Accounting 1 Study Guide / Review Activity

Accounting 1 Study Guide/Activity Review

General Instructions
You have been hired as a Financial Assistant and will be keeping the accounting records for
Professional Business Associates located at 5454 Cleveland Avenue, Columbus, Ohio 43231.
Professional Business Associates provides accounting and other financial services for clients. You
will complete jobs for Professional Business Associates own accounting records as well as for
clients.
This packet contains activities and questions that cover an entire Accounting Cycle.
Good luck!

Accounting 1 Study Guide/Review Activity

Record the best answer for each of the following questions on the form provided.
1. Figure Lees capital balance taking into consideration the following information:
Beginning capital balance
$48,000
Net income for the period
$18,000
Total sales for the period
$30,000
Owners withdrawal
$ 2,000
Additional investments by the owner
$ 5,000
Income Taxes Payable
$ 5,400
A. $66,000
B. $69,000
C. $93,600
D. $60,600
2. Which of the following groups consists of accounts that will have zero balances after the
closing process is completed?
A. Allowances for Bad Debts and Uncollectible Accounts Expense
B. Purchases and Purchases Returns and Allowances
C. Merchandise Inventory and Sales
D. Depreciation Expense and Accumulated Depreciation
3. The time within which an invoice must be paid, in order to receive an amount off the
invoice price, is called a _____________.
A. due date
B. processing time
C. purchases discount
D. discount period
4. If a business has a net loss for the period, the journal entry to close the balance of the
Income Summary account is ___________________.
A. a debit to Owners Capital, a credit to Income Summary
B. a debit to Fees, a credit to Owners Capital
C. a debit to Income Summary, a credit to Owners Capital
D. a debit to Owners Capital, a credit to Fees
5. A credit memo was issued for $75 plus 6% tax for merchandise returned by a charge
customer. The entry to record the return would be:
Debit
A. Accounts Receivable
B. Sales Returns & Allowances
C. Sales Returns & Allowances
Sales Tax Payable
D. Sales Returns & Allowances
Sales Tax Payable

$75.00
75.00
75.00
5.50
75.00
4.50

Credit
Sales
Sales Tax Payable
Accounts Receivable
Accounts Receivable

$70.00
5.00
75.00
80.50

Accounts Receivable

79.50

6. The purchases account is a ________________.

A. permanent account

Accounting 1 Study Guide/Review Activity

B. temporary account
C. subsidiary account
D. expense account
7. The amount of purchases for a period is presented in the ______________.
A. liabilities section of the balance sheet
B. revenue section of the income statement
C. cost of goods sold section of the income statement
D. expense section of the income statement
8. Figure Tonys net purchases from the following information:
Purchases
$18,500
Purchases returns & allowances 1,000
Purchases discounts
450
Sales returns & allowances
300
Sales discounts
100
A. $16,600
B. $17,050
C. $17,150
D. $17,250
9. The source document for recording a purchase of merchandise for cash is a _________.
A. purchase order
B. purchase invoice
C. purchase requisition
D. check number
10. Entry to record purchase of supplies on credit includes
A. debit to purchases and credit to accounts receivable
B. debit to supplies and credit to accounts payable
C. debit to accounts payable and credit to supplies
D. debit to accounts payable and credit to purchases
11. Nicoles account in the accounts payable ledger has a $2,850 beginning balance. After a
transaction for $900 is posted from the purchases journal, the balance in Nicole's account
is _________.
A. $900 debit
B. $3,750 debit
C. $900 credit
D. $3,750 credit

12. Which of the following is a factor in the determination of the amount of Social Security
tax to withhold from an employees pay?
A. gross wages
B. marital status

Accounting 1 Study Guide/Review Activity

C. withholding allowances
D. rate of pay
13. Nguyen earns $13.50 per hour and works a 40-hour week. The following deductions
apply to wages:
Federal Income Tax
$60
Social Security Tax
6.5%
Medicare Tax
1.5%
Nguyens net pay is:
A. $433.80
B. $434.80
C. $435.80
D. $436.80
14. Antonio earns $12 per hour with an overtime rate of 1 times the regular rate. If Antonio
works 46 hours in one week, what are his overtime earnings?
A. $102
B. $104
C. $106
D. $108
15. The column totals in the payroll register are _____________________.
A. used in the journal entry to record the payroll
B. posted directly to the general ledger accounts
C. neither recorded in a journal entry nor posted to the general ledger accounts
D. used to update employee earnings records
16. Sales people who are paid a percentage of net sales are paid on a(n) _____________.
A. commission basis
B. salary basis
C. hourly-rate basis
D. piece-rate basis
17. On February 1, 2001, Brock purchased a 2-year insurance policy for $2,000 and paid the
full premium in advance. The insurance expense associated with this policy for 2001 is
A. $2,000
B. $1,000
C. $1,500
D. less than $920

18. On the financial statements prepared at the end of an accounting period, the ending
merchandise inventory is shown on __________________________.
A. neither the income statement nor balance sheet
B. the balance sheet but not the income statement
C. the income statement but not the balance sheet
D. both the income statement and the balance sheet

Accounting 1 Study Guide/Review Activity

19. On July 2, 2001, Loeb purchased equipment for $7,500. Depreciation expense for 2001,
given the straight-line method, a 5-year useful life, and a salvage value of $500 is _____.
A. $700
B. $1,400
C. $750
D. $1,500
20. The adjusting entry for uncollectible accounts requires:
A.
B.
C.
D.

Debit
Allowance for Uncollectible Accounts
Uncollectible Accounts Expense
Uncollectible Accounts Expense
Allowance for Uncollectible Accounts

Credit
Accounts Receivable
Allowance for Uncollectible Accounts
Accounts Receivable
Accounts Payable

21. What accounts are affected by the adjusting entry for merchandise inventory?
A. Merchandise inventory and purchases
B. Purchases and income summary
C. Accounts receivable and purchases
D. Merchandise inventory and income summary
22. If Maria uses special journals, credit sales of merchandise are recorded in __________.
A. sales journal
B. cash payments journal
C. purchases journal
D. cash receipts journal
23. Merchandise Inventory was sold on account for $600 plus 5.5% sales tax. The entry
would include:
Debit
A. Accounts Receivable

$630

B. Accounts Receivable

$600

C. Accounts Receivable

$615

D. Accounts Receivable

$633

Credit
Sales
Sales Tax Payable
Sales
Sales Tax Payable
Sales
Sales Tax Payable
Sales
Sales Tax Payable

$600
$ 30
$570
$ 30
$600
$ 15
$600
$ 33

Accounting 1 Study Guide/Review Activity

i.

24. For Nicole to find the amount due from a charge customer, she would refer to the ______.
A. sales journal
B. sales account in general ledger
C. accounts receivable subsidiary ledger
accounts receivable account in general ledger
25. If Smith had sales of $75,000, sales returns and allowances of $3,500, and sales discounts
of 5% of sales, Smiths net sales total would be ______________.
A. $67,250
B. $67,500
C. $67,750
D. $68,000
26. After Alicia posted all journals, the total of accounts receivable ledger balances should
equal __________________________.
A. balance of sales account
B. total of accounts receivable debit column in sales journal
C. balance of accounts receivable account in general ledger
D. cash debit column of cash receipts journal
27. The best order for posting special journals is which of the following?
A. Sales, Purchases, General, CR, CP
B. Purchases, Sales, General, CR, CP
C. CR, CP, Sales, Purchases, General
D. Sales, Purchases, CR, CP, General
28. Champions supplies account shows a balance of $5,549 in the trial balance debit column
of the worksheet and a credit of $3,709 in the adjustments column. What amount should
be extended to what column in the worksheet?
A. $9,258 extended to balance sheet debit column
B. $1,840 extended to balance sheet debit column
C. $1,840 extended to income statement debit column
D. $3,709 extended to balance sheet credit column
29. Which account balance is not adjusted at the end of the accounting period?
A. merchandise inventory
B. supplies
C. insurance expense
D. cash
30. Information reported on an income statement includes all of the following except ______.
A. revenue
B. expenses
C. cost of merchandise
D. all of the above items are included in the income statement

Accounting 1 Study Guide/Review Activity

Classify each account listed below as one of the following:

A
L
OE
R
CM
E

=
=
=
=
=
=

Asset
Liability
Owners Equity
Revenue
Cost of Merchandise
Expenses

Accounts:
1.

Merchandise Inventory

2.

John Jones, Drawing

3.

Sales

4.

Cash

5.

Advertising Expense

6.

Purchases

7.

Accounts Receivable

8.

Accounts Payable

9.

Income Summary

10.

Prepaid Insurance

Accounting 1 Study Guide/Review Activity

Problem 1: Eight-Column Worksheet

The final balances in the general ledger of Windy City Graphics Desktop Publishing at the end of
March are listed below.
Cash in bank
Petty Cash
Accounts ReceivableWendy Willet
Supplies
Prepaid Insurance
Accounts PayableSolutions Software
Jack Cameron, Capital
Jack Cameron, Withdrawals
Income Summary
Design Revenue
Advertising Expense
Insurance Expense
Miscellaneous Expense
Rent Expense
Supplies Expense
Utilities Expense
Adjustment Information, March 31:
Supplies Inventory
Value of Prepaid Insurance

$ 1,609
300
581
795
1,100
450
3,550
300
3,000
525
250
1,100
440
$ 250
1,000

FUNDAMENTAL ACCOUNTING
STATE 2002
PAGE 10

Account Title

Trial Balance
Debit
Credit

Adjustments
Debit
Credit

Income Statement
Debit
Credit

Balance Sheet
Debit
Credit

FUNDAMENTAL ACCOUNTING
STATE 2002
PAGE 11

Problem 2: Bank Reconciliation

On March 31, 2002, Lakeside Computers received a bank statement dated March 28, 2002. The
following information is obtained from the bank statement and from the records of the business:
Bank Statement.............................................$27,160.00
Bank Service Charge..............................................10.40
Bank Credit Card Charge.....................................393.80
Outstanding Deposit: March 29........................3,157.20
Outstanding Checks:
No. 231..........................................................1,221.00
No. 232.............................................................860.40
Checkbook Balance on Check Stub 233.........28,640.00
Prepare a bank reconciliation. Use March 31, 2002, as the date.

FUNDAMENTAL ACCOUNTING
STATE 2002
PAGE 12

PROBLEM 3

Tom and Pat do business as T & P Consulting Associates, a general partnership. On December 31,
2001, the partners capital balances, profit sharing percentages, investments, and drawing balances
were as follows:
Tom
Pat

Capital
$1,020,000
680,000

Profit Sharing %
60%
40%

Investments
$10,000
$5,000

Drawing
$280,000
200,000

Instructions:
T & P Consulting Associates prospered in 2001 with a net income of $900,000. Prepare a
statement of owners equity on the following page.
Use your best judgment in choosing the format for this statement.

FUNDAMENTAL ACCOUNTING
STATE 2002
PAGE 13

T & P Consulting Associates

Partnership Equity
December 31, 2001

PROBLEM 4

FUNDAMENTAL ACCOUNTING
STATE 2002
PAGE 14

From the list of account balances below for Kent, Inc., prepare an income statement, statement of
owners equity, and a balance sheet for the month of June of the current year on the forms
provided.
All account balances are from the worksheet income statement and balance sheet columns.
Cash...........................................................................$ 7,900.00
Accounts Receivable.....................................................1,800.00
Prepaid Insurance.............................................................940.00
Supplies............................................................................745.00
Office Equipment.........................................................10,200.00
Accumulated Depreciation Office Equipment............3,500.00
Accounts Payable..........................................................2,400.00
Capital.........................................................................15,430.00
Drawing.........................................................................2,700.00
Consulting Revenue......................................................4,850.00
Supplies Expense..............................................................300.00
Salary Expense.................................................................950.00
Rent Expense....................................................................475.00
Depreciation Expense.......................................................170.00

FUNDAMENTAL ACCOUNTING
STATE 2002
PAGE 15

Kent, Inc.
Income Statement
For Month Ended June 30, 2002

Kent, Inc.
Statement of Owners Equity
For Month Ended June 30, 2002

FUNDAMENTAL ACCOUNTING
STATE 2002
PAGE 16

Kent, Inc.
Balance Sheet
June 30, 2002