Question 1

What is the purpose of closing entries? Describe the closing process.

Accepted Answer

The purpose of closing entries is to transfer the end-of-period balances in the temporary accounts to the equity account(s).The closing process has four steps: (1)close credit balances in revenue accounts to income summary,(2)close debit balances in expense accounts to income summary,(3)close dividends to the retained earnings,and (4)close income summary to retained earnings.

Question 2

A company's fiscal year must correspond with the calendar year.

Accepted Answer

A) True 
 B)False  False

Question 3

The adjusted trial balance of the Thomas Company follows:
 $\begin{array}{c}
 \text {THOMAS COMPANY}\
 \text {Adjusted Trial Balance}\
 \text {December 31}\\begin{array}{|l|r|l|}
\hline &\text { Debit } & \text { Credit } \
\hline \text { Cash } & 8,000 & \
\hline \text { Prepaid insurance } & 2,400 & \
\hline \text { Equipment } & 18,000 & \
\hline \text { Accumulated depreciation - Equipment } & & 3,600 \
\hline \text { Salaries payable } & & 2,000 \
\hline \text { Unearned repair fees } & & 1,200 \
\hline \text { Common stock } & & 4,000 \
\hline \text { Retained earnings } & & 7,400\
\hline\text { Dividends } & 4,000 \
\hline \text { Repair fees earned } & & 27,500 \
\hline \text { Salaries expense } & 10,000 & \
\hline \text { Depreciation expense } & 1,800 & \
\hline \text { Insurance expense } & 1,500 & \
\hline \text { Totals } & 45,700 & 45,700 \
\hline 
\end{array}\end{array}$ 
Prepare the closing entries for Thomas Company.

Accepted Answer

$\begin{array}{|r|r|c|r|r|}
\hline \text { Dec. } & 31 & \text { Repair Fees Earned } & 27,500 & \
\hline & & \text { Income Summary } & & 27,500 \
\hline & & & & \
\hline & 31 & \text { Income Summary } & 13,300 & \
\hline & & \text { Salaries Expense } & & 10,000 \
\hline & & \text { Depreciation Expense } & & 1,800 \
\hline & & \text { Insurance Expense } & & 1,500 \
\hline & & & & \
\hline & 31 & \text { Income Summary } & 14,200 & \
\hline & & \text { Retained earnings } & & 14,200 \
\hline & & & & \
\hline & 31 & \text { Retained earnings } & 4,000 & \
\hline & & \text { Dividends } & & 4,000\
\hline
\end{array}$

Question 4

Discuss how accrual accounting enhances the usefulness of financial statements.

Accepted Answer

The accrual accounting method recognizes

Question 5

Profit margin is defined as:

Accepted Answer

A)  Revenues divided by net sales. 
B)  Net sales divided by assets. 
C)  Net income divided by net sales. 
D)  Net income divided by assets. 
E)  Assets divided by net sales. 
A)  Revenues divided by net sales. 
B)  Net sales divided by assets. 
C)  Net income divided by net sales. 
D)  Net income divided by assets. 
E)  Assets divided by net sales.

Question 6

On December 31,the balance in the Prepaid Insurance account was $4,500,which is the remaining balance of a 12-month policy purchased on October 31 in the current year.How much did this policy originally cost?

Accepted Answer

A)  $5,400 
B)  $3,750 
C)  $4,909 
D)  $4,500 
E)  $6,000 
A)  $5,400 
B)  $3,750 
C)  $4,909 
D)  $4,500 
E)  $6,000

Question 7

The calendar year-end adjusted trial balance for Acosta Co.follows:
   
Required:
a.Prepare a classified year-end balance sheet.(Note: A $7,000 installment on the long-term note payable is due within one year.)
b.Calculate the current ratio.

Accepted Answer

@#IMG-DLM&_TB6312_00_TB6312_00 @#IMG-DLM&_TB6312_00_TB6312_

Question 8

Based on the following information,determine the current assets,assuming all accounts have a normal balance?
$\begin{array}{lrlr}
\text { Cash } & \$ 6,754 & \text { Dividends } & \$ 2,000 \
\text { Accounts receivable } & 13,733 & \text { Consulting fees earned } & 13,718 \
\text { Office supplies } & 2,625 & \text { Rent expense } & 3,673 \
\text { Land } & 37,153 & \text { Salaries expense } & 6,642 \
\text { Office equipment } & 14,535 & \text { Telephone expense } & 560 \
\text { Accounts payable } & 6,463 & \text { Miscellaneous expense } & 280 \
\text { Common stock } & 54,490 & \text { Retained earnings } & ?
\end{array}$

Accepted Answer

A)  $74,800 
B)  $37,647 
C)  $60,265 
D)  $23,112 
E)  $60,953 
A)  $74,800 
B)  $37,647 
C)  $60,265 
D)  $23,112 
E)  $60,953

Question 9

Based on the following information,determine the current ratio,assuming all accounts have a normal balance?
$\begin{array}{lrlr}
\text { Cash } & \$ 6,754 & \text { Dividends } & \$ 2,000 \
\text { Accounts receivable } & 13,733 & \text { Consulting fees earned } & 13,718 \
\text { Office supplies } & 2,625 & \text { Rent expense } & 3,673 \
\text { Land } & 37,153 & \text { Salaries expense } & 6,642 \
\text { Office equipment } & 14,535 & \text { Telephone expense } & 560 \
\text { Accounts payable } & 6,463 & \text { Miscellaneous expense } & 280 \
\text { Common stock } & 54,490 & \text { Retained earnings } & ?
\end{array}$

Accepted Answer

A)  1.23 
B)  3.58 
C)  11.57 
D)  12.3 
E)  1.57 
A)  1.23 
B)  3.58 
C)  11.57 
D)  12.3 
E)  1.57

Question 10

Using the following table indicate the impact of the following errors made during the adjusting entry process.Use a "+" for overstatements,a "-" for understatements and a "0" for no effect.The first one is provided as an example:
 $\begin{array}{|l|l|l|l|l|l|l|}
\hline&\text { Error }&\text { Revenues }&\text { Expenses }&\text { Assets }&\text { Liabilities }&\text { Equity }\
\hline\text { Ex. } & \begin{array}{l}
\text { Did not record depreciation for this } \
\text { period }
\end{array} & 0 & - & + & 0 & + \
\hline 1 . & \text { Did not record unpaid utility bill } & & & & & \
\hline 2 . & \begin{array}{l}
\text { Did not adjust unearned revenue } \
\text { account for revenue earned this } \
\text { period. }
\end{array} & & & & & \
\hline 3 . & \begin{array}{l}
\text { Did not adjust office supplies for } \
\text { supplies used this period. }
\end{array} & & & & & \
\hline 4 . & \begin{array}{l}
\text { Did not accrue employees wages } \
\text { for this period. }
\end{array} & & & & & \
\hline \text { 5. } & \begin{array}{l}
\text { Recorded rent expense with a debit } \
\text { to salary expense and a credit to } \
\text { rent payable. }
\end{array} & & & & &\
\hline
\end{array}$

Accepted Answer

None

Question 11

Intangible assets are long-term resources that benefit business operations,usually lack physical form,and have uncertain benefits.

Accepted Answer

A) True 
 B)False

Question 12

Calculate the current ratio in each of the following separate cases.
 $$\begin{array} { | l | r | r | } 
\hline & \text { Curent Assets } & \text { Current Liabilities } \
\hline \text { Case 1 } & \$ 75,000 & \$ 30,000 \
\hline \text { Case 2 } & \$ 161,500 & \$ 85,000 \
\hline \text { Case 3 } & \$ 45,000 & \$ 53,000 \
\hline \text { Case 4 } & \$ 132,000 & \$ 127,000 \
\hline \text { Case 5 } & \$ 99,000 & \$ 110,000 \
\hline
\end{array}$$

Accepted Answer

Case 1: 2.5
Case 2.1

Question 13

The matching principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses,not when cash is paid.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following accounts would be closed at the end of the accounting period?

Accepted Answer

A)  Accounts Receivable 
B)  Unearned Consulting Fees 
C)  Fees Earned 
D)  Retained Earnings 
E)  Land 
A)  Accounts Receivable 
B)  Unearned Consulting Fees 
C)  Fees Earned 
D)  Retained Earnings 
E)  Land

Question 15

Interim statements report a company's business activities for a one-year period.

Accepted Answer

A) True 
 B)False

Question 16

The Unadjusted Trial Balance columns of a work sheet total $84,000.The Adjustments columns contain entries for the following:
Office supplies used during the period,$1,200.
Expiration of prepaid rent,$700.
Accrued salaries expense,$500.
Depreciation expense,$800.
Accrued service fees receivable,$400.
The Adjusted Trial Balance columns total is:

Accepted Answer

A)  $80,400 
B)  $84,000 
C)  $85,700 
D)  $85,900 
E)  $87,600 
A)  $80,400 
B)  $84,000 
C)  $85,700 
D)  $85,900 
E)  $87,600

Question 17

A company had no office supplies at the beginning of the year.During the year,the company purchased $250 worth of office supplies.On December 31,$75 worth of office supplies remained.How much should the company report as office supplies expense for the year?

Accepted Answer

A)  $75 
B)  $125 
C)  $175 
D)  $250 
E)  $325 
A)  $75 
B)  $125 
C)  $175 
D)  $250 
E)  $325

Question 18

The summary amounts below appear in the Income Statement and Balance Sheet columns of a company's December 31 work sheet.Prepare the necessary closing entries.

Accepted Answer

None

Question 19

The Income Summary account is used:

Accepted Answer

A)  To adjust and update asset and liability accounts. 
B)  To close the revenue and expense accounts. 
C)  To determine the appropriate dividend amount. 
D)  In some situations to replace the income statement. 
E)  To replace the retained earnings account in some businesses. 
A)  To adjust and update asset and liability accounts. 
B)  To close the revenue and expense accounts. 
C)  To determine the appropriate dividend amount. 
D)  In some situations to replace the income statement. 
E)  To replace the retained earnings account in some businesses.

Question 20

An adjusting entry was made on December 31,2014 to accrue a salary expense of $1,200.Which of the following entries would be prepared to record the next payment of salaries on January,2015 in the amount of $3,000?

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Salaries Expense } & 3,000 & \
\hline \text { Salaries Payable } & 1,200 & \
\hline \text { Cash } & & 4,200 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Payable } & 3,000 & \
\hline \text { Cash } & & 3,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Payable } & 1,200 & \
\hline \text { Cash } & & 1,200 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Expense } & 1,200 & \
\hline \text { Salaries Payable } & & 1,200 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Payable } & 1,200 & \
\hline \text { Salaries Expense } & 1,800 & \
\hline \text { Cash } & & 3 , 000 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | r | r | } 
\hline \text { Salaries Expense } & 3,000 & \
\hline \text { Salaries Payable } & 1,200 & \
\hline \text { Cash } & & 4,200 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Payable } & 3,000 & \
\hline \text { Cash } & & 3,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Payable } & 1,200 & \
\hline \text { Cash } & & 1,200 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Expense } & 1,200 & \
\hline \text { Salaries Payable } & & 1,200 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Payable } & 1,200 & \
\hline \text { Salaries Expense } & 1,800 & \
\hline \text { Cash } & & 3 , 000 \
\hline
\end{array}$$

Exam 3: Adjusting Accounts and Preparing Financial Statements

What is the purpose of closing entries? Describe the closing process.

A company's fiscal year must correspond with the calendar year.

Discuss how accrual accounting enhances the usefulness of financial statements.

Profit margin is defined as:

On December 31,the balance in the Prepaid Insurance account was $4,500,which is the remaining balance of a 12-month policy purchased on October 31 in the current year.How much did this policy originally cost?

The calendar year-end adjusted trial balance for Acosta Co.follows: Required: a.Prepare a classified year-end balance sheet.(Note: A $7,000 installment on the long-term note payable is due within one year.) b.Calculate the current ratio.

Intangible assets are long-term resources that benefit business operations,usually lack physical form,and have uncertain benefits.

Calculate the current ratio in each of the following separate cases. Curent Assets Current Liabilities Case 1 \ 75,000 \ 30,000 Case 2 \ 161,500 \ 85,000 Case 3 \ 45,000 \ 53,000 Case 4 \ 132,000 \ 127,000 Case 5 \ 99,000 \ 110,000

The matching principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses,not when cash is paid.

Which of the following accounts would be closed at the end of the accounting period?

Interim statements report a company's business activities for a one-year period.

A company had no office supplies at the beginning of the year.During the year,the company purchased $250 worth of office supplies.On December 31,$75 worth of office supplies remained.How much should the company report as office supplies expense for the year?

The summary amounts below appear in the Income Statement and Balance Sheet columns of a company's December 31 work sheet.Prepare the necessary closing entries.

The Income Summary account is used:

An adjusting entry was made on December 31,2014 to accrue a salary expense of $1,200.Which of the following entries would be prepared to record the next payment of salaries on January,2015 in the amount of $3,000?

Introducing Accounting in Business

Analyzing and Recording Transactions

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing

Activity-Based Costing and Analysis

Cost-Volume-Profit Analysis

Variable Costing and Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Decentralization and Performance Measurement

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Accounting With Special Journals

Time Value of Money

Investments and International Operations

Accounting for Partnerships

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