Ch04 Completing the Accounting Cycle
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Descripción: CH_04...
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Chapter 4 Completing the Accounting Cycle OBJECTIVES
Obj 1 Obj 2 Obj Obj 3 Obj Obj 4 Obj Obj 5 Obj !
Descri Describe be the the flow flow of accoun accountin ting g inform informati ation on from from the the unadjus unadjusted ted tria triall balance balance into into the adjusted trial balance and financial statements. Prepar Preparee fina financi ncial al statem statement entss from from adjust adjusted ed account account balance balances. s. Prep Prepar aree clos closiing ent entries ries.. Desc Descri ribe be the acco accoun unti ting ng cycl cycle. e. llu llust stra rate te the the accou account ntin ing g cycl cyclee for for one one peri period od.. "#plai "#plain n what what is is meant meant by by the the fisca fiscall year year and and the the natural natural bus busine iness ss year year..
QUESTION GI!
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Chapter 4/Completing the Accounting Cycle
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Chapter 4/Completing the Accounting Cycle
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Chapter 46Completing the Accounting Cycle TUE"#A7SE
1. 'fter analy,ing analy,ing transact transactionsions- the the ne#t step step would would be to post the the transacti transactions ons in the the ledger. ledger. D/ "asy O0/ $4%$1 ANS8 '/ '/ ''0 'nalytic 'nalytic + 'P' 'P' %&easurement 2. he most most important important output of the the accounting accounting cycle cycle is the financial financial statements statements.. D/ "asy O0/ $4%$1 ANS8 '/ '/ ''0 'nalytic 'nalytic + 'P' 'P' %&easurement 3. he wo wor6 sh sheet is is not considered a part of the formal accounting records. D/ "asy O0/ $4%$1 ANS8 '/ '/ ''0 'nalytic 'nalytic + 'P' 'P' %&easurement 4. ross%ref ross%referenci erencing ng is useful useful in assuri assuring ng that the debits debits and and credits credits are are in balance. balance. D/ &oderate O0/ $4%$1 ANS8 '/ '/ ''0 'nalytic 'nalytic + 'P' 'P' %&easurement 5.
7hen accounts accounts do not appear on the unadjusted unadjusted trial trial balance but are are needed needed to post post adjustments- they are simply added to the account title column. D/ &oderate O0/ $4%$1 ANS8 '/ '/ ''0 'nalytic 'nalytic + 'P' 'P' %&easurement !.
Once the the adjusted adjusted trial trial balance balance is in in balancebalance- the the flow flow of account accountss will will now go into into the financial statements. D/ &oderate O0/ $4%$1 ANS8 '/ '/ ''0 'nalytic 'nalytic + 'P' 'P' %&easurement
170
hapter
48ompleting the 'ccounting ycle
(. here is really no benefit in preparing financial statements in any particular order. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement ).
9ound tripping is a fraudulent scheme where business ' artificially inflates re:enue by lending money to customer 0 who uses that money to buy products from '. D/ &oderate O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement *.
On the income statement- miscellaneous e#penses are usually presented as the last item without regard to the dollar amount. D/ &oderate O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 1$. he usual presentation of the statement of retained earnings is ;1< 0eginning retained earnings- ;2< et income or loss- ;3< Di:idends- ;4< n:estment by toc6holder- ;5< "nding retained earnings. D/ &oderate O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 11. he difference between a classified balance sheet and one that is not classified is that the classified one has subheadings. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 12. ash and other assets that may reasonably be e#pected to be reali,ed in cash- sold- or consumed through the normal operations of a business- usually longer than one year- are called current assets. D/ &oderate O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 13. Prepaid nsurance is an e#ample of a current asset. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 14. =and is an e#ample of a plant asset. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 15. =iabilities that will be due within one year or less and that are to be paid out of current assets are called current liabilities. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
1(1
1!. he amount of the net income for a period appears on both the income statement and the balance sheet for that period. D/ &oderate O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 1(. 'ccrued ta#es payable are generally reported on the balance sheet as a current liability. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 1). 't the end of the fiscal period- prepaid e#penses are reported on the ncome tatement as e#penses. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 1*. Office ">uipment is an e#ample of a current asset account. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 2$. apital toc6 and Di:idends are reported in the stoc6holders? e>uity section of the balance sheet. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 21. Deferred e#penses that benefit a relati:ely short period of time are listed on the balance sheet as current assets. D/ &oderate O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 22. @nearned re:enues that will be earned in a relati:ely short period of time are listed on the balance sheet as current assets. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 23. 'ccrued e#penses are ordinarily listed on the balance sheet as current assets. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 24. 'ccrued re:enues are ordinarily listed on the balance sheet as current liabilities. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 25. he income statement is prepared from the adjusted trial balance or the income statement columns on the wor6 sheet. D/ "asy O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement
172
hapter
48ompleting the 'ccounting ycle
2!. "#amples of temporary accounts are supplies and prepaid e#penses which are in the ledger for just a short time before they e#pire. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 2(. 'ccumulated Depreciation is a permanent account. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 2). he di:idend account is a temporary account. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 2*. he balance sheet accounts are referred to as real or permanent accounts. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 3$. ournali,ing and posting the adjustments and closing entries updates the ledger for the new accounting period. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 31. he income summary account is closed to the retained earnings account. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 32. he accumulated depreciation account is closed to the income summary account. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 33. he di:idends account is closed to the income summary account. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 34. he trial balance prepared after all the closing entries ha:e been posted is called a pre% closing trial balance. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 35. "ntries re>uired to close the balances of the temporary accounts at the end of the period are called final entries. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
1(3
3!. n a corporation- a closing entry for the di:idends account may not be necessary. D/ &oderate O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 3(. ournali,ing and posting closing entries must be completed before financial statements can be prepared. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 3). During the closing process- some balance sheet accounts are closed and end the period with a ,ero balance. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 3*. losing entries are entered directly on to the wor6 sheet. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 4$. he post%closing trial balance will generally ha:e fewer accounts than the trial balance. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 41. ' post%closing trial balance contains only asset and liability accounts. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 42. ' post%closing trial balance should be prepared before the financial statements are prepared. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 43. 'ssets- liabilities- and stoc6holders? e>uity are real accounts and do not get closed at the end of the period. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 44. he income summary account is also 6nown as the clearing account. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 45. 'll income statement accounts will be closed at the end of the period. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement
174
hapter
48ompleting the 'ccounting ycle
4!. 0alance heet are not considered real accounts. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 4(. t is not necessary to post the closing entries to the general ledger. D/ "asy O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 4). Once an account has been closed for the period- inserting a line in the balance columns zero’s out the account ma6ing it ready for the following period. D/ &oderate O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 4*. he last step of the accounting cycle is to prepare a post%closing trial balance. D/ "asy O0/ $4%$4 ANS8 '/ ''0 'nalytic + 'P' %&easurement 5$. he accounting cycle begins with preparing an unadjusted trial balance. D/ "asy O0/ $4%$4 ANS8 '/ ''0 'nalytic + 'P' %&easurement 51. inancial statements should be prepared before the closing entries are journali,ed and posted. D/ &oderate O0/ $4%$4 ANS8 '/ ''0 'nalytic + 'P' %&easurement 52. he unadjusted- adjusted- and final trial balances are prepared during the accounting cycle of a period. D/ "asy O0/ $4%$4 ANS8 '/ ''0 'nalytic + 'P' %&easurement 53. 'ny twel:e%month accounting period adopted by a company is 6nown as its fiscal year. D/ "asy O0/ $4%$! ANS8 '/ ''0 'nalytic + 'P' 00%ndustry 54. ' fiscal year that ends when business acti:ities ha:e reached their lowest point is called the natural business year. D/ "asy O0/ $4%$! ANS8 '/ ''0 'nalytic + 'P' 00%ndustry 55. 'll companies must use a calendar year as their fiscal year. D/ "asy O0/ $4%$! ANS8 '/ ''0 'nalytic + 'P' 00%ndustry
Chapter 4/Completing the Accounting Cycle
1(5
5!. he majority of businesses end their fiscal year on December 31. D/ "asy O0/ $4%$! ANS8 '/ ''0 'nalytic + 'P' 00%ndustry 5(. he wor6 sheet is not considered a part of the formal accounting records. D/ "asy O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement 5). he wor6 sheet is a wor6ing paper that accountants can use to summari,e adjusting entries and the account balances for the financial statements. D/ "asy O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement 5*. n a computeri,ed accounting system- a wor6 sheet may not be necessary because the software program automatically posts entries to the accounts and prepares financial statements. D/ &oderate O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement !$. he trial balance may be listed on the wor6 sheet instead of being prepared separately. D/ "asy O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement !1. he totals of the 'djusted rial 0alance columns on a wor6 sheet will always be the sum of the rial 0alance column totals and the 'djustments column totals. D/ &oderate O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement !2. ' wor6 sheet heading is dated for a period of time. D/ "asy O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement !3. On the wor6 sheet- the retained earnings and di:idend account balances are e#tended to the 0alance heet columns. D/ "asy O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement !4. 'fter the account balances ha:e been e#tended from the 'djusted rial 0alance columns on the wor6 sheet- the difference between the initial totals of the 0alance heet debit and credit columns is et ncome or et =oss. D/ &oderate O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement
176
hapter
48ompleting the 'ccounting ycle
!5. 'fter et ncome or =oss is entered on the wor6 sheet- the debit column total must e>ual the credit column total for the 0alance heet pair of columns. D/ &oderate O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement !!. ' net loss is shown on the wor6 sheet in the credit columns of both the ncome tatement columns and the 0alance heet columns. D/ &oderate O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement !(. et income is shown on the wor6 sheet in the ncome tatement debit column and the 0alance heet credit column. D/ &oderate O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement !). f the totals of the ncome tatement debit and credit columns of a wor6 sheet are A22-(5$ and A25-$$$- respecti:ely- after all account balances ha:e been e#tended- the amount of the net loss is A2-25$. D/ &oderate O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement !*. he wor6sheet and the financial statements both re>uire dollar signs. D/ "asy O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement ($. he balance in the retained accounts account on the wor6sheet will e>ual the amount presented in the balance sheet. D/ &oderate O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement (1. ince the adjustments are entered on the wor6 sheet- it is not necessary to record them in the journal or post them to the ledger. D/ "asy O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement (2. he chart of accounts- the journal- and the ledger are essential parts of the accounting system. D/ "asy O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
3ATC9ING
Identify the following transactions as either: a. ournal entries b. 'djusting journal entries c. losing journal entries
1.
ash
5$$
ees "arned 5$$ 2. ncome ummary 4!5 9etained earnings 4!5 3. @tilities "#pense 123 ash 123 4. 7ages "#pense (*$ 7ages Payable (*$ 5. @nearned re:enue 4*) ees "arned 4*) !. ncome ummary !(( 9ent "#pense 24$ upplies "#pense 22$ @tilities "#pense 13$ &iscellaneous "#p )( (. Di:idends 1(5 ash 1(5 ). 'ccounts 9ecei:able 4$$ ees earned 4$$ ;ustomer billed for ser:ices performed< 1. ANS8 ' D/ &oderate O0/ $4%$5 '/ ''0 'nalytic + 'P' %&easurement 2. ANS8 D/ &oderate O0/ $4%$5 '/ ''0 'nalytic + 'P' %&easurement 3. ANS8 ' D/ &oderate O0/ $4%$5 '/ ''0 'nalytic + 'P' %&easurement 4. ANS8 0 D/ &oderate O0/ $4%$5 '/ ''0 'nalytic + 'P' %&easurement 5. ANS8 0 D/ &oderate O0/ $4%$5 '/ ''0 'nalytic + 'P' %&easurement !. ANS8 D/ &oderate O0/ $4%$5 '/ ''0 'nalytic + 'P' %&easurement (. ANS8 ' D/ &oderate O0/ $4%$5 '/ ''0 'nalytic + 'P' %&easurement ). ANS8 ' D/ &oderate O0/ $4%$5 '/ ''0 'nalytic + 'P' %&easurement
1((
178
hapter
48ompleting the 'ccounting ycle
3U7TI57E C9OICE
1.
n the accounting cycle- the last step is a. preparing the financial statements b. journali,ing and posting the adjusting entries c. preparing a post%closing trial balance d. journali,ing and posting the closing entries D/ &oderate O0/ $4%$1 ANS8 '/ ''0 'nalytic + 'P' %&easurement 2.
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 ncome tatement- adjusted trial balance- 0alance heet c. Preparation of adjusted trial balance- cross%referencing- journali,ing d. Preparation of adjustments- adjusted trial balance- posting D/ Difficult O0/ $4%$1 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement 3.
7hat is the major difference between the @nadjusted rial 0alance and the 'djusted rial 0alanceB a. he 'djusted rial 0alance will show the net income ;loss< as an additional account. b. 0oth will need to be in balance in order to continue with the end%of%period processing c. he 'djusted rial 0alance includes the postings of the adjustments for the period in the balance of the accounts. d. he @nadjusted rial 0alance will be used to record the adjustments for the period. D/ Difficult O0/ $4%$1 ANS8 '/ ''0 'nalytic + 'P' %&easurement 4.
Once the adjusting entries are posted- the 'djusted rial 0alance will prepared to a. :erify that the debits and credits are in balance. b. :erify that all of the adjustments were posted in the correct accounts. c. :erify that the net income ;loss< is correct for the period. d. :erify the correct flow of accounts into the financial statements. D/ &oderate O0/ $4%$1 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement 5.
7hen preparing the statement of retained earnings- the beginning retained earnings balance can always be found a. in the ncome tatement columns of the wor6 sheet b. in the statement of cash flows c. in the general ledger d. in the 0alance heet columns of the wor6 sheet D/ &oderate O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
!.
'ccumulated Depreciation appears on the a. balance sheet in the current assets section b. balance sheet in the property- plant and e>uipment section c. balance sheet in the long%term liabilities section d. income statement as an operating e#pense D/ &oderate O0/ $4%$2 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement (.
otes 9ecei:able due in 345 days appear on the a. balance sheet in the current assets section b. balance sheet in the fi#ed assets section c. balance sheet in the current liabilities section d. income statement as an e#pense D/ &oderate O0/ $4%$2 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement ).
@nearned ees appear on the a. balance sheet in the current assets section b. balance sheet as a current liability c. balance sheet in the stoc6holders? e>uity section d. income statement as re:enue D/ "asy O0/ $4%$2 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement *.
7hich one of the fi#ed asset accounts listed below will not ha:e a related contra asset accountB a. Office ">uipment b. =and c. Deli:ery ">uipment d. 0uilding D/ "asy O0/ $4%$2 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement 1$. Prepaid insurance is reported on the balance sheet as a a. current asset b. fi#ed asset c. current liability d. long%term liability D/ "asy O0/ $4%$2 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement
1(*
180
hapter
48ompleting the 'ccounting ycle
11. he income statement is prepared from the a. adjusted trial balance b. income statement columns of the wor6 sheet c. either the adjusted trial balance or the income statement columns of the wor6 sheet d. both the adjusted trial balance and the income statement columns of the wor6 sheet D/ &oderate O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 12. 9ound%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 intend of inflating re:enues 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. D/ Difficult O0/ $4%$2 ANS8 D '/ ''0 'nalytic + 'P' %&easurement 13. he tatement of 9etained "arnings 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 D/ &oderate O0/ $4%$2 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement 14. he income statement should be prepared a. before the statement of retained earnings and balance sheet b. after the statement of retained earnings and before the balance sheet c. after the statement of retained earnings and balance sheet d. after the balance sheet and before the statement of retained earnings D/ &oderate O0/ $4%$2 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement 15. 7hen preparing the tatement of 9etained "arnings the beginning balance should be followed by CCCC to arri:e and the ending balance of retained earnings. a. in:estments plus net income ;loss< b. in:estments less di:idends c. net income ;loss< less di:idends d. in:estments plus net income ;loss< less di:idends D/ &oderate O0/ $4%$2 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
he following is the adjusted trial balance for teely ompany. teely ompany 'djusted rial 0alance or the ear ended December 31- 2$$) ash 'ccounts 9ecei:able Prepaid "#penses ">uipment 'ccumulated Depreciation 'ccounts Payable otes Payable apital toc6 Di:idends ees "arned 7ages "#pense 9ent "#pense @tilities "#pense Depreciation "#pense &iscellaneous "#pense otals
!-13$ 2-3$$ (5$ 13-4$$ 1-2$$ 1-($$ 5-$$$ 12-$$$ )($ !-!$$ 1-45$ *$$ 4(5 15$ (5 2!-5$$
1!. Determine the net income ;loss< for the period. a. et ncome 2!-5$$ b. et =oss )($ c. et =oss 3-55$ d. et ncome 3-55$ D/ &oderate O0/ $4%$2 ANS8 D '/ ''0 'nalytic + 'P' %&easurement 1(. Determine the stoc6holders? e>uity ending balance for the period. a. A14-!)$ b. A11-13$ c. A15-55$ d. A2-!)$ D/ Difficult O0/ $4%$2 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement
2!-5$$
1)1
182
hapter
48ompleting the 'ccounting ycle
1). Determine total assets. a. A2!-5$$ b. A15-3)$ c. A21-3)$ d. A22-5)$ D/ &oderate O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 1*. Determine the current assets. a. A22-5)$ b. A*-1)$ c. A21-3)$ d. A2!-5$$ D/ &oderate O0/ $4%$2 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement 2$. Determine the total liabilities for the period. a. A!-($$ b. A1-($$ c. A5-$$$ d. A1)-($$ D/ &oderate O0/ $4%$2 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement 21. he 0alance heet should be prepared a. before the income statement and the statement of retained earnings b. before the income statement and after the statement of retained earnings c. after the income statement and the statement of retained earnings d. after the income statement and before the statement of retained earnings D/ &oderate O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 22. he tatement of 9etained "arnings begins with the beginning balance followed by a. plus et ncome ;loss< less di:idends b. plus et ncome ;loss< plus in:estments c. plus in:estments less di:idends d. plus in:estments plus et ncome ;loss< less di:idends D/ &oderate O0/ $4%$2 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
1)3
23. he ncome tatement will include the following accounts a. 9e:enues less "#penses ;ordered largest to smallest amount< with &iscellaneous "#pense listed last b. 9e:enues less "#penses ;ordered smallest to largest amounts< with &iscellaneous "#pense listed last c. 9e:enues less "#penses ;ordered in alphabetical order< d. 9e:enues less "#penses ;order is not important< D/ &oderate O0/ $4%$2 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement 24. he classified 0alance heet will subsection the assets section as follows a. urrent 'ssets and Other 'ssets b. urrent 'ssets and Property- Plant- and ">uipment c. urrent 'ssets and =ong%erm 'ssets d. Other 'ssets and Property- Plant and ">uipment D/ &oderate O0/ $4%$2 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement 25. he classified 0alance heet will di:ide its =iabilities ection as the following subsections a. urrent =iabilities and =ong%erm =iabilities b. urrent =iabilities and Other =iabilities c. Other =iabilities and =ong%erm =iabilities d. Present =iabilities and omorrow?s =iabilities D/ &oderate O0/ $4%$2 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement 2!. =ong%term liabilities are those liabilities that a. will be paid in less than one year b. are due to paid in 5 to 1$ years c. are due to be paid in more than one year d. are liabilities owed to the owner and will ne:er be paid D/ &oderate O0/ $4%$2 ANS8 '/ ''0 'nalytic + 'P' %&easurement 2(. he stoc6holders? e>uity is a. added to assets and the two are e>ual to liabilities b. added to liabilities and the two are e>ual to assets c. subtracted from liabilities and the net amount is e>ual to assets d. subtracted from stoc6holders? e>uity and the net amount is e>ual to net income D/ &oderate O0/ $4%$2 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement
184
hapter
48ompleting the 'ccounting ycle
2). 0alance sheet accounts a. represent amounts accumulated during a specific period of time b. are called real accounts c. ha:e ,ero balances after the closing entries ha:e been posted d. are e>ual to assets and liabilities D/ &oderate O0/ $4%$3 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement 2*. On which financial statement will ncome ummary be shownB a. tatement of retained earnings b. 0alance heet c. ncome tatement d. o financial statement D/ &oderate O0/ $4%$3 ANS8 D '/ ''0 'nalytic + 'P' %&easurement 3$. 7hich is the following that is not true about closing entriesB a. here are four closing entries that update the stoc6holders? e>uity account. b. 'fter the second closing entry- the income summary account is e>ual to the net income or ;loss< for the period. c. 'll real accounts are closed at the end of the period. d. 0y closing nominal accounts at the end of the period to ,ero- it is possible to isolate ne#t period?s information correctly. D/ Difficult O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 31. he income summary account is also called a. the closing account b. the clearing account c. the nominal account d. the temporary account D/ "asy O0/ $4%$3 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement 32. 'fter posting the second closing entry to the income summary account- the balance will be e>ual to a. ,ero. b. stoc6holders? e>uity. c. re:enues for the period d. the net income or ;loss< for the period. D/ "asy O0/ $4%$3 ANS8 D '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
1)5
33. 7hat is the last account that should be listed in the Post losing rial 0alanceB a. ncome ummary b. 9etained "arnings c. ash d. ees "arned D/ "asy O0/ $4%$3 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement 34. 7hich of the following account groups are all considered nominal accountsB a. ash- ees "arned- @nearned 9e:enues b. Prepaid "#penses- @nearned 9e:enues- ees "arned c. apital toc6- Di:idends- ncome ummary d. Di:idends- ees "arned- 9ent "#pense D/ &oderate O0/ $4%$3 ANS8 D '/ ''0 'nalytic + 'P' %&easurement 35. here are four closing entries. he first one is to close CCCC- the second one is to close CCCCthe third one is to close CCCC- and the last one is to close CCCC. a. 9e:enues- e#penses- income summary- di:idends account b. "#penses- assets- income summary- capital stoc6 account c. apital stoc6 account- di:idends account- income summary- assets d. Di:idends account- income summary- e#penses- re:enues D/ &oderate O0/ $4%$3 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement 3!. 'll of the closing entries will adjust CCCC to update that account. a. the di:idends account b. the retained earnings account c. the cash account d. the income summary account D/ "asy O0/ $4%$3 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement 3(. losing entries a. need not be journali,ed if adjusting entries are prepared b. need not be posted if the financial statements are prepared from the wor6 sheet c. are not needed if adjusting entries are prepared d. must be journali,ed and posted D/ &oderate O0/ $4%$3 ANS8 D '/ ''0 'nalytic + 'P' %&easurement
186
hapter
48ompleting the 'ccounting ycle
3). losing entries are dated in the journal as of a. the date they are actually journali,ed- although they are generally prepared after the end of the accounting period b. the last day of the accounting period- although they are actually journali,ed after the end of the accounting period c. the first day of the accounting period- although they are actually journali,ed after the end of the accounting period d. the first day of the subse>uent accounting period D/ &oderate O0/ $4%$3 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement 3*. 7hich of the accounts below would be closed by posting a debit to the accountB a. @nearned 9e:enue b. ees "arned c. Di:idends d. 9ent "#pense D/ &oderate O0/ $4%$3 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement 4$. 7hich of the following accounts should be closed to ncome ummary at the end of the fiscal yearB a. upplies "#pense b. 'ccumulated Depreciation c. Prepaid nsurance d. @nearned 9ent D/ &oderate O0/ $4%$3 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement 41. 7hich of the following accounts will not be closed to ncome ummary at the end of the fiscal yearB a. alaries "#pense b. ees "arned c. @nearned 9ent d. Depreciation "#pense D/ &oderate O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 42. 7hich of the following accounts will be closed to the retained earnings account at the end of the fiscal yearB a. 9ent "#pense b. ees "arned c. ncome ummary d. Depreciation "#pense D/ &oderate O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
1)(
43. he entry to close the appropriate insurance account at the end of the accounting period is a. debit ncome ummaryE credit Prepaid nsurance b. debit Prepaid nsuranceE credit ncome ummary c. debit nsurance "#penseE credit ncome ummary d. debit ncome ummaryE credit nsurance "#pense D/ &oderate O0/ $4%$3 ANS8 D '/ ''0 'nalytic + 'P' %&easurement 44. 7hich of the following accounts ordinarily appears in the post%closing trial balanceB a. Di:idends b. upplies "#pense c. ees "arned d. @nearned 9ent D/ "asy O0/ $4%$3 ANS8 D '/ ''0 'nalytic + 'P' %&easurement 45. he post%closing trial balance differs from the adjusted trial balance in that it a. does not ta6e into account closing entries b. does not ta6e into account adjusting entries c. does not include balance sheet accounts d. does not include income statement accounts D/ &oderate O0/ $4%$3 ANS8 D '/ ''0 'nalytic + 'P' %&easurement 4!. he following accounts were ta6en from the 'djusted rial 0alance columns of the wor6 sheet/ 'ccumulated Depreciation ees "arned Depreciation "#pense nsurance "#pense Prepaid nsurance upplies upplies "#penses et income for the period is a. A2-3$$ b. A1$-$$$ c. A4-3$$ d. A5-$$$ D/ Difficult O0/ $4%$3 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement
A 2-$$$ 15-$$$ 1-$$$ 5$$ 4-5$$ 1-2$$ 3-5$$
188
hapter
48ompleting the 'ccounting ycle
4(. ' summary of selected ledger accounts appear below for edFs 'uto er:ices for the 2$$( calendar year end.
12831
apital toc6 (-$$$ 181 12831
5-$$$ 1(-$$$
!83$ 1183$
Di:idends 2-$$$ 12831 5-$$$
(-$$$
12831 12831
ncome ummary 15-$$$ 12831 1(-$$$
32-$$$
et income for the period is a. A1(-$$$ b. A22-$$$ c. A(-$$$ d. A15-$$$ D/ &oderate O0/ $4%$3 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement 4). 9ed 9oc6 tone purchased a one%year liability insurance policy on anuary 1st of this year for A3-!$$ and recorded it as a prepaid e#pense. rom the selections of a. through d.- select the :alue that would be utili,ed in the closing entry for insurance e#pense and prepaid insurance during the closing process at the end of the first fiscal period on anuary 31st. a. A3-!$$. b. A3!$. c. A3$$. d. A3!$. D/ Difficult O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
4*. he journal entry to close the ees "arned- A1$$- and 9ent 9e:enue- A25- accounts on December 31st during the closing process would be/ a. Dec 31 ees "arned 1$$ 9ent 9e:enue 25 ncome ummary 125 b. Dec 31 ncome ummary 125 ees "arned 1$$ 9ent 9e:enue 25 c. Dec 31 9e:enues 125 ncome ummary 125 d. Dec 31 ncome ummary 125 9e:enues 125 D/ &oderate O0/ $4%$3 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement &antle ompany 7or6sheet or the ear "nded December 31- 2$$) 'djusted rial 0alance ncome tatement 'ccount itle Debit redit ash 1!-$$$ 'ccounts 9ecei:able !-$$$ upplies 2-$$$ ">uipment 1*-$$$ 'ccumulated Depr% !-$$$ ">uip 'ccounts Payable 1$-$$$ 7ages Payable 2-$$$ apital toc6 11-$$$ Di:idends 1-$$$ ees "arned 4(-$$$ 7ages "#pense 21-$$$ 9ent "#pense !-$$$ Depreciation "#pense 5-$$$ otals (!-$$$ (!-$$$ et ncome ;=oss<
0alance heet Debit redit Debit 1!-$$$ !-$$$ 2-$$$ 1*-$$$
redit
!-$$$ 1$-$$$ 2-$$$ 11-$$$ 1-$$$ 4(-$$$ 21-$$$ !-$$$ 5-$$$ 32-$$$ 15-$$$ 4(-$$$
4(-$$$
44-$$$
4(-$$$
44-$$$
2*-$$$ 15-$$$ 44-$$$
1)*
190
hapter
48ompleting the 'ccounting ycle
5$. he journal entry to close re:enues would be/ a. debit ncome ummary A4(-$$$- credit ees "arned A4(-$$$ b. debit 9etained "arnings A4(-$$$- credit ees "arned A4(-$$$ c. debit ees "arned A4(-$$$E credit ncome ummary A4(-$$$ d. credit ees "arned A4(-$$$E credit apital toc6 A4(-$$$ D/ &oderate O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 51. 0ased on the preceding trial balance- the entry to close e#penses would be/ a. 7ages "#pense A21-$$$ 9ent "#pense !-$$$ Depreciation "#pense 5-$$$ ncome ummary 32-$$$ b. "#penses 32-$$$ ncome ummary 32-$$$ c. 7ages "#pense A21-$$$ 9ent "#pense !-$$$ Depreciation "#pense 5-$$$ 9etained "arnings 32-$$$ d. ncome ummary 32-$$$ 7ages "#pense A21-$$$ 9ent "#pense !-$$$ Depreciation "#pense 5-$$$ D/ &oderate O0/ $4%$3 ANS8 D '/ ''0 'nalytic + 'P' %&easurement 52. 0ased on the preceding trial balance- the entry to close income summary would be/ a. debit ncome ummary A15-$$$E credit 9etained "arnings A4-$$$ b. debit ncome ummary A4(-$$$E credit 9etained "arnings A4(-$$$ c. debit ncome ummary A15-$$$- credit 9etained "arnings A15-$$$ d. debit 9etained "arnings A4-$$$E credit ncome ummary A4-$$$ D/ &oderate O0/ $4%$3 ANS8 '/ ''0 'nalytic + 'P' %&easurement 53. 0ased on the preceding trial balance- the entry to close the di:idends would be/ a. debit 9etained "arnings A1-$$$- credit Di:idends A1-$$$ b. debit 9etained "arnings A4-$$$- credit Di:idends A4-$$$ c. debit Di:idends A1-$$$E credit 9etained "arnings A1-$$$ d. debit Di:idends A4-$$$E credit 9etained "arnings A4-$$$ D/ &oderate O0/ $4%$3 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
1*1
54. 0ased on the preceding trial balance- the ending balance in 9etained "arnings is/ a. A$ b. A25-$$$ c. A4-$$$ d. A1-$$$ D/ &oderate O0/ $4%$3 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement 55. he proper se>uence for the steps in the accounting cycle is a follows a. analy,e and record transactions- post transaction to the ledger- prepare a trial balance prepare financial statements- journali,e closing entries- analy,e adjustment data and prepare adjusting entries b. prepare a trial balance- analy,e adjustment data- prepare adjusting entries- prepare financial statements- journali,e closing entries and post to the ledger- analy,e and record transactions- post transactions to the ledger c. analy,e and record transactions- post transactions to the ledger- prepare a trial balanceanaly,e adjustment data- prepare adjusting entries- prepare financial statements journali,e closing entries and post to the ledger d. prepare financial statements- journali,e closing entries and post to the ledger- analy,e and record transactions- post transactions to the ledger- prepare a trial balance- analy,e adjustment data- prepare adjusting entries D/ &oderate O0/ $4%$4 ANS8 '/ ''0 'nalytic + 'P' %&easurement 5!. he following are steps to the accounting cycle. Of the following- which step should be done first. a. losing entries are journali,ed and posted to the ledger. b. ransactions are posted to the ledger. c. 'djusting entries are journali,ed and posted to the ledger. d. inancial statements are prepared. D/ &oderate O0/ $4%$4 ANS8 0 '/ ''0 'nalytic + 'P' %&easurement 5(. he following are steps in the accounting cycle. Of the following- which would be prepared lastB a. 'n adjusted trial balance is prepared. b. ransactions are posted to the ledger. c. 'n unadjusted trial balance is prepared. d. 'djusting entries are journali,ed and posted to the ledger. D/ &oderate O0/ $4%$4 ANS8 ' '/ ''0 'nalytic + 'P' %&easurement
192
hapter
48ompleting the 'ccounting ycle
5). he accounting cycle re>uires three trial balances be done. n what order should they be preparedB a. Post%closing- unadjusted- adjusted b. @nadjusted- post%closing- adjusted c. @nadjusted- adjusted- post%closing d. Post%closing- adjusted- unadjusted D/ "asy O0/ $4%$4 ANS8 '/ ''0 'nalytic + 'P' %&easurement 5*. he 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 anuary 1. d. will change each year D/ &oderate O0/ $4%$! ANS8 0 '/ ''0 'nalytic + 'P' 00%ndustry !$. ' 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 go:ernment c. always begins on anuary 1 and ends on December 31 of the same year d. should end at the height of the businessFs annual operating cycle D/ &oderate O0/ $4%$! ANS8 ' '/ ''0 'nalytic + 'P' 00%ndustry !1. he natural business year a. is a fiscal year that ends when business acti:ities are at its lowest point. b. is a calendar year that ends when business acti:ities are at its lowest point. c. is a fiscal year that ends when business acti:ities are at its highest point. d. is a calendar year that ends when business acti:ities are at its highest point. D/ &oderate O0/ $4%$! ANS8 ' '/ ''0 'nalytic + 'P' 00%ndustry !2. he wor6sheet a. is an integral part of the accounting cycle b. eliminates the need to rewrite the financial statements c. is a wor6ing paper that is re>uired d. is used to summari,e account balances and adjustments for the financial statements D/ "asy O0/ $4%'pp ANS8 D '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
!3. 7hich one of the steps below is not aided by the preparation of the wor6 sheetB a. preparing the adjusted trial balance b. posting to the general ledger c. preparing the financial statements d. preparing the closing entries D/ &oderate O0/ $4%'pp ANS8 0 '/ ''0 'nalytic + 'P' %&easurement !4. ' wor6 sheet includes columns for a. adjusting entries b. closing entries c. re:ersing entries d. adjusting and closing entries D/ "asy O0/ $4%'pp ANS8 ' '/ ''0 'nalytic + 'P' %&easurement !5. 7hen a wor6 sheet is complete- the adjustment columns should ha:e a. total credits greater than total debits if a net income was earned b. total debits grater 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 e>ual total credits D/ "asy O0/ $4%'pp ANS8 D '/ ''0 'nalytic + 'P' %&easurement !!. he difference between the totals of the debit and credit columns of the 'djusted rial 0alance columns on a wor6 sheet a. is the amount of net income or loss b. indicates there is an error on the wor6 sheet c. is not unusual when preparing the wor6 sheet d. is the net difference between re:enue- e#penses- and di:idends D/ &oderate O0/ $4%'pp ANS8 0 '/ ''0 'nalytic + 'P' %&easurement !(. et income appears on the wor6 sheet in the a. debit column of the 0alance heet columns b. debit column of the 'djustments columns c. debit column of the ncome tatement columns d. credit column of the ncome tatement columns D/ &oderate O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement
1*3
194
hapter
48ompleting the 'ccounting ycle
!). ' net loss appears on the wor6 sheet in the a. debit column of the 0alance heet columns b. credit column of the 0alance heet columns c. debit column of the ncome tatement columns d. credit column of the 'djustments columns D/ &oderate O0/ $4%'pp ANS8 ' '/ ''0 'nalytic + 'P' %&easurement !*. 'fter net income is entered on the wor6 sheet- the 0alance heet debit and credit columns must a. be the same amount as the total amount of the ncome tatement debit and credit columns b. e>ual each other c. be the same amount as the total amount in the 'djusted rial 0alance debit and credit columns d. not be e>ual to each other and need not be the same total amounts as any other pair of columns on the wor6 sheet D/ &oderate O0/ $4%'pp ANS8 0 '/ ''0 'nalytic + 'P' %&easurement ($. 7hich of the statements below indicates that a company earned a net income for the periodB a. he sum of the debits e#ceeds the sum of the credits in the 0alance heet columns on the wor6 sheet. b. he sum of the credits e#ceeds the sum of the debits in the ncome tatement columns on the wor6 sheet. c. he sum of the debits e#ceeds the sum of the credits in the ncome tatement columns on the wor6 sheet. d. ash inflows e#ceeded cash outflows. D/ &oderate O0/ $4%'pp ANS8 0 '/ ''0 'nalytic + 'P' %&easurement (1. 7hich of the items below would appear in the ncome tatement columns of the wor6 sheetB a. ">uipment b. @nearned ees c. Prepaid "#pense d. et =oss D/ &oderate O0/ $4%'pp ANS8 D '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
1*5
(2. 7hich of the accounts below would appear in the balance sheet columns of the wor6sheetB a. 9ent "arned b. Di:idends c. @nearned 9e:enue d. Di:idends and @nearned 9e:enue D/ "asy O0/ $4%'pp ANS8 D '/ ''0 'nalytic + 'P' %&easurement (3. 7hich of the accounts below would appear in the 0alance heet columns of the wor6 sheetB a. er:ice 9e:enue b. Prepaid 9ent c. upplies "#pense d. one are correct D/ &oderate O0/ $4%'pp ANS8 0 '/ ''0 'nalytic + 'P' %&easurement (4. he wor6 sheet at the end of eptember has A4-$$$ in the 0alance heet credit column for 'ccumulated Depreciation. he wor6 sheet at the end of October has A4-(5$ in the 0alance heet credit column for 'ccumulated Depreciation. 7hat was the amount of the depreciation e#pense adjustment for the month of OctoberB a. amount can not be determined b. A4-(5$ c. A4-$$$ d. A(5$ D/ &oderate O0/ $4%'pp ANS8 D '/ ''0 'nalytic + 'P' %&easurement (5. 7hich of the items below does not appear on the wor6 sheetB a. adjusting entries b. the unadjusted trial balance c. closing entries d. di:idends D/ &oderate O0/ $4%'pp ANS8 '/ ''0 'nalytic + 'P' %&easurement (!. 'n indication that the wor6 sheet columns are in balance and the wor6 sheet is completed is a. the word GotalG 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 in6 D/ &oderate O0/ $4%'pp ANS8 0 '/ ''0 'nalytic + 'P' %&easurement
196
hapter
48ompleting the 'ccounting ycle
((. 'fter all of the account balances ha:e been e#tended to the 0alance heet columns of the wor6 sheet- the totals of the debit and credit columns are A25-25$ and A21-)25- respecti:ely. 7hat is the amount of net income or net loss for the periodB a. A3-425 net income b. A25-25$ net loss c. A3-425 net loss d. A21-)25 net income D/ &oderate O0/ $4%'pp ANS8 ' '/ ''0 'nalytic + 'P' %&easurement (). 'fter all of the account balances ha:e been e#tended to the ncome tatement columns of the wor6 sheet- the totals of the debit and credit columns are A)(-5$$ and A*)-3$$respecti:ely. 7hat is the amount of the net income or net loss for the periodB a. A1$-)$$ net income b. A1$-)$$ net loss c. A*)-3$$ net income d. A)(-5$$ net loss D/ &oderate O0/ $4%'pp ANS8 ' '/ ''0 'nalytic + 'P' %&easurement (*. On October 1- the company pays rent for twel:e months in ad:ance and debits an asset account. 't year end- the adjusting entry on the wor6 sheet would a. increase an e#pense account b. decrease a liability account c. increase an asset account d. decrease an e#pense account D/ &oderate O0/ $4%'pp ANS8 ' '/ ''0 'nalytic + 'P' %&easurement )$. On 'ugust 1- a company collects re:enue in ad:ance for the ne#t twel:e months and credits a liability account. he adjusting entry at year end on the wor6 sheet would a. increase a liability account b. decrease an asset account c. decrease a re:enue account d. decrease a liability account D/ &oderate O0/ $4%'pp ANS8 D '/ ''0 'nalytic + 'P' %&easurement )1. 7hich of the following is not an essential part of the accounting recordsB a. he journal b. he ledger c. he chart of accounts d. he wor6 sheet D/ "asy O0/ $4%'pp ANS8 D '/ ''0 'nalytic + 'P' %&easurement
Chapter 4/Completing the Accounting Cycle
1*(
)2. 'fter totaling all of the columns in the wor6 sheet- the 0alance heet show debits of A35-!() and the credits of A3*-*$1. his indicates that a. neither net income or loss can be calculated because that is found on the income statement b. the company recorded a net loss of A4-223 c. the company recorded a net income of A4-223 d. he amounts are out of balance and need to be corrected D/ Difficult O0/ $4%'pp ANS8 ' '/ ''0 'nalytic + 'P' %&easurement )3. he column of the income statement show the debits are e>ual to A5!-)** and credits are A!$-333. 7hat do this information mean to the accountantB a. et income of A3-434 b. et loss of A3-434 c. the accounts are out of balance d. one are correct. D/ Difficult O0/ $4%'pp ANS8 ' '/ ''0 'nalytic + 'P' %&easurement E:ECISE"OT9E
1.
he balances for the accounts listed below appear in the 'djusted rial balance columns of the end%of%period spreadsheet ;wor6 sheetuity section of the December 31- 2$$)- balance sheet of 9each t 0atting ages ompany. ;1< ;2< ;3< ;4< ;5< ;!< ;(< ;)<
apital toc6 'ccumulated Depreciation @nearned 9e:enues &ortgage Payable ">uipment otes Payable ;due in 2$1$< ash 'ccounts 9ecei:able
Chapter 4/Completing the Accounting Cycle
ANS8 ;1< ;2< ;3< ;4< ;5< ;!< ;(< ;)<
1**
toc6holders? e>uity Property- plant and e>uipment urrent liabilities =ong%term liabilities Property- plant and e>uipment =ong%term liabilities urrent assets urrent assets
D/ "asy O0/ $4%$2 '/ ''0 'nalytic + 'P' %&easurement OP/ "#ample "#ercise 4%4 5. ompare the differences between a balance sheet and a classified balance sheet. ANS8 ' classified balance sheet subsections assets as current assets and property- plant- and e>uipment. t also subsections liabilities as current liabilities and long%term liabilities- and stoc6holders? e>uity. D/ "asy O0/ $4%$2 '/ ''0 'nalytic + 'P' %&easurement !. =ist and describe the purpose of the four closing entries. ANS8 ;1< lose re:enues to income summary. ;2< lose e#penses to income summary. ;3< lose income summary to retained earnings. ;4< lose di:idend account to retained earnings. D/ "asy O0/ $4%$3 '/ ''0 'nalytic + 'P' %&easurement (.
'fter the accounts ha:e been adjusted at anuary 31- 2$$)- the end of the fiscal year- the following balances are ta6en from the ledger of 9each t 0atting ages ompany apital toc6 Di:idends ees "arned 7ages "#pense 9ent "#pense upplies "#pense &iscellaneous "#pense
A35!-$$$ 12-$$$ 123-4$$ 3!-$$$ 5$-$$$ 14-3$$ 1-$5$
200
hapter
48ompleting the 'ccounting ycle
ournali,e the four entries re>uired to close the accounts ANS8 an 31 ees "arned ncome ummary 31 ncome ummary 7ages "#pense 9ent "#pense upplies "#pense &iscellaneous "#pense
123-4$$ 123.4$$ 1$1-35$ 3!-$$$ 5$-$$$ 14-3$$ 1-$5$
31 ncome ummary 9etained "arnings
22-$5$
31 9etained "arnings Di:idends
12-$$$
22-$5$
12-$$$
D/ &oderate O0/ $4%$3 '/ ''0 'nalytic + 'P' %&easurement OP/ "#ample "#ercise 4%5 ).
Prior to adjustment at uly 31- 2$$(- alary "#pense has a debit balance of A3$$-5$$. alaries owed but not paid as of the same date total A1-5$$. Present the entries to record the following/ ;1< 'ccrued salaries as of uly 31. ;2< losing of alary "#pense as of uly 31.
ANS8 ;1< alary "#pense alaries Payable
;2<
ncome ummary alary "#pense
D/ &oderate O0/ $4%$3 '/ ''0 'nalytic + 'P' %&easurement
1-5$$ 1-5$$ 3$2-$$$ 3$2-$$$
Chapter 4/Completing the Accounting Cycle
*.
2$1
he following are all the steps in the accounting cycle. =ist them in the order in which they should be done.
% losing entries are journali,ed and posted to the ledger. % 'n unadjusted trial balance is prepared. % 'n optional end%of%period spreadsheet ;wor6 sheet< is prepared. % ' post%closing trial balance is prepared. % 'djusting entries are journali,ed and posted to the ledger. % ransactions are analy,ed and recorded in the journal. % 'djustment data are assembled and analy,ed. % inancial statements are prepared. % 'n adjusted trial balance is prepared. % ransactions are posted to the ledger. ANS8 1. ransactions are analy,ed and recorded in the journal. 2. ransactions are posted to the ledger. 3. 'n unadjusted trial balance is prepared. 4. 'djustment data are assembled and analy,ed. 5. 'n optional end%of%period spreadsheet ;wor6 sheet< is prepared. !. 'djusting entries are journali,ed and posted to the ledger. (. 'n adjusted trial balance is prepared. ). inancial statements are prepared. *. losing entries are journali,ed and posted to the ledger. 1$. ' post%closing trial balance is prepared. D/ Difficult O0/ $4%$4 '/ ''0 'nalytic + 'P' %&easurement OP/ "#ample "#ercise 4%! 1$. f wor6 papers are not considered a part of the formal accounting records- then why are they usedB ANS8 7or6 papers are tools used by accounts to collect and summari,e date for :arious analysis and reports. D/ &oderate O0/ $4%'pp '/ ''0 'nalytic + 'P' %&easurement
202
hapter
48ompleting the 'ccounting ycle
11. "#plain how net income or loss is determined by using the wor6 sheet. ANS8 he difference between the debits and credits from the ncome tatement columns are compared to the debits and credits from the 0alance heet columns. hey should be the same amounts but opposite from each other. f the debits are more than the credits on the income statement columns- signifying a net loss- then the credits should be higher than the debits on the balance sheet columns by the same amount. f the credits are more than the debits on the income statement columns- signifying a net income- then the debits should be higher than the credits on the balance sheet columns by the same amount. D/ Difficult O0/ $4%'pp '/ ''0 'nalytic + 'P' %&easurement 5OB7E3
1.
he balances for the accounts listed below appeared in the 'djusted rial 0alance columns of the wor6 sheet. ndicate whether each balance should be e#tended to ;a< the ncome tatement columns or ;b< the 0alance heet columns. ;1< ;2< ;3< ;4< ;5< ;!<
alaries Payable ees "arned 'ccounts Payable apital toc6 upplies "#pense @nearned 9ent
;(< ;)< ;*< ;1$< ;11< ;12<
Di:idends ">uipment 'ccounts 9ecei:able 'ccumulated Depreciation alary "#pense Depreciation "#pense
ANS8 ;a< ncome statement/ 2- 5- 11- 12 ;b< 0alance sheet/ 1- 3- 4- !- (- )- *- 1$
D/ "asy O0/ $4%$2 '/ ''0 'nalytic + 'P' %&easurement 2.
ndicate whether each of the following would be reported in the financial statements as a;n< ;a< current asset- ;b< current liability- ;c< re:enue- or ;d< e#pense/ ;1< ;2< ;3< ;4<
upplies @nearned ees Prepaid 'd:ertising 'd:ertising "#pense
;5< ;!< ;(< ;)<
upplies "#pense Prepaid nsurance 'ccounts Payable ees "arned
Chapter 4/Completing the Accounting Cycle
2$3
ANS8 ;1< current asset ;2< current liability ;3< current asset ;4< e#pense ;5< e#pense ;!< current asset ;(< current liability ;)< re:enue
D/ "asy O0/ $4%$2 '/ ''0 'nalytic + 'P' %&easurement 3.
he following accounts were ta6en from the 'djusted rial 0alance columns of the wor6 sheet for une 3$- 2$$( for 0rodie o./ 'ccumulated Depreciation ees "arned Depreciation "#pense 9ent "#pense Prepaid nsurance upplies upplies "#pense
A 25-$$$ )5-$$$ *-5$$ 44-$$$ (-$$$ 5$$ 2-5$$
Prepare an income statement. ANS8 0rodie o. ncome tatement or the ear "nded une 3$- 2$$( ees earned "#penses/ 9ent e#pense Depreciation e#pense upplies e#pense otal e#penses et income D/ &oderate O0/ $4%$2 '/ ''0 'nalytic + 'P' %&easurement
A)5-$$$ A44-$$$ *-5$$ 2-5$$ 5!-$$$ A2*-$$$
204
hapter
4.
he following re:enue and e#pense account balances were ta6en from the ncome tatement columns of the wor6 sheet for &arion er:ices o. for December 31- 2$$(/
48ompleting the 'ccounting ycle
Depreciation "#pense nsurance "#pense &iscellaneous "#pense 9ent "#pense er:ice 9e:enue upplies "#pense @tilities "#pense 7ages "#pense
A 5-*5$ 3-*$$ 2-2$$ 34-$$$ 1$2-5$$ 4-15$ !-$$$ 53-(5$
Prepare an income statement. ANS8 &arion er:ices o. ncome tatement or the ear "nded December 31- 2$$( er:ice re:enue Operating e#penses/ 7ages e#pense 9ent e#pense @tilities e#pense Depreciation e#pense nsurance e#pense upplies e#pense &iscellaneous e#pense otal operating e#penses et loss
A 1$2-5$$ A53-(5$ 34-$$$ !-$$$ 5-*5$ 3-*$$ 4-15$ 2-2$$ 1$*-*5$ A ;(-45$<
D/ "asy O0/ $4%$2 '/ ''0 'nalytic + 'P' %&easurement 5.
he following data were ta6en from the 0alance heet columns of the wor6 sheet for eptember 3$- 2$$( for layton ompany/ 'ccumulated Depreciation%ruc6s Prepaid 9ent upplies @nearned ees ruc6s ash apital toc6 9etained "arnings
A25-$$$ 4-$$$ 5$$ 4-3$$ 2*-$$$ 2-$$$ 1-$$$ B
Chapter 4/Completing the Accounting Cycle
Prepare a classified balance sheet. ANS8 layton ompany 0alance heet eptember 3$- 2$$( 'ssets urrent assets/ ash upplies Prepaid rent otal current assets Property- plant- and e>uipment/ ruc6s
=iabilities A 2-$$$ 5$$ 4-$$$
urrent liabilities/ @nearned fees A !-5$$
A2*-$$$
=ess accum. depreciation otal property- plant and e>uipment otal assets
toc6holders? ">uity apital toc6 1-$$$ 9etained "arnings 5-2$$ otal toc6holders? ">uity otal liabilities and ownerFs e>uity
A 4-3$$
!-2$$ A1$-5$$
25-$$$ 4-$$$ A1$-5$$
D/ &oderate O0/ $4%$2 '/ ''0 'nalytic + 'P' %&easurement !.
ndicate whether each of the following would be reported in the section of financial statements identified as ;a< current asset- ;b< property- plant- and e>uipment- ;c< current liability- ;d< re:enue- or ;e< e#pense/ ;1< ;2< ;3< ;4< ;5< ;!< ;(< ;)< ;*<
'utomobile 'ccumulated depreciation 9ent e#pense ees earned alaries payable Prepaid rent tore supplies 'd:ertising e#pense @nearned rent
2$5
206
hapter
48ompleting the 'ccounting ycle
ANS8 ;1< property- plant- and e>uipment ;2< property- plant- and e>uipment ;3< e#pense ;4< re:enue ;5< current liability ;!< current asset ;(< current asset ;)< e#pense ;*< current liability
D/ "asy O0/ $4%$2 '/ ''0 'nalytic + 'P' %&easurement (.
he following balance sheet contains errors. 0illy 0rown er:ices o. 0alance heet or the ear "nded December 31- 2$$( 'ssets urrent assets/ ash 'ccounts payable upplies Prepaid insurance =and otal current assets
Property- plant- and e>uipment/ 0uilding ">uipment otal property- plantand e>uipment otal assets
=iabilities urrent liabilities/ 'ccounts recei:able 'ccum. depr%building 'ccum. depr%e>uipment et income
A !-1($ )-5$$ 1-5*$ 345 25-$$$
A 41-!$5 otal liabilities toc6holders? ">uity 7ages payable A45-5$$ 2)-25$
apital stoc6 9etained earnings otal toc6holders?">uity
A
*-$$$ 13-525 !-34$ 12-5$$
A 41-3!5
A
5$$
4$-$$$ A 34-4*$ A(4-**$
(3-(5$ otal liabilities and A11!-355 stoc6holders? e>uity
A11!-355
Chapter 4/Completing the Accounting Cycle
;a< =ist the errors in the balance sheet abo:e and ;b< prepare a corrected balance sheet. ANS8 ;a< ;1< Date of statement should be GDecember 31- 2$$(G and not Gor the ear "nded December 31- 2$$(.G ;2< 'ccounts payable should be a current liability. ;3< =and should be a fi#ed asset and listed as Property- Plant and ">uipment. ;4< 'ccumulated depreciation should be deducted from the related fi#ed asset in the Property Plant- and ">uipment section. ;5< 'n adding error was made in determining the amount of total assets. ;!< 'ccounts recei:able should be a current asset. ;(< et income would be reported on the income statement. ;)< 7ages payable should be a current liability.
2$(
208
hapter
48ompleting the 'ccounting ycle
' corrected balance sheet would be as follows/ 0illy 0rown er:ices o. 0alance heet December 13- 2$$( 'ssets urrent assets/ ash 'ccounts recei:able upplies Prepaid insurance otal current assets Property- plant- and e>uipment/ =and 0uilding =ess accum. depreciation ">uipment =ess accum. depreciation otal property- plant- and e>uipment otal assets =iabilities urrent liabilities/ 'ccounts payable 7ages payable otal liabilities
A !-1($ *-$$$ 1-5*$ 345 A1(-1$5 A25-$$$ A45-5$$ 13-525 2)-25$ !-34$
toc6holders? ">uity apital stoc6 9etained earnings otal toc6holders? e>uity otal liabilities and stoc6holders? e>uity D/ Difficult O0/ $4%$2 '/ ''0 'nalytic + 'P' %&easurement
31-*(5 21-*1$ ()-))5 A*5-**$
A)-5$$ 5$$ A *-$$$
A4$-$$$ 4!-**$ )!-**$ A*5-**$
Chapter 4/Completing the Accounting Cycle
).
he following is the adjusted trial balance for teely ompany. teely ompany 'djusted rial 0alance or the ear ended December 31- 2$$) ash 'ccounts 9ecei:able Prepaid "#penses ">uipment 'ccumulated Depreciation 'ccounts Payable otes Payable % Due on une 3$- 2$$* apital toc6 9etained "arnings Di:idends ees "arned 7ages "#pense 9ent "#pense @tilities "#pense Depreciation "#pense &iscellaneous "#pense otals
!-13$ 2-3$$ (5$ 13-4$$ 1-2$$ 1-($$ 5-$$$ !-$$$ !-$$$ )($ !-!$$ 1-45$ *$$ 4(5 15$ (5 2!-5$$
2!-5$$
Prepare an ncome tatement- 0alance heet- and tatement of toc6holders? ">uity. ANS8 teely ompany ncome tatement or ear "nded December 31- 2$$) ees "arned "#penses/ 7ages "#pense 9ent "#pense @tilities "#pense Depreciation "#pense &iscellaneous "#pense otal "#penses et ncome
A!-!$$ A1-45$ *$$ 4(5 15$ (5 3-$5$ A3-55$
2$*
210
hapter
48ompleting the 'ccounting ycle
teely ompany tatement of 9etained "arnings or ear "nded December 31- 2$$) 9etained earnings- anuary 1- 2$$) et ncome
A!-$$$ 3-55$
ub%otal =ess Di:idends
A*-55$ )($
9etained earnings- December 31- 2$$)
A)-!)$
teely ompany 0alance heet December 31- 2$$) A$$et$
urrent 'ssets ash 'ccounts 9ecei:able Prepaid "#penses
A!-13$ 2-3$$ (5$
otal urrent 'ssets Property- Plant- H ">uip./ ">uipment =ess/ 'ccum Depre.
otal Prop.- Plant- H ">uip otal 'ssets
7ia&ilitie$ urrent =iabilities 'ccounts Payable otes Payable
otal =iabilities
A1-($$ 5-$$$ A!-($$
A*-1)$
A13-4$$ 1-2$$
Stoc;holuity apital toc6 A!-$$$ 9etained "arnings )-!)$ otal toc6holders? ">uity A12-2$$ otal =iabilities and
A21-3)$ toc6holders? ">uity
D/ Difficult O0/ $4%$2 '/ ''0 'nalytic + 'P' %&easurement
14-!)$
A21-3)$
Chapter 4/Completing the Accounting Cycle
*.
211
Prepare an income statement and a statement of retained earnings for & ompany- for the month ended October 31- 2$$)- from the following %'ccounts. Prepaid nsurance 12$$ 1$$
'ccounts 9ecei:able. !$$$ 5$$
@nearned 9e:enues 135$ 35$
apital toc6
9etained "arnings 4515 35$$
Di:idends
ncome ummary ))5$ 4535 4515
ees "arned
35$$ 35$$
($$$
)$$$ 5$$ 35$ ))5$
7ages "#pense 2!$$ 4(5 3$(5
9ent "#pense 12)$ 12)$
nsurance "#pense 1$$ 1$$
@tilities "#pense )$ )$
ANS8
& ompany ncome tatement or the &onth "nded October 31- 2$$) ees "arned "#penses/ 7ages "#pense 9ent "#pense nsurance "#pense @tilities "#pense otal "#penses et ncome
A)-)5$ A3$(5 1-2)$ 1$$ )$ A4-535 A4-515
212
hapter
48ompleting the 'ccounting ycle
& ompany tatement of toc6holders? ">uity or the &onth "nded October 31- 2$$) 0eginning balance 'dd/ et ncome &onth "nded October 31- 2$$) =ess/ Di:idends
A$ A4-515 3-5$$
ncrease in 9etained "arnings "nding 0alance 9etained "arnings- October 31- 2$$)
1-$15 A1-$15
D/ Difficult O0/ $4%$2 '/ ''0 'nalytic + 'P' %&easurement 1$. Prepare an income statement and a statement of retained earnings for the month ended o:ember 3$- 2$$) from the %accounts below. Prepaid nsurance 12$$ 1$$
'ccounts 9ecei:able. 2$$$ 5$$
@nearned 9e:enues 135$ 35$
apital toc6
9etained "arnings 3$$$ 1)5 2!$$
Di:idends
ncome ummary 5)5$ !$35 1)5
ees "arned
2!$$ 2!$$
4$$$ 3$$$
5$$$ 5$$ 35$ 5)5$
7ages "#pense 3!$$ 4(5 4$(5
9ent "#pense 1()$ 1()$
nsurance "#pense 1$$ 1$$
@tilities "#pense )$ )$
Chapter 4/Completing the Accounting Cycle
213
ANS8
& ompany ncome tatement or the &onth "nded o:ember 3$- 2$$) ees "arned "#penses/ 7ages "#pense 9ent "#pense nsurance "#pense @tilities "#pense otal "#penses
A5-)5$ A4-$(5 1-()$ 1$$ )$ A!-$35
et =oss
;A1)5< & ompany tatement of 9etained "arnings or the &onth "nded o:ember 3$- 2$$)
0eginning balance =ess/ et =oss &onth "nded October 31- 2$$) Di:idends
A3-$$$ ;A1)5< 2-!$$
Decrease in 9etained "arnings "nding 0alance 9etained "arnings- October 31- 2$$)
2-()5 A 215
D/ Difficult O0/ $4%$2 '/ ''0 'nalytic + 'P' %&easurement 11. elected ledger accounts appear below for onstruction er:ices for 2$$(. apital toc6 181
2$-$$$
3831 12822
Di:idends 12-$$$ 12831 3-$$$
15-$$$
9etained "arnings 1283 1
12831 12831
15-$$$ 12831
ncome ummary 1*-$$$ 12831 45-$$$
45-$$$
!4-$$$
214
hapter
48ompleting the 'ccounting ycle
Prepare a statement of retained earnings. ANS8 onstruction er:ices tatement of 9etained "arnings or the ear "nded December 31- 2$$( 9etained "arnings- 18182$$( et income A 45-$$$ =ess di:idends 15-$$$ ncrease in retained earnings 9etained "arnings- 1283182$$(
A$
3$-$$$ A3$-$$$
D/ Difficult O0/ $4%$2 + $4%$3 '/ ''0 'nalytic + 'P' %&easurement 12. On the basis of the following data ta6en from the 'djusted rial 0alance columns of the wor6 sheet for the year ended October 31 for hore o.- journali,e the four closing entries. ash 'ccounts 9ecei:able upplies ">uipment 'ccumulated Depreciation 'ccounts Payable apital toc6 Di:idends ees "arned alary "#pense 9ent "#pense Depreciation "#pense upplies "#pense &iscellaneous "#pense
A 21-5$$ 45-2$$ 5-$$$ 1!*-*$$ A !*-$$$ 42-5$$ 152-!$$ 3$-$$$ 4$4-5$$ 3$$-5$$ !$-$$$ 25-$$$ *-5$$ 2-$$$ A!!)-!$$
A!!)-!$$
Chapter 4/Completing the Accounting Cycle
ANS8 Oct. 31
31
31
31
ees "arned ncome ummary
4$4-5$$
ncome ummary alary "#pense 9ent "#pense Depreciation "#pense upplies "#pense &iscellaneous "#pense
3*(-$$$
215
4$4-5$$
3$$-5$$ !$-$$$ 25-$$$ *-5$$ 2-$$$
ncome ummary 9etained "arnings
(-5$$
9etained "arnings Di:idends
3$-$$$
(-5$$
3$-$$$
D/ &oderate O0/ $4%$3 '/ ''0 'nalytic + 'P' %&easurement 13. 'fter all adjustments ha:e been made- but before the accounts ha:e been closed- the following balances were ta6en from the ledger/ 'ccounts Payable 'ccounts 9ecei:able 'ccumulated Depreciation ash Depreciation "#pense ">uipment nsurance "#pense Prepaid nsurance
A 4$-$$$ 54-5$$ )3-325 (-15$ 23-5$$ 155-$$$ )-!$$ 5-2(5
9ent "#pense alary "#pense alaries Payable er:ice 9e:enue upplies upplies "#pense apital toc6 Di:idends
A 21-4$$ !!-$$$ 15$ 151-$$$ 2-5$$ 3-5$$ 1$$-*5$ 2)-$$$
216
hapter
48ompleting the 'ccounting ycle
ournali,e the entries to close the appropriate accounts. ANS8 er:ice 9e:enue ncome ummary ncome ummary Depreciation "#pense nsurance "#pense 9ent "#pense alary "#pense upplies "#pense
151-$$$ 151-$$$ 123-$$$ 23-5$$ )-!$$ 21-4$$ !!-$$$ 3-5$$
ncome ummary 9etained "arnings
2)-$$$
9etained "arnings Di:idends
2)-$$$
2)-$$$
2)-$$$
D/ Difficult O0/ $4%$3 '/ ''0 'nalytic + 'P' %&easurement 14. On the basis of the following information ta6en from the 'djusted rial 0alance columns of the wor6 sheet for the month ended o:ember 3$th- journali,e the closing entries. ash A12-5$$.$$ 'ccounts 9ecei:able 4-5(5.$$ Office upplies 1-)5$.$$ 9epair Parts 4-()5.$$ &achinery 14-(5$.$$ 'ccumulated Depreciation 2-*5$.$$ 'ccounts Payable 1-(5$.$$ otes Payable (-5$$.$$ apital toc6 2-(5$.$$ Di:idends 2-5$$.$$ er:ice 9e:enue 32-5$$.$$ 7ages "#pense 3-)4$.$$ Office upplies "#pense 2(5.$$ 9epair Parts "#pense 1-*25.$$ Depreciation "#pense 45$.$$ A4(-45$.$$ A4(-45$.$$ ANS8 o: 3$
er:ice 9e:enue ncome ummary losing "ntry % er:ice 9e:enue
32-5$$.$$ 32-5$$.$$
Chapter 4/Completing the Accounting Cycle
o: 3$
o: 3$
o: 3$
ncome ummary 7ages "#pense Office upplies "#pense 9epair Parts "#pense Depreciation "#pense losing "ntry % "#penses
21(
!-4*$.$$ 3-)4$.$$ 2(5.$$ 1-*25.$$ 45$.$$
ncome ummary 9etained "arnings losing "ntry % ncome ummary
2!-$1$.$$
9etained "arnings Di:idends losing "ntry % Di:idends
2-5$$.$$
2!-$1$.$$
2-5$$.$$
D/ &oderate O0/ $4%$3 '/ ''0 'nalytic + 'P' %&easurement 15. he following adjusted trial balance is the result of the adjustments made at the end of the month of &ay for enni =inn ompany. @tili,e these adjusted :alues to perform the closing entries for enni =inn ompany. ash A14-(5$.$$ 'ccounts 9ecei:able 3-(5$.$$ Office upplies 1-525.$$ tore upplies 4-()5.$$ &achinery 1*-(5$.$$ 'ccumulated Depreciation 3-15$.$$ 'ccounts Payable 1-55$.$$ otes Payable 5-5$$.$$ apital toc6 2*-(25.$$ Di:idends 3-25$.$$ er:ice 9e:enue 1!-5$$.$$ 7ages "#pense 4-425.$$ Office upplies "#pense 4!5.$$ tore upplies "#pense 3-15$.$$ Depreciation "#pense 5(5.$$ CCCCCCCC A5!-425.$$ A5!-425.$$ ANS8 &ay 31
er:ice 9e:enue ncome ummary losing "ntry % er:ice 9e:enue
1!-5$$.$$ 1!-5$$.$$
218
hapter
&ay 31
&ay 31
&ay 31
48ompleting the 'ccounting ycle
ncome ummary 7ages "#pense Office upplies "#pense tore upplies "#pense Depreciation "#pense losing "ntry % "#penses
)-!15.$$
ncome ummary 9etained "arnings losing "ntry % ncome ummary
(-))5.$$
9etained "arnings Di:idends losing "ntry % Di:idends
3-25$.$$
4-425.$$ 4!5.$$ 3-15$.$$ 5(5.$$
(-))5.$$
3-25$.$$
D/ &oderate O0/ $4%$3 '/ ''0 'nalytic + 'P' %&easurement 1!. he following adjusted trial balance is the result of the adjustments made at the end of the month of &arch for enni =inn ompany. @tili,e these adjusted :alues to perform the closing entries for enni =inn ompany. ash A14-(5$.$$ 'ccounts 9ecei:able 3-(5$.$$ Office upplies 1-525.$$ tore upplies 4-()5.$$ &achinery 1*-(5$.$$ 'ccumulated Depreciation 5-15$.$$ 'ccounts Payable 4-3$$.$$ otes Payable *-5$$.$$ apital toc6 1$-$$$.$$ 9etained "arnings 1*-(25.$$ Di:idends 3-25$.$$ er:ice 9e:enue 11-5$$.$$ 7ages "#pense 4-425.$$ 9ent "#pense 2-$$$.$$ 'd:ertising "#pense 1-(5$.$$ Office upplies "#pense 4!5.$$ tore upplies "#pense 3-15$.$$ Depreciation "#pense 5(5.$$ A!$-1(5.$$ A!$-1(5.$$ ANS8 &ay 31
er:ice 9e:enue ncome ummary losing "ntry % er:ice 9e:enue
11-5$$.$$ 11-5$$.$$
Chapter 4/Completing the Accounting Cycle
&ay 31
&ay 31
&ay 31
ncome ummary 7ages "#pense 9ent "#pense 'd:ertising "#pense Office upplies "#pense tore upplies "#pense Depreciation "#pense losing "ntry % "#penses 9etained "arnings ncome ummary losing "ntry % ncome ummary
9etained "arnings Di:idends losing "ntry % Di:idends D/ &oderate O0/ $4%$3 '/ ''0 'nalytic + 'P' %&easurement
12-3!5.$$ 4-425.$$ 2-$$$.$$ 1-(5$.$$ 4!5.$$ 3-15$.$$ 5(5.$$
)!5.$$ )!5.$$
3-25$.$$ 3-25$.$$
21*
220
hapter
48ompleting the 'ccounting ycle
1(. 0ased on the the following following wor6shee wor6sheett- prepare prepare and income income statementstatement- statement statement of retain retained ed earnings- and balance sheet for &antle "nterprises. &antle "nterprises 7or6sheet or the ear ear "nded December 31- 2$$) 'djusted rial 0alance ncome tatement 0alance heet 'ccount itle Debit redit Debit redit Debit ash 1!-$$$ 1!-$$$ 'ccounts 9ecei:able !-$$$ !-$$$ upplies 2-$$$ 2-$$$ ">uipment 1*-$$$ 1*-$$$ 'ccumulated Depr% ! -$$ $ ">uip 'ccounts Payable 1 $ -$$$ 7ages Payable 2 -$ $ $ apital toc6 ( -$$ $ 9etained "arnings 4 -$ $ $ Di:idends 1-$$$ 1-$$$ ees "arned 4 ( -$ $ $ 4(-$$$ 7ages "#pense 21-$$$ 21-$$$ 9ent "#pense !-$$$ !-$$$ Depreciation "#pense 5-$$$ 5-$$$ otals (!-$$$ ( ! -$$$ 32-$$$ 4(-$$$ 44-$$$ et ncome ;=oss< 15-$$$ 4(-$$$ 4(-$$$ 44-$$$ ANS8 3antle Enterpri$e$ Income Statement #or the ?ear En " >uipment =ess accum depr
3antle Enterpri$e$ Balance Sheet !ecem&er 0*@ +//2 7ia&ilitie$ urrent liabilities A1!-$$ 'ccounts Payable $ ! -$$$ 7ages Payable 2 -$$$ otal =iabilities A 24-$$$
A1*-$$ $ !-$$$
otal property- plant and e>uipment
otal assets
Stoc;holuity apital toc6
A 4 -$ $ $
14 -$$ $ A 1 ) -$ $ $
A 1$-$$$ 2-$$$ A12-$$$
A(-$$$
13-$$$ 9etained "a "arning otal o tal toc6holders ">uity A3(-$$$ otal liabilities and toc6holders? e>uity
D/ Difficult O0/ $4%$3 '/ '/ ''0 'nalytic 'nalytic + 'P' 'P' %&easurement
1)-$$$ 25-$$$ A3(-$$$
221
222
hapter
48ompleting the 'ccounting ycle
1). Prepare Prepare closing closing entries entries from the the following following wor6 wor6 sheet. sheet. &antle "nterprises 7or6sheet or the ear ear "nded December 31- 2$$) 'djusted rial ncom ncomee tat tatem emen entt 0ala 0alanc ncee heet heet 0alance 'ccount itle Debit redit Debit redit Debit redit ash 1!-$$$ 1 ! -$ $ $ 'ccounts 9ecei:able !-$$$ ! -$ $ $ upplies 2-$$$ 2 -$$$ ">uipment 1*-$$$ 1 * -$ $ $ 'ccumulated Depr% !-$$$ !-$$$ ">uip 'ccounts Payable 1$-$$$ 1$-$$$ 7ages Payable 2-$$$ 2-$$$ apital toc6 (-$$$ (-$$$ 9etained "arnings 4-$$$ 4-$$$ Di:idends 1-$$$ 1 -$$$ ees "arned 4(-$$$ 4(-$$$ 7ages "#pense 21-$$$ 21-$$$ 9ent "#pense !-$$$ !-$$$ Depreciation "#pense 5-$$$ 5-$$$ otals (!-$$$ (!-$$$ 32-$$$ 4(-$$$ 44-$$$ 2*-$$$ et ncome ;=oss< 15-$$$ 15-$$$ 4(-$$$ 4(-$$$ 44-$$$ 44-$$$ ANS8 Journal 5o$t !ate !e$cription e) !e&it Creuipment 'ccumulated Depreciation 'ccounts Payable otes Payable % Due on une 3$- 2$$* apital toc6 Di:idends ees "arned 7ages "#pense 9ent "#pense @tilities "#pense Depreciation "#pense &iscellaneous "#pense otals Prepare closing entries and the post closing trial balance. ANS8 ees "arned ncome ummary
!-13$ 2-3$$ (5$ 13-4$$ 1-2$$ 1-($$ 5-$$$ 12-$$$ )($ !-!$$ 1-45$ *$$ 4(5 15$ (5 2!-5$$
!-!$$ !-!$$
ncome ummary 7ages "#pense 9ent "#pense @tilities "#pense Depreciation "#pense &iscellaneous "#pense
3-$5$
ncome ummary 9etained "arnings
3-55$
9etained "arnings Di:idends
2!-5$$
145$ *$$ 4(5 15$ (5
3-55$ )($ )($
223
224
hapter
48ompleting the 'ccounting ycle
teely ompany Post losing rial 0alance or the ear ended December 31- 2$$) ash 'ccounts 9ecei:able Prepaid "#penses ">uipment 'ccumulated Depreciation 'ccounts Payable otes Payable apital toc6
!-13$ 2-3$$ (5$ 13-4$$ 1-2$$ 1-($$ 5-$$$ 12-$$$
9etained "arnings
2-!)$
otal
A22-5)$
A22-5)$
D/ Difficult O0/ $4%$3 '/ ''0 'nalytic + 'P' %&easurement 2$. 9econstruct the adjusting and closing entries from the following %'ccounts. Prepaid nsurance 12$$ 1$$
'ccounts 9ecei:able. !$$$ 5$$
@nearned 9e:enues 135$ 35$
apital toc6
9etained "arnings 4515 35$$
Di:idends
ncome ummary ))5$ 4535 4515
ees "arned
35$$ 35$$
($$$
)$$$ 5$$ 35$ ))5$
7ages "#pense 3$(5 3$(5
9ent "#pense 12)$ 12)$
nsurance "#pense 1$$ 1$$
@tilities "#pense )$ )$
Chapter 4/Completing the Accounting Cycle
ANS8 'djusting "ntries/
1< 2< 3<
nsurance "#pense Prepaid nsurance 'ccounts 9ecei:able ees "arned @nearned 9e:enue ees "arned
1$$ 1$$ 5$$ 5$$ 35$ 35$
losing "ntries/ 1< 2<
3< 4<
D/ '/
ees "arned ncome ummary
))5$
ncome ummary 7ages "#pense 9ent "#pense nsurance "#pense @tilities "#pense ncome ummary 9etained "arnings 9etained "arnings Di:idends
4535 3$(5
Difficult O0/ $4%$3 ''0 'nalytic + 'P' %&easurement
))5$ 12)$ 1$$ )$ 4515 4515 35$$ 35$$
225
226
hapter
48ompleting the 'ccounting ycle
21. 9econstruct adjusting and closing entries for the month ended o:ember 3$- 2$$) from the % accounts below. Prepaid nsurance 12$$ 1$$
9etained "arnings 3$$$
'ccounts 9ecei:able. 2$$$ 5$$
@nearned 9e:enues 135$
($$$
35$
&- Drawing
ncome ummary
2!$$
1)5 2!$$
apital toc6
ees "arned
5)5$ 2!$$
5$$$ 5$$ 35$
!$35 1)5 5)5$
7ages "#pense 4$(5
9ent "#pense 1()$
4$(5
nsurance "#pense 1$$
1()$
@tilities "#pense )$
1$$
)$
ANS8 'djusting "ntries/
1< 2< 3<
nsurance "#pense Prepaid nsurance 'ccounts 9ecei:able ees "arned @nearned 9e:enue ees "arned
losing "ntries/ 1< ees "arned ncome ummary 2< ncome ummary 7ages "#pense 9ent "#pense nsurance "#pense @tilities "#pense 3< 9etained "arnings ncome ummary 4< 9etained "arnings Di:idends
1$$ 1$$ 5$$ 5$$ 35$ 35$
5)5$ 5)5$ !$35 4$(5 1()$ 1$$ )$ 1)5 1)5 2!$$ 2!$$
Chapter 4/Completing the Accounting Cycle
D/ '/
Difficult O0/ $4%$3 ''0 'nalytic + 'P' %&easurement
22. ;1<
9econstruct the entries for the month ended ebruary 2)- 2$$) from the %accounts below. 9ecord them as follows/ ' % = ournal "ntries &% 9 'djusting ournal "ntries 0alance and prepare the ncome tatement- tatement of 9etained "arnings- and the 0alance heet from the %'ccounts. Prepare the four closing entries ; % Iuipment apital toc6 9ent "#pense ash ash ees "arned 'ccounts 9ecei:able ees "arned upplies 'ccounts Payable 7ages "#pense ash Prepaid nsurance ash ash ees "arned &iscellaneous "#pense ash Di:idends ash ash @nearned 9e:enue
($$$ ($$$ 3$$$ 3$$$ !$$ !$$ ($$ ($$ 1$$$ 1$$$ !($ !($ 35$ 35$ 24$$ 24$$ 25$$ 25$$ 5$ 5$ 4$$ 4$$ *3$ *3$
Auipment =ess/ 'ccum Depre otal 'ssets
A(-33$ 1-5)5 31$ 2-2$$ A3-$$$ 3$
2-*($ A14-3*5
=iabilities/ 'ccounts Payable 7ages Payable @nearned 9e:enues otal =iabilities toc6holders? ">uity apital toc6 1$-$$$ 9etained "arnings
13-12$ A14-3*5
;3< Clo$ing Entrie$8 ees earned
1-2(5
3-12$
otal toc6holders? ">uity otal =iabilities and Owner?s ">uity
s<
A!($ 125 4)$
5235
22*
230
hapter
t<
u< :<
48ompleting the 'ccounting ycle
ncome ummary ncome ummary 7ages "#pense 9ent "#pense upplies "#pense nsurance "#pense Depreciation "#pense &iscellaneous "#pense ncome ummary 9etained "arnings 9etained "arnings Di:idends
5235 1(15 4)5 !$$ 35$ 2$$ 3$ 5$ 352$ 352$ 4$$ 4$$
;4< D= ompany Post%losing rial 0alance or the &onth "nded ebruary 2)- 2$$) ash 'ccounts 9ecei:able upplies Prepaid nsurance ">uipment 'ccumulated Depreciation 'ccounts Payable 7ages Payable @nearned 9e:enues apital toc6 9etained "arnings
(33$ 15)5 31$ 22$$ 3$$$ 3$ !($ 125 4)$ 1$-$$$ 3-12$ otal
D/ '/
A14-425 A14-425
Difficult O0/ $4%$5 ''0 'nalytic + 'P' %&easurement
23. he balances in the ledger of =andscape er:ices as of December 31- 2$$( before adjustments- are as follows/ ash upplies Prepaid nsurance ">uipment 'ccumulated Depreciation
A 4-5$$ 4-15$ )-($$ 42-$$$ 1$-2$$
apital toc6 Di:idends er:ice 9e:enue alary "#pense 9ent "#pense &iscellaneous "#pense
A33-$5$ 2-*$$ 52-5$$ 2!-!$$ 5-$$$ 1-*$$
'djustment data are as follows/ supplies on hand- December 31- A1-$$$E insurance e#pired for DecemberA*$$E depreciation on e>uipment for December- A1-5$$E salaries accrued- December 31- A1-$$$. ;a< ;b<
Prepare a ten%column wor6 sheet for =andscape er:ices for December- 2$$(. On the basis of the wor6 sheet in ;a
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