Q: Retained earnings at the end of the period is calculated as:

$\text{Retained earnings at the beginning of the period} + \text{Net income} - \text{Dividends declared}$

Q: Gross profit is calculated as:

$\text{Net sales} - \text{Cost of goods sold}$

Q: A company purchased equipment with a 5-year life for $60,000 on July 1, 2018. What is the accumulated depreciation and carrying amount at December 31, 2019?

Accumulated depreciation $= \frac{60,000}{5} \times 1.5 = 18,000$; Carrying amount $= 60,000 - 18,000 = 42,000$

Q: On February 1, Chopper Motorcycles Ltd. signed a 5%, twelve-month bank loan payable for $168,000. What is the required adjusting entry for interest accrued to December 31?

Interest Expense $= 168,000 \times 0.05 \times \frac{11}{12} = 7,700$; Interest Payable $= 7,700$

Question 1

Which accounting standards must a publicly traded corporation in Canada follow?

Accepted Answer

International financial reporting standards

Question 2

Which of the following is NOT a characteristic of a corporation?

Accepted Answer

Shareholders have unlimited liability

Question 3

On a classified statement of financial position, how are current assets listed?

Accepted Answer

In the order in which they are expected to be converted into cash

Question 4

Which of the following is NOT considered an asset?

Accepted Answer

Dividends declared

Question 5

Retained earnings at the end of the period is calculated as:

Accepted Answer

$	ext{Retained earnings at the beginning of the period} + 	ext{Net income} - 	ext{Dividends declared}$

Question 6

Under the accrual basis of accounting, when is revenue recognized?

Accepted Answer

When earned, while expenses are recognized when incurred to generate revenue

Question 7

A credit to an asset account indicates:

Accepted Answer

A decrease in the asset

Question 8

Which of the following best describes an accrual?

Accepted Answer

An expense incurred but not paid or revenue earned but not received and not yet recognized

Question 9

Fang's Tune-Up Shop Ltd. uses the accrual basis of accounting. Fang services a car on May 31. The customer picks up the vehicle on June 1 and mails payment on June 5. Fang receives the cheque on June 6. When is the revenue recognized?

Accepted Answer

May 31

Question 10

Gross profit is calculated as:

Accepted Answer

$	ext{Net sales} - 	ext{Cost of goods sold}$

Question 11

Plumbers-on-the-Go Ltd. started the year with total assets of $120,000 and total liabilities of $75,000. During the year, the business recorded $82,000 in revenues, $45,000 in expenses, and paid dividends of $2,500. What is the net income for the year?

Accepted Answer

$82,000 - $45,000 = $37,000$

Question 12

If total liabilities increased by $18,000 and shareholders’ equity increased by $21,000 during a period, by how much did total assets change?

Accepted Answer

$39,000$ increase

Question 13

A company purchased equipment with a 5-year life for $60,000 on July 1, 2018. What is the accumulated depreciation and carrying amount at December 31, 2019?

Accepted Answer

Accumulated depreciation $= \frac{60,000}{5} 	imes 1.5 = 18,000$; Carrying amount $= 60,000 - 18,000 = 42,000$

Question 14

Griffin Inc. purchased supplies costing $4,250. At period end, $2,100 remains. What is the correct adjusting entry?

Accepted Answer

Debit Supplies Expense $2,150$; Credit Supplies $2,150$

Question 15

On February 1, Chopper Motorcycles Ltd. signed a 5%, twelve-month bank loan payable for $168,000. What is the required adjusting entry for interest accrued to December 31?

Accepted Answer

Interest Expense $= 168,000 	imes 0.05 	imes \frac{11}{12} = 7,700$; Interest Payable $= 7,700$

Question 16

Operating expenses are $45,000, sales returns and allowances $25,000, sales discounts $16,000, sales $210,000, cost of goods sold $79,000, income tax expense $11,000. What is net sales?

Accepted Answer

$210,000 - 25,000 - 16,000 = 169,000$

Question 17

Which of the following correctly identifies the normal balances of accounts?

Accepted Answer

Assets Debit; Liabilities Credit; Common Shares Credit; Revenues Credit; Expenses Debit

Question 18

If total liabilities increased by $22,500, what must have happened to assets and shareholders’ equity?

Accepted Answer

Assets must have increased by $22,500, or shareholders’ equity must have decreased by $22,500

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