Test Bank – Chapter 4 Completing the Accounting Cycle | 24th Ed

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Fundamental Accounting Principles, 24e (Wild)

Chapter 4 Completing the Accounting Cycle

1) Accounts that appear in the balance sheet are often called temporary accounts.

2) Income Summary is a temporary account only used for the closing process.

3) Revenue accounts are temporary accounts that should begin each accounting period with zero balances.

4) Closing revenue and expense accounts at the end of the accounting period serves to make the revenue and expense accounts ready for use in the next period.

5) The closing process takes place before financial statements have been prepared.

6) Revenue and expense accounts are permanent accounts and should not be closed at the end of the accounting period.

7) Closing entries result in the owner's capital account being transferred into net income or net loss for the period ending.

8) The closing process is a step in the accounting cycle that prepares accounts for the next accounting period.

9) Closing entries are required at the end of each accounting period to close all ledger accounts.

10) Closing entries are designed to transfer the end-of-period balances in the revenue accounts, the expense accounts, and the withdrawals account to owner's capital.

11) The Income Summary account is a permanent account that will be carried forward period after period.

12) Closing entries are necessary so that owner's capital will begin each period with a zero balance.

13) Permanent accounts carry their balances into the next accounting period.

14) If a company plans to continue business into the future, closing entries are not required.

15) The first step in the accounting cycle is to analyze transactions and events to prepare for journalizing.

16) The accounting cycle refers to the sequence of steps used in preparing the work sheet.

17) The first five steps in the accounting cycle include analyzing transactions, journalizing, posting, preparing an unadjusted trial balance, and recording adjusting entries.

18) The last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements, and recording closing and adjusting entries.

19) A classified balance sheet organizes assets and liabilities into important subgroups that provide more information to decision makers.

20) An unclassified balance sheet provides more information to users than a classified balance sheet.

21) Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle whichever is longer.

22) Intangible assets are long-term resources that benefit business operations and usually lack physical form.

23) Assets are often classified into current assets, long-term investments, plant assets, and intangible assets.

24) Current liabilities are cash and other resources that are expected to be sold, collected or used within one year or the company's operating cycle whichever is longer.

25) Long-term investments can include land held for future expansion.

26) Intangible assets are assets that are long-term, have physical form, and are used to produce or sell products and services.

27) Current liabilities include accounts receivable, unearned revenues, and salaries payable.

28) Cash and office supplies are both classified as current assets.

29) Plant assets are usually listed by how quickly they can be converted to cash.

30) The current ratio is used to help assess a company's ability to pay its debts in the near future.

31) The current ratio is computed by dividing current liabilities by current assets.

32) Trekker Bikes' current assets are $300 million and its current liabilities are $125 million. Its current ratio is 0.417.

33) If a company has current assets of $15,000 and current liabilities of $9,500, its current ratio is 1.6

34) Flo's Flowers' current ratio is 1.3. The industry average for the current ratio is 1.2. This indicates that Flo's can cover its short-term liabilities with its short-term assets.

35) A benefit of using a work sheet is that it aids in the preparation of the financial statements.

36) Adjustments must be entered in the journal and posted to the ledger after the work sheet is prepared.

37) The work sheet is a required report made available to external decision makers.

38) A work sheet contains all of the balances for each account and therefore may be used as a substitute for the set of financial statements.

39) All necessary amounts needed to prepare the income statement can be taken from the income statement columns of the work sheet, including the net income or net loss.

40) On a work sheet, if the Debit total exceeds the Credit total of the Income Statement columns, a net loss is indicated.

41) If all columns of a completed work sheet balance, you can be sure that no errors were made in its preparation.

42) Normally closing entries are first entered in the general journal and then posted to the work sheet.

43) Adjusting entries are usually entered in the work sheet before they are entered in the general journal.

44) On a work sheet, the adjusted balances of revenues and expenses are sorted to the Income Statement columns of the work sheet.

45) On the work sheet, net income is entered in the Income Statement Credit column as well as the Balance Sheet or Statement of Owner's Equity Credit column.

46) All necessary amounts to prepare the balance sheet, including ending owner's capital, can be found in the Balance Sheet columns of the work sheet.

47) A worksheet can be helpful in showing the effects of proposed or "what if" transactions but not in helping to prepare financial statements.

48) Because it is a necessary financial statement, the work sheet must be prepared according to specified accounting procedures.

49) An expense account is normally closed by debiting Income Summary and crediting the expense account.

50) The withdrawals account is normally closed by debiting it.

51) After posting the entries to close all revenue and expense accounts, the Income Summary account of Cleaver Auto Services has a $4,000 debit balance. This result implies that Cleaver earned a net income of $4,000.

52) After posting the entries to close all revenue and expense accounts, Marker Company's Income Summary account has a credit balance of $6,000, and its Marker, Withdrawals account has a debit balance of $2,500. These balances indicate that net income for the current accounting period amounted to $3,500.

53) When there is a net loss, the Income Summary account would have a credit balance.

54) The Income Summary account is used to close the permanent accounts at the end of an accounting period.

55) The steps in the closing process are (1) close credit balances in revenue accounts to Income Summary; (2) close debit balances in expense accounts to Income Summary; (3) close Income Summary to Owner's Capital; (4) close Withdrawals to Owner's Capital.

56) During the closing process, Owner's Capital is closed to the Owner's Withdrawals account.

57) A post-closing trial balance is a list of permanent accounts and their balances after all closing entries.

58) The aim of a post-closing trial balance is to verify that (1) total debits equal total credits for temporary accounts, and (2) all temporary accounts have zero balances.

59) A company's post-closing trial balance has total debits of $40,560 and total credits of $40,650. Accordingly, the company should review for errors in the closing process.

60) Reversing entries are optional.

61) Reversing entries are recorded in response to external transactions that were created in error during the prior accounting period.

62) Reversing entries simplify the entries to pay accrued liabilities from the previous accounting period.

63) Which of the following accounts is a temporary account:

A) Accounts receivable.

B) J. Jones, capital.

C) Accounts payable.

D) Cash.

E) Salaries expense.

64) Which of the following accounts is a permanent account?

A) Fees earned.

B) Office supplies expense.

C) Interest revenue.

D) Accounts payable.

E) Salaries expense.

65) When closing entries are made:

A) All ledger accounts are closed to start the new accounting period.

B) All temporary accounts are closed but permanent accounts are not closed.

C) All asset accounts are closed but liability accounts are not closed.

D) All permanent accounts are closed but temporary accounts are not closed.

E) All balance sheet accounts are closed.

66) Revenues, expenses, and withdrawals accounts, which are closed at the end of each accounting period are:

A) Real accounts.

B) Temporary accounts.

C) Closing accounts.

D) Permanent accounts.

E) Balance sheet accounts.

67) Which of the following statements is incorrect?

A) Permanent account is another name for revenue accounts.

B) Temporary accounts carry a zero balance at the beginning of each accounting period.

C) The Income Summary account is a temporary account.

D) Permanent accounts remain open as long as the asset, liability, or equity items recorded in the accounts continue in existence.

E) The closing process applies only to temporary accounts.

68) Assets, liabilities, and equity accounts are not closed; these accounts are called:

A) Nominal accounts.

B) Temporary accounts.

C) Permanent accounts.

D) Contra accounts.

E) Accrued accounts.

69) Closing the temporary accounts at the end of each accounting period does all of the following except:

A) Serves to transfer the effects of these accounts to the owner's capital account on the balance sheet.

B) Prepares the withdrawals account for use in the next period.

C) Brings the revenue and expense accounts to zero balances.

D) Has no effect on the owner's capital account.

E) Causes owner's capital to reflect increases from revenues and decreases from expenses and withdrawals.

70) Journal entries recorded at the end of each accounting period to prepare the revenue, expense, and withdrawals accounts for the upcoming period and to update the owner's capital account for the events of the period just finished are referred to as:

A) Adjusting entries.

B) Closing entries.

C) Final entries.

D) Work sheet entries.

E) Updating entries.

71) The closing process is necessary in order to:

A) Ensure compliance with payroll regulations.

B) Ensure that all permanent accounts are closed to zero at the end of each accounting period.

C) Ensure that the company complies with state laws.

D) Ensure that net income or net loss and owner withdrawals for the period are closed into the owner's capital account.

E) Ensure that management is aware of how well the company is operating.

72) Closing entries are required:

A) If management has decided to cease operating the business.

B) Only if the company adheres to the accrual method of accounting.

C) If a company's bookkeeper does not choose to prepare reversing entries.

D) If the temporary accounts are to reflect correct amounts for each accounting period.

E) In order to satisfy the Internal Revenue Service guidelines.

73) The steps performed each reporting period in preparing financial statements, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, is referred to as the:

A) Accounting period.

B) Operating cycle.

C) Accounting cycle.

D) Closing cycle.

E) Natural business year.

74) Which of the following is the usual final step in the accounting cycle?

A) Journalizing transactions.

B) Preparing an adjusted trial balance.

C) Preparing a post-closing trial balance.

D) Preparing the financial statements.

E) Preparing a work sheet.

75) A classified balance sheet:

A) Measures a company's ability to pay its bills on time.

B) Organizes assets and liabilities into important subgroups that provide more information.

C) Broadly groups items into assets, liabilities, and equity.

D) Reports operating, investing, and financing activities.

E) Reports the effect of profit and withdrawals on owner's capital.

76) The assets section of a classified balance sheet usually includes the subgroups:

A) Current assets, long-term investments, plant assets, and intangible assets.

B) Current assets, long-term assets, revenues, and intangible assets.

C) Current assets, long-term investments, plant assets, and equity.

D) Current liabilities, long-term investments, plant assets, and intangible assets.

E) Current assets, liabilities, plant assets, and intangible assets.

77) The usual order for the asset subgroups of a classified balance sheet is:

A) Current assets, prepaid expenses, long-term investments, intangible assets.

B) Long-term investments, current assets, plant assets, intangible assets.

C) Current assets, long-term investments, plant assets, intangible assets.

D) Intangible assets, current assets, long-term investments, plant assets.

E) Plant assets, intangible assets, long-term investments, current assets.

78) A classified balance sheet differs from an unclassified balance sheet in that

A) An unclassified balance sheet is never used by large companies.

B) A classified balance sheet groups items into the broad categories of asset, liability, and equity.

C) A classified balance sheet presents information in a manner that makes it easier to calculate a company's current ratio.

D) A classified balance sheet will include more accounts than an unclassified balance sheet for the same company on the same date.

E) A classified balance sheet is not usually provided to outside parties.

79) Two common subgroups for liabilities on a classified balance sheet are:

A) Current liabilities and intangible liabilities.

B) Present liabilities and operating liabilities.

C) General liabilities and specific liabilities.

D) Intangible liabilities and noncurrent liabilities.

E) Current liabilities and noncurrent liabilities.

80) Which of the following is classified as a current asset?

A) Office equipment.

B) Patent.

C) Unearned revenue.

D) Accounts receivable.

E) Land.

81) Which of the following is classified as a plant asset?

A) Equipment.

B) Patent.

C) Cash.

D) Office supplies.

E) Merchandise inventory.

82) The current ratio:

A) Is used to measure a company's collection period.

B) Is used to measure the relationship between assets and long-term debt.

C) Measures the effect of operating income on profit.

D) Is used to help assess a company's ability to pay its debts in the near future.

E) Is calculated by dividing current assets by equity.

83) All of the following regarding the current ratio are true except:

A) Current ratio is calculated by dividing current assets by current liabilities.

B) Current ratio helps to assess a company's ability to pay its debts in the near future.

C) Current ratio does not affect a creditor's decision on whether to allow a company to buy on credit.

D) Current ratio can affect a creditor's decision about whether to lend money to a company.

E) Current ratio can reveal challenges in covering short-term obligations if it is less than 1.

84) The Unadjusted Trial Balance columns of a company's work sheet shows the Store Supplies account with a balance of $750. The Adjustments columns show a credit of $425 for supplies used during the period. The amount shown as Store Supplies in the Balance Sheet columns of the work sheet is:

A) $325 debit.

B) $325 credit.

C) $425 debit.

D) $750 debit.

E) $425 credit.

85) An optional aid used to prepare a company's unadjusted trial balance, adjusting entries, adjusted trial balance, and financial statements is a(n):

A) Adjusted trial balance.

B) Work sheet.

C) Post-closing trial balance.

D) Unadjusted trial balance.

E) General ledger.

86) Accumulated Depreciation and Fees Earned would be sorted to which respective columns in completing a work sheet?

A) Balance Sheet and Statement of Owner's Equity-Credit; and Income Statement-Credit.

B) Balance Sheet and Statement of Owner's Equity-Debit; and Income Statement-Debit.

C) Income Statement-Debit and Income Statement-Credit.

D) Balance Sheet and Statement of Owner's Equity-Debit; and Balance Sheet and Statement of Owner's Equity-Credit.

E) Balance Sheet and Statement of Owner's Equity-Debit; and Income Statement-Credit.

87) Which of the following statements is incorrect?

A) Work sheets are useful aids in the accounting process.

B) On the work sheet, the effects of the accounting adjustments are shown on the account balances.

C) After the work sheet is completed, it can be used to help prepare the financial statements.

D) On the work sheet, the adjusted amounts are sorted into columns according to whether the accounts are used in preparing the unadjusted trial balance or the adjusted trial balance.

E) A worksheet is not a substitute for financial statements.

88) A company shows a $600 balance in Prepaid Rent in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired rent of $200. This adjusting entry results in:

A) $200 decrease in net income.

B) $200 increase in net income.

C) $200 difference between the debit and credit columns of the Unadjusted Trial Balance.

D) $200 of prepaid insurance.

E) An error in the financial statements.

89) Statements that show the financial statements as if proposed transactions had already occurred are called:

A) Pro forma statements.

B) Professional statements.

C) Simplified statements.

D) Temporary statements.

E) Interim statements.

90) In preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column. Upon completion of the worksheet, the Balance Sheet columns will balance, but with the wrong net income, if the amount sorted in error is:

A) An expense amount placed in the Balance Sheet Credit column.

B) A revenue amount placed in the Balance Sheet Debit column.

C) A liability amount placed in the Income Statement Credit column.

D) An asset amount placed in the Balance Sheet Credit column.

E) A liability amount placed in the Balance Sheet Debit column.

91) If the Balance Sheet and Statement of Owner's Equity columns of a work sheet fail to balance when the net income is added to the Balance Sheet and Statement of Owner's Equity Credit column, the cause could be:

A) An expense entered in the Balance Sheet and Statement of Owner's Equity Debit column.

B) A revenue entered in the Balance Sheet and Statement of Owner's Equity Credit column.

C) An asset amount entered in the Income Statement and Statement of Owner's Equity Debit column.

D) A liability amount entered in the Income Statement and Statement of Owner's Equity Credit column.

E) An expense entered in the Balance Sheet and Statement of Owner's Equity Credit column.

92) A company's December 31 work sheet for the current period appears below. Based on the information provided, what is net income for the current period?

A) $1,400.

B) $1,855.

C) $1,905.

D) $2,060.

E) $4,670.

93) A company's December 31 work sheet for the current period appears below. Based on the information provided, what is net income for the current period?

A) $3,305.

B) $4,180.

C) $2,350.

D) $2,540.

E) $3,225.

94) Which of the following errors would cause the Balance Sheet and Statement of Owner's Equity columns of a work sheet to be out of balance?

A) Entering an asset amount in the Income Statement Debit column.

B) Entering a liability amount in the Income Statement Credit column.

C) Entering an expense amount in the Balance Sheet and Statement of Owner's Equity Debit column.

D) Entering a revenue amount in the Balance Sheet and Statement of Owner's Equity Debit column.

E) Entering a liability amount in the Balance Sheet and Statement of Owner's Equity Credit column.

95) The Unadjusted Trial Balance columns of a work sheet total $84,000. The Adjustments columns contain entries for the following:

1. Office supplies used during the period, $1,200.

2. Expiration of prepaid rent, $700.

3. Accrued salaries expense, $500.

4. Depreciation expense, $800.

5. Accrued service fees receivable, $400.

The Adjusted Trial Balance columns total is:

A) $80,400.

B) $84,000.

C) $85,700.

D) $85,900.

E) $87,600.

96) The balances in the unadjusted columns of a work sheet will agree with:

A) the balances reflected in the company's financial statements.

B) the balances reflected in the company's unadjusted trial balance.

C) whatever balances management has decided to report.

D) the balances in the company's post-closing trial balance.

E) the balances management budgeted for the accounting period.

97) In the process of completing a work sheet, the accountant determines that the Income Statement debit column totals $83,000, while the Income Statement credit column totals $65,000. To enter net income (or net loss) for the period into the work sheet would require an entry to

A) the Adjustments debit column and the Adjustments credit column.

B) the Unadjusted Trial Balance debit column and the Adjustments credit column.

C) it is not practical to enter Net Income (or Net Loss) on the work sheet.

D) the Balance Sheet & Statement of Owner's Equity debit column and the Income Statement credit column.

E) the Income Statement debit column and the Balance Sheet & Statement of Owner's Equity credit column.

98) The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the owner's capital account is the:

A) Income Summary account.

B) Closing account.

C) Balance column account.

D) Contra account.

E) Nominal account.

99) K. Canopy, the proprietor of Canopy Services, withdrew $5,700 from the business during the current year. The entry to close the withdrawals account at the end of the year is:

A) Debit K Canopy, Withdrawals $5,700; credit Cash, $5,700

B) Debit K. Canopy, Capital $5,700; credit K. Canopy, Withdrawals $5,700

C) Debit K. Canopy, Withdrawals $5,700; credit K. Canopy, Capital $5,700

D) Debit K. Canopy, Capital $5,700, credit Salary Expense $5,700

E) Debit Income Summary $5,700; credit K. Canopy, Capital $5,700

100) Tara Westmont, the proprietor of Tiptoe Shoes, had annual revenues of $185,000, expenses of $103,700, and withdrew $18,000 from the business during the current year. The owner's capital account before closing had a balance of $297,000. The entry to close the Income Summary account at the end of the year, after revenue and expense accounts have been closed, is:

A) Debit T. Westmont, Capital $297,000; credit Income Summary $297,000

B) Debit T. Westmont, Capital $63,300; credit Income Summary $63,300

C) Debit Income Summary $63,300; credit T. Westmont, Capital $63,300

D) Debit Income Summary $81,300, credit T. Westmont, Capital $81,300

E) Debit T. Westmont, Capital $81,300; credit Income Summary $81,300

101) Tara Westmont, the proprietor of Tiptoe Shoes, had annual revenues of $185,000, expenses of $103,700, and withdrew $18,000 from the business during the current year. The owner's capital account before closing had a balance of $297,000. The Net Income for the year is:

A) $185,000

B) $63,300

C) $81,300

D) $360,300

E) $378,300

102) Tara Westmont, the proprietor of Tiptoe Shoes, had annual revenues of $185,000, expenses of $103,700, and withdrew $18,000 from the business during the current year. The owner's capital account before closing had a balance of $297,000. The ending owner's capital balance after closing is:

A) $185,000

B) $63,300

C) $81,300

D) $360,300

E) $378,300

103) A company had revenues of $75,000 and expenses of $62,000 for the accounting period. The owner withdrew $8,000 in cash during the same period. Which of the following entries could not be a closing entry?

A) Debit Income Summary $13,000; credit Owner's, Capital $13,000.

B) Debit Income Summary $75,000; credit Revenues $75,000.

C) Debit Revenues $75,000; credit Income Summary $75,000.

D) Debit Income Summary $62,000, credit Expenses $62,000.

E) Debit Owner's, Capital $8,000, credit Owner's, Withdrawals $8,000.

104) The following information is available from the adjusted trial balance of the Harris Vacation Rental Agency. After closing entries are posted, what will be the balance in the Sue Harris, Capital account?

A) $65,000.

B) $80,000.

C) $130,000.

D) $145,000.

E) $280,000.

105) The following information is available for the Higgins Travel Agency. After closing entries are posted, what will be the balance in the C. Higgins, Capital account?

A) $75,500.

B) $184,500.

C) $99,500.

D) $160,500.

E) $130,000.

106) The following information is available for the Noir Detective Agency. After closing entries are posted, what will be the balance in the G. Noir, Capital account?

A) $239,400.

B) $274,600.

C) $303,400.

D) $289,000.

E) $257,000.

107) The F. Mercury, Capital account has a credit balance of $37,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800, and withdrawals are $9,000, what is the ending balance in the F. Mercury, Capital account after all closing entries are made?

A) $37,000.

B) $35,400.

C) $43,400.

D) $28,000.

E) $52,400.

108) The F. Mercury, Capital account has a credit balance of $37,000 before closing entries are made. Total revenues for the period are $55,200, total expenses are $39,800, and withdrawals are $9,000. What is the correct closing entry for the revenue accounts?

A) Debit Income Summary $55,200; credit Revenue accounts $55,200.

B) Debit Revenue accounts $37,000; credit F. Mercury, Capital $37,000.

C) Debit Revenue accounts $55,200; credit F. Mercury, Capital $37,000.

D) Debit Revenue accounts $55,200; credit Income Summary $55,200.

E) Debit Income Summary $37,000; credit F. Mercury Capital $37,000.

109) The F. Mercury, Capital account has a credit balance of $37,000 before closing entries are made. Total revenues for the period are $55,200, total expenses are $39,800, and withdrawals are $9,000. What is the correct closing entry for the expense accounts?

A) Debit Income Summary $39,800; credit Expense accounts $39,800.

B) Debit Expense accounts $37,000; credit F. Mercury, Capital $37,000.

C) Credit Expense accounts $39,800; debit F. Mercury, Capital $39,800.

D) Debit Expense accounts $39,800; credit Income Summary $39,800.

E) Debit Income Summary $39,800; credit F. Mercury Capital $39,800.

110) The Income Summary account is used to:

A) Adjust and update asset and liability accounts.

B) Close the revenue and expense accounts.

C) Determine the appropriate withdrawal amount.

D) Replace the income statement under certain circumstances.

E) Replace the capital account in some businesses.

111) Jen Rogers withdrew a total of $35,000 from her business during the current year. The entry needed to close the withdrawals account is:

A) Debit Income Summary and credit Cash for $35,000.

B) Debit Jen Rogers, Withdrawals and credit Cash for $35,000.

C) Debit Income Summary and credit Jen Rogers, Withdrawals for $35,000.

D) Debit Jen Rogers, Capital and credit Jen Rogers, Withdrawals for $35,000.

E) Debit Jen Rogers, Withdrawals and credit Jen Rogers, Capital for $35,000.

112) A company's ledger accounts and their end-of-period balances before closing entries are posted are shown below. What amount will be posted to Wilson Peters, Capital in the process of closing the Income Summary account? (Assume all accounts have normal balances.)

A) $16,780 debit.

B) $7,180 credit.

C) $16,780 credit.

D) $18,280 credit.

E) $23,780 credit.

113) It is obvious that an error occurred in the preparation and/or posting of closing entries if:

A) all revenue and expense accounts have zero balances.

B) the owner's capital account is debited for the amount of the net loss for the period.

C) the income summary account is debited for the amount of net income for the period.

D) all balance sheet accounts have zero balances.

E) only permanent accounts appear on the post-closing trial balance.

114) At the beginning of the year, a company's balance sheet reported the following balances: Total Assets = $225,000; Total Liabilities = $125,000; and Owner's Capital = $100,000. During the year, the company reported revenues of $46,000 and expenses of $30,000. In addition, owner's withdrawals for the year totaled $20,000. Assuming no other changes to owner's capital, the balance in the owner's capital account at the end of the year would be:

A) $116,000.

B) $136,000.

C) $24,000.

D) $96,000.

E) $104,000.

115) At the beginning of the year, Sigma Company's balance sheet reported Total Assets of $195,000 and Total Liabilities of $75,000. During the year, the company reported total revenues of $226,000 and expenses of $175,000. Also, owner withdrawals during the year totaled $48,000. Assuming no other changes to owner's capital, the balance in the owner's capital account at the end of the year would be:

A) $174,000.

B) $78,000.

C) $171,000.

D) $120,000.

E) $123,000.

116) After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $33,000. The entry to close the income summary account will be:

A) Debit Owner Withdrawals $33,000; credit Income Summary $33,000.

B) Debit Income Summary $33,000; credit Owner Withdrawals $33,000.

C) Debit Income Summary $33,000; credit Owner Capital $33,000.

D) Debit Owner Capital $33,000; credit Income Summary $33,000.

E) Credit Owner Capital $33,000; debit Owner Withdrawals $33,000.

117) The trial balance prepared after all closing entries have been journalized and posted is called the:

A) Unadjusted trial balance.

B) Post-closing trial balance.

C) General ledger.

D) Adjusted trial balance.

E) Work sheet.

118) Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

A) Office Equipment.

B) Accumulated Depreciation-Office Equipment.

C) Depreciation Expense-Office Equipment.

D) N. Young, Capital.

E) Salaries Payable.

119) Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

A) Land.

B) S. Stills, Withdrawal.

C) Accounts Payable.

D) Unearned Revenue.

E) Prepaid Insurance.

120) A post-closing trial balance reports:

A) All permanent ledger accounts with balances.

B) All temporary ledger accounts with balances.

C) All temporary and permanent ledger accounts with balances.

D) Only revenue and expense accounts.

E) Only asset accounts.

121) Which of the following statements is true?

A) Owner's capital must be closed each accounting period.

B) A post-closing trial balance should include only permanent accounts.

C) The work sheet can be substituted for preparing financial statements.

D) By using a work sheet to prepare adjusting entries you need not post these entries to the ledger accounts.

E) Closing entries are only necessary if errors have been made.

122) Reversing entries:

A) Are optional.

B) Are mandatory.

C) Correct errors in journal entries.

D) Are required by GAAP.

E) Are prepared on the worksheet.

123) Kline Company accrued wages of $7,350 that were earned by employees unpaid at the year-end. Assuming Kline uses reversing entries, which of the following entries correctly reverses the accrued wages at the beginning of the following year?

A) Debit Wages Expense $7,350; credit Cash $7,350.

B) Debit Wages Expense $7,350; credit Wages Payable $7,350.

C) Debit Wages Payable $7,350; credit Cash $7,350.

D) Debit Cash $7,350; credit Wages Expense $7,350.

E) Debit Wages Payable $7,350; credit Wages Expense $7,350.

124) Which of the following is not true?

A) Reversing entries are optional.

B) Reversing entries are recorded in response to accrued assets and accrued liabilities that were created by adjusting entries at the end of the previous accounting period.

C) Reversing entries are used to simplify a company's recordkeeping.

D) Reversing entries are dated the first day of the new accounting period.

E) Reversing entries should not be the exact opposite of previous period adjusting entries.

125) Reversing entries:

A) Are necessary when journal entries have been incorrectly recorded.

B) Are a required step in the accounting cycle.

C) Will often result temporarily in abnormal account balances in some accounts.

D) Are required only if the company uses accounting software to record journal entries.

E) Must be made before preparing the post-closing trial balance.

126) The purpose of reversing entries is to:

A) Simplify a company's recording of certain journal entries in the future.

B) Correct errors made in previous journal entries.

C) Ensure that closing entries have been properly posted to the ledger accounts.

D) Make certain that only permanent accounts are carried forward into the next accounting period.

E) Complete a required step in the accounting cycle.

127) Which of the following is not true?

A) A worksheet aids in the preparation of financial statements.

B) A worksheet reduces possible errors when working with many accounts and adjustments.

C) A worksheet is not useful in planning and organizing an audit of financial statements.

D) A worksheet links accounts and adjustments to financial statements.

E) A worksheet shows the effects of proposed or "what-if" transactions.

128) Which of the following is not true?

A) The balances in the Income Statement credit column are revenues.

B) The balances in the Income Statement credit column are unearned revenues.

C) The balances in the Income Statement debit column are expenses.

D) The difference between the totals of the Income Statement columns is net income or net loss.

E) The net income or net loss from the Income Statement columns is entered in the Balance Sheet & Statement of Owner's Equity columns.

129) Temporary accounts include all of the following except:

A) Consulting revenue.

B) Withdrawals.

C) Rent expense.

D) Prepaid rent.

E) Income Summary.

130) Permanent accounts include all of the following except:

A) Accumulated Depreciation—Equipment.

B) Prepaid Insurance.

C) Unearned Revenue.

D) Accounts Receivable.

E) Depreciation Expense—Equipment.

131) Which of the following statements about a company's operating cycle is not true:

A) Non-current items are those expected to come due within one year or the company's operating cycle.

B) The operating cycle is the time span from when cash is used to acquire goods and services until cash is received from the sale of goods and services.

C) Current items are those expected to come due within one year or the company's operating cycle, whichever is longer.

D) Most companies use a one-year period to classify current and noncurrent items.

E) Most operating cycles are less than one year.

132) Which of the following types of businesses might have an operating cycle longer than one year?

A) Ski resort.

B) Clothing retailer.

C) Florist.

D) Wheat farmer.

E) Commercial airplane manufacturer.

133) Use the information in the adjusted trial balance presented below to calculate current assets for Taron Company:

A) $21,200.

B) $45,600.

C) $24,400.

D) $95,600.

E) $41,200.

134) Use the information in the adjusted trial balance presented below to calculate the current ratio for Taron Company:

A) 1.87.

B) .54.

C) 3.92.

D) 1.77.

E) 1.60.

135) Use the information in the adjusted trial balance presented below to calculate total current liabilities for Taron Company:

A) $50,000.

B) $67,000.

C) $24,400

D) $30,000

E) $35,000

136) Based on the following information from Schrute Company's balance sheet, calculate the current ratio.

A) .44.

B) 3.51.

C) 3.33.

D) 1.06.

E) 2.23.

137) The following information is available for Zephyr Company before closing the accounts. After all of the closing entries are made, what will be the balance in the Zephyr, Capital account?

A) $115,000.

B) $225,000.

C) $264,000.

D) $186,000.

E) $956,000.

138) The following information is available for Brendon Company before closing the accounts. What will be the amount in the Income Summary account that should be closed to Brendon, Capital?

A) $80,000.

B) $64,400.

C) $43,000.

D) $32,400.

E) $42,400.

139) For the year ended December 31, a company had revenues of $187,000 and expenses of $109,000. The owner withdrew $37,000 during the year. Which of the following entries could not be a closing entry?

A) Debit Income Summary $78,000; credit Owner's, Capital $78,000.

B) Debit Owner's Capital $37,000; credit Owner Withdrawals $37,000.

C) Debit revenues $187,000; credit Income Summary $187,000.

D) Debit Income Summary $109,000, credit expenses $109,000.

E) Debit Income Summary $187,000; credit revenues $187,000.

140) Flagg records adjusting entries at its December 31 year-end. At December 31, employees had earned $12,000 of unpaid and unrecorded salaries. The next payday is January 3, at which time $30,000 will be paid. Prepare the January 1 journal entry to reverse the effect of the December 31 salary expense accrual.

A) Debit Salaries expense $12,000; credit Salaries payable $12,000.

B) Debit Salaries expense $18,000; debit Salaries payable $12,000; credit Cash $30,000.

C) Debit Salaries payable $18,000; credit Cash $18,000.

D) Debit Salaries payable $12,000, credit Salaries expense $12,000.

E) Debit Salaries expense $18,000; credit Salaries payable $18,000.

141) Flagg records adjusting entries at its December 31 year-end. At December 31, employees had earned $12,000 of unpaid and unrecorded salaries. The next payday is January 3, at which time $30,000 will be paid. Prepare the journal entry on January 3 to record payment assuming the adjusting and reversing entries were made on December 31 and January 1.

A) Debit Salaries expense $12,000; debit Salaries payable $18,000; credit Cash $30,000.

B) Debit Salaries expense $30,000; credit Cash $30,000.

C) Debit Salaries payable $30,000; credit Cash $30,000.

D) Debit Salaries expense $18,000, debit Salaries payable $12,000; credit Cash $30,000.

E) Debit Salaries expense $18,000; credit Cash $18,000.

142) Which of the following accounts would be included in a post-closing trial balance?

A) Accounts Receivable.

B) S. Stills, Withdrawal.

C) Consulting Fees Earned.

D) Depreciation Expense—Equipment.

E) Salaries Expense.

143) Palmer Company is at the end of its annual accounting period. The accountant has journalized and posted all external transactions and all adjusting entries, has prepared an adjusted trial balance, and completed the financial statements. The next step in the accounting cycle is:

A) Prepare a work sheet.

B) Prepare reversing entries.

C) Close temporary accounts.

D) Prepare a post-closing trial balance.

E) Prepare an unadjusted trial balance.

144) For the year ended December 31, a company has revenues of $317,000 and expenses of $196,000. The owner withdrew $50,000 during the year. The balance in the owner's capital account before closing is $81,000. Which of the following entries would be used to close the withdrawal account?

A) Debit Income Summary $50,000; credit Owner's, Capital $50,000.

B) Debit Owner's Capital $50,000; credit Owner Withdrawals $50,000.

C) Debit Owner's Capital $81,000; credit Income Summary $81,000.

D) Debit Income Summary $81,000, credit Owner's Withdrawals $81,000.

E) Debit Owner's Withdrawals $50,000; credit Owner's Capital $50,000.

145) Which of the following accounts could not be classified as a current liability?

A) Unearned revenues.

B) Accounts payable.

C) Notes payable (due in 11 months).

D) Current portion of long-term note payable.

E) Notes payable (due in 5 years).

146) Match the following terms with the appropriate definition.

A. Permanent accounts F. Work sheet

B. Accounting cycle G. Closing entries

C. Temporary accounts H. Post-closing trial balance

D. Classified balance sheet I. Operating cycle

E. Income summary J. Pro forma financial statements

____ 1. Organizes assets and liabilities into subgroups, including separation of current and noncurrent.

____ 2. The time span from when cash is used to acquire goods and services until cash is received from the sale of those goods and services.

____ 3. A temporary account only used for the closing process that contains a credit for the sum of all revenues and a debit for the sum of all expenses.

____ 4. A widely used working paper that is a useful tool for preparers in working with accounting information, usually not available to external decision makers.

____ 5. A list of permanent accounts and their balances after all closing entries.

____ 6. The steps in preparing financial statements.

____ 7. Entries used to transfer end-of-period balances in revenue, expense, and withdrawals accounts to the permanent owner's capital account.

____ 8. Statements that show the effects of proposed transactions as if the transactions had already occurred.

____ 9. Accounts that report on activities related to one or more future accounting periods; they carry their ending balances into future periods.

____10. Accounts that accumulate data related to one accounting period only; they include revenues, expenses, withdrawals, and the Income Summary account.

147) Match the following terms with the appropriate definition.

A. Plant assets

B. Owner's capital

C. Classified balance sheet

D. Intangible assets

E. Current ratio

F. Closing entries

G. Current liabilities

H. Long-term investments

I. Current assets

J. Unclassified balance sheet

____ 1. The owner's claim on the assets of a company.

____ 2. Tangible assets that are long-lived and used to produce or sell products or services.

____ 3. Cash and other resources that are expected to be sold, collected, or used within one year or the company's operating cycle, whichever is longer.

____ 4. Entries recorded at the end of each accounting period to transfer end-of-period balances in

revenue, expense, and withdrawals accounts to the permanent owner's capital account.

____ 5. Long-term resources that benefit business operations, usually lack physical form, and have uncertain benefits.

____ 6. Assets that are held for more than the longer of one year or the operating cycle of the company and are not used in operations.

____ 7. A balance sheet that organizes the assets and liabilities into important subgroups.

____ 8. Obligations due to be paid or settled within one year or the operating cycle of a business, whichever is longer.

____ 9. A balance sheet that broadly groups items into assets, liabilities and equity.

____10. A ratio that is used to help evaluate a company's ability to pay its short-term obligations,

calculated by dividing current assets by current liabilities.

148) Classified balance sheets commonly include the following categories.

a. Current assets

b. Long-term investments

c. Plant assets

d. Intangible assets

e. Current liabilities

f. Long-term liabilities

g. Equity.

Indicate the typical classification of each item below by placing the letter of the correct balance sheet category a through g in the blank space next to the item.

1) ____ Equipment used in business operations

2) ____ Store Supplies

3) ____ Investment maturing in two years

4) ____ Long-term Note Payable

5) ____ Prepaid Rent

6) ____ D. Flanders, Capital

7) ____ Accounts Payable

8) ____ Current portion of long-term debt

9) ____ Trademarks

10) ____ Wages Payable

11) ____ Accounts Receivable

12) ____ Cash

149) Explain why temporary accounts are closed each period.

150) Explain the difference between temporary and permanent accounts.

151) List the steps in the accounting cycle.

152) How is a classified balance sheet different from an unclassified balance sheet? List the usual order of the categories on a classified balance sheet.

153) How is the current ratio calculated? How is it used to evaluate a company?

154) Describe a work sheet and explain why it is useful.

155) List and explain the steps in preparing a 10-column worksheet.

156) What is the purpose of closing entries? Describe the closing process.

157) What is the purpose of a post-closing trial balance?

158) Explain the purpose of reversing entries.

159) In the table below, indicate with an "X" in the proper column whether the account is a temporary account or a permanent account.

160) A number of accounts are listed below. Use the table to classify each account by indicating whether it is a temporary or permanent account, whether it is included in the Income Statement or Balance sheet, and if it is closed at the end of the accounting period, and, if so, whether it is closed with a debit or credit. The first one is done as an example.

161) The steps in the accounting cycle are shown below. List them in the correct order in which they are completed:

Prepare adjusted trial balance

Post transactions

Prepare an unadjusted trial balance

Journalize transactions

Prepare the financial statements

Close the temporary accounts

Adjust the ledger accounts

Prepare a post-closing trial balance

Analyze transactions

162) a) Prepare a classified balance sheet for Martin Air Freight based on the adjusted trial balance shown below. b) Prepare the required closing entries.

*$2,000 of the long-term note payable is due during the next year.

163) The calendar year-end adjusted trial balance for Blessinger Co. follows:

BLESSINGER CO.

Adjusted Trial Balance

December 31

Required:

(a) Prepare a classified year-end balance sheet. (Note: A $9,000 installment on the long-term note payable is due within one year.)

(b) Prepare the required closing entries.

164) The calendar year-end adjusted trial balance for Blessinger Co. follows:

BLESSINGER CO.

Adjusted Trial Balance

December 31

Required:

(a) Determine the amounts of current assets and current liabilities. (Note: A $9,000 installment on the long-term note payable is due within one year.)

(b) Calculate the current ratio. Comment on the ability of Blessinger Co. to meets its short-term debts.

165) Calculate the current ratio in each of the following separate cases and identify the company case with the strongest liquidity position.

166) Calculate the current ratio for each of the following companies and identify the company with the strongest liquidity position.

167) Use the following partial work sheet from Carmelo Bowl to prepare its income statement, statement of owner's equity and a classified balance sheet (Assume the owner did not make any investments in the business this year.)

168) The unadjusted trial balance of R. Tryon, Consultant is entered on the partial work sheet below. Complete the work sheet using the following information:

(a) Salaries earned by employees that are unpaid and unrecorded, $500.

(b) An inventory of supplies showed $800 of unused supplies still on hand.

(c) Depreciation on equipment, $1,300.

169) A partially completed work sheet is shown below. The unadjusted trial balance columns are complete. Complete the adjustments, adjusted trial balance, income statement, and balance sheet and statement of owner's equity columns.

170) Shown below are selected data taken from the unadjusted and adjusted trial balances for the Dryer Company for the current year ended December 31. Determine the items A through H below.

171) A company's December 31 work sheet appears below with summary amounts in the Income Statement and Balance Sheet columns. Prepare the four necessary closing entries.

172) The adjusted trial balance of Carson's Internet Services follows:

CARSON'S INTERNET SERVICES

Adjusted Trial Balance

December 31

(a) Prepare the four closing entries necessary.

(b) What is the balance of Carson Gaines' capital account after the closing entries are posted?

173) Following are selected accounts and their balances for a company after the adjustments made on May 31, the end of its fiscal year. (All accounts have normal balances.)

Prepare all the necessary closing entries for this company.

174) The adjusted trial balance of the Waterstone Company follows:

Waterstone Company

Adjusted Trial Balance

December 31

Prepare the closing entries for Waterstone Company.

175) The Income Statement columns of the work sheet prepared for Crawford Delivery Service at current year-end are shown below. In addition, L. Crawford, Capital had a credit balance of $117,000 and L. Crawford, Withdrawals had a debit balance of $30,000 at year-end. Prepare closing journal entries for this company.

176) The Income Statement columns of the work sheet prepared for Jolly Auto Service at current year-end are shown below. In addition, B. Jolly, Capital had a credit balance of $235,000 and B. Jolly, Withdrawals had a debit balance of $40,000 at year-end. Prepare closing journal entries for this company.

177) Presented below are the year-end balances at December 31 of Becca's Dry Cleaning Service. (All accounts have normal balances.)

(a) Prepare the necessary closing entries at December 31.

(b) Prepare a post-closing trial balance at December 31.

178) Paradise Travel's adjusted trial balance as of the end of its annual accounting period is shown below:

(a) Prepare the necessary closing entries.(b) Prepare a post-closing trial balance.

179) Employees of Potteryworld Co. have earned but have not been paid $3,500 in salaries for the last week of the current calendar year.

(a) Prepare the necessary adjusting journal entry for Potteryworld at December 31 of the current year.
(b) Assuming that Potteryworld makes reversing entries, prepare the necessary reversing entry, including the appropriate date.

180) The following information has been gathered for Major Properties Co. to assist in preparing its year-end adjusting entries at December 31:

(a) The company has earned $2,500 of rental revenue that has not yet been received or recorded.

(b) Major had previously recorded $3,200 of unearned rental revenue. At year-end, $1,500 of this amount has been earned.

(c) Depreciation on equipment for the year is $7,800.

(d) Employees have earned but have not yet been paid $2,750 in salaries.

Identify which of the above accounting adjustment would be reversed assuming Major Properties Co. uses reversing entries.

181) The unadjusted trial balance of Rapido Delivery is entered on the partial work sheet below. Complete the work sheet using the following information:

(a) Salaries earned by employees that are unpaid and unrecorded, $5,000.

(b) An inventory of supplies showed $1,000 of unused supplies still on hand.

(c) Depreciation on delivery vans, $24,000.

(d) Services paid in advance by customers of $10,000 have now been provided to customers.

182) The following December 31 year-end adjusted trial balance is for Heath Wilmer Co.. The credit balance in Heath Wilmer, Owner Capital at the beginning of the year, January 1, was $320,000. The owner, Heath Wilmer, invested an additional $300,000 during the current year. The land held for future expansion was also purchased during the current year.

Heath Wilmer Co.

Adjusted Trial Balance

December 31

Required:

1. Prepare a classified year-end balance sheet. (Note: A $22,000 installment on the long-term note payable is due within one year.)

2. Using the information presented:

(a) Calculate the current ratio. Comment on the ability of Heath Wilmer Co. to meets its short-term debts.

(b) Calculate the debt ratio and comment on the financial position and risk analysis of Heath Wilmer Co.

(c) Using the account balances to analyze the financial position of Heath Wilmer Co., why would the owner need to invest an additional $300,000 in the business when the business is already profitable and the owner had an existing capital balance of $320,000?

183) Mandarin Company frequently has accrued expenses at the end of its fiscal year that should be recorded for proper financial statement presentation. Mandarin pays on a weekly basis and has $50,000 of accrued salaries incurred but not paid for June 30, its fiscal year-end. This consists of one day's accrued salaries for the week. The company will pay its employees $250,000 on July 4; the one day of accrued salaries and the remaining four days for July salaries. Record the following entries:

(a) Accrual of the salaries on June 30.

(b) Payment of the salaries on July 4, assuming that Mandarin does not prepare reversing entries.

(c) Assuming that Mandarin prepares reversing entries, reverse the adjusting entry made on June 30.

(d) Assuming that Mandarin prepares reversing entries, payment of the salaries on July 4.

184) Tunica Company's fiscal year ends on September 30 of the current year. Tunica frequently has accrued revenues at the end of its fiscal year that are recorded for proper financial statement presentation. The company has determined through an evaluation of invoices and services rendered that $32,000 of services has been provided as of September 30, but not yet billed. The total contract to be billed for services when completed will be $60,000. Record the following entries:

(a) Accrual of the revenues on September 30.

(b) Receipt of payment from customers on October 9 for the services rendered, assuming that Tunica does not prepare reversing entries.

(c) Assuming that Tunica prepares reversing entries, reverse the adjusting entry made on September 30.

(d) Assuming that Tunica prepares reversing entries, receipt of the payment for the total contract amount on October 9.

185) Compute Darling Company's current ratio using the following information:

186) Compute Chase Company's current ratio using the following information:

187) The unadjusted trial balance of Barber Housekeeping Service is entered on the partial work sheet below.

Required: Complete the work sheet using the following information:

(a) Salaries earned by employees that are unpaid and unrecorded, $5,000.

(b) An inventory of supplies showed $3,000 of unused supplies still on hand.

(c) Depreciation on automobiles, $30,000.

(d) Advertising for November and December in the amount of $8,000 remains unpaid and unrecorded.

188) Complete the work sheet below for Barber Housekeeping Services by extending the account balances from the adjusted trial balance columns into the appropriate financial statement columns and by entering the amount of net income for the reporting period:

189) The following adjusted trial balance is for Carla Co. at year-end December 31. The credit balance in Carla West, Capital at the beginning of the year, January 1, was $320,000. The owner, Carla West, invested an additional $100,000 during the current year. The land held for future expansion was also purchased during the current year.

Required:

Prepare a classified balance sheet as of December 31. (Note: A $21,000 installment on the long-term note payable is due within one year.)

190) The closing process resets ________, ________, and ________ account balances to zero at the end of each accounting period.

191) The ________ account is a temporary account used only in the closing process.

192) Revenues, expenses, withdrawals, and Income Summary are called ________ accounts because they are closed at the end of each accounting period.

193) Balance sheet accounts are called ________ accounts because they carry their balances to the next accounting period, and are not closed as long as the company continues to own the asset, owe the liability and have equity.

194) The ________ refers to the steps in preparing financial statements for users.

195) ________ are long-term resources used to produce or sell products and services; they generally lack physical form and their benefits are highly uncertain.

196) The current portion of long-term debt is classified in the ________ section of a classified balance sheet.

197) A current ratio of 2.1 suggests that a company has ________ current assets to cover current liabilities.

198) A ________ is an optional working paper that helps in preparing financial statements, is useful in preparing interim statements, and is helpful in showing the effects of proposed transactions.

199) A company's post-closing trial balance has a debit total of $475,000 and a credit total of $457,000. This indicates that ________.

200) Reversing entries are linked to ________ and ________ that were created by adjusting entries at the end of the prior accounting period.