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

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.. A net loss is shown on the work sheet in

Chapter 4 Completing the Accounting Cycle

5 When accounts do not appear on the unadjusted trial balance but are needed to post adjustments, they are

simply added to the account title column

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

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

27 Accumulated Depreciation is a permanent account

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

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

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

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

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

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

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

86 Round-tripping is when

A a selling company sells to a customer company with huge discounts

B a selling company pretends to sell to a fictitious company with the intent of inflating revenues

C a selling company lends money to a customer company to increase assets

D a selling company lends money to a customer company to be used to purchase goods from the selling company

87 The Statement of Owner’s Equity should be prepared

A before the income statement and after the balance sheet

B before the income statement and balance sheet

C after the income statement and balance sheet

D after the income statement and before the balance sheet

88 The income statement should be prepared

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

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

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

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

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

Stockton Company

Adjusted Trial Balance

For the Year ended December 31, 20XX

Determine the net income (loss) for the period.

Adjusted Trial Balance

For the Year ended December 31, 20XX

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

Stockton Company

Adjusted Trial Balance

For the Year ended December 31, 20XX

Adjusted Trial Balance

For the Year ended December 31, 20XX

Determine the current assets.

Adjusted Trial Balance

For the Year ended December 31, 20XX

95 The Statement of Owner’s Equity begins with the beginning balance followed by

A plus Net Income (loss) less withdrawals

B plus Net Income (loss) plus investments

C plus investments less withdrawals

D plus investments plus Net Income (loss) less withdrawals

96 The Income Statement will include the following accounts

A Revenues less Expenses (ordered largest to smallest amount) with Miscellaneous Expense listed last

B Revenues less Expenses (ordered smallest to largest amounts) with Miscellaneous Expense listed last

C Revenues less Expenses (ordered in alphabetical order)

D Revenues less Expenses (order is not important)

97 The classified Balance Sheet will subsection the assets section as follows

A Current Assets and Other Assets

B Current Assets and Property, Plant, and Equipment

C Current Assets and Short-Term Assets

D Other Assets and Property, Plant and Equipment

98 The classified Balance Sheet will divide its Liabilities Section as the following subsections

A Current Liabilities and Long-Term Liabilities

B Current Liabilities and Other Liabilities

C Other Liabilities and Long-Term Liabilities

D Present Liabilities and Tomorrow’s Liabilities

99 Short-term liabilities are those liabilities that

A will be paid in less than one year

B are due to be paid in 5 to 10 years

C are due to be paid in more than one year

D are owed to the owner and will never be paid

101 Balance sheet accounts

A represent amounts accumulated during a specific period of time

B are called real accounts

C have zero balances after the closing entries have been posted

D are not affected by adjustments

102 On which financial statement will Income Summary be shown?

A Statement of Owner’s Equity

B Balance Sheet

C Income Statement

D No financial statement

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

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

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

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

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

104 The income summary account is also called

A the imprest account

B the clearing account

C the adjustments account

D the helpful account

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

A zero

B owner’s equity

C revenues for the period

D the net income or (loss) for the period

107 Which of the following account groups are all considered nominal accounts?

A Cash, Owner’s Equity, Wages Payable

B Prepaid Insurance, Property, Plant & Equipment, Fees Earned

C Capital Account, Dividend Account, Income Summary

D Rent Revenue, Fees Earned, Miscellaneous Expense

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

is to close , and the last one is to close

A Revenues, expenses, income summary, drawing account

B Expenses, assets, income summary, capital account

C Capital account, drawing account, income summary, assets

D Drawing account, income summary, expenses, revenues

109 Closing entries

A need not be journalized if adjusting entries are prepared

B need not be posted if the financial statements are prepared from the work sheet

C are not needed if adjusting entries are prepared

D must be journalized and posted

110 Closing entries are dated in the journal as of

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

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

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

D the first day of the subsequent accounting period

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

115 The entry to close the appropriate insurance account at the end of the accounting period is

A debit Income Summary; credit Prepaid Insurance

B debit Prepaid Insurance; credit Income Summary

C debit Insurance Expense; credit Income Summary

D debit Income Summary; credit Insurance Expense

117 The post-closing trial balance differs from the adjusted trial balance in that it

A does not take into account closing entries

B does not take into account adjusting entries

C does not include balance sheet accounts

D does not include income statement accounts

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

Net income for the period is

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

A Dec 31 Fees Earned 750

31, 2014 Adjusted Trial Balance

Income Statement Balance Sheet

123 Use the following worksheet to answer the following questions

Finley Company Worksheet For the Year Ended December

31, 2014 Adjusted Trial Balance

Income Statement Balance Sheet

Account Title Debit Credit Debit Credit Debit Credit

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

A debit C Finley, Capital $50,000; credit Income Summary $50,000

B debit Income Summary $155,000; credit C Finley, Capital $155,000

C debit Income Summary $50,000, credit C Finley, Capital $50,000

D debit C Finley, Capital $9,000; credit Income Summary $9,000

125 Use the following worksheet to answer the following questions

Finley Company Worksheet For the Year Ended December

31, 2014 Adjusted Trial Balance

Income Statement Balance Sheet

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

A debit C Finley, Capital $3,000, credit C Finley, Drawing $3,000

B debit C Finley, Capital $12,000, credit C Finley, Drawing $12,000

C debit C Finley, Drawing $3,000; credit C Finley, Capital $3,000

D debit C Finley, Drawing $12,000; credit C Finley, Capital $12,000

126 Use the following worksheet to answer the following questions

Finley Company Worksheet For the Year Ended December

31, 2014 Adjusted Trial Balance

Income Statement Balance Sheet

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

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

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

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

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

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

128 The following are steps to the accounting cycle Of the following, which step should be done first?

A Closing entries are journalized and posted to the ledger

B Transactions are posted to the ledger

C Adjusting entries are journalized and posted to the ledger

D Financial statements are prepared

129 The following are steps in the accounting cycle Of the following, which would be prepared last?

A An adjusted trial balance is prepared

B Transactions are posted to the ledger

C An unadjusted trial balance is prepared

D Adjusting entries are journalized and posted to the ledger

130 The accounting cycle requires three trial balances be done In what order should they be prepared?

A Post-closing, unadjusted, adjusted

B Unadjusted, post-closing, adjusted

C Unadjusted, adjusted, post-closing

D Post-closing, adjusted, unadjusted

132 A fiscal year

A ordinarily begins on the first day of a month and ends on the last day of the following twelfth month

B for a business is determined by the federal government

C always begins on January 1 and ends on December 31 of the same year

D should end at the height of the business's annual operating cycle

133 The natural business year

A is a fiscal year that ends when business activities are at its lowest point

B is a calendar year that ends when business activities are at its lowest point

C is a fiscal year that ends when business activities are at its highest point

D is a calendar year that ends when business activities are at its highest point

134 The worksheet

A is an integral part of the accounting cycle

B eliminates the need to rewrite the financial statements

C is a working paper that is required

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

135 Which one of the steps below is not aided by the preparation of the work sheet?

A preparing the adjusted trial balance

B posting to the general ledger

C preparing the financial statements

D preparing the closing entries

138 The difference between the totals of the debit and credit columns of the Adjusted Trial Balance columns on

a work sheet

A is the amount of net income or loss

B indicates there is an error on the work sheet

C is the amount of retained earnings

D is the difference between revenue and expenses

139 Net income appears on the work sheet in the

A debit column of the Balance Sheet columns

B debit column of the Adjustments columns

C debit column of the Income Statement columns

D credit column of the Income Statement columns

140 A net loss appears on the work sheet in the

A debit column of the Balance Sheet columns

B credit column of the Balance Sheet columns

C debit column of the Income Statement columns

D credit column of the Adjustments columns

141 After net income is entered on the work sheet, the Balance Sheet debit and credit columns must

A be the same amount as the total amount of the Income Statement debit and credit columns

B equal each other

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

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

142 Which of the statements below indicates that a company earned a net income for the period?

A The sum of the credits exceeds the sum of the debits in the Balance Sheet columns on the work sheet

B The sum of the credits exceeds the sum of the debits in the Income Statement columns on the work sheet

C The sum of the debits exceeds the sum of the credits in the Income Statement columns on the work sheet

D Cash inflows exceeded cash outflows

144 Which of the accounts below would not appear in the balance sheet columns of the worksheet?

A Chad Daniels, Drawing

A amount can not be determined

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

or net loss for the period?

A 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

154 After all of the account balances have been extended to the Balance Sheet columns of the work sheet, the totals of the debit and credit columns show debits of $37,686 and the credits of $41,101 This indicates that

A neither net income or loss can be calculated because it is found on the income statement

B the company has a net loss of $3,415 for the period

C the company has a net income of $3,415 for the period

D The amounts are out of balance and need to be corrected

155 The income statement columns in the worksheet show that debits are equal to $55,800 and credits are

$67,520 What does this information mean to the accountant?

A Net income of $11,720

B Net loss of $11,720

C The accounts are out of balance, indicating an error has been made

D The accounts have not been updated

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

158 The balances for the accounts listed below appear in the Adjusted Trial balance columns of the

end-of-period spreadsheet (work sheet) Indicate whether each balance should be extended to an Income Statement column or (b) a Balance Sheet column

of net income or net loss?

$52,400 For the year ended December 31, 2014 Crystal Pool Service Company reported a net income of

$73,200 Prepare a Statement of Owner’s Equity for the year ended December 31, 2014

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

1 Taylor Brock, Capital

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

(1) Accrued salaries as of August 31

(2) Closing of Salary Expense as of August 31

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

- Closing entries are journalized and posted to the ledger

- An unadjusted trial balance is prepared

- An optional end-of-period spreadsheet (work sheet) is prepared

- A post-closing trial balance is prepared

- Adjusting entries are journalized and posted to the ledger

- Transactions are analyzed and recorded in the journal

- Adjustment data are assembled and analyzed

- Financial statements are prepared

- An adjusted trial balance is prepared

- Transactions are posted to the ledger

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

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

Surfer Dude Enterprises

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

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

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

Statement of Accounts December 31, 2010

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

2010

Hakik Enterprises

End of Period Spreadsheet (Work

Sheet)

For the Year Ended July 31, 2010

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

Adjustments:

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

b) Accrued Wages $2

c) Unused supplies on hand $8

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

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

Hakik Enterprises

End of Period Spreadsheet (Work

Sheet)

For the Year Ended July 31, 2010

Trial Balance

174 Bob Evans owns a business, Beachside Realty, that rents condominiums and furnishings Below is the adjusted trial balance at December 31, 2010

175 Bob Evans owns a business, Beachside Realty, that rents condominiums and furnishings Below is the adjusted trial balance at December 31, 2010