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Exam 4: Completing the Accounting Cycle

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Question 1

Multiple Choice

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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.

F) A) and D)
G) A) and E)

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Question 2

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Permanent accounts carry their balances into the next accounting period. Moreover, asset, liability and revenue accounts are not closed as long as a company continues in business.

A) True
B) False

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Question 3

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Classified balance sheets commonly include the following categories. Indicate the typical classification of each item listed below by placing the letter of the correct balance sheet category a through g in the blank space next to the item.

All necessary numbers to prepare the balance sheet can be found in the balance sheet columns of the work sheet including ending owner's capital.

Since it is an important financial statement, the trial balance must be prepared according to specified accounting procedures.

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

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

The Unadjusted Trial Balance columns of a company's work sheet show the balance in the Office Supplies account as $750. The Adjustments columns show that $425 of these supplies were used during the period. The amount shown as Office Supplies in the Balance Sheet columns of the work sheet is:

Closing entries are required:

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

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

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.

The ___________________ account is used only in the closing process.

Property, plant and equipment are tangible assets that are usually long-term assets used to produce or sell products and services.

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

On the work sheet, net income is entered in the Income Statement Credit column as well as the Balance Sheet or Statement of Changes in Equity Debit column.

A worksheet can be helpful in showing the effects of proposed or "what if" transactions, as well as being useful in helping to prepare end-of-period financial statements.

At the beginning of the year, Beta 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:

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

Property, plant and equipment are usually listed in order from most liquid to least liquid.