1) Jackson Electric Services incurred $800 as a repair expense and paid for it in cash.

This

transaction will

A) increase the assets of the business

B) increase the liabilities of the business

C) decrease the liabilities of the business

D) decrease the Owner's equity

2) Mofro's Computer Repair Shop started the year with total assets of $270,000 and total
liabilities of $180,000. During the year, the business recorded $450,000 in computer repair
revenues, $270,000 in expenses, and Mofro withdrew $45,000. Mofro's Owner's Capital balance
changed by what amount from the beginning of the year to the end of the year?

A) $225,000

B) $90,000

C)$135,000

D) $180,000

3) On October 1, 2018, Golde Company paid $22,200 for one year of insurance for the period,
October 1, 2018 through September 30, 2019. Which of the following will be part of the
adjusting entry on December 31, 2018

A) Debit Prepaid Insurance for $16,650

C) Debit Insurance Expense for $16,650

B) Debit insurance Expense for $5550

D) Debit Prepaid Insurance for $5550

4) Employees at Tengo Corporation are paid $10,000 cash every Friday for working Monday
through Friday. The calendar year accounting period ends on Wednesday, December 31. How
much salary expense should be recorded two days later on January 2?

A) $6,000
B) $4,000

C)None, matching requires the weekly salary to be accrued on Dec 31

D) $10,000

5) If total liabilities decreased by $15,000 and owner's equity increased by $10,000 during a
period of time, then total assets must change by what amount and direction during that same

period?

A) $25,000 decrease

C) $5,000 decrease

B) $25,000 increase

D) $5,000 increase

6) Which one of the following represents the expanded basic accounting equation?

A) Assets= Revenues + Expenses - Liabilities

B) Assets+ Owner's Drawings + Expenses = Liabilities + Owner's Capital + Revenues

C) Assets Liabilities+ Owner's Capital + Owner's Drawings-Revenue - Expenses

D) Assets-Liabilities-Owner's Drawings = Owner's Capital + Revenues – Expenses

7) At December 1, 2012, Cursive Company's accounts receivable balance was $1,200. During
December, Cursive had credit revenues of $4,800 and collected accounts receivable of $4,000.
At December 31, 2012, the accounts receivable balance is

A) $400 debit

B) $2,000 credit

C)$2,000 debit

D) $400 credit

8) Which of the following steps in the accounting cycle may be performed most frequently?

A) Journalize closing entries

C) Post closing entries

B) Prepare a trial balance

D) Prepare a post-closing trial balance

9) Mofro's Computer Repair Shop started the year with total assets of $270,000 and total
liabilities of $180,000. During the year, the business recorded $450,000 in computer repair
revenues, $270,000 in expenses, and Mofro withdrew $45,000. The net income reported by
Mofro's Computer Repair Shop for the year was

A) $90,000

B) $225,000

C$180,000

D) $135,000

10) All of the following statements about the post-closing trial balance are correct except it

A) provides evidence that the journalizing and posting of closing entries have been properly
completed

B) contains only permanent accounts

C) shows that the accounting equation is in balance

D)proves that all transactions have been recorded

11) In preparing closing entries

A) the owner's drawings account will be debited

B) each expense account will be credited

C) each revenue account will be credited

D) the owner's capital account will be debited if there is net income for the period

12) The revenue principle requires that a business record revenue when the business:

A) receives an order from a customer.

B) it has been earned and not before.

C) prepares the invoice for the customer.

D) receives payment from a customer.

13) Under accrual accounting, revenue is recorded:

A) when the services are performed, regardless of when the cash is received.

B) at the end of every month.

C) only if the cash is received at the same time the services are performed.

D) when the cash is received, regardless of when the services are performed.

14) Camper Van Company purchased equipment for $2,600 cash. As a result of this event,

A) owner's equity decreased by $2,600

B) Both a and b

C) total assets remained unchanged

D) total assets increased by $2,600

15) A post-closing trial balance will show

A) only temporary account balances

B) zero balances for all accounts

C) the amount of net income (or loss) for the period

D) only permanent account balances

16) In order to close the owner's drawings account, the

A) owner's capital account should be credited

B) income summary account should be credited

C) income summary account should be debited

D) owner's capital account should be debited

17) -------------will be increased when a company receives cash before performing the services

A) Accrued Salaries Payable

C)Unearned Service Revenue

B) Service Revenue

D) Accumulated Depreciation

18) Sebastian Belle, CPA, has billed her clients for services performed. She subsequently
receives payments from her clients. What entry will Sebastian make upon receipt of the
payments?

A) Debit Accounts Receivable and credit Service Revenue

B) Debit Cash and credit Accounts Receivable

C) Debit Cash and credit Service Revenue

D) Debit Unearned Revenue and credit Service Revenue

19) Sonic Youth Corporation purchased a one-year insurance policy in January 2012 for
$82,500. The insurance policy is in effect from March 2012 through February 2013. If the
company neglects to make the proper year-end adjustment for the expired insurance

A) Net income and assets will be understated by $68.750

B) Net income and assets will be overstated by $13.750

C) Net income and assets will be overstated by $68,750

D) Net income and assets will be understated by $13,750

20) A business paid $50,000 cash to purchase equipment. The business would:

A) debit Cash for $50,000 and credit Notes Payable for $50,000.

B) Debit Equipment for $50,000 and credit Cash for $50,000.

C) debit Accounts Payable for $50.000 and credit Cash for $50,000.
D) debit Equipment for $50,000 and credit Accounts Payable for $50,000.

21) Balance sheet accounts are considered to be

A) permanent accounts

C) nominal accounts

B) capital accounts

D) temporary owner's equity accounts

22) At October 1, 2012, Padilla Industries had an accounts payable balance of $30,000. During
the month, the company made purchases on account of $25,000 and made payments on
account of $36,000. Actober 31, 2012, the accounts payable balance is

A) $ 91,000

B) $19,000

C) $41,000

D) $21,000

23) Liabilities are generally classified on a balance sheet as

A) small liabilities and large liabilities

C) present liabilities and future liabilities

B ) tangible liabilities and intangible liabilities

D) current liabilities and long-term liabilities

24) Mitchell Company receives a bill from one of its suppliers for advertising services received
and will pay the supplier next month. How does the receipt of the bill from the supplier affect the
accounting equation of Mitchell?

A) Liabilities increase and equity decreases.

C) Assets and equity decrease.

B) Liabilities and equity increase.

D) Assets and liabilities increase.

25) The field of accounting that focuses on providing information for external decision makers is:
A) cost accounting

B) nonmonetary accounting

C) managerial accounting

D) financial accounting

26) Andy Company had a cash balance on May 1 of $27,000. At the end of May, the cash
balance has increased to $31,000. During the month of May, Andy received cash of $48,000
from various sources. Based on this information, cash payments for the month of May were:

(A)$44,000.

(C) $31,000.

(B) $75,000.

(D) $27,000.

27) Why are adjusting entries prepared?

A) Because the unadjusted trial balance is not quite ready for preparing the financial
statements.

B) Because some day to day transactions have not been recorded.

C) Because some accounts are not up to date.

D) A and C

28) Income Summary has a credit balance of $17,000 in S. Sufjan Co. after closing revenues Dr
and expenses. The entry to close Income Summary is

A) debit Income Summary $17,000, credit Owner's Capital $17,000

B) debit Income Summary $17,000, credit Owner's Drawing $17,000

C) credit Income Summary $17,000, debit Owner's Capital $17,000

D) credit Income Summary $17,000, debit Owner's Drawing $17,000

29) At October 1, Arcade Fire Enterprises reported owner's equity of $35,000. During October,
the owner made additional investments of $2,000 and the company earned net income of
$7,000. If owner's equity at October 31 totals $40,000, what amount of owner drawings were
made during the month?

A) $2,000

B)$4,000

C) $5,000

D) $0

30) Silver Mt. Zion pays its employees twice a month, on the 7th and the 21st On June 21,
Silver Mt. Zion paid employee salaries of $5,000. This transaction would

A) decrease the balance in Salaries and Wages Expense by $5,000

B) increase owner's equity by $5,000

C) Decrease net income for the month by $5,000

D) be recorded by a $5,000 debit to Salaries and Wages Payable and a $4,000 credit to
Salaries and Wages Expense

31) During February 2012, its first month of operations, the owner of Ariel Pink Enterprises
invested cash of $25.000 Ariel had cash revenues of $5,000 and paid expenses of $7,000.
Assuming no other transactions impacted the cash account, what is the balance in Cash at
February 28?

A) $27,000 debit

B) $2,000 debit

C) 23,000 debit

D) $2,000 credit

32) A debit is not the normal balance for which account listed below?

A) Cash

C) Drawings

B) Service Revenue

D) Accounts Receivable
33) The steps in preparing a trial balance include all of the following except

A) listing the account titles and their balances

B) proving the equality of the two columns

C) transferring journal amounts to ledger accounts

D) totaling the debit and credit columns

34) The drawings account

A) appears on the income statement along with the expenses of the business

B) must show transactions every accounting period

C) is not a proper subdivision of owner's equity

D) is increased with debits and decreased with credits

35) A company spends $15 million dollars for an office building. Over what period should the
cost be written off?

A) All in the first year

B) Over the useful life of the building

C) After $15 million in revenue is earned

D) When the $15 million is expended in cash

36) The purchase of office computers for cash includes a debit to:

A) Office Equipment and a credit to Accounts Payable.

B) Accounts Receivable and credit to Office Equipment.

C) Cash and a credit to Office Equipment.

D) Office Equipment and a credit to Cash.

37) In a service-type business, revenue is considered earned

A) when the service is performed at the end of the month

B) at the end of the year

C) at the end of the month

D) when cash is received

38) Which of the following events is NOT recorded by accountants?

A) effects of an economic boom

C) purchase of a building for $200,000 cash land

B) sale of merchandise on account

D) signing a $400,000 note to purchase

39) Closing entries are journalized and posted

A) before the financial statements are prepared

B) after the financial statements are prepared

C) at the end of each interim accounting period

D) at management's discretion

40) A current asset is

A) an asset which is currently being used to produce a product or service

B) usually found as a separate classification in the income statement

C) the last asset purchased by a business

D)an asset that a company expects to convert to cash or use up within one year
SECTION 2: PROBLEMS

Problem question 1 (4.0 Marks)

Hartford Company is the exclusive distributor for an automotive product that sells for $60 per
unit and has a CM ratio of 30%. The company's fixed expenses are $198,000 per year. The
company plans to sell 20,000 units this year.

Required:

a. What is the break-even point in unit sales and in dollar sales? (1.5 marks)

b. If the sales increase by $80,000 per year and there is no change in fixed cost, by how much
would you expect yearly net operating income to increase? (1 mark)

c. What amount of unit sales and dollar sales is required to attain a target profit of $90,000 per
year? (1.5 marks)