Section: A - Multiple Choice Questions

This section carries 10 Marks – mark the correct answer in the given answer sheet.
Answers marked on this exam paper will not be considered for marking

1. Suppose the list price of goods is $1,000 and the trade discount is 20 percent. What is
the amount of the discount and what is the net price to be recorded in the sales
journal?

a. $20; $1,000
b. $200; $800
c. $200; $1,000
d. $800; $200

2. The Sales Returns and Allowances account is classified as

a. an asset account.
b. an expense account
c. a revenue account
d. a contra revenue account

3. When equipment is purchased on credit,

a. assets and liabilities increase.

b. assets increase and liabilities decrease.
c. assets and owner's equity increase.
d. assets and expenses increase.

4. When a business collects an account receivable

a. total assets do not change.

b. assets increase and revenues increase.
c. assets and liabilities increase.
d. assets increase and owner's equity increases.

5. Assume that, after analyzing its business transaction, a firm has the following ending
balances: accounts payable $3,400, accounts receivable $2,000, cash $1,000, capital
$3,600, equipment $3,000, prepaid rent $600, and supplies $400. What is the total
amount of assets that will be reported on the firm's balance sheet?

a. $6,400
b. $7,000
c. $9,800
d. $14,000
6. When J. Simmons, the owner, invests in her business, the transaction would be
entered on the

a. right side of the J. Simmons, Capital T account.

b. left side of the J. Simmons, Capital T account.
c. right side of the Cash T account.
d. left side of the J. Simmons, Capital T account and the right side of the Cash T
account.

7. The normal balance of an account is the

a. increase side of the account.

b. decrease side of the account.
c. the left side of the account.
d. the right side of the account.

8. The three financial statements are linked together because the

a. net income from the income statement is used on the statement of owner's equity
and the ending balance of the capital account, computed on the statement of
owner's equity, is used on the balance sheet.
b. net income from the statement of owner's equity is used on the income statement
and the ending balance of the capital account, also computed on the statement of
owner's equity, is used on the balance sheet.
c. net income from the income statement is used on the statement of owner's equity
and the ending balance of the capital account, computed on the balance sheet, is
used on the statement of owner's equity.
d. net income from the balance sheet is used on the income statement and the ending
balance of the capital account, computed on the statement of owner's equity, is
used on the balance sheet.

9. The entry to record the withdrawal of cash by Sue Snow, the owner, to pay a
personal utility bill would include a

a. debit to Sue Snow, Capital, and a credit to Cash.

b. debit to Utilities Expense and a credit to Cash.
c. debit to Sue Snow, Drawing and a credit to Cash.
d. debit to Sue Snow, Drawing and a credit to Utilities Expense.

10. The Accounts Payable account has a $5,000 credit balance. An entry for the
payment of $2,000 on the amount owed is recorded and posted. The new balance
of the Accounts Payable account is

a. a $7,000 debit balance.

b. a $7,000 credit balance.
c. a $3,000 credit balance.
d. a $3,000 debit balance.
11. A firm purchased telephone equipment for cash. By mistake, the person who recorded
the transaction debited Utilities Expense instead of Office Equipment. The error was
discovered after the data posted. The correcting entry should contain

a. a debit to Utilities Expense and a credit to Cash.

b. a debit to Office Equipment and a credit to Cash.
c. a debit to Cash and a credit to Office Equipment.
d. a debit to Office Equipment and a credit to Utilities Expense

12. Credit terms of 1/10, n/30 mean that

a. payment in full is due 30 days after date of the invoice.

b. if the invoice is paid within 10 days of its date, a 1% discount may be taken;
otherwise the total amount is due in 30 days.
c. payment in full is due 10 days after date of the invoice.
d. if the invoice is paid within 10 days of its date, a 1% discount may be taken;
otherwise the total amount is due in 20 days.

13. The net delivered cost for purchases is calculated as follows:

a. Purchases plus Freight In plus Purchases Returns and Allowances.

b. Purchases less Freight In less Purchases Returns and Allowances.
c. Purchases plus Freight In less Purchases Returns and Allowances.
d. Purchases less Freight In plus Purchases Returns and Allowances.

14. Most businesses use the petty cash fund to pay for

a. accounts payable.
b. small expenditures.
c. office lunches.
d. internal expenses.

15. The payment of a purchase invoice when a cash discount is taken includes a

a. debit to Accounts Payable, a credit to Purchases Discounts, and a credit to

Cash.
b. debit to Accounts Payable, debit to Purchases Discounts, and credit to Cash.
c. debit to Accounts Payable and credit to Cash.
d. debit to Purchases, credit to Purchases Discounts, and credit to Cash.

16. The entry to replenish a petty cash fund includes a

a. debit to Cash and a credit to Petty Cash.

b. debit to Petty Cash Fund and a credit to Cash.
c. debits to various expense accounts and a credit to Petty Cash Fund.
d. debits to various expense accounts and a credit to Cash.
17. Which of the following financial statements is for a particular date rather than a
period of time?

a. The income statement.

b. The cash flow statement.
c. The statement of retained earnings.
d. The balance sheet.

18. Saira's Maid Service began the year with total assets of $120,000 and
Owner’s' equity of $40,000. During the year the company earned $90,000 in
net income and owner withdrew $20,000 in drawings. Total assets at the end of
the year were $215,000. How much was stockholders' equity at the end of the
year?

a. $130,000
b. $110,000
c. $150,000
d. $135,000

19. Brenden's Pizza sold $25,000 worth of pizzas in 2011. They received $15,000 in
cash and the balance of $10,000 will be paid in 2012. The reported revenues for
2011 are

a. $15,000
b. $25,000
c. $10,000
d. $5,000

20. The expanded accounting equation is

a.Assets + Liabilities = Share Capital + Retained Earnings + Drawings + Revenues

+ Expenses
b. Assets = Liabilities + Share Capital + Retained Earnings + Drawings +
Revenues
- Expenses
c.Assets = Liabilities - Share Capital – Retained Earnings - Drawings - Revenues -
Expenses
d. Assets = Liabilities + Share Capital + Retained Earnings - Drawings +
Revenues -
Expenses
Question
The following is a summary of the petty cash transactions for Glitter Traders for
September 2014.

Sep-01 Received a çheque for $ 500 from cashier and cashed it for petty cash float
Voucher
Sep-02 Paid Bus fare (travel expenses) 1 18
Voucher
Sep-03 Paid for Note Book (stationery expenses) 2 12
Voucher
Sep-04 Paid for Postage Stamps 3 10
Voucher
Sep-06 Paid Travelling expenses 4 20
Voucher
Sep-08 Paid Casual wages-Kingston 5 45
Voucher
Sep-10 Paid for Pens and Pencils ( stationery expenses) 6 11
Voucher
Sep-12 Paid Photocopy papers ( stationery expenses) 7 27
Voucher
Sep-13 Paid for Casual wages- Tony 8 50
Voucher
Sep-15 Paid for Postage stamps and envelopes 9 16
Voucher
Sep-19 Paid for Marker Pens ( stationery expenses) 10 9
Voucher
Sep-25 Paid Casual wages- Linda 11 25
Voucher
Sep-30 Paid for Taxi Hire charges(travel expenses) 12 20
Received cheque from cashier and cashed it to restore petty
Sep-30 cash

a) Enter the month’s transactions in the petty cash book

b) Enter the receipt of the amount necessary to restore the imprest and carry down the
balance for the commencement of the following month.