Chapter 4--Completing the Accounting Cycle.pdf

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Chapter 4--Completing the Accounting Cycle

Student: ___________________________________________________________________________

1. After analyzing transactions, the next step would be to post the transactions in the ledger. True False

2. The most important output of the accounting cycle is the financial statements. True False

3. The work sheet is not considered a part of the formal accounting records. True False

4. Cross-referencing is useful in assuring that the debits and credits are in balance. True False

5. When accounts do not appear on the unadjusted trial balance but are needed to post adjustments, they are simply added to the account title column.

True False

6. Once the adjusted trial balance is in balance, the flow of accounts will now go into the financial statements. True False

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9. On the income statement, miscellaneous expenses are usually presented as the last item without regard to the dollar amount.

True False

10. The usual presentation of the statement of owner's equity is (1) Beginning capital, (2) Net income or loss, (3) Drawing, (4) Owner's contributions, (5) Ending capital.

True False

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

True False

12. Cash and other assets that may reasonably be expected to be realized in cash, sold, or consumed through the normal operations of a business, usually longer than one year, are called current assets.

True False

13. Prepaid Insurance is an example of a current asset. True False

14. Land is an example of a plant asset. True False

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

True False

16. The amount of the net income for a period appears on both the income statement and the balance sheet for that period.

True False

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18. At the end of the fiscal period, prepaid expenses are reported on the income statement as expenses. True False

19. Office Equipment is an example of a current asset account. True False

20. Capital and Drawing are reported in the owner's equity section of the balance sheet. True False

21. Deferred expenses that benefit a relatively short period of time are listed on the balance sheet as current assets.

True False

22. Unearned revenues that will be earned in a relatively short period of time are listed on the balance sheet as current assets.

True False

23. Accrued expenses are ordinarily listed on the balance sheet as current assets. True False

24. Accrued revenues are ordinarily listed on the balance sheet as current liabilities. True False

25. The income statement is prepared from the adjusted trial balance or the income statement columns on the work sheet.

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27. Accumulated Depreciation is a permanent account. True False

28. The drawing account is a temporary account. True False

29. The balance sheet accounts are referred to as real or permanent accounts. True False

30. Journalizing and posting the adjustments and closing entries updates the ledger for the new accounting period.

True False

31. The income summary account is closed to the owner's capital account. True False

32. The accumulated depreciation account is closed to the income summary account. True False

33. The drawing account is closed to the income summary account. True False

34. The trial balance prepared after all the closing entries have been posted is called a pre-closing trial balance. True False

35. Entries required to close the balances of the temporary accounts at the end of the period are called final entries.

True False

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37. During the closing process, some balance sheet accounts are closed and end the period with a zero balance. True False

38. Closing entries are entered directly on to the work sheet. True False

39. The post-closing trial balance will generally have fewer accounts than the trial balance. True False

40. A post-closing trial balance contains only asset and liability accounts. True False

41. A post-closing trial balance should be prepared before the financial statements are prepared. True False

42. Assets, liabilities, and owner’s capital are real accounts and do not get closed at the end of the period. True False

43. The income summary account is also known as the clearing account. True False

44. All income statement accounts will be closed at the end of the period. True False

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47. Once an account has been closed for the period, inserting a line in the balance columns zeros out the account, making it ready for the following period.

True False

48. The last step of the accounting cycle is to prepare a post-closing trial balance. True False

49. The accounting cycle begins with preparing an unadjusted trial balance. True False

50. Financial statements should be prepared before the closing entries are journalized and posted. True False

51. The unadjusted, adjusted, and final trial balances are prepared during the accounting cycle of a period. True False

52. Any twelve-month accounting period adopted by a company is known as its fiscal year. True False

53. A fiscal year that ends when business activities have reached their lowest point is called the natural business year.

True False

54. All companies must use a calendar year as their fiscal year. True False

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56. The balances of the capital accounts from the Adjusted Trial Balance of the work sheet are extended to the Statement of Owner’s Equity columns.

True False

57. The work sheet is a working paper that accountants can use to summarize adjusting entries and the account balances for the financial statements.

True False

58. In a computerized accounting system, a work sheet may not be necessary because the software program automatically posts entries to the accounts and prepares financial statements.

True False

59. The trial balance may be listed on the work sheet instead of being prepared separately. True False

60. The totals of the Adjusted Trial Balance columns on a work sheet will always be the sum of the Trial Balance column totals and the Adjustments column totals.

True False

61. A work sheet heading is dated for a period of time. True False

62. On the work sheet, the capital and drawing account balances are extended to the Balance Sheet columns. True False

63. After the account balances have been extended from the Adjusted Trial Balance columns on the work sheet, the difference between the initial totals of the Balance Sheet debit and credit columns is Net Income or Net Loss.

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65. A net loss is shown on the work sheet in the credit columns of both the Income Statement columns and the Balance Sheet columns.

True False

66. Net income is shown on the work sheet in the Income Statement debit column and the Balance Sheet credit column.

True False

67. If the totals of the Income Statement debit and credit columns of a work sheet are $27,000 and $29,000, respectively, after all account balances have been extended, the amount of the net loss is $2,000.

True False

68. The worksheet and the financial statements both require dollar signs. True False

69.

The balance in the capital account on the worksheet will equal the amount presented in the balance sheet. True False

70. Since the adjustments are entered on the work sheet, it is not necessary to record them in the journal or post them to the ledger.

True False

71. The chart of accounts, the journal, and the ledger are essential parts of the accounting system. True False

72. The closing process is sometimes referred to as closing the books. True False

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74. Real accounts are not permanent accounts. True False

75. In the accounting cycle, the last step is A. preparing the financial statements

B. journalizing and posting the adjusting entries C. preparing a post-closing trial balance

D. journalizing and posting the closing entries

76. 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 Income Statement, adjusted trial balance, Balance Sheet C. Preparation of adjusted trial balance, cross-referencing, journalizing D. Preparation of adjustments, adjusted trial balance, posting

77. What is the major difference between the Unadjusted Trial Balance and the Adjusted Trial Balance? A. The Adjusted Trial Balance will show the net income (loss) as an additional account.

B. Unlike the Adjusted Trial Balance, the Unadjusted Trial Balance will continue with the end-of-period processing even if it is not in balance.

C. The Adjusted Trial Balance includes the postings of the adjustments for the period in the balance of the accounts.

D. The Adjusted Trial Balance will be used to record the adjustments for the period.

78. Once the adjusting entries are posted, the Adjusted Trial Balance is prepared to A. verify that the debits and credits are in balance.

B. verify that the net income correctly flows into the statement of owner’s equity from the income statement C. verify that the net income (loss) is correct for the period.

D. verify the correct flow of accounts into the financial statements.

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80. Accumulated Depreciation appears on the A. balance sheet in the current assets section

B. balance sheet in the property, plant and equipment section C. balance sheet in the long-term liabilities section

D. income statement as an operating expense

81. Notes Receivable due in 350 days appear on the A. balance sheet in the current assets section

B. balance sheet in the fixed assets section C. balance sheet in the current liabilities section D. income statement as an expense

82. Unearned Fees appear on the

A. balance sheet in the current assets section B. balance sheet as a current liability

C. balance sheet in the owner's equity section D. income statement as revenue

83. Which one of the fixed asset accounts listed below will not have a related contra asset account? A. Office Equipment

B. Land

C. Delivery Equipment D. Building

84. Prepaid insurance is reported on the balance sheet as a A. current asset

B. fixed asset C. current liability D. long-term liability

85. The income statement is prepared from: A. the adjusted trial balance.

B. the income statement columns of the work sheet.

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86. Round-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 intent of inflating revenues 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.

87. The Statement of Owner’s Equity 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

88. The income statement should be prepared

A. before the statement of owner’s equity and balance sheet

B. after the statement of owner’s equity and before the balance sheet C. after the statement of owner’s equity and balance sheet

D. after the balance sheet and before the statement of owner’s equity

89. Use the following information in the adjusted trial balance for Stockton Company to answer the following questions.

Stockton Company Adjusted Trial Balance

For the Year ended December 31, 20XX

Cash $ 6,530

Accounts Receivable 2,100

Prepaid Expenses 700

Equipment 13,700

Accumulated Depreciation $ 1,100

Accounts Payable 1,900

Notes Payable 4,300

Bob Steely, Capital 12,940

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Determine the net income (loss) for the period.

A. Net Income $9,250 B. Net Loss $790 C. Net Loss $5,670 D. Net Income $3,580

Cash $ 6,530

Equipment 13,700

Notes Payable 4,300

Bob Steely, Withdrawals 790

Fees Earned 9,250

Wages Expense 2,500

Rent Expense 1,960

Utilities Expense 775

Depreciation Expense 250

Miscellaneous Expense 185

Totals $29,490 $29,490

Determine the Owner’s Equity ending balance for the period.

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Cash $ 6,530

Equipment 13,700

Notes Payable 4,300

Fees Earned 9,250

Wages Expense 2,500

Rent Expense 1,960

Totals $29,490 $29,490

Determine total assets.

A. $24,130 B. $15,830 C. $21,930 D. $23,030

Cash $ 6,530

Equipment 13,700

Notes Payable 4,300

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Determine the current assets.

A. $23,030 B. $9,330 C. $21,930 D. $8,630

Cash $ 6,530

Equipment 13,700

Notes Payable 4,300

Fees Earned 9,250

Wages Expense 2,500

Rent Expense 1,960

Totals $29,490 $29,490

Determine the total liabilities for the period.

A. $1,900 B. $6,200 C. $4,300 D. $20,240

94. The Balance Sheet should be prepared

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95. The Statement of Owner’s Equity begins with the beginning balance followed by A. plus Net Income (loss) less withdrawals

B. plus Net Income (loss) plus investments C. plus investments less withdrawals

D. plus investments plus Net Income (loss) less withdrawals

96. The Income Statement will include the following accounts

A. Revenues less Expenses (ordered largest to smallest amount) with Miscellaneous Expense listed last B. Revenues less Expenses (ordered smallest to largest amounts) with Miscellaneous Expense listed last C. Revenues less Expenses (ordered in alphabetical order)

D. Revenues less Expenses (order is not important)

97. The classified Balance Sheet will subsection the assets section as follows A. Current Assets and Other Assets

B. Current Assets and Property, Plant, and Equipment C. Current Assets and Short-Term Assets

D. Other Assets and Property, Plant and Equipment

98. The classified Balance Sheet will divide its Liabilities Section as the following subsections A. Current Liabilities and Long-Term Liabilities

B. Current Liabilities and Other Liabilities C. Other Liabilities and Long-Term Liabilities D. Present Liabilities and Tomorrow’s Liabilities

99. Short-term liabilities are those liabilities that A. will be paid in less than one year

B. are due to be paid in 5 to 10 years C. are due to be paid in more than one year D. are owed to the owner and will never be paid

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101. Balance sheet accounts

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

C. have zero balances after the closing entries have been posted D. are not affected by adjustments

102. On which financial statement will Income Summary be shown? A. Statement of Owner’s Equity

B. Balance Sheet C. Income Statement D. No financial statement

103. Which of the following is not true about closing entries?

A. There are four closing entries that update the owner’s equity account.

B. After the second closing entry, the income summary account is equal to the net income or (loss) for the period.

C. All real accounts are closed at the end of the period.

D. By closing nominal accounts at the end of the period to zero, it is possible to isolate next period’s information correctly.

104. The income summary account is also called A. the imprest account

B. the clearing account C. the adjustments account D. the helpful account

105. After posting the second closing entry to the income summary account, the balance will be equal to A. zero.

B. owner’s equity.

C. revenues for the period

D. the net income or (loss) for the period.

106. What is the last account that should be listed in the Post Closing Trial Balance? A. Income Summary

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107. Which of the following account groups are all considered nominal accounts? A. Cash, Owner’s Equity, Wages Payable

B. Prepaid Insurance, Property, Plant & Equipment, Fees Earned C. Capital Account, Dividend Account, Income Summary D. Rent Revenue, Fees Earned, Miscellaneous Expense

108. There are four closing entries. The first one is to close ____, the second one is to close ____, the third one is to close ____, and the last one is to close ____.

A. Revenues, expenses, income summary, drawing account B. Expenses, assets, income summary, capital account

C. Capital account, drawing account, income summary, assets D. Drawing account, income summary, expenses, revenues

109. Closing entries

A. need not be journalized if adjusting entries are prepared

B. need not be posted if the financial statements are prepared from the work sheet C. are not needed if adjusting entries are prepared

D. must be journalized and posted

110. Closing entries are dated in the journal as of

A. the date they are actually journalized, although they are generally prepared after the end of the accounting period

B. the last day of the accounting period, although they are actually journalized after the end of the accounting period

C. the first day of the accounting period, although they are actually journalized after the end of the accounting period

D. the first day of the subsequent accounting period

111. Which of the accounts below would be closed by posting a debit to the account? A. Unearned Revenue

B. Fees Earned

C. Josh Morton, Drawing D. Miscellaneous Expense

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113. Which of the following accounts will not be closed to Income Summary at the end of the fiscal year? A. Salaries Expense

B. Fees Earned C. Unearned Rent

D. Depreciation Expense

114. Which of the following accounts will be closed to the Capital account at the end of the fiscal year? A. Rent Expense

B. Fees Earned C. Income Summary D. Depreciation Expense

115. The entry to close the appropriate insurance account at the end of the accounting period is A. debit Income Summary; credit Prepaid Insurance

B. debit Prepaid Insurance; credit Income Summary C. debit Insurance Expense; credit Income Summary D. debit Income Summary; credit Insurance Expense

116. Which of the following accounts ordinarily appears in the post-closing trial balance? A. Fees Earned

B. Supplies Expense C. Zane White, Drawing D. Unearned Rent

117. The post-closing trial balance differs from the adjusted trial balance in that it A. does not take into account closing entries

B. does not take into account adjusting entries C. does not include balance sheet accounts D. does not include income statement accounts

118. The following accounts were taken from the Adjusted Trial Balance columns of the work sheet:

Fees Earned 17,400

Depreciation Expense 1,300

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Net income for the period is

A. $3,200 B. $12,100 C. $17,400 D. $8,900

119. A summary of selected ledger accounts appear below for Alberto’s Plumbing Services for the current calendar year end.

Alberto, Capital

12/31 8,500 1/1 6,500

12/31 15,000

Alberto, Drawing

6/30 3,500 12/31 8,500

11/30 5,000

Income Summary

12/31 18,500 12/31 33,500

12/31 15,000

Net income for the period is

A. $13,000 B. $33,500 C. $15,000 D. $18,500

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121. The journal entry to close the Fees Earned, $750, and Rent Revenue, $175, accounts on December 31st during the closing process would be:

A. Dec. 31 Fees Earned 750 Rent Revenue 175 Income Summary 925 B. Dec. 31 Income Summary 925 Fees Earned 750 Rent Revenue 175 C. Dec. 31 Revenues 925 Income Summary 925 D. Dec. 31 Income Summary 925 Revenues 925

122. Use the following worksheet to answer the following questions.

Finley Company Worksheet For the Year Ended December 31, 2014 Adjusted Trial Balance

Income Statement Balance Sheet

Account Title Debit Credit Debit Credit Debit Credit

Cash 48,000 48,000

Accounts Receivable 18,000 18,000

Supplies 6,000 6,000

Equipment 57,000 57,000

Accumulated Depr-Equip 18,000 18,000

Accounts Payable 25,000 25,000

Wages Payable 6,000 6,000

C. Finley, Capital 33,000 33,000

C. Finley, Drawing 3,000 3,000

Fees Earned 155,000 155,000

Wages Expense 63,000 63,000

Rent Expense 27,000 27,000

Depreciation Expense 15,000 15,000

Totals 237,000 237,000 105,000 155,000 132,000 82,000

Net Income (Loss) 50,000 50,000

155,000 155,000 132,000 132,000

The journal entry to close revenues would be:

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Cash 48,000 48,000

Equipment 57,000 57,000

Fees Earned 155,000 155,000

Totals 237,000 237,000 105,000 155,000 132,000 82,000

155,000 155,000 132,000 132,000

Based on the preceding trial balance, the entry to close expenses would be:

A. Wages Expense 63,000 Rent Expense 27,000 Depreciation Expense 15,000

Income Summary 105,000 B. Expenses 105,000

Income Summary 105,000 C. Wages Expense 63,000

Rent Expense 27,000 Depreciation Expense 15,000

C. Finley, Drawing 105,000 D. Income Summary 105,000 Wages Expense 63,000 Rent Expense 27,000 Depreciation Expense 15,000

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Cash 48,000 48,000

Equipment 57,000 57,000

Fees Earned 155,000 155,000

Totals 237,000 237,000 105,000 155,000 132,000 82,000

155,000 155,000 132,000 132,000

Based on the preceding trial balance, the entry to close income summary would be:

A. debit C. Finley, Capital $50,000; credit Income Summary $50,000 B. debit Income Summary $155,000; credit C. Finley, Capital $155,000 C. debit Income Summary $50,000, credit C. Finley, Capital $50,000 D. debit C. Finley, Capital $9,000; credit Income Summary $9,000

Cash 48,000 48,000

Equipment 57,000 57,000

Fees Earned 155,000 155,000

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Based on the preceding trial balance, the entry to close C. Finley, Drawing would be:

A. debit C. Finley, Capital $3,000, credit C. Finley, Drawing $3,000 B. debit C. Finley, Capital $12,000, credit C. Finley, Drawing $12,000 C. debit C. Finley, Drawing $3,000; credit C. Finley, Capital $3,000 D. debit C. Finley, Drawing $12,000; credit C. Finley, Capital $12,000

Cash 48,000 48,000

Equipment 57,000 57,000

Fees Earned 155,000 155,000

Totals 237,000 237,000 105,000 155,000 132,000 82,000

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127. The proper sequence of steps in the accounting cycle is as follows

A. analyze and record transactions, post transaction to the ledger, prepare a trial balance, prepare financial statements, journalize closing entries, analyze adjustment data and prepare adjusting entries

B. prepare a trial balance, analyze adjustment data, prepare adjusting entries, prepare financial statements, journalize closing entries and post to the ledger, analyze and record transactions, post transactions to the ledger C. analyze and record transactions, post transactions to the ledger, prepare a trial balance, analyze adjustment data, prepare adjusting entries, prepare financial statements, journalize closing entries and post to the ledger, and finally prepare a post-closing trial balance

D. prepare financial statements, journalize closing entries and post to the ledger, analyze and record

transactions, post transactions to the ledger, prepare a trial balance, analyze adjustment data, prepare adjusting entries

128. The following are steps to the accounting cycle. Of the following, which step should be done first? A. Closing entries are journalized and posted to the ledger.

B. Transactions are posted to the ledger.

C. Adjusting entries are journalized and posted to the ledger. D. Financial statements are prepared.

129. The following are steps in the accounting cycle. Of the following, which would be prepared last? A. An adjusted trial balance is prepared.

B. Transactions are posted to the ledger. C. An unadjusted trial balance is prepared.

D. Adjusting entries are journalized and posted to the ledger.

130. The accounting cycle requires three trial balances be done. In what order should they be prepared? A. Post-closing, unadjusted, adjusted

B. Unadjusted, post-closing, adjusted C. Unadjusted, adjusted, post-closing D. Post-closing, adjusted, unadjusted

131. The fiscal year selected by companies A. is the same as the calendar year

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132. A 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 government

C. always begins on January 1 and ends on December 31 of the same year D. should end at the height of the business's annual operating cycle

133. The natural business year

A. is a fiscal year that ends when business activities are at its lowest point. B. is a calendar year that ends when business activities are at its lowest point. C. is a fiscal year that ends when business activities are at its highest point. D. is a calendar year that ends when business activities are at its highest point.

134. The worksheet

A. is an integral part of the accounting cycle

B. eliminates the need to rewrite the financial statements C. is a working paper that is required

D. is used to summarize account balances and adjustments for the financial statements

135. Which one of the steps below is not aided by the preparation of the work sheet? A. preparing the adjusted trial balance

B. posting to the general ledger C. preparing the financial statements D. preparing the closing entries

136. A work sheet includes columns for A. adjusting entries

B. closing entries C. reversing entries

D. adjusting and closing entries

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138. The difference between the totals of the debit and credit columns of the Adjusted Trial Balance columns on a work sheet

A. is the amount of net income or loss

B. indicates there is an error on the work sheet C. is the amount of retained earnings

D. is the difference between revenue and expenses

139. Net income appears on the work sheet in the A. debit column of the Balance Sheet columns B. debit column of the Adjustments columns C. debit column of the Income Statement columns D. credit column of the Income Statement columns

140. A net loss appears on the work sheet in the A. debit column of the Balance Sheet columns B. credit column of the Balance Sheet columns C. debit column of the Income Statement columns D. credit column of the Adjustments columns

141. After net income is entered on the work sheet, the Balance Sheet debit and credit columns must A. be the same amount as the total amount of the Income Statement debit and credit columns

B. equal each other

C. be the same amount as the total amount in the Adjusted Trial Balance debit and credit columns

D. not be equal to each other and need not be the same total amounts as any other pair of columns on the work sheet

142. Which of the statements below indicates that a company earned a net income for the period? A. The sum of the credits exceeds the sum of the debits in the Balance Sheet columns on the work sheet. B. The sum of the credits exceeds the sum of the debits in the Income Statement columns on the work sheet. C. The sum of the debits exceeds the sum of the credits in the Income Statement columns on the work sheet. D. Cash inflows exceeded cash outflows.

143. Which of the items below would appear in the Income Statement columns of the work sheet? A. Equipment

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144. Which of the accounts below would not appear in the balance sheet columns of the worksheet? A. Chad Daniels, Drawing

B. Rent Earned C. Unearned Revenue

D. Chad Daniels, Drawing and Unearned Revenue

145. Which of the accounts below would appear in the Balance Sheet columns of the work sheet? A. Service Revenue

B. Prepaid Rent C. Supplies Expense D. None are correct

146. The work sheet at the end of July has $5,950 in the Balance Sheet credit column for Accumulated Depreciation. The work sheet at the end of August has $7,600 in the Balance Sheet credit column for Accumulated Depreciation. What was the amount of the depreciation expense adjustment for the month of August?

A. amount can not be determined B. $7,600

C. $5,950 D. $1,650

147. Which of the items below does not appear on the work sheet? A. adjusting entries

B. the unadjusted trial balance C. closing entries

D. the drawing account

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149. After all of the account balances have been extended to the Balance Sheet columns of the work sheet, the totals of the debit and credit columns are $38,755 and $32,735, respectively. What is the amount of net income or net loss for the period?

A. $6,020 net income B. $38,755 net loss C. $6,020 net loss D. $32,735 net income

150. After all of the account balances have been extended to the Income Statement columns of the work sheet, the totals of the debit and credit columns are $77,500 and $83,900, respectively. What is the amount of the net income or net loss for the period?

A. $6,400 net income B. $6,400 net loss C. $83,900 net income D. $77,500 net loss

151. On September 1, the company pays rent for twelve months in advance and debits an asset account. At year end, the adjusting entry on the work sheet would

A. increase an expense account B. decrease a liability account C. increase an asset account D. decrease an expense account

152. On March 1, a company collects revenue in advance for the next twelve months and credits a liability account. The adjusting entry at year end on the work sheet would

A. increase a liability account B. decrease an asset account C. decrease a revenue account D. decrease a liability account

153. Which of the following is not an essential part of the accounting records? A. The journal

B. The ledger

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154. After all of the account balances have been extended to the Balance Sheet columns of the work sheet, the totals of the debit and credit columns show debits of $37,686 and the credits of $41,101. This indicates that A. neither net income or loss can be calculated because it is found on the income statement

B. the company has a net loss of $3,415 for the period C. the company has a net income of $3,415 for the period D. The amounts are out of balance and need to be corrected

155. The income statement columns in the worksheet show that debits are equal to $55,800 and credits are $67,520. What does this information mean to the accountant?

A. Net income of $11,720 B. Net loss of $11,720

C. The accounts are out of balance, indicating an error has been made. D. The accounts have not been updated.

156. Bob Evans owns a business, Beachside Realty, that rents condominiums and furnishings. Below is the adjusted trial balance at December 31, 2014.

Debit Credit

Cash $ 1,500

Accounts receivable 2,000

Interest receivable 100

Prepaid insurance 1,600

Notes receivable (long-term) 2,800

Equipment 15,000

Accumulated depreciation $3,000

Accounts payable 2,400

Accrued expenses payable 3,920

Income taxes payable 2,700

Unearned rent fees 500

Bob Evans, Capital 7,700

Bob Evans, Drawing 2,000

Rent fees earned 37,000

Furniture rental revenue 1,200

Interest revenue 100

Wages expense 19,000

Depreciation expense 1,800

Utilities expense 320

Insurance expense 700

Maintenance expense 9,000

Income tax expense 2,700

$58,520 $58,520

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Debit Credit

Cash $ 1,500

Equipment 15,000

$58,520 $58,520

The entry required to close the expense accounts at the end of the period includes a:

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158. The balances for the accounts listed below appear in the Adjusted Trial balance columns of the end-of-period spreadsheet (work sheet). Indicate whether each balance should be extended to an Income Statement column or (b) a Balance Sheet column.

1. Dobson, Capital 2. Dobson, Drawing 3. Depreciation Expense 4. Accumulated Depreciation 5. Fees earned

6. Unearned Fees 7. Supplies

8. Supplies Expense

159. The end-of-period spreadsheet (work sheet) for the current year for Jamal Company shows Balance Sheet columns with a debit total of $630,430 and a credit total of $614,210. This is before the amount for net income or net loss has been included. In preparing the income statement from work sheet, what is the amount of net income or net loss?

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161. The following accounts appear in an adjusted trial balance of Brock Pool Service Company. Indicate whether each account would be reported in the (a) current assets, (b) property, plant, and equipment, (c) current liabilities, (d) long-term liabilities, or (e) owner’s equity section of the December 31, 2010, balance sheet of Brock Pool Service Company.

1. Taylor Brock, Capital 2. Accumulated Depreciation 3. Unearned Revenues 4. Mortgage Payable 5. Equipment

6. Notes Payable (due in 2012) 7. Cash

8. Accounts Receivable

162. Describe a classified balance sheet.

163. List and describe the purpose of the four closing entries.

(33)

164. After the accounts have been adjusted at January 31, 2014, the end of the fiscal year, the following balances are taken from the ledger of Taylor Pool Service Company:

Hope Taylor, Capital $349,000 Hope Taylor, Drawing 5,000

Fees Earned 124,600

Wages Expense 29,000

Rent Expense 43,000

Supplies Expense 7,300

Miscellaneous Expense 5,700

Journalize the four entries required to close the accounts

165. Prior to adjustment at August 31, 2014, Salary Expense has a debit balance of $298,500. Salaries owed but not paid as of the same date total $7,200.

Present the entries to record the followin g:

(1) Accrued salaries as of August 31.

(2) Closing of Salary Expense as of August 31.

(34)

166. The following are all the steps in the accounting cycle. List them in the order in which they should be done.

- Closing entries are journalized and posted to the ledger. - An unadjusted trial balance is prepared.

- An optional end-of-period spreadsheet (work sheet) is prepared. - A post-closing trial balance is prepared.

- Adjusting entries are journalized and posted to the ledger. - Transactions are analyzed and recorded in the journal. - Adjustment data are assembled and analyzed.

- Financial statements are prepared. - An adjusted trial balance is prepared. - Transactions are posted to the ledger.

167. If working papers are not considered part of the formal accounting records, then why are they used?

168. Explain how net income or loss is determined by using the work sheet.

(35)

169. You evaluate loan requests as part of your job at Beach Front National Bank. One loan request you received is from Surfer Dude Supplies, a small proprietorship. Tracy Roberts, the owner, is requesting $75,000 and brings you a trial balance (or Statement of Accounts) for his first year of operations ended December 31, 2010.

REQUIRED: While you are willing to work with Tracy, how would you explain to him that a complete set of financial statements from his accountant would be more useful for evaluating the loan request?

170. You have just accepted your first job out of college, which requires you to evaluate loan requests at Beach Front National Bank. The first loan request you receive is from Surfer Dude Enterprises, a small

proprietorship. Marty Monroe, the owner, is requesting $75,000 and brings you the following trial balance (or Statement of Accounts) for his first year of operations ended December 31, 2010.

What three accounts do you think should be relabeled for greater clarity?

Surfer Dude Enterprises Statement of Accounts December 31, 2010

Cash 2,050

Billings Due from Others 15,070

Office Supplies 7,470

Trucks 26,370

Equipment 8,090

Amounts Owed to Others 2,850

Investment in Business 23,500

Service Revenues 73,650

Rent Expense 7,330

Insurance Expense 2,400

Utilities Expenses 700

Miscellaneous Expenses 470

100,000 100,000

(36)

171. You have just accepted your first job out of college, which requires you to evaluate loan requests at Beach Front National Bank. The first loan request you receive is from Surfer Dude Enterprises, a small

proprietorship. Marty Monroe, the owner, is requesting $75,000 and brings you the following trial balance (or Statement of Accounts) for his first year of operations ended December 31, 2010.

Which of the following accounts do you think might need to be adjusted before an accurate set of financial statements could be prepared?

Surfer Dude Enterprises

Statement of Accounts December 31, 2010

Cash 2,050

Billings Due from Others 15,070

Office Supplies 7,470

Trucks 26,370

Equipment 8,090

Amounts Owed to Others 2,850

Investment in Business 23,500

Service Revenues 73,650

Rent Expense 7,330

Insurance Expense 2,400

Miscellaneous Expenses 470

100,000 100,000

(37)

172. Hakik Enterprises offers rug cleaning services to business clients. Below is the trial balance for Hakik Enterprises, which was prepared on the end of period spreadsheet (work sheet) for the year ended July 31, 2010.

Hakik Enterprises

End of Period Spreadsheet (Work Sheet)

For the Year Ended July 31, 2010

Trial Balance Adjustments Adjusted Trial Balance

Debit Credit Debit Credit Debit Credit

Cash 36

Prepaid Insurance 12

Fees Receivable 56

Supplies 12

Equipment 60

Accum. Depreciation 12

Unearned Revenue 20

Accounts Payable 32

Wages Payable

Ramon Hakik, Capital 84

Ramon Hakik, Drawings 4

Service Revenue 80

Advertising Expense 28

Wage Expense 20

Insurance Expense

Supplies Expense

Depreciation Expense

Totals 228 228

REQUIRED: Enter the adjustment data in the work sheet for the transactions shown below and place the balances in the Adjusted Trial Balance columns.

a) The equipment is estimated to last for 5 years with no salvage value. The asset will be depreciated evenly over its useful life. Record one month’s depreciation.

b) Accrued Wages $2. c) Unused supplies on hand $8.

d) Of the unearned revenue, 75% has been earned.

(38)

173. Hakik Enterprises offers rug cleaning services to business clients. Below are the adjustments data for the year ended July 31, 2010. REQUIRED: Using this information along with the spreadsheet below, record the adjusting entries in proper general journal form.

Adjustments:

a) The equipment is estimated to last for 5 years with no salvage value. The asset will be depreciated evenly over its useful life. Please record one month’s depreciation.

b) Accrued Wages $2.

c) Unused supplies on hand $8.

d) Of the unearned revenue, 75% has been earned.

e) Unexpired insurance remaining at the end of the month, $9.

Hakik Enterprises

End of Period Spreadsheet (Work Sheet)

For the Year Ended July 31, 2010

Trial Balance Adjustments Adjusted Trial Balance

Debit Credit Debit Credit Debit Credit

Cash 36

Prepaid Insurance 12

Fees Receivable 56

Supplies 12

Equipment 60

Accum. Deprec. - Equip 12

Unearned Revenue 20

Accounts Payable 32

Wages Payable

Ramon Hakik, Capital 84

Ramon Hakik, Drawings 4

Service Revenue 80

Advertising Expense 28

Wage Expense 20

Insurance Expense

Supplies Expense

Depreciation Expense

Totals 228 228

(39)

Debit Credit

Cash $ 1,500

Equipment 15,000

Total $ 58,520 $ 58,520

(40)

Debit Credit

Cash $ 1,500

Equipment 15,000

$ 58,520 $ 58,520

Prepare the entry required to close the expense accounts at the end of the period.

(41)

Debit Credit

Cash $ 1,500

Equipment 15,000

$ 58,520 $ 58,520

(42)

Debit Credit

Cash $ 1,500

Equipment 15,000

$ 58,520 $ 58,520

Prepare the entry required to close the Drawing account at the end of the period.

(43)

178. Each of the following transactions for Morrison Company requires an adjusting entry, which if omitted, will overstate or understate assets, liabilities, owner’s equity, revenues, expenses, or net income. Indicate the amount and direction of the misstatement that would result if the end of period adjusting entry suggested by the transaction was omitted. Place your results in the table following the transactions and use (+) for overstate, (-) for understate, and (NE) for no effect.

1. Morrison purchased supplies on December 1 for $900. On December 31, $350 of supplies were on hand.

2. Prepaid insurance had a debit balance of $5,400 on December 1, which represented a prepayment for 2 years of insurance.

3. The unearned rent revenue account has a credit balance of $390 on December 1, which represents 3 months rent.

Transaction Assets Liabilities Owner’s Equity Revenues Expenses Net Income

1.

2.

3.

(44)

180. Identify which of the following accounts should be closed with a debit or a credit to Income Summary at the end of the fiscal year. If it is not closed to Income Summary, mark as n/a.

1. Utilities Payable 2. Utilities Expense 3. Supplies

4. Supplies Expense 5. Fees Earned 6. Unearned Fees 7. Accounts Receivable 8. Jason Hill, Drawing 9. Jason Hill, Capital

10. Accumulated Depreciation - Equipment 11. Depreciation Expense - Equipment 12. Equipment

13. Prepaid Insurance 14. Insurance Expense

181. The balances for the accounts listed below appeared in the Adjusted Trial Balance columns of the work sheet. Indicate whether each balance should be extended to (a) the Income Statement columns or (b) the Balance Sheet columns.

(1) Salaries Payable (7) Felipe Ramos, Drawing

(2) Fees Earned (8) Equipment

(3) Accounts Payable (9) Accounts Receivable (4) Felipe Ramos, Capital (10) Accumulated Depreciation (5) Supplies Expense (11) Salary Expense (6) Unearned Rent (12) Depreciation Expense

(45)

182. Indicate whether each of the following would be reported in the financial statements as a(n) (a) current asset, (b) current liability, (c) revenue, or (d) expense:

(1) Supplies (5) Supplies Expense

(2) Unearned Fees (6) Prepaid Insurance (3) Prepaid Advertising (7) Accounts Payable (4) Advertising Expense (8) Fees Earned

183. The following accounts were taken from the Adjusted Trial Balance columns of the work sheet for April 30, 2010 for Finnegan Co.:

Fees Earned 78,000

Rent Expense 34,000

Prepaid Insurance 6,000

Supplies 400

Prepare an income statement.

(46)

Prepare an income statement.

185. The following data were taken from the Balance Sheet columns of the work sheet for April 30, 2010 for Mackenzie Company:

Accumulated Depreciation-Trucks $42,400

Prepaid Rent 6,800

Supplies 850

Unearned Fees 7,310

Trucks 49,300

Cash 3,400

Mackenzie, Capital ?

Prepare a classified balance sheet.

186. Indicate whether each of the following would be reported in the section of financial statements identified as (a) current asset, (b) property, plant, and equipment, (c) current liability, (d) revenue, or (e) expense:

(1) Automobile

(2) Accumulated depreciation

(3) Rent expense

(4) Fees earned

(5) Salaries payable

(47)

187. The following balance sheet contains errors.

Brock Morton Services Co. Balance Sheet

For the Year Ended December 31, 2010

Assets Liabilities

Current assets: Current liabilities:

Cash $ 7,170 Accounts receivable $ 10,000 Accounts payable 7,500 Accum. depr-building 12,525

Supplies 2,590 Accum. depr-equipment 7,340

Prepaid insurance 800 Net income 11,500

Land 24,000

Total current assets $ 42,060 Total liabilities $ 41,365

Owner's Equity

Property, plant, and equipment: Wages payable $ 1,500 Building $43,700 Brock Morton, Capital 88,645 Equipment 29,250 Total owner's equity $ 90,145 Total property, plant,

and equipment

72,950

Total liabilities and

Total assets $131,510 owner's equity $131,510

(48)

188. The following is the adjusted trial balance for Nadia Company.

Nadia Company Adjusted Trial Balance December 31, 2014

Cash 5,130

Equipment 12,400

Accumulated Depreciation 2,200

Accounts Payable 700

Notes Payable - Due on June 30, 2011 3,070

Nadia Porter, Capital 13,000

Nadia Porter, Drawing 700

Fees Earned 10,930

Wages Expense 2,450

Rent Expense 1,900

Utilities Expense 1,475

Totals 29,900 29,900

Prepare an Income Statement, Balance Sheet, and Statement of Owner’s Equity. Assume that the capital account started with a beginning balance of $10,000.

189. Prepare an income statement and a statement of owner’s equity, for the month ended August 31, 2014, from the following T-Accounts of Marley Company.

Prepaid Insurance

Accou nts Receiv able

Unearned Revenues

Wages Payable

(49)

Marley, Capital

Marley , Drawin g

Income Summary

Fees Earned

6,500 3,200 9,775 7,500 2,800 3,200 3,995 2,000

5,780 5,780 275

3,200 9,775

Wages Expense

Rent Expens e

Insurance Expense

Utilities Expense

2,200 990 285 95

425 990 285 95

2,625

190. Prepare an income statement and a statement of owner’s equity for the month ended September 30, 2010 from the T-accounts below of Carson Company.

Prepaid Insurance

Accou nts Receiv able

Unearned Revenues

Wages Payable

1,400 1,600 1,200 435

120 400 200

(50)

Wages Expense

Rent Expens e

Insurance Expense

Utilities Expense

3,200 1,130 80 125

225 1,130 80 125

3,425

191. Selected ledger accounts appear below for Fulton Surveying Services for 2014.

Fulton, Capital

Fulton,

Drawing

12/31 25,000 1/1 20,000 3/31 12,000 12/31 25,000

12/31 48,000 12/22 13,000

Income Summary

12/31 19,000 12/31 67,000 12/31 48,000

Prepare a statement of owner's equity.

(51)

192. On the basis of the following data taken from the Adjusted Trial Balance columns of the work sheet for the year ended March 31 for Boles Athletic Company, journalize the four closing entries.

Cash $ 30,000

Supplies 5,000

Equipment 169,900

Jason Boles, Capital 71,600

Jason Boles, Drawing 47,000

Fees Earned 510,000

Salary Expense 244,500

Rent Expense 48,000

$626,100 $626,100

193. After all adjustments have been made, but before the accounts have been closed, the following balances were taken from the ledger of Ramona’s Designs:

Accounts Payable $ 27,600 Rent Expense $ 32,700 Accounts Receivable 64,500 Salary Expense 41,390 Accumulated Depreciation 73,325 Salaries Payable 8,150

Cash 17,150 Service Revenue 186,000

Depreciation Expense 13,500 Supplies 1,500

Equipment 165,000 Supplies Expense 2,500

Insurance Expense 2,510 Ramona Cross, Capital 99,950 Prepaid Insurance 6,275 Ramona Cross, Drawing 48,000

(52)

194. On the basis of the following information taken from the Adjusted Trial Balance columns of the work sheet for the month ended September 30th, journalize the closing entries for Perez Roofing Company.

Cash $22,500.00

Accounts Receivable 3,575.00

Office Supplies 2,850.00

Repair Parts 3,785.00

Machinery 17,750.00

Accumulated Depreciation 3,250.00

Accounts Payable 1,150.00

Notes Payable 6,500.00

Sam Perez, Capital 2,500.00

Sam Perez, Drawing 1,750.00

Service Revenue 47,200.00

Wages Expense 4,840.00

Office Supplies Expense 1,275.00

Repair Parts Expense 925.00

Depreciation Expense 1,350.00

$60,600.00 $60,600.00

195. The following adjusted trial balance is the result of the adjustments made at the end of the month of March for Erik Martin Company. Utilize these adjusted values to perform the closing entries for Erik Martin Company.

Cash $24,750.00

Store Supplies 4,785.00

Machinery 9,750.00

Erik Martin, Capital 19,725.00

Erik Martin, Drawing 6,250.00

Office Supplies Expense 1,465.00

Store Supplies Expense 5,150.00

Depreciation Expense 1, 575.00 ________

$69,425.00 $69,425.00

(53)

196. The following adjusted trial balance is the result of the adjustments made at the end of the month of July for Ladonna Douglas Company. Utilize these adjusted values to perform the closing entries for Ladonna Douglas Company.

Cash $34,750.00

Store Supplies 4,785.00

Machinery 10,750.00

Ladonna Douglas, Capital 53,725.00 Ladonna Douglas, Drawing 13,250.00

Rent Expense 3,000.00

Advertising Expense 2,750.00

Office Supplies Expense 1,465.00 Store Supplies Expense 2,150.00 Depreciation Expense 575.00 ________

$123,175.00 $123,175.00

(54)

Cash 26,500 26,500

Equipment 18,500 18,500

Damien Marcus, Capital 8,000 8,000

Damien Marcus, Drawing 2,000 2,000

Fees Earned 59,500 59,500

Totals 84,500 84,500 29,500 59,500 55,000 25,000

59,500 59,500 55,000 55,000

198. Prepare closing entries from the following work sheet.

Lakendra Enterprises Worksheet

For the Year Ended December 31, 2010

Adjusted Trial Balance

Cash 26,500 26,500

Equipment 18,500 18,500

Lakendra Thomas, Capital 8,000 8,000

Lakendra Thomas, Drawing 2,000 2,000

Fees Earned 59,500 59,500

(55)

199. The following is the adjusted trial balance for Sandeep Company.

Sandeep Company Adjusted Trial Balance December 31, 2010

Cash 8,130

Prepaid Expenses 2,750

Equipment 10,400

Accumulated Depreciation 2,200

Notes Payable 1,000

Rena Sandeep, Capital 11,200

Rena Sandeep, Drawing 4,870

Fees Earned 36,600

Rent Expense 4,900

Utilities Expense 3,475

Totals 53,700 53,700

(56)

200. Reconstruct the adjusting and closing entries from the following T-Accounts. Prepaid Insurance Accou nts Receiv able. Unearned Revenues Wages Payable

1,200 6,000 1,350 530

200 1,500 435 530

1,000 7,500 915

Madison Cox, Capital Madis on Cox, Drawi ng Income Summary Fees Earned

7,000 2,100 9,935 8,000 5,280 2,100 4,655 1,500

2,100 0 5,280 435

10,180 0 9,935

0 Wages Expense Rent Expens e Insurance Expense Utilities Expense

2,600 1,145 200 180

530 1,145 200 180

3,130 0 0 0

0

201. Reconstruct adjusting and closing entries for the month ended September 30, 2010 from the T-accounts below. Prepaid Insurance Accou nts Receiv able. Unearned Revenues Wages Payable

(57)

Mai Lui, Capital

Mai Lui, Drawin g

Income Summary

Fees Earned

7,000 2,400 5,510 5,000 580 2,400 6,090 275 2,400 0 580 235

4,020 5,510

Wages Expense

Rent Expens e

Insurance Expense

Utilities Expense

3,600 1,880 130 95

385 1,880 130 95

3,985 0 0 0

0