Required: For each of the following multiple choice questions, circle the option that represents the best answer.
1. A contra account that normally has a debit balance is
a. Accumulated amortization.
b. Wages expense.
c. Sales returns and allowances.
d. Purchase returns and allowances.
e. Accounts payable.
2. A payment of accounts payable would
a. Decrease assets and decrease owner’s equity.
b. Decrease assets and increase owner’s equity.
c. Decrease assets and increase liabilities.
d. Decrease assets and decrease liabilities.
e. Decrease liabilities and decrease owner’s equity.
3. A trial balance would help in detecting which of the following errors?
a. An error in dollar amount in posting the credit side of a journal entry
b. A journal entry that is posted twice
c. A transaction that is not journalized
d. The posting of a debit entry to the wrong ledger account
e. The omission of an adjusting journal entry to record the consumption of supplies 1
4. The ending inventory of Sloppy Company is understated by $9,000. The effects of this error on the current year’s cost of goods sold, net income, and owner’s equity are
a. Understated, overstated, overstated.
b. Overstated, understated, understated.
c. Understated, understated, understated,
d. Overstated, understated, overstated.
e. Overstated, overstated, understated.
5. If the total liabilities of a business increased by $52,000 during a year and the owner’s equity in the business decreased by $6,000 during the same period, the assets of the business must have
a. Increased by $46,000.
b. Increased by $58,000.
c. Decreased by $6,000.
d. Decreased by $46,000.
e. Decreased by $58,000.
6. The adjusting journal entry to show that a customer’s advance deposit has now been earned would affect
a. An asset account and an expense account.
b. An asset account and a revenue account.
c. A liability account and an expense account.
d. A liability account and a revenue account.
e. A revenue account and an expense account.
7. An income statement shows net sales of $200,000, cost of goods sold of $120,000, operating expenses of $40,000, and other revenues of $6,000. What is the profit margin? a. 17%
8. A company reports current assets of $50,000, total assets of $150,000, current liabilities of $20,000 and total liabilities of $100,000. Its working capital is
a. 2.5 to 1
d. 1.5 to 1
9. The accounting records of a company that uses the perpetual inventory system show an ending inventory value of $38,500. A physical count reveals an actual balance of
$36,800 of inventory on hand. The necessary journal entry will
a. Debit the Merchandise Inventory account.
b. Credit the Merchandise Inventory account.
c. Credit the Cost of Goods Sold account.
d. Debit the Inventory Expense account.
e. All of the above.
10. Before recording adjusting journal entries, total revenues exceed total expenses by
$35,000. Adjusting entries were made to record $3,000 in accrued wages and $4,000 in amortization expense. Net income for the year would be
The following selected events occurred during October, 2007, the first month of Rose
Wier’s real estate business.
The owner, Rose Wier, invests $30,000 in cash and a computer worth $5,000 to start a real estate business operating as a sole proprietorship.
Hired an office assistant at a salary of $12 per hour to start work immediately.
Billed clients for real estate commission fees totalling $4,000.
Paid $1,260 in office salaries.
Received a cheque for $2,000 from a client in payment on account for commissions billed in transaction 3.
Question #2 - JE (10 marks)
R. Wier, capital