1) Although a proprietorship is not a separate legal entity, a partnership is True False 2) Purchasing supplies on credit increases assets while decreasing liabilities. True False 3)On October 15, Gallery Comp. received $12,500 as a down payment on a consuting contract. The amount was credited to Unearned Consulting Revenue By October 31, 10% of the contract was completed. Gallery Corp. needs to prepare an adjusting entry for $1.250. True False 4) Asset, liability and revenue accounts are not closed as longas a company continues in business." True False 5) After posting the entries to close si revenue accounts and expense accounts, the income Summary account of Wat Services has a $4.000 debit balance. This shows that Wail Services earned profit of $4,000 True False 6) Z-Mart had a gross profit of $340,000 based on sales of $700.000. Its cost of goods sold was $350,000. False 7) A journal entry with a debito cash of $980. a debitto Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment." True False 8) In a periodo inflation FIFO usually gives a lower taxable income and thus a tax advantage. True False 9. The cost of an inventory item includes its invoice price plus any added or incidental costs necessary to put it in a place and conditon for sale." True False 10) How would the accounting equation of Lenore Turner's consulting business be attected by the biling of a client for $2.000 for consultingwork completed? Accounts receivable $2.000 increase, liabilities, $2,000 decrease. Accounts receivable, $2,000 increase, liabilities, $2,000 increase Accounts receivable, $2,000 increase, cash, $2,000 increase Accounts receivable $2,000 increase, equity, $2,000 increase. Accounts receivable, $2,000 increase, cash, $2,000 decrease. 11) Celery Company has assets of $150,000, liabilities of $90,000, and equity of $60,000. It buys supplies forcash $5,000 What effect would this transaction have on the accounting equation? Assets. $5,000 increase, equity, $5,000 increase. Assets, $5,000 increase, equity, $5,000 decrease Liabilities. $5,000 increase, equity, $5,000 decrease. Assets, $5.000 decrease, equity, $5,000 decrease Assets, no effect liabilities, no effect 12) Unearned revenues are revenues that have been earned and received revenues that have been earned but not yet collected liabilities created by advancecash payments fromcustomers for products or services recorded as an asset in the accounting records increases to owners' equity 13) On June 30, the Cash account of Majeau Company had anomalbalance of $4,300. During July the account was debited for a total of $3,400 and credited for a total of $3,600. What was the balance in the Cash account on August 1? $0 $4,100 debit $3,400 credit $3.400 debit $4,100 credit 14) Adjusting entries are joumal entries made at the end of an accounting period for the purposeot Updating related liability and asset accounts Assigning revenues to the period in which they are earned Assigning expenses to the period in which the expiration of benefithas incurred Recording intemal transactions All of these 151 Before recording adjusting entries, the Office Supplies account had a $359 debit balance while a physical count of the Supplies showed $105 of unused supplies on hand. Thus, the required adjusting entry is Debit Office Supplies $105 and credit Office Supplies Expense $105 Debit Office Supplies Expense $254 and credit Office Supplies $254 Debit Office Supplies Expense $105 and credit Office Supplies $105 Debit Office Supplies $254 and credit Office Supplies Expense $254 Some other entry 16) The information on a worksheet can be used to prepare Year-end financial statements Adjusting entries Closing entries Interim financial statements All of these 17) A company shows an $800 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the worksheet. The Adjustments columns show expired insurance of $600. This adjusting entry results in $600 less proft $600 more profit $200 difference between the debt and credit columns of the unadjusted trial balance $400 in the income Statement Debit column on the worksheet $400 in the Balance Sheet Credit column on the worksheet 18) The J. Dawson, Capital account has a cred balance of $1.200 before closing entries are made. If total revenues for the year are $65.200, total expenses $49.800 and withdrawals are $2.400 what is the ending balance in the J. Dawson, Capital account after all closing entries have been made? $5.200 $7.600 $14,200 $16.800 $23,200 19) The asset section of a classified balance sheet includes Current assets, long-terminvestments, property, plant and equipment, and intang ble assets. Current assets, non-current assets, equity, and intangible assets. Current assets, long terminvestments, property, plant and equipment, and withdrawals. Current liabilities, long-terminvestments, property.plant and equipment, and intangible assets. Current assets, liabilities, property, plant and equipment, and intangible assets 20) A merchandising company Earns profit from buying and selling merchandise Buys products from manufacturers and sels to retailer Buys products from manufacturers and sells them to consumers Reports cost of goods sold on the income statement All of the above 211 Z. Maturchased $3,000 worth of merchandise on credit. Transportation costs were an additional $100 paid cash to the cartage company on delivery. Z-Mart returned $300 worth of merchandise and paid the invoice on time, and tooka 2 purchase discount. The amount of this payment was $2,744 $2,700 $3,000 $3,100 $2,900 2210 Aan 4. Fianda Company (FC) sold sweaters to one of its customers for $65,000 on credit forms of 315 30 April the customer contacted FC to say that the sweater colours dd not match their orginal order. FC reached an eith the customer to keep the shipment and FC granted the customer a pricereduction of $3.000. The customer and the outstanding bill on April 15. The journal entry to be made by FC on Apni 15 is Debit Sales Returns and Allowances $3.000.Credit Accounts Receivable $3.000 Debit Accounts Receivable $62.000 Credit Sales Revenue 562.000 Debit Cash $62,000 Credit Accounts Recevable $62.000 Debit Cash $60,140,Debit Sales Discounts $1,860: Credit Accounts Receivable 562,000 Debit Cash $62,000 Debit Sales Discounts $1.500 Credit Accounts Receivable $55.200 23) A business sold some very that had cost 5.000 botones These issued poods and services Tax (GST) and provincial sales tax (PST). Thebusinesses a perpetual invertory System How much will be credited to the Merchandise inventory account as a result of this 55,000 $5,300 $5.350 $5.500 None of these answers is correct. 25) Physical counts of inventory Are not necessary under the perpetual system Are necessary to adjust for shrinkage Should be taken at least once a month Are necessary to adjust for shrinkage and should be taken at least once a month Are not necessary under the perpetual system and should be taken at least once a month 26) Use of the FIFO cost fow assumption means that Ending inventory items are the ones most recently purchased Goods are removed from inventory at their average cost The periodic costing system is used The beginning inventory contains the oldest costs All of these are correct answers 271 On September 30, Stark Company needed to estimate its endinginventory in order to prepare its third quarterfinancial statements. The following information is available: (1) Inventory, July 1:$12,500 (2) Third quarter net sales $40.000 13) Third quarter net purchases $17.500 Stark's gross proftratio is 15% Estimated cost of goods sold would be $6.000 $34.000 $36,000 $40.000 $57,500 281 Toys 'R'Lidhad cost of goods sold 56,000 million, ending inventory of $2,500 million, and avem invertory of 22.000 million. The merchandise turnoveris" 2.40 3.00 0.33 12.00 29) Explain why temporary accounts are closed each period. (10 Points) 30) Discuss the difference between theperiodic and perpetual inventory systems. (10 Points) 31) A company made the following purchases during the year Jan. 10 Mar. 15 Apr. 25 July 30 Oct. 10 15 25 10 20 15 units at $360 units at S390 units at S420 units at $450 units at $480 On December 31. there were 27 units in ending inventory. These 27 units consisted of 4 from the January 10 shipment, 6 from the March 15 shipment, 3 from the April 25 shipment. 12 from the July 30 shipment, and 2 from the October 10 shipment. Using specific identification, calculate the cost of the ending inventory