Bus 143 AB2 & 3

Midterm 1
Winter 2019

Multiple choice (questions 1 to 11, 1 mark each; questions 12 & 13, 2 marks each)
Circle the letter of the correct answer. It you change your answer, clearly indicate your final
choice.
1. Accounts are grouped in a book called the:
A) trial balance.
B) chart of accounts.
C) journal.
D) ledger.

2. The year end balance in the capital account is determined by:

A) the change in cash from the beginning to the end of the year.
B) the beginning capital balance, investments, net income or loss, and withdrawals.
C) only investments and withdrawals.
D) the change in total assets from the beginning to the end of the year.

3. The concept that requires that accountants accrue wage expense at the end of the accounting
period for unpaid wages is the:
A) Cost principle.
B) Time-period assumption.
C) Recognition criteria for revenue.
D) Matching objective.

4. Deferrals involve the recording of an expense or a revenue account:

A) either before or after the cash is paid or received.
B) after the cash is paid or received.
C) before the cash is paid or received.
D) either before or at the same time the cash is paid or received.

5. The entry for amortization has what effect on the financial statements?
A) increases assets and decreases liabilities
B) decreases net income and increases assets
C) increases expenses and decreases assets
D) decreases assets and increases liabilities

6. GAAP stands for:

A) generally accepted auditing practices.
B) generally accrued auditing procedures.
C) generally accepted accounting principles.
D) generally accrued accounting principles.

7. Temporary accounts are:

A) a special type of nominal account.
B) closed at the end of the accounting period.
C) all of the owner equity accounts.
D) revenue and expense accounts but not the income summary account.

8. The balance in the capital account after all closing entries have been posted is:
A) equal to net income or loss for the period.
B) the same as the balance of the account on the worksheet.
C) always more than the balance of the account on the worksheet.
D) the balance that will appear on the balance sheet.

9. Prepaid insurance would appear on a classified balance sheet as a(n):

A) long-term liability.
B) long-term asset.
C) current asset.
D) other asset.

10. If the amount of net income for the current period exceeds the amount of the owner's
withdrawals, there will be a(n):
A) decrease in the cash account.
B) increase in the owner's capital account.
C) decrease in the owner's capital account.
D) increase in the cash account.

11. Which of the following types of organizations have the entity legally separate from its
owners?
A) corporation
B) proprietorship
C) partnership
D) sole proprietorship

12. The ledger accounts for Alice's Rentals include the following normal balances as of
December 31, 2014:

Accumulated amortization $2,000

Cash 7,300
Equipment 15,000
Alice Normanson, Capital 9,300
Alice Normanson, Withdrawals 2,200
Prepaid rent 3,600
Accounts payable 7,800
Supplies 1,200
Unearned revenue 1,600
Notes payable (due Dec. 31, 2018) 7,500

What are the total current assets and total assets for Alice's Rentals?
A) $12,100 and $25,100
B) $8,500 and $27,100
C) $8,500 and $21,500
D) $12,100 and $27,100

13. The ledger accounts for Alice's Rentals include the following normal balances as of
December 31, 2014:

Accumulated amortization $2,000

Cash 7,300
Equipment 15,000
Alice Normanson, Capital 9,300
Alice Normanson, Withdrawals 2,200
Prepaid rent 3,600
Accounts payable 7,800
Supplies 1,200
Unearned revenue 1,600
Notes payable (due Dec. 31, 2018) 7,500

What are the total current liabilities and total liabilities for Alice's Rentals?
A) $7,800 and $18,900
B) $9,400 and $16,900
C) $7,800 and $15,300
D) $9,400 and $18,900
Question 1
Jack Thompson began a courier company on October 1, 2016 called Thompson Trucking.
Transactions that occurred in the month of October are listed below:
Oct. 1 Common shares issued $66,000 cash
5 Paid $1,200 cash for a new computer.
6 Paid four months' rent on the warehouse of $1,800.
10 Received $700 cash from a client for delivery services.
12 Purchased packing supplies on account, $2,300.
13 Performed delivery services for a customer and billed the client $1,200.
18 Dividend declared and paid $500.
23 Paid $700 for the packaging supplies purchased on Oct. 12.
27 Paid the October utility bill, $300.
28 Paid an assistant's salary of $1,500.
31 Received $900 cash from a customer on account
Record each transaction in the general journal.
Date Account Titles and Explanations PR Debit Credit
Diff: 2 Type: ES
CPA Competency: 1.2.2 Evaluates treatment for routine transactions
Objective: 2-3 Analyze and record transactions in the journal
Knowledge Taxon.: Conceptual
Cognitive Taxon.: Understand
Question 2
The unadjusted trial balance of Danvon Collection Services at December 31, 2014 follows.

Debit Credit
Cash $4,800
Accounts receivable 10,400
Prepaid insurance 2,000
Prepaid rent 1,000
Office supplies 400
Equipment 16,500
Accumulated amortization $2,400
Salaries payable 0
Interest payable 0
Unearned service revenue 600
Note payable 8,000
Common Shares 15,200
Dividends declared 3,000
Service revenue 32,700
Salaries expense 20,500
Amortization expense 0
Rent expense 0
Insurance expense 0
Office supplies expense 0
Interest expense 300 _______
$58,900 $58,900

Given the following information, prepare the necessary adjusting entries at year end, December
31, 2014, for Danvon Collection Services.

a) A count revealed that $100 of office supplies were still on hand at December 31, 2014.
b) The accountant has determined that the prepaid insurance balance at December 31, 2014,
should be in the amount of $450.
c) The equipment is amortized at the rate of $200 per month.
d) The accountant has determined that the unearned service revenue balance at December 31,
2014, should be in the amount of $350.
e) Interest of $200 on the note payable has accrued to the end of the year.
f) Salaries accrued at December 31, 2014, amounted to $650.
g) The accountant has determined that the prepaid rent balance at December 31, 2014, should be
in the amount of $100.
Answer:
General Journal
Question 3
Prepare an income statement and statement of owners’ equity based on the adjusted trial
balance for the Wood Productions on December 31, 2013.

Wood Productions
Adjusted Trial Balance
December 31, 2013

Debit Credit
Cash $2,000
Accounts receivable 9,000
Prepaid rent 5,000
Prepaid insurance 2,500
Supplies 3,200
Land 30,000
Building 50,000
Accumulated amort.-building $10,000
Equipment 35,000
Accumulated amort.-equipment 7,000
Accounts payable 8,000
Salary payable 3,000
Interest payable 1,000
Mortgage payable
(due 12/31/2018) 40,000
Common shares 84,900
Dividends declared 10,000
Service revenue 80,000
Salary expense 28,000
Insurance expense 5,000
Rent expense 12,000
Utilities expense 15,000
Advertising expense 9,000
Amortization expense-building 10,000
Amortization expense-equipment 7,000
Supplies expense 1,200 ________
Total $233,900 $233,900
Question 4
Based on the following adjusted trial balance, prepare the closing entries for Tudhope Plumbing
on December 31, 2013.

Tudhope Plumbing
Adjusted Trial Balance
December 31, 2013

Debit Credit
Cash $12,000
Accounts receivable 20,500
Office supplies 4,600
Prepaid insurance 4, 800
Equipment 80,500
Accum. amort.-equipment $43,300
Accounts payable 15,500
Unearned service revenue 6,800
Salary payable 3,300
Common shares 80,200
Dividends declared 20,600
Service revenue 77,500
Salary expense 33,900
Advertising expense 15,400
Utilities expense 9,900
Miscellaneous expense 1,700
Supplies expense 4,900
Insurance expense 5,400
Amort. expense-equipment 12,400 ________
Total $226,600 $226,600
Answer:
General Journal