Part 1.

Multiple Choices

1. Total liabilities on a balance sheet at the end of the year are 150000, retained earnings at the end of
the year are 80,000, net income for the year is 60,000, common stock is 40,000, and additional paid in
capital is 20,000. What amount of total assets would be reported on the balance sheet at the end of the
year?

a. 290,000
b. 270,000
c. 205,000
d. 15,000

2. The dual effects concept can be best described as follows:

a. When one records a transaction in the accounting system, at least two effects on the basic accounting
equation will result
b. When an exchange takes place between two parties, both parties must record the transaction
c. When a transaction is recorded, both the balance sheet and the income statement must be impacted
d. When a transaction is recorded, one account will always increase and one account will always
decrease

3. The Cash T-account has a beginning balance of 21,000. During the year, 100,000 was debited and
110,000 was credited to the account. What is the ending balance of cash?

a. 11,000 debit balance

b. 11,000 credit balance
c. 31,000 credit balance
d. 31,000 debit balance

4. Which of the following statements are true regarding the balance sheet?

1. One cannot determine the true fair market value of a company by reviewing its balance sheet
2. Certain internally generated assets, such as a trademark, are not reported on a company's balance
sheet
3. A balance sheet shows only the ending balances, in a summarized format, of all balance sheet
accounts in the accounting system as of a particular date

a. None are true

b. Statements 1 and 2 only are true
c. Statements 2 and 3 only are true
d. All statements are true
5. During 2016, CliffCo Inc. incurred operating expenses of 250,000, of which 150,000 was paid in cash;
the balance will be paid in January 2017. Transaction analysis of operating expenses for 2016 should
reflect only the following:

a. Decrease stockholder's equity 150,000; decrease assets 15,0000

b. Decrease assets 250,000; decrease stockholder's equity 250,000
c. Decrease stockholder's equity 250,000; decrease assets 150,000; increase liabilities 100,000
d. Decrease assets 250,000; increase liabilities 100,000; decrease stockholder's equity 150,000

6. On October 1, 2017, the 12,000 premium on a one-year insurance policy for the building was paid and
recorded as Prepaid Insurance. On December 31, 2017 (end of the accounting period), what adjusting
entry is needed?

a. Interest Expense (+E) 2,000

Prepaid Insurance (-A) 2,000
b. Insurance Expense (+E) 3,000
Prepaid Insurance 3,000
c. Prepaid Insurance 3,000
Insurance Expense 3000
d. Prepaid Insurance 9,000
Insurance Expense 9,000

7. At the beginning of the current year, Donna Company had 1,000 of supplies on hand. During the
current year, the company purchased supplies amounting to 6,400 (paid for in cash and debited to
Supplies). At the end of the current year, a count of supplies reflected 2,000. The adjusting entry Donna
Company would record at the end of the current year to adjust the Supplies account would include a

a. Debit to Supplies for 2,000

b. Credit to Supplies Expense for 5,400
c. Credit to Supplies for 5,400
d. Debit to Supplies Expense for 4,400

8. Consider the following information: beginning inventory, 10 units @ 20 per unit; first purchase 35 @
22 per unit; second purchase 40 units @ 24 per unit; 50 units were sold. What is cost of goods sold using
the FIFO method of inventory costing?
a. 1090
b. 1060
c. 1180
d. 1200

bb9. A company records a transaction in which six months' rent is paid in advance. Which of the
following journal entries record the transaction?
a.) prepaid rent- debit; cash- credit
b.) rent receivable- debit; cash-credit
c.) rent revenue- debit; cash-credit
d.) rent expense- debit; cash-credit

10. Receiving cash from a customer for settlement of an Account Receivable will
a.) decrease stockholders' equity
b.) increase net income
c.) increase total assets
d.) not affect total assets

11. Which of the following errors will NOT cause the debit and credit columns of the trial balance to be
unequal?
a.) a debit entry was recorded in the wrong account
b.) a debit was entered in an account as a credit
c.) the account balance was carried to the wrong column of the trial balance
d.) the balance of an account was incorrectly computed

12. On January 1, Incredible Infants sold goods to Babies Inc. for $1,540, terms 30 days, and received
payment on January 18. Which journal would the company use to record this transaction on the 18th?
a. cash receipts journal
b. sales journal
c. purchases journal
d. cash disbursements journal

13. An unhappy customer just returned $50 of the items he purchased yesterday when he charged the
goods to the company's store credit card. Which special journal would the company use to record this
transaction?
a. general journal
b. sales journal
c. purchases journal
d. cash receipts journal

14. You just posted a debit to Cash in the general ledger. Which special journal did it come from?
a. cash receipts journal
b. sales journal
c. purchases journal
d. cash disbursements journal

15. The accounting principle which, in times of rising prices, tends to understate asset values and
overstate profits, is:
A going concern
B accruals
C consistency
D historical cost

16. Winn Ltd has opening trade payables of £24,183 and closing trade payables of £34,655. Purchases
for the period totaled £254,192 (£31,590 relating to cash purchases).
Total payments recorded in the payables ledger for the period were:
A £212,130
B £233,074
C £243,720
D £264,664

17. Violet had an opening trade payables balance of £3,450 on 1 December. During the month of
December, she sold goods totalling £6,780 to customers on credit, purchased goods totalling £5,100
from suppliers on credit and made cash purchases of £400. She also received £3,900 from credit
customers and made payments to credit suppliers of £4,200.
What was the balance on Violet's trade payables account at the end of December?
A £4,350
B £6,330
C £4,750
D £2,550

18. The credit purchase of a delivery truck for $4,700 was posted to Delivery Trucks as a $4,700 debit
and to Accounts Payable as a $4,700 debit. What effect would this error have on the trial balance?
A. The total of the Debit column of the trial balance will exceed the total of the Credit column by $4,700.
B. The total of the Credit column of the trial balance will exceed the total of the Debit column by $4,700.
C. The total of the Debit column of the trial balance will exceed the total of the Credit column by $9,400.
D. The total of the Credit column of the trial balance will exceed the total of the Debit column by $9,400.

19. A written promise to pay a definite sum of money on a specified future date is a(n):
A. Unearned revenue.
B. Prepaid expense.
C. Credit account.
D. Note payable.

20. Which of the following statements is incorrect?

A. The normal balance of accounts receivable is a debit.
B. The normal balance of owner's withdrawals is a debit.
C. The normal balance of unearned revenues is a credit.
D. The normal balance of an expense account is a credit.

Part 2. Short answer

What is the prepayment? What is its type of account? Give an example.

Part 3. Problem

As at 1.10 .20 X 9, a business, has the following balances

Account Balance
$
Bank loan 24,000

Cash 23,400

Capital 26,000

Rent 3,760

Trade payables 22,400

Purchases 24,800

Sales 69,200

Other payables 3,240

Trade receivables 24,000

Bank loan interest 2,800

Other expenses 22,040

Non-current asset 44,040

COGS 34,000

On October,20X9 the business made the following transactions after the balances listed above had been
calculated.

1 Bought non-current asset for $ 18,400, half by cash and half by making loan from bank
2 Transfer $5000 of cash in hand into bank account.
3 Pay old suppliers $ 8,600 by cash
 4 Receive $ 6,800 cash from a credit customer
5 Buy goods on credit, $3,000
6 Depreciation on non-current assets on October is $3,000.
7 Sale good on credit, $6,000. The original cost of good is $3,000.
8 The interest from bank loan in October is $1,000.
a. Record all the transaction.
b. Prepare a Trial Balance for the end of October, 20X9.
c. Prepare an Income Statement for the October, 20X9.
d. Prepare a Financial Position for the end of October, 20X9.
Ending stock