Question 1

The withdrawals account is normally closed by debiting it.

Accepted Answer

A) True 
 B)False

Question 2

Explain why temporary accounts are closed each period.

Accepted Answer

Temporary accounts accumulate data relat

Question 3

Assets, liabilities, and equity accounts are not closed; these accounts are called:

Accepted Answer

A)  Temporary accounts. 
B)  Contra accounts. 
C)  Accrued accounts. 
D)  Nominal accounts. 
E)  Permanent accounts. 
A)  Temporary accounts. 
B)  Contra accounts. 
C)  Accrued accounts. 
D)  Nominal accounts. 
E)  Permanent accounts.

Question 4

Intangible assets are assets that are long-term, have physical form, and are used to produce or sell products and services.

Accepted Answer

A) True 
 B)False

Question 5

If a company plans to continue business into the future, closing entries are not required.

Accepted Answer

A) True 
 B)False

Question 6

Reversing entries:

Accepted Answer

A)  Will often result temporarily in abnormal account balances in some accounts. 
B)  Must be made before preparing the post-closing trial balance. 
C)  Are a required step in the accounting cycle. 
D)  Are required only if the company uses accounting software to record journal entries. 
E)  Are necessary when journal entries have been incorrectly recorded. 
A)  Will often result temporarily in abnormal account balances in some accounts. 
B)  Must be made before preparing the post-closing trial balance. 
C)  Are a required step in the accounting cycle. 
D)  Are required only if the company uses accounting software to record journal entries. 
E)  Are necessary when journal entries have been incorrectly recorded.

Question 7

Which of the following statements is incorrect?

Accepted Answer

A)  After the work sheet is completed, it can be used to help prepare the financial statements. 
B)  On the work sheet, the effects of the accounting adjustments are shown on the account balances. 
C)  Working papers are useful aids in the accounting process. 
D)  On the work sheet, the adjusted amounts are sorted into columns according to whether the accounts are used in preparing the unadjusted trial balance or the adjusted trial balance. 
E)  A worksheet is not a substitute for financial statements. 
A)  After the work sheet is completed, it can be used to help prepare the financial statements. 
B)  On the work sheet, the effects of the accounting adjustments are shown on the account balances. 
C)  Working papers are useful aids in the accounting process. 
D)  On the work sheet, the adjusted amounts are sorted into columns according to whether the accounts are used in preparing the unadjusted trial balance or the adjusted trial balance. 
E)  A worksheet is not a substitute for financial statements.

Question 8

Presented below are the year-end balances at December 31 of Becca's Dry Cleaning Service. (All accounts have normal balances.)
 $\begin{array}{ll}
\text { Accounts receivable } & \$ 12,000 \
\text { Accounts payable } & 25,000 \
\text { Accumul ated depreciation-equipment } & 30,000 \
\text { Cash } & 42,000 \
\text { Depreciation expense-equipment } & 12,000 \
\text { Insurance expense } & 7,000\
\text { Equipment } & 125,000 \
\text { Service revenue } & 200,000 \
\text { Notes payable } & 65,000 \
\text { B. Stanton, Capital } & 17,000 \
\text { B. Stanton, Withdrawals } & 18,000 \
\text { Prepaid insurance } & 1,500\
\text { Salaries payable } & 4,000 \
\text { Salary expense } & 97,000 \
\text { Supplies } & 1,500 \
\text { Supplies expense } & 16,000 \
\text { Unearned service revenues } & 500 \
\text { Utilities expense } & 9,500 
\end{array}$
 (a) Prepare the necessary closing entries at December 31.
(b) Prepare a post-closing trial balance at December 31.

Accepted Answer

(a) 
   (b)
Becca's

Question 9

Reversing entries overcome the disadvantage of more complex entries to pay accrued liabilities from the previous accounting period.

Accepted Answer

A) True 
 B)False

Question 10

All of the following regarding the current ratio are true except:

Accepted Answer

A)  Current ratio is calculated by dividing current assets by current liabilities. 
B)  Current ratio can reveal challenges in covering short-term obligations if it is less than 1. 
C)  Current ratio can affect a creditor's decision about whether to lend money to a company. 
D)  Current ratio does not affect a creditor's decision on whether to allow a company to buy on credit. 
E)  Current ratio helps to assess a company's ability to pay its debts in the near future. 
A)  Current ratio is calculated by dividing current assets by current liabilities. 
B)  Current ratio can reveal challenges in covering short-term obligations if it is less than 1. 
C)  Current ratio can affect a creditor's decision about whether to lend money to a company. 
D)  Current ratio does not affect a creditor's decision on whether to allow a company to buy on credit. 
E)  Current ratio helps to assess a company's ability to pay its debts in the near future.

Question 11

A company had revenues of $75,000 and expenses of $62,000 for the accounting period. The owner withdrew $8,000 in cash during the same period. Which of the following entries could not be a closing entry?

Accepted Answer

A)  Debit Income Summary $75,000; credit Revenues $75,000. 
B)  Debit Revenues $75,000; credit Income Summary $75,000. 
C)  Debit Owner's, Capital $8,000, credit Owner's, Withdrawals $8,000. 
D)  Debit Income Summary $62,000, credit Expenses $62,000. 
E)  Debit Income Summary $13,000; credit Owner's, Capital $13,000. 
A)  Debit Income Summary $75,000; credit Revenues $75,000. 
B)  Debit Revenues $75,000; credit Income Summary $75,000. 
C)  Debit Owner's, Capital $8,000, credit Owner's, Withdrawals $8,000. 
D)  Debit Income Summary $62,000, credit Expenses $62,000. 
E)  Debit Income Summary $13,000; credit Owner's, Capital $13,000.

Question 12

Use the information in the adjusted trial balance presented below to calculate the current ratio for Taron Company: $$\begin{array} { | l | r | r | } 
\hline \text { Account Title } & { \text { Dr. } } & \text { Cr. } \
\hline \text { Cash } & \$ 23,000 & \
\hline \text { Accounts receivable } & 16,000 & \
\hline \text { Prepaid insurance } & 6,600 & \
\hline \text { Equipm ent } & 100,000 & \
\hline \text { Accumulated Depreciation -Equipment } & & \$ 50,000 \
\hline \text { Land } & 95,000 & \
\hline \text { Accounts payable } & & 17,000 \
\hline \text { Interest payable } & & 2,400 \
\hline \text { Unearned revenue } & & 5,000 \
\hline \text { Long-term notes payable } & & 30,000 \
\hline \text { Z. Taron, Capital } && 136,200  \
\hline \text { Totals } & \$ 240,600 & \$ 240,600 \
\hline
\end{array}$$

Accepted Answer

A)  .54. 
B)  1.77. 
C)  1.87. 
D)  3.92. 
E)  1.60. 
A)  .54. 
B)  1.77. 
C)  1.87. 
D)  3.92. 
E)  1.60.

Question 13

Which of the following accounts is a permanent (real) account?

Accepted Answer

A)  Interest revenue. 
B)  Office supplies expense. 
C)  Fees earned. 
D)  Salaries expense. 
E)  Accounts payable. 
A)  Interest revenue. 
B)  Office supplies expense. 
C)  Fees earned. 
D)  Salaries expense. 
E)  Accounts payable.

Question 14

The Income Summary account is used to close the permanent accounts at the end of an accounting period.

Accepted Answer

A) True 
 B)False

Question 15

Calculate the current ratio in each of the following separate cases and identify the company case with the strongest liquidity position.
 $$\begin{array} { | l | l | l | } 
\hline & \text { Current Assets } & \text { Current Liabilities } \
\hline \text { Case 1 } & \$ 55,000 & \$ 30,000 \
\hline \text { Case 2 } & \$ 141,500 & \$ 85,000 \
\hline \text { Case 3 } & \$ 45,000 & \$ 59,000 \
\hline & & \
\hline & & \
\hline
\end{array}$$

Accepted Answer

Current Ratio = Current Assets/Current L

Question 16

The first step in the accounting cycle is to analyze transactions and events to prepare for journalizing.

Accepted Answer

A) True 
 B)False

Question 17

Tunica Company's fiscal year ends on September 30 of the current year. Tunica frequently has accrued revenues at the end of its fiscal year that are recorded for proper financial statement presentation. The company has determined through an evaluation of invoices and services rendered that $32,000 of services has been provided as of September 30, but not yet billed. The total contract to be billed for services when completed will be $60,000. Record the following entries:
(a) Accrual of the revenues on September 30.
(b) Receipt of payment from customers on October 9 for the services rendered, assuming that Tunica does not prepare reversing entries.
(c) Assuming that Tunica prepares reversing entries, reverse the adjusting entry made on September 30.
(d) Assuming that Tunica prepares reversing entries, receipt of the payment for the total contract amount on October 9.

Accepted Answer

None

Question 18

Revenue and expense accounts are permanent (real) accounts and should not be closed at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 19

The following information is available for the Higgins Travel Agency. After closing entries are posted, what will be the balance in the C. Higgins, Capital account? 
$\begin{array}{llr}
  \text {Net Income  } &\$42,500\
 \text { C. Higgins, Capital } &130,000\
 \text { C. Higgins, Withdrawals } &12,000
\end{array}$

Accepted Answer

A)  $99,500. 
B)  $130,000. 
C)  $75,500. 
D)  $184,500. 
E)  $160,500. 
A)  $99,500. 
B)  $130,000. 
C)  $75,500. 
D)  $184,500. 
E)  $160,500.

Question 20

On the work sheet, net income is entered in the Income Statement Credit column as well as the Balance Sheet or Statement of Owner's Equity Credit column.

Accepted Answer

A) True 
 B)False

Exam 4: Completing the Accounting Cycle

The withdrawals account is normally closed by debiting it.

Explain why temporary accounts are closed each period.

Assets, liabilities, and equity accounts are not closed; these accounts are called:

Intangible assets are assets that are long-term, have physical form, and are used to produce or sell products and services.

If a company plans to continue business into the future, closing entries are not required.

Reversing entries:

Which of the following statements is incorrect?

Reversing entries overcome the disadvantage of more complex entries to pay accrued liabilities from the previous accounting period.

All of the following regarding the current ratio are true except:

A company had revenues of $75,000 and expenses of $62,000 for the accounting period. The owner withdrew $8,000 in cash during the same period. Which of the following entries could not be a closing entry?

Which of the following accounts is a permanent (real) account?

The Income Summary account is used to close the permanent accounts at the end of an accounting period.

Calculate the current ratio in each of the following separate cases and identify the company case with the strongest liquidity position. Current Assets Current Liabilities Case 1 \ 55,000 \ 30,000 Case 2 \ 141,500 \ 85,000 Case 3 \ 45,000 \ 59,000

The first step in the accounting cycle is to analyze transactions and events to prepare for journalizing.

Revenue and expense accounts are permanent (real) accounts and should not be closed at the end of the accounting period.

The following information is available for the Higgins Travel Agency. After closing entries are posted, what will be the balance in the C. Higgins, Capital account? Net Income \4 2,500 C. Higgins, Capital 130,000 C. Higgins, Withdrawals 12,000

On the work sheet, net income is entered in the Income Statement Credit column as well as the Balance Sheet or Statement of Owner's Equity Credit column.

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

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

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