy Ribbons question. What is the amount debited to Cost of Goods Sold for the month? 161) 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. 162) What does a check mark in the PR column of the General Journal indicate? 163) Why are sales returns and allowances recorded in the general journal instead of in a special journal? 164) 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. 15

165) 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

Debit

Credit

GENERAL LEDGER Cash 101

Inventory 110

Sales Discount 402

Brad. Cap 301

Accounts Rec 102

Sales 401

Sales Ret.and All. 403

Cost of Goods Sold 501

SUBSIDIARY LEDGER H. Holand

T. Traer

166) Refer to the Fruit & Company question above. What amount would the XYZ Company owe at month end, assuming no payments were received? 167) 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. 168) If cash flow is so important to merchandisers, why do they extend credit to their customers? 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.

169) Inventory

Column 1

Column 2

Column 3

________

170) 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 within the discount period. 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

171) Cost of Goods Sold

________

172) Cleaning Expense

________

173) Store Rent Expense

________

174) 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. 175) Explain the difference between posting and recording. 176) Determine the amount to be paid after the discount period has expired for a previous sale with an invoice price of $12,128, subject to credit terms of 2/10, n/30.

177) Refer to the Fruit & Company question. What is the amount debited to Cost of Goods Sold for the month? 178) Refer to the previous question. What is the amount credited to Sales for the month? 179) 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. b. c.

________ ________

d. e.

Sold merchandise on account to M. Mahar. P. Pratt invested additional cash in the business Received payment from M. Mahar. No discount was given. Made a cash sale. Issued a credit memo to B. Briggs. Goods returned to inventory.

180) July 20 Taylor Co. returned merchandise in good condition with an invoice price of $1,000 and a cost of $800. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 181) Explain the role of a controlling account. 182) July 25 Received full payment from Carter and Co. ________ ________ ________ ________ ________ ________ 183) Refer to the Fruit & Company question. What is the amount credited to Inventory for the month? 184) Refer to the Fruit & Company question above. What is the Gross Profit for the month?

Answer Key Testname: CHAPTER 6 1) B 2) C 3) A 4) D 5) B 6) A 7) D 8) D 9) B 10) A 11) D 12) B 13) C 14) D 15) D 16) C 17) A 18) C 19) B 20) D 21) C 22) A 23) C 24) C 25) C 26) C 27) A 28) D 29) D 30) B 31) C 32) B 33) B 34) C 35) A 36) A 37) D 38) B 39) A 40) C 41) D 42) D 43) D 44) C 45) A 46) B 47) A 48) D 49) C 50) A 19

Answer Key Testname: CHAPTER 6 51) A 52) A 53) C 54) A 55) D 56) D 57) C 58) D 59) A 60) D 61) A 62) D 63) D 64) C 65) B 66) D 67) A 68) B 69) B 70) A 71) A 72) C 73) A 74) B 75) A 76) A 77) B 78) A 79) D 80) C 81) TRUE 82) FALSE 83) FALSE 84) TRUE 85) FALSE 86) TRUE 87) FALSE 88) TRUE 89) TRUE 90) TRUE 91) TRUE 92) FALSE 93) TRUE 94) FALSE 95) FALSE 96) TRUE 97) TRUE 98) FALSE 99) FALSE 100) TRUE 20

Answer Key Testname: CHAPTER 6 101) TRUE 102) FALSE 103) FALSE 104) FALSE 105) TRUE 106) FALSE 107) FALSE 108) FALSE 109) FALSE 110) FALSE 111) TRUE 112) FALSE 113) FALSE 114) FALSE 115) FALSE 116) FALSE 117) TRUE 118) FALSE 119) TRUE 120) FALSE 121) TRUE 122) FALSE 123) FALSE 124) FALSE 125) TRUE 126) FALSE 127) FALSE 128) TRUE 129) $9,050 3,500 130) Accounts Receivable - Carter Sales 3,500 Cost of Goods Sold 2,000 Inventory 2,000 131) $7,544 132) 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. 5,000 133) Cash Accounts Receivable - Taylor 5,000 134) 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. 135) $4,350 136) $75,982.50 137) Owner's Capital: owner's equity credit balance sheet

Answer Key Testname: CHAPTER 6 138)

Account(s) Account(s) Debit Credit Journal a. Accts. Rec./T. Stark Sales S Cost of Goods Sold Inventory S b. Cash P. Quill, Capital CR c. Cash Accts. Rec./T. Stark CR d. Accts. Rec./B. Banner Sales S Cost of Goods Sold Inventory S e. Sales Returns and Allowances Accts. Rec./B. Banner GJ Inventory Cost of Goods Sold GJ 139) Professional Fees Earned: revenue income income statement 140) $1,700 141) 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. 6,000 142) Accounts Receivable - Taylor Sales 6,000 Cost of Goods Sold 4,500 Inventory 4,500 143) Sales Discounts: contra-revenue debit income statement 144) 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. 145) Store Supplies: asset debit balance sheet 146) Sales Returns and Allowances: contra-revenue debit income statement 147) $9,000 Account Accts. Rec. Dr. Cost of Goods Sold, Dr. 148) 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

9,050

7,544

Answer Key Testname: CHAPTER 6 149) 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. 150) $1,506 151) $1,900 152) Sales: revenue credit income statement 153) $9,000 154) $10,500.00 155) $76,750 156) $2,800 157) $5,000 158) $81,639 Account Accts. Rec. Dr. Cost of Goods Sold, Dr. 159) 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 1,105 April 28 WMS Company 2/10, n/30 2,200 1,870 Totals 9,000 7,573 160) $7,544 161) $10,395.00 162) The check mark in the PR column of the General Journal indicates that the amount has been recorded in the corresponding subsidiary ledger for that account. 163) Special journals are used to reduce the administrative burden of entering many transactions in high volume accounts. If companies sell high-quality goods and do not expect many sales returns and allowances, a special journal is unnecessary as the volume of transactions will be low. Instead, returns and allowances are recorded in the general journal. 164) 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. 165) GENERAL JOURNAL Date Oct

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 23

Credit 15,000

2,500 2,000 2,000

Answer Key Testname: CHAPTER 6

Inventory

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

Cash Sales Discount Accounts Receivable/ T. Traer

101 402 102/X

1,089 11

1,200

1,000

2,500

100

1,100

GENERAL LEDGER Cash (101) 15,000 2,475 1,089 18,564 Accounts Rec (102) 2,500 2,500 1,200 100 1,100 0

Inventory (140) 2,000 1,000 80 2,920 Sales (401) 2,500 1,200 3,700 7,400

Sales Discount (402) 25 11 36 72 Sales Ret.and All. 403 100

Brad. Cap (301) 15,000

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

166) $2,300 167) $11,885.44 168) A customer who is limited to making only cash purchases will buy less than when credit is available. 169) Inventory: asset debit balance sheet 24

Answer Key Testname: CHAPTER 6 170) $80,822.61 171) Cost of Goods Sold: expense debit income statement 172) Cleaning Expense: expense debit income statement 173) Store Rent Expense: expense debit income statement 174) 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. 175) 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. 176) $12,128 177) $7,573 178) $9,050 Account(s) Account(s) 179) Debit Credit Journal a. Accts. Rec./M. Mahar Sales S Cost of Goods Sold Inventory S b. Cash P. Pratt, Capital CR 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 1,000 180) Sales Returns and Allowances Accounts Receivable - Taylor 1,000 Inventory 800 Cost of Goods Sold 800 181) 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. 3,465 182) Cash Sales Discounts 35 Accounts Receivable - Carter 3,500 183) $7,573 184) $1,427

Exam

Chapter 7

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) On May 5, the Good Times Company purchased $10,000 of merchandise on account from the Dark Days Company, terms 1/10, n/15. The goods were shipped F.O.B. shipping point. The freight charge of $95 was paid by Dark Days Company and added to the invoice. The amount to record in the Inventory account is A) $9,005. B) $0. C) $10,095. D) $10,000.

2) 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 Inventory for $200, credit Cost of Goods Sold for $200. D) debit to Accounts Payable for $200, credit Cash for $200.

3) Amounts are posted to the Accounts Payable Subsidiary Ledger A) daily. B) at the end of the month. C) when financial statements are being prepared. D) whenever the accountant has some spare time.

4) The term F.O.B. means A) free on board. C) freight or bill.

B) freight order billing. D) found on base.

5) The term used when the seller is responsible for the cost of freight is A) F.O.B. destination. B) F.O.B. purchaser. C) F.O.B. shipping point. D) F.O.B. seller.

6) 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

7) Inventory is a(n) A) cost.

B) liability.

C) revenue.

D) asset.

8) 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.

9) 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.

10) The value of inventory includes A) Purchases + Freight B) Purchases + Freight - Purchases Discount - Purchases Returns and Allowances. C) Purchases + Freight - Purchases Returns and Allowances. D) Purchases + Purchases Returns and Allowances.

10)

11) A list of creditors with balances owed is called A) a schedule of accounts payable. C) a list of suppliers.

11)

B) a trade list. D) a schedule of accounts receivable.

12) The arrangements between buyer and seller as to when payments for merchandise are to be made are called A) gross cash. B) net cash. C) credit terms. D) cash on demand.

12)

13) 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 is expected to be $40. The amount to be recorded in the Accounts Payable Subsidiary ledger is A) $343. B) $390. C) $383. D) $350.

13)

14) The entry to record a payment sent on a $900 account after the 1% discount period has expired would include a A) debit to Accounts Payable for $900. B) debit to Cash for $891. C) debit to Accounts Payable for $891. D) credit to Inventory for $909.

14)

15) 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) $637.60 B) $638.00 C) $637.40 D) $639.00

15)

16) R&R Lumber reports purchases of $40,000, a purchase return of $6,000, and a purchase discount of $1,500. What is the impact on Inventory? A) $32,500 B) $36,000 C) $47,500 D) $38,500

16)

17) 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) $38,500 B) $51,500 C) $30,000 D) $28,500

17)

18) Bexon Machining reports purchases of $25,000, a purchase return of $3,500, a purchase discount of $50, and shipping charges of $600. What is the impact on Inventory? A) $22,050 B) $20,850 C) $22,150 D) $27,850

18)

19) 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) Purchased office supplies for cash C) Recorded the adjustment for depreciation D) Purchased merchandise inventory on account

19)

20) 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) $582 B) $510 C) $618 D) $600

20)

21) The entry to record a payment on a $900 account after the 3% discount period has expired would include a A) credit to Inventory for $873. B) debit to Accounts Payable for $873. C) debit to Accounts Payable for $900. D) debit to Cash for $873.

21)

22) 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.

22)

23) A debit memo for the return of merchandise is usually recorded in the A) cash payments journal. B) purchases journal. C) general journal. D) sales journal.

23)

24) The purchases journal is used for A) recording purchases of merchandise. C) recording cash purchases.

24)

B) recording credit sales. D) recording cash payments.

25) 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) $175.00. D) $190.00.

25)

26) 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) $712. B) $672. C) $700. D) $740.

26)

27) 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) $150 B) $98 C) $100 D) $147

27)

28) The special journal used to record all transactions involving payment of cash is a A) Purchases journal. B) Sales journal. C) Cash Receipts journal. D) Cash Payments journal.

28)

29) A list of creditors with ending balances is called A) a Schedule of Accounts Payable. C) a list of suppliers.

29)

B) a Schedule of Accounts Receivable. D) a trade list.

30) 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) $392 C) $360 D) $408 3

30)

31) Barnie's Cafe started with $4,000 in Inventory and had the following transaction totals for the month: 31) 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) $4,300.

C) $5,300.

D) $6,300.

32) Which account is the controlling account for the amounts owed to individual creditors? A) Accounts Payable in the subsidiary ledger B) Accounts Receivable in the general ledger C) Accounts Receivable in the subsidiary ledger D) Accounts Payable in the general ledger

32)

33) 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) $1,070. B) $1,080. C) $990. D) $1,000.

33)

34) Every transaction in a purchases journal includes A) a credit to Cash. C) a credit to Inventory.

34)

B) a credit to Accounts Payable. D) a debit to Office Supplies.

35) Which of the following events does NOT require a journal entry to be made? A) A supplier's invoice is received. B) A purchase requisition is completed. C) A purchase order is generated and delivered. D) Both B and C are correct.

35)

36) The entry to record a payment on a $900 account within the 3% discount period would include a A) debit to Accounts Payable for $900. B) debit to Accounts Payable for $873. C) credit to Inventory for $873. D) debit to Cash for $873.

36)

37) The term used when the purchaser is responsible for the cost of freight is A) F.O.B. seller. B) F.O.B. purchaser. C) F.O.B. shipping point. D) F.O.B. destination.

37)

38) The account used to record the buyer's shipping costs is A) Freight. B) Inventory. C) Discounts. D) Accounts Payable.

38)

39) Discounts which reduce the price for customers who buy items for resale or to produce other goods are A) trade discounts. B) cash discounts. C) purchase discounts. D) sale discounts.

39)

40) When the term F.O.B. destination is used, title passes A) when goods are shipped. B) when goods reach the halfway point. C) when goods reach the destination. D) when the buyer unpacks the goods.

40)

41) Ralph's Dairy started with $5,000 in Inventory and had the following transaction totals for the month: 41) 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) $5,300. B) $5,800. C) $6,300.

D) $4,300.

42) What is the price of the merchandise if the list price is $1,500, trade discount is 20%, and the terms are 3/10, n30? A) $1,455 B) $1,500 C) $1,164 D) $1,200

42)

43) 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) $580 C) $800 D) $784

43)

44) Accounts of a single type (i.e., Accounts Payable) are kept in this form of ledger. A) General ledger B) Supplemental ledger C) Employee ledger D) Subsidiary ledger

44)

of 45) Fred's Footwear started with $7,000 in Inventory and had the following transaction totals for the month45) 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 ??? If ending Inventory for the period is $11,000, what is the total of purchase discounts experienced? A) $4,000 B) $3,000 C) $1,000 D) $2,000

46) 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 understated. B) the accounts payable control account to not agree with the subsidiary ledger. C) the accounts receivable control account to not agree with the subsidiary ledger. D) net income to be overstated.

46)

47) Which special journal is used to record merchandise or other items bought on account? A) Purchases journal B) Sales journal C) Cash Payments journal D) Cash Receipts journal

47)

48) Credit terms of 2/10, n/30 mean that A) a 2% discount is allowed if the customer pays the bill within 30 days. B) a 2% 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 within 30 days. D) a discount is allowed if the bill is paid after 10 days.

48)

49) Purchased office supplies on account. This will be recorded with A) a debit to Supplies and a credit to Supplies Expense. B) a debit to Accounts Payable and a credit to Supplies. C) a debit to Supplies and a credit to Accounts Payable. D) a credit to Supplies and a debit to Purchases.

49)

50) A characteristic of Cost of Goods Sold is that A) it reduces net income. B) it has a debit normal balance. C) it is used to record the purchase of merchandise to be resold. D) Both A and B are correct.

50)

51) Accounts of a single type are kept in this ledger. A) Supplemental ledger C) Additional ledger

51)

B) Subsidiary ledger D) None of these answers are correct.

52) Which of the following does NOT receive a copy of the Purchase Order? A) Accounting department B) Supplier C) Customer D) Department that initiated purchase requisition

52)

53) To prove the subsidiary ledger agrees with the Accounts Payable controlling account balance, complete a A) schedule of accounts payable. B) schedule of accounts receivable. C) debit memorandum. D) purchase order.

53)

54) A form used with a business by the requesting department asking the purchasing department to buy specific goods is called a A) purchase order. B) purchase invoice. C) purchase requisition. D) debit memorandum.

54)

55) 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) $8,025 D) $20,250

55)

56) A form used in business to place an order for the buying of goods from a seller is A) purchase discount. B) purchase order. C) purchase requisition. D) purchases returns.

56)

57) 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) $100 D) $150

57)

58) Which of the following is NOT a main type of Special Journal? A) Personnel Journal B) Cash Payments Journal C) Purchases Journal D) Cash Receipts Journal

58)

59) A debit memorandum decreases which account on the purchaser's books? A) Cash B) Accounts Payable C) Accounts Receivable D) Cost of Goods Sold

59)

60) Credit terms of n/15, EOM means that A) if the bill is paid by the end of the month, a discount will be granted. B) if the bill is paid 10 days after the end of the month, a discount is allowed. C) the bill is due 15 days after the end of the month and no discount is allowed. D) the bill is due 15 days before the end of the month.

60)

61) 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) $520. C) $540. D) $500.

61)

62) Lita purchased $600 of goods on January 8 and received credit terms of 3/10, n/30. How much did she pay if payment was made on February 21? A) $510 B) $618 C) $582 D) $600

62)

63) A characteristic of Inventory is that A) it is used to record the purchase of merchandise to be resold. B) it reduces net income. C) it has a debit normal balance. D) Both A and C are correct.

63)

64) A trade discount would A) need approval from senior management. B) increase the amount of the purchase discount. C) decrease the amount of the purchase discount. D) have no effect on the books.

64)

65) Marcel's Fashions started with $7,000 in Inventory and had the following transaction totals for the month 65) 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 If ending Inventory for the period is $14,000, what is the total amount of purchases during the month? A) $15,500 B) $18,500 C) $17,500 D) $16,500

66) F.O.B. shipping point means A) the buyer pays for the freight. C) the title passes at time of shipment.

B) the seller pays for the freight. D) both A and C are correct.

66)

67) Jackie's Online Service started with $7,000 in Inventory and had the following transaction totals for the 67) 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 Allowances 2,000 Purchases Discounts 1,400 Ending Inventory for the period is A) $14,000. B) $9,600.

C) $12,600.

D) $10,600.

68) 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) net income to be understated. B) total assets to be understated. C) net income to be overstated. D) net income to not be affected.

68)

69) Which is the correct order of buying merchandise from a company? A) Requisition, order, invoice, approval for payment, receiving report B) Approval for payment, order, requisition, invoice, receiving report C) Approval for payment, requisition, order, invoice, receiving report D) Requisition, order, invoice, receiving report, approval for payment

69)

70) When using a subsidiary ledger, the Accounts Payable account in the general ledger is called the A) receivable account. B) master account. C) subsidiary account. D) controlling account.

70)

71) The entry to record a payment on a $500 account within the 2% discount period would include a A) debit to Accounts Payable for $490. B) debit to Accounts Payable for $500. C) debit to Cash for $490. D) credit to Purchases for $510.

71)

72) Purchases Returns and Allowances A) decrease Inventory. C) increase Inventory.

B) have no effect on Inventory. D) Not enough information provided.

72)

73) Holdco reports purchases of $17,200, a purchase return of $780, purchase discounts of $88, and shipping charges of $350. What is the impact on Inventory? A) $16,858 B) $18,418 C) $16,682 D) $15,982

73)

74) Lucy purchased $800 of goods on January 8 and received credit terms of 3/10, n/30. How much did she pay if payment was made on January 10? A) $0 B) $824 C) $776 D) $800

74)

75) 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) $392 D) $408

75)

76) 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 Cash for $400. B) debit Inventory for $400; credit Accounts Payable/Suppliers Name for $400. C) debit to Accounts Payable/Suppliers Name for $400; credit Inventory for $400. D) debit Inventory for $400; credit Cash for $400.

76)

77) 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.

77)

78) The entry to record a payment on a $900 account within the 3% discount period would include a A) credit to Inventory for $873. B) debit to Accounts Payable for $873. C) credit to Cash for $873. D) credit to Accounts Payable for $900.

78)

79) The principal ledger containing all the balance sheet and income statement accounts is the A) AR ledger. B) general ledger. C) employee ledger. D) AP ledger.

79)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 80) The accounts payable subsidiary ledger is organized in chronological order.

80)

81) Invoices should be paid within the discount period.

81)

82) A receiving report is used to notify the company of the quantity and condition of the goods received.

82)

83) The Accounts Receivable and Accounts Payable accounts are both controlling accounts.

83)

84) Purchases of merchandise for cash are recorded in the purchases journal.

84)

85) 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.

85)

86) 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.

86)

87) Under the periodic system, the Inventory account is not used for purchases.

87)

88) F.O.B. is short for Free On Board.

88)

89) The purchasing department issues purchase orders.

89)

90) Trade discounts are recorded in the cash payments journal along with purchases discounts.

90)

91) A buyer may not receive both a trade discount and a cash discount.

91)

92) FOB is short for Freedom Of Business.

92)

93) The Schedule of Accounts Payable is listed by purchase frequency.

93)

94) Under the periodic system, the Inventory account is used for purchases.

94)

95) Invoices are always paid as soon as they are received.

95)

96) The accounts payable subsidiary ledger is organized from the highest to the lowest balance outstanding.

96)

97) A list showing the ending balances owed to individual creditors is called a Schedule of Accounts Receivable.

97)

98) The accounts payable subsidiary ledger should equal the control account in the general ledger.

98)

99) Trade discounts are recorded in the purchases journal.

99)

100) Credit terms of 2/10, n/30 means that a customer is allowed a 10% discount if the invoice is paid within 10 days.

100)

101) The account Inventory includes the shipping costs from the seller.

101)

102) It is costly to take advantage of purchases discounts.

102)

103) If a debit memorandum is issued, the buyer will reduce its accounts receivable.

103)

104) Credit terms of 2/10, n/30 means that a customer is allowed a 2% discount if the invoice is paid within 10 days.

104)

105) Credit terms of 3/10, Net 30 permit a purchaser to deduct 3% of the invoice total if payment is made within 10 days.

105)

106) It is a requirement that all suppliers must provide identical credit terms.

106)

107) The time a purchaser is granted to pay an invoice is the discount period.

107)

108) An invoice approval form is used by accounting to check the invoice before approving it for payment.

108)

109) Purchases discounts are usually an incentive for the customer to pay early.

109)

110) A list showing the ending balances owed to individual customers is called a Schedule of Accounts Payable.

110)

111) The accounts payable subsidiary ledger is organized alphabetically.

111)

112) The Inventory account normally has a credit balance.

112)

113) The seller's sales invoice is the buyer's purchase invoice.

113)

114) Payment for merchandise should not be made until approval is given.

114)

115) A list showing the ending balances owed to individual creditors is called a Schedule of Accounts Payable.

115)

116) The controlling account is found in the subsidiary ledger for all accounts payable.

116)

117) A Schedule of Accounts Payable is an alphabetical list of all customers.

117)

118) The seller's sales invoice is the buyer's purchase invoice.

118)

119) F.O.B. destination means the title of the goods passes as soon as the items are shipped.

119)

120) The account Inventory includes the shipping costs charged by the vendor.

120)

121) F.O.B. is short for Freight On Buyers.

121)

122) A cash disbursement journal and a cash payments journal are the same thing.

122)

123) The accounts payable column total is posted to the Accounts Payable general ledger account at the end of the month.

123)

124) Payments of cash are recorded in the cash receipts journal.

124)

125) Terms of 2/10, n/30 means that a customer is allowed a 10% discount in 30 days.

125)

126) A purchase requisition form is completed by the accounts payable clerical staff.

126)

127) The account Inventory includes the shipping costs to the customer.

127)

128) The seller issues a debit memorandum when granting a reduction in price to a customer.

128)

129) F.O.B. shipping point means the title of the goods passes as soon as the items are shipped.

129)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 130) July 11 Paid the amount due to The Bunters. ________ ________ ________ ________ ________ ________ 131) July 31 Paid the amount due to Eldorado Supply Co. ________ ________ ________ ________ ________ ________ 132) 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. a. b. c. d. e. f. g.

Purchased supplies on account Purchased inventory on account. Paid utilities expense. Purchased inventory for cash. Returned half of inventory in a. Owners made a withdrawal of cash. Purchased store equipment on account. Paid for inventory in a., less return within the period.

133) 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. 134) 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.

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) Determine the amount of credit to be earned on a full return of merchandise purchased with an invoice price of $1,750 and credit terms of 1/15, n/30 when full payment was made after the discount period had expired. 137) Determine the amount to be paid within the discount period for a purchase with an invoice price of $10,000 and credit terms of 3/15, n/30 when $900 has already been returned for credit. 138) 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 question 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 ________.

139) July 9 Purchased merchandise from the Burgeroni Co. with a price of $1,500. ________ ________ ________ ________ ________ ________ 140) Determine the amount of credit to be earned on a full return of merchandise purchased with an invoice price of $1,750 and credit terms of 1/15, n/30 when full payment was made within the discount period. 141) Explain the difference between F.O.B. shipping point and F.O.B. destination. 142) 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. 143) 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. b. c.

________ ________

d. e.

Purchased inventory on account from P. Parker. Received cash from the bank as a loan for the business Made payment to P. Parker. No discount was given. Made a sale on account to S. Rogers Issued a debit memo to T. Stark for return of faulty goods.

144) Nov. 23 Paid the amount due to Montana Supply Co. ________ ________ ________ ________ ________ ________ 145) 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. b. c.

________

Purchased inventory on account from Thanos. Paid cash to the bank to reduce the outstanding loan. Made payment to Thanos. A discount was given. Purchased inventory on account from Groot. Incurred a shipping charge. Returned defective goods to Groot.

146) July 10 Purchased merchandise with a price of $3,225 from the Eldorado Supply Co. ________ ________ ________ ________ ________ ________ 147) 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 ________. 148) 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.

149) July 7 Purchased merchandise with a price of $2,000 from The Bunters. ________ ________ ________ ________ ________ ________

150) Determine the amount to be paid to the vendor within the discount period for a purchase with an invoice price of $5,000 and credit terms of 3/10, n/15 when $950 has already been returned for credit. The goods were purchased with freight terms of F.O.B shipping point and freight of $95 was included on the invoice. 151) July 12 Paid the amount due to Burgeroni Co. ________ ________ ________ ________ ________ ________ 152) 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. 153) Nov. 7 Purchased merchandise with a price of $1,500 from the Montana Supply Co. ________ ________ ________ ________ ________ ________ 154) 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. 155) Nov. 3 Purchased merchandise with a price of $1,000 from the Bartkowski Inc. ________ ________ ________ ________ ________ ________ 156) On May 6, R. Alexander purchased merchandise for his jewellery 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 ________. 157) Nov. 5 Purchased merchandise from the Thiesman and Co. with a price of $3,000. ________ ________ ________ ________ ________ ________ 158) Nov. 10 Paid the amount due to Bartkowski Inc. ________ ________ ________ ________ ________ ________

159) 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

160) Nov. 12 Paid the amount due to Thiesman and Co. ________ ________ ________ ________ ________ ________ 161) What is the self check that a person should implement after creating the schedule of accounts payable? 162) 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. 163) 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 question 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 ________.

Answer Key Testname: CHAPTER 7 1) C 2) B 3) A 4) A 5) A 6) A 7) D 8) D 9) D 10) B 11) A 12) C 13) D 14) A 15) B 16) A 17) D 18) A 19) D 20) A 21) C 22) D 23) C 24) A 25) D 26) D 27) C 28) D 29) A 30) A 31) C 32) D 33) B 34) B 35) D 36) A 37) C 38) B 39) A 40) C 41) A 42) D 43) A 44) D 45) C 46) B 47) A 48) B 49) C 50) D 17

Answer Key Testname: CHAPTER 7 51) B 52) C 53) A 54) C 55) A 56) B 57) A 58) A 59) B 60) C 61) C 62) D 63) D 64) D 65) C 66) D 67) D 68) C 69) D 70) D 71) B 72) A 73) C 74) C 75) C 76) C 77) B 78) C 79) B 80) FALSE 81) TRUE 82) TRUE 83) TRUE 84) FALSE 85) TRUE 86) TRUE 87) TRUE 88) TRUE 89) TRUE 90) FALSE 91) FALSE 92) FALSE 93) FALSE 94) FALSE 95) FALSE 96) FALSE 97) FALSE 98) TRUE 99) FALSE 100) FALSE 18

Answer Key Testname: CHAPTER 7 101) TRUE 102) FALSE 103) FALSE 104) TRUE 105) TRUE 106) FALSE 107) FALSE 108) TRUE 109) TRUE 110) FALSE 111) TRUE 112) FALSE 113) TRUE 114) TRUE 115) TRUE 116) FALSE 117) FALSE 118) TRUE 119) FALSE 120) TRUE 121) FALSE 122) TRUE 123) TRUE 124) FALSE 125) FALSE 126) FALSE 127) FALSE 128) FALSE 129) TRUE 130) Accounts Payable - Bunters 2,000 Inventory Cash 131) Accounts Payable - Eldorado 3,225 Cash Debit Credit 132) a. Inventory Accts. Pay. b. Utilities Exp. Cash c. Inventory Cash d. Accts. Pay Inventory e. Withdrawals Cash f. Store Equip. Accts. Pay. g. Accts. Pay. Inventory, Cash 133) $3,920

40 1,960

3,225

Journal P CP CP GJ CP P CP

Answer Key Testname: CHAPTER 7 134) a. P b. GJ c. CR d. S e. GJ f. P g. CR h. CP i. CP j. CP 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) $1,750 137) $8,827 138) $11,300 1,500 139) Inventory Accounts Payable - Burgeroni 1,500 140) $1,732.50 141) 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. 142) $1,814 Account(s) Account(s) 143) Debit Credit Journal a. Inventory Accts. Pay./P. Parker P b. Cash Bank Loan CR 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 1,500 144) Accounts Payable - Montana Cash 1,500 Account(s) Account(s) 145) Debit Credit Journal a. Inventory Accts. Pay./Thanos P b. Bank Loan Cash CP c. Accts. Pay./Thanos Cash CP Inventory CP d. Inventory Accts. Pay/Groot P e. Accts. Pay/Groot Inventory GJ 3,225 146) Inventory Accounts Payable - Eldorado 3,225 20

Answer Key Testname: CHAPTER 7 147) a. $4,500 b. $4,500 c. $200 d. $4,214 e. $86 Debit Credit Journal 148) 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 2,000 149) Inventory Accounts Payable - Bunters 2,000 150) $4,023.50 151) Accounts Payable - Burgeroni 1,500 Inventory 30 Cash 1,470 152) 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 account 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. 1,500 153) Inventory Accounts Payable - Montana 1,500 154) $6,860 1,000 155) Inventory Accounts Payable - Bartkowski 1,000 156) a. $81,500 b. $81,500 c. $15,000 d. $650 e. $65,850 3,000 157) Inventory Accounts Payable - Thiesman 3,000 1,000 158) Accounts Payable - Bartkowski Inventory 20 Cash 980

Answer Key Testname: CHAPTER 7 159) a. 1, 3 b. 1 c. 4, 5 d. 2 e. 2 f. 2, 3 3,000 160) Accounts Payable - Thiesman Inventory 60 Cash 2,940 161) 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. 162) $2,450 163) $11,350

Exam

Chapter 8

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In what category in a classified balance sheet is Mortgage Payable found? A) Capital Assets B) Long-term Liabilities C) Current Liabilities D) Both B and C are correct.

2) Which of the following items generally has a debit balance in the income statement columns of the worksheet? A) Sales Returns and Allowances B) Inventory C) Accumulated Depreciation D) Sales

3) When using a perpetual inventory method, what account is increased when you buy merchandise inventory? A) Prepaid Assets B) Inventory C) Cost of Goods Sold D) Merchandise Expense

4) The post-closing trial balance contains A) only temporary accounts. C) expenses and revenues.

B) withdrawals. D) None of these answers are correct.

5) The adjustment for salaries is necessary A) to recognize the revenue in the period earned. B) because the employer did not have enough cash to write the paycheques. C) to recognize the expense in the period incurred. D) None of the above answers are correct.

6) The capital account in the ledger agrees with the balance sheet A) after the income statement has been prepared. B) after the adjusting entries have been posted. C) after posting the reversing entries. D) after the closing entries have been posted.

7) Reversing entries occur at the beginning of the accounting period and A) simplify the bookkeeping associated with accruals from the prior period. B) help to reduce potential errors. C) reverse the adjusting entries. D) All of the above are correct.

8) The entry to adjust for Unearned Rent becoming earned includes A) a debit to Rent Revenue. B) a credit to Unearned Rent. C) a credit to Rent Revenue. D) None of these are correct.

9) When closing the expense accounts, which of the following accounts will also be closed? A) Sales Discounts B) Interest Income C) Unearned Revenue D) Income Summary

10) 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 Capital $14; credit Income Summary $14 B) Debit Income Summary $100; credit Capital $100 C) Debit Income Summary $86; credit Capital $86 D) Debit Income Summary $14; credit Capital $14

10)

11) In what category in a classified balance sheet is Accounts Receivable found? A) Capital Assets B) Current Assets C) Owner's Equity D) Current Liabilities

11)

12) 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.

12)

13) The financial statement on which Rental Income would appear is the A) balance sheet. B) operations statement. C) income statement. D) statement of owner's equity.

13)

14) Freight-in is A) recorded as an asset. C) a Cost of Selling Goods.

14)

B) a Cost of Purchasing Goods. D) recorded as an Operating Revenue.

15) The normal balance for Unearned Rent is A) a debit. C) zero.

B) a credit. D) dependent on circumstances.

16) Capital assets are usually listed A) in order of liquidity. C) by how long they will last.

B) in alphabetical order. D) None of these are correct.

15)

16)

17) Gitan Clothing paid $25,200 rent on a building in advance for two years on April 1. The amount that should be recorded as rent expense as of December 31 is A) $600. B) $2,100. C) $1,050. D) $9,450.

17)

18) The Inventory ledger account balance was $24,520 but the physical count at the end of period was $23,990. What adjustment is required to Inventory? A) -$530 B) +$530 C) $23,990 D) $0

18)

19) A characteristic of a periodic inventory method is that A) it keeps continual track of inventory. B) it records units sold immediately. C) it updates the balance of the inventory at the end of the accounting period. D) All of these answers are correct.

19)

20) Net Sales - Cost of Goods Sold is equal to A) Operating Expenses. C) Gross Profit.

20)

B) Net Income from Operations. D) Gross Expenses.

21) Unearned Rent is what type of account? A) Revenue B) Liability

C) Expense

22) When the adjustment for depreciation is made A) total liabilities increase. C) total expenses decrease.

D) Asset

B) total assets decrease. D) None of the answers are correct.

21)

22)

23) 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 Rental Income B) Debit Cash; credit Unearned Rent C) Debit Cash; credit Prepaid Rent D) Debit Cash; credit Rent Expense

23)

24) The adjusted trial balance on the worksheet A) contains balances from the temporary accounts. B) contains balances for all accounts with balances. C) contains balances from the permanent accounts. D) None of the above answers are correct.

24)

25) The adjustment for accrued wages was not done; this would cause A) liabilities to be understated. B) net income to be understated. C) expenses to be overstated. D) liabilities to be overstated.

25)

26) Which of the following transactions could cause the Income Summary to be debited and Capital to be credited? A) Closed the Owner's Capital account. B) The business earned a net income for the period. C) The business earned a net loss for the period. D) None of these are correct.

26)

27) 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 increased and the revenue account is decreased. D) the liability account is not affected but the revenue account is decreased.

27)

28) Gross profit less operating expenses equals A) Cost of Goods Sold. C) net sales.

28)

B) net revenue. D) net income.

29) The term used when the physical inventory count shows an amount less than the Inventory account balance at the end of the period is A) Inventory Management. B) Inventory Shrinkage C) Inventory Degradation. D) Inventory Padding.

29)

30) Which of the following is NOT an operating expense? A) Salaries Expense B) Postage Expense C) Maintenance Expense D) Interest Expense

30)

31) The financial statement on which Unearned Rent would appear is A) the balance sheet. B) the statement of owner's equity. C) the income statement. D) Unearned Rent is not reported until earned.

31)

32) Net Sales are A) Gross Sales + Sales Discounts + Sales Returns and Allowances. B) Revenue - Sales Discounts + Sales Returns and Allowances. C) Gross Sales - Sales Discounts - Sales Returns and Allowances. D) Gross Sales + Sales Discounts - Sales Returns and Allowances.

32)

33) Accounts payable is a(n) A) operating expense. C) long-term liability.

33)

B) current asset. D) current liability.

34) Sales would be found on the worksheet in the A) income statement debit column. C) balance sheet debit column.

B) income statement credit column. D) balance sheet credit column.

35) Closing entries A) can be done before adjusting entries. C) are posted to the general ledger.

B) are done to update Cash. D) All of the above are correct.

36) The adjustment for unearned rent is recorded when A) rent is earned. C) closing entries are prepared.

B) cash is received. D) revenue is received.

34)

35)

36)

37) The entry to close the Cost of Goods Sold account will include which of the following? A) Credit to Income Summary B) Debit to Income Summary C) Debit to Capital D) Debit to Cost of Goods Sold

37)

38) Net Sales + Sales Discounts + Sales Returns and Allowances equals A) Gross Profit. B) Net Loss. C) Net Income from Operations. D) Gross Sales.

38)

39) The information to prepare the trial balance comes from the A) adjustments columns on the worksheet. B) balance sheet columns on the worksheet. C) income statement columns on the worksheet. D) general ledger.

39)

40) Which of the following could be recorded as a reversing entry? A) Accrual of interest expense B) Allocation of prepaid rent in the current period C) Depreciation of building D) Correction of an error

40)

41) 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) $0 B) $10,100 C) -$100 D) +$100

41)

42) In the periodic inventory system the inventory balance is A) updated at the beginning of the period. B) updated only at the end of the period. C) adjusted only every three months. D) continually updated throughout the year.

42)

43) In what category in a classified balance sheet is Store Equipment found? A) Current Assets B) Current Liabilities C) Plant and Equipment D) Owner's Equity

43)

44) Merchandise inventory is not A) an important item on a merchandise company's financial statements. B) a current asset on the balance sheet. C) a long term asset. D) goods a company plans to sell to its customers.

44)

45) The normal balance of Rental Income is A) dependent on the circumstances. C) a credit.

45)

B) a debit. D) zero.

46) 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.

46)

47) The physical count of inventory was incorrect which overstated the ending inventory. This would cause A) Cost of Goods Sold to be understated. B) Cost of Goods Sold to be overstated. C) net income to be understated. D) gross profit to be understated.

47)

48) The ending merchandise inventory was understated. This error would cause A) net income to be overstated. B) assets to be understated. C) assets to be overstated. D) None of these are correct.

48)

49) Merchandise purchased for resale under the perpetual inventory method is added to A) Sales Discounts. B) Sales. C) Merchandise Inventory. D) Cost of Goods Sold.

49)

50) 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.

50)

51) Recording the adjustment for supplies will A) increase the total assets and increase the total liabilities. B) decrease the total assets and decrease the total expenses. C) decrease the total assets and increase the total expenses. D) increase the total assets and increase the total expenses.

51)

52) Which of the following accounts will appear on the post-closing trial balance? A) Interest Expense B) Interest Revenue C) Interest Payable D) Insurance Expense

52)

53) The dollar amount determined by a physical count of merchandise on hand at the end of the period is called A) perpetual inventory. B) periodic inventory. C) beginning inventory. D) ending inventory.

53)

54) In which section does Interest Revenue appear in the Income Statement? A) Other Expense B) Selling Expenses C) Other Income D) Administrative Expenses

54)

55) Which of the following is an operating expense? A) Salaries Expense C) Interest Expense

55)

B) Postage Expense D) Both A and B are correct.

56) Rental Income is what type of account? A) Asset B) Expense

C) Liability

D) Revenue

56)

57) Which of the following accounts will NOT appear on the post-closing trial balance? A) Withdrawals B) Cash C) Accounts Payable D) Capital

57)

58) In what category on a classified balance sheet is Unearned Revenue found? A) Current Liabilities B) Current Assets C) Owner's Equity D) Capital Assets

58)

59) After the closing entries have been posted A) the Capital account includes the current net profit or loss. B) the temporary accounts are zeroed out. C) the post-closing trial balance is prepared. D) All of these answers are correct.

59)

60) In what category on a classified balance sheet is Rent Revenue found? A) Owner's Equity B) Current Liabilities C) Current Assets D) None of the above are correct.

60)

61) When the adjustment for Unearned Rent is made, A) liabilities decrease. C) assets decrease.

61)

B) revenue increases. D) Both A and B are correct.

62) 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) $4,000 B) $14,000 C) $7,000 D) $3,000

62)

63) The entry to adjust salaries was done twice. This error would cause A) liabilities to be overstated. B) liabilities to be understated. C) expenses to be understated. D) Capital to be overstated.

63)

64) What is the name of the revenue account used by merchandise companies? A) Merchandise Inventory B) Sales C) Merchandise Fees D) Capital

64)

65) 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) a mathematical error was made in the worksheet. B) an error was made when preparing the adjustments in the worksheet. C) the company incurred a net income of $600. D) the company incurred a net loss of $600.

65)

66) When closing the expense accounts, which of the following accounts will also be closed? A) Cost of Goods Sold B) Merchandise Inventory C) Unearned Rent Revenue D) Earned Rent Revenue

66)

67) Gross Profit is calculated on the A) Statement of Owner's Equity. C) Income Statement.

67)

B) Balance Sheet. D) Trial Balance.

68) The periodic inventory system updates the record of goods on hand A) as transactions occur. B) weekly. C) at the end of the accounting period. D) daily.

68)

69) 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.

69)

70) 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.

70)

71) Which of the following is NOT under the heading Capital Assets on a classified balance sheet? A) Accumulated Depreciation on Office Machines B) Office Machines C) Store Equipment D) Office Supplies

71)

72) Which of the following items generally has a credit balance in the income statement columns of the worksheet? A) Sales Returns and Allowances B) Inventory C) Accumulated Depreciation D) Sales

72)

73) How is Income Summary closed if the company had a net income? A) Debit Income Summary; credit Capital B) Debit Withdrawals; credit Capital C) Debit Capital; credit Withdrawals D) Debit Capital; credit Income Summary

73)

74) When closing sales, which of the following accounts will also be closed? A) Sales Discounts B) Unearned Revenue C) Sales Returns and Allowances D) Interest Income

74)

75) The goods a company has available to sell to customers are called A) Sales. B) Merchandise Inventory. C) Supplies. D) Cost of Goods Sold.

75)

76) The Balance Sheet columns on a worksheet have subtotals as follows debit column, $1,000, and credit column, $900. This indicates that A) there was an error in the Balance Sheet columns. B) the company earned a net income of $100. C) the company incurred a net loss of $100. D) there was an error in the Adjustments columns.

76)

77) Interest Expense A) has a credit balance. B) has a debit balance. C) is not reported on the financial statements. D) is reported on the Balance Sheet.

77)

78) The first step in the closing process is to A) transfer the balance from the Income Summary Account to the Capital Account. B) close all balances on the income statement credit column of the worksheet except Income Summary. C) transfer the balance of the Owner's Withdrawals Account to Capital. D) close all balances on the income statement debit column of the worksheet except Income Summary.

78)

79) The adjustment for accrued salaries would be to A) debit Salaries Payable; credit Cash. B) debit Salaries Expense; credit Accrued Salaries. C) debit Salaries Expense; credit Cash. D) debit Salaries Payable; credit Salaries Expense.

79)

80) The adjustment for supplies used would be to A) debit Supplies Expense; credit Supplies. C) debit Supplies; credit Accounts Payable.

B) debit Supplies; credit Cash. D) debit Supplies; credit Supplies Expense.

80)

81) Which of the following items generally has a credit balance in the balance sheet columns of the worksheet? A) Sales Returns and Allowances B) Inventory C) Accumulated Depreciation D) Sales

81)

82) The perpetual inventory system updates the record of goods on hand A) weekly. B) as transactions occur. C) daily. D) at the end of the accounting period.

82)

83) Which of the following steps of the accounting cycle comes last? A) Journalize and post adjusting entries B) Prepare financial statements C) Journalize and post closing entries D) Post-closing trial balance

83)

84) The closing entry for the $700 balance of Wages Expense includes A) a credit to Income Summary for $700. B) a debit to Income Summary for $700. C) a credit to Wages Payable for $700. D) a debit to Wages Expense for $700.

84)

85) A company paid next month's rent in advance. This would be classified as A) Expense. B) Revenue. C) a Current Asset. D) Other Income.

85)

86) Current assets are A) cash and other assets that will not be used during the year. B) cash and other assets that will be used during the year. C) cash and assets that will be converted or consumed during the normal operating cycle or one year, whichever is shorter. D) cash and other assets that will be converted or consumed during the normal operating cycle of the company or one year, whichever is longer.

86)

87) The entry to close the owner's Withdrawal account will include which of the following? A) A debit to Withdrawals B) A credit to Withdrawals C) A credit to Income Summary D) A debit to Income Summary

87)

88) 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 incurred a net loss of $500. C) there was an error in the adjustments columns. D) the company earned a net income of $500.

88)

89) GT Machining paid $1,200 insurance in advance for one year on July 1. The amount that should be recorded as insurance expense as of December 31 is A) $0. B) $1,200. C) $100. D) $600.

89)

90) At the end of the fiscal period the merchandise inventory account A) will be reported as an expense on the income statement. B) will have the same balance as the beginning inventory. C) will be compared to the results of the physical inventory count. D) will have a zero balance.

90)

91) 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 $800. D) overstate net income $400.

91)

92) The entry to close the Withdrawals account to Capital was omitted. This error would cause A) net income to be overstated. B) net income to be understated. C) the Capital account to be overstated. D) the Capital account to be understated.

92)

93) Capital Assets includes which of the following? A) Accounts Receivable B) Cash C) Accumulated Depreciation on office machines D) All of these are correct.

93)

94) What inventory method is used when the inventory balance is updated at every purchase and sale? A) Periodic B) Perpetual C) Cost of Goods Sold D) Net Income

94)

95) The goal of closing entries is A) to update the Capital account balance. C) to clear the Withdrawal account.

95)

B) to clear revenue and expense accounts. D) All of these answers are correct.

96) When closing the expense account, which of the following accounts will also be closed? A) Owner's Capital B) Sales Returns and Allowances C) Rental Income D) Merchandise Inventory

96)

97) What financial statement shows the amount for Cost of Goods Sold? A) Statement of Owner's Equity B) Statement of Cash Flows C) Income Statement D) Balance Sheet

97)

98) 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) Unearned Revenue B) Merchandise Expense C) Cost of Goods Sold D) Prepaid Assets

98)

99) A classified balance sheet includes all of the following EXCEPT A) revenues. B) current liabilities. C) capital assets. D) current assets.

99)

100) 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 Unearned Rent; credit Rent Expense $100. B) debit Unearned Rent; credit Rental Income $100. C) debit Rental Income; credit Unearned Rent $1,200. D) debit Cash; credit Rental Income $1,200.

100)

101) Which of the following adjustments may be reversed? A) The adjustment to Allocate Prepaid Insurance to the current period B) The adjustment to Record Depreciation Expense C) The adjustment to Accrue Salaries Payable D) The adjustment to determine Supplies Expense for the period

101)

102) A characteristic of a perpetual inventory method is that A) it records units sold immediately. B) it records units on hand at the beginning of the period. C) it keeps continual track of inventory. D) All of these answers are correct.

102)

103) When counting supplies, several boxes were missed. This would cause A) Net Income to be overstated. B) Supplies Expense to be overstated. C) Supplies to be overstated. D) All of the above are correct.

103)

104) The trial balance columns on the worksheet are populated using the A) general journal. B) subsidiary ledger. C) general ledger. D) none of the above.

104)

105) If no adjustments are needed for the Frances Company A) the adjusted trial balance will be identical to its post-closing trial balance. B) the trial balance, adjusted trial balance, and post-closing trial balance will be identical. 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.

105)

106) Accumulated Depreciation-Buildings should be shown on the A) balance sheet. B) income statement. C) statement of owner's equity. D) The account does not appear on a financial statement since it is a temporary account.

106)

107) 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) prepare the financial statements. C) prepare the closing journal entries. D) complete the worksheet.

107)

108) 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 loss of $600. B) an error was made when preparing the adjustments in the worksheet. C) the company incurred a net income of $600. D) a mathematical error was made in the worksheet.

108)

109) The reversing entry for Salaries is A) debit Salaries Expense; credit Cash. B) debit Salaries Payable; credit Income Summary. C) debit Salaries Payable; credit Salaries Expense. D) debit Salaries Expense; credit Salaries Payable.

109)

110) The entry to adjust for Inventory Shrinkage includes A) a credit to Cost of Goods Sold. B) a debit to Inventory. C) a credit to Inventory. D) None of these are correct.

110)

111) Rental income earned by a merchandise company is A) added to gross profit. C) subtracted from administrative expenses.

111)

B) other income. D) included in gross sales.

112) An item that can be converted into cash or used up during the normal operating cycle is A) a current asset. B) a long-term liability. C) a capital asset. D) a current liability. 11

112)

113) 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 Unearned Rent $4,000, credit Rental Income $4,000 D) Debit Cash $1,000; credit Rental Income $1,000

113)

114) From the following items, which would most likely cause the recording of unearned revenue? A) Subscriptions collected in advance for a magazine B) Potential sale of merchandise C) Purchase of merchandise on account D) Legal fees collected after work is performed

114)

115) Cost of Goods Sold includes A) Freight-out. B) Net Sales.

115)

C) Other Income.

116) Inventory shrinkage A) increases liabilities. C) decreases Cost of Goods Sold.

D) Freight-in.

B) does not affect Cost of Goods Sold. D) increases Cost of Goods Sold.

116)

117) In what category on a classified balance sheet is Interest Expense found? A) Current Liabilities B) Owner's Equity C) Current Assets D) None of the above are correct.

117)

118) Capital assets are A) long-lived assets used in the production or sales of goods or services. B) cash and accounts receivable. C) cash and assets that will be converted or used during the normal operating cycle of the company or one year, whichever is longer. D) liabilities used to generate net income.

118)

119) Mortgage Payable A) has a debit balance. C) shows the amount owed on a mortgage.

119)

B) has a credit balance. D) Both B and C are correct.

120) 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.

120)

121) 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

121)

122) The adjustment for depreciation expense was omitted; this would A) overstate the period's expenses and understate the period end liabilities. B) understate the period's expenses and overstate the period's assets. C) overstate the period's expenses and overstate the period end liabilities. D) understate the period's expenses and understate the period's assets.

122)

123) Unearned Rent is recorded when A) the fee has been paid, and the service is complete. B) no fee has been paid, but the service is complete. C) the fee has been collected before the service has been provided. D) the fee is earned but not collected.

123)

124) What inventory method is used when the inventory balance is updated only at the end of the accounting period? A) Perpetual B) Net Income C) Periodic D) Cost of Goods Sold

124)

125) Which of the following accounts is NOT a liability? A) Salaries Payable C) Accounts Payable

125)

B) Unearned Rent D) All of the above answers are liabilities.

126) 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) $1,800. B) $525. C) $600. D) $900.

126)

127) The entry to close the Income Summary to Capital was omitted, there was a net income. This error would cause A) the Capital account to be overstated. B) net income to be understated. C) net income to be overstated. D) the Capital account to be understated.

127)

128) Selling expenses include A) Office Supplies Expense. C) Rent Expense.

B) Advertising Expense. D) All of the above are correct.

128)

129) As supplies are used, they become A) an expense. B) an asset.

C) a revenue.

D) a liability.

130) The first two columns of a worksheet are used for A) posting. C) journalizing.

B) adjustments. D) the trial balance.

131) If gross profit exceeds expenses, the company A) broke even. C) had a net loss.

B) had a net income. D) Not enough information given.

129)

130)

131)

132) Other Income is used to A) record owner investments. B) record any revenue from activities other than sales. C) record income from sales. D) record all revenue.

132)

133) Which amount is not directly found on the worksheet? A) Sales B) Cost of Goods Sold C) Inventory D) Gross Profit

133)

134) Which of the following accounts will appear on the post-closing trial balance? A) Sales B) Withdrawals C) Cost of Goods Sold D) Capital

134)

135) The income statement is prepared from the A) worksheet. C) statement of owner's equity.

135)

B) general journal. D) balance sheet.

136) Which amount is not directly found on the worksheet? A) Net Sales B) Sales Returns C) Sales Discounts

D) Sales

136)

137) 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.

137)

138) To determine how much a company has discounted payments from its customers, it should review the A) Sales Discounts account. B) Sales Returns & Allowances account. C) Cost of Goods Sold account. D) Inventory account.

138)

139) To calculate gross profit, A) subtract Freight-In from net purchases. B) add freight to net purchases. C) subtract ending inventory from cost of goods available for sale. D) subtract cost of goods sold from net sales.

139)

140) In what category on a classified balance sheet is Prepaid Rent found? A) Current Liabilities B) Capital Assets C) Owner's Equity D) Current Assets

140)

141) The post-closing trial balance contains A) only permanent accounts. C) all accounts with balances.

141)

B) assets and liabilities. D) All of these answers are correct.

142) The income statement lists regular business expenses under the heading A) liabilities. B) operating debts. C) current expenses. D) operating expenses.

142)

143) The post-closing trial balance is prepared from A) the general ledger. B) the income statement columns on the worksheet. C) the balance sheet columns on the worksheet. D) the trial balance columns on the worksheet.

143)

144) Unearned Revenue A) has a credit balance. B) is a liability account. C) shows amounts collected but not yet earned. D) All of the above answers are correct.

144)

145) 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 Cash for $960; and credit to Prepaid Insurance for $960. B) debit to Insurance Expense for $800; and a credit to Prepaid Insurance for $800. 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.

145)

146) 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) assets to be overstated. B) Capital account to be understated. C) Capital account to be overstated. D) liabilities to be overstated.

146)

147) 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 income. B) $100 net income. C) $100 net loss. D) $150 net loss.

147)

148) The perpetual inventory method A) does not ever require a physical count of inventory. B) is used by service companies with no inventory. C) is not used by many companies today. D) is used by companies with high amounts of inventory.

148)

149) The ending merchandise inventory was overstated. This error would cause A) assets to be understated. B) net income to be understated. C) net income to be overstated. D) None of these are correct.

149)

150) When closing sales, which of the following accounts will also be closed? A) Sales Discounts B) Sales Returns and Allowances C) Rental Income D) Owner's Capital

150)

151) At the start of the year, Northern Lights had $7,000 worth of merchandise. This is called A) Cost of Goods Sold. B) Ending Inventory. C) Shrinkage. D) Beginning Inventory.

151)

152) Reversing entries are general journal entries that A) are the opposite of adjusting entries. C) only affect balance sheet accounts.

152)

B) only affect income statement accounts. D) are the same as the adjusting entries.

153) Net Income equals A) Gross Profit - Operating expenses. B) Sales - Sales Returns & Allowances - Sales Discount - Cost of goods sold - Operating Expenses. C) Net Sales - Cost of goods sold - Operating expenses. D) All of the above are correct.

153)

154) When completing a worksheet, A) the inventory amount appears in the unadjusted trial balance credit column of the worksheet. B) the inventory amount appears in the adjustment credit column. C) the inventory amount appears in the income statement debit column. D) the inventory amount appears in the balance sheet debit column of the worksheet.

154)

155) As Unearned Rent is earned, it becomes A) a liability. B) an asset.

155)

C) an expense.

D) a revenue.

156) Adjusting entries from the worksheet A) affect only balance sheet accounts. B) are journalized and posted to the ledger. C) are posted directly to the ledger. D) are closed to the Income Summary account.

156)

157) Interest Expense A) is categorized as a miscellaneous expense. B) has a normal debit balance. C) is a cost of borrowing money. D) All of the above are correct.

157)

158) 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.

158)

159) The journal entry to adjust for shrinkage includes A) a credit to Cost of Goods Sold. C) a credit to Inventory.

159)

B) a debit to Inventory. D) None of these are correct.

160) The second two columns of a worksheet are used for A) adjustments. B) the balance sheet. C) the income statement. D) the trial balance. 161) Mortgage Payable is what type of account? A) Capital B) Asset

C) Expense

160)

D) Liability

161)

162) Depreciation on equipment was recorded twice this period. This would cause A) expenses to be understated and total assets to be understated. B) expenses to be overstated and total assets to be understated. C) expenses to be understated and total assets to be overstated. D) expenses to be overstated and total assets to be overstated

162)

163) Which of the following could appear in an adjusting entry, closing entry, and reversing entry? A) Withdrawals B) Depreciation Expense, Buildings C) Salary Expense D) Accumulated Depreciation, Buildings

163)

164) Which of the following accounts will NOT appear on the post-closing trial balance? A) Rent Revenue B) Unearned Revenue C) Accrued Salaries D) Prepaid Rent

164)

165) Liquidity is A) how much cash a company has on its balance sheet. B) how quickly Accounts Payable can be paid. C) how easily an asset can be converted to cash. D) None of the above are correct.

165)

166) Other Expense is used to record A) selling expenses. C) administrative expenses.

166)

B) non-operating expenses. D) operating expenses.

167) A merchandise company's interest expense is a(n) A) other expense. C) contra-revenue.

B) administrative expense. D) selling expense.

167)

168) How is Income Summary closed if the company had a net loss? A) Debit Capital; credit Withdrawals B) Debit Income Summary; credit Capital C) Debit Withdrawals; credit Capital D) Credit Income Summary; debit Capital

168)

169) If operating expenses exceed gross profit, the company A) broke even. B) had a net loss. C) had a net income. D) Not enough information given.

169)

170) To determine how much merchandise a company has had returned from its customers, it should review the A) Cost of Goods Sold account. B) Sales Discounts account. C) Inventory account. D) Sales Returns & Allowances account.

170)

171) Inventory Shrinkage A) does not affect Cost of Goods Sold. C) depends on the circumstances.

171)

B) reduces the Cost of Goods Sold. D) adds to the Cost of Goods Sold.

172) Administrative Expenses include A) Delivery Expense. C) Insurance Expense.

B) Depreciation Expense. D) None of the above are correct.

173) An account usually not used in an adjusting entry is A) Consulting Fees-Revenue. C) Accumulated Depreciation - Equipment.

B) Interest Payable. D) Equipment.

174) Inventory Shrinkage results because of A) breakage. C) theft.

B) errors in recording transactions. D) All of the above are correct.

175) Assuming a periodic system, the beginning inventory A) remains unchanged during the accounting period. B) in the current period is a periodic inventory. C) in the current period is the beginning inventory last period. D) in the current period is a perpetual inventory.

172)

173)

174)

175)

176) The last four columns of a worksheet are used for A) the cash flow statement. C) adjustments.

B) the income statement and balance sheet. D) the trial balance.

176)

177) To determine how much merchandise was returned from a company's customers, the company should review the A) Inventory Account. B) Sales Discounts Account. C) Sales Returns and Allowances Account. D) Cost of Goods Sold Account.

177)

178) When the adjustment for depreciation is made A) total expenses increase. C) total liabilities increase.

B) total assets increase. D) None of the answers are correct.

178)

179) Which of the following is an operating expense? A) Interest revenue C) Inventory

B) Interest expense D) Salaries expense

179)

180) Payment discounts received on merchandise purchased for resale under the perpetual inventory method are subtracted from A) Merchandise Inventory. B) Inventory Expense. C) Sales. D) Sales Discounts.

180)

181) 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) $0 C) +$100 D) $15,900

181)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 182) Merchandise Inventory appears on both the Income Statement and the Balance Sheet.

182)

183) Differences in the ending physical count of inventory are adjusted through the cost of goods sold.

183)

184) The Net Sales figure used on the income statement is copied as is from the worksheet.

184)

185) Reversing entries are optional.

185)

186) Unearned Rent is one type of unearned revenue.

186)

187) In the perpetual inventory system, it is not necessary to take a physical inventory at the end of the period.

187)

188) The general ledger balances are used to prepare the post-closing trial balance.

188)

189) 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.

189)

190) On the worksheet, Cost of Goods Sold appears in the balance sheet columns.

190)

191) The formal income statement can be prepared from the income statement columns of the worksheet.

191)

192) Reversing entries are done when assets or liabilities are increasing and have no previous balance.

192)

193) An adjustment to Prepaid Insurance would not normally be made until the end of two years.

193)

194) All adjusting entries can be reversed.

194)

195) Non-operating expenses are found in the Cost of Goods Sold section of the income statement.

195)

196) Administrative expenses are also called general expenses.

196)

197) In closing entries, the Income Summary account is left with a Credit balance equal to the amount of net income.

197)

198) Mortgage Payable is an expense account.

198)

199) Unearned Revenue is a liability account used to record rent fees received in advance.

199)

200) The Cost of Goods Sold is found on the worksheet in the balance sheet columns.

200)

201) Mortgage Payable is a liability account.

201)

202) Reversing entries help reduce potential errors and simplify the record-keeping process.

202)

203) After the closing process, the temporary accounts are set back to zero.

203)

204) Gross profit minus cost of goods sold equals net sales.

204)

205) The amount for Cost of Goods Sold is found on the worksheet.

205)

206) 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.

206)

207) Unearned Subscription Revenue is one type of unearned revenue.

207)

208) The Inventory account balance is assumed to be accurate; therefore, a physical count of goods is not required.

208)

209) If a physical count is not completed and shrinkage has occurred, beginning inventory will be overstated in the next period.

209)

210) The physical inventory count is not needed to validate Cost of Goods Sold.

210)

211) The final balance in the Capital Account on the Balance Sheet can be taken directly from the worksheet.

211)

212) Adjustments are journalized before recording them in the worksheet.

212)

213) Not all adjusting entries are reversed.

213)

214) The post-closing trial balance would include Sales and Cost of Goods Sold.

214)

215) Accounts Payable would be classified as a current liability.

215)

216) Reversing entries increase potential errors and complicate the record-keeping process.

216)

217) On the worksheet, the Unearned Rent Revenue account is found on the Income Statement columns.

217)

218) Net income is added to the worksheet credit column of the balance sheet.

218)

219) Under the accrual system, expenses are recorded when paid.

219)

220) Interest Payable is an expense account.

220)

221) Since adjustments are listed on the worksheet, there is no need to record the entries in the general journal.

221)

222) Under the accrual system, revenue is recorded when cash is received.

222)

223) The left and right columns on the financial statements are used for debits and credits.

223)

224) Adjusting journal entries are not needed if a worksheet is used.

224)

225) Unearned Rent is a balance sheet account.

225)

226) Unearned Rent is an income statement account.

226)

227) A balance sheet where assets and liabilities are broken down into more detail is called a comprehensive balance sheet.

227)

228) 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.

228)

229) 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.

229)

230) The statement of owner's equity ending capital is equal to the capital on the worksheet.

230)

231) The ending inventory in Year 1 is the beginning inventory in Year 2.

231)

232) Sales Discount is used when calculating Inventory.

232)

233) The ending inventory figure is shown on the balance sheet.

233)

234) Reversing entries are the opposite of adjusting entries.

234)

235) In closing entries, the Income Summary account is closed to the Capital account after Withdrawals.

235)

236) The category Other Income can be used to report rental income if it is not a core business activity.

236)

237) Interest Revenue would be classified as a current asset.

237)

238) The amount of supplies used causes a decrease in Supplies and an increase in expense.

238)

239) Store Equipment would normally be classified as a current asset.

239)

240) The entry to record the adjustment for depreciation on equipment would be a debit to Depreciation Expense-Equipment and a credit to Equipment.

240)

241) Land is usually listed first under Capital Assets.

241)

242) Unearned Rent is the only type of unearned revenue.

242)

243) When the adjustment is made for depreciation, both the Depreciation Expense account and Accumulated Depreciation account are increased.

243)

244) After the closing process, the permanent accounts are set back to zero.

244)

245) Every figure reported on the income statement comes directly from the worksheet, without any additional calculations required.

245)

246) Salaries Payable is found on the income statement.

246)

247) When calculating Gross Profit on the Income Statement, the Net Sales and Cost of Goods Sold values are both required.

247)

248) The Merchandise Inventory is found on the worksheet in the balance sheet columns.

248)

249) The post-closing trial balance would not include temporary accounts.

249)

250) On the worksheet, the Unearned Rent Revenue account is found on the Balance Sheet columns.

250)

251) Reversing entries are mandatory for all Canadian corporations.

251)

252) Reversing entries are recorded on the first day of the new accounting period.

252)

253) Prepaid Insurance would be classified as a current asset.

253)

254) Interest Payable is found on the income statement.

254)

255) The Statement of Owner's Equity is the same for a service business as for a merchandise business.

255)

256) The average time it takes to buy and sell merchandise and collect Accounts Receivable is the normal operating cycle for a business.

256)

257) Gross profit minus Operating Expenses equals Net Income.

257)

258) The inside columns on the financial reports are used for subtotalling rather than debits and credits.

258)

259) The Prepaid Asset and Cost of Goods Sold accounts are combined to come up with the balance sheet inventory amount.

259)

260) Net income is added to the worksheet credit column of the income statement.

260)

261) The adjusting entry to record rental income that is earned would be a debit to Rental Income and a credit to Unearned Rent.

261)

262) Unearned Revenue would be classified as a current asset.

262)

263) Salaries Payable is an expense account.

263)

264) The Balance Sheet will show the Capital asset "Land" less its accumulated depreciation.

264)

265) Net income from operations plus other income minus other expenses equals net income.

265)

266) The Gross Profit figure used on the income statement is copied as is from the worksheet.

266)

267) Operating expenses that are not related to the selling of goods are administrative expenses.

267)

268) The Income Summary account is used to adjust for Inventory Shrinkage.

268)

269) Mortgage Payable is found on the income statement.

269)

270) Merchandise Inventory would be classified as a current asset.

270)

271) Adjusting journal entries still need to be made after the worksheet; otherwise the account balances will not be correct.

271)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 272) 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 ________ ________ ________ ________ ________

273) 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.

274) Indicate the normal balance of each of the following accounts: a) Unearned Rent Revenue b) Merchandise Inventory c) Cost of Goods Sold d) Rent Revenue e) Unearned Subscription Revenue 275) 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 80

Cost of Goods Sold (unadjusted) Merchandise Inventory Physical Inventory Count Operating Expenses

$ 2,000 1,400 1,350 300

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).

276) Accumulated Depreciation Equip.

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).

277) Prepaid Insurance

Column 1

Column 2

Column 3

Column 4

________

278) 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. 279) The following accounts are on the Balance Sheet section of Pickton Company worksheet for the month ended August 31, 20XX. 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.

280) 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

$2,200 50 25

Merchandise Inventory Cost of Goods Sold Operating Expenses

$65 1,320 360

281) Prepare the general journal entry to record the adjustment for inventory: Merchandise Inventory account balance Physical Count of inventory

$7,250 7,125

282) Merchandise Inventory

Column 1

Column 2

Column 3

________

283) Discuss the reasons a company would consider using a periodic inventory system.

284) 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-c) in each of the following independent scenarios.

285)

Sales 800

Physical Merchandise Inventory Inventory Count 750 725

Unadjusted Cost of Goods Sold 700

Adjusted Cost of Inventory Goods Shrinkage Sold Gross Profit a) b) c)

a) ________ b) ________ c) ________

286) 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

Cost of Goods Sold (unadjusted) Merchandise Inventory Physical Inventory Count Operating Expenses

$ 1,061 900 884 100

287) Unearned Revenue

Column 1

Column 2

Column 3

Column 4

________

288) Weir Company's adjusting entries included the following items: Interest Expense Interest Payable

200

Depreciation Expense Accumulated Depreciation

Interest Receivable Interest Income

200

Required: Prepare the appropriate reversing entries.

289) Prepaid Rent

Column 1

Column 2

Column 3

________

290) 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.

Column 2

Column 3

291) Prepaid Insurance

________

292) Sales Discounts

________

293) 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

294) 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. 295) 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 $180,000 296) The following accounts are on the Balance Sheet section of Marble Company worksheet for the month ended August 31, 20XX. Required: Prepare a classified balance sheet.

ACCOUNT Cash Accounts Receivable Merchandise Inventory Store Equipment Accum. Dep., Store Equip. Accounts Payable Mortgage Payable (due in 5 years) Marble, Capital

BALANCE SHEET Debit Credit 4 7 4 12 4 5 13 3

Additional information Withdrawals for the period are $4, and Net Income is $6.

Calculate the missing figures (a-c) in each of the following independent scenarios.

297)

Sales

Physical Merchandise Inventory Inventory Count

Unadjusted Cost of Goods Sold

Adjusted Cost of Inventory Goods Shrinkage Sold

a) ________ b) ________ c) ________

Gross Profit c)

298) 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 2 299) 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.

Column 2

Column 3

300) Supplies Expense

________

301) Depreciation Expense

________

302) Maggie's Magazine's unadjusted trial balance includes the following: Cash Unearned Subscription Revenue Subscription Revenue

$6,800 2,000 1,500

Using the above data, record the adjusting entry for $500 of the unearned subscription revenue earned.

303) Sales Returns and Allowances

Column 1

Column 2

Column 3

________

304) Describe the difference between the multi-step and single-step income statements.

Column 2

Column 3

Column 4

305) Interest Receivable

________

306) Interest Expense

________

Calculate the missing figures (a-c) in each of the following independent scenarios.

307)

Sales 32

Physical Merchandise Inventory Inventory Count 10 9

Unadjusted Cost of Goods Sold 26

Adjusted Cost of Inventory Goods Shrinkage Sold Gross Profit a) b) c)

a) ________ b) ________ c) ________

308) 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.

Column 2

Column 3

309) Rent Expense

________

310) Supplies

________

Column 2

Column 3

Column 4

311) Accounts Payable

________

312) Sales

________

313) Insurance Expense

Column 1

Column 2

Column 3

________

314) 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.

315) 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

Pamela's Company Partial Worksheet for the Year Ended December 31, 20XX

316) Cost of Goods Sold

Column 1

Column 2

Column 3

Column 4

________

317) 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

Income Statement Debit Credit 45 6 2 23 4 3 1 1 1

Sales Sales Returns and Allowances Sales Discounts Cost of Goods Sold Salaries Expense Rent Expense Depreciation Expense Interest Expense Interest Revenue

318) Identify the expense category (Selling or Administrative) 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 ________ ________ ________ ________ ________

319) Myla Company's adjusting entries included the following items: Interest Receivable Interest Income

150

Depreciation Expense Accumulated Depreciation

475

Interest Expense Interest Payable

150

475

Required: Prepare the appropriate reversing entries.

320) 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

321) 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 Subscription Revenue

322) Petty Cash

Column 1

Column 2

Column 3

________

323) The following accounts are on the Balance Sheet section of Scents Galore worksheet for the period ending November 30, 20XX. Required: Prepare a classified Balance Sheet for the company as of Nov. 30, 20XX. 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 6 - Store Equipment Accounts Payable 14 Mortgage Payable 24 Scents Galore, Capital 8

324) Wages Payable

Column 1

Column 2

Column 3

Column 4

________

325) Earned Revenue

Column 1

Column 2

Column 3

________

Column 2

Column 3

Column 4

326) Interest Payable

________

327) Accumulated Dep., Equip.

________

328) Sales Discounts

________

Column 2

Column 3

329) Wages Payable

________

330) Unearned Rent

________

331) 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

Column 2

Column 3

332) Cost of Goods Sold

________

333) Wages Expense

________

334) Prepare the general journal entry to record the adjustment for inventory: Merchandise Inventory account balance Physical Count of inventory

$7,120 7,250

335) Indicate the financial statement(s) on which you would find the following items: a) Cost of Goods Sold b) Unearned Rent Revenue c) Rent Revenue d) Merchandise Inventory e) Sales Discount 336) 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

Rosemary's Company Partial Worksheet for the Year Ended December 31, 20XX

337) The following accounts are on the Balance Sheet section of Great Lakes Camping worksheet for the month ended January 31, 20XX. 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.

Column 2

Column 3

Column 4

338) Accounts Receivable

________

339) Depreciation Expense

________

340) Prepare closing entries from the following information on the Warner Books worksheet income statement columns. Additional information: Withdrawals equal $20 for the period.

Sales Sales Ret. and Allow. Cost of Good Sold Interest Revenue Sales Salaries Expense Office Salaries Expense

Income Statement Debit Credit 80 8 42 8 12 4

341) Prepare the general journal entry to record the adjustment for inventory: Merchandise Inventory account balance $4,975 Physical Count of inventory 4,995

342) Sales

Column 1

Column 2

Column 3

________

343) 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 15

Beginning Inventory Net Purchases Ending Inventory Operating Expenses

$11 1,050 16 100

Column 2

Column 3

344) Cash

________

345) Earned Rent

________

346) The following accounts are on the Balance Sheet section of Appleton Company worksheet for the month ended July 31, 20XX. 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.

347) Prepare the general journal entry to record the adjustment for inventory: Merchandise Inventory account balance $4,975 Physical Count of inventory 4,955

348) What are the two basic formats for the income statement?

349) Identify the expense category (Selling or Administrative) 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 ________ ________ ________ ________ ________

350) Merchandise Inventory

Column 1

Column 2

Column 3

Column 4

________

351) 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

Roxanne's Company Partial Worksheet for the Year Ended December 31, 20XX

352) Prepare the general journal entry to record the adjustment for inventory: Merchandise Inventory account balance $5,000 Physical Count of inventory 4,995

Column 2

Column 3

Column 4

353) Interest Revenue

________

354) Cash

________

355) 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

Column 2

Column 3

Column 4

356) Wages Expense

________

357) Sales Returns & Allow.

________

358) 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

359) 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

Bill's Company Partial Worksheet for the Year Ended December 31, 20XX

360) Equipment

Column 1

Column 2

Column 3

Column 4

________

Calculate the missing figures (a-c) in each of the following independent scenarios.

361)

Sales 400

Physical Merchandise Inventory Inventory Count 125 130

Unadjusted Cost of Goods Sold 325

Adjusted Cost of Inventory Goods Shrinkage Sold Gross Profit a) b) c)

a) ________ b) ________ c) ________

362) Discuss the purpose of a detailed income statement. Briefly describe the major kinds of business activities covered on a detailed income statement.

363) Prepaid Rent

Column 1

Column 2

Column 3

Column 4

________

Answer Key Testname: CHAPTER 8 1) D 2) A 3) B 4) D 5) C 6) D 7) D 8) C 9) A 10) D 11) B 12) C 13) C 14) B 15) B 16) C 17) D 18) A 19) C 20) C 21) B 22) B 23) B 24) B 25) A 26) B 27) B 28) D 29) B 30) D 31) A 32) C 33) D 34) B 35) C 36) A 37) B 38) D 39) D 40) A 41) C 42) B 43) C 44) C 45) C 46) A 47) A 48) B 49) C 50) A 41

Answer Key Testname: CHAPTER 8 51) C 52) C 53) D 54) C 55) D 56) D 57) A 58) A 59) D 60) D 61) D 62) C 63) A 64) B 65) C 66) A 67) C 68) C 69) D 70) D 71) D 72) D 73) A 74) D 75) B 76) B 77) B 78) B 79) B 80) A 81) C 82) B 83) D 84) B 85) C 86) D 87) B 88) B 89) D 90) C 91) B 92) C 93) C 94) B 95) D 96) B 97) C 98) C 99) A 100) B 42

Answer Key Testname: CHAPTER 8 101) C 102) D 103) B 104) C 105) D 106) A 107) D 108) A 109) C 110) C 111) B 112) A 113) B 114) A 115) D 116) D 117) D 118) A 119) D 120) C 121) A 122) B 123) C 124) C 125) D 126) C 127) D 128) B 129) A 130) D 131) B 132) B 133) D 134) D 135) A 136) A 137) B 138) A 139) D 140) D 141) D 142) D 143) A 144) D 145) B 146) C 147) C 148) D 149) C 150) C 43

Answer Key Testname: CHAPTER 8 151) D 152) A 153) D 154) D 155) D 156) B 157) D 158) A 159) C 160) A 161) D 162) B 163) C 164) A 165) C 166) B 167) A 168) D 169) B 170) D 171) D 172) D 173) D 174) D 175) A 176) B 177) C 178) A 179) D 180) A 181) C 182) FALSE 183) TRUE 184) FALSE 185) TRUE 186) TRUE 187) FALSE 188) TRUE 189) TRUE 190) FALSE 191) TRUE 192) TRUE 193) FALSE 194) FALSE 195) FALSE 196) TRUE 197) FALSE 198) FALSE 199) TRUE 200) FALSE 44

Answer Key Testname: CHAPTER 8 201) TRUE 202) TRUE 203) TRUE 204) FALSE 205) TRUE 206) TRUE 207) TRUE 208) FALSE 209) TRUE 210) FALSE 211) FALSE 212) FALSE 213) TRUE 214) FALSE 215) TRUE 216) FALSE 217) FALSE 218) TRUE 219) FALSE 220) FALSE 221) FALSE 222) FALSE 223) FALSE 224) FALSE 225) TRUE 226) FALSE 227) FALSE 228) FALSE 229) FALSE 230) FALSE 231) TRUE 232) FALSE 233) TRUE 234) TRUE 235) FALSE 236) TRUE 237) FALSE 238) TRUE 239) FALSE 240) FALSE 241) TRUE 242) FALSE 243) TRUE 244) FALSE 245) FALSE 246) FALSE 247) TRUE 248) TRUE 249) TRUE 250) TRUE 45

Answer Key Testname: CHAPTER 8 251) FALSE 252) TRUE 253) TRUE 254) FALSE 255) TRUE 256) TRUE 257) TRUE 258) TRUE 259) FALSE 260) FALSE 261) FALSE 262) FALSE 263) FALSE 264) FALSE 265) TRUE 266) FALSE 267) TRUE 268) FALSE 269) FALSE 270) TRUE 271) TRUE 272) Item Category a. Current Liabilities b. Capital Asset c. Current Liabilities / Long-term Liabilities d. Current Liabilities e. Current Asset 400 273) Unearned Legal Fees Legal Fees Revenue 400 274) a) Credit b) Debit c) Debit d) Credit e) Credit 275) a) $2,870 b) $50 c) $820 d) $520 276) Accumulated Depreciation Equip.: credit balance sheet none 277) Prepaid Insurance: asset debit balance sheet permanent 278) 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.

Answer Key Testname: CHAPTER 8 279)

PICKTON COMPANY Balance Sheet August 31, 20XX 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

$5 3 2 15

$14 7

$12 5

Long-Term Liabilities Total Liabilities Owner's Equity Appleton, Capital Total Liabilities and Owner's Equity 280) Sales Deduct: Sales Discounts Sales Returns and Allowances Net Sales Deduct: Cost of Goods Sold Gross Profit on Sales

$25

7 $32

$17 8 $25

7 $32 $2,200 $50 25

75 $2,125 1,320 $805

Less: Operating Expense 360 Net Income $445 125 281) Cost of Goods Sold Merchandise Inventory 125 282) Merchandise Inventory debit balance sheet none 283) 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.

Answer Key Testname: CHAPTER 8 284) Item Category a. Current Asset b. Current Liabilities c. Current Liabilities / Long-term Liabilities d. Capital Asset e. Current Asset 285) a) $25 b) $725 c) $75 286) a) $1,280 b) $16 c) $203 d) $103 287) Unearned Revenue: liability credit 200 288) Interest Payable Interest Expense 200 Interest Income 90 Interest Receivable 90 289) Prepaid Rent: debit 950 290) Unearned Accounting Fees Accounting Fees Revenue 950 291) Prepaid Insurance: debit 292) Sales Discounts: debit 34 293) Sales Interest Revenue 3 Income Summary 37 Income Summary Sales Salaries Expense Office Salaries Expense Cost of Goods Sold Sales Returns and Allow. Income Summary Capital 294) a) $2,200 b) $1,950 c) $2,220 295) $58,000

balance sheet

permanent

none

balance sheet none income statement decrease

5 2 22 2

Answer Key Testname: CHAPTER 8 296)

MARBLE COMPANY Balance Sheet August 31, 20XX Assets Current Assets Cash Accounts Receivable Merchandise Inventory Total Current Assets Capital Assets Store Equipment Less Accumulated Dep. Total Assets

$4 7 4

$12 4

Liabilities Current Liabilities Accounts Payable Long-Term Liabilities Total Liabilities

$5 13

Owner's Equity Marble, Capital Total Liabilities and Owner's Equity 297) a) $2 b) $54 c) $10 17 298) Sales Rental Fees Earned 2 Income Summary

Income Summary Insurance Expense Office Salaries Expense Cost of Goods Sold Sales Returns and Allow.

$15

8 $23

$18

$5 $23

3 1 11 1

Income Summary 3 PC Pros, Capital 3 500 299) Unearned Security Fees Security Fees Revenue 500 300) Supplies Expense: debit income statement decrease 301) Depreciation Expense: debit income statement decrease 500 302) Unearned Subscription Revenue Subscription Revenue 500 303) Sales Returns and Allowances: debit income statement decrease 304) The multi-step income statement shows subtotals to highlight significant relationships whereas the single-step income statement simply groups all revenues together, and then lists and deducts all expenses without any subtotals. 305) Interest Receivable: asset debit balance sheet permanent 49

Answer Key Testname: CHAPTER 8 306) Interest Expense: expense debit income statement temporary 307) a) $1 b) $27 c) $5 1,000 308) Unearned Legal Fees Legal Fees Revenue 1,000 309) Rent Expense: debit income statement decrease 310) Supplies: debit balance sheet none 311) Accounts Payable: liability credit balance sheet permanent 312) Sales: revenue credit income statement temporary 313) Insurance Expense: debit income statement decrease 150 314) Unearned Magazine Fees Magazine Fees Revenue 150 315) Pamela's Company Partial Worksheet for the Year Ended December 31, 20XX

316) Purchases: 317) a. $37 b. $14 c. $8 d. $1 e. $6 318) Item Category a. Selling b. Administrative c. Selling d. Administrative e. Administrative 319) Interest Income Interest Receivable Interest Payable Interest Expense

expense

150

debit

income statement

150

temporary

Answer Key Testname: CHAPTER 8 5 320) (a) Interest Receivable Interest Income (b) Supplies Expense 2 Supplies (c) Cost of Goods Sold 4 Inventory (d) Unearned Rental Fees 7 Rental Fees Earned 321) a. Debit b. Debit c. Debit d. Debit e. Credit f. Debit g. Credit h. Credit 322) Petty Cash: debit 323) Scents Galore Balance Sheet November 30, 20XX Assets Current Assets: Cash Accounts Receivable Merchandise Inventory Total Current Assets Capital Assets: Store Equipment Less: Accumulated Dep. Total Assets

5 2 4 7

balance sheet

$6 10 14

$30

$30 6

24 $54

Liabilities Current Liabilities: Accounts Payable Long-Term Liabilities Mortgage Payable Total Liabilities Owner's Equity Scents Galore, Capital Total Liabilities and Owner's Equity 324) Wages Payable: liability 325) Earned Revenue: credit 326) Interest Payable: liability 327) Accumulated Dep., Equip.: asset 328) Sales Discounts: revenue 329) Wages Payable: credit

none

$14 24 $38

16 $54

credit credit credit debit

balance sheet permanent income statement increase balance sheet permanent balance sheet permanent income statement temporary balance sheet none 51

Answer Key Testname: CHAPTER 8 330) Unearned Rent: credit balance sheet none 331) $27,000 332) Purchases: debit income statement decrease 333) Wages Expense: debit income statement decrease 130 334) Merchandise Inventory Cost of Goods Sold 130 335) a) Income Statement b) Balance Sheet c) Income Statement d) Balance Sheet e) Income Statement 336) Rosemary's Company Partial Worksheet for the Year Ended December 31, 20XX

Answer Key Testname: CHAPTER 8 337)

Great Lakes Camping Balance Sheet January 31, 20XX Assets Current Assets: Cash Accounts Receivable Merchandise Inventory Total Current Assets

$2 4 2

Capital Assets: Store Equipment Less: Accumulated Dep. Total Assets

$6 2

Liabilities Current Liabilities: Accounts Payable Long-Term Liabilities Mortgage Payable Total Liabilities

4 $12

$3 6 $9

Owner's Equity Great Lakes, Capital Total Liabilities and Owner's Equity 338) Accounts Receivable: asset 339) Depreciation Expense: expense 340) Sales 80 Interest Revenue 8 Income Summary Income Summary Sales Salaries Expense Office Salaries Expense Cost of Goods Sold Sales Returns and Allow.

Income Summary Warner, Capital

Warner, Capital Warner, Withdrawals 341) Merchandise Inventory Cost of Goods Sold 342)

3 $12

debit debit

permanent temporary

12 4 42 8

credit

balance sheet income statement

20 income statement

increase

Answer Key Testname: CHAPTER 8 343) a) $1,280 b) $1,045 c) $235 d) $135 344) Cash: 345) 346)

debit credit

balance sheet none income statement increase

APPLETON COMPANY Balance Sheet July 31, 20XX

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 Total Liabilities

$3 5 7

$15 3

$15

12 $27

$7 12 $19

Owner's Equity Appleton, Capital 8 Total Liabilities and Owner's Equity $27 20 347) Cost of Goods Sold Merchandise Inventory 20 348) The multi-step and the single-step format. 349) Item Category a. Administrative b. Selling c. Administrative d. Selling e. Selling 350) Merchandise Inventory: asset debit

balance sheet

permanent

Answer Key Testname: CHAPTER 8 351)

Roxanne's Company Partial Worksheet for the Year Ended December 31, 20XX

5 352) Cost of Goods Sold Merchandise Inventory 5 353) Interest Revenue: revenue credit income statement 354) Cash: asset debit balance sheet 355) a. $29 b. $19 c. $15 d. $2 e. $6 356) Wages Expense: expense debit income statement 357) Sales Returns & Allow.: revenue debit income statement 358) $60,000 359) Bill's Company Partial Worksheet for the Year Ended December 31, 20XX

temporary permanent

temporary temporary

360) Equipment: asset debit balance sheet permanent 361) a) $(5) b) $320 c) $80 362) 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. 363) Prepaid Rent: asset debit balance sheet permanent

Exam

Chapter 9

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) When a company sets up a change fund account it would be considered a(n) A) withdrawal. B) asset. C) expense.

D) liability.

2) 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.

3) 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) $1,550 B) $1,100

$2,500 500 600 1,400 2,650 C) $1,250

D) $1,350

4) Petty cash disbursements for expenses should be reported daily in the A) auxiliary record. B) ledger. C) journal. D) not recorded.

5) 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 Cash for $80. C) credit to Cash Short/Over for $4. D) credit to Petty Cash for $84.

6) The original amount of the petty cash fund should equal A) cash on hand at the end of the day. B) the sum of the petty cash on hand and the paid petty cash vouchers. C) the cash received plus the cash in the petty cash box. D) the total payments made during the day.

7) If the owner of Kelly Legal Services forgot to deduct a withdrawal from the balance per books, what entry would be necessary? A) Debit Revenue; credit Cash B) Debit Cash; credit Withdrawals C) Debit Withdrawals; credit Cash D) Debit cash; credit Revenue

8) The May bank statement for Accounting Services shows a balance of $6,300, but the balance per books 8) shows a cash balance of $7,980. Other information includes 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) Note collected by the bank B) Cheque outstanding C) Deposit in transit D) Bank service charge

9) When the bank pays a cheque written by the company, it would A) debit the customer's bank account. B) debit the cash account on the company's books. C) credit the customer's bank account. D) No increase or decrease is made to the company's bank account.

10) 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 bank statement. C) a deduction from the balance per company books. D) an addition to the balance per company books.

10)

11) Which of the following accounts would most likely be debited in the replenishment of petty cash? A) Petty Cash B) Postage Expense C) Cash D) Withdrawals

11)

12) Compute the adjusted bank balance on May 31 from the following information:

12)

Chequebook balance on May 31 Outstanding cheques NSF cheque returned Deposits in transit Service charges Note collected by bank A) $7,340 B) $7,560

$7,200 500 100 250 10 250 C) $6,615

D) $7,200

13) When a cheque is presented for payment, the bank will A) credit the depositor's account. B) debit the depositor's account. C) print more cheques for the depositor's use. D) hold the cheque until deposits are cleared.

13)

14) When reconciling the ending bank balance per the company records to the correct adjusted bank balance, outstanding cheques are A) subtracted from the company's records balance. B) added to the company's records balance. C) subtracted from the bank statement balance. D) added to the bank statement balance.

14)

15) The person or company to whom a cheque is payable is called the A) payer. B) payee. C) drawer.

D) drawee.

15)

16) Which of the following would NOT be shown on the bank statement? A) Bank service charge B) Cancelled cheques C) NSF cheque D) Deposit in transit

16)

17) A signature card is used to A) send to customers as a marketing tool. B) verify the authenticity of the signature on all cheques. C) close the bank account. D) change management authority.

17)

18) 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 books. B) addition to the balance per books. C) addition to the balance per bank. D) subtraction from the balance per bank.

18)

19) Cash Short and Over is A) a Miscellaneous Expense or Miscellaneous Revenue account depending on the balance in the account. B) a Miscellaneous Revenue account. C) a Miscellaneous Expense account. D) neither a Miscellaneous Expense nor a Miscellaneous Revenue.

19)

20) A company would use a change fund if A) there are cash transactions daily. B) the owner wants to make personal withdrawals easily. C) they want to pay the postage expense without writing a cheque. D) None of these are correct.

20)

21) 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.

21)

22) The Petty Cash account is debited when A) the account balance is being decreased. B) the account balance is being increased. C) the account is being replenished. D) the custodian pays for postage from petty cash.

22)

23) The debit recorded in the journal to establish the petty cash fund is to A) Accounts Payable. B) Petty Cash. C) Cash. D) Accounts Receivable.

23)

24) 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.

24)

25) The replenishment of the petty cash fund was recorded twice. This would cause A) petty cash to be overstated. B) expenses to be understated. C) petty cash to be understated. D) expenses to be overstated.

25)

26) A bank service charge 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) subtraction from the balance per bank. D) addition to the balance per books.

26)

27) 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) notification from the bank of a customer's NSF cheque. C) the total of outstanding cheques. D) deposits in transit.

27)

28) 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 Cash for $148. C) a debit to Petty Cash for $160. D) a credit to Petty Cash for $148.

28)

29) 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 overstated. B) petty cash to be understated. C) supplies to be understated. D) assets to be overstated.

29)

30) Which of the following bank reconciliation items would be reflected in a general journal entry? A) Deposits in transit B) The bank incorrectly charges another company's cheque to your account. C) Outstanding cheques D) The bank service charges for the period

30)

31) Cheques that have been processed by the bank and are no longer negotiable are A) cheques in process. B) canceled cheques. C) blank cheques. D) outstanding cheques.

31)

32) The journal entry to reverse the entry of a customer's nonsufficient funds cheque would include a A) debit to Cash. B) credit to Cash. C) credit to Accounts Receivable. D) debit to Accounts Payable.

32)

33) The credit recorded in the journal to replenish the petty cash fund is to A) Accounts Receivable. B) Petty Cash. C) Cash. D) Accounts Payable.

33)

34) A deposit received by the bank will include A) a credit to the cash account on the company's books. B) a credit to the company's bank account. C) a debit to the company's bank account. D) no increase or decrease is made to the company's bank account.

34)

35) On a bank reconciliation, deposits added to the bank statement side are called A) late deposits. B) deposits on hold. C) deposits in transit. D) outstanding deposits.

35)

36) SWIFT codes are used for A) making certain any cheques written are cleared as soon as possible. B) identifying a payee in another country. C) speeding up deposits. D) identifying a particular branch of a bank worldwide.

36)

37) Which item is NOT an example of an advantage of Online Banking? A) Perform bank reconciliation more often than monthly B) Manage all accounts from one secure site C) Phishing D) Transactions confirmed quickly

37)

38) The May bank statement for Accounting Services shows a balance of $6,300, but the balance per books 38) shows a cash balance of $7,980. Other information includes 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) Cheques outstanding and bank service charge B) Bank service charge and the note collected by the bank C) Bank service charge D) None of the above are correct.

39) 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.

39)

40) The entry reducing a petty cash fund by $150 would include a A) debit to Miscellaneous Expense for $150. B) debit to Petty Cash for $150. C) credit to Petty Cash for $150. D) credit to Cash for $150.

40)

41) Marcella Industries received a debit memorandum from the bank. During the bank reconciliation, the company's bookkeeper should A) decrease the cash account on the company's books. B) decrease the ending cash balance on the bank statement. C) increase the ending cash balance on the bank statement. D) increase the cash account on the company's books.

41)

42) The bank statement shows A) the cheques the bank has paid and any deposits received. B) the beginning bank balance of the cash at the start of the month. C) any other charges or additions to the bank balance. D) All of these answers are correct.

42)

43) The credit recorded in the journal entry to establish the petty cash fund is to A) Petty Cash. B) Withdrawals. C) Cash. D) Postage Expense.

43)

44) From the bank reconciliation no entry was recorded for deposits in transit. This would cause A) assets to be overstated. B) assets to be understated. C) no impact since deposits are not recorded on the books. D) no impact since deposits in transit are already included in the balance per books.

44)

45) 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.

45)

46) Information to calculate the adjusted cash balance for Everest Climbing Gear is as follows:

46)

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) $4,860 B) $5,060

$4,000 150 80 1,000 1,400 1,290 C) $5,260

D) $4,660

47) Which of the following bank reconciliation items would NOT be reflected in a journal entry? A) Bank service charges B) NSF customer cheque C) Outstanding cheques D) Collection of a note by the bank

47)

48) Which of the following bank reconciliation items would NOT be reflected in a journal entry? A) Payment of interest from the bank B) Payment of interest to the bank C) EFT from a customer D) Deposits in transit

48)

49) The bank added another company's deposit to our account. This would be included on the bank reconciliation as a(n) A) addition to the balance per bank. B) addition to the balance per books. C) subtraction from the balance per books. D) subtraction from the balance per bank.

49)

50) When a company transfers funds among parties electronically, without the use of paper cheques it is called A) electronic funds transfer. B) automated reconciliation. C) cheque truncation. D) e-commerce.

50)

51) Which of the following transactions would be recorded in an auxiliary petty cash record? A) Purchase of a $20,000 piece of Equipment B) Purchase of first aid supplies C) Payment of Salaries Expense D) Owner Withdrawal

51)

52) Information to calculate the adjusted cash balance for Fran's Food Services is as follows:

52)

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) $2,530 B) $2,630

$2,000 75 40 500 700 645 C) $2,330

D) $2,430

53) The entry to establish the petty cash fund debited Misc. Expense. This would cause A) expenses to be overstated. B) expenses to be understated. C) revenues to be overstated. D) revenues to be understated.

53)

54) If a business deposits a customer's cheque and later learns that it is an insufficient funds cheque, the A) bank will try to collect the amount. B) general ledger balance will be less than the bank balance. C) business will receive a debit memorandum from the bank. D) business will receive a credit memorandum from the bank.

54)

55) The entry establishing a $150 petty cash fund would include a A) debit to Miscellaneous Expense for $150. B) debit to Petty Cash for $150. C) debit to Cash for $150. D) credit to Petty Cash for $150.

55)

56) A bank statement is a record of A) all cheques written during the period. B) all purchases made during the period. C) all sales made during the period. D) all the activity in the bank account during the period.

56)

57) An error in recording a $51 deposit as $15 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.

57)

58) Which of the following transactions would most likely NOT be recorded in an auxiliary petty cash record? A) Purchase of postage stamps B) Payment of gas for the company vehicle C) Payment on a $700 utility bill D) Purchase of first aid supplies

58)

59) The August bank statement for Jenn's Nursing Service shows a balance of $8,900, but the balance per the 59) ledger account shows a cash balance of $8,310. Other information includes 1. A payment to a supplier 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) $8,840. B) $9,020. C) $8,770.

D) $9,660.

60) From the bank reconciliation no entry was recorded for a debit memo for a new cheque fee expense. This would cause A) liabilities to be overstated. B) expenses to be understated. C) liabilities to be understated. D) expenses to be overstated.

60)

61) Calculate from the following information accumulated by Linda Lee the adjusted bank balance at the end 61) of August. 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) $2,750 B) $2,500

$2,500 2,750 20 1,400 1,235 65 C) $2,435

D) $2,665

62) 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.

62)

63) The entry to establish the petty cash fund was not completed. This would cause A) cash to be overstated. B) assets to be understated. C) assets to be overstated. D) cash to be understated.

63)

64) Red's Rentals entry to establish a $50 petty cash fund for the office would include a A) credit to Cash for $50. B) debit to Office Expense for $50. C) credit to Petty Cash for $50. D) debit to Cash for $50.

64)

65) An example of an internal control is A) all cheques written must have reference source documents. B) the use of bank account. C) all cheques are prenumbered. D) All of these answers are correct.

65)

66) Bank statements show all the following EXCEPT A) the beginning and ending balances shown on the depositor's general ledger. B) items debited and credited to the chequing account. C) the beginning and ending balances shown on the bank's records. D) deposits received and cheques paid.

66)

67) The cheque is written and signed by the A) payee. B) drawer.

67)

C) drawee.

D) payer.

68) The entry to replenish the petty cash fund debited Insurance Expense for postage. This would cause A) Insurance Expense to be overstated. B) Postage Expense to be overstated. C) Petty Cash to be overstated. D) Petty Cash to be understated.

68)

a 69) The May bank statement for Lawn Services shows a balance of $6,300, but the balance per books shows69) cash balance of $7,980. Other information includes 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) $7,620. B) $8,080. C) $9,810.

D) $7,980.

70) The Petty Cash account is credited when A) the account balance is being decreased. B) the account is being replenished. C) the custodian pays for postage from petty cash. D) the account balance is being increased.

70)

71) 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 added to the balance of the bank statement. B) They would be added to the balance per books. C) They would be subtracted from the balance of the bank statement. D) They would be ignored.

71)

72) Calculate, from the following information accumulated by Vera Freese, the adjusted cash balance at the72) 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) $4,000 B) $5,500

$3,000 4,250 45 2,500 1,500 205 C) $3,000

D) $4,250

73) An example of electronic funds transfer is A) the same as a deposit in transit. B) a transfer of funds without the use of paper cheques. C) a transfer of funds by writing a cheque. D) All of these are correct.

73)

74) 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 been subtracted on the bank records but not the chequebook records. C) have not been presented to the bank for payment but have been subtracted in the ledger account. D) have been returned to the business for nonpayment.

74)

75) What type of an account is the petty cash fund? A) Asset B) Liability

75)

C) Expense

D) Revenue

76) Information on the Maritime Mining Company bank reconciliation included the following items: Bank service charges Deposits in transit Outstanding cheques

76)

$ 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.

77) Calculate, from the following information accumulated by Bob Verna, the adjusted cash balance at the end 77) 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) $8,000 B) $6,000

$6,000 8,500 90 5,000 3,000 410 C) $8,500

D) $11,000

78) 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 Petty Cash for $80. C) a credit to Cash for $80. D) a credit to Cash for $76.

78)

79) The entry to replenish a $150 petty cash fund which has cash of $60 and valid receipts for $91 would include A) a credit to Cash for $90. B) a credit to Petty Cash for $91. C) a credit to Cash for $91. D) a debit to Cash for $91.

79)

80) 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.

80)

81) The June bank statement for Paul's Plumbing shows a balance of $3,150, but the balance per books shows 81)a cash balance of $3,990. Other information includes 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 $1,530. The adjusted cash balance at the end of June should be A) $3,990. B) $4,405. C) $3,710.

D) $4,040.

82) Technological controls can include all of the following EXCEPT A) using personal identification scanners. B) requiring passwords on all systems. C) restricting social media access at work. D) using digital keycards for access.

82)

83) The entry to replenish a $100 petty cash fund which has cash of $20 and valid receipts for $80 would include A) a credit to Petty Cash for $80. B) a credit to Cash for $80. C) a credit to Cash for $100. D) a debit to Cash for $80.

83)

84) 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.

84)

85) Company policy for internal control should include all of the following EXCEPT A) all cheques are signed by the owner (or responsible employee) after receiving authorization to pay from the departments concerned. B) at time of payment, all supporting invoices or documents will be stamped "paid." C) one employee should have the total responsibility for approving purchases, authorizing payments, and signing cheques. D) employees will be rotated through a variety of assignments.

85)

86) 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) $304 debit to Cash; $4 credit to Cash Short/Over; 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) $300 debit to Cash and $300 credit to Sales.

86)

87) 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) employees and managers comply with laws and regulations. D) business information is accurate.

87)

88) 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 Petty Cash for $168. B) credit to Cash for $160. C) credit to Cash Short and Over for $8. D) debit to Cash Short and Over for $8.

88)

89) The drawee is the A) person to whom the cheque is payable. C) person who reconciles the account.

89)

B) bank that drawer has an account with. D) person who writes the cheque.

90) Deposits not yet added into the bank balance are called A) deposits on hold. B) outstanding deposits. C) late deposits. D) deposits in transit.

90)

91) Advantages of online banking include A) effectiveness. C) transaction speed.

91)

B) convenience. D) All of the above are correct.

92) The petty cash overage was not recorded. This would cause A) revenues to be understated. B) expenses to be overstated. C) revenues to be overstated. D) expenses to be understated.

92)

93) Marcella Industries received a credit memorandum from the bank. During the bank reconciliation they should A) decrease their cash account on the company's books. B) decrease the ending cash balance on the bank statement. C) increase the ending cash balance on the bank statement. D) increase their cash account on the company's books.

93)

94) The change fund is what type of account? A) Asset B) Revenue

94)

C) Liability

D) Expense

95) A petty cash fund is set up A) to pay for small expenses. B) for the owner to withdraw money for personal use conveniently. C) to pay for large expenses. D) None of these answers are correct.

95)

96) The May bank statement for Accounting Services shows a balance of $6,300, but the balance per books 96) shows a cash balance of $7,980. Other information includes 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.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 97) Theft is the only reason a Petty Cash account will ever have a shortage.

97)

98) External control includes control over the assets as well as ways of monitoring the company's operations.

98)

99) All entries made on the bank side of a bank reconciliation will require a journal entry.

99)

100) Interact Flash technology eliminates the need for the merchant to complete bank reconciliations.

100)

101) Internal controls are unnecessary as long as you only hire people you know.

101)

102) All banks use the same format for their bank statements.

102)

103) There is no need to keep track of deposits on the cheque stub since the bank creates a statement every month.

103)

104) When adjustments are made to the bank balance in preparing a bank reconciliation, a journal entry is needed to bring the ledger up to date.

104)

105) The Auxiliary Petty Cash Record is a special journal used by merchandising companies.

105)

106) Bonding assures that employees have experience with bank reconciliations.

106)

107) A cheque stub is used to keep track of bank balances.

107)

108) The balance in the change fund at the end of the day is included with the daily deposits to the bank.

108)

109) The Petty Cash account should always be debited when the fund is replenished.

109)

110) NSF is an abbreviation for Not Satisfactory Funding.

110)

111) A signature card shows the signature of only the person who authorizes others in the company to sign cheques.

111)

112) Internal controls are unnecessary as long as you have a signed signature card stored at the bank.

112)

113) Rounding cash transactions to the nearest nickel may create overages or shortages in the Petty Cash account.

113)

114) The Auxiliary Petty Cash Record is a required financial statement under GAAP.

114)

115) Banks must record deposits as soon as a customer records a journal entry impacting cash.

115)

116) Cancelled cheques are negotiable at the bank for the face value.

116)

117) 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.

117)

118) Using correct cash handling procedures, deposits should be made every half hour.

118)

119) The auxiliary petty cash record is a special journal.

119)

120) Interact Flash technology eliminates the need for the merchant to use a terminal or reader at their place of business.

120)

121) 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.

121)

122) The normal balance of the Petty Cash account is a credit.

122)

123) Any adjustment to the depositor's records because of an item on the bank statement requires a journal entry.

123)

124) Banks routinely return cancelled cheques with bank statements.

124)

125) A change fund is an expense on the income statement.

125)

126) The use of physical cash in the business environment is increasing.

126)

127) Petty Cash is used to provide cash to pay some small items quickly.

127)

128) Transferring money without paper cheques is called electronic funds transfer.

128)

129) Business deposits must be made during the hours the bank is open.

129)

130) Interac Flash (or "tap") debit cards slow down purchases and lead to increased incidents of skimming and fraud.

130)

131) The drawee of the cheque is the person receiving the money.

131)

132) Petty Cash is an asset shown on the balance sheet.

132)

133) NSF cheques fees are paid by the bank.

133)

134) Once an effective internal control system is in place, monitoring employees and systems is no longer required.

134)

135) One internal control safeguard is to assign all the duties of receiving, depositing, and recording cash to one employee.

135)

136) When a bank credits your account, it is increasing the balance.

136)

137) S.W.I.F.T. codes in modern banking make moving funds internationally a quick and accurate process.

137)

138) When a debit card is used to pay for a purchase the amount is deducted directly from your chequing account.

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 Petty Cash account is used to pay for small items such as postage stamps and supplies.

140)

141) When a deposit is completed, it should also be recorded on the current cheque stub.

141)

142) A Cash Short and Over account is a temporary account closed at the end of the accounting cycle.

142)

143) A change fund will always reconcile to the original balance at the end of a shift.

143)

144) When a bank debits your account, it is decreasing the balance.

144)

145) Using correct cash handling procedures, deposits should be made by the end of the week.

145)

146) Endorsements can be made using a rubber stamp instead of a handwritten signature.

146)

147) If the petty cash fund is always full of cash, the float amount should be increased.

147)

148) A bank statement reports the beginning balance, deposits in transit, cancelled cheques, and outstanding cheques for the month.

148)

149) When a credit card is used to pay for a purchase the amount is deducted directly from your chequing account.

149)

150) A shift in assets occurs when a petty cash account is established.

150)

151) A deposit receipt usually separates cheques deposited from coin and currency deposited.

151)

152) 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.

152)

153) Electronic funds transfers are a growing trend in Canada.

153)

154) Every employee in a business must be bonded to comply with GAAP.

154)

155) Accounting can only record transactions using paper money.

155)

156) An employee assigned the responsibility for overseeing the petty cash fund is called the custodian.

156)

157) If a cheque marked NSF is returned from the bank, an adjusting entry crediting cash is needed.

157)

158) Any overages or shortages in the Petty Cash account must be paid by the custodian.

158)

159) When a bank debits your account, it is decreasing the balance.

159)

160) A change fund is a liability on the balance sheet.

160)

161) Deposits that have been added to the bank balance but not the General Ledger balance are called deposits in transit.

161)

162) Anyone can sign at the bank as there is no way of confirming the authorized signatures for the account.

162)

163) The drawer writes the cheque.

163)

164) The auxiliary petty cash record is not a journal.

164)

165) A signature card is kept in the bank files so that possible forgeries could be spotted.

165)

166) On a bank reconciliation, outstanding cheques are deducted from the balance per books.

166)

167) A credit to petty cash is made to replenish the fund.

167)

168) Debit cards can be used in many locations in exactly the same manner as a credit card.

168)

169) The Petty Cash account should be credited every time it is used to pay for small expenses.

169)

170) Deposits in transit result because of a timing difference between the bank records and Ledger records.

170)

171) Postings must be completed from the Auxiliary Petty Cash Record to the General Ledger.

171)

172) If a cheque marked NSF is returned from the bank, an adjusting entry debiting cash is needed.

172)

173) If the petty cash fund is too large, the Petty Cash Fund account should be increased.

173)

174) Petty Cash could be used to purchase a box of paper clips if required.

174)

175) 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.

175)

176) Petty Cash could be used to pay employee wages if required.

176)

177) Banks have no way of knowing a deposit is coming until they receive it.

177)

178) The drawee of a cheque is normally the bank.

178)

179) The auxiliary petty cash record is posted to the ledger daily.

179)

180) If there is an overage in the petty cash fund it would be considered other income.

180)

181) 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.

181)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 182) 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.

183) 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

184) ________ Filled up the company's van with gas 185) What is the purpose of internal control? 186) List at least five company policies that would be included in an internal control system. For each of the following items shown on a bank reconciliation identify – in Column 1 is an adjusting journal needed? (yes/no). If column 1 is a yes, in Column 2 the account to debit in the entry, and in Column 3 the account to credit in the entry.

Example: Interest charged

Column 1

Column 2

Column 3

yes

Interest Expense

Cash

187) Outstanding cheques 188) 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. 189) What is the difference between a debit and credit memorandum? 190) What would a company gain by using a petty cash fund? 191) List and describe some of the electronic conveniences that we are now provided when doing our banking. For each of the following items shown on a bank reconciliation identify – in Column 1 is an adjusting journal needed? (yes/no). If column 1 is a yes, in Column 2 the account to debit in the entry, and in Column 3 the account to credit in the entry.

Example: Interest charged

Column 1

Column 2

Column 3

yes

Interest Expense

Cash

192) Bank error 193) Construct a bank reconciliation for Mike's DJ Services as of June 30, 20XX, 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

194) 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

195) From the following information, prepare the bank reconciliation for Erin's Hair Studio for June 30, 20XX. Ending General Ledger balance Ending bank statement balance Deposits in transit Outstanding cheques Service Charge

$190 130 90 40 10

196) 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

197) Construct a bank reconciliation for Savannah's Printing as of April 30, 20XX, 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

Example:

198) Delivery Expense

Column 1 Asset

________

Column 2 Debit

Column 3 Balance Sheet

________

Column 4 Permanent

________

199) 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.

200) 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 $110 201) 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.

202) 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. 203) Construct the bank reconciliation for Zone Training, as of October 31, 20XX 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

204) 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.

205) 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

Example:

206) Petty Cash

Column 1 Asset

________

Column 2 Debit

Column 3 Balance Sheet

________

Column 4 Permanent

________

207) Construct the bank reconciliation for Evitus Company as of July 31, 20XX 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

208) ________ Replenishment of petty cash

For each of the following items shown on a bank reconciliation identify – in Column 1 is an adjusting journal needed? (yes/no). If column 1 is a yes, in Column 2 the account to debit in the entry, and in Column 3 the account to credit in the entry.

Example: Interest charged

Column 1

Column 2

Column 3

yes

Interest Expense

Cash

209) Loan payment (preauthorized withdrawal) 210) 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.

Example:

Column 1 Asset

211) Miscellaneous Expense ________

Column 2 Debit

Column 3 Balance Sheet

________

Column 4 Permanent

________

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

212) ________ Bought Equipment on account 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:

213) Cash

Column 1 Asset

________

Column 2 Debit

Column 3 Balance Sheet

________

Column 4 Permanent

________

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

214) ________ Owner withdrew money from the company for personal use For each of the following items shown on a bank reconciliation identify – in Column 1 is an adjusting journal needed? (yes/no). If column 1 is a yes, in Column 2 the account to debit in the entry, and in Column 3 the account to credit in the entry.

Example: Interest charged

Column 1

Column 2

Column 3

yes

Interest Expense

Cash

215) NSF cheque 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). Column 1 Asset

Example:

216) Change Fund

________

Column 2 Debit

Column 3 Balance Sheet

________

Column 4 Permanent

________

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

217) ________ Establishment of petty cash 218) When completing a bank reconciliation, explain why all adjustments to the general ledger balance require journal entries. 219) 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.

Example:

220) Cash Short & Over

Column 2 Debit

________

Column 3 Balance Sheet

________

Column 4 Permanent

________

221) List the various steps and procedures included in the bank reconciliation process. What are the advantages in preparing a monthly bank reconciliation? 222) 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 For each of the following items shown on a bank reconciliation identify – in Column 1 is an adjusting journal needed? (yes/no). If column 1 is a yes, in Column 2 the account to debit in the entry, and in Column 3 the account to credit in the entry.

Example: Interest charged

Column 1

Column 2

Column 3

yes

Interest Expense

Cash

223) EFT received from customer 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

224) ________ Bought a book of stamps 225) List three objectives of internal controls. 226) 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.

227) Construct a bank reconciliation for Philip's Guided Tours as of September 30, 20XX, 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

228) Construct a bank reconciliation for Bark Zoo as of April 30, 20XX, 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

Example: Interest charged

Column 1

Column 2

Column 3

yes

Interest Expense

Cash

229) Deposits in transit 230) 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, $25 231) Prepare the required journal entries from the bank reconciliation below as of the end of March: The balance per general ledger is $525 There is a credit memo for interest revenue, $25 There is a debit memo for a customer's NSF cheque, $115 There is a credit memo for an EFT from a customer, $500 Outstanding cheques amount to $650 This month's service charge amounts to $75 Deposits in transit amount to $420

232) 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 $1,500 233) Construct a bank reconciliation for Players Sporting Goods as of July 31, 20XX, 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

234) Why is the petty cash account not credited if you add up the vouchers in the petty cash box and they equal $72.00? 235) 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 $575 236) Prepare journal entries for the following petty cash fund transactions: Jul. 1 9 31

Example: Interest charged

Column 1

Column 2

Column 3

yes

Interest Expense

Cash

237) Interest received 238) 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.

239) 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.

240) Prepare a bank reconciliation from the following information: a. Balance per bank statement on September 30, 20XX 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

241) Explain why only the general ledger side of the bank reconciliation must be journalized.

Answer Key Testname: CHAPTER 9 1) B 2) D 3) C 4) A 5) A 6) B 7) C 8) A 9) A 10) C 11) B 12) A 13) B 14) C 15) B 16) D 17) B 18) C 19) A 20) A 21) D 22) B 23) B 24) C 25) D 26) A 27) B 28) A 29) C 30) D 31) B 32) B 33) C 34) B 35) C 36) D 37) C 38) C 39) D 40) C 41) A 42) D 43) C 44) D 45) D 46) B 47) C 48) D 49) D 50) A 28

Answer Key Testname: CHAPTER 9 51) B 52) A 53) A 54) C 55) B 56) D 57) B 58) C 59) B 60) B 61) D 62) C 63) A 64) A 65) D 66) A 67) B 68) A 69) B 70) A 71) C 72) A 73) B 74) C 75) A 76) B 77) A 78) C 79) A 80) A 81) C 82) C 83) B 84) C 85) C 86) A 87) B 88) D 89) B 90) D 91) D 92) A 93) D 94) A 95) A 96) A 97) FALSE 98) FALSE 99) FALSE 100) FALSE 29

Answer Key Testname: CHAPTER 9 101) FALSE 102) FALSE 103) FALSE 104) FALSE 105) FALSE 106) FALSE 107) TRUE 108) FALSE 109) FALSE 110) FALSE 111) FALSE 112) FALSE 113) TRUE 114) FALSE 115) FALSE 116) FALSE 117) FALSE 118) FALSE 119) FALSE 120) FALSE 121) TRUE 122) FALSE 123) TRUE 124) FALSE 125) FALSE 126) FALSE 127) TRUE 128) TRUE 129) FALSE 130) FALSE 131) FALSE 132) TRUE 133) FALSE 134) FALSE 135) FALSE 136) TRUE 137) TRUE 138) TRUE 139) FALSE 140) TRUE 141) TRUE 142) TRUE 143) FALSE 144) TRUE 145) FALSE 146) TRUE 147) FALSE 148) FALSE 149) FALSE 150) TRUE 30

Answer Key Testname: CHAPTER 9 151) TRUE 152) FALSE 153) TRUE 154) FALSE 155) FALSE 156) TRUE 157) TRUE 158) FALSE 159) TRUE 160) FALSE 161) FALSE 162) FALSE 163) TRUE 164) TRUE 165) TRUE 166) FALSE 167) FALSE 168) FALSE 169) FALSE 170) TRUE 171) FALSE 172) FALSE 173) FALSE 174) TRUE 175) TRUE 176) FALSE 177) TRUE 178) TRUE 179) FALSE 180) TRUE 181) TRUE 182) Date Sept.1

183) _________ ____X____ ____X____ ____X____ _________ ____X____ ____X____ ____X____ 184) 3, 4

Transaction Petty Cash Cash

Debit 100

Donation Expense 12 Postage Expense 18 Office Supplies Expense 24 Miscellaneous Expense 26 Cash 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.

Credit

100

Answer Key Testname: CHAPTER 9 185) Internal control helps a company protect their assets (i.e. Cash) and monitor its ongoing operations. 186) 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. 187) Outstanding cheques no 188) 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. 189) 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 memorandum is received from the bank when the bank has increased the customer's account balance for reasons such as: collection of a note, interest revenue, etc. 190) 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. 191) 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. 192) Bank error no

Answer Key Testname: CHAPTER 9 193)

MIKE'S DJ SERVICES BANK RECONCILIATION AS OF JUNE 30, 20XX G/L Balance Ending Ledger Bal.

$950

Deduct: Service Charge Reconciled Balance 194) Cash Short and over Postage expense Office supplies Withdrawals Delivery expense Cash 195)

Deduct: Service Charge

Reconciled Balance 196) Postage expense Office supplies Withdrawals Delivery expense Cash

$899 333 1,232

Deduct: Outstanding cheques

295

$937 Reconciled Balance 5 45 60 50 20 180 Erin's Hair Studio Bank Reconciliation as of June 30, 20XX

G/L Balance Ending G/L Balance

Balance per Bank Ending Bank Balance Add: Deposits in Transit

$937

Balance per Bank $190

Ending Bank Stat. Bal. Add: Deposits in Transit

$130 90 $220

Deduct: Outstanding Cheques

$180 45 60 50 20

Reconciled Balance

$180

175

Answer Key Testname: CHAPTER 9 197)

SAVANNAH'S PRINTING BANK RECONCILIATION AS OF APRIL 30, 20XX G/L Balance Ending Ledger Bal. Add: EFT Payment

Deduct: Interest Charge Service Charge Reconciled Balance 198) Delivery Expense: expense Transaction 199) Date Sept.1 Petty Cash Cash

200) April 30 April 30 April 30

201) Date Nov.1

$550 85 635

50 30 $555 debit

Donation Expense Postage Expense Office Supplies Expense Miscellaneous Expense Cash Short/Over Cash Interest Expense Cash Cash Accounts Receivable Service Charge Expense Cash Transaction Petty Cash Cash

Balance per Bank Ending Bank Balance Add: Deposits in Transit

110 785

Deduct: Outstanding cheques

230

Reconciled Balance $555 income statement temporary PR Debit Credit

100

12 18 24 26

50 85 30 PR

100

8 72

50 85 30 Debit 50

Petty Cash Cash

Donation Expense Postage Expense Office Supplies Expense Miscellaneous Expense Cash 202) $2 short [($100 - $23) - $25 - $6 - $6 - $38]

10 16 30 20

$675

Credit 50

Answer Key Testname: CHAPTER 9 203)

Zone Training Bank Reconciliation as of October 31, 20XX G/L Balance

Balance per Bank

Ending G/L Balance

Deduct: Service Charge

$840

Ending Bank Stat. Bal. Add: Deposits in Transit

Aug. 31

$800

Donation Expense Postage Expense Office Supplies Expense Miscellaneous Expense Cash

205) a. 1 b. 4 c. 4 d. 4 e. 2 f. 3 g. 4 h. 3 206) Petty Cash: asset 207)

Reconciled Balance 50 50

6 9 12 13

280 $800

debit

balance sheet permanent Evitus Company Bank Reconciliation as of July 31, 20XX

G/L Balance Ending G/L Balance Add: Interest Earned

Deduct: Service Charge NSF Cheque Reconciled Balance 208) 1, 2, 3 209) Loan payment

440 $1,080

Deduct: Outstanding Cheques Reconciled Balance Petty Cash 204) Aug.1 Cash

$640

$10,250 140 $10,390

115 220 $10,055

yes

Balance per Bank Ending Bank Stat. Bal. Add: Deposit in Transit

$10,150 705 $10,855

Deduct: Outstanding Cheques Reconciled Balance

Loan Payable

800 $10,055

Cash

Answer Key Testname: CHAPTER 9 210) Jul. 1

Petty Cash Cash

Jul. 9

Petty Cash Cash

Jul. 31

Donation Expense 12 Postage Expense 21 Supplies Expense 30 Miscellaneous Expense 15 Cash Short and Over 2 Cash 80 211) Misc. Expense: expense debit income statement temporary 212) 2 213) Cash: asset debit balance sheet permanent 214) 1, 2 215) NSF chequeyes Accounts Receivable Cash 216) Change Fund: asset debit balance sheet permanent 217) 1, 2, 3 218) 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. Petty Cash 50 219) Aug. 1 Cash 50 Aug. 31

Donation Expense 6 Postage Expense 9 Office Supplies Expense 12 Miscellaneous Expense 13 Cash Short and Over 2 Cash 42 220) Cash Short & Over: expense/Revenue debit/credit income statement temporary 221) 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.

Answer Key Testname: CHAPTER 9 222) January 31

Interest Expense 100 Cash Accounts Receivable 375 Cash Service Charge Expense50 Cash yes Cash

January 31 January 31

100 375

50 223) EFT received Accounts Receivable 224) 3, 4 225) To ensure efficient operations and provide reasonable assurance that: 1. assets are safeguarded and used for business purposes 2. business information is accurate 3. employees and managers comply with laws and regulations Petty Cash 100 226) Aug. 1 Cash 100 Aug. 31

227)

Advertising Expense 10 Shipping Expense 15 Parking Expense 30 Meals Expense 34 Miscellaneous Expense 5 Cash Short and Over 1 Cash 93 PHILIP'S GUIDED TOURS BANK RECONCILIATION AS OF SEPTEMBER 30, 20XX

G/L Balance Ending Ledger Bal. Add: EFT Payment

Deduct: Interest Charge Service Charge Reconciled Balance

$795 330 1,125

20 60 $1,045

Balance per Bank Ending Bank Balance Add: Deposits in Transit

Deduct: Bank Error Outstanding cheques Reconciled Balance

$880 575 1,455

180 230 $1,045

Answer Key Testname: CHAPTER 9 228)

BARK ZOO BANK RECONCILIATION AS OF APRIL 30, 20XX G/L Balance Ending Ledger Bal. Add: Proceeds from a note

Deduct: Error in recording cheque NSF Cheque

$5,500 300 $5,800

9 200

Balance per Bank Ending Bank Stat. Bal. Add: Deposit in Transit

Deduct: Outstanding cheques

Reconciled Balance $5,591 Reconciled Balance 229) Deposits in transit no 230) $113 [$108 + $850 - $845] or [$105 + $408 + $25 - $350 - $50 - $25] Cash 25 231) March 31 Interest Revenue 25 March 31 Accounts Receivable 115 Cash 115 March 31 Cash 500 Accounts Receivable 500 March 31 Service Charge Expense75 Cash 75 232) $625 [($200 + 450 - $100 - $375 - $50) - $1,500 + $2,000] PLAYERS SPORTING GOODS 233) BANK RECONCILIATION AS OF JULY 31, 20XX G/L Balance Ending Ledger Bal.

Deduct: Service Charge

$420

Balance per Bank Ending Bank Bal. Stat. Add: Deposits in Transit

Deduct: Outstanding cheques

$5,300 2,000 $7,300

1,709

$5,591

$320 220 540

155

Reconciled Balance $385 Reconciled Balance $385 234) 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.

Answer Key Testname: CHAPTER 9 235)

September 30

Interest Expense 20 Cash September 30 Cash 330 Sales Revenue September 30 Service Charge Expense 60 Cash Petty Cash 75 236) Jul. 1 Cash Jul. 9

Petty Cash Cash

Donation Expense Postage Expense Supplies Expense Miscellaneous Expense Cash 237) Interest received yes 238) $12 short [($75 - $22) - $9 - $18 - $14] Transaction 239) Date Nov. 1 Petty Cash Cash

12 21 30 17

Jul. 31

20 330 60 75

Cash PR

Interest Revenue Debit 50

Petty Cash Cash

Donation Expense 10 Postage Expense 16 Office Supplies Expense 30 Miscellaneous Expense 20 Cash Short/Over 4 Cash 80 Bank Reconciliation as of September 30, 20XX

240)

Credit

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 $6,140 241) 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.

Chapter 10 Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Payroll periods can be A) 52 pay periods/year. C) 12 pay periods/year.

B) 26 pay periods/year. D) All of the above are correct.

2) The amount of CPP to be deducted from an employee with earnings this week of $1,200 and cumulative earnings for the year before this week of $57,400 would be A) $64.56. B) $18.96. C) $0.00. D) $1,196.16.

3) The amount of EI to be deducted from an employee with earnings this week of $1,200 and cumulative earnings for the year before this week of $60,300 would be A) $64.56. B) $18.96. C) $0.00. D) $1,196.16.

4) 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 $60,300 would be A) $0.00. B) $41.76. C) $12.64. D) $796.16.

5) If Sheila worked 8 hours a day for a total of 40 hours this week, how many hours of overtime will Sheila earn? A) 1 B) 5 C) 9 D) 0

6) 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) $15.80. B) $53.16. C) $0.00. D) $996.16.

7) 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) $441 B) $336 C) $777 D) None of the above are correct.

8) Which of the following is an optional payroll deduction? A) Employment Insurance B) Canada Pension Plan C) Income Taxes D) Charitable Contributions

9) 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) $22.80. B) $0.00. C) $6.32. D) $6.48.

10) 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.

10)

11) All of the following are statutory payroll deductions EXCEPT A) Canada Pension Plan. B) Income Tax. C) Employment Insurance. D) Canada Savings Bond Payments.

11)

12) A summary record of each person's earnings, deductions, and net pay is called a(n) A) payroll register. B) employee earnings record. C) general journal. D) T4.

12)

13) One benefit of using computer software to complete a payroll is NOT: A) It speeds up the payroll process. B) It makes year-end reporting much easier. C) It creates fewer calculation errors. D) It is preferred by the Canada Revenue Agency (CRA).

13)

14) 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 $64,900 would be A) $796.16. B) $0.00. C) $41.76. D) $45.60.

14)

15) The amount of CPP 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) $996.16. B) $15.80. C) $0.00. D) $53.16.

15)

16) The amount deducted for CPP is reported at the end of the year to the employee on a A) Payroll Register. B) T4. C) Record of Employment. D) TD1.

16)

17) Net pay is the same as A) take-home pay. C) gross pay.

17)

B) before taxes pay. D) pay before deductions.

18) 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.

18)

19) Which of the following is a law that has no effect on payroll net earnings? A) Provincial Income Tax B) Minimum Wage C) Canada Savings Bond D) Federal Income Tax

19)

20) A TD1 Form A) calculates the maximum CPP an employee has to pay. B) is used to complete your income tax return. C) specifies the claim code for each employee. D) is sent to each employee annually.

20)

21) What type of account is Payroll Tax Payable? A) Asset B) Liability

C) Revenue

D) Expense

21)

22) Which of the following pays no CPP premiums this month? A) A person over 70 years of age B) A person under 18 years of age C) A person earning less than $200 this month D) All of the above.

22)

23) CRA stands for A) Canadian Revenue Association. C) Civil Revenue Agency.

23)

B) Canada Revenue Agency. D) Canadian Revenue and Affiliates.

24) Georgia Ally's hourly rate is $20.00, 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) $920. B) $1,320. C) $880. D) $940.

24)

25) Workers' compensation provides insurance for employees who are A) unemployed due to an economic downturn. B) injured while on the job. C) unemployed due to a plant closing. D) not paid enough.

25)

26) Gross Earnings are the same as A) regular earnings only. C) net earnings + overtime earnings.

26)

B) regular earnings + overtime earnings. D) net earnings.

27) 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) $780 B) $720 C) $840 D) $860

27)

28) To examine in detail the weekly payroll for all employees, one would look at A) the payroll register. B) the employee earnings record. C) form T4. D) form TD1.

28)

29) Workers' compensation A) insures employees against losses they may incur due to injury or death while on the job. B) is paid for by the employer. C) is based on the total estimated payroll. D) All of the above are correct.

29)

30) The payroll register does NOT contain A) ledger accounts for payroll. C) deductions.

30)

B) net pay. D) gross pay.

31) The amount of EI deducted is reported at the end of the year on a A) TD1. B) Payroll Register. C) T4. D) Record of Employment.

31)

32) 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) $11.58. B) $45.60. C) $12.96. D) $12.64.

32)

33) Gross pay is the same as A) take-home pay. C) after taxes pay.

B) pay before deductions. D) net pay.

33)

34) The amount of EI to be deducted from an employee with earnings this week of $1,200 and cumulative earnings for the year before this week of $53,100 would be A) $64.56. B) $18.96. C) $0.00. D) $1,196.16.

34)

35) 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) $1,000 B) $780 C) $975 D) $950

35)

36) The automatic increase of claim amounts that account for inflation is called A) indexing. B) deductions. C) cost of living increases. D) increments.

36)

37) 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) $45.60. B) $0.00. C) $41.76. D) $796.16.

37)

38) 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) $0.00. B) $12.64. C) $41.76 D) $796.16.

38)

39) Income tax deduction amounts for employees in all provinces and territories in Canada (except Quebec) must be calculated based on A) Provincial/Territorial Tax rates only. B) the TONI Tax tables. C) Federal Tax rates only. D) both Federal and Provincial/Territorial Tax rates.

39)

40) A pay period is defined as A) weekly. C) bi-weekly.

40)

B) monthly. D) All of the above are correct.

41) If Reed Bar's hourly wage is $16.00 and he worked 35 hours during the week with no overtime, what is his gross pay for the week? A) $560 B) $520 C) $330 D) $1,220

41)

42) The actual tax Bram pays for the year will be affected by A) the amount of earnings he makes from all sources. B) any deductible tuition he has paid. C) his charitable donations made. D) All of the above.

42)

43) The form used to determine an employee's net claim code is called a(n) A) T4. B) Employee Earnings Record. C) TD1. D) Record of Employment.

43)

44) 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) $2,580 C) $1,780 D) $1,720

44)

45) Valerie Chandler works 46 hours as a coffee barista and earns $16 per hour. Compute her weekly pay assuming an overtime (more than 40 hours) rate of 1.5. A) $784 B) $392 C) $832 D) $736

45)

46) Net pay equals A) regular earnings. B) net earnings + overtime earnings greater than the amount withheld from the employee. C) gross pay less all deductions. D) regular earnings + overtime earnings.

46)

47) The payroll register A) shows all employee information related to an entire pay period. B) is a worksheet. C) keeps track of an individual employee's payroll history for a calendar year. D) Both A and B are correct.

47)

48) The employee earnings record provides a summary of all of the following for a single employee EXCEPT A) earnings. B) performance ratings. C) net pay. D) withholding taxes.

48)

49) What type of account is EI Payable? A) Asset B) Liability

49)

C) Revenue

D) Expense

50) The payroll register does NOT contain A) gross pay. B) payroll information for the payroll period. C) net pay. D) all cumulative payroll information for each individual employee.

50)

51) What liability account is reduced when the employees are paid? A) Wages and Salaries Payable B) Income Tax Payable, CPP Payable, EI Payable C) Payroll Taxes Payable D) Wages and Salaries Expense

51)

52) Which of the following not a statutory payroll deduction? A) Employment Insurance B) Income Taxes C) Canada Pension Plan D) Registered Retirement Savings Plans

52)

53) 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) $100 C) $40 D) $200

53)

54) What type of account is CPP Payable? A) Asset B) Liability

54)

C) Revenue 5

D) Expense

55) Which report would an employer review if they wanted to check how much an employee has earned to date? A) Payroll register B) Employee earnings record C) T-4 form D) None of these answers are correct.

55)

56) Kim received $1,780 for working 40 regular hours. What was Kim's rate of pay per hour? A) $45.00 B) $40.00 C) $44.00 D) $44.50

56)

57) 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.

57)

58) The Office Salaries Expense account would be used to record A) a credit for the amount owed to the office workers. B) gross earnings for the office workers. C) a debit for the amount of net pay owed to the office workers. D) net earnings for the office workers.

58)

59) 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) $900 C) $880 D) $800

59)

60) The amount of CPP to be deducted from an employee with earnings this week of $1,200 and cumulative earnings for the year before this week of $64,900 would be A) $64.56. B) $18.96. C) $0.00. D) $1,196.16.

60)

61) 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 paid after more than 8 hours a day? A) 12 B) 17 C) 4 D) 0

61)

62) 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) T4. B) Payroll Summary. C) Record of Employment. D) Employee Earnings Record.

62)

63) All payroll registers include sections for recording A) assets, liabilities, equity, revenue and expenses. B) gross pay, deductions and net pay. C) accrued expenses, unearned revenue and net pay. D) trade accounts receivable and short-term notes receivable.

63)

64) 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) $832 B) $840 C) $896 D) $768

64)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 65) The EI premium rate will be the same every year.

65) 6

66) The 2022 EI premium rate is 1.88% of gross earnings.

66)

67) The EI premium rate increases every calendar year.

67)

68) Maximum contributions for CPP, EI, and Income Tax change on an annual basis.

68)

69) The 2022 CPP premium rate is 5.1% of gross earnings.

69)

70) The 2022 EI premium rate is 1.58% of gross earnings.

70)

71) Like CPP, Federal Income Tax has a cut-off point where there is no longer Income Tax withheld.

71)

72) All employees must contribute to provincial and federal income tax.

72)

73) Regular earnings are equal to total earnings less deductions.

73)

74) The T4 contains information about the employee's earnings, statutory deductions and social insurance number.

74)

75) Employees must complete and sign TD1 exemption forms at the beginning of every year.

75)

76) All provinces use the same rates for Income Taxes.

76)

77) Net pay is the amount that the employee takes home.

77)

78) The T4 is the single most important document in the Employment Insurance program.

78)

79) The Record of Employment is issued by the employee on the leaving of an employee.

79)

80) All provinces use the same percent for their income tax rate.

80)

81) Like EI, CPP has a maximum deduction per year.

81)

82) The taxable earnings column of the payroll register records the tax due.

82)

83) The 2022 CPP premium rate is 1.58% of gross earnings.

83)

84) CPP, EI and Income Tax are statutory deductions.

84)

85) Computing payroll for employees can sometimes be quite complicated.

85)

86) The formula for computing 2022 EI Premiums to be deducted from an employee's weekly pay is Gross Pay × 1.58%, maximum $67.30.

86)

87) Net pay and gross pay mean the same.

87)

88) Net pay is equal to gross pay less deductions.

88) 7

89) Income Taxes have no maximum amount.

89)

90) The T4 is issued by the employer on the leaving of an employee.

90)

91) Union dues are a deduction that is usually matched by the employer.

91)

92) Regular earnings are equal to total earnings less deductions.

92)

93) The higher the TD1 code a person claims, the more income tax is paid.

93)

94) The Record of Employment is only issued if the employee is planning to apply for employment insurance benefits.

94)

95) The Income Tax, EI and CPP tables are found on the Canada Revenue Agency website.

95)

96) If a TD1 exemption form is not filed the employee is treated as if he or she has a claim code of 1.

96)

97) The T4 is issued by the employee on leaving an employer.

97)

98) Gross pay is the amount that the employee takes home.

98)

99) The use of a TD1 to calculate a company's payroll is optional.

99)

100) Payroll Tax Payable is credited for the amount of net pay.

100)

101) The formula for computing 2022 CPP Premiums to be deducted from an employee's weekly pay is (Gross Pay - $67.30) × 5.70%, subject to maximum premium per year.

101)

102) Like CPP, Employment Insurance has a cut-off point where there is no longer Employment Insurance withheld.

102)

103) All salary and wage expenses must be tracked in the same expense account.

103)

104) The Record of Employment is issued by the employee on the leaving of an employer.

104)

105) The 2022 CPP premium rate is 5.70% of gross earnings.

105)

106) If a company pays out a bonus at year end, no income tax is deducted from it.

106)

107) A maximum limit is set for all income tax deductions.

107)

108) The 2022 EI premium rate is 5.70% of gross earnings.

108)

109) An employee pays no CPP premiums once past $64,900 in gross earnings for 2022.

109)

110) A TD1 Claim Code represents a certain amount of a person's income that will be considered tax exempt.

110)

111) Each province is responsible for administering an employment insurance program.

111)

112) The payroll information for a pay period is found in the payroll register.

112)

113) If a TD1 exemption form is not filed the employee is treated as if he or she has a claim code of 0.

113)

114) The higher the TD1 code a person claims, the less income tax is paid.

114)

115) The EI premium rate is subject to change and must be verified before calculating payroll.

115)

116) The employee's earnings record contains the information about an employee's gross earnings, deductions, and net pay for each payroll period.

116)

117) Workers' Compensation insurance is paid for by the employees of a business.

117)

118) Employees must complete and sign TD1 exemption forms every time the basic personal amount is changed by the government.

118)

119) The Record of Employment is issued by the employer on the leaving of an employee.

119)

120) The CPP premium rate will be the same every year.

120)

121) The payroll register maintains a record of year-to-date earnings for each employee.

121)

122) The employer is responsible for verifying the claims made by employees on TD1 Forms.

122)

123) Companies can choose different pay periods for hourly workers versus salary workers.

123)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 124) Calculate the total wages earned for each employee (assume an overtime rate of time and a half over 40 hours): a) Gurpreet earns $25 per hour and worked 42 hours in one week. b) Ming earns $16 per hour and worked 46 hours in one week. 125) What are statutory deductions and which ones apply in Canada? 126) From the following information, 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).

Bob Roberts Jeff Jeffery Doug Douglas

Gross Pay $750.00 $200.00 $50.00

CPP Deduction ________ ________ ________

127) 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 $21 $24 $27

No. of Hours 44 35 43

Gross Earnings ________ ________ ________

128) From the following information, 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 1.58%. (No employee has earned more than $40,000 so far this year).

Bob Roberts Jeff Jeffery Doug Douglas

Gross Pay $581.00 $450.00 $688.00

EI Deduction ________ ________ ________

129) Why is it important for an employee to complete a TD1 form? 130) 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

$17 $16 $18

No. of Hours Worked 44 35 43

Gross Earnings ________ ________ ________

131) 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. 132) 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. Hourly Rate Bob Chow $23 Drew James $32 Casey Barker $19

No. of Hours 46 43 37

Gross Earnings ________ ________ ________

133) From the following information, 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 1.58%. (No employee has earned more than $40,000 so far this year).

Bob Roberts Jeff Jeffery Doug Douglas

Gross Pay $750.00 $200.00 $50.00

EI Deduction ________ ________ ________

134) 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.

Jim Janet Delbert

Monday 8 12 7

Tuesday 7 9 4

Wednesday 9 2 15

Thursday 6 4 14

Friday 5 11 12

Saturday 3 2

135) Calculate the total wages earned for each employee (assume an overtime rate of time and a half over 40 hours). a) Deon Brown earns $20 per hour and worked 42 hours in one week. b) Gerald Cornelius earns $16 per hour and worked 48 hours in one week. 136) 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

137) Using the Payroll Register below, produce the General Journal entry to record the payroll for the week ending December 13, 20XX.

Employee Sharon Gavin Theresa Steve

Gross Pay 1,050 999 1,750 500 4,299

Income Tax 210 199 350 100 859

CPP 56.01 53.11 95.91 24.66 229.69

EI 16.59 15.78 27.65 7.90 67.92

Department Net Office 767.40 1,050 731.11 999 1,276.44 367.44 3,142.39 2,049

Sales

1,750 500 2,250

138) 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 $16 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 $20 per hour to work 2 hours of overtime each workday of that 12 weeks, rather than hiring the temporary workers.

139) From the following information, 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 5.70% and an annual exemption of $3,500. (Each employee has earned more than $64,900 so far this year).

Bob Roberts Jeff Jeffery Doug Douglas

Gross Pay $581.00 $450.00 $688.00

CPP Deduction ________ ________ ________

140) Using the Payroll Register below, produce the General Journal entry to record the payroll for the week ending November 22, 20XX.

Employee Simone George Tanya Steve

Gross Pay 800 700 600 700 2,800

Income Tax 116 93 75 93 377

CPP 41.76 36.06 30.36 36.06 144.24

EI 12.64 11.06 9.48 11.06 44.24

Department Net Office 629.60 800 559.88 700 485.16 559.88 2,234.52 1,500

Sales

600 700 1,300

141) Why are more companies using software programs to complete their payroll? 142) Explain the purpose of workers' compensation, and discuss the premium cost to the employer. 143) 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.

Bob Roberts Jeff Jeffery Doug Douglas

Hourly Rate $17 $15 $16

No. of Hours 41 30 42

Gross Earnings ________ ________ ________

144) 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 5.70% (exemption of $67.30); EI 1.58% b) Income Tax (including Federal and Provincial Income Tax) is 22% of gross pay c) Each employee pays $10 per week for medical insurance.

145) From the following information, 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 1.58%. (Each employee has earned more than $60,300 so far this year).

Bob Roberts Jeff Jeffery Doug Douglas

Gross Pay $581.00 $450.00 $688.00

EI Deduction ________ ________ ________

146) Explain what is meant by the cumulative gross earnings. 147) Employees are often surprised that their take-home pay is different from their gross pay. How would you explain this discrepancy to them?

148) From the following information, 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 5.70% and an annual exemption of $3,500. (No employee has earned more than $40,000 so far this year).

Bob Roberts Jeff Jeffery Doug Douglas

Gross Pay $581.00 $450.00 $688.00

CPP Deduction ________ ________ ________

149) Using the Payroll Register below, produce the General Journal entry to record the payroll for the week ending April 5, 20XX.

Employee Susan Geoffrey Tessa Stanley

Gross Pay 900 1,100 2,000 700 4,700

Income Tax 198 242 440 154 1,034

CPP 47.46 58.86 110.6 36.06 252.98

EI 14.22 17.38 31.60 11.06 74.26

Department Net Office 640.32 900 781.76 1,100 1,417.80 498.88 3,338.76 2,000

Sales

2,000 700 2,700

150) Using the following information, complete the Payroll Register (Payroll Summary) for the week ending January 17, 20XX. Assume a tax rate of 15%, CPP of 5.70% (exemption of $67.30), and EI of 1.58%. Employee Sara W. Howard R. Pinder C.

Type Office Sales Sales

Gross Pay $400 300 500

151) 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

152) 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.

153) 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 1.58% and CPP using a rate of 5.70% and a weekly exemption of $67.30.

Employee Letitia Paulo Steve Catriona

Earnings YTD 20,000 16,000 36,000 60,300

Earnings this Week 800 400 900 1,075

Medical Premiums 10 10 10 0

154) 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. 155) Given the following payroll summary for January, 20XX, make the necessary journal entry to record it:

Employee Sara W. Howard R. Pinder C.

Gross Pay 400 300 500 1,200

Income Tax 60.00 45.00 75.00 180.00

CPP 18.96 13.26 24.66 56.89

EI 6.32 4.74 7.90 18.96

Net 314.72 237.00 392.44 944.15

Department Office Sales 400 300 500 400 800

Answer Key Testname: CHAPTER 10 1) D 2) A 3) C 4) A 5) D 6) A 7) C 8) D 9) C 10) D 11) D 12) B 13) D 14) B 15) D 16) B 17) A 18) D 19) C 20) C 21) B 22) D 23) B 24) A 25) B 26) B 27) C 28) A 29) D 30) A 31) C 32) D 33) B 34) B 35) C 36) A 37) C 38) C 39) D 40) D 41) A 42) D 43) C 44) C 45) A 46) C 47) D 48) B 49) B 50) D 15

Answer Key Testname: CHAPTER 10 51) A 52) D 53) C 54) B 55) B 56) D 57) D 58) B 59) A 60) C 61) C 62) A 63) B 64) C 65) FALSE 66) FALSE 67) FALSE 68) FALSE 69) FALSE 70) TRUE 71) FALSE 72) TRUE 73) FALSE 74) TRUE 75) FALSE 76) FALSE 77) TRUE 78) FALSE 79) FALSE 80) FALSE 81) TRUE 82) FALSE 83) FALSE 84) TRUE 85) TRUE 86) FALSE 87) FALSE 88) TRUE 89) TRUE 90) FALSE 91) FALSE 92) FALSE 93) FALSE 94) TRUE 95) TRUE 96) TRUE 97) FALSE 98) FALSE 99) FALSE 100) FALSE 16

Answer Key Testname: CHAPTER 10 101) TRUE 102) TRUE 103) FALSE 104) FALSE 105) TRUE 106) FALSE 107) FALSE 108) FALSE 109) TRUE 110) TRUE 111) FALSE 112) TRUE 113) FALSE 114) TRUE 115) TRUE 116) TRUE 117) FALSE 118) FALSE 119) TRUE 120) FALSE 121) FALSE 122) FALSE 123) TRUE 124) a) $1,075 b) $784 125) 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 126) Bob Roberts CPP Deduction = $38.91 Jeff Jeffery CPP Deduction = $7.56 Doug Douglas CPP Deduction = $0.00 127) Ron Jhamal gross pay = $966.00 J.C. Latour gross pay = $840.00 Jerry Chan gross pay = $1,201.50 128) Bob Roberts EI Deduction = $9.18 Jeff Jeffery EI Deduction = $7.11 Doug Douglas EI Deduction = $10.87 129) 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. $782 130) Kurt Nelson Sabrina Schmitz $560 Kirk Seifker $801

Answer Key Testname: CHAPTER 10 131) 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. 132) Bob Chow gross pay = $1,127.00 Drew James gross pay = $1,424.00 Casey Barker gross pay = $703.00 133) Bob Roberts EI Deduction = $11.85 Jeff Jeffery EI Deduction = $3.16 Doug Douglas EI Deduction = $0.79 134) Jim - 1 hour overtime Janet - 8 hours overtime Delbert - 17 hours overtime 135) a) $860 b) $832 136) Hourly Rate Hours Worked Gross Pay April Jenkins $17 44 $824.50 Tim Hansman $18 36 $657.00 Penny Leung $19 20 $380.00 2049.00 137) Office Salaries Expense Sales Salaries Expense 2250.00 Income Tax Payable 859.00 CPP Payable 229.69 EI Payable 67.92 Wages & Salaries Payable 3142.39 To record the payroll for week ending December 13, 20XX. 138) 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 $20/hour × 5 days × 12 weeks × 200 employees = $480,000. Temps would receive 40 hours × 12 weeks × $16/hour × 50 employees = $384,000.) 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? 139) Bob Roberts CPP Deduction = $0.00 Jeff Jeffery CPP Deduction = $0.00 Doug Douglas CPP Deduction = $0.00

Answer Key Testname: CHAPTER 10 1500.00 140) Office Salaries Expense Sales Salaries Expense 1300.00 Income Tax Payable 377.00 CPP Payable 144.24 EI Payable 44.24 Wages & Salaries Payable 2,234.52 To record the payroll for week ending November 22, 20XX. 141) 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. 142) 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. 143) Bob Roberts gross pay = $705.50 Jeff Jeffery gross pay = $450.00 Doug Douglas gross pay = $688.00 1,700 144) Office Salaries Expense Sales Salaries Expense 800 CPP Payable 130.99 EI Payable 39.50 Income Tax Payable 550.00 Medical Insurance Payable 30.00 Salaries Payable 1,749.51 145) Bob Roberts EI Deduction = $0.00 Jeff Jeffery EI Deduction = $0.00 Doug Douglas EI Deduction = $0.00 146) Cumulative gross earnings represent the total earned earlier in the year prior to the current period's earnings, before any deductions are taken. 147) 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. 148) Bob Roberts CPP Deduction = $29.28 Jeff Jeffery CPP Deduction = $21.81 Doug Douglas CPP Deduction = $35.38 2000.00 149) Office Salaries Expense Sales Salaries Expense 2700.00 Income Tax Payable 1034.00 CPP Payable 252.98 EI Payable 74.26 Wages & Salaries Payable 3338.76 To record the payroll for week ending April 5, 20XX.

Answer Key Testname: CHAPTER 10 150)

Gross Income Department Pay Tax CPP EI Net Office Sales 400 60.00 18.96 6.32 314.72 400 300 45.00 13.26 4.74 237.00 300 500 75.00 24.66 7.90 392.44 500 1,200 180.00 56.89 19.44 944.15 400 800 1,100 151) Office Salaries Expense Sales Salaries Expense 2,900 CPP Payable 106.33 EI Payable 31.60 Income Tax Payable 880.00 Medical Insurance Payable 30.00 Salaries Payable 2,952.07 152) a) $1,111 b) $747 153) Employee Gross Tax CPP EI Medical Net Pay Letitia 800 120.00 41.76 12.64 10 615.60 Paulo 400 60.00 18.96 6.32 10 304.72 Steve 900 198.00 47.46 14.22 10 630.32 Catriona 1,075 236.50 57.44 0 0 781.06 3,175 614.50 165.63 33.18 30 2,331.69 154) 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.). 400.00 155) Office Salaries Expense Sales Salaries Expense 800.00 Income Tax Payable 180.00 CPP Payable 56.89 EI Payable 18.96 Salaries Payable 944.15 Employee Sara W. Howard R. Pinder C.

Exam

Chapter 11

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Why would a company use a separate payroll cash account? A) Determine whether or not the employee has cashed their cheque B) Ease of account reconciliation C) Provides for better internal control D) All of the above are correct.

2) If the employees' EI deductions for the week total $300, the employer's EI contribution will be A) $300. B) $0. C) $420. D) $30.

3) The employer pays employee Income Tax premiums in what ratio to employee deductions? A) Matches employee deductions B) 2 times employee deductions C) 1.4 times employee deductions D) Does not contribute

4) When remitting payroll amounts due, an employer must complete a A) PD7A. B) T4 or T4A. C) T4001. D) Record of Employment.

5) If the employees have had $150 in CPP contributions and $80 in EI contributions deducted from their paycheques, then the Employee Benefits Expense would be A) $230. B) $460. C) $492. D) $262.

6) What is the threshold at which employers would be required to send in their remittance more often than monthly? A) $1,000 B) $15,000 C) $12,000 D) $10,000

7) As the Prepaid Workers Compensation is recognized, the amount will transfer to A) Cash. B) Workers Compensation Insurance Payable. C) Payroll Tax Expense. D) Workers Compensation Insurance Expense.

8) If the employees' CPP deductions for the week total $120, the employer's CPP contribution will be A) $168. B) $60. C) $120. D) $240.

9) The employer's remittance to CRA includes A) income tax, CPP, EI, and Workers Compensation. B) income tax, CPP, EI, and extended health care. C) CPP, EI, and extended health care. D) income tax, CPP, and EI.

10) If the employees' EI deductions for the week total $500, the employer's EI contribution will be A) $500. B) $20. C) $50. D) $700.

10)

11) Which of the following is NOT a form required by CRA in the payroll process? A) PD7A B) T4X C) T4 Summary D) T4

11)

12) The journal entry to record the EHT amount owing for the year is A) Workers' Compensation Expense B) Employer Health Tax Payable Workers' Compensation Payable Cash C) Employer Health Tax Expense D) Employer Health Tax Payable Employer Health Tax Payable Employer Health Tax Expense

12)

13) Employers must pay the Employer Health Tax to the Ministry of Finance by A) April 30. B) February 28. C) March 31.

13)

D) December 31.

14) If the employees' EI deductions for the week total $120, the employer's EI contribution will be A) $60. B) $168. C) $240. D) $120.

14)

15) The journal entry to record the estimated advance premium payment for workers' compensation is A) Cash Prepaid Insurance, Workers' Compensation B) Workers' Compensation Insurance Payable Cash C) Prepaid Insurance, Workers' Compensation Cash D) Workers' Compensation Insurance Expense Cash

15)

16) The "entry" to record payment of statutory payroll deductions is generally recorded first in the A) worksheet. B) general ledger. C) general or cash payments journal. D) chart of accounts.

16)

17) The T4 Summary A) must equal the total of the year's T4 Forms. B) is sent in quarterly. C) is sent in monthly. D) is completed for each employee.

17)

18) If the employees' CPP deductions for the week total $500, the employer's CPP contribution will be A) $50. B) $500. C) $20. D) $700.

18)

19) 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.

19)

20) 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) $1,050. B) $600. C) $740. D) $1,790.

20)

21) The form that contains information about gross earnings given to each individual employee by February 28 of the year following is the A) T4. B) T4 Summary. C) TD1. D) ROE.

21)

22) The T4 Summary form is filed A) with the T4s. B) quarterly. C) with the Statement of Account for Current Source Deductions. D) monthly.

22)

23) What type of an account is Wages and Salaries Payable? A) Liability B) Expense C) Revenue

D) Asset

24) Which of the following is an amount paid by both employee and employer? A) EI only B) CPP only C) Income Tax

D) CPP & EI

23)

24)

25) Employers share with their employees the total cost of A) income tax. B) CPP, EI, and income tax. C) EI and income tax. D) CPP and EI.

25)

26) In addition to CPP and EI, employers often share the expense of A) savings plans. B) garnishees. C) health care plans. D) income tax.

26)

27) The Wages and Salaries Expense account would be used to record A) a debit for the amount of net pay owed to the office workers. B) gross earnings for the office workers. C) net earnings for the office workers. D) a credit to the amount owed to the office workers.

27)

28) 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) $740. B) $1,790. C) $600. D) $1,050.

28)

29) The general journal entry to record payroll benefits and taxes generally includes A) a debit to Salaries Expense. B) a debit to Sales Tax Expense. C) a credit to Salaries Payable. D) a debit to Employee Benefits Expense.

29)

30) When remitting EI, the entry would be A) debit EI Expense, credit Cash. C) debit EI Payable, credit Cash.

30)

B) debit Cash, credit EI Expense. D) debit Cash, credit EI Payable.

31) Prepaid Worker's Compensation Insurance is what type of account? A) Liability B) Asset C) Expense

D) Revenue

31)

32) The employer records deductions from the employee's paycheque A) as credits to liability accounts until paid. B) as debits to asset accounts until paid. C) as credits to capital accounts. D) as debits to expense accounts.

32)

33) An employer might agree to pay a portion of the following items to which the employees contribute. A) Federal tax B) Medical plan C) Union dues D) Provincial tax

33)

34) The entry to record the employee benefits expense would include A) a credit to Federal Income Taxes Expense. B) a credit to EI Payable and CPP Payable. C) a credit to Wages Payable. D) a credit to Taxes Payable.

34)

35) If the employee's income tax deductions for the week total $300, the employer's income tax contribution will be A) $300. B) $0. C) $420. D) $30.

35)

36) 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 Summary must be filed each year by February 28. C) The T4 must be sent out by December 31. D) The total of all T4's CPP, EI and tax deductions must agree with the totals on the T4 Summary.

36)

37) Employers must send employees their T4 by A) February 28. B) April 30.

37)

C) December 31.

D) February 1.

38) If Wages and Salaries Payable is debited, what account would most likely be credited? A) Cash B) CPP Payable C) Wages and Salaries Expense D) Payroll Expense

38)

39) The employer pays CPP premiums in what ratio to employee CPP deductions? A) 1.4 times employee CPP deductions B) 1/2 employee CPP deductions C) 1/4 of employee CPP deductions D) Matching employee CPP deductions

39)

40) The Wages and Salaries Payable account would be used to record A) cumulative earnings of the employees. B) the paid portion of the earnings. C) gross earnings of the employees. D) net earnings of the employees not yet paid.

40)

41) If the employees have had $150 in CPP contributions and $80 in EI contributions deducted from their paycheques, then the amount to be remitted to the Receiver General would be (excluding income taxes) A) $460. B) $262. C) $230. D) $492.

41)

42) Workers' Compensation Insurance A) ensures employees their wage if they were to be laid off as a result of new technology. B) ensures employees their wages if they were reduced due to a cut in hours worked. C) protects employers against employee's fraudulent acts. D) insures employees against losses due to workplace injury or death.

42)

43) 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) $400. B) $2,320. C) $320. D) $368.

43)

44) The information needed to make the journal entries to record the wages and salaries expense comes from A) the payroll register. B) form TD1-A. C) form PD7A. D) the look-back period.

44)

45) The forms T4 and T4-T4A Summary must be submitted to the employees and Federal Government respectively by A) April 30 of the year following. B) February 28 of the year following. C) when an employee leaves a job. D) the 15th of the month following.

45)

46) The form that contains information about gross earnings given to the CRA by February 28 of the year following is the A) T4. B) ROE. C) T4 Summary. D) TD1.

46)

47) The debit amount to Employee Benefits Expense represents A) the employees' portion of the payroll taxes. B) the employer's and employees' portion of the payroll taxes. C) the employer's portion of the payroll taxes. D) None of the above are correct.

47)

48) If the employees had $200 CPP, $300 EI and $400 Income Tax deducted from their paycheques, the employer would remit A) $1,120. B) $900. C) $1,520. D) $1,920.

48)

49) The journal entry to record the payment of the EHT liability for the year is A) Cash B) Employer Health Tax Payable Employer Health Tax Expense Cash C) Employer Health Tax Expense D) Workers' Compensation Payable Employer Health Tax Payable Cash

49)

50) When remitting CPP, the entry would be A) debit Cash, credit CPP Payable. C) debit CPP Expense, credit Cash.

B) debit CPP Payable, credit Cash. D) debit Cash, credit CPP Expense.

50)

51) Employment Insurance premiums are paid by A) the employee. C) the employer.

B) the Provincial Government. D) both the employer and employee.

52) Personal Income Tax rates A) are set by the Municipal Government annually. B) vary according to the employee's cash on hand. C) vary from province to province. D) are the same in every province. 53) A T4 Summary is filed A) monthly. C) quarterly.

52)

B) annually. D) depends on the amount owed.

54) 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.

51)

53)

54)

55) 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) $1,560. B) $1,520. C) $700. D) $860.

55)

56) What type of account is Employee Benefits Expense? A) Asset B) Liability C) Expense

56)

D) Revenue

57) The last step in the payroll process for the year is A) mailing the record of employment. C) completing the payroll register.

B) mailing the T4 Summary. D) calculating gross pay.

58) Wages and Salaries Expense is A) equal to the employer's taxes. C) equal to net pay.

B) equal to gross pay. D) None of the above are correct.

57)

58)

59) If the employees' CPP deductions for the week total $300, the employer's CPP contribution will be A) $30. B) $0. C) $420. D) $300.

59)

60) The employer pays EI premiums in what ratio to employee EI deductions? A) 4 times employee EI deductions B) 1.4 times employee EI deductions C) 2 times employee EI deductions D) Does not contribute

60)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 61) Remittance due dates are based on the frequency of pay dates in a calendar year.

61)

62) The cheque to remit CPP, EI and Income Tax would be remitted to CRA by the 15th of the following month for a monthly reminder.

62)

63) Most smaller companies must send in their remittance every week if they have a weekly pay period.

63)

64) Fines for late payroll remittances are 5% of the amount due.

64)

65) A T4 Summary must be issued to every employee each year.

65)

66) 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.

66)

67) The payroll tax expense is recorded at the same time the payroll is recorded.

67)

68) For a weekly payroll, the journal entry to record the employer's portions should also be done weekly.

68)

69) The account credited for the employer's portion of CPP is CPP Payable.

69)

70) The individual employee earnings are reported on Form T4.

70)

71) The premium rate for workers' compensation is based on the type of work performed.

71)

72) Organizations may have more than one rate for workers' compensation if they have employees working in different categories of risk.

72)

73) The balance in the Wages and Salaries Expense account is equal to net pay.

73)

74) Every business with employees must have a unique identification number issued by the Canada Revenue Agency.

74)

75) Employers must apply for a Business Number to handle their responsibilities for payroll correctly.

75)

76) Many companies will use an account called Due to CRA instead of three separate liability accounts to record payroll liabilities.

76)

77) Hiring employees who have reached the EI maximum with a previous employer can save the new employer the costs of EI for the current year.

77)

78) The employer must contribute 1.4 times the employee's Income Tax contributions.

78)

79) An employer must always use a calendar year for the purposes of completing T4s and the T4 Summary.

79)

80) Payroll Tax Expense or Employee Benefits Expense are possible account titles employers use for the employer's portion of CPP and EI.

80)

81) After sending the monthly payroll remittance, Employee Benefits Expense would decrease.

81)

82) "Remitted" means money has been paid to employees.

82)

83) The employer's EI contribution is based on the employee's EI deductions.

83)

84) Employers should use a PD7A form to remit monthly employee deductions to the Canada Revenue Agency.

84)

85) Different remittance rules apply to employers based on the amount collected and owed by that employer.

85)

86) Employers should use a Statement of Account for Current Source Deductions to remit monthly employee deductions to the Canada Revenue Agency.

86)

87) Employers should use a T4 Summary form to remit monthly employee deductions to the Canada Revenue Agency.

87)

88) CPP Payable normally has a credit balance.

88)

89) If the employer calendar year ends on September 30, the T4 Summary will be filed for the period from October 1 to September 30.

89)

90) "Remitted" means money has been sent to the government.

90)

91) Businesses with payroll deductions over $15,000 must remit payroll withholdings quarterly.

91)

92) The employer must contribute 1.4 times the employee's CPP contributions.

92)

93) After sending the monthly payroll remittance, CPP Payable would decrease.

93)

94) The employer's EI contribution is 1.4 times that of the employee's deduction.

94)

95) The premium for worker's compensation insurance is based on the total estimated gross payroll.

95)

96) Worker's Compensation premiums are paid directly to the Federal Government by the employer.

96)

97) 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.

97)

98) The account credited for all payroll deductions is Employee Benefits Expense.

98)

99) If an employee leaves an employer during the year, the employer must issue a T4 within 30 days of the request.

99)

100) 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.

100)

101) 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.

101)

102) Business numbers are automatically assigned to new businesses once they begin operations.

102)

103) A Form PD7A is used to remit EI, CPP and Income Taxes.

103)

104) The amount of employment insurance paid by employers can be reduced if the employer has an approved wage-loss replacement plan.

104)

105) The cheque to remit Workers Compensation, Health Taxes and Income Tax would be remitted to CRA by the 15th of the following month.

105)

106) The employer must match the employee's Income Tax deductions.

106)

107) 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.

107)

108) Fines for late payroll remittances are 10% of the amount due over $500.

108)

109) Fines for late payroll remittances are deductible as a business expense for tax purposes.

109)

110) Companies have a business number given by the federal government that uniquely identifies them.

110)

111) The premium rate for workers' compensation is the same for all employees, regardless of the type of work they do.

111)

112) Premiums for worker's compensation insurance may be adjusted based on actual payroll amounts at the end of the year.

112)

113) The cost of workers' compensation insurance must be estimated and paid in advance by the employer.

113)

114) The employee's T4 must be sent to the employee by February 28 of the year following.

114)

115) If the employer calendar year ends on September 30, the T4 Summary will be filed for the calendar year from January 1 to December 30.

115)

116) The Employee Benefits Expense entry is recorded at the time the payroll is recorded.

116)

117) If the employer calendar year ends on September 30, the T4 Summary will be filed for the period from January 1 to September 30.

117)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 118) Brown Supplies has four payrolls for the month. Each payroll had $8,000 salary, $2,000 income tax, $450 CPP, $120 EI, $50 Health Plan, $170 Workers Compensation, and $5,380 net pay. What amount would the company send to the CRA as the remittance from this month? 119) The payroll register for Marty's Marlin Boat reads as follows: Name John Marty

Gross Pay 300 250 550

CPP 13.26 10.41 23.67

EI 4.74 3.95 8.69

Inc Tax 11.86 0.00 11.86

Union 10.00 10.00 20.00

Medical 15.00 15.00 30.00

Net Pay 245.14 210.64 455.78

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.

120) Why should employers make every effort to submit the necessary deductions to CRA on or before the appropriate deadline? 121) 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 41.76 0.00 47.46 89.22

EI 12.64 13.43 14.22 40.29

Inc Tax 130.81 146.19 162.02 439.02

Net Pay 614.79 690.38 676.30 1981.47

Produce the general journal entry to record the employer's contributions.

122) Explain the formula used to compute EI deductions. Is it easier or more difficult to calculate than the CPP deduction? 123) 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 53.16 24.66 30.36

EI Deducted 15.80 7.90 9.48

124) 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.

125) Why are the employee deductions recorded as payables on the employer's books? 126) 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.

127) What is the purpose of the T4-T4A Summary and when is it to be submitted? 128) 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.

129) What is the purpose of the Canada Pension Plan and how are the employer's contributions calculated? 130) Why is income tax NOT considered an expense of the employer?

131) 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. 132) 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? 133) Once the monthly remittance is complete, will the CPP Payable, EI Payable, and Income Tax Payable accounts equal zero in a company with a weekly payroll? 134) 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?

Answer Key Testname: CHAPTER 11 1) D 2) C 3) D 4) A 5) D 6) B 7) D 8) C 9) D 10) D 11) B 12) C 13) C 14) B 15) C 16) C 17) A 18) B 19) A 20) D 21) A 22) A 23) A 24) D 25) D 26) C 27) B 28) A 29) D 30) C 31) B 32) A 33) B 34) B 35) B 36) C 37) A 38) A 39) D 40) D 41) D 42) D 43) D 44) A 45) B 46) C 47) C 48) C 49) B 50) B 12

Answer Key Testname: CHAPTER 11 51) D 52) C 53) B 54) B 55) A 56) C 57) B 58) B 59) D 60) B 61) FALSE 62) TRUE 63) FALSE 64) FALSE 65) FALSE 66) FALSE 67) TRUE 68) TRUE 69) TRUE 70) TRUE 71) TRUE 72) TRUE 73) FALSE 74) TRUE 75) TRUE 76) TRUE 77) FALSE 78) FALSE 79) TRUE 80) TRUE 81) FALSE 82) FALSE 83) TRUE 84) TRUE 85) TRUE 86) TRUE 87) FALSE 88) TRUE 89) FALSE 90) TRUE 91) FALSE 92) FALSE 93) TRUE 94) TRUE 95) TRUE 96) FALSE 97) TRUE 98) FALSE 99) FALSE 100) TRUE 13

Answer Key Testname: CHAPTER 11 101) FALSE 102) FALSE 103) TRUE 104) TRUE 105) FALSE 106) FALSE 107) FALSE 108) TRUE 109) FALSE 110) TRUE 111) FALSE 112) TRUE 113) TRUE 114) TRUE 115) TRUE 116) TRUE 117) FALSE $2,000 × 1 = $2,000 118) $450 × 2 = $900 $120 × 2.4 = $288 Remittance = $3,188 × 4 payrolls = $12,752 65.84 119) Employee Benefits Expense CPP Payable 23.67 EI Payable 12.17 Medical Plan Payable 30.00 120) 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. 145.62 121) Employee Benefits Expense CPP Payable 89.22 EI Payable 56.41 122) Currently, the EI is simply 1.58% 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. 108.19 × 1 = 108.19 123) CPP EI 33.18 × 1.4 = 46.45 154.64 1,223.60 124) Employee Benefits Expense CPP Payable 770.00 EI Payable 453.60 125) 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. 611.80 126) Employee Benefits Expense CPP Payable 385.00 EI Payable 226.80

Answer Key Testname: CHAPTER 11 127) 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. 200.00 128) CPP EI 154.00 Medical 80.00 434.00 129) 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. 130) 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. 131) 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. $4,000 × 1 = $4,000 132) $900 × 2 = $1,800 $324 × 2.4 = $777.60 Remittance = $6,577.60 × 2 payrolls = $13,155.20 133) No. The payment for a monthly remittance must be made by the 15th of the month for all pay periods in the month prior. By the time the 15th of the month comes around, additional weekly payrolls will have been completed, which will add amounts to the payables that will not be remitted until the 15th of the following month. $1,800 × 1 = $1,800 134) 430 × 2 = 860 165 × 2.4 = 396 Remittance = $3,056 × 5 payrolls = $15,280

Exam

Chapter 12

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Gross Accounts Receivable is $62,000. Allowance for Doubtful Accounts has a debit balance of $700. Net credit sales for the year are $500,000. The company follows the balance sheet approach, using a rate of 7% 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) $3,640 B) $35,000 C) $5,040 D) $4,340

2) 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) balance sheet approach. B) direct write-off method. C) aging of Accounts Receivable approach. D) income statement approach.

3) Gross Accounts Receivable is $62,000. Allowance for Doubtful Accounts has a debit balance of $700. Net credit sales for the year are $500,000. The company follows the income statement approach, using a rate of 2.0% 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) $10,700 B) $9,300 C) $1,240 D) $10,000

4) 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 $2,000 A) Accounts Receivable Allowance for Doubtful Accounts $2,000 $2,000 B) Bad Debts Expense Allowance for Doubtful Accounts $2,000 $2,000 C) Allowance for Doubtful Accounts Bad Debts Expense $2,000 $2,000 D) Bad Debts Expense Accounts Receivable $2,000

5) 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) $2,850 B) $850 C) $3,700 D) $2,000

6) Gross Accounts Receivable is $62,000. Allowance for Doubtful Accounts has a debit balance of $700. Net credit sales for the year are $500,000. The company follows the income statement approach, using a rate of 2.0% 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) $10,000 B) $1,240 C) $10,700 D) $9,300

7) Gross Accounts Receivable is $57,000. Allowance for Doubtful Accounts has 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) $16,600 C) $1,950 D) $2,850

8) 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 credit to Bad Debts Expense. C) a credit to Bad Debts Recovered. D) a debit to Allowance for Doubtful Accounts.

9) Which of the following is considered a temporary account? A) Bad Debts Expense B) Accounts Receivable C) Merchandise Inventory D) Allowance for Doubtful Accounts

10) The balance in the Allowance for Doubtful Accounts is ignored under which of the following approaches? A) Balance sheet approach B) Income statement approach C) Neither approach D) Both approaches

10)

11) Which of the following is a contra-asset account? A) Accounts Receivable C) Allowance for Doubtful Accounts

11)

B) Bad Debts Expense D) None of these answers is correct.

12) A company uses the allowance method and has confirmed that $28,000 will not be collected. The journal entry to write off the receivable is A) Bad Debts Expense $28,000 Allowance for Doubtful Accounts $28,000

12)

B) Allowance for Doubtful Accounts Accounts Receivable

$28,000

Allowance for Doubtful Accounts Bad Debts Expense

$28,000

Accounts Receivable Allowance for Doubtful Accounts

$28,000

C) $28,000

D) $28,000

13) 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) income statement approach. B) balance sheet approach. C) direct write-off method. D) aging of Accounts Receivable approach.

13)

14) Gross Accounts Receivable is $57,000. Allowance for Doubtful Accounts has 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) $6,150 C) $900 D) $5,250

14)

15) 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

15)

16) The Allowance for Doubtful Accounts is adjusted A) each time a customer is granted credit. B) at the end of each accounting period. C) within one year of granting credit to a customer. D) each time a customer's debt is satisfied.

16)

17) 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) $2,650 B) $550 C) $3,200 D) $3,750

17)

18) When a specific customer account is written off under the allowance method, Bad Debts Expense is A) not affected. B) debited. C) credited. D) None of these answers is correct.

18)

19) The Bad Debts Recovered account would be reported on the A) balance sheet. B) statement of owners' equity. C) income statement. D) would not be reported on a financial statement.

19)

20) Ontario Company uses the Allowance for Doubtful Accounts Method. When Ontario writes off an uncollectible account, there is A) an increase in Accounts Receivable. B) an increase in the Allowance Account. C) a decrease in Accounts Receivable. D) None of these answers is correct.

20)

21) What general ledger account is credited to write off a customer's account as uncollectible if using the allowance method for uncollectible receivables? A) Allowance for Doubtful Accounts B) Bad Debts Expense C) Accounts Receivable D) Bad Debts Recovered

21)

22) 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) Allowance for Doubtful Accounts $6,000 Bad Debts Expense $6,000 B) Allowance for Doubtful Accounts

$6,000

Accounts Receivable

C) Bad Debts Expense

$6,000 $6,000

Allowance for Doubtful Accounts

D) Accounts Receivable

22)

$6,000 $6,000

Allowance for Doubtful Accounts

$6,000

23) 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.

23)

24) 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) $3,800 B) $4,100 C) $3,500 D) $4,880

24)

25) The two methods of accounting for uncollectible receivables are the direct write-off method and the A) cash method. B) interest method. C) allowance method. D) equity method.

25)

26) 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 credit to Accounts Receivable. B) $350 credit to Bad Debts Recovered. C) $630 debit to Accounts Receivable. D) $350 credit to Bad Debts Expense.

26)

27) 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 credit to Bad Debts Expense. B) a debit to Bad Debts Expense. C) a credit to Allowance for Doubtful Accounts. D) a debit to Allowance for Doubtful Accounts.

27)

28) When a specific customer pays on an account that has been previously written off under the allowance method, Bad Debts Expense is A) not affected. B) debited. C) credited. D) None of these answers is correct.

28)

29) 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) $504,000 B) $507,000 C) $510,000 D) $513,000

29)

30) A method that estimates the amount of Bad Debts Expense based on a percentage of net credit sales for the period is called A) direct write off method. B) balance sheet approach. C) income statement approach. D) None of these answers is correct.

30)

31) An expense incurred as a result of sales on credit or on account is A) Bad Debts Expense. B) Prepaid Rent. C) Allowance for Doubtful Accounts. D) Insurance Expense.

31)

32) 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) $19,132. B) $19,200. C) $17,500. D) some other number.

32)

33) When a customer's account is written off A) net realizable value of the Accounts Receivable decreases. B) net realizable value of the Accounts Receivable increases. C) net realizable value of the Accounts Receivable remains the same. D) None of the above.

33)

34) Which of the following is a contra-revenue account? A) Bad Debts Expense B) Allowance for Doubtful Accounts C) Accounts Receivable D) None of these answers is correct.

34)

35) When a year-end adjustment is made for estimated bad debts (assuming an opening balance of zero in Allowance for Doubtful Accounts), A) net assets increase. B) net assets decrease. C) liabilities increase. D) net income is increased.

35)

36) Gross Accounts Receivable is $57,000. Allowance for Doubtful Accounts has 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) $17,500 B) $2,850 C) $1,950 D) $16,600

36)

37) 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) $640,000 B) $40,000 C) $600,000 D) $560,000

37)

38) Net Realizable Value can be defined as A) the Gross Accounts Receivable minus the Allowance for Doubtful Accounts. B) the Current Bad Debts Expense. C) the Gross Accounts Receivable. D) the amount of Accounts Receivable you do not expect to collect.

38)

39) 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) $2,950 C) $2,150 D) $800

39)

40) In which section would the Bad Debts Recovered account appear on the income statement? A) Operating expenses B) Sales revenue C) Other revenue D) Other expenses

40)

41) 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.

41)

42) Accounts included in the current assets section of the balance sheet are A) Sales. B) Allowance for Doubtful Accounts. C) Buildings. D) Land.

42)

43) At December 31, 20XX, 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 $3,480. B) includes a credit to the Allowance account for $4,520. C) includes a debit to the Allowance account for $520. D) includes a debit to the Allowance account for $4,000.

43)

44) A company is not able to reasonably estimate its bad debts expense. The method it may use is A) aging method. B) net realizable value method. C) income statement method. D) direct write-off method.

44)

45) Uncollectible accounts could A) affect accounts payable. B) be a major cost of selling goods on account. C) ease credit restrictions. D) decrease cash shortages.

45)

46) 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 $2,000 A) Allowance for Doubtful Accounts Accounts Receivable $2,000 $2,000 B) Bad Debts Expense Accounts Receivable $2,000 $2,000 C) Accounts Receivable Allowance for Doubtful Accounts $2,000 $2,000 D) Bad Debts Expense Allowance for Doubtful Accounts $2,000

46)

47) 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 Allowance for Doubtful Accounts $900; credit Accounts Receivable $900. C) debit Bad Debts Expense $500; credit Allowance for Doubtful Accounts $500. D) debit Bad Debts Expense $500; credit Accounts Receivable $500.

47)

48) Which of the following is considered a permanent account? A) Sales Returns and Allowances B) Sales C) Bad Debts Expense D) Allowance for Doubtful Accounts

48)

49) In the direct write-off method, collecting on a previously written off account causes A) an increase in Accounts Receivable and a decrease to revenue. B) an increase in Accounts Receivable and an increase to revenue. C) an increase in expense and a decrease in an asset. D) a decrease in expense and an increase in an asset.

49)

50) Mercury Holdings estimates it will collect $8,930 of the $10,000 owed by customers. The difference of $1,070 represents the A) Allowance for Doubtful Accounts. B) Net Realizable Value. C) Value of the Current Unpaid Receivables. D) Gross Accounts Receivable.

50)

51) A detailed analysis of Accounts Receivable to determine how long each account has been outstanding is called A) aging the uncollectible accounts. B) analyzing the Accounts Receivable. C) taking a percentage of sales on account. D) aging the Accounts Receivable.

51)

52) 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) $820. B) $390. C) $1,210. D) $430.

52)

53) 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) increase to Accounts Receivable and a decrease to Allowance for Doubtful Accounts. C) increase to Accounts Receivable and an increase to Allowance for Doubtful Accounts. D) decrease to Bad Debts Expense and a decrease to Accounts Receivable.

53)

54) What general ledger account is debited to write off a customer's account as uncollectible if using the allowance method for uncollectible receivables? A) Bad Debts Expense B) Accounts Receivable C) Bad Debts Recovered D) Allowance for Doubtful Accounts

54)

55) Mercury Holdings estimates it will collect $4,200 of the $5,620 owed by customers. The $4,200 is A) the Gross Accounts Receivable. B) the Allowance for Doubtful Accounts. C) the Net Realizable Value. D) the Bad Debts Expense.

55)

56) 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) 4.82% B) 4.60% C) 4.40% D) 45.98%

56)

57) 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) $530,000 B) $540,000 C) $550,000 D) $570,000

57)

58) 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) $1,200. B) $4,700. C) $4,200. D) $2,200.

58)

59) Bad Debts Expense is A) listed on the income statement. B) not included in Cost of Goods Sold. C) considered an expense matched with revenues. D) All of the above.

59)

60) 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) Accounts Receivable/Jerry $1,300 Bad Debts Expense $1,300

60)

B) Allowance for Doubtful Accounts

$1,300

Accounts Receivable/Jerry

C) Bad Debts Expense

$1,300 $1,300

Allowance for Doubtful Accounts

$1,300

D) None of the above. 61) If the direct write-off method is used, the debit account to write off an uncollectible is A) Accounts Receivable. B) Allowance for Doubtful Accounts. C) Sales. D) Bad Debt Expense.

61)

62) Gross Accounts Receivable is $57,000. Allowance for Doubtful Accounts has 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) $900 B) $5,250 C) $855 D) $6,150

62)

63) Which financial statement reports Allowance for Doubtful Accounts? A) Balance Sheet B) Income statement C) Statement of owner's equity D) None of these answers is correct.

63)

64) The journal entry to write off an uncollectible account under the allowance method would include a credit to A) Bad Debts Expense. B) Sales. C) Accounts Receivable. D) Allowance for Doubtful Accounts.

64)

65) 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) $2,400. B) $3,960. C) $4,560. D) $1,200.

65)

66) In what situation would the following journal entry would appear on Arial Company's records? Arial uses 66) the allowance method. Accounts Receivable — Chad Paid Allowance for Doubtful Accounts

450 450

A) The firm is making a collection of a previously written-off account, so it is reinstating the receivable. B) The firm is estimating its uncollectible accounts. C) It is a reversing entry. D) The firm is writing off a specific account. 67) The Accounts Receivable subsidiary ledger is A) credited when a debt is identified as uncollectible. B) updated when a debt is identified as uncollectible. C) debited when a debt is identified as uncollectible. D) Both A and B are correct.

67)

68) What type of account is an Allowance for Doubtful Accounts? A) Contra-revenue B) Expense C) Asset D) Contra-asset

68)

69) 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) $9,490 C) $10,440 D) $2,440

69)

70) The net realizable value of a company's Accounts Receivables under the allowance method is A) the guaranteed amount the company will collect from its customers. B) unchanged at the time of a specific write-off. C) increased at the time of a specific write-off. D) decreased at the time of a specific write-off.

70)

71) Joe's Auto Repair estimates that approximately 3% of net credit sales are uncollectible. Joe's calculates Bad Debts Expense using the A) direct write-off method. B) balance sheet method. C) gross method. D) income statement method.

71)

72) The allowance method requires A) an estimated entry to Bad Debts Expense. B) a known uncollectible amount to write off bad debts. C) a known individual account to write off bad debts. D) None of these answers is correct.

72)

73) 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) $1,000 debit to Accounts Receivable. C) $500 debit to Accounts Receivable. D) $500 debit to Bad Debts Recovered.

73)

74) 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) credit Sales. B) debit the allowance account. C) credit cash. D) credit Bad Debts Recovered.

74)

75) A company uses the allowance method and has estimated $28,000 as uncollectible. The journal entry to record the estimated bad debts is A) Bad Debts Expense $28,000 Allowance for Doubtful Accounts $28,000 B) Allowance for Doubtful Accounts Bad Debts Expense

$28,000

C) Allowance for Doubtful Accounts

$28,000

Accounts Receivable

D) Accounts Receivable

75)

$28,000 $28,000

Allowance for Doubtful Accounts

$28,000

76) As the past due time increases for an account, the likelihood of collecting that account A) usually goes down. B) usually goes up. C) Time does not affect collectibility. D) None of the above.

76)

77) When writing off a specific customer account using the income statement approach under the allowance method A) Bad Debts Expense increases and Accounts Receivable decreases. B) Allowance for Doubtful Accounts decreases and Bad Debts Expense increases. C) Allowance for Doubtful Accounts decreases and Accounts Receivable decreases. D) Accounts Receivable increases and Allowance for Doubtful Accounts increases.

77)

78) 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 expense and an increase in an asset. C) an increase in Accounts Receivable and a decrease to revenue. D) a decrease in the Allowance account and a decrease in expense.

78)

79) 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) decrease Cash. B) decrease Bad Debts Expense. C) increase Bad Debts Recovered. D) decrease Accounts Receivable.

79)

80) The method based on the Accounts Receivable amount and the aging process is called A) balance sheet approach. B) direct write off method. C) income statement approach. D) None of these answers is correct.

80)

81) The journal entry to record the estimate of uncollectible accounts (assuming an opening balance of zero in Allowance for Doubtful Accounts) includes a A) debit Bad Debts Expense; credit Allowance for Doubtful Accounts. B) debit Sales; credit Bad Debts Expense. C) debit Bad Debts Expense; credit Accounts Receivable. D) debit Allowance for Doubtful Accounts; credit Bad Debts Expense.

81)

82) What type of account is Bad Debts Expense? A) Contra-asset C) Contra-revenue

B) Expense D) Asset

82)

83) Gross Accounts Receivable is $62,000. Allowance for Doubtful Accounts has a debit balance of $700. Net credit sales for the year are $500,000. The company follows the balance sheet approach, using a rate of 7% of outstanding accounts receivable to estimate the Bad Debt Expense for the year. What would be the Bad Debt Expense entry for the current year under the balance sheet approach? A) $5,040 B) $4,340 C) $35,000 D) $3,640

83)

84) 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 credit to the Bad Debts Expense account for $20. B) includes a credit to the Bad Debts Expense account for $1,380. C) includes a debit to the Bad Debts Expense account for $700. D) includes a debit to the Bad Debt Expense account for $20.

84)

85) What would be the basis for the following entry on a firm's records?

85)

Bad Debt Expense Allowance for Doubtful Accounts

300 300

A) The firm is writing off an uncollectible account. B) The firm is using the direct write-off method. C) The firm is using the allowance method for estimating bad debt. D) None of these answers is correct. 86) 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 Bad Debts Expense. B) a debit to Allowance for Doubtful Accounts. C) a credit to Allowance for Doubtful Accounts. D) a debit to Bad Debts Expense.

86)

87) 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) $2,184 B) $6,784 C) $4,784 D) $5,784

87)

88) 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) decrease to Sales. C) decrease to Cash. D) increase to Allowance for Doubtful Accounts.

88)

89) 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 Bad Debts Expense; credit Accounts Receivable. B) debit Sales; credit Allowance for Doubtful Accounts. C) debit Allowance for Doubtful Accounts; credit Accounts Receivable. D) debit Allowance for Doubtful Accounts; credit Bad Debts Expense.

89)

90) 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) $2,400 B) $1,800 C) $3,300 D) $2,100

90)

91) In what situation would the following journal entry would appear on Arial Company's records? Arial uses 91) the allowance method. Allowance for Doubtful Accounts Accounts Receivable–Ellen Gibbons

320 320

A) The firm is making a collection of a previously written-off account. B) The firm is estimating its uncollectible accounts. C) It is a reversing entry. D) The firm is writing off a specific account. SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. 92) 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.

92)

Amount of the adjustment ________

93) 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 $ ________

93)

94) 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 $ ________

94)

95) The Allowance for Doubtful Accounts has a credit balance of $5,000. Net credit sales for the year 95) 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. Amount of the adjustment ________

96) Why is it necessary to estimate the amount of Bad Debts that will be incurred during an accounting period?

96)

97) 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 $ ________

97)

98) 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 (debit) $550 Net Credit Sales $660,000 $ ________

98)

99) 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 (credit) $240 Net Credit Sales $750,000 $ ________

99)

100) 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 $ ________

100)

101) 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 $ ________

101)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 102) When collection is made on an account receivable previously written off as uncollectible using the direct write off method, it decreases Bad Debts Expense.

102)

103) The direct write-off method follows the matching principle.

103)

104) When an account receivable is written off as uncollectible using the direct write off method, it increases Bad Debts Expense.

104)

105) The longer a bill has been due and not paid, the less likely it is that collection will occur.

105)

106) The income statement approach estimates a percentage of Accounts Receivable that is uncollectible.

106)

107) When a specific account receivable is written off as uncollectible under the direct write off method, it decreases the Allowance for Doubtful Accounts.

107)

108) A debit balance in Allowance for Doubtful Accounts indicates the estimate for Bad Debts was too low.

108)

109) The aging of Accounts Receivable is a balance sheet approach.

109)

110) The normal balance of the Allowance for Doubtful Accounts account is a debit.

110)

111) Allowance for Doubtful Accounts is closed at the end of every accounting period.

111)

112) Bad Debts Expense is recorded in the year the sale was earned when using the income statement approach.

112)

113) Companies that feel aging is too time-consuming may estimate Bad Debts based on a percentage of total Accounts Receivable.

113)

114) Allowance for Doubtful Accounts is a contra-asset account.

114)

115) The direct write-off method violates the matching principle.

115)

116) Receiving a payment for an account receivable previously written off requires both a debit and a credit to accounts receivable.

116)

117) The normal balance of the Bad Debts Expense account is a debit.

117)

118) For tax purposes, the law does not permit the allowance for doubtful accounts reserve method of deducting bad debts.

118)

119) 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.

119)

120) 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.

120)

121) Using the balance sheet approach, the balance in Allowance for Doubtful Accounts is taken into consideration when finding the adjustment.

121)

122) When a journal entry is recorded to estimate an Allowance for Doubtful Accounts, the Accounts Receivable subsidiary ledger must be updated immediately.

122)

123) The adjusting entry for uncollectible receivables is based on an estimate.

123)

124) 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.

124)

125) Bad Debts Expense is a contra-revenue account.

125)

126) When using the allowance method, writing off an account receivable will increase expenses in the current period.

126)

127) Bad Debts Recovered is a revenue account usually reported in Other Income on the Income Statement.

127)

128) The longer a bill has been due and not paid, the more likely it is that collection will occur very soon.

128)

129) When a journal entry is recorded to write off an account, the Accounts Receivable subsidiary ledger must be updated immediately.

129)

130) Using the income statement approach, the balance in Allowance for Doubtful Accounts is taken into consideration when finding the adjustment.

130)

131) Bad Debts Expense is closed at the end of every accounting period.

131)

132) The Allowance for Doubtful Accounts is shown on the balance sheet as a contra-asset.

132)

133) 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.

133)

134) 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.

134)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 135) Prepare general journal entries to record the following transactions for Elliott Consulting. (The company uses the income statement approach for recording bad debts expense.) 20X1 Dec. 20X2 Jan. Mar. Jul. Aug.

31 Recorded Bad Debts Expense, $ 2,010 9 12 8 19

Wrote off Summer's account as uncollectible, $435 Wrote off Manny's account as uncollectible, $650 Recovered $100 from Manny Wrote off Jared's account as uncollectible, $215

136) Prepare general journal entries to record the following transactions for Smith Company. (The company uses the balance sheet approach for recording bad debts expense.) 20X1 Dec. 20X2 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

137) Prepare the current assets section of the balance sheet for Tangiers Industries at December 31, 20XX, 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

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.

138)

Column 1

Column 2

Column 3

Column 4

Bad debts expense

139) On December 31, 20XX, 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. 140) Prepare any required journal entries to record the receipt of $600 from Allan Brown for a $1,000 account previously written off under the allowance method. 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.

142) 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.

143) Canadian Contractors uses the direct write-off method for uncollectible accounts. Record the following transactions in general journal form. Feb 11 $4,500. Mar 8 Apr 10 May 3

Sold merchandise on account to Leslie Noonan for $8,400. The cost to Canadian for merchandise the is 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.

144) Prepare the current assets section of the balance sheet for the Swanson Company at December 31, 20XX, 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

145) 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.

146) 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.

147) 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.

148) On December 31, 20XX, 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. 149) On December 31, 20XX, 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. 150) 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.

151) On December 31, 20XX, 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.

152) 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.

153) Prepare the current assets section of the balance sheet for Brown Company at December 31, 20XX, from the following information: Accounts Receivable Equipment Accumulated Depreciation: Equip Prepaid Insurance Allowance for Doubtful Accounts Sales Revenue Bad Debts Expense Salaries Expense Cash Land Merchandise Inventory

$9,710 15,000 1,500 200 900 25,000 1,500 12,200 5,780 100,500 2,480

154) 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.

155)

Column 1

Column 2

Column 3

Column 4

Bad debts recovered

156) 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.

157) 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.

158)

Column 1

Column 2

Column 3

Column 4

Allowance for doubtful accounts

159) 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.

160) 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.

Answer Key Testname: CHAPTER 12 1) D 2) D 3) B 4) B 5) D 6) A 7) D 8) C 9) A 10) B 11) C 12) B 13) D 14) D 15) C 16) B 17) A 18) A 19) C 20) C 21) C 22) B 23) C 24) B 25) C 26) B 27) D 28) A 29) B 30) C 31) A 32) B 33) C 34) D 35) B 36) C 37) A 38) A 39) A 40) C 41) D 42) B 43) A 44) D 45) B 46) A 47) C 48) D 49) B 50) A 24

Answer Key Testname: CHAPTER 12 51) D 52) D 53) C 54) D 55) C 56) B 57) A 58) C 59) D 60) B 61) D 62) D 63) A 64) C 65) D 66) A 67) D 68) D 69) A 70) B 71) D 72) A 73) C 74) D 75) A 76) A 77) C 78) A 79) C 80) A 81) A 82) B 83) A 84) D 85) C 86) D 87) C 88) D 89) C 90) D 91) D 92) $34,680 93) $5,340 94) $51,700 95) $36,000

Answer Key Testname: CHAPTER 12 96) Accrual accounting requires that entries are made to match earned revenue with the expenses that have been incurred 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. 97) $7,210 98) $8,310 99) $4,860 100) $6,450 101) $7,840 102) FALSE 103) FALSE 104) TRUE 105) TRUE 106) FALSE 107) FALSE 108) TRUE 109) TRUE 110) FALSE 111) FALSE 112) TRUE 113) TRUE 114) TRUE 115) TRUE 116) TRUE 117) TRUE 118) FALSE 119) TRUE 120) TRUE 121) TRUE 122) FALSE 123) TRUE 124) TRUE 125) FALSE 126) FALSE 127) TRUE 128) FALSE 129) TRUE 130) FALSE 131) TRUE 132) TRUE 133) FALSE 134) TRUE

Answer Key Testname: CHAPTER 12 135) 20X1 Dec. 31 Bad Debts Expense Allowance for Doubtful Accounts 20X2 Jan. 9

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

Accounts Receivable, Manny

Aug. 19 Allowance for Doubtful Accounts Accounts Receivable, Jared 136) 20X1 Dec. 31 Bad Debts Expense Allowance for Doubtful Accounts 20X2 Jan. 3

215

900

Allowance for Doubtful Accounts Accounts Receivable, Jal

260

Mar. 4

Allowance for Doubtful Accounts Accounts Receivable, Hall

Jul. 5

Accounts Receivable, Hall Allowance for Doubtful Accounts

Cash

Accounts Receivable, Hall

Aug. 19 Allowance for Doubtful Accounts Accounts Receivable, M. Wilson

Nov. 7

Accounts Receivable, Jal Allowance for Doubtful Accounts

Cash

Accounts Receivable, Jal

2,010

435

650

100

215

900

260

Answer Key Testname: CHAPTER 12 137)

Tangiers Industries Balance Sheet December 31, 20XX

Current Assets Cash Accounts Receivable Less: Allow. for Doubtful Accts. Merchandise Inventory Prepaid Insurance Prepaid Rent

$10,400 1,500

Total Current Assets

138)

Column 1 Bad debts expenseexpense

$19,320 8,900 5,222 450 640 $34,532

Column 2 debit

Column 3 Column 4 income statement temporary

139) Dec 31

Bad Debts Expense 8,350 Allowance for Doubtful Accounts 8,350 600 140) Accounts Receivable — Allan Brown Allowance for Doubtful Accounts 600 Cash 600 Accounts Receivable — Allan Brown 600 18,246 141) Bad Debts Expense Allowance for Doubtful Accounts 18,246 142) (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.

Answer Key Testname: CHAPTER 12 143) Feb 11

Accounts Receivable-Noonan Sales

8,400

Feb 11

Cost of Goods Sold Merchandise Inventory

4,500

Mar 8

Cash

2,650

Apr 10

Bad Debts Expense Accounts Receivable-Noonan

5,750

May 3

Accounts Receivable-Noonan Bad Debt Expense

3,900

May 3

Cash

3,900

144)

Accounts Receivable-Noonan

Accounts Receivable-Noonan Swanson Company Balance Sheet December 31, 20XX

Current Assets Cash Accounts Receivable Less: Allow. for Doubtful Accts. Merchandise Inventory Prepaid Rent

Journal Entry: Dec 31, 20XX

146) April 2

Cash

4,500

2,650

5,750

3,900

$12,500

$8,560 750

7,810 3,700 800

Total Current Assets

145) Bad Debt Expense Total $4088.68

8,400

$24,810

Not Due $57.00

1-30 $79.68

31-60 $750.00

Bad Debt Expense 3,588.68 Allowance For Doubtful Accounts

61-90 $630.00

3,588.68 1,400

Accounts Receivable-Billie April 12 Allowance for Doubtful Accounts Accounts Receivable-Billie April 17 Cash Accounts Receivable-Jason

600 250

Over 90 $2572.00

1,400 600 250

Answer Key Testname: CHAPTER 12 3,500 147) Aug 15 Accounts Receivable-Townsend 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 Bad Debts Expense 2,060 148) Dec 31 Allowance for Doubtful Accounts 2,060 Bad Debts Expense 4,676 149) Dec 31 Allowance for Doubtful Accounts 4,676 150) Bad Debt Expense Total Not Due 1-30 31-60 61-90 Over 90 $9400.00 $1530.00 $70.00 $120.00 $4010.00 $3670.00 Journal Entry: Dec 31, 20XX

Bad Debt Expense $10,400.00 Allowance For Doubtful Accounts $10,400.00 Bad Debts Expense 660 151) Dec 31 Allowance for Doubtful Accounts 152) Bad Debt Expense Total Not Due 1-30 31-60 61-90 $1863.72 $84.00 $84.72 $120.00 $900.00 Journal Entry: Dec 31, 20XX

153)

Bad Debt Expense $1,963.72 Allowance For Doubtful Accounts

660 Over 90 $675.00

$1,963.72

Brown Company Balance Sheet December 31, 20XX

Current Assets Cash Accounts Receivable Less: Allow. for Doubtful Accts. Merchandise Inventory Prepaid Insurance Total Current Assets 154) Bad Debt Expense Total $9400.00

Journal Entry: Dec 31, 20XX

$5,780

$25,000 900

24,100 2,480 200 $32,560

Not Due $1530.00

1-30 $70.00

31-60 $120.00

Bad Debt Expense $6,400.00 Allowance For Doubtful Accounts

61-90 $4010.00

$6,400.00

Over 90 $3670.00

Answer Key Testname: CHAPTER 12 155)

Column 1 Bad debts recovered

revenue

Column 2

Column 3

credit

Column 4

income statement temporary

156) 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. 157) Bad Debt Expense Total Not Due 1-30 31-60 61-90 Over 90 $4088.68 $57.00 $79.68 $750.00 $630.00 $2572.00 Journal Entry: Dec 31, 20XX

158)

Bad Debt Expense $4,588.68 Allowance For Doubtful Accounts Column 1 Column 2

Allowance for doubtful accounts contra-asset

159) Bad Debt Expense Total $1863.72

Not Due $84.00

credit 1-30 $84.72

$4,588.68 Column 3

balance sheet 31-60 $120.00

Journal Entry: Dec 31, 20XX

Bad Debt Expense $363.72 Allowance For Doubtful Accounts 11,246 160) Bad Debts Expense Allowance for Doubtful Accounts

61-90 $900.00

$363.72

11,246

Column 4 permanent Over 90 $675.00

Exam

Chapter 13

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) PST Payable is a A) contra revenue account with a debit balance. B) cost of goods sold account with a debit balance. C) revenue account with a credit balance. D) liability account with a credit balance.

2) 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) $444 C) $392 D) $452

3) If Rosie sends back damaged merchandise for credit, to Rosie it would be a A) debit to Sales Return and Allowance. B) credit to Inventory. C) debit to Inventory. D) credit to Sales Discount.

4) 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 Cash, $452, credit Accounts Receivable, $452 B) Debit Accounts Receivable $420, credit Sales, $420 C) Debit Cash, $452, credit Sales, $452 D) Debit Cash, $400, credit Accounts Receivable, $400

5) Fiona's Bistro on May 31 has the following transaction totals for the month:

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) $46,400. B) $36,125.

C) $37,875.

D) $32,950.

6) TinMan Cycling sold goods for $800 plus HST of 13% to a charge customer. The customer returned $50 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) $832.50 B) $830.55 C) $847.50 D) $904.00

7) Sold merchandise subject to GST, accepting cash. This will be recorded with A) a debit to an owner's equity account. B) a credit to a liability account. C) a credit to an expense account. D) None of these are correct.

8) Sue's Jewellery sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewellery 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 Accounts Receivable for $693.75. C) a debit to Sales for $625. D) a debit to Accounts Receivable for $625.

9) 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 Capital. C) a credit to an expense account. D) None of these are correct.

10) Sue's Jewellery sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewellery was $15. The invoice included 5% GST 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 $515.00. D) a credit to Accounts Receivable for $643.13.

10)

11) 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 Inventory for $52.50. B) a debit to Accounts Payable for $50.00. C) a debit to Inventory for $50.00. D) a debit to Accounts Payable for $52.50.

11)

12) Cynthia's Crystals sold $1,000 worth of crystal plus 13% HST to a charge customer with terms 2/10, n/30. The invoice was paid within the discount period. The entry to record receipt of payment is A) debit Cash $1,130, credit Accounts Receivable $1,130. B) debit Cash $1,297.60, debit Sales Discounts $22.40, credit Accounts Receivable $1,120. C) debit Cash $1,080, debit Sales Discounts $20, credit Accounts Receivable $1,000, credit HST Payable $130. D) debit Cash $1,110, debit Sales Discounts $20, credit Accounts Receivable $1,130.

12)

13) The total of all cash and credit sales, net of sales taxes, equals A) gross sales. B) sales returns and allowances. C) input tax credit. D) net sales.

13)

14) 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 total the amount in the Sales account. C) The subsidiary ledger accounts will show details of any HST billed. D) All of these answers are correct.

14)

15) Bruce's Jewellery 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 Inventory for $565.00. C) a debit to Accounts Payable for $500.00. D) a debit to Accounts Payable for $565.00.

15)

16) All controlling accounts must have a A) journal. C) subsidiary ledger.

16)

B) revenue ledger. D) general ledger.

17) Entries to customers' accounts for sales made with 13% HST are recorded in the A) accounts receivable subsidiary ledger. B) fixed asset subsidiary ledger. C) accounts payable subsidiary ledger. D) cash subsidiary ledger.

17)

18) When a debit memorandum for returned merchandise for Moore Co. is recorded, the entry is A) debit Accounts Payable Moore Co. in the accounts payable subsidiary ledger, debit Accounts Payable in the general ledger, credit Purchases Returns and Allowances. B) debit Purchases, credit Accounts Payable. C) debit Purchases Returns and Allowances, credit Accounts Payable in the general ledger. D) debit Accounts Payable, credit Purchases.

18)

19) 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.

19)

20) The normal balance for Inventory is A) a credit. C) a debit.

20)

B) zero. D) It does not have a normal balance.

21) Goods and Services Tax Payable is a A) contra-asset account with a credit balance. B) contra-asset account with a debit balance. C) liability account with a credit balance. D) liability account with a debit balance.

21)

22) 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 control account to not agree with the subsidiary ledger. B) the net income for the period to be overstated. C) the assets to be overstated. D) the net income for the period to be understated.

22)

23) The liability account used to record GST owed is A) Sales Tax Expense. C) Sales.

23)

B) Prepaid Taxes. D) GST Payable.

24) Molly's Craft Shop sold goods for $450 plus PST at 6% 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) $350.00 B) $371.00 C) $377.00 D) $364.00

24)

25) 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) $1,210. B) $1,130. C) $1,300. D) $1,000.

25)

26) A debit memorandum decreases which account on the buyer's books? A) Accounts Payable B) Accounts Receivable C) Inventory D) Sales Returns and Allowances

26)

27) 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) $1,130. C) $1,210. D) $1,000.

27)

28) 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 Accounts Receivable for $1,890; credit GST Payable $90 and credit Sales for $1,800 B) Debit Accounts Receivable for $1,800; credit Sales for $1,800 C) Debit Accounts Receivable $1,890; credit Sales, $1,890 D) Debit Cash for $1,890; credit Sales for $1,890

28)

29) Sue's Jewellery sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewellery was $15. The invoice included a 6% 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 debit to Cash for $530.00. B) a credit to Accounts Receivable for $676.00. C) a credit to Accounts Receivable for $662.50. D) a debit to Cash for $520.00.

29)

30) The accounts payable subsidiary ledger A) lists accounts with which the company does business on a regular basis. B) lists accounts alphabetically. C) has a controlling account in the general ledger. D) All of the above are correct.

30)

31) The normal balance of the HST Collected is A) positive. B) a credit.

C) a debit.

D) zero.

31)

32) 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 Cash for $1,030. C) a credit to Cash for $1,050. D) a credit to Inventory for $1,000.

32)

33) Bruce's Jewellery 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 Inventory for $56.50. C) a credit to Accounts Payable for $56.50. D) a credit to Inventory for $50.00.

33)

34) 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 $420.00. C) a debit to HST Payable for $20.00. D) a credit to Accounts Payable for $400.00.

34)

35) Flat Tire Company sold tires to a charge customer, including PST and GST. What entry is required to record this transaction? A) Debit Cash, credit Sales, credit GST Payable, credit PST Payable, Debit Cost of Goods Sold, Credit Inventory B) Debit Accounts Receivable, credit Sales, credit GST Payable, credit PST Payable, Debit Cost of Goods Sold, Credit Inventory C) Debit Cash, credit Sales, Debit Cost of Goods Sold, Credit Inventory D) Debit Accounts Receivable, credit Sales, Debit Cost of Goods Sold, Credit Inventory

35)

36) Sue's Jewellery sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewellery 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 $84.75. B) a credit to Inventory for $75. C) a debit to Sales Returns and Allowances for 84.75. D) a debit to Sales Returns and Allowances for $75.

36)

37) Canada's tax legislation allows the use of the quick method of accounting for GST/HST because A) Canada's free trade agreement with the US requires that the option exist. B) it was forced to allow this by the Canadian Small Business Association. C) it wants to collect tax revenue quicker. D) it wants to simplify tax handling for some smaller companies.

37)

38) Sue's Jewellery sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewellery 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 credit to Sales Tax Payable for $16.25. B) a debit to Sales Returns and Allowances for $141.25. C) a debit to Accounts Receivable for $141.25. D) a debit to Sales Returns and Allowances for $125.00.

38)

39) The credit that a company receives for the GST/HST it pays is called A) Payroll Tax Credit. B) Input Tax Credit. C) Output Tax Credit. D) Business Tax Credit.

39)

40) 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, $442.96, debit Sales Discounts $9.04, credit Accounts Receivable, $452 B) Debit Cash, $444, credit Accounts Receivable, $444 C) Debit Cash, $444, debit Sales Discounts $8, credit Accounts Receivable, $452 D) Debit Cash, $452, credit Accounts Receivable, $452

40)

41) The basic concept of the quick method of accounting for GST/HST is best described as follows: A) A small company with large capital purchases should always avoid using the quick method. B) Only small companies with total sales of less than $150,000 can use the quick method. C) A smaller company will remit about as much tax as they would if detailed records were maintained. D) The quick method allows a small company to pay as little tax as possible.

41)

42) Sue's Jewellery sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewellery was $15. The invoice included 5% GST 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 Accounts Receivable for $515.00. D) a credit to Cash for $555.00.

42)

43) The contra-revenue accounts include A) HST Payable. C) Sales Discount.

B) Sales Returns and Allowances. D) Both B and C are correct.

43)

44) An entry for a purchase return will include A) a credit to Inventory. C) a credit to Sales Returns and Allowances.

B) a debit to Sales Returns and Allowances. D) a debit to Inventory.

44)

45) 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.

45)

46) A credit memorandum decreases which account on the seller's books? A) Accounts Payable B) Accounts Receivable C) Purchases Returns and Allowances D) Sales Returns and Allowances

46)

47) 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.

47)

48) What type of account is Prepaid HST? A) Contra liability B) Contra asset

C) Contra revenue

D) Liability

48)

49) 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 Cash, $888; debit Sales Discounts, $16; credit Accounts Receivable, $904 B) Debit Cash, $904; credit Sales, $904 C) Debit Cash, $885.92; debit Sales Discounts, $18.08; credit Accounts Receivable, $904 D) Debit Cash, $888; credit Accounts Receivable, $888

49)

50) Bruce's Jewellery 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 credit to Cash for $508.50. B) a debit to Accounts Payable for $499.50. C) a credit to Cash for $499.50. D) a credit to Accounts Payable for $508.50.

50)

51) What type of account is HST Payable? A) Contra asset C) Contra revenue

B) Contra cost/expense D) Liability

51)

52) Sales discounts are usually allowed only on A) credit sales to customers. C) credit sales plus PST.

B) credit sales plus GST/HST. D) freight.

53) The liability account used to record HST owed is A) Sales Tax Expense. C) Prepaid Taxes.

B) HST Payable. D) Sales.

52)

53)

54) 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.

54)

55) Harmonized Sales Tax Payable is a A) contra-asset account with a debit balance. B) contra-asset account with a credit balance. C) liability account with a debit balance. D) liability account with a credit balance.

55)

56) Lee's Golf Shop on May 31 has the following transaction totals: 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

56)

$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) $6,910. C) $6,400.

D) $12,600.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 57) Using the quick method of accounting for GST/HST will always result in lower taxes payable.

57)

58) Customers can take cash discounts on GST and PST when terms are 2/10, n/30.

58)

59) The purpose of the quick method of accounting for GST/HST is to save money.

59)

60) Individual invoice amounts, including HST, are recorded during the month to the accounts payable ledger.

60)

61) An "X" in the cash payments journal indicates that the customer had previously defaulted on their payment.

61)

62) PST Payable is a Liability Account.

62)

63) The accuracy of the cash receipts journal can be proved by totaling all of the columns and adding them together.

63)

64) Sales discounts are always given on taxes such as PST and HST.

64)

65) A credit to Prepaid HST causes an increase in the amount of HST owed to the federal government.

65)

66) Trade discounts are not subject to HST.

66)

67) A cash payments journal and a cash disbursements journal are the same thing.

67)

68) Purchases discounts are usually not taken on PST or HST.

68)

69) Customers who return their full purchase will also receive a refund for the sales tax paid.

69)

70) Amounts recorded to the Accounts Payable subsidiary ledger must exclude GST.

70)

71) HST collected by the seller increases the seller's total revenue.

71)

72) Companies using the quick method of accounting for GST/HST can still claim GST/HST back on major capital expenditures.

72)

73) The normal balance of Provincial Sales Tax Payable is a credit.

73)

74) HST must be paid on employee wages.

74)

75) A check mark in the cash payments journal indicates that a discount was taken on payment.

75)

76) The Accounts Receivable subsidiary ledger will exclude HST from the balances.

76)

77) PST charged on a sale will not be refunded, even if the merchandise is returned.

77)

78) GST Collected is an owner's equity account with a debit balance.

78)

79) Payment terms 2/10, n/30 will reduce PST owed if paid within the discount period.

79)

80) The accuracy of the cash receipts journal can be proved by matching the total of all the columns with debit balances to the total of all the columns with credit balances.

80)

81) Net Sales equals Gross Sales plus HST, less Sales Returns & Allowances, less Sales Discounts.

81)

82) Provincial Sales Tax Payable represents an asset on the books of the seller.

82)

83) The applicable rates under the quick method of accounting for GST/HST are the same for all types of business.

83)

84) Discounts for early payment also reduce the amount of GST/HST owing.

84)

85) The Prepaid HST account is only required for merchandising companies.

85)

86) The Prepaid HST account normally has a credit balance and is a Contra Cost account.

86)

87) A list showing the ending balances owed to individual suppliers includes any HST paid.

87)

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 88) Determine the amount of accounts receivable recorded at the time of making a credit sale of $8,000 worth of merchandise subject to 5% GST. 89) 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.

90) February 9 Sold merchandise priced at $125 to Connor Beuter on account. The cost of goods was $80. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 91) 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.

92) GST Payable

Column 1

Column 2

Column 3

________

93) 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. 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.

94) HST Payable

Column 1

Column 2

Column 3

________

95) Zinck Furniture Company of Ontario sold K. Daniels a bedroom set for $2,500 plus 13% HST. 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.

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 13 Sold merchandise priced at $400 to Jan Ellsworth on account. The cost of goods was $300. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________

97) Determine the amount of cash collected: Gross sales = $250,000 HST collected = $27,300 Sales Discounts = $6,000 Sales Returns and Allowances = $40,000 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.

98) Professional Fees Earned

Column 1

Column 2

Column 3

________

99) Chan Company sold $500.00 of goods to Abdel Company on account, terms 2/10, n/30, and 5% GST. What was amount will Chan Company receive if the customer takes the discount and pays within the discount period? (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.

100) December 10 Payment from Cathy Norton received. ________ ________ ________ ________ ________ ________ ________ ________ ________ 101) 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. 102) 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.

103) February 12 Payment from Connor Beuter received. ________ ________ ________ ________ ________ ________ ________ ________ ________ 104) 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. 105) What should always be done after creating the schedule of accounts receivable?

106) 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 ________.

107) 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 ________.

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.

108) April 14 Sold merchandise priced at $300 to a cash customer. The cost of goods was $175. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 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.

109) Sales Returns and Allowances

Column 1

Column 2

Column 3

________

110) February 15 Payment from Francis Fast received. ________ ________ ________ ________ ________ ________ ________ ________ ________

111) 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

112) 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.

113) Sales Discounts

Column 1

Column 2

Column 3

________

114) February 10 Sold merchandise priced at $192 to a cash customer. The cost of goods was $150. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 115) 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 ________.

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.

116) April 16 Sold merchandise priced at $600 to a cash customer. The cost of goods sold was $420. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________

117) 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.

118) Chan Company sold $500.00 of goods to Abdel Company on account, terms 2/10, n/30, and 5% GST. What was the amount of the invoice? (Show your computations.) 119) Morris Jewellery Store sold R. Alexander a diamond engagement ring for $2,000 plus 6% 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.

120) Determine the amount of cash collected at the time of making a cash sale of $9,220 worth of merchandise subject to 13% HST. 121) Following is a list of accounts with balances for Tinman Tools. How much HST must be remitted? HST Charged HST Paid

$10,500 3,600

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.

122) April 20 The customer of April 14 returned $40 worth of merchandise for a cash refund. The cost of goods sold was $22. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________

123) April 25 Received full payment from Dana Carter. ________ ________ ________ ________ ________ ________ 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.

124) Store Rent Expense

Column 1

Column 2

Column 3

________

125) February 11 Sold merchandise priced at $185 to a Francis Fast on account. The cost of goods was $120. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 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.

126) April 15 Sold merchandise priced at $160 to Dana Carter on account. The cost of goods was $112. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 127) 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 ________.

128) Determine the amount of revenue to record at the time of making a credit sale of $9,500 worth of merchandise subject to 5% GST and 7% PST. 129) 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. 130) Why isn't it a normal practice to give discounts on taxes?

131) Determine the amount of accounts receivable recorded at the time of making a credit sale of $9,500 worth of merchandise subject to 5% GST and 7% PST. 132) 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

Column 2

Column 3

133) Store Supplies

________

134) PST Payable

________

135) 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. 136) 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 ________.

137) Cleaning Expense

Column 1

Column 2

Column 3

________

138) 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 ________.

139) December 16 cash customer returned $35 worth of merchandise. The cost of goods was $27. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 140) Calculate gross sales: Net sales HST charged Sales returns and allowances Sales discounts Accounts receivable

$75,000 $14,300 $15,000 $20,000 $12,000

141) Use the following information to answer the question below: Sales HST Collected Sales Discount Sales Returns and Allowances Delivery Expense

$73,400 9,542 1,500 900 700

The Net Sales are ________.

142) February 13 Francis Fast returned $50 worth of merchandise. The cost of goods was $30. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 143) 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. 144) 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. 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) Determine the amount of cash collected: Gross sales = $420,000.00 HST collected = $52,357.50 Sales Discounts = $2,500.00 Sales Returns and Allowances = $17,250.00 147) 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. 148) Why isn't there an entry to HST when a vendor gets paid for an outstanding invoice? 149) 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. 150) 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.

151) December 2 Sold merchandise priced at $85 to Cathy Norton on account. The cost of goods was $60. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ 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.

152) Owner's Capital

Column 1

Column 2

Column 3

________

153) Determine the amount of cash collected at the time of making a cash sale of $7,450 worth of merchandise subject to 13% HST.

Answer Key Testname: CHAPTER 13 1) D 2) B 3) B 4) A 5) D 6) A 7) B 8) B 9) D 10) B 11) D 12) D 13) A 14) A 15) A 16) C 17) A 18) A 19) D 20) C 21) C 22) D 23) D 24) D 25) A 26) A 27) A 28) A 29) D 30) D 31) B 32) B 33) D 34) B 35) B 36) B 37) D 38) D 39) B 40) C 41) C 42) B 43) D 44) A 45) B 46) B 47) A 48) A 49) A 50) C 20

Answer Key Testname: CHAPTER 13 51) D 52) A 53) B 54) D 55) D 56) C 57) FALSE 58) FALSE 59) FALSE 60) TRUE 61) FALSE 62) TRUE 63) FALSE 64) FALSE 65) TRUE 66) TRUE 67) TRUE 68) TRUE 69) TRUE 70) FALSE 71) FALSE 72) TRUE 73) TRUE 74) FALSE 75) FALSE 76) FALSE 77) FALSE 78) FALSE 79) FALSE 80) TRUE 81) FALSE 82) FALSE 83) FALSE 84) FALSE 85) FALSE 86) FALSE 87) TRUE 88) $8,400.00 ($8,000 × 1.05) 89) $1,776 (($1,600 × 1.13) - $32 = $1,776) 141.25 90) Accounts Receivable - Connor Beuter Sales HST Payable Cost of Goods Sold 80.00 Inventory 118.65 91) Cash Sales 105.00 HST Payable 13.65 Cost of Goods Sold 79.00 Inventory 79.00

125.00 16.25 80.00

Answer Key Testname: CHAPTER 13 92) liability credit balance sheet 93) $3,885 (($5,000 - $1500) × 1.13) less (2% × $3,500) 94) liability credit balance sheet 95) $2,800 ($2,500 + $325 (HST) - $25 (discount) = $2,800) 452.00 96) Accounts Receivable - Jan Ellsworth Sales 400.00 HST Payable 52.00 Cost of Goods Sold 300.00 Inventory 300.00 97) $231,300 ($250,000 - $40,000) × 1.13 - $6,000 98) revenue credit income statement 99) $515 (PST is not discounted: $500 × 0.05 = $25, the sale amount net of the discount is: $500 × 0.98 = $490) Total owed is $25 GST plus $490 = $515 94.35 100) Cash Sales Discount 1.70 Accounts Receivable - Cathy Norton 96.05 101) $3,328.89 ($2,999 × 1.11) 102) 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 it has collected. 138.75 103) Cash Sales Discount 2.50 Accounts Receivable - Connor Beuter 141.25 104) $9,220 (HST is not revenue) 105) 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. 106) a) $100,000 b) $13,000 c) $16,950 d) $1,700 e) $94,350 107) $5,350 339.00 108) Cash Sales 300.00 HST Payable 39.00 Cost of Goods Sold 175.00 Inventory 175.00 109) revenue debit income statement 149.85 110) Cash Sales Discount 2.70 Accounts Receivable - Francis Fast 152.55 Inventory GST 111) J. Bentley $1,500.00 $75.00 P. Anders 2,314.00 115.70 N. Cassels 4,770.00 238.50 $8,584.00 $429.20 112) $2,999 (PST and GST are not revenue) 113) revenue debit income statement 22

Answer Key Testname: CHAPTER 13 216.96 114) Cash Sales 192.00 HST Payable 24.96 Cost of Goods Sold 150.00 Inventory 150.00 115) a) $10,500 b) $11,025 c) $300 d) $10,710 e) $0 678.00 116) Cash Sales 600.00 HST Payable 78.00 Cost of Goods Sold 420.00 Inventory 420.00 117) 1. h 2. d 3. g 4. c 5. f 6. b 7. e 8. a 9. i 10. j 118) $525 ($500 × 1.05 = $525) 119) $1,665 ($2,000 - $500) + (($2,000 - $500) × 0.06) + (($2,000 - $500) × 0.05) = $1,665) 120) $10,418.60 ($9,220 × 1.13) 121) $6,900 ($10,500 - $3,600) 40.00 122) Sales Returns and Allowances HST Payable 5.20 Cash 45.20 Inventory 22.00 Cost of Goods Sold 22.00 180.80 123) Cash Accounts Receivable - Dana Carter 180.80 124) expense debit income statement 209.05 125) Accounts Receivable - Francis Fast Sales 185.00 HST Payable 24.05 Cost of Goods Sold 120.00 Inventory 120.00 180.80 126) Accounts Receivable - Dana Carter Sales 160.00 HST Payable 20.80 Cost of Goods Sold 112.00 Inventory 112.00

Answer Key Testname: CHAPTER 13 127) 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) 128) $9,500.00 (PST and GST are not revenue) 129) $4,218 (($4,300 - $500) × 1.13) less (2% × $3,800) 130) 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. 131) $10,735.00 ($9,500 × 1.13) Inventory HST 132) S. Over $2,000.00 $260.00 B. Danders 1,500.00 195.00 R. Deals 800.00 104.00 $4,300.00 $559.00 133) asset debit balance sheet 134) liability credit balance sheet 135) $7,770 ($7,000 × 1.13 - $140) 136) 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) 137) expense debit income statement 138) $11,030 35.00 139) Sales Returns and Allowances HST Payable 4.55 Cash 39.55 Inventory 27.00 Cost of Goods Sold 27.00 140) $110,000 141) $71,000 50.00 142) Sales Returns and Allowances HST Payable 6.50 Accounts Receivable - Francis Fast 56.50 Inventory 30.00 Cost of Goods Sold 30.00 143) $2,575 (($3,000 - $500) × 1.05) less (2% × $2,500) 144) $11,100 ($10,000 × 1.13 - ($10,000 × 2%)) 145) revenue credit income statement 146) $452,607.50 ($420,000 - $17,250) × 1.13 - $2,500 147) $2,054.50 (($2,500 - $700) × 1.13) less ($1,800 × 2%) plus ($50 × 1.13) 148) 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. 149) $1,332 ($1,200 × 1.11) 150) $4,520 ($4,000 × 1.13) 24

Answer Key Testname: CHAPTER 13 151) Accounts Receivable - Cathy Norton Sales HST Payable Cost of Goods Sold Inventory 152) owner's equity 153) $8,418.50 ($7,450 × 1.13)

96.05

65.00

credit

85.00 11.05 65.00 balance sheet