Chapter 4--Completing the a - Copy

Chapter 4--Completing the Accounting Cycle

Chapter 4--Completing the

Accounting CycleStudent: ___________________________________________________________________________

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

2. 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

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

4. There is really no benefit in preparing financial statements in any particular order. True False

5. Round tripping is a fraudulent scheme where business A artificially inflates revenue by lending money to customer B who uses that money to buy products from A. True False

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

7. The usual presentation of the retained earnings statement is (1) beginning retained earnings, (2) net income or loss, (3) dividends (4) ending retained earnings. True False

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

9. 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

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

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

12. 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

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

14. Accrued taxes payable are generally reported on the balance sheet as a current liability. True False

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

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

17. Capital Stock and Dividends are reported in the stockholders equity section of the balance sheet. True False

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

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

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

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

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

23. Examples of temporary accounts are supplies and prepaid expenses which are in the ledger for just a short time before they expire. True False

24. Accumulated Depreciation is a permanent account. True False

25. The dividends account is a temporary account. True False

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

27. Journalizing and posting the adjustments and closing entries updates the ledger for the new accounting period. True False

28. The income summary account is closed to the retained earnings account. True False

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

30. The dividends account is closed to the income summary account. True False

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

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

33. Journalizing and posting closing entries must be completed before financial statements can be prepared. True False

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

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

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

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

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

39. Cash, Accounts Payable, and Capital Stock are real accounts and do not get closed at the end of the period. True False

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

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

42. Balance Sheet accounts are not considered real accounts. True False

43. It is not necessary to post the closing entries to the general ledger. True False

44. 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

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

46. Accounts reported on the balance sheet that are carried forward from year to year are known as permanent accounts. True False

47. Real accounts are not permanent accounts. True False

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

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

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

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

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

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

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

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

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

57. The majority of businesses end their fiscal year on December 31. True False

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

59. The balances of the equity accounts from the Adjusted Trial Balance columns of the work sheet are extended to the Retained Earnings Statement columns. True False

60. 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

61. 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

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

63. 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

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

65. On the work sheet, the capital stock and dividends account balances are extended to the Balance Sheet columns. True False

66. 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. True False

67. After net income or loss is entered on the work sheet, the debit column total must equal the credit column total of the Balance Sheet columns. True False

68. 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

69. Net income is shown on the work sheet in the Income Statement Debit column and the Balance Sheet Credit column. True False

70. 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

71. The work sheet and the financial statements both require dollar signs. True False

72. The balance in the retained earnings account on the work sheet will equal the amount presented in the balance sheet. True False

73. 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

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

75. 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. Both will need to be in balance in order to continue with the end-of-period processing. C. The adjusted trial balance includes the postings of the adjustments for the period in the balance of the accounts. D. The unadjusted trial balance will be used to record the adjustments for the period.

76. 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 all of the adjustments were posted in the correct accounts C. verify that the net income (loss) is correct for the period D. verify the correct flow of accounts into the financial statements

77. When preparing the retained earnings statement, the beginning retained earnings balance can always be found A. in the Income Statement columns of the work sheet B. in the statement of cash flows C. in the general ledger D. in the Adjustments columns of the work sheet

78. 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

79. 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

80. 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 stockholders equity section D. income statement as revenue

81. 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

82. Prepaid insurance is reported on the balance sheet as a A. current asset B. fixed asset C. current liability D. long-term liability

83. The income statement is prepared from: A. the adjusted trial balance. B. the income statement columns of the work sheet. C. either the adjusted trial balance or the income statement columns of the work sheet. D. both the adjusted trial balance and the income statement columns of the work sheet.

84. 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.

85. The retained earnings statement 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

86. The income statement should be prepared A. before the retained earnings statement and balance sheet B. after the retained earnings statement and before the balance sheet C. after the retained earnings statement and balance sheet D. after the balance sheet and before the retained earnings statement

87. Use the information in the adjusted trial balance for Stockton Company to answer the questions that follow.

Stockton Company Adjusted Trial Balance For the Year Ended December 31, 20XX Cash Accounts Receivable Prepaid Expenses Equipment Accumulated Depreciation Accounts Payable Notes Payable Capital Stock Retained Earnings Dividends Fees Earned Wages Expense Rent Expense Utilities Expense Depreciation Expense Miscellaneous Expense Totals $ 6,030 2,100 700 13,700 $ 1,100 1,900 4,200 2,000 10,940 790 8,750 2,500 1,960 775 250 85 $28,890

$28,890

Determine the net income (loss) for the period.

A. net income, $2,390 B. net loss, $790 C. net loss, $5,570 D. net income, $3,180



$28,890

Determine the Retained Earnings ending balance.

A. $10,150 B. $13,330 C. $14,120 D. $10,940 89. Use the information in the adjusted trial balance for Stockton Company to answer the questions that follow.


$28,890

Determine total assets.



$28,890

Determine the current assets.

A. $22,530 B. $8,830 C. $21,430 D. $8,130



$28,890

Determine the total liabilities for the period.

A. $1,900 B. $6,100 C. $4,200 D. $19,040 92. The balance sheet should be prepared A. before the income statement and the retained earnings statement B. before the income statement and after the retained earnings statement C. after the income statement and the retained earnings statement D. after the income statement and before the retained earnings statement

93. The retained earnings statement begins with the beginning balance followed by A. net income (loss) and dividends B. net income (loss) and issuances of capital stock C. issuances of capital stock and dividends D. issuances of capital stock, net income (loss), and dividends

94. The income statement will include 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)

95. The classified balance sheet will subsection the assets as follows A. Current Assets and Other Assets B. Current Assets and Property, Plant, and Equipment C. Current Assets and Long-Term Assets D. Other Assets and Property, Plant, and Equipment

96. The classified balance sheet will have liabilities divided into 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 Tomorrows Liabilities

97. Current 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 stockholders and will never be paid

98. On the balance sheet, stockholders equity is A. added to assets and the two are equal to liabilities B. added to liabilities and the two are equal to assets C. subtracted from liabilities and the net amount is equal to assets D. subtracted from assets and the net amount is equal to net income

99. 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 equal to assets and liabilities

100. On which financial statement will Income Summary be shown? A. retained earnings statement B. balance sheet C. income statement D. none of these

101. Which of the following is not true about closing entries? A. There are four closing entries that update the retained earnings 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 periods information correctly.

102. The income summary account is also called A. the imprest account B. the clearing account C. the adjustments account D. the helpful account

103. After posting the second closing entry to the income summary account, the balance will be equal to A. zero B. retained earnings C. revenues for the period D. the net income or (loss) for the period

104. What is the last account that should be listed in the post-closing trial balance? A. Income Summary B. Retained Earnings C. Cash D. Fees Earned

105. Which of the following account groups are all considered nominal accounts? A. Cash, Retained Earnings, Wages Payable B. Prepaid Insurance, Property, Plant & Equipment, Fees Earned C. Capital Stock, Dividends, Income Summary D. Rent Revenue, Fees Earned, Miscellaneous Expense

106. 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, dividends B. expenses, assets, income summary, capital stock C. retained earnings, dividends, income summary, assets D. dividends, income summary, expenses, revenues

107. 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

108. 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

109. Which of the accounts below would be closed by posting a debit to the account? A. Unearned Revenue B. Fees Earned C. Dividends D. Miscellaneous Expense

110. Which of the following accounts should be closed to Income Summary at the end of the fiscal year? A. Supplies Expense B. Accumulated Depreciation C. Prepaid Insurance D. Unearned Rent

111. 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

112. Which of the following accounts will be closed to the retained earnings account at the end of the fiscal year? A. Rent Expense B. Fees Earned C. Income Summary D. Depreciation Expense

113. 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

114. Which of the following accounts ordinarily appears in the post-closing trial balance? A. Fees Earned B. Supplies Expense C. Dividends D. Unearned Rent

115. 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

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

Accumulated Depreciation Fees Earned Depreciation Expense Insurance Expense Dividends Prepaid Insurance Supplies Supplies Expense

$ 2,300 14,700 1,300 200 500 4,800 900 3,800

Net income for the period is

A. $1,400 B. $9,400 C. $14,700 D. $8,900

117. A summary of selected ledger accounts appear below for Albertos Plumbing Services for the current calendar year-end.

Retained Earnings 12/31

8,500

1/1 12/31

6,500 18,500

Dividends 6/30 11/30 Income Summary 12/31 12/31

3,500 5,000

12/31

8,500

15,000 18,500

12/31

33,500


A. $16,500 B. $33,500 C. $18,500 D. $15,000 118. Amir Designs purchased a one-year liability insurance policy on March 1st of this year for $5,400 and recorded it as a prepaid expense. Which of the following amounts would be recorded for insurance expense during the adjusting process at the end of Amirs first month of operations on March 31st? A. $5,400. B. $540. C. $450. D. $500.

119. The journal entry to close the Fees Earned, $275, and Rent Revenue, $200, accounts on December 31st during the closing process would be A. Dec. 31 Fees Earned Rent Revenue Income Summary B. Dec. 31 Income Summary Fees Earned Rent Revenue C. Dec. 31 Revenues Income Summary D. Dec. 31 Income Summary Revenues 275 200 475 475 275 200 475 475 475 475

120. Use the work sheet for Finley Company to answer the questions that follow.

F i n le y C o m p a n y W o r k S h e et F o r t h e Y e a r E n d e d D e c e m b e r 3 1, 2 0 1 0 Adjusted Trial Balance Account Title Cash Accounts Receivable Supplies Equipment Accum. Depr. - Equip. Accounts Payable Wages Payable Capital Stock

Income Statement Debit 48,000 18,000 6,000 57,000

Balance Sheet Credit

Debit

Credit

Debit 48,000 18,000 6,000 57,000

Credit

18,000 30,000 6,000 5,000

18,000 30,000 6,000 5,000

Retained Earnings Dividends Fees Earned Wages Expense Rent Expense Depreciation Expense Totals Net Income (Loss) 63,000 18,000 15,000 228,000 3,000

28,000 3,000 141,000 63,000 18,000 15,000 228,000 96,000 45,000 141,000 141,000 132,000 141,000 132,000 141,000

28,000

87,000 45,000 132,000

The journal entry to close revenues would be

A. debit Income Summary, $141,000; credit Fees Earned, $141,000 B. debit Retained Earnings, $141,000; credit Fees Earned, $141,000 C. debit Fees Earned, $141,000; credit Income Summary, $141,000 D. credit Fees Earned, $141,000; credit Retained Earnings, $141,000





Debit

Credit

Debit 48,000 18,000 6,000 57,000

Credit

18,000 30,000 6,000 5,000

18,000 30,000 6,000 5,000


28,000 3,000 141,000 63,000 18,000 15,000 228,000 96,000 45,000 141,000 141,000 132,000 141,000 132,000 141,000

28,000

87,000 45,000 132,000

The entry to close expenses would be

A. Wages Expense 63,000 Rent Expense 18,000 Depreciation Expense 15,000 Income Summary 96,000 B. Expenses 96,000 Income Summary 96,000 C. Wages Expense 63,000 Rent Expense 18,000 Depreciation Expense 15,000 Dividends 96,000 D. Income Summary 96,000 Wages Expense 63,000 Rent Expense 18,000 Depreciation Expense 15,000





Debit

Credit

Debit 48,000 18,000 6,000 57,000

Credit

18,000 30,000 6,000 5,000

18,000 30,000 6,000 5,000


28,000 3,000 141,000 63,000 18,000 15,000 228,000 96,000 45,000 141,000 141,000 132,000 141,000 132,000 141,000

28,000

87,000 45,000 132,000

The entry to close Income Summary would be

A. debit Retained Earnings, $45,000; credit Income Summary, $45,000 B. debit Income Summary, $141,000; credit Retained Earnings, $141,000 C. debit Income Summary, $45,000; credit Retained Earnings, $45,000 D. debit Retained Earnings, $9,000; credit Income Summary, $9,000





Debit

Credit

Debit 48,000 18,000 6,000 57,000

Credit

18,000 30,000 6,000 5,000

18,000 30,000 6,000 5,000


28,000 3,000 141,000 63,000 18,000 15,000 228,000 96,000 45,000 141,000 141,000 132,000 141,000 132,000 141,000

28,000

87,000 45,000 132,000

The entry to close Dividends would be

A. debit Retained Earnings, $3,000; credit Dividends, $3,000 B. debit Retained Earnings, $12,000; credit Dividends, $12,000 C. debit Dividends, $3,000; credit Retained Earnings, $3,000 D. debit Dividends, $12,000; credit Retained Earnings, $12,000





Debit

Credit

Debit 48,000 18,000 6,000 57,000

Credit

18,000 30,000 6,000 5,000

18,000 30,000 6,000 5,000


28,000 3,000 141,000 63,000 18,000 15,000 228,000 96,000 45,000 141,000 141,000 132,000 141,000 132,000 141,000

28,000

87,000 45,000 132,000

The ending balance in Retained Earnings is

A. $28,000 B. $70,000 C. $25,000 D. $73,000 125. The proper sequence for the steps in the accounting cycle is a 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 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

126. 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.

127. 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.

128. 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

129. The fiscal year selected by companies A. is the same as the calendar year. B. begins with the first day of the month and ends on the last day of the twelfth month. C. must always begin on January 1. D. will change each year.

130. 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.

131. 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.

132. 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

133. During the end-of-period processing, which of the following best describes the logical order of steps? 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

134. The work sheet 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

137. When a work sheet is complete, the adjustment columns should have A. total credits greater than total debits if a net income was earned B. total debits greater than total credits if a net loss was incurred C. total debits greater than total credits if a net income was earned D. total debits equal total credits

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 not unusual when preparing the work sheet D. is the net difference between revenue, expenses, and dividends

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 item would appear in the Income Statement columns of the work sheet? A. Equipment B. Unearned Fees C. Prepaid Expense D. Net Loss

144. Which account would not appear in the Balance Sheet columns of the work sheet? A. Dividends B. Rent Earned C. Unearned Revenue D. Dividends 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 $5,350 in the Balance Sheet credit column for Accumulated Depreciation. The work sheet at the end of August has $6,700 in the Balance Sheet credit column for Accumulated Depreciation. What was the amount of the depreciation expense adjustment for the month of August? A. $1,350 B. $6,700 C. $5,350 D. none of the above

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 dividends account

148. An indication that the work sheet columns are in balance and the work sheet is completed is A. the word "Total" is written at the bottom of each pair of columns B. each pair of columns is double underlined C. each pair of columns has the totals circled D. the final figures are written in ink

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 $37,875 and $32,735, respectively. What is the amount of net income or net loss for the period? A. $5,140 net income B. $37,875 net loss C. $5,140 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 $85,300, respectively. What is the amount of the net income or net loss for the period? A. $7,800 net income B. $7,800 net loss C. $85,300 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. journal B. ledger C. chart of accounts D. work sheet

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 $36,678 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 $4,423 for the period C. the company has a net income of $4,423 for the period D. The amounts are out of balance and need to be corrected

155. The Income Statement columns in the work sheet show that debits total $55,800 and credits total $62,705. What does this information mean to the accountant? A. Net income is equal to $6,905. B. Net loss is equal to $6,905. C. The accounts are out of balance, indicating an error has been made. D. The accounts have not been updated.

156. The balances for the accounts listed below appear in the Adjusted Trial balance columns of the end-ofperiod spreadsheet (work sheet). Indicate whether each balance should be extended to an Income Statement column or (b) a Balance Sheet column. 1. 2. 3. 4. 5. 6. 7. 8. Capital Stock Retained Earnings Depreciation Expense Accumulated Depreciation Fees Earned Unearned Fees Supplies Supplies Expense

157. Tracy Roberts, the sole stockholder of Surfer Dude Supplies, is requesting a $75,000 loan from the bank where you work as a loan officer. He brings to you the following trial balance (or statement of accounts) as of the end of his first year of operations. (a) What three accounts do you think should be relabeled for greater clarity? (b) What adjustments might be necessary before an accurate set of financial statements could be prepared?

Surfer Dude Supplies Statement of Accounts December 31, 2011 Cash Billings Due from Others Office Supplies Trucks Equipment Amounts Owed to Others Investment in Business Service Revenues Wages Expense Rent Expense Insurance Expense Utilities Expenses Miscellaneous Expenses

2,050 15,070 7,470 26,370 8,090 2,850 23,500 73,650 30,050 7,330 2,400 700 470 100,000

100,000

158. 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?

159. On January 1, 2011, the retained earnings account of Crystal Pool Service Company had a balance of $252,000. During the year, the company issued an additional $20,000 of capital stock and paid $52,400 in dividends. For the year ended December 31, 2011, Crystal Pool Service Company reported a net income of $72,300. Prepare a retained earnings statement for the year ended December 31, 2011.

160. 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) stockholders equity section of the December 31, 2011, balance sheet of Brock Pool Service Company.

1. 2. 3. 4. 5. 6. 7. 8.

Retained Earnings Accumulated Depreciation Unearned Revenues Mortgage Payable Equipment Notes Payable (due in 2012) Cash Accounts Receivable

161. Explain the differences between a nonclassified balance sheet and a classified balance sheet.

162. List/describe the four closing entries in the order that they should occur.

163. After the accounts were adjusted at January 31, 2010, the end of the fiscal year, the following balances were taken from the ledger of Taylor Pool Service Company:

Capital Stock Retained Earnings Dividends Fees Earned Wages Expense Rent Expense Supplies Expense Miscellaneous Expense

$ 20,000 115,000 5,000 116,400 29,000 43,000 7,300 1,750

Journalize the four entries required to close the accounts

164. Prior to adjustment at August 31, 2011, Salary Expense has a debit balance of $298,500. Salaries owed but not paid as of the same date total $2,700.

Present the entries to record the followin g: (1) Accrued salaries as of August 31. (2) Closing of Salary Expense as of August 31.

165. Identify which of the following accounts should be closed to Income Summary at the end of the fiscal year. Record next to each account: a (Y) for YES, it should be closed to Income Summary; OR an (N) for NO, it would not be closed to Income Summary. 1. Utilities Payable 2. Utilities Expense 3. Supplies 4. Supplies Expense 5. Fees Earned 6. Unearned Fees 7. Accounts Receivable 8. Dividends 9. Retained Earnings 10. Accumulated Depreciation - Equipment 11. Depreciation Expense - Equipment 12. Equipment 13. Prepaid Insurance 14. Insurance Expense

166. Beachside Realty rents condominiums and furnishings. Its adjusted trial balance at December 31, 2011, is as follows:

Cash Accounts Receivable Interest Receivable Prepaid Insurance Notes Receivable (long-term) Equipment Accumulated Depreciation Accounts Payable Accrued Expenses Payable Income Taxes Payable Unearned Rental Fees Capital Stock Retained Earnings Dividends Rental Fees Earned Furniture Rental Revenue Interest Revenue Wages Expense Depreciation Expense Utilities Expense Insurance Expense Maintenance Expense Income Tax Expense

Debit Balances 1,500 2,000 100 1,600 2,800 15,000

Credit Balances

1,500 1,400 2,920 1,700 500 3,000 5,200 2,000 41,000 1,200 100 19,000 1,800 320 700 9,000 2,700 58,520

58,520

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



Debit Balances 1,500 2,000 100 1,600 2,800 15,000

Credit Balances

1,500 1,400 2,920 1,700 500 3,000 5,200 2,000 41,000 1,200 100 19,000 1,800 320 700 9,000 2,700 58,520

58,520

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



Debit Balances 1,500 2,000 100 1,600 2,800 15,000

Credit Balances

1,500 1,400 2,920 1,700 500 3,000 5,200 2,000 41,000 1,200 100 19,000 1,800 320 700 9,000 2,700 58,520

58,520

Prepare the closing entry required to transfer the income or loss at the end of the period.



Debit Balances 1,500 2,000 100 1,600 2,800 15,000

Credit Balances

1,500 1,400 2,920 1,700 500 3,000 5,200 2,000 41,000 1,200 100 19,000 1,800 320 700 9,000 2,700 58,520

58,520

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

170. 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.

171. Hakik Enterprises offers rug cleaning services to business clients. Below is the work sheet containing the trial balance for the month ended July 31, 2012.

Hakik Enterprises Work Sheet For the Month Ended July 31, 2012 Adjusted Trial Balance Adjustments Trial Balance Debit Credit Debit Credit 36 12 56 12 60 12 20 32 30 54 4 80 28 20

Debit

Credit

Cash Prepaid Insurance Fees Receivable Supplies Equipment Accum. Depreciation Unearned Revenue Accounts Payable Wages Payable Capital Stock Retained Earnings Dividends Service Revenue Advertising Expense Wage Expense Insurance Expense Supplies Expense Depreciation Expense Totals

228

228

Enter the adjustments in the work sheet based on the data provided below. Then enter the adjusted account 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 months 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.

172. Hakik Enterprises offers rug cleaning services to business clients. Below is the work sheet containing the trial balance for the month ended July 31, 2012.

Hakik Enterprises Work Sheet For the Month Ended July 31, 2012 Adjusted Trial Balance Adjustments Trial Balance Debit Credit Debit Credit 36 12 56 12 60 12 20 32 30 54 4 80 28 20

Debit

Credit

Cash Prepaid Insurance Fees Receivable Supplies Equipment Accum. Depreciation Unearned Revenue Accounts Payable Wages Payable Capital Stock Retained Earnings Dividends Service Revenue Advertising Expense Wage Expense Insurance Expense Supplies Expense Depreciation Expense Totals

228

228

Journalize adjusting entries based on the work sheet trial balance and the adjustment data provided below. 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 months 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.

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

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

175. 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) (2) (3) (4) (5) (6)

Salaries Payable Fees Earned Accounts Payable Capital Stock Supplies Expense Unearned Rent

(7) (8) (9) (10) (11) (12)

Retained Earnings Equipment Accounts Receivable Accumulated Depreciation Salary Expense Depreciation Expense

176. 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) (2) (3) (4)

Supplies Unearned Fees Prepaid Advertising Advertising Expense

(5) (6) (7) (8)

Supplies Expense Prepaid Insurance Accounts Payable Fees Earned

177. The following accounts were taken from the Adjusted Trial Balance columns of the work sheet for the year ended April 30, 2011, for Finnegan Co.:

Accumulated Depreciation Fees Earned Depreciation Expense Dividends Rent Expense Prepaid Insurance Supplies Supplies Expense Insurance Expense

$ 32,000 78,000 7,250 5,000 34,000 6,000 400 1,800 2,000

Prepare an income statement.

178. The following revenue and expense account balances were taken from the Income Statement columns of the work sheet for Fraser Services Co. for the year ended December 31, 2011:

Depreciation Expense Insurance Expense Miscellaneous Expense Rent Expense Service Revenue Supplies Expense Utilities Expense Wages Expense

$ 4,950 2,900 1,200 24,000 92,500 3,150 5,000 63,750

Prepare an income statement.

179. The following data were taken from the Balance Sheet columns of the work sheet for April 30, 2011 for Mackenzie Company:

Accumulated DepreciationTrucks Prepaid Rent Supplies Unearned Fees Trucks Cash Capital Stock Retained Earnings

$42,400 6,800 850 7,310 49,300 3,400 4,000 ?

Prepare a classified balance sheet.

180. Indicate whether each of the following would be reported in the section of financial statements identified as (a) current assets, (b) property, plant, and equipment, (c) current liabilities, (d) revenues, or (e) expenses:

(1) (2) (3) (4) (5) (6) (7) (8) (9)

Automobile Accumulated depreciation Rent expense Fees earned Salaries payable Prepaid rent Store supplies Advertising expense Unearned rent

181. The following balance sheet contains errors.

Brock Morton Services Co. Balance Sheet For the Year Ended December 31, 2011 Assets Current assets: Cash Accounts payable Supplies Prepaid insurance Land Total current assets Liabilities Current liabilities: Accounts receivable Accum. depr.building Accum. depr.equipment Net income Total liabilities Stockholders Equity Wages payable Capital stock Retained earnings Total stockholders equity Total liabilities and stockholders equity

$ 7,170 7,500 2,590 800 24,000 $ 42,060

$ 10,000 12,525 7,340 11,500 $ 41,365

Property, plant, and equip: Building Equipment Total property, plant, and equipment Total assets

$ 43,700 29,250 $ 72,950 $131,510

$ 1,500 25,000 63,645 $ 90,145

$131,510

(a) List the errors in the balance sheet above and (b) prepare a corrected balance sheet.

182. The following is the adjusted trial balance for Nadia Company prepared at the end of Nadias fiscal year.

Nadia Company Adjusted Trial Balance December 31, 2011 Cash Accounts Receivable Prepaid Expenses Equipment Accumulated Depreciation Accounts Payable Notes Payable - Due on June 30, 2012 Capital Stock Retained Earnings Dividends Fees Earned Wages Expense Rent Expense Utilities Expense Depreciation Expense Miscellaneous Expense Totals

5,130 3,300 550 12,400 2,200 700 4,000 2,000 11,000 700 9,930 2,450 1,900 1,475 1,150 775 29,830

29,830

Prepare an income statement, retained earnings statement, and classified balance sheet.

183. Prepare an income statement and a retained earnings statement for the month ended August 31, 2011, from the following T accounts of Marley Company.

Prepaid Insurance

Account s Receiva ble 135 5,400 1,600

Unearned Revenues

Wages Payable

1,100

1,400 400

425

Retained Earnings 6,500 5,930 3,200

Divide nds 3,200

Income Summary

Fees Earned 9,775 7,775 1,600 400 9,775

3,200

3,845 5,930

Wages Expense

Rent Expens e 990

Insurance Expense

Utilities Expense

2,200 425 2,625

135 990 135

95 95

184. Prepare an income statement and a retained earnings statement for the month ended September 30, 2011, from the T accounts below of Carson Company.

Prepaid Insurance

Accoun ts Receiv able 80 1,600 500

Unearned Revenues

Wages Payable

1,400

1,200 350

225

Retained Earnings 6,800 610 2,400

Divide nds 2,400

Income Summary

Fees Earned 4,150 3,300 500 350 4,150

2400

4,760 610

Wages Expense

Rent Expens e 1,130

Insurance Expense

Utilities Expense

3,200 225 3,425

80 1,130 80

125 125

185. Selected ledger accounts appear below for Fulton Surveying Services for 2011.

Retained Earnings 12/31 15,000

Dividends 1/1 12/31 20,000 45,000 3/31 12/22 12,000 3,000 12/31 15,000

Income Summary 12/31 19,000 12/31 45,000

12/31

64,000

Prepare a retained earnings statement.

186. 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 Accounts Receivable Supplies Equipment Accumulated Depreciation Accounts Payable Capital Stock Retained Earnings Dividends Fees Earned Salary Expense Rent Expense Depreciation Expense Supplies Expense Miscellaneous Expense

$ 30,000 45,200 5,000 169,900 $ 32,000 12,500 20,000 51,600 47,000 510,000 244,500 48,000 25,000 9,500 2,000 $626,100

$626,100

187. After all adjustments have been made, but before the accounts have been closed, the following balances were taken from the ledger of Ramonas Designs:

Accounts Payable Accounts Receivable Accumulated Depreciation Cash Depreciation Expense Equipment Insurance Expense Miscellaneous Expense Prepaid Insurance

$ 30,000 64,500 73,325 17,150 11,500 165,000 1,600 2,000 6,275

Rent Expense Salary Expense Salaries Payable Service Revenue Supplies Supplies Expense Capital Stock Retained Earnings Dividends

$ 31,400 46,000 1,150 191,000 1,500 2,500 24,000 77,950 48,000

Journalize the entries to close the appropriate accounts.

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

Cash Accounts Receivable Office Supplies Repair Parts Machinery Accumulated Depreciation Accounts Payable Notes Payable Capital Stock Retained Earnings Dividends Service Revenue Wages Expense Office Supplies Expense Repair Parts Expense Depreciation Expense

22,500.00 3,575.00 2,850.00 13,785.00 27,750.00 3,250.00 1,150.00 6,500.00 5,000.00 17,500.00 1,750.00 47,200.00 4,840.00 1,275.00 925.00 1,350.00 80,600.00

80,600.00

189. 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 prepare the closing entries for Erik Martin Company.

Cash Accounts Receivable Office Supplies Store Supplies Machinery Accumulated Depreciation Accounts Payable Notes Payable Capital Stock Retained Earnings Dividends Service Revenue Wages Expense Office Supplies Expense Store Supplies Expense Depreciation Expense

24,750.00 5,750.00 3,525.00 4,785.00 9,750.00 2,150.00 3,550.00 7,500.00 10,000.00 9,725.00 6,250.00 36,500.00 6,425.00 1,465.00 5,150.00 1, 575.00 69,425.00

__ __ ___ 69,425.00

190. 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 prepare the closing entries for Ladonna Douglas Company.

Cash Accounts Receivable Office Supplies Store Supplies Machinery Accumulated Depreciation Accounts Payable Notes Payable Capital Stock Retained Earnings Dividends Service Revenue Wages Expense Rent Expense Advertising Expense Office Supplies Expense Store Supplies Expense Depreciation Expense

34,750.00 9,750.00 2,525.00 4,785.00 20,750.00 2,150.00 14,300.00 11,500.00 7,500.00 46,225.00 3,250.00 41,500.00 37,425.00 3,000.00 2,750.00 1,465.00 2,150.00 575.00 123,175.00

___ _ ___ 123,175.00

191. Marcus Enterprises began in 2011 when Damien Marcus invested $8,000 in exchange for capital stock. The following is the work sheet for the company at the end of the first year in business. Marcus Enterprises Work Sheet For the Year Ended December 31, 2011

Adjusted Trial Balance

Income Statement Balance Sheet

Account Title Cash Accounts Receivable Supplies Equipment Accum. Depr. - Equip. Accounts Payable Wages Payable Capital Stock Dividends Fees Earned Wages Expense Rent Expense Depreciation Expense Totals Net Income (Loss)

Debit 25,000 7,000 1,000 18,500

Credit

Debit

Credit

Debit 25,000 7,000 1,000 18,500

Credit

3,500 11,000 1,000 8,000 2,000 59,500 19,000 7,000 3,500 83,000 19,000 7,000 3,500 29,500 30,000 59,500 59,500 2,000

3,500 11,000 1,000 8,000

83,000

59,500 59,500

53,500 53,500

23,500 30,000 53,500

Prepare an income statement, retained earnings statement, and classified balance sheet for Marcus Enterprises for the year ended December 31, 2011.

192. Marcus Enterprises began in 2011 when Damien Marcus invested $8,000 in exchange for capital stock. The following is the work sheet for the company at the end of the first year in business. Marcus Enterprises Work Sheet For the Year Ended December 31, 2011

Adjusted Trial Balance

Income Statement Balance Sheet

Account Title Cash Accounts Receivable Supplies Equipment Accum. Depr. - Equip. Accounts Payable Wages Payable Capital Stock Dividends Fees Earned Wages Expense Rent Expense Depreciation Expense Totals Net Income (Loss)

Debit 25,000 7,000 1,000 18,500

Credit

Debit

Credit

Debit 25,000 7,000 1,000 18,500

Credit

3,500 11,000 1,000 8,000 2,000 59,500 19,000 7,000 3,500 83,000 19,000 7,000 3,500 29,500 30,000 59,500 59,500 2,000

3,500 11,000 1,000 8,000

83,000

59,500 59,500

53,500 53,500

23,500 30,000 53,500

Prepare the required closing entries for Marcus Enterprises for the year ended December 31, 2011.

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

Sandeep Company Adjusted Trial Balance December 31, 2011 Cash Accounts Receivable Prepaid Expenses Equipment Accumulated Depreciation Accounts Payable Notes Payable Capital Stock Retained Earnings Dividends Fees Earned Wages Expense Rent Expense Utilities Expense Depreciation Expense Miscellaneous Expense Totals

18,130 3,300 2,750 30,400 12,200 2,700 1,000 10,000 21,200 4,870 36,600 12,450 4,900 3,475 2,150 1,275 83,700

83,700

Prepare closing entries and the post closing trial balance.

194. Reconstruct the adjusting and closing entries from the following T accounts.

Prepaid Insurance

Accoun ts Receiv able. 200 6,000 1,500 7,500

Unearned Revenues

Wages Payable

1,200 1,000

1,350 435 915

530 530

Retained Earnings 7,000 5,280 2,100 10,180

Divid ends 2,100

Income Summary

Fees Earned 9,935 8,000 1,500 435 9,935 0

2,100 0

4,655 5,280 0

Wages Expense

Rent Expens e 1,145

Insurance Expense

Utilities Expense

2,600 530 3,130 0

200 1,145 200 0

180 180 0

0

195. Reconstruct adjusting and closing entries for the month ended September 30, 2011 from the T accounts below.

Prepaid Insurance

Accoun ts Receiv able. 130 1,250 275 1,525

Unearned Revenues

Wages Payable

1,350 1,220

1,050 235 815

385 385

Retained Earnings 7,000 580 2,400 4,020

Divide nds 2,400

Income Summary

Fees Earned 5,510 5,000 275 235 5,510

2,400 0

6,090 580

Wages Expense

Rent Expens e 1,880

Insurance Expense

Utilities Expense

3,600 385 3,985 0

130 1,880 130 0

95 95 0

0

196.1) Bowen Company is completing its first year of operations on April 30, 2012. Reconstruct the entries for the year ended April 30, 2012 from the T accounts below. Record them as follows: A - L Journal Entries M- R Adjusting Journal Entries 2) Prepare the income statement, retained earnings statement, and classified balance sheet from the T accounts. Prepare the four closing entries (S - V). Prepare the postclosing trial balance.

3) 4)

Cash

Accoun ts Receiv able 2,500 400 1,250 385

Supplies

Prepaid Insurance

8,500

870 540

1,940 725

900 420 1,940 2,600 50 350 830

Equipment

Accum ulated Deprec iation

Accounts Payable

Wages Payable

2,500

130

870

225

Unearned Revenues 830 490

Capital Stock

Retained Earnings 8,500

Dividends 350

Fees Earned 900 1,250 2,600 385 490

Wages Expens e 420 225

Rent Expense

Supplies Expense 400 540

Insurance Expense

Deprec iation Expens e 130

Miscellaneo us Expense

Income Summary

725

50

197. The balances in the ledger of Good Landscape Services as of January 31, 2012 before adjustments are as follows:

Cash Supplies Prepaid Insurance Equipment Accumulated Depreciation Capital Stock

$ 4,250 3,900 8,400 41,750 9,950 6,850

Retained Earnings Dividends Service Revenue Salary Expense Rent Expense Miscellaneous Expense

$13,525 3,425 63,200 24,300 6,000 1,500

Adjustment data are as follows: supplies on hand, January 31, $1,800; insurance expired for January, $1,100; depreciation on equipment for January, $2,500; salaries accrued, January 31, $1,650. (a) (b) (c) Prepare a ten-column work sheet for Good Landscape Services for January, 2010. On the basis of the work sheet in (a), present the following in good order: (1) income statement, (2) retained earnings statement (no additional investments were made during the month), and (3) classified balance sheet. On the basis of the work sheet in (a), journalize the closing entries as of January 31, 2012.

198. Complete the following work sheet for Danilo Enterprises. Danilo Enterprises Work Sheet For the Year Ended December 31, 2011Adjusted Trial Balance Income Statement B a l a n c e S h e e t Credit D Credit e b i t

Account Title

Debit

Debit

Credit

Cash Accounts Receivable Supplies Equipment Accum. Depr. - Equip. Accounts Payable Wages Payable Capital Stock Retained Earnings Dividends Fees Earned Wages Expense Rent Expense Depreciation Expense Totals

14,500 7,500 500 20,500 15,000 9,500 3,060 5,000 13,240 1,000 34,000 18,000 9,300 8,500 79,800

79,800

Chapter 4--Completing the Accounting Cycle Key

1. Cross-referencing is useful in assuring that the debits and credits are in balance. FALSE

2. 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

3. Once the adjusted trial balance is in balance, the flow of accounts will now go into the financial statements. TRUE

4. There is really no benefit in preparing financial statements in any particular order. FALSE

5. Round tripping is a fraudulent scheme where business A artificially inflates revenue by lending money to customer B who uses that money to buy products from A. TRUE

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

7. The usual presentation of the retained earnings statement is (1) beginning retained earnings, (2) net income or loss, (3) dividends (4) ending retained earnings. TRUE

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

9. 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. FALSE

10. Prepaid Insurance is an example of a current asset. TRUE

11. Land is an example of a plant asset. TRUE

12. 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

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

14. Accrued taxes payable are generally reported on the balance sheet as a current liability. TRUE

15. At the end of the fiscal period, prepaid expenses are reported on the income statement as expenses. FALSE

16. Office Equipment is an example of a current asset account. FALSE

17. Capital Stock and Dividends are reported in the stockholders equity section of the balance sheet. FALSE

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

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

20. Accrued expenses are ordinarily listed on the balance sheet as current assets. FALSE

21. Accrued revenues are ordinarily listed on the balance sheet as current liabilities. FALSE

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

23. Examples of temporary accounts are supplies and prepaid expenses which are in the ledger for just a short time before they expire. FALSE

24. Accumulated Depreciation is a permanent account. TRUE

25. The dividends account is a temporary account. TRUE

26. The balance sheet accounts are referred to as real or permanent accounts. TRUE

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

28. The income summary account is closed to the retained earnings account. TRUE

29. The accumulated depreciation account is closed to the income summary account. FALSE

30. The dividends account is closed to the income summary account. FALSE

31. The trial balance prepared after all the closing entries have been posted is called a pre-closing trial balance. FALSE

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

33. Journalizing and posting closing entries must be completed before financial statements can be prepared. FALSE

34. During the closing process, some balance sheet accounts are closed and end the period with a zero balance. FALSE

35. Closing entries are entered directly on to the work sheet. FALSE

36. The post-closing trial balance will generally have fewer accounts than the trial balance. TRUE

37. A post-closing trial balance contains only asset and liability accounts. FALSE

38. A post-closing trial balance should be prepared before the financial statements are prepared. FALSE

39. Cash, Accounts Payable, and Capital Stock are real accounts and do not get closed at the end of the period. TRUE

40. The income summary account is also known as the clearing account. TRUE

41. All income statement accounts will be closed at the end of the period. TRUE

42. Balance Sheet accounts are not considered real accounts. FALSE

43. It is not necessary to post the closing entries to the general ledger. FALSE

44. 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

45. The closing process is sometimes referred to as closing the books. TRUE

46. Accounts reported on the balance sheet that are carried forward from year to year are known as permanent accounts. TRUE

47. Real accounts are not permanent accounts. FALSE

48. After analyzing transactions, the next step would be to post the transactions in the ledger. FALSE

49. The most important output of the accounting cycle is the financial statements. TRUE

50. The last step of the accounting cycle is to prepare a post-closing trial balance. TRUE

51. The accounting cycle begins with preparing an unadjusted trial balance. FALSE

52. Financial statements should be prepared before the closing entries are journalized and posted. TRUE

53. The unadjusted, adjusted, and final trial balances are prepared during the accounting cycle of a period. FALSE

54. Any twelve-month accounting period adopted by a company is known as its fiscal year. TRUE

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

56. All companies must use a calendar year as their fiscal year. FALSE

57. The majority of businesses end their fiscal year on December 31. TRUE

58. The work sheet is not considered a part of the formal accounting records. TRUE

59. The balances of the equity accounts from the Adjusted Trial Balance columns of the work sheet are extended to the Retained Earnings Statement columns. FALSE

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

61. 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

62. The trial balance may be listed on the work sheet instead of being prepared separately. TRUE

63. 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. FALSE

64. A work sheet heading is dated for a period of time. TRUE

65. On the work sheet, the capital stock and dividends account balances are extended to the Balance Sheet columns. TRUE

66. 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. TRUE

67. After net income or loss is entered on the work sheet, the debit column total must equal the credit column total of the Balance Sheet columns. TRUE

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

69. Net income is shown on the work sheet in the Income Statement Debit column and the Balance Sheet Credit column. TRUE

70. 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. FALSE

71. The work sheet and the financial statements both require dollar signs. FALSE

72. The balance in the retained earnings account on the work sheet will equal the amount presented in the balance sheet. FALSE

73. 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. FALSE

74. The chart of accounts, the journal, and the ledger are essential parts of the accounting system. TRUE

75. 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. Both will need to be in balance in order to continue with the end-of-period processing. C. The adjusted trial balance includes the postings of the adjustments for the period in the balance of the accounts. D. The unadjusted trial balance will be used to record the adjustments for the period.

76. 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 all of the adjustments were posted in the correct accounts C. verify that the net income (loss) is correct for the period D. verify the correct flow of accounts into the financial statements

77. When preparing the retained earnings statement, the beginning retained earnings balance can always be found A. in the Income Statement columns of the work sheet B. in the statement of cash flows C. in the general ledger D. in the Adjustments columns of the work sheet

78. 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

79. 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

80. 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 stockholders equity section D. income statement as revenue

81. 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

82. Prepaid insurance is reported on the balance sheet as a A. current asset B. fixed asset C. current liability D. long-term liability

83. The income statement is prepared from: A. the adjusted trial balance. B. the income statement columns of the work sheet. C. either the adjusted trial balance or the income statement columns of the work sheet. D. both the adjusted trial balance and the income statement columns of the work sheet.

84. 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.

85. The retained earnings statement 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

86. The income statement should be prepared A. before the retained earnings statement and balance sheet B. after the retained earnings statement and before the balance sheet C. after the retained earnings statement and balance sheet D. after the balance sheet and before the retained earnings statement



$28,890

Determine the net income (loss) for the period.

A. net income, $2,390 B. net loss, $790 C. net loss, $5,570 D. net income, $3,180



$28,890

Determine the Retained Earnings ending balance.



$28,890

Determine total assets.



$28,890

Determine the current assets.

A. $22,530 B. $8,830 C. $21,430 D. $8,130



$28,890

Determine the total liabilities for the period.

A. $1,900 B. $6,100 C. $4,200 D. $19,040 92. The balance sheet should be prepared A. before the income statement and the retained earnings statement B. before the income statement and after the retained earnings statement C. after the income statement and the retained earnings statement D. after the income statement and before the retained earnings statement

93. The retained earnings statement begins with the beginning balance followed by A. net income (loss) and dividends B. net income (loss) and issuances of capital stock C. issuances of capital stock and dividends D. issuances of capital stock, net income (loss), and dividends

94. The income statement will include 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)

95. The classified balance sheet will subsection the assets as follows A. Current Assets and Other Assets B. Current Assets and Property, Plant, and Equipment C. Current Assets and Long-Term Assets D. Other Assets and Property, Plant, and Equipment

96. The classified balance sheet will have liabilities divided into 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 Tomorrows Liabilities

97. Current 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 stockholders and will never be paid

98. On the balance sheet, stockholders equity is A. added to assets and the two are equal to liabilities B. added to liabilities and the two are equal to assets C. subtracted from liabilities and the net amount is equal to assets D. subtracted from assets and the net amount is equal to net income

99. 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 equal to assets and liabilities

100. On which financial statement will Income Summary be shown? A. retained earnings statement B. balance sheet C. income statement D. none of these

101. Which of the following is not true about closing entries? A. There are four closing entries that update the retained earnings 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 periods information correctly.

102. The income summary account is also called A. the imprest account B. the clearing account C. the adjustments account D. the helpful account

103. After posting the second closing entry to the income summary account, the balance will be equal to A. zero B. retained earnings C. revenues for the period D. the net income or (loss) for the period

104. What is the last account that should be listed in the post-closing trial balance? A. Income Summary B. Retained Earnings C. Cash D. Fees Earned

105. Which of the following account groups are all considered nominal accounts? A. Cash, Retained Earnings, Wages Payable B. Prepaid Insurance, Property, Plant & Equipment, Fees Earned C. Capital Stock, Dividends, Income Summary D. Rent Revenue, Fees Earned, Miscellaneous Expense

106. 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, dividends B. expenses, assets, income summary, capital stock C. retained earnings, dividends, income summary, assets D. dividends, income summary, expenses, revenues

107. 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

108. 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

109. Which of the accounts below would be closed by posting a debit to the account? A. Unearned Revenue B. Fees Earned C. Dividends D. Miscellaneous Expense

110. Which of the following accounts should be closed to Income Summary at the end of the fiscal year? A. Supplies Expense B. Accumulated Depreciation C. Prepaid Insurance D. Unearned Rent

111. 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

112. Which of the following accounts will be closed to the retained earnings account at the end of the fiscal year? A. Rent Expense B. Fees Earned C. Income Summary D. Depreciation Expense

113. 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

114. Which of the following accounts ordinarily appears in the post-closing trial balance? A. Fees Earned B. Supplies Expense C. Dividends D. Unearned Rent

115. 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

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

Accumulated Depreciation Fees Earned Depreciation Expense Insurance Expense Dividends Prepaid Insurance Supplies Supplies Expense

$ 2,300 14,700 1,300 200 500 4,800 900 3,800


A. $1,400 B. $9,400 C. $14,700 D. $8,900

117. A summary of selected ledger accounts appear below for Albertos Plumbing Services for the current calendar year-end.

Retained Earnings 12/31

8,500

1/1 12/31

6,500 18,500

Dividends 6/30 11/30 Income Summary 12/31 12/31

3,500 5,000

12/31

8,500

15,000 18,500

12/31

33,500


A. $16,500 B. $33,500 C. $18,500 D. $15,000 118. Amir Designs purchased a one-year liability insurance policy on March 1st of this year for $5,400 and recorded it as a prepaid expense. Which of the following amounts would be recorded for insurance expense during the adjusting process at the end of Amirs first month of operations on March 31st? A. $5,400. B. $540. C. $450. D. $500.

119. The journal entry to close the Fees Earned, $275, and Rent Revenue, $200, accounts on December 31st during the closing process would be A. Dec. 31 Fees Earned Rent Revenue Income Summary B. Dec. 31 Income Summary Fees Earned Rent Revenue C. Dec. 31 Revenues Income Summary D. Dec. 31 Income Summary Revenues 275 200 475 475 275 200 475 475 475 475





Debit

Credit

Debit 48,000 18,000 6,000 57,000

Credit

18,000 30,000 6,000 5,000

18,000 30,000 6,000 5,000


28,000 3,000 141,000 63,000 18,000 15,000 228,000 96,000 45,000 141,000 141,000 132,000 141,000 132,000 141,000

28,000

87,000 45,000 132,000

The journal entry to close revenues would be

A. debit Income Summary, $141,000; credit Fees Earned, $141,000 B. debit Retained Earnings, $141,000; credit Fees Earned, $141,000 C. debit Fees Earned, $141,000; credit Income Summary, $141,000 D. credit Fees Earned, $141,000; credit Retained Earnings, $141,000


F i n le y C o m p a n y W o r k S h e et F o r t h e Y e a r E n d e d D e c e m b e r 3 1, 2 0 1 0 Adjusted Trial

Chapter 4--Completing the a - Copy

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