What is Alim? Essay
Chapter 9 — Test 1
Note: Most questions can be placed in more than one of the four achievement categories. The achievement chart designation provided here indicates the category that is predominant within the question.
1.For each of the following, choose the most appropriate response.
1)A one-year insurance policy was purchased for $960 on July 1, 20-1. On December 31, 20-1, it had an unexpired value of:
e.none of the above.
2)The accountant did not prepare an entry to adjust the Supplies account at the end of the accounting period and, as a result:
a.the Supplies account was overstated.
b.the total expenses were understated.
c.the net income was overstated.
d.the owner’s equity was overstated.
e.all of the above are true.
3)On the basis of the following data, what is the proper adjusting entry for June 30, the end of the fiscal year?
•Supplies account balance before adjustment, $1 900
•Supplies physical inventory on June 30, $750
a.Debit Supplies $750; credit Supplies Expense $750.
b.Debit Supplies Expense $750; credit Supplies $750.
c.Debit Supplies Expense $1 900; credit Supplies $1 900.
d.Debit Supplies $1 900; credit Supplies Expense $1 900.
e.Debit Supplies Expense $1 150; credit Supplies $1 150.
4)The source of data for preparing closing entries is:
a.the trial balance.
b.the work sheet.
c.the general ledger.
d.all of the above.
5)Before the Income Summary account is closed, a credit balance represents
a.total expenses for the accounting period.
b.net loss for the accounting period.
c.net income for the accounting period.
d.total assets for the accounting period.
6)When all closing entries have been posted, a net income will be shown on the:
a.credit side of the Drawings account.
b.debit side of the Capital account.
c.credit side of the Capital account.
d.debit side of the Drawings account.
7)The net income or net loss figure shown in the Income Summary account will also appear on:
a.the income statement.
c.the balance sheet.
d.all of the above.
8)Which of the following accounts is not closed out at the end of the accounting period?
9)The last step in the basic accounting cycle is the:
b.post-closing trial balance.
c.closing journal entries.
d.adjusting journal entries.
2.An accountant neglects to calculate the yearly depreciation for an electric pencil sharpener, which cost $30 and has an expected useful life of five years. That is because the accountant charged the entire $30 to the Office Expense account at the time of purchase. Explain whether the accountant has violated the consistency, materiality, or full disclosure principle and state why.
3.In the chart below, write in the numbers of the accounts that are debited and credited when the given adjustments are made. For items b), c), and d), assume that accounting clerks debited asset accounts when they received the appropriate invoices. Adjustments
a)Adjust for late-arriving telephone bill
b)Adjust for insurance used
c)Adjust for prepaid licence
d)Adjust for supplies used
4.Kathy Morris owns a small decorating business called Premium Decorating. A partially completed work sheet for Premium Decorating and additional information follow directly.
1.Purchase invoices received in January 20-3, which pertain to goods or services received in 20-2, are for the following:
2.The supplies counted and valued as of December 31, 20-2, are $980.
3.The unexpired insurance at December 31, 20-2, amounted to $1 040.
4.a)Using the additional information above, complete the eight-column work sheet. GST accounts are not to be considered.
b)Prepare the four closing journal entries for Premium Decorating as of December 31, 20-2. Omit explanations.
4.c)Assuming all entries have been posted, calculate the ending Capital balance for Premium Decorating as of December 31, 20-2, in the account provided below.
d)Prepare a post-closing trial balance for Premium Decorating as of December 31, 20-2.
5.A company purchases equipment costing $50 000, which it expects to last for 12 years and to have a salvage value of $2 000.
a)Prepare a schedule of depreciation for the first five years using the straight-line method. Year
b)For the same equipment, prepare a schedule of depreciation for the first five years using the declining-balance method. Canada Customs and Revenue Agency’s prescribed rate for depreciation is 30%. Year
c)Repeat the same type of calculations as in b) above, but this time
assume CCRA’s “50% rule” is in effect.
Declining Balance with 50% Rule
6.Indicate which of the accounts below are nominal accounts by placing a check mark () in the space provided.
g)Chris Vella, Capital
i)Chris Vella, Drawings
7.The information below is related to adjustments to the accounts as of June 30, 20—, the end of the current fiscal period.
Prepare the appropriate adjusting entries to be made as of June 30, 20-1. Leave one blank line between entries. Omit explanations.
1.The $50 000 balance in Advertising Expense at June 30, 20-1, represents the amount paid for advertising. Analysis indicates that $7 500 of this amount is for radio ads to be aired in July.
2.The $4 800 balance in Prepaid Maintenance on June 30, 20-1, represents an advance payment, effective September 30, 20-1, for maintenance on computers for one year at $400 per month. This regular maintenance service has been performed for nine months, October through June, of the year just ended.
3.A bill for supplies purchased on June 29, 20-1, for $400 was not received until July 8, 20-1.
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