Ch04 Completing the Accounting Cycle

OBJECTIVES OBJECTIVES

Obj 1

Obj 1 DesDescricribe thbe the floe flow of acw of accouncountinting infg informormatiation fron from thom the unade unadjusjusted tted triarial ball balance iance intonto the adjusted trial balance and financial statements.

the adjusted trial balance and financial statements. Obj

Obj 22 PrePreparpare fe finainancincial al stastatemtementents fs from rom adjadjustusted ed accaccount ount balbalanceances.s. Ob

Obj j 33 PrPrepeparare e clclososiing ng enenttririeses.. Ob

Obj 4j 4 DeDescscriribe be tthe he acaccocoununtiting ng cycyclcle.e. Ob

Obj 5j 5 llluluststrarate te ththe ace accoucountntining cyg cyclcle fe for or onone pee peririodod.. Obj

Obj !! "#p"#plailain whn what iat is mes meant bant by ty the fihe fiscascal yel year anar and thd the nate natural ural busbusineiness yss yearear.. QUESTION GI! QUESTION GI! True " #al$e True " #al$e No No %% O

O&'&'ecectiti(e (e !i!i))))icicululty ty NoNo% % O&O&'e'ectcti(i(e e !i!i))))icicululty ty NoNo% % O&O&'e'ectcti(i(e e !i!i))))iciculultyty *

* $$44%%$$11 ""aassyy +,+, $$44%%$$22 ""aassyy 4-4- $$44%%$$44 ""aassyy +

+ $$44%%$$11 ""aassyy +.+. $$44%%$$33 ""aassyy ,/,/ $$44%%$$44 ""aassyy 0

0 $$44%%$$11 ""aassyy +1+1 $$44%%$$33 ""aassyy ,*,* $$44%%$$44 &&ooddeerraattee 4

4 $$44%%$$11 &&ooddeerraattee +2+2 $$44%%$$33 ""aassyy ,+,+ $$44%%$$44 ""aassyy ,

, $$44%%$$11 &&ooddeerraattee +-+- $$44%%$$33 ""aassyy ,0,0 $$44%%$$!! ""aassyy .

. $$44%%$$11 &&ooddeerraattee 0/0/ $$44%%$$33 ""aassyy ,4,4 $$44%%$$!! ""aassyy 1

1 $$44%%$$22 ""aassyy 0*0* $$44%%$$33 ""aassyy ,,,, $$44%%$$!! ""aassyy 2

2 $$44%%$$22 &&ooddeerraattee 0+0+ $$44%%$$33 ""aassyy ,.,. $$44%%$$!! ""aassyy

-- $$44%%$$22 &&ooddeerraattee 0000 $$44%%$$33 ""aassyy ,1,1 $$44%%''PPPP ""aassyy */

*/ $$44%%$$22 &&ooddeerraattee 0404 $$44%%$$33 ""aassyy ,2,2 $$44%%''PPPP ""aassyy **

** $$44%%$$22 ""aassyy 0,0, $$44%%$$33 ""aassyy ,-,- $$44%%''PPPP &&ooddeerraattee *+

*+ $$44%%$$22 &&ooddeerraattee 0.0. $$44%%$$33 &&ooddeerraattee ././ $$44%%''PPPP ""aassyy *0

*0 $$44%%$$22 ""aassyy 0101 $$44%%$$33 ""aassyy .*.* $$44%%''PPPP &&ooddeerraattee *4

*4 $$44%%$$22 ""aassyy 0202 $$44%%$$33 ""aassyy .+.+ $$44%%''PPPP ""aassyy *,

*, $$44%%$$22 ""aassyy 0-0- $$44%%$$33 ""aassyy .0.0 $$44%%''PPPP ""aassyy *.

*. $$44%%$$22 &&ooddeerraattee 4/4/ $$44%%$$33 ""aassyy .4.4 $$44%%''PPPP &&ooddeerraattee *1

*1 $$44%%$$22 ""aassyy 4*4* $$44%%$$33 ""aassyy .,., $$44%%''PPPP &&ooddeerraattee *2

*2 $$44%%$$22 ""aassyy 4+4+ $$44%%$$33 ""aassyy .... $$44%%''PPPP &&ooddeerraattee

*-*- $$44%%$$22 ""aassyy 4040 $$44%%$$33 ""aassyy .1.1 $$44%%''PPPP &&ooddeerraattee +/

+/ $$44%%$$22 ""aassyy 4444 $$44%%$$33 ""aassyy .2.2 $$44%%''PPPP &&ooddeerraattee +*

+* $$44%%$$22 &&ooddeerraattee 4,4, $$44%%$$33 ""aassyy .-.- $$44%%''PPPP ""aassyy ++

++ $$44%%$$22 ""aassyy 4.4. $$44%%$$33 ""aassyy 1/1/ $$44%%''PPPP &&ooddeerraattee +0

+0 $$44%%$$22 ""aassyy 4141 $$44%%$$33 ""aassyy 1*1* $$44%%''PPPP ""aassyy +4

Chapter 4/Completing the Accounting Cycle

Chapter 4/Completing the Accounting Cycle  _1!) 1!)

3atching 3atching No No %% O

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* $$44%%$$55 &&ooddeerraattee 44 $$44%%$$55 &&ooddeerraattee 11 $$44%%$$55 &&ooddeerraattee +

+ $$44%%$$55 &&ooddeerraattee ,, $$44%%$$55 &&ooddeerraattee 22 $$44%%$$55 &&ooddeerraattee 0

0 $$44%%$$55 &&ooddeerraattee .. $$44%%$$55 &&ooddeerraattee 3ultiple Choice 3ultiple Choice Eerci$e"Other Eerci$e"Other No No %% O

O&'&'ecectiti(e (e !i!i))))icicululty ty NoNo% % O&O&'e'ectcti(i(e e !i!i))))icicululty ty NoNo% % O&O&'e'ectcti(i(e e !i!i))))iciculultyty N

No% o% OO&'&'ecectiti(e (e !i!i))))icicululty ty NoNo% % O&O&'e'ectcti(i(e e !i!i))))icicululty ty NoNo% % O&O&'e'ectcti(i(e e !i!i))))iciculultyty *

* $$44%%$$11 &&ooddeerraattee +-+- $$44%%$$33 &&ooddeerraattee ,1,1 $$44%%$$44 &&ooddeerraattee +

+ $$44%%$$11 DDiiffffiiccuulltt 0/0/ $$44%%$$33 DDiiffffiiccuulltt ,2,2 $$44%%$$44 ""aassyy 0

0 $$44%%$$11 DDiiffffiiccuulltt 0*0* $$44%%$$33 ""aassyy ,-,- $$44%%$$!! &&ooddeerraattee 4

4 $$44%%$$11 &&ooddeerraattee 0+0+ $$44%%$$33 ""aassyy ././ $$44%%$$!! &&ooddeerraattee ,

, $$44%%$$22 &&ooddeerraattee 0000 $$44%%$$33 ""aassyy .*.* $$44%%$$!! &&ooddeerraattee .

. $$44%%$$22 &&ooddeerraattee 0404 $$44%%$$33 &&ooddeerraattee .+.+ $$44%%''PPPP ""aassyy 1

1 $$44%%$$22 &&ooddeerraattee 0,0, $$44%%$$33 &&ooddeerraattee .0.0 $$44%%''PPPP &&ooddeerraattee 2

2 $$44%%$$22 ""aassyy 0.0. $$44%%$$33 ""aassyy .4.4 $$44%%''PPPP ""aassyy

-- $$44%%$$22 ""aassyy 0101 $$44%%$$33 &&ooddeerraattee .,., $$44%%''PPPP ""aassyy */

*/ $$44%%$$22 ""aassyy 0202 $$44%%$$33 &&ooddeerraattee .... $$44%%''PPPP &&ooddeerraattee **

** $$44%%$$22 &&ooddeerraattee 0-0- $$44%%$$33 &&ooddeerraattee .1.1 $$44%%''PPPP &&ooddeerraattee *+

*+ $$44%%$$22 ""aassyy 4/4/ $$44%%$$33 &&ooddeerraattee .2.2 $$44%%''PPPP &&ooddeerraattee *0

*0 $$44%%$$22 &&ooddeerraattee 4*4* $$44%%$$33 &&ooddeerraattee .-.- $$44%%''PPPP &&ooddeerraattee *4

*4 $$44%%$$22 &&ooddeerraattee 4+4+ $$44%%$$33 &&ooddeerraattee 1/1/ $$44%%''PPPP &&ooddeerraattee *,

*, $$44%%$$22 &&ooddeerraattee 4040 $$44%%$$33 &&ooddeerraattee 1*1* $$44%%''PPPP &&ooddeerraattee *.

*. $$44%%$$22 &&ooddeerraattee 4444 $$44%%$$33 ""aassyy 1+1+ $$44%%''PPPP ""aassyy *1

*1 $$44%%$$22 ""aassyy 4,4, $$44%%$$33 &&ooddeerraattee 1010 $$44%%''PPPP &&ooddeerraattee *2

*2 $$44%%$$22 &&ooddeerraattee 4.4. $$44%%$$33 DDiiffffiiccuulltt 1414 $$44%%''PPPP &&ooddeerraattee

*-*- $$44%%$$22 &&ooddeerraattee 4141 $$44%%$$33 &&ooddeerraattee 1,1, $$44%%''PPPP &&ooddeerraattee +/

+/ $$44%%$$22 &&ooddeerraattee 4242 $$44%%$$33 DDiiffffiiccuulltt 1.1. $$44%%''PPPP &&ooddeerraattee +*

+* $$44%%$$22 &&ooddeerraattee 4-4- $$44%%$$33 &&ooddeerraattee 1111 $$44%%''PPPP &&ooddeerraattee ++

++ $$44%%$$22 &&ooddeerraattee ,/,/ $$44%%$$33 &&ooddeerraattee 1212 $$44%%''PPPP &&ooddeerraattee +0

+0 $$44%%$$22 &&ooddeerraattee ,*,* $$44%%$$33 &&ooddeerraattee 1-1- $$44%%''PPPP &&ooddeerraattee +4

+4 $$44%%$$22 &&ooddeerraattee ,+,+ $$44%%$$33 &&ooddeerraattee 2/2/ $$44%%''PPPP &&ooddeerraattee +,

+, $$44%%$$22 &&ooddeerraattee ,0,0 $$44%%$$33 &&ooddeerraattee 2*2* $$44%%''PPPP ""aassyy +.

+. $$44%%$$22 &&ooddeerraattee ,4,4 $$44%%$$33 &&ooddeerraattee 2+2+ $$44%%''PPPP DDiiffffiiccuulltt +1

+1 $$44%%$$22 &&ooddeerraattee ,,,, $$44%%$$44 &&ooddeerraattee 2020 $$44%%''PPPP DDiiffffiiccuulltt +2

3atching 3atching No No %% O

O&'&'ecectiti(e (e !i!i))))icicululty ty NoNo% % O&O&'e'ectcti(i(e e !i!i))))icicululty ty NoNo% % O&O&'e'ectcti(i(e e !i!i))))iciculultyty *

* $$44%%$$55 &&ooddeerraattee 44 $$44%%$$55 &&ooddeerraattee 11 $$44%%$$55 &&ooddeerraattee +

+ $$44%%$$55 &&ooddeerraattee ,, $$44%%$$55 &&ooddeerraattee 22 $$44%%$$55 &&ooddeerraattee 0

0 $$44%%$$55 &&ooddeerraattee .. $$44%%$$55 &&ooddeerraattee 3ultiple Choice 3ultiple Choice Eerci$e"Other Eerci$e"Other No No %% O

O&'&'ecectiti(e (e !i!i))))icicululty ty NoNo% % O&O&'e'ectcti(i(e e !i!i))))icicululty ty NoNo% % O&O&'e'ectcti(i(e e !i!i))))iciculultyty N

No% o% OO&'&'ecectiti(e (e !i!i))))icicululty ty NoNo% % O&O&'e'ectcti(i(e e !i!i))))icicululty ty NoNo% % O&O&'e'ectcti(i(e e !i!i))))iciculultyty *

* $$44%%$$11 &&ooddeerraattee +-+- $$44%%$$33 &&ooddeerraattee ,1,1 $$44%%$$44 &&ooddeerraattee +

+ $$44%%$$11 DDiiffffiiccuulltt 0/0/ $$44%%$$33 DDiiffffiiccuulltt ,2,2 $$44%%$$44 ""aassyy 0

0 $$44%%$$11 DDiiffffiiccuulltt 0*0* $$44%%$$33 ""aassyy ,-,- $$44%%$$!! &&ooddeerraattee 4

4 $$44%%$$11 &&ooddeerraattee 0+0+ $$44%%$$33 ""aassyy ././ $$44%%$$!! &&ooddeerraattee ,

, $$44%%$$22 &&ooddeerraattee 0000 $$44%%$$33 ""aassyy .*.* $$44%%$$!! &&ooddeerraattee .

. $$44%%$$22 &&ooddeerraattee 0404 $$44%%$$33 &&ooddeerraattee .+.+ $$44%%''PPPP ""aassyy 1

1 $$44%%$$22 &&ooddeerraattee 0,0, $$44%%$$33 &&ooddeerraattee .0.0 $$44%%''PPPP &&ooddeerraattee 2

2 $$44%%$$22 ""aassyy 0.0. $$44%%$$33 ""aassyy .4.4 $$44%%''PPPP ""aassyy

-- $$44%%$$22 ""aassyy 0101 $$44%%$$33 &&ooddeerraattee .,., $$44%%''PPPP ""aassyy */

*/ $$44%%$$22 ""aassyy 0202 $$44%%$$33 &&ooddeerraattee .... $$44%%''PPPP &&ooddeerraattee **

** $$44%%$$22 &&ooddeerraattee 0-0- $$44%%$$33 &&ooddeerraattee .1.1 $$44%%''PPPP &&ooddeerraattee *+

*+ $$44%%$$22 ""aassyy 4/4/ $$44%%$$33 &&ooddeerraattee .2.2 $$44%%''PPPP &&ooddeerraattee *0

*0 $$44%%$$22 &&ooddeerraattee 4*4* $$44%%$$33 &&ooddeerraattee .-.- $$44%%''PPPP &&ooddeerraattee *4

*4 $$44%%$$22 &&ooddeerraattee 4+4+ $$44%%$$33 &&ooddeerraattee 1/1/ $$44%%''PPPP &&ooddeerraattee *,

*, $$44%%$$22 &&ooddeerraattee 4040 $$44%%$$33 &&ooddeerraattee 1*1* $$44%%''PPPP &&ooddeerraattee *.

*. $$44%%$$22 &&ooddeerraattee 4444 $$44%%$$33 ""aassyy 1+1+ $$44%%''PPPP ""aassyy *1

*1 $$44%%$$22 ""aassyy 4,4, $$44%%$$33 &&ooddeerraattee 1010 $$44%%''PPPP &&ooddeerraattee *2

*2 $$44%%$$22 &&ooddeerraattee 4.4. $$44%%$$33 DDiiffffiiccuulltt 1414 $$44%%''PPPP &&ooddeerraattee

*-*- $$44%%$$22 &&ooddeerraattee 4141 $$44%%$$33 &&ooddeerraattee 1,1, $$44%%''PPPP &&ooddeerraattee +/

+/ $$44%%$$22 &&ooddeerraattee 4242 $$44%%$$33 DDiiffffiiccuulltt 1.1. $$44%%''PPPP &&ooddeerraattee +*

+* $$44%%$$22 &&ooddeerraattee 4-4- $$44%%$$33 &&ooddeerraattee 1111 $$44%%''PPPP &&ooddeerraattee ++

++ $$44%%$$22 &&ooddeerraattee ,/,/ $$44%%$$33 &&ooddeerraattee 1212 $$44%%''PPPP &&ooddeerraattee +0

+0 $$44%%$$22 &&ooddeerraattee ,*,* $$44%%$$33 &&ooddeerraattee 1-1- $$44%%''PPPP &&ooddeerraattee +4

+4 $$44%%$$22 &&ooddeerraattee ,+,+ $$44%%$$33 &&ooddeerraattee 2/2/ $$44%%''PPPP &&ooddeerraattee +,

+, $$44%%$$22 &&ooddeerraattee ,0,0 $$44%%$$33 &&ooddeerraattee 2*2* $$44%%''PPPP ""aassyy +.

+. $$44%%$$22 &&ooddeerraattee ,4,4 $$44%%$$33 &&ooddeerraattee 2+2+ $$44%%''PPPP DDiiffffiiccuulltt +1

+1 $$44%%$$22 &&ooddeerraattee ,,,, $$44%%$$44 &&ooddeerraattee 2020 $$44%%''PPPP DDiiffffiiccuulltt +2

Chapter 4/Completing the Accounting Cycle

Chapter 4/Completing the Accounting Cycle  _1!* 1!*

+

+ $$44%%$$22 ""aassyy .. $$44%%$$33 ""aassyy */*/ $$44%%''PPPP &&ooddeerraattee 0

0 $$44%%$$22 &&ooddeerraattee 11 $$44%%$$33 &&ooddeerraattee **** $$44%%''PPPP DDiiffffiiccuulltt 4

4 $$44%%$$22 ""aassyy 22 $$44%%$$33 &&ooddeerraattee 5ro&lem 5ro&lem No No %% O&

O&'e'ectcti(i(e e !i!i))))icicululty ty NoNo %%

O

O&'&'ecectiti(e (e !i!i))))icicululty ty NoNo %%

O&'e

O&'ecti(cti(e e !i)!i))icu)icultylty *

* $$44%%$$22 ""aassyy -- $$44%%$$22 DDiiffffiiccuulltt *1*1 $$44%%$$33 DDiiffffiiccuulltt +

+ $$44%%$$22 ""aassyy */*/ $$44%%$$22 DDiiffffiiccuulltt *2*2 $$44%%$$33 &&ooddeerraattee 0

0 $$44%%$$22 &&ooddeerraattee **** $4$4%%$2$2++$4$4%%$3$3 DiDifffficiculultt *-*- $$44%%$$33 DDiiffffiiccuulltt 4

4 $$44%%$$22 ""aassyy *+*+ $$44%%$$33 &&ooddeerraattee +/+/ $$44%%$$33 DDiiffffiiccuulltt ,

, $$44%%$$22 &&ooddeerraattee *0*0 $$44%%$$33 DDiiffffiiccuulltt +*+* $$44%%$$33 DDiiffffiiccuulltt .

. $$44%%$$22 ""aassyy *4*4 $$44%%$$33 &&ooddeerraattee ++++ $$44%%$$55 DDiiffffiiccuulltt 1

1 $$44%%$$22 DDiiffffiiccuulltt *,*, $$44%%$$33 &&ooddeerraattee +0+0 $$44%%''PPPP DDiiffffiiccuulltt 2

2 $$44%%$$22 DDiiffffiiccuulltt *.*. $$44%%$$33 &&ooddeerraattee +4+4 $$44%%''PPPP DDiiffffiiccuulltt Chapter 46Completing the Accounting Cycle

Chapter 46Completing the Accounting Cycle

TUE"#A7SE TUE"#A7SE 1.

1. 'fter 'fter analyanaly,ing tr,ing transactansactions- tions- the ne#t she ne#t step wotep would be to uld be to post tpost the tranhe transactisactions in tons in the ledgehe ledger.r. ANS8

ANS8  DD// ""aassyy OO00// $$44%%$$11  '

 '// ''0 'naly''0 'nalytic + 'Ptic + 'P' ' %&easurement%&easurement 2.

2. he mohe most imst important portant output output of thof the accounte accounting cying cycle is cle is the fithe financial nancial statstatementsements.. ANS8

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3.. hhe we woorr6 s6 shheeeet it issnotnot considered a part of the formal accounting records. considered a part of the formal accounting records. ANS8

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 '// ''0 'naly''0 'nalytic + 'Ptic + 'P' ' %&easurement%&easurement 4.

4. rossross%ref%referencierencing is ung is useful seful in asin assurisuring that ng that the debthe debits aits and crednd credits aits are in re in balancebalance.. ANS8

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 '// ''0 'naly''0 'nalytic + 'Ptic + 'P' ' %&easurement%&easurement 5.

5. 7hen ac7hen accounts counts do not do not appear appear on the on the unadjuunadjusted tsted trial rial balance balance but arbut are needee needed to pod to postst adjustments- they are simply added to the account title column.

adjustments- they are simply added to the account title column. ANS8

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!. Once tOnce the adjuhe adjusted tsted trial rial balancbalance is ie is in baln balance- tance- the flohe flow of aw of accountccounts wils will now l now go intgo into theo the financial statements.

financial statements. ANS8

(. here is reallyno benefit in preparing financial statements in any particular order. ANS8  D/ "asy O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement

). 9ound tripping is a fraudulent scheme where business ' artificially inflates re:enue by lending money to customer 0 who uses that money to buy products from '.

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*. On the income statement- miscellaneous e#penses are usually presented as the last item without regard to the dollar amount.

ANS8  D/ &oderate O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

1$. he usual presentation of the statement of retained earnings is ;1< 0eginning retained earnings- ;2< et income or loss- ;3< Di:idends- ;4< n:estment by toc6holder- ;5< "nding retained earnings.

ANS8  D/ &oderate O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

11. he difference between a classified balance sheet and one that is not classified is that the classified one has subheadings.

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 '/ ''0 'nalytic + 'P' %&easurement

12. ash and other assets that may reasonably be e#pected to be reali,ed in cash- sold- or consumed through the normal operations of a business- usually longer than one year- are called current assets.

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13. Prepaid nsurance is an e#ample of a current asset. ANS8  D/ "asy O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement 14. =and is an e#ample of a plant asset.

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 '/ ''0 'nalytic + 'P' %&easurement

15. =iabilities that will be due within one year or less and that are to be paid out of current assets are called current liabilities.

Chapter 4/Completing the Accounting Cycle  ₁₍₁

1!. he amount of the net income for a period appears on both the income statement and the  balance sheet for that period.

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1(. 'ccrued ta#es payable are generally reported on the balance sheet as a current liability. ANS8  D/ "asy O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement

1). 't the end of the fiscal period- prepaid e#penses are reported on the ncome tatement as e#penses.

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 '/ ''0 'nalytic + 'P' %&easurement

1*. Office ">uipment is an e#ample of a current asset account. ANS8  D/ "asy O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement

2$. apital toc6 and Di:idends are reported in the stoc6holders? e>uity section of the balance sheet.

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21. Deferred e#penses that benefit a relati:ely short period of time are listed on the balance sheet as current assets.

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22. @nearned re:enues that will be earned in a relati:ely short period of time are listed on the  balance sheet as current assets.

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 '/ ''0 'nalytic + 'P' %&easurement

23. 'ccrued e#penses are ordinarily listed on the balance sheet as current assets. ANS8  D/ "asy O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement

24. 'ccrued re:enues are ordinarily listed on the balance sheet as current liabilities. ANS8  D/ "asy O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement

25. he income statement is prepared from the adjusted trial balance or the income statement columns on the wor6 sheet.

2!. "#amples of temporary accounts are supplies and prepaid e#penses which are in the ledger for just a short time before they e#pire.

ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement 2(. 'ccumulated Depreciation is a permanent account. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement 2). he di:idend account is a temporary account. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

2*. he balance sheet accounts are referred to as real or permanent accounts. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

3$. ournali,ing and posting the adjustments and closing entries updates the ledger for the new accounting period.

ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

31. he income summary account is closed to the retained earnings account. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

32. he accumulated depreciation account is closed to the income summary account. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

33. he di:idends account is closed to the income summary account. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

34. he trial balance prepared after all the closing entries ha:e been posted is called a pre% closing trial balance.

ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

35. "ntries re>uired to close the balances of the temporary accounts at the end of the period are called final entries.

Chapter 4/Completing the Accounting Cycle  ₁₍₃

3!. n a corporation- a closing entry for the di:idends account maynot be necessary. ANS8  D/ &oderate O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

3(. ournali,ing and posting closing entries must be completed before financial statements can  be prepared.

ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

3). During the closing process- some balance sheet accounts are closed and end the period with a ,ero balance.

ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

3*. losing entries are entered directly on to the wor6 sheet. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

4$. he post%closing trial balance will generally ha:e fewer accounts than the trial balance. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

41. ' post%closing trial balance contains only asset and liability accounts. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

42. ' post%closing trial balance should be prepared before the financial statements are prepared. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

43. 'ssets- liabilities- and stoc6holders? e>uity are real accounts and do not get closed at the end of the period.

ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

44. he income summary account is also 6nown as the clearing account. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

45. 'll income statement accounts will be closed at the end of the period. ANS8  D/ "asy O0/ $4%$3

4!. 0alance heet are not considered real accounts. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

4(. t is not necessary to post the closing entries to the general ledger. ANS8  D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

4). Once an account has been closed for the period- inserting a line in the balance columns  zero’s out the account ma6ing it ready for the following period.

ANS8  D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

4*. he last step of the accounting cycle is to prepare a post%closing trial balance. ANS8  D/ "asy O0/ $4%$4

 '/ ''0 'nalytic + 'P' %&easurement

5$. he accounting cycle begins with preparing an unadjusted trial balance. ANS8  D/ "asy O0/ $4%$4

 '/ ''0 'nalytic + 'P' %&easurement

51. inancial statements should be prepared before the closing entries are journali,ed and  posted.

ANS8  D/ &oderate O0/ $4%$4  '/ ''0 'nalytic + 'P' %&easurement

52. he unadjusted- adjusted- and final trial balances are prepared during the accounting cycle of  a period.

ANS8  D/ "asy O0/ $4%$4

 '/ ''0 'nalytic + 'P' %&easurement

53. 'ny twel:e%month accounting period adopted by a company is 6nown as its fiscal year. ANS8  D/ "asy O0/ $4%$!

 '/ ''0 'nalytic + 'P' 00%ndustry

54. ' fiscal year that ends when business acti:ities ha:e reached their lowest point is called the natural business year.

ANS8  D/ "asy O0/ $4%$!  '/ ''0 'nalytic + 'P' 00%ndustry

55. 'll companies must use a calendar year as their fiscal year. ANS8  D/ "asy O0/ $4%$!

Chapter 4/Completing the Accounting Cycle  ₁₍₅

5!. he majority of businesses end their fiscal year on December 31. ANS8  D/ "asy O0/ $4%$!

 '/ ''0 'nalytic + 'P' 00%ndustry

5(. he wor6 sheet isnot considered a part of the formal accounting records. ANS8  D/ "asy O0/ $4%'pp

 '/ ''0 'nalytic + 'P' %&easurement

5). he wor6 sheet is a wor6ing paper that accountants can use to summari,e adjusting entries and the account balances for the financial statements.

ANS8  D/ "asy O0/ $4%'pp

 '/ ''0 'nalytic + 'P' %&easurement

5*. n a computeri,ed accounting system- a wor6 sheet maynot be necessary because the software program automatically posts entries to the accounts and prepares financial statements.

ANS8  D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

!$. he trial balance may be listed on the wor6 sheet instead of being prepared separately. ANS8  D/ "asy O0/ $4%'pp

 '/ ''0 'nalytic + 'P' %&easurement

!1. he totals of the 'djusted rial 0alance columns on a wor6 sheet will always be the sum of the rial 0alance column totals and the 'djustments column totals.

ANS8  D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

!2. ' wor6 sheet heading is dated for a period of time. ANS8  D/ "asy O0/ $4%'pp

 '/ ''0 'nalytic + 'P' %&easurement

!3. On the wor6 sheet- the retained earnings and di:idend account balances are e#tended to the 0alance heet columns.

ANS8  D/ "asy O0/ $4%'pp

 '/ ''0 'nalytic + 'P' %&easurement

!4. 'fter the account balances ha:e been e#tended from the 'djusted rial 0alance columns on the wor6 sheet- the difference between the initial totals of the 0alance heet debit and credit columns is et ncome or et =oss.

!5. 'fter et ncome or =oss is entered on the wor6 sheet- the debit column total must e>ual the credit column total for the 0alance heet pair of columns.

ANS8  D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

!!. ' net loss is shown on the wor6 sheet in the credit columns of both the ncome tatement columns and the 0alance heet columns.

ANS8  D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

!(. et income is shown on the wor6 sheet in the ncome tatement debit column and the 0alance heet credit column.

ANS8  D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

!). f the totals of the ncome tatement debit and credit columns of a wor6 sheet are A22-(5$ and A25-$$$- respecti:ely- after all account balances ha:e been e#tended- the amount of the net loss is A2-25$.

ANS8  D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

!*. he wor6sheet and the financial statements both re>uire dollar signs. ANS8  D/ "asy O0/ $4%'pp

 '/ ''0 'nalytic + 'P' %&easurement

($. he balance in the retained accounts account on the wor6sheet will e>ual the amount  presented in the balance sheet.

ANS8  D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

(1. ince the adjustments are entered on the wor6 sheet- it is not necessary to record them in the  journal or post them to the ledger.

ANS8  D/ "asy O0/ $4%'pp

 '/ ''0 'nalytic + 'P' %&easurement

(2. he chart of accounts- the journal- and the ledger are essential parts of the accounting system.

ANS8  D/ "asy O0/ $4%'pp

Chapter 4/Completing the Accounting Cycle  ₁₍₍

3ATC9ING

 Identify the following transactions as either: a. ournal entries

 b. 'djusting journal entries c. losing journal entries

1. ash 5$$ ees "arned 5$$ 2. ncome ummary 4!5 9etained earnings 4!5 3. @tilities "#pense 123 ash 123 4. 7ages "#pense (*$ 7ages Payable (*$ 5. @nearned re:enue 4*) ees "arned 4*) !. ncome ummary !(( 9ent "#pense 24$ upplies "#pense 22$ @tilities "#pense 13$ &iscellaneous "#p )( (. Di:idends 1(5 ash 1(5 ). 'ccounts 9ecei:able 4$$ ees earned 4$$ ;ustomer billed for ser:ices performed<

1.   ANS8 ' D/ &oderate O0/ $4%$5  '/ ''0 'nalytic + 'P' %&easurement

2.   ANS8  D/ &oderate O0/ $4%$5  '/ ''0 'nalytic + 'P' %&easurement

3.   ANS8 ' D/ &oderate O0/ $4%$5  '/ ''0 'nalytic + 'P' %&easurement

4.   ANS8 0 D/ &oderate O0/ $4%$5  '/ ''0 'nalytic + 'P' %&easurement

5.   ANS8 0 D/ &oderate O0/ $4%$5  '/ ''0 'nalytic + 'P' %&easurement

!.   ANS8  D/ &oderate O0/ $4%$5  '/ ''0 'nalytic + 'P' %&easurement

(.   ANS8 ' D/ &oderate O0/ $4%$5  '/ ''0 'nalytic + 'P' %&easurement

3U7TI57E C9OICE

1. n the accounting cycle- the last step is a. preparing the financial statements

 b. journali,ing and posting the adjusting entries c. preparing a post%closing trial balance

d. journali,ing and posting the closing entries ANS8  D/ &oderate O0/ $4%$1  '/ ''0 'nalytic + 'P' %&easurement

2. During the end%of%period processing which of the following best describes the logical order of this process

a. Preparation of adjustments- adjusted trial balance- financial statements  b. Preparation of ncome tatement- adjusted trial balance- 0alance heet

c. Preparation of adjusted trial balance- cross%referencing- journali,ing d. Preparation of adjustments- adjusted trial balance- posting

ANS8 ' D/ Difficult O0/ $4%$1  '/ ''0 'nalytic + 'P' %&easurement

3. 7hat is the major difference between the @nadjusted rial 0alance and the 'djusted rial 0alanceB

a. he 'djusted rial 0alance will show the net income ;loss< as an additional account.  b. 0oth will need to be in balance in order to continue with the end%of%period processing

c. he 'djusted rial 0alance includes the postings of the adjustments for the period in the  balance of the accounts.

d. he @nadjusted rial 0alance will be used to record the adjustments for the period. ANS8  D/ Difficult O0/ $4%$1

 '/ ''0 'nalytic + 'P' %&easurement

4. Once the adjusting entries are posted- the 'djusted rial 0alance will prepared to a. :erify that the debits and credits are in balance.

 b. :erify that all of the adjustments were posted in the correct accounts. c. :erify that the net income ;loss< is correct for the period.

d. :erify the correct flow of accounts into the financial statements. ANS8 ' D/ &oderate O0/ $4%$1

 '/ ''0 'nalytic + 'P' %&easurement

5. 7hen preparing the statement of retained earnings- the beginning retained earnings balance can always be found

a. in the ncome tatement columns of the wor6 sheet  b. in the statement of cash flows

c. in the general ledger 

d. in the 0alance heet columns of the wor6 sheet ANS8  D/ &oderate O0/ $4%$2

Chapter 4/Completing the Accounting Cycle  _1(*

!. 'ccumulated Depreciation appears on the a. balance sheet in the current assets section

 b. balance sheet in the property- plant and e>uipment section c. balance sheet in the long%term liabilities section

d. income statement as an operating e#pense ANS8 0 D/ &oderate O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

(. otes 9ecei:able due in 345 days appear on the a. balance sheet in the current assets section  b. balance sheet in the fi#ed assets section

c. balance sheet in the current liabilities section d. income statement as an e#pense

ANS8 ' D/ &oderate O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

). @nearned ees appear on the

a. balance sheet in the current assets section  b. balance sheet as a current liability

c. balance sheet in the stoc6holders? e>uity section d. income statement as re:enue

ANS8 0 D/ "asy O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement

*. 7hich one of the fi#ed asset accounts listed below will not ha:e a related contra asset accountB

a. Office ">uipment  b. =and

c. Deli:ery ">uipment d. 0uilding

ANS8 0 D/ "asy O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement

1$. Prepaid insurance is reported on the balance sheet as a a. current asset

 b. fi#ed asset c. current liability d. long%term liability

ANS8 ' D/ "asy O0/ $4%$2

11. he income statement is prepared from the a. adjusted trial balance

 b. income statement columns of the wor6 sheet

c. either the adjusted trial balance or the income statement columns of the wor6 sheet d. both the adjusted trial balance and the income statement columns of the wor6 sheet ANS8  D/ &oderate O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement 12. 9ound%tripping is when

a. a selling company sells to a customer company with huge discounts.

 b. a selling company pretends to sell to a fictitious company with the intend of inflating re:enues

c. a selling company lends money to a customer company to increase assets.

d. a selling company lends money to a customer company to be used to purchase goods from the selling company.

ANS8 D D/ Difficult O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

13. he tatement of 9etained "arnings should be prepared a. before the income statement and after the balance sheet  b. before the income statement and balance sheet

c. after the income statement and balance sheet

d. after the income statement and before the balance sheet ANS8 ' D/ &oderate O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement 14. he income statement should be prepared

a. before the statement of retained earnings and balance sheet

 b. after the statement of retained earnings and before the balance sheet c. after the statement of retained earnings and balance sheet

d. after the balance sheet and before the statement of retained earnings ANS8 ' D/ &oderate O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement

15. 7hen preparing the tatement of 9etained "arnings the beginning balance should be followed by CCCC to arri:e and the ending balance of retained earnings.

a. in:estments plus net income ;loss<  b. in:estments less di:idends

c. net income ;loss< less di:idends

d. in:estments plus net income ;loss< less di:idends ANS8 ' D/ &oderate O0/ $4%$2

Chapter 4/Completing the Accounting Cycle  ₁₎₁

he following is the adjusted trial balance for teely ompany. teely ompany

'djusted rial 0alance

or the ear ended December 31- 2$$)

ash !-13$ 'ccounts 9ecei:able 2-3$$ Prepaid "#penses (5$ ">uipment 13-4$$ 'ccumulated Depreciation 1-2$$ 'ccounts Payable 1-($$  otes Payable 5-$$$ apital toc6 12-$$$ Di:idends )($ ees "arned !-!$$ 7ages"#pense 1-45$ 9ent "#pense *$$ @tilities "#pense 4(5 Depreciation "#pense 15$ &iscellaneous "#pense (5 otals 2!-5$$ 2!-5$$

1!. Determine the net income ;loss< for the period. a. et ncome 2!-5$$

 b. et =oss )($ c. et =oss 3-55$ d. et ncome 3-55$

ANS8 D D/ &oderate O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

1(. Determine the stoc6holders? e>uity ending balance for the period. a. A14-!)$

 b. A11-13$ c. A15-55$ d. A2-!)$

ANS8 ' D/ Difficult O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

1). Determine total assets. a. A2!-5$$

 b. A15-3)$ c. A21-3)$ d. A22-5)$

ANS8  D/ &oderate O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

1*. Determine the current assets. a. A22-5)$

 b. A*-1)$ c. A21-3)$ d. A2!-5$$

ANS8 0 D/ &oderate O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

2$. Determine the total liabilities for the period. a. A!-($$

 b. A1-($$ c. A5-$$$ d. A1)-($$

ANS8 ' D/ &oderate O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

21. he 0alance heet should be prepared

a. before the income statement and the statement of retained earnings  b. before the income statement and after the statement of retained earnings

c. after the income statement and the statement of retained earnings

d. after the income statement and before the statement of retained earnings ANS8  D/ &oderate O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement

22. he tatement of 9etained "arnings begins with the beginning balance followed by a. plus et ncome ;loss< less di:idends

 b. plus et ncome ;loss< plus in:estments c. plus in:estments less di:idends

d. plus in:estments plus et ncome ;loss< less di:idends ANS8 ' D/ &oderate O0/ $4%$2

Chapter 4/Completing the Accounting Cycle  ₁₎₃

23. he ncome tatement will include the following accounts

a. 9e:enues less "#penses ;ordered largest to smallest amount< with &iscellaneous "#pense listed last

 b. 9e:enues less "#penses ;ordered smallest to largest amounts< with &iscellaneous "#pense listed last

c. 9e:enues less "#penses ;ordered in alphabetical order< d. 9e:enues less "#penses ;order is not important<

ANS8 ' D/ &oderate O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

24. he classified 0alance heet will subsection the assets section as follows a. urrent 'ssets and Other 'ssets

 b. urrent 'ssets and Property- Plant- and ">uipment c. urrent 'ssets and =ong%erm 'ssets

d. Other 'ssets and Property- Plant and ">uipment ANS8 0 D/ &oderate O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

25. he classified 0alance heet will di:ide its =iabilities ection as the following subsections a. urrent =iabilities and =ong%erm =iabilities

 b. urrent =iabilities and Other =iabilities c. Other =iabilities and =ong%erm =iabilities d. Present =iabilities and omorrow?s =iabilities ANS8 ' D/ &oderate O0/ $4%$2  '/ ''0 'nalytic + 'P' %&easurement

2!. =ong%term liabilities are those liabilities that a. will be paid in less than one year 

 b. are due to paid in 5 to 1$ years

c. are due to be paid in more than one year 

d. are liabilities owed to the owner and will ne:er be paid ANS8  D/ &oderate O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement 2(. he stoc6holders? e>uity is

a. added to assets and the two are e>ual to liabilities  b. added to liabilities and the two are e>ual to assets

c. subtracted from liabilities and the net amount is e>ual to assets

d. subtracted from stoc6holders? e>uity and the net amount is e>ual to net income ANS8 0 D/ &oderate O0/ $4%$2

2). 0alance sheet accounts

a. represent amounts accumulated during a specific period of time  b. are called real accounts

c. ha:e ,ero balances after the closing entries ha:e been posted d. are e>ual to assets and liabilities

ANS8 0 D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

2*. On which financial statement will ncome ummary be shownB a. tatement of retained earnings

 b. 0alance heet c. ncome tatement d. o financial statement

ANS8 D D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

3$. 7hich is the following that is not true about closing entriesB

a. here are four closing entries that update the stoc6holders? e>uity account.

 b. 'fter the second closing entry- the income summary account is e>ual to the net income or  ;loss< for the period.

c. 'll real accounts are closed at the end of the period.

d. 0y closing nominal accounts at the end of the period to ,ero- it is possible to isolate ne#t  period?s information correctly.

ANS8  D/ Difficult O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

31. he income summary account is also called a. the closing account

 b. the clearing account c. the nominal account d. the temporary account

ANS8 0 D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

32. 'fter posting the second closing entry to the income summary account- the balance will be e>ual to

a. ,ero.

 b. stoc6holders? e>uity. c. re:enues for the period

d. the net income or ;loss< for the period. ANS8 D D/ "asy O0/ $4%$3

Chapter 4/Completing the Accounting Cycle  ₁₎₅

33. 7hat is the last account that should be listed in the Post losing rial 0alanceB a. ncome ummary

 b. 9etained "arnings c. ash

d. ees "arned

ANS8 0 D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

34. 7hich of the following account groups are all considered nominal accountsB a. ash- ees "arned- @nearned 9e:enues

 b. Prepaid "#penses- @nearned 9e:enues- ees "arned c. apital toc6- Di:idends- ncome ummary

d. Di:idends- ees "arned- 9ent "#pense ANS8 D D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

35. here are four closing entries. he first one is to close the second one is to close CCCC-the third one is to close CCCC- and CCCC-the last one is to close CCCC.

a. 9e:enues- e#penses- income summary- di:idends account  b. "#penses- assets- income summary- capital stoc6 account

c. apital stoc6 account- di:idends account- income summary- assets d. Di:idends account- income summary- e#penses- re:enues

ANS8 ' D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

3!. 'll of the closing entries will adjust CCCC to update that account. a. the di:idends account

 b. the retained earnings account c. the cash account

d. the income summary account

ANS8 0 D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement 3(. losing entries

a. need not be journali,ed if adjusting entries are prepared

 b. need not be posted if the financial statements are prepared from the wor6 sheet c. are not needed if adjusting entries are prepared

d. must be journali,ed and posted

ANS8 D D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

3). losing entries are dated in the journal as of 

a. the date they are actually journali,ed- although they are generally prepared after the end of the accounting period

 b. the last day of the accounting period- although they are actually journali,ed after the end of the accounting period

c. the first day of the accounting period- although they are actually journali,ed after the end of the accounting period

d. the first day of the subse>uent accounting period ANS8 0 D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

3*. 7hich of the accounts below would be closed by posting a debit to the accountB a. @nearned 9e:enue

 b. ees "arned c. Di:idends d. 9ent "#pense

ANS8 0 D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

4$. 7hich of the following accounts should be closed to ncome ummary at the end of the fiscal yearB

a. upplies "#pense

 b. 'ccumulated Depreciation c. Prepaid nsurance

d. @nearned 9ent

ANS8 ' D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

41. 7hich of the following accounts willnot be closed to ncome ummary at the end of the fiscal yearB

a. alaries "#pense  b. ees "arned

c. @nearned 9ent

d. Depreciation "#pense

ANS8  D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

42. 7hich of the following accounts will be closed to the retained earnings account at the end of  the fiscal yearB

a. 9ent "#pense  b. ees "arned

c. ncome ummary d. Depreciation "#pense

Chapter 4/Completing the Accounting Cycle  ₁₎₍

43. he entry to close the appropriate insurance account at the end of the accounting period is a. debit ncome ummaryE credit Prepaid nsurance

 b. debit Prepaid nsuranceE credit ncome ummary c. debit nsurance "#penseE credit ncome ummary d. debit ncome ummaryE credit nsurance "#pense ANS8 D D/ &oderate O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

44. 7hich of the following accounts ordinarily appears in the post%closing trial balanceB a. Di:idends

 b. upplies "#pense c. ees "arned d. @nearned 9ent

ANS8 D D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

45. he post%closing trial balance differs from the adjusted trial balance in that it a. does not ta6e into account closing entries

 b. does not ta6e into account adjusting entries c. does not include balance sheet accounts d. does not include income statement accounts ANS8 D D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

4!. he following accounts were ta6en from the 'djusted rial 0alance columns of the wor6 sheet/ 'ccumulated Depreciation A 2-$$$ ees"arned 15-$$$ Depreciation"#pense 1-$$$ nsurance"#pense 5$$ Prepaid nsurance 4-5$$ upplies 1-2$$ upplies"#penses 3-5$$

 et income for the period is a. A2-3$$

 b. A1$-$$$ c. A4-3$$ d. A5-$$$

4(. ' summary of selected ledger accounts appear below for edFs 'uto er:ices for the 2$$( calendar year end.

apital toc6  12831 (-$$$ 181 5-$$$ 12831 1(-$$$ Di:idends !83$ 2-$$$ 12831 (-$$$ 1183$ 5-$$$ ncome ummary 12831 15-$$$ 12831 32-$$$ 12831 1(-$$$

 et income for the period is a. A1(-$$$

 b. A22-$$$ c. A(-$$$ d. A15-$$$

ANS8 ' D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

4). 9ed 9oc6 tone purchased a one%year liability insurance policy on anuary 1st of this year for A3-!$$ and recorded it as a prepaid e#pense. rom the selections of a. through d.- select the :alue that would be utili,ed in the closing entry for insurance e#pense and prepaid insurance during the closing process at the end of the first fiscal period on anuary 31st. a. A3-!$$.

 b. A3!$. c. A3$$. d. A3!$.

ANS8  D/ Difficult O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

Chapter 4/Completing the Accounting Cycle  _1)*

4*. he journal entry to close the ees "arned- A1$$- and 9ent 9e:enue- A25- accounts on December 31st during the closing process would be/

a. Dec 31 ees "arned 1$$ 9ent 9e:enue 25

ncome ummary 125  b. Dec 31 ncome ummary 125

ees "arned 1$$ 9ent 9e:enue 25 c. Dec 31 9e:enues 125

ncome ummary 125 d. Dec 31 ncome ummary 125

9e:enues 125

ANS8 ' D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

&antle ompany 7or6sheet

or the ear "nded December 31- 2$$)

'djusted rial 0alance ncome tatement 0alance heet

'ccount itle Debit redit Debit redit Debit redit

ash 1!-$$$ 1!-$$$ 'ccounts 9ecei:able !-$$$ !-$$$ upplies 2-$$$ 2-$$$ ">uipment 1*-$$$ 1*-$$$ 'ccumulated Depr% ">uip !-$$$ !-$$$ 'ccounts Payable 1$-$$$ 1$-$$$ 7agesPayable 2-$$$ 2-$$$ apital toc6 11-$$$ 11-$$$ Di:idends 1-$$$ 1-$$$ ees "arned 4(-$$$ 4(-$$$ 7ages "#pense 21-$$$ 21-$$$ 9ent "#pense !-$$$ !-$$$ Depreciation "#pense 5-$$$ 5-$$$ otals (!-$$$ (!-$$$ 32-$$$ 4(-$$$ 44-$$$ 2*-$$$

 et ncome ;=oss< 15-$$$ 15-$$$

5$. he journal entry to close re:enues would be/

a. debit ncome ummary A4(-$$$- credit ees "arned A4(-$$$  b. debit 9etained "arnings A4(-$$$- credit ees "arned A4(-$$$

c. debit ees "arned A4(-$$$E credit ncome ummary A4(-$$$ d. credit ees "arned A4(-$$$E credit apital toc6 A4(-$$$ ANS8  D/ &oderate O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

51. 0ased on the preceding trial balance- the entry to close e#penses would be/ a. 7ages "#pense A21-$$$

9ent "#pense !-$$$ Depreciation "#pense 5-$$$

ncome ummary 32-$$$  b. "#penses 32-$$$

ncome ummary 32-$$$ c. 7ages "#pense A21-$$$

9ent "#pense !-$$$ Depreciation "#pense 5-$$$

9etained "arnings 32-$$$ d. ncome ummary 32-$$$

7ages "#pense A21-$$$ 9ent "#pense !-$$$ Depreciation "#pense 5-$$$ ANS8 D D/ &oderate O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

52. 0ased on the preceding trial balance- the entry to close income summary would be/ a. debit ncome ummary A15-$$$E credit 9etained "arnings A4-$$$

 b. debit ncome ummary A4(-$$$E credit 9etained "arnings A4(-$$$ c. debit ncome ummary A15-$$$- credit 9etained "arnings A15-$$$ d. debit 9etained "arnings A4-$$$E credit ncome ummary A4-$$$ ANS8  D/ &oderate O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

53. 0ased on the preceding trial balance- the entry to close the di:idends would be/ a. debit 9etained "arnings A1-$$$- credit Di:idends A1-$$$

 b. debit 9etained "arnings A4-$$$- credit Di:idends A4-$$$ c. debit Di:idends A1-$$$E credit 9etained "arnings A1-$$$ d. debit Di:idends A4-$$$E credit 9etained "arnings A4-$$$ ANS8 ' D/ &oderate O0/ $4%$3

Chapter 4/Completing the Accounting Cycle  _1*1

54. 0ased on the preceding trial balance- the ending balance in 9etained "arnings is/ a. A$

 b. A25-$$$ c. A4-$$$ d. A1-$$$

ANS8 0 D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement

55. he proper se>uence for the steps in the accounting cycle is a follows

a. analy,e and record transactions- post transaction to the ledger- prepare a trial balance- prepare financial statements- journali,e closing entries- analy,e adjustment data and  prepare adjusting entries

 b. prepare a trial balance- analy,e adjustment data- prepare adjusting entries- prepare

financial statements- journali,e closing entries and post to the ledger- analy,e and record transactions- post transactions to the ledger 

c. analy,e and record transactions- post transactions to the ledger- prepare a trial balance-analy,e adjustment data- prepare adjusting entries- prepare financial

statements- journali,e closing entries and post to the ledger 

d. prepare financial statements- journali,e closing entries and post to the ledger- analy,e and record transactions- post transactions to the ledger- prepare a trial balance- analy,e

adjustment data- prepare adjusting entries ANS8  D/ &oderate O0/ $4%$4  '/ ''0 'nalytic + 'P' %&easurement

5!. he following are steps to the accounting cycle. Of the following- which step should be done first.

a. losing entries are journali,ed and posted to the ledger.  b. ransactions are posted to the ledger.

c. 'djusting entries are journali,ed and posted to the ledger. d. inancial statements are prepared.

ANS8 0 D/ &oderate O0/ $4%$4  '/ ''0 'nalytic + 'P' %&easurement

5(. he following are steps in the accounting cycle. Of the following- which would be prepared lastB

a. 'n adjusted trial balance is prepared.  b. ransactions are posted to the ledger.

c. 'n unadjusted trial balance is prepared.

d. 'djusting entries are journali,ed and posted to the ledger. ANS8 ' D/ &oderate O0/ $4%$4

5). he accounting cycle re>uires three trial balances be done. n what order should they be  preparedB

a. Post%closing- unadjusted- adjusted  b. @nadjusted- post%closing- adjusted

c. @nadjusted- adjusted- post%closing d. Post%closing- adjusted- unadjusted ANS8  D/ "asy O0/ $4%$4

 '/ ''0 'nalytic + 'P' %&easurement 5*. he fiscal year selected by companies

a. is the same as the calendar year 

 b. begins with the first day of the month and ends on the last day of the twelfth month c. must always begin on anuary 1.

d. will change each year 

ANS8 0 D/ &oderate O0/ $4%$!  '/ ''0 'nalytic + 'P' 00%ndustry

!$. ' fiscal year 

a. ordinarily begins on the first day of a month and ends on the last day of the following twelfth month

 b. for a business is determined by the federal go:ernment

c. always begins on anuary 1 and ends on December 31 of the same year  d. should end at the height of the businessFs annual operating cycle

ANS8 ' D/ &oderate O0/ $4%$!  '/ ''0 'nalytic + 'P' 00%ndustry

!1. he natural business year 

a. is a fiscal year that ends when business acti:ities are at its lowest point.  b. is a calendar year that ends when business acti:ities are at its lowest point.

c. is a fiscal year that ends when business acti:ities are at its highest point. d. is a calendar year that ends when business acti:ities are at its highest point. ANS8 ' D/ &oderate O0/ $4%$!

 '/ ''0 'nalytic + 'P' 00%ndustry !2. he wor6sheet

a. is an integral part of the accounting cycle

 b. eliminates the need to rewrite the financial statements c. is a wor6ing paper that is re>uired

d. is used to summari,e account balances and adjustments for the financial statements ANS8 D D/ "asy O0/ $4%'pp

Chapter 4/Completing the Accounting Cycle  _1*3

!3. 7hich one of the steps below is not aided by the preparation of the wor6 sheetB a. preparing the adjusted trial balance

 b. posting to the general ledger  c. preparing the financial statements d. preparing the closing entries

ANS8 0 D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

!4. ' wor6 sheet includes columns for  a. adjusting entries

 b. closing entries c. re:ersing entries

d. adjusting and closing entries

ANS8 ' D/ "asy O0/ $4%'pp

 '/ ''0 'nalytic + 'P' %&easurement

!5. 7hen a wor6 sheet is complete- the adjustment columns should ha:e a. total credits greater than total debits if a net income was earned  b. total debits grater than total credits if a net loss was incurred

c. total debits greater than total credits if a net income was earned d. total debits e>ual total credits

ANS8 D D/ "asy O0/ $4%'pp

 '/ ''0 'nalytic + 'P' %&easurement

!!. he difference between the totals of the debit and credit columns of the 'djusted rial 0alance columns on a wor6 sheet

a. is the amount of net income or loss

 b. indicates there is an error on the wor6 sheet c. is not unusual when preparing the wor6 sheet

d. is the net difference between re:enue- e#penses- and di:idends ANS8 0 D/ &oderate O0/ $4%'pp

 '/ ''0 'nalytic + 'P' %&easurement !(. et income appears on the wor6 sheet in the

a. debit column of the 0alance heet columns  b. debit column of the 'djustments columns

c. debit column of the ncome tatement columns d. credit column of the ncome tatement columns ANS8  D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

!). ' net loss appears on the wor6 sheet in the a. debit column of the 0alance heet columns  b. credit column of the 0alance heet columns

c. debit column of the ncome tatement columns d. credit column of the 'djustments columns ANS8 ' D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

!*. 'fter net income is entered on the wor6 sheet- the 0alance heet debit and credit columns must

a. be the same amount as the total amount of the ncome tatement debit and credit columns  b. e>ual each other 

c. be the same amount as the total amount in the 'djusted rial 0alance debit and credit columns

d. not be e>ual to each other and need not be the same total amounts as any other pair of columns on the wor6 sheet

ANS8 0 D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

($. 7hich of the statements below indicates that a company earned a net income for the periodB a. he sum of the debits e#ceeds the sum of the credits in the 0alance heet columns on the

wor6 sheet.

 b. he sum of the credits e#ceeds the sum of the debits in the ncome tatement columns on the wor6 sheet.

c. he sum of the debits e#ceeds the sum of the credits in the ncome tatement columns on the wor6 sheet.

d. ash inflows e#ceeded cash outflows.

ANS8 0 D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

(1. 7hich of the items below would appear in the ncome tatement columns of the wor6 sheetB

a. ">uipment  b. @nearned ees

c. Prepaid "#pense d. et =oss

ANS8 D D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

Chapter 4/Completing the Accounting Cycle  _1*5

(2. 7hich of the accounts below would appear in the balance sheet columns of the wor6sheetB a. 9ent "arned

 b. Di:idends

c. @nearned 9e:enue

d. Di:idends and @nearned 9e:enue ANS8 D D/ "asy O0/ $4%'pp

 '/ ''0 'nalytic + 'P' %&easurement

(3. 7hich of the accounts below would appear in the 0alance heet columns of the wor6 sheetB a. er:ice 9e:enue

 b. Prepaid 9ent c. upplies "#pense d. one are correct

ANS8 0 D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

(4. he wor6 sheet at the end of eptember has A4-$$$ in the 0alance heet credit column for 'ccumulated Depreciation. he wor6 sheet at the end of October has A4-(5$ in the 0alance heet credit column for 'ccumulated Depreciation. 7hat was the amount of the

depreciation e#pense adjustment for the month of OctoberB a. amount can not be determined

 b. A4-(5$ c. A4-$$$ d. A(5$

ANS8 D D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

(5. 7hich of the items below doesnot appear on the wor6 sheetB a. adjusting entries

 b. the unadjusted trial balance c. closing entries

d. di:idends

ANS8  D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

(!. 'n indication that the wor6 sheet columns are in balance and the wor6 sheet is completed is a. the word GotalG is written at the bottom of each pair of columns

 b. each pair of columns is double underlined c. each pair of columns has the totals circled d. the final figures are written in in6 

((. 'fter all of the account balances ha:e been e#tended to the 0alance heet columns of the wor6 sheet- the totals of the debit and credit columns are A25-25$ and A21-)25- respecti:ely. 7hat is the amount of net income or net loss for the periodB

a. A3-425 net income  b. A25-25$ net loss

c. A3-425 net loss d. A21-)25 net income

ANS8 ' D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

(). 'fter all of the account balances ha:e been e#tended to the ncome tatement columns of the wor6 sheet- the totals of the debit and credit columns are A)(-5$$ and

A*)-3$$-respecti:ely. 7hat is the amount of the net income or net loss for the periodB a. A1$-)$$ net income

 b. A1$-)$$ net loss c. A*)-3$$ net income d. A)(-5$$ net loss

ANS8 ' D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

(*. On October 1- the company pays rent for twel:e months in ad:ance and debits an asset account. 't year end- the adjusting entry on the wor6 sheet would

a. increase an e#pense account  b. decrease a liability account

c. increase an asset account d. decrease an e#pense account

ANS8 ' D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

)$. On 'ugust 1- a company collects re:enue in ad:ance for the ne#t twel:e months and credits a liability account. he adjusting entry at year end on the wor6 sheet would

a. increase a liability account  b. decrease an asset account

c. decrease a re:enue account d. decrease a liability account

ANS8 D D/ &oderate O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

)1. 7hich of the following is not an essential part of the accounting recordsB a. he journal

 b. he ledger 

c. he chart of accounts d. he wor6 sheet

Chapter 4/Completing the Accounting Cycle  _1*(

)2. 'fter totaling all of the columns in the wor6 sheet- the 0alance heet show debits of A35-!() and the credits of A3*-*$1. his indicates that

a. neither net income or loss can be calculated because that is found on the income statement

 b. the company recorded a net loss of A4-223 c. the company recorded a net income of A4-223

d. he amounts are out of balance and need to be corrected ANS8 ' D/ Difficult O0/ $4%'pp

 '/ ''0 'nalytic + 'P' %&easurement

)3. he column of the income statement show the debits are e>ual to A5!-)** and credits are A!$-333. 7hat do this information mean to the accountantB

a. et income of A3-434  b. et loss of A3-434

c. the accounts are out of balance d. one are correct.

ANS8 ' D/ Difficult O0/ $4%'pp  '/ ''0 'nalytic + 'P' %&easurement

E:ECISE"OT9E 

1. he balances for the accounts listed below appear in the 'djusted rial balance columns of the end%of%period spreadsheet ;wor6 sheet<. ndicate whether each balance should be

e#tended to ;a< an ncome tatement column or ;b< a 0alance heet column. ;1< 9etained "arnings ;2< Di:idends ;3< Depreciation "#pense ;4< 'ccumulated Depreciation ;5< ees earned ;!< @nearned ees ;(< upplies ;)< upplies "#pense ANS8

;1< 0alance sheet column ;2< 0alance sheet column ;3< ncome statement column ;4< 0alance sheet column ;5< ncome statement column ;!< 0alance sheet column ;(< 0alance sheet column ;)< ncome statement column D/ "asy O0/ $4%$1

2. n the 0alance heet columns of the end%of%period spreadsheet ;wor6 sheet< for ugar ompany. for the current year- the Debit column total is A5!3-43$- and the redit column total is A544-21$ before the amount for net income or net loss has been included. n

 preparing the income statement from the end%of%period spreadsheet ;wor6 sheet<- what is the amount of net income or net lossB

ANS8

' net income of A1*-22$ D/ "asy O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement OP/ "#ample "#ercise 4%2

3. 'aron Daniel owns and operates 9each t 0aseball 0atting ages ompany. On anuary 1-2$$)- 'aron Daniel- the balance in capital stoc6 was A1$$-$$$ and retained earnings had a  balance of A212-$$$ During the year 'aron in:ested an additional A2$-$$$ and the

company paid cash di:idends of A35-$$$. or the year ended December 31- 2$$)- 9each t 0aseball 0atting ages reported a net income of A5!-()$. Prepare a statement of retained earnings for the year ended December 31- 2$$).

ANS8

9each t 0aseball 0atting ages ompany tatement of 9etained "arnings or the ear "nded December 31- 2$$)

9etained earnings anuary 1- 2$$) A212-$$$

 et ncome A5!-()$

=ess Di:idends 35-$$$

ncrease in retained earnings 21-()$

9etained earnings- December 31- 2$$) A233-()$

D/ &oderate O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement OP/ "#ample "#ercise 4%3

4. he following accounts appear in an adjusted trial balance of 9each t 0atting ages ompany. ndicate whether each account would be reported in the ;a< current asset- ;b<  property- plant- and e>uipment- ;c< current liabilities- ;d< long%term liability- or ;e<

stoc6holders? e>uity section of the December 31- 2$$)- balance sheet of 9each t 0atting ages ompany. ;1< apital toc6   ;2< 'ccumulated Depreciation ;3< @nearned 9e:enues ;4< &ortgage Payable ;5< ">uipment

;!< otes Payable ;due in 2$1$< ;(< ash

Chapter 4/Completing the Accounting Cycle  _1**

ANS8

;1< toc6holders? e>uity

;2< Property- plant and e>uipment ;3< urrent liabilities

;4< =ong%term liabilities

;5< Property- plant and e>uipment ;!< =ong%term liabilities

;(< urrent assets ;)< urrent assets

D/ "asy O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement OP/ "#ample "#ercise 4%4 5. ompare the differences between a balance sheet and a classified balance sheet. ANS8

' classified balance sheet subsections assets as current assets and property- plant- and e>uipment. t also subsections liabilities as current liabilities and long%term liabilities- and stoc6holders? e>uity.

D/ "asy O0/ $4%$2

 '/ ''0 'nalytic + 'P' %&easurement

!. =ist and describe the purpose of the four closing entries. ANS8

;1< lose re:enues to income summary. ;2< lose e#penses to income summary.

;3< lose income summary to retained earnings. ;4< lose di:idend account to retained earnings. D/ "asy O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement

(. 'fter the accounts ha:e been adjusted at anuary 31- 2$$)- the end of the fiscal year- the following balances are ta6en from the ledger of 9each t 0atting ages ompany

apital toc6 A35!-$$$

Di:idends 12-$$$ ees"arned 123-4$$ 7ages "#pense 3!-$$$ 9ent "#pense 5$-$$$ upplies "#pense 14-3$$ &iscellaneous "#pense 1-$5$

ournali,e the four entries re>uired to close the accounts ANS8

an 31 ees "arned 123-4$$

ncome ummary 123.4$$ 31 ncome ummary 1$1-35$ 7ages "#pense 3!-$$$ 9ent"#pense 5$-$$$ upplies "#pense 14-3$$ &iscellaneous "#pense 1-$5$ 31 ncome ummary 22-$5$ 9etained "arnings 22-$5$ 31 9etained "arnings 12-$$$ Di:idends 12-$$$ D/ &oderate O0/ $4%$3

 '/ ''0 'nalytic + 'P' %&easurement OP/ "#ample "#ercise 4%5

). Prior to adjustment at uly 31- 2$$(- alary "#pense has a debit balance of A3$$-5$$. alaries owed but not paid as of the same date total A1-5$$.

Present the entries to record the following/ ;1< 'ccrued salaries as of uly 31.

;2< losing of alary "#pense as of uly 31.

ANS8 ;1< alary"#pense 1-5$$ alaries Payable 1-5$$ ;2< ncome ummary 3$2-$$$ alary"#pense 3$2-$$$ D/ &oderate O0/ $4%$3  '/ ''0 'nalytic + 'P' %&easurement