2005SummerTest1 - MGT120 Summer2005 Term Test #1 1...

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MGT120 Summer2005 Term Test #1 1 Summer2005 Term Test #1 PART A ( 10 marks) 1. Brinkman's General Store had the following transactions during the current year: Sales generated for the year on credit $500,000 (85% have been collected at year end) Borrowed a short-term loan from the bank 50,000 Interest incurred but not yet paid on the loan 5,000 Bought inventory for resale 40,000 Depreciation on building 10,000 Operating expenses 50,000 Inventory sold 375,000 Paid suppliers for inventory 15,000 Accounts payable, ending balance 10,000 Tax rate 40% Net income reported for the year is a. $65,000 b. $36,000 c. $60,000 d. $20,000 2. On March 31, 2004, BiBi Company purchased a one-year insurance policy for $2,400 and recorded it with a debit to Prepaid Insurance. The adjusting entry at December 31, 2004, would include a: a) Debit to Insurance expense of 2,000 b) Credit to Prepaid insurance of $1,800 c) Debit to Insurance expense of $600 d) Credit to Prepaid insurance of $600 3. On January 1, 2000, the Worchester Company paid $8,000 for January, February, March and April’s rent in advance. The company recorded this transaction by increasing the balance in the prepaid rent account. What will be the balance in the prepaid rent account as of March 31, 2000? a) $0 b) $4,000 c) $2,000 d) $6,000
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MGT120 Summer2005 Term Test #1 2 4. Summerhill Corporation had the following trial balances at its year-end (before closing entries). All accounts had normal debit or credit balances. Cash $250 Equipment 150 Revenue 400 Supplies expense 200 Unearned revenue 70 Wages expense 60 One of the required closing entries should have Retained Earnings: a) Credited for $140 b) Credited for $210 c) Debited for $140 d) Credited for $470 5. What is the effect on a company’s balance sheet equation when depreciation is recorded? a)
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This note was uploaded on 01/16/2011 for the course MGT 120 taught by Professor Zuliani during the Winter '08 term at University of Toronto.

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2005SummerTest1 - MGT120 Summer2005 Term Test #1 1...

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