Question 1

A current ratio of 2.1 suggests that a company has ________ current assets to cover current liabilities.

Accepted Answer

sufficient

Question 2

Income Summary is a temporary account only used for the closing process.

Accepted Answer

A) True 
 B)False  True

Question 3

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

Accepted Answer

A)  Debit Income Summary $33,000; credit Owner Capital $33,000. 
B)  Debit Owner Capital $33,000; credit Income Summary $33,000. 
C)  Debit Income Summary $33,000; credit Owner Withdrawals $33,000. 
D)  Debit Owner Withdrawals $33,000; credit Income Summary $33,000. 
E)  Credit Owner Capital $33,000; debit Owner Withdrawals $33,000. 
A)  Debit Income Summary $33,000; credit Owner Capital $33,000. 
B)  Debit Owner Capital $33,000; credit Income Summary $33,000. 
C)  Debit Income Summary $33,000; credit Owner Withdrawals $33,000. 
D)  Debit Owner Withdrawals $33,000; credit Income Summary $33,000. 
E)  Credit Owner Capital $33,000; debit Owner Withdrawals $33,000. B

Question 4

The following information is available for Zephyr Company before closing the accounts. After all of the closing entries are made, what will be the balance in the Zephyr, Capital account? $$\begin{array} { | l | r | } 
\hline \text { Net income } & \text { \$ } 115,000 \
\hline \text { Zephyr, Capital } & 110,000 \
\hline \text { Zephyr, Withdrawals } & 39,000 \
\hline
\end{array}$$

Accepted Answer

A)  $225,000. 
B)  $264,000. 
C)  $956,000. 
D)  $115,000. 
E)  $186,000. 
A)  $225,000. 
B)  $264,000. 
C)  $956,000. 
D)  $115,000. 
E)  $186,000.

Question 5

Tara Westmont, the proprietor of Tiptoe Shoes, had annual revenues of $185,000, expenses of $103,700, and withdrew $18,000 from the business during the current year. The owner's capital account before closing had a balance of $297,000.
- The entry to close the Income Summary account at the end of the year, after revenue and expense accounts have been closed, is:

Accepted Answer

A)  Debit T. Westmont, Capital $297,000; credit Income Summary $297,000 
B)  Debit Income Summary $63,300; credit T. Westmont, Capital $63,300 
C)  Debit T. Westmont, Capital $81,300; credit Income Summary $81,300 
D)  Debit T. Westmont, Capital $63,300; credit Income Summary $63,300 
E)  Debit Income Summary $81,300, credit T. Westmont, Capital $81,300 
A)  Debit T. Westmont, Capital $297,000; credit Income Summary $297,000 
B)  Debit Income Summary $63,300; credit T. Westmont, Capital $63,300 
C)  Debit T. Westmont, Capital $81,300; credit Income Summary $81,300 
D)  Debit T. Westmont, Capital $63,300; credit Income Summary $63,300 
E)  Debit Income Summary $81,300, credit T. Westmont, Capital $81,300

Question 6

Current liabilities include accounts receivable, unearned revenues, and salaries payable.

Accepted Answer

A) True 
 B)False

Question 7

Closing the temporary accounts at the end of each accounting period does all of the following except:

Accepted Answer

A)  Serves to transfer the effects of these accounts to the owner's capital account on the balance sheet. 
B)  Prepares the withdrawals account for use in the next period. 
C)  Causes owner's capital to reflect increases from revenues and decreases from expenses and withdrawals. 
D)  Brings the revenue and expense accounts to zero balances. 
E)  Has no effect on the owner's capital account. 
A)  Serves to transfer the effects of these accounts to the owner's capital account on the balance sheet. 
B)  Prepares the withdrawals account for use in the next period. 
C)  Causes owner's capital to reflect increases from revenues and decreases from expenses and withdrawals. 
D)  Brings the revenue and expense accounts to zero balances. 
E)  Has no effect on the owner's capital account.

Question 8

The following adjusted trial balance is for Carla Co. at year-end December 31. The credit balance in Carla West, Capital at the beginning of the year, January 1, was $320,000. The owner, Carla West, invested an additional $100,000 during the current year. The land held for future expansion was also purchased during the current year.
 
$\begin{array}{l|l|l}
\hline\text { Sal aries payable } & & 10,500 \
\hline \text { Interest payable } & & 7,900 \
\hline \text { Long-term note payable } && 252,000 \
\hline \text { C. West, Capital } && 420,000\
\hline\text { C. West, Withdrawals } & 60,000 & \ 
\hline \text { Service fees earned } & & 470,800 \
\hline \text { Sal aries expense } & 195,000 &\
\hline \text { Insurance expense } & 18,000 \
\hline \text { Rent expense } & 36,000 \
\hline \text { Depreciation expense-Equipment } & 12,000 \
\hline \text { Depreciation expense-Building } & 15,000 \
\hline \text { Totals } & \$ 1,436,000 & \$ 1,436,000 \
\hline 
\end{array}$
 Required: Prepare a classified balance sheet as of December 31. (Note: A $21,000 installment on the long-term note payable is due within one year.)

Accepted Answer

None

Question 9

Two common subgroups for liabilities on a classified balance sheet are:

Accepted Answer

A)  Current liabilities and intangible liabilities. 
B)  Current liabilities and long-term liabilities. 
C)  Present liabilities and operating liabilities. 
D)  General liabilities and specific liabilities. 
E)  Intangible liabilities and long-term liabilities. 
A)  Current liabilities and intangible liabilities. 
B)  Current liabilities and long-term liabilities. 
C)  Present liabilities and operating liabilities. 
D)  General liabilities and specific liabilities. 
E)  Intangible liabilities and long-term liabilities.

Question 10

Reversing entries are recorded in response to external transactions that were created in error during the prior accounting period.

Accepted Answer

A) True 
 B)False

Question 11

The following information is available for the Noir Detective Agency. After closing entries are posted, what will be the balance in the G. Noir, Capital account? 
$\begin{array}{lr}
\text { Net Loss } & \$ 17,600 \
\text { G. Noir, Capital } & 289,000 \
\text { G. Noir, Withdrawals } & 32,000
\end{array}$

Accepted Answer

A)  $303,400. 
B)  $289,000. 
C)  $239,400. 
D)  $274,600. 
E)  $257,000. 
A)  $303,400. 
B)  $289,000. 
C)  $239,400. 
D)  $274,600. 
E)  $257,000.

Question 12

The Income Summary account is used to:

Accepted Answer

A)  Determine the appropriate withdrawal amount. 
B)  Adjust and update asset and liability accounts. 
C)  Replace the capital account in some businesses. 
D)  Replace the income statement under certain circumstances. 
E)  Close the revenue and expense accounts. 
A)  Determine the appropriate withdrawal amount. 
B)  Adjust and update asset and liability accounts. 
C)  Replace the capital account in some businesses. 
D)  Replace the income statement under certain circumstances. 
E)  Close the revenue and expense accounts.

Question 13

All necessary amounts needed to prepare the income statement can be taken from the income statement columns of the work sheet, including the net income or net loss.

Accepted Answer

A) True 
 B)False

Question 14

The purpose of reversing entries is to:

Accepted Answer

A)  Make certain that only permanent accounts are carried forward into the next accounting period. 
B)  Complete a required step in the accounting cycle. 
C)  Correct errors made in previous journal entries. 
D)  Ensure that closing entries have been properly posted to the ledger accounts. 
E)  Simplify a company's recording of certain journal entries in the future. 
A)  Make certain that only permanent accounts are carried forward into the next accounting period. 
B)  Complete a required step in the accounting cycle. 
C)  Correct errors made in previous journal entries. 
D)  Ensure that closing entries have been properly posted to the ledger accounts. 
E)  Simplify a company's recording of certain journal entries in the future.

Question 15

At the beginning of the year, Sigma Company's balance sheet reported Total Assets of $195,000 and Total Liabilities of $75,000. During the year, the company reported total revenues of $226,000 and expenses of $175,000. Also, owner withdrawals during the year totaled $48,000. Assuming no other changes to owner's capital, the balance in the owner's capital account at the end of the year would be:

Accepted Answer

A)  $123,000. 
B)  $120,000. 
C)  $78,000. 
D)  $174,000. 
E)  $171,000. 
A)  $123,000. 
B)  $120,000. 
C)  $78,000. 
D)  $174,000. 
E)  $171,000.

Question 16

Which of the following statements regarding reporting under GAAP and IFRS is not true:

Accepted Answer

A)  The definition of a liability under GAAP and IFRS involves three basic criteria. 
B)  After acquisition, one of two asset measurement systems is applied. 
C)  The definition of an asset under GAAP and IFRS involves three basic criteria. 
D)  Both GAAP and IFRS define the initial asset value as historical cost for nearly all assets. 
E)  Both GAAP and IFRS define the initial asset value as replacement value. 
A)  The definition of a liability under GAAP and IFRS involves three basic criteria. 
B)  After acquisition, one of two asset measurement systems is applied. 
C)  The definition of an asset under GAAP and IFRS involves three basic criteria. 
D)  Both GAAP and IFRS define the initial asset value as historical cost for nearly all assets. 
E)  Both GAAP and IFRS define the initial asset value as replacement value.

Question 17

The calendar year-end adjusted trial balance for Blessinger Co. follows:
   Required:
(a) Prepare a classified year-end balance sheet. (Note: A $9,000 installment on the long-term note payable is due within one year.)
(b) Prepare the required closing entries.

Accepted Answer

None

Question 18

A classified balance sheet:

Accepted Answer

A)  Broadly groups items into assets, liabilities and equity. 
B)  Measures a company's ability to pay its bills on time. 
C)  Organizes assets and liabilities into important subgroups that provide more information. 
D)  Reports operating, investing, and financing activities. 
E)  Reports the effect of profit and withdrawals on owner's capital. 
A)  Broadly groups items into assets, liabilities and equity. 
B)  Measures a company's ability to pay its bills on time. 
C)  Organizes assets and liabilities into important subgroups that provide more information. 
D)  Reports operating, investing, and financing activities. 
E)  Reports the effect of profit and withdrawals on owner's capital.

Question 19

Accumulated Depreciation and Service Fees Earned would be sorted to which respective columns in completing a work sheet?

Accepted Answer

A)  Balance Sheet and Statement of Owner's Equity-Debit and Balance Sheet and Statement of Owner's Equity-Credit. 
B)  Balance Sheet and Statement of Owner's Equity-Debit and Income Statement-Debit. 
C)  Income Statement-Debit and Income Statement-Credit. 
D)  Balance Sheet and Statement of Owner's Equity-Debit; and Income Statement-Credit. 
E)  Balance Sheet and Statement of Owner's Equity-Credit and Income Statement-Credit. 
A)  Balance Sheet and Statement of Owner's Equity-Debit and Balance Sheet and Statement of Owner's Equity-Credit. 
B)  Balance Sheet and Statement of Owner's Equity-Debit and Income Statement-Debit. 
C)  Income Statement-Debit and Income Statement-Credit. 
D)  Balance Sheet and Statement of Owner's Equity-Debit; and Income Statement-Credit. 
E)  Balance Sheet and Statement of Owner's Equity-Credit and Income Statement-Credit.

Question 20

For the year ended December 31, a company has revenues of $317,000 and expenses of $196,000. The owner withdrew $50,000 during the year. The balance in the owner's capital account before closing is $81,000. Which of the following entries would be used to close the withdrawal account?

Accepted Answer

A)  Debit Owner's Capital $81,000; credit Income Summary $81,000. 
B)  Debit Income Summary $50,000; credit Owner's, Capital $50,000. 
C)  Debit Income Summary $81,000, credit Owner's Withdrawals $81,000. 
D)  Debit Owner's Capital $50,000; credit Owner Withdrawals $50,000. 
E)  Debit Owner's Withdrawals $50,000; credit Owner's Capital $50,000. 
A)  Debit Owner's Capital $81,000; credit Income Summary $81,000. 
B)  Debit Income Summary $50,000; credit Owner's, Capital $50,000. 
C)  Debit Income Summary $81,000, credit Owner's Withdrawals $81,000. 
D)  Debit Owner's Capital $50,000; credit Owner Withdrawals $50,000. 
E)  Debit Owner's Withdrawals $50,000; credit Owner's Capital $50,000.

Exam 4: Completing the Accounting Cycle

A current ratio of 2.1 suggests that a company has ________ current assets to cover current liabilities.

Income Summary is a temporary account only used for the closing process.

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

The following information is available for Zephyr Company before closing the accounts. After all of the closing entries are made, what will be the balance in the Zephyr, Capital account? Net income \ 115,000 Zephyr, Capital 110,000 Zephyr, Withdrawals 39,000

Current liabilities include accounts receivable, unearned revenues, and salaries payable.

Closing the temporary accounts at the end of each accounting period does all of the following except:

Two common subgroups for liabilities on a classified balance sheet are:

Reversing entries are recorded in response to external transactions that were created in error during the prior accounting period.

The following information is available for the Noir Detective Agency. After closing entries are posted, what will be the balance in the G. Noir, Capital account? Net Loss \ 17,600 G. Noir, Capital 289,000 G. Noir, Withdrawals 32,000

The Income Summary account is used to:

All necessary amounts needed to prepare the income statement can be taken from the income statement columns of the work sheet, including the net income or net loss.

The purpose of reversing entries is to:

Which of the following statements regarding reporting under GAAP and IFRS is not true:

The calendar year-end adjusted trial balance for Blessinger Co. follows: Required: (a) Prepare a classified year-end balance sheet. (Note: A $9,000 installment on the long-term note payable is due within one year.) (b) Prepare the required closing entries.

A classified balance sheet:

Accumulated Depreciation and Service Fees Earned would be sorted to which respective columns in completing a work sheet?

For the year ended December 31, a company has revenues of $317,000 and expenses of $196,000. The owner withdrew $50,000 during the year. The balance in the owner's capital account before closing is $81,000. Which of the following entries would be used to close the withdrawal account?

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

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Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

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