Test bank accounting 25th editon warren chapter 4 completing the accounting cycle

Chapter Completing the Accounting Cycle Student: _ After analyzing transactions, the next step would be to post the transactions in the ledger True False The most important output of the accounting cycle is the financial statements True False The work sheet is not considered a part of the formal accounting records True False Cross-referencing is useful in assuring that the debits and credits are in balance True False When accounts not appear on the unadjusted trial balance but are needed to post adjustments, they are simply added to the account title column True False Once the adjusted trial balance is in balance, the flow of accounts will now go into the financial statements True False There is really no benefit in preparing financial statements in any particular order True False 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 On the income statement, miscellaneous expenses are usually presented as the last item without regard to the dollar amount True False 10 The usual presentation of the statement of owner's equity is (1) Beginning capital, (2) Net income or loss, (3) Drawing, (4) Owner's contributions, (5) Ending capital True False 11 The difference between a classified balance sheet and one that is not classified is that the classified one has subheadings True False 12 Cash and other assets that may reasonably be expected to be realized in cash, sold, or consumed through the normal operations of a business, usually longer than one year, are called current assets True False 13 Prepaid Insurance is an example of a current asset True False 14 Land is an example of a plant asset True False 15 Liabilities that will be due within one year or less and that are to be paid out of current assets are called current liabilities True False 16 The amount of the net income for a period appears on both the income statement and the balance sheet for that period True False 17 Accrued taxes payable are generally reported on the balance sheet as a current liability True False 18 At the end of the fiscal period, prepaid expenses are reported on the income statement as expenses True False 19 Office Equipment is an example of a current asset account True False 20 Capital and Drawing are reported in the owner's equity section of the balance sheet True False 21 Deferred expenses that benefit a relatively short period of time are listed on the balance sheet as current assets True False 22 Unearned revenues that will be earned in a relatively short period of time are listed on the balance sheet as current assets True False 23 Accrued expenses are ordinarily listed on the balance sheet as current assets True False 24 Accrued revenues are ordinarily listed on the balance sheet as current liabilities True False 25 The income statement is prepared from the adjusted trial balance or the income statement columns on the work sheet True False 26 Examples of temporary accounts are supplies and prepaid expenses which are in the ledger for just a short time before they expire True False 27 Accumulated Depreciation is a permanent account True False 28 The drawing account is a temporary account True False 29 The balance sheet accounts are referred to as real or permanent accounts True False 30 Journalizing and posting the adjustments and closing entries updates the ledger for the new accounting period True False 31 The income summary account is closed to the owner's capital account True False 32 The accumulated depreciation account is closed to the income summary account True False 33 The drawing account is closed to the income summary account True False 34 The trial balance prepared after all the closing entries have been posted is called a pre-closing trial balance True False 35 Entries required to close the balances of the temporary accounts at the end of the period are called final entries True False 36 Journalizing and posting closing entries must be completed before financial statements can be prepared True False 37 During the closing process, some balance sheet accounts are closed and end the period with a zero balance True False 38 Closing entries are entered directly on to the work sheet True False 39 The post-closing trial balance will generally have fewer accounts than the trial balance True False 40 A post-closing trial balance contains only asset and liability accounts True False 41 A post-closing trial balance should be prepared before the financial statements are prepared True False 42 Assets, liabilities, and owner’s capital are real accounts and not get closed at the end of the period True False 43 The income summary account is also known as the clearing account True False 44 All income statement accounts will be closed at the end of the period True False 45 Balance Sheet accounts are not considered real accounts True False 46 It is not necessary to post the closing entries to the general ledger True False 47 Once an account has been closed for the period, inserting a line in the balance columns zeros out the account, making it ready for the following period True False 48 The last step of the accounting cycle is to prepare a post-closing trial balance True False 49 The accounting cycle begins with preparing an unadjusted trial balance True False 50 Financial statements should be prepared before the closing entries are journalized and posted True False 51 The unadjusted, adjusted, and final trial balances are prepared during the accounting cycle of a period True False 52 Any twelve-month accounting period adopted by a company is known as its fiscal year True False 53 A fiscal year that ends when business activities have reached their lowest point is called the natural business year True False 54 All companies must use a calendar year as their fiscal year True False 55 The majority of businesses end their fiscal year on December 31 True False 56 The balances of the capital accounts from the Adjusted Trial Balance of the work sheet are extended to the Statement of Owner’s Equity columns True False 57 The work sheet is a working paper that accountants can use to summarize adjusting entries and the account balances for the financial statements True False 58 In a computerized accounting system, a work sheet may not be necessary because the software program automatically posts entries to the accounts and prepares financial statements True False 59 The trial balance may be listed on the work sheet instead of being prepared separately True False 60 The totals of the Adjusted Trial Balance columns on a work sheet will always be the sum of the Trial Balance column totals and the Adjustments column totals True False 61 A work sheet heading is dated for a period of time True False 62 On the work sheet, the capital and drawing account balances are extended to the Balance Sheet columns True False 63 After the account balances have been extended from the Adjusted Trial Balance columns on the work sheet, the difference between the initial totals of the Balance Sheet debit and credit columns is Net Income or Net Loss True False 64 After Net Income or Loss is entered on the work sheet, the debit column total must equal the credit column total for the Balance Sheet pair of columns True False 65 A net loss is shown on the work sheet in the credit columns of both the Income Statement columns and the Balance Sheet columns True False 66 Net income is shown on the work sheet in the Income Statement debit column and the Balance Sheet credit column True False 67 If the totals of the Income Statement debit and credit columns of a work sheet are $27,000 and $29,000, respectively, after all account balances have been extended, the amount of the net loss is $2,000 True False 68 The worksheet and the financial statements both require dollar signs True False 69 The balance in the capital account on the worksheet will equal the amount presented in the balance sheet True False 70 Since the adjustments are entered on the work sheet, it is not necessary to record them in the journal or post them to the ledger True False 71 The chart of accounts, the journal, and the ledger are essential parts of the accounting system True False 72 The closing process is sometimes referred to as closing the books True False 73 Accounts reported on the balance sheet that are carried forward from year to year are known as permanent accounts True False 74 Real accounts are not permanent accounts True False 75 In the accounting cycle, the last step is A preparing the financial statements B journalizing and posting the adjusting entries C preparing a post-closing trial balance D journalizing and posting the closing entries 76 During the end-of-period processing which of the following best describes the logical order of this process A Preparation of adjustments, adjusted trial balance, financial statements B Preparation of Income Statement, adjusted trial balance, Balance Sheet C Preparation of adjusted trial balance, cross-referencing, journalizing D Preparation of adjustments, adjusted trial balance, posting 77 What is the major difference between the Unadjusted Trial Balance and the Adjusted Trial Balance? A The Adjusted Trial Balance will show the net income (loss) as an additional account B Unlike the Adjusted Trial Balance, the Unadjusted Trial Balance will continue with the end-of-period processing even if it is not in balance C The Adjusted Trial Balance includes the postings of the adjustments for the period in the balance of the accounts D The Adjusted Trial Balance will be used to record the adjustments for the period 78 Once the adjusting entries are posted, the Adjusted Trial Balance is prepared to A verify that the debits and credits are in balance B verify that the net income correctly flows into the statement of owner’s equity from the income statement C verify that the net income (loss) is correct for the period D verify the correct flow of accounts into the financial statements 79 When preparing the statement of owner's equity, the beginning capital 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 Balance Sheet columns of the work sheet 80 Accumulated Depreciation appears on the A balance sheet in the current assets section B balance sheet in the property, plant and equipment section C balance sheet in the long-term liabilities section D income statement as an operating expense 81 Notes Receivable due in 350 days appear on the A balance sheet in the current assets section B balance sheet in the fixed assets section C balance sheet in the current liabilities section D income statement as an expense 82 Unearned Fees appear on the A balance sheet in the current assets section B balance sheet as a current liability C balance sheet in the owner's equity section D income statement as revenue 83 Which one of the fixed asset accounts listed below will not have a related contra asset account? A Office Equipment B Land C Delivery Equipment D Building 84 Prepaid insurance is reported on the balance sheet as a A current asset B fixed asset C current liability D long-term liability 85 The income statement is prepared from: A the adjusted trial balance B the income statement columns of the work sheet 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 Wages Expense Rent Expens e 3,600 385 1,880 Utilities Expense 130 1,880 3,985 Insurance Expense 95 130 95 Adjusting Entries: 1) 2) 3) 4) Ins 130 ura nc e Ex pe nse Pre pai d Ins ura nc e Ac 275 co unt s Re cei va ble Fe es Ea rne d Un 235 ear ne d Re ve nu e Fe es Ea rne d W 385 ag es Ex pe nse W ag es Pa ya ble 130 275 235 385 Closing Entries: 1) 2) 3) 4) Fees 5,510 Earne d Inco me Sum mary Inco 6,090 me Sum mary Wage s Expe nse Rent Expe nse Insura nce Expe nse Utiliti es Expe nse Mai 580 Lui, Capit al Inco me Sum mary Mai 2,400 Lui, Capit al Mai Lui, Drawi ng 5,510 3,985 1,880 130 95 580 2,400 202 1) Dana Bowen Company is completing its first year of operations on April 30, 2010 Reconstru ct the entries for the year ended April 30, 2010 from the T-accounts below Record them as follows: A - L Journal Entries M- R Adjusting Journal Entries 2) Balance and prepare the Income Statement, Statement of Owner’s Equity, and the Balance Sheet from the T-Accounts 3) Prepare the four closing entries (S - V) 4) Prepare the Post-Closing Trial Balance Cash Accou nts Receiv able 6,500 900 Supplies 1,250 385 Prepaid Insurance 870 1,940 540 725 870 225 400 420 1,940 2,500 50 350 930 Equipment 2,500 Accum ulated Deprec iation Accounts Payable 130 Wages Payable Unearned Revenues Dana Bowen , Capital 930 590 Fees Earned Wages Expens e 900 1,250 2,500 385 590 Insurance Expense 725 Dana Bowen, Drawing Income Summary 6,500 2,500 350 Rent Expense Supplies Expense 420 225 Deprec iation Expens e 400 Miscellaneo us Expense 130 50 540 1) Journal Entries: a) C a s h 6, 0 Dana Bowen, Capital b) E q ui p m e nt 6,500 2, 0 Dana Bowen, Capital c) d) e) f) R e nt E x p e n s e 2,500 0 Cash 400 C 900 a s h Fees Earned 0 A 1,250 c c o u nt s R e c ei v a bl e Fees Earned 1, S 870 u p pl ie s Accounts Payable g) h) i) j) W420 a g e s E x p e n s e Cash P 1,940 re p d I n s u n c e Cash 1, C 2,500 a s h Fees Earned 2, 0 M50 is c el la n e o u s E x p e n s e Cash k) l) D 350 a n a B o w e n, D w in g Cash C 930 a s h Unearned Revenue Adjusting Entries: m) Supplies Expense n) Accounts Receivable o) Insurance Expense p) Depreciation Expense q) Wages Expense r) Unearned Revenues 540 Supplies 540 385 Fees Earned 385 725 Prepaid Insurance 725 130 Accumulated Depreciation 130 225 Wages Payable 225 590 Fees Earned 590 2) Dana Bowen Company Income Statement For the Year Ended April 30, 2010 Fees Earned Expenses: Wages Expense Rent Expense Supplies Expense Insurance Expense Depreciation Expense Miscellaneous Expense Total Expenses Net Income $5,625 $645 400 540 725 130 50 2,490 $3,135 Dana Bowen Company Statement of Owner’s Equity For the Year Ended April 30, 2010 Dana Bowen Capital, May 1, 2009 Add: Investments Sub-Total Net Income for the Period Less: withdrawals Increase in Owner’s Equity Dana Bowen, Capital, April 20, 2010 Dana Bowen Company Balance Sheet April 30, 2010 Assets: Current Assets: Cash Accounts Receivable Supplies Prepaid Insurance Total Current Assets Property, Plant, & Equipment Equipment Less: Accum Depre Total Assets $0 9,000 9,000 $3,135 350 2,785 $11,785 Liabilities: $7,670 1,635 330 1,215 Accounts Payable Wages Payable Unearned Revenues Total Liabilities $870 225 340 1,435 Owner’s Equity Dana Bowen, Capital Total Liabilities and Owner’s Equity 11,785 $13,220 $10,850 $2,500 130 2,370 $13,220 3) Closing Entries: s) Fees Earned 5,625 Inc om e Su m ma ry t) Income Summary 5,625 2,490 W ag es Ex pe nse Re nt Ex pe nse Su ppl ies Ex pe nse Ins ura nc e Ex pe nse De pre cia tio n Ex pe nse Mi sce lla ne ou s Ex pe nse u) Income Summary 645 400 540 725 130 50 3,135 Da na Bo we n, Ca pit al v) Dana Bowen, Capital 3,135 350 Da na Bo we n, Dr aw ing 350 4) Dana Bowen Company Post-Closing Trial Balance For the Year Ended April 30, 2010 Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation Accounts Payable Wages Payable Unearned Revenues Dana Bowen, Capital Total $7,670 1,635 330 1,215 2,500 $13,350 $ 130 870 225 340 11,785 $13,350 203 The balances in the ledger of Good Landscape Services as of January 31, 2014 before adjustments, are as follows: Cash Supplies Prepaid Insurance Equipment Accumulated Depreciation $ 6,750 3,900 8,400 41,750 9,950 Dalton Good, Capital Dalton Good, Drawing Service Revenue Salary Expense Rent Expense Miscellaneous Expense $29,775 3,425 56,300 24,300 6,000 1,500 Adjustment data are as follows: supplies on hand, January 31, $900; insurance expired for January, $1,100; depreciation on equipment for January, $1,600; salaries accrued, January 31, $1,650 (a) (b) (c) Prepare a ten-column work sheet for Good Landscape Services for January, 2014 On the basis of the work sheet in (a), present the following in good order: (1) income statement, (2) statement of owner's equity (no additional investments were made during the month), and (3) balance sheet On the basis of the work sheet in (a), journalize the closing entries as of January 31, 2014 (a) ) Good Landscape Services Work Sheet For the Month Ended January 31, 2014 ) ) ) ) Trial Balance Adjustm ents Account Title Dr Cr Dr Cr ) Cash Supplies Prepaid Insurance Equipment Accumulated Depreciation Dalton Good, Capital Dalton Good, Drawing Service Revenue Salary Expense Rent Expense Miscellaneous Expense 6,750 3,900 8,400 41,750 3,425 24,300 6,000 1,500 96,025 9,950 29,775 63,200 96,025 (d) 1,650 (a) 3,000 (b) 1,100 (c) 1,600 Supplies Expense Insurance Expense Depreciation Expense Salaries Payable (a) 3,000 (b) 1,100 (c) 1,600 7,350 d) 1,650 7,350 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Net Income ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( Adjusted Trial Balance Dr 6,750 900 7,300 41,750 3,425 25,950 6,000 1,500 3,000 1,100 1,600 99,275 Income Stateme nt Balance Sheet Cr Dr Cr Dr Cr 11,550 29,775 56,300 1,650 99,275 25,950 6,000 1,500 3,000 1,100 1,600 39,150 17,150 56,,300 56,300 56,300 56,300 6,750 900 7,300 41,750 3,425 60,125 60,125 11,550 29,275 1,650 43,875 17,150 60,125 (b) (1) Good Landscape Services Income Statement For the Month Ended January 31, 2014 Service revenue Operating expenses: Salary expense Rent expense Supplies expense Insurance expense Depreciation expense Miscellaneous expense Total operating expenses Net income $56,300 $25,950 6,000 2,100 1,100 2,500 1,500 39,150 $17,150 (b) (2) Good Landscape Services Statement of Owner's Equity For the Month Ended January 31, 2014 Dalton Good, Capital, January 1, 2014 Net income for the month Less withdrawals Increase in owner's equity Dalton Good, Capital, January 31, 2014 (b) (3) Good Landscape Services Balance Sheet January 31, 2014 Assets Current assets: Cash Supplies Prepaid insurance Total current assets Property, plant, and equipment: Equipment Less accumulated depreciation Total property, plant, and equipment Total assets $29,775 $17,150 3,425 13,725 $43,500 Liabilities $ 6,750 1,800 7,300 Current liabilities: Salaries payable $15,850 $41,750 12,450 29,300 $45,150 Owner's Equity Dalton Good, Capital Total liabilities and owner's equity $ 1,650 43,500 $45,150 (c) Jan 31 31 31 31 Closing Entries Service Revenue Income Summary 56,300 56,300 Income Summary Salary Expense Rent Expense Miscellaneous Expense Supplies Expense Insurance Expense Depreciation Expense 39,150 Income Summary Dalton Good, Capital 17,150 Dalton Good, Capital Dalton Good, Drawing 3,425 25,950 6,000 1,500 2,100 1,100 2,500 17,150 3,425 204 Complete the following worksheet for Danilo Enterprises Danilo Enterprises Worksheet For the Year Ended December 31, 2010 Adjusted Trial Balance Account Title Debit Cash Accounts Receivable Supplies Equipment Accumulated Depr-Equip Accounts Payable Wages Payable Tony Danilo, Capital Tony Danilo, Drawing Fees Earned Wages Expense Rent Expense Depreciation Expense Totals Net Income (Loss) 14,500 7,500 500 20,500 Income Statement B a l a n c e Credit 15,000 9,500 3,060 18,240 1,000 34,000 18,000 9,300 8,500 79,800 79,800 S h e e t DCredit e b i t Debit Credit Danilo Enterprises Worksheet For the Year Ended December 31, 2010 Adjusted Trial Balance Account Title Debit Cash Accounts Receivable Supplies Equipment Accumulated Depr-Equip Accounts Payable Wages Payable Tony Danilo, Capital Tony Danilo, Drawing Fees Earned Wages Expense 14,500 7,500 500 20,500 Rent Expense 9,300 Depreciation Expense 8,500 Totals 79,800 Net Loss Income Statement B a l a n c e Credit S h e e t DCredit e b i t Debit Credit 14,500 7,500 500 20,500 15,000 9,500 3,060 18,240 15,000 9,500 3,060 18,240 1,000 1,000 34,000 18,000 79,800 34,000 , 0 , 0 , 0 334,000 , 0 1,800 335,800 , 0 44,000 45,800 1,800 45,800 45,800 ... 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. .. 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... 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