Exam 4: Completing the Accounting Cycle

The following year-end adjusted trial balance is for Tom Janes Co. at the end of December 31. The credit balance in Tom Janes, Capital at the beginning of the year, January 1, was $320,000. The owner, Tom Janes, invested an additional $300,000 during the current year. The land held for future expansion was also purchased during the current year. Required: 1. Prepare a classified year-end balance sheet. (Note: A $22,000 installment on the long-term note payable is due within one year.) 2. Using the information presented: (a) Calculate the current ratio. Comment on the ability of Tom Janes Co. to meets its short-term debts. (b) Calculate the debt ratio and comment on the financial position and risk analysis of Tom Janes Co. (c) Using the account balances to analyze the financial position of Tom Janes Co., why would the owner need to invest an additional $300,000 in the business when the business is already profitable and the owner had an existing capital balance of $320,000?

The following are the steps in the accounting cycle. List them in the order in which they are completed: Prepare adjusted trial balance Post transactions Prepare an unadjusted trial balance Journalize transactions Prepare the financial statements Close the temporary accounts Adjust the ledger accounts Prepare a post-closing trial balance Analyze transactions

The unadjusted trial balance of Quick Delivery is entered on the partial work sheet below. Complete the work sheet using the following information: (a) Salaries earned by employees that are unpaid and unrecorded, $5,000. (b) An inventory of supplies showed $1,000 of unused supplies still on hand. (c) Depreciation on delivery vans, $24,000. (d) Services paid in advance by customers of $10,000 have now been provided to customers.

The closing process is a step in the accounting cycle that prepares accounts for the next accounting period.

Reversing entries:

A post-closing trial balance is a list of permanent accounts and their balances from the ledger after all closing entries are journalized and posted.

Which of the following errors would cause the Balance Sheet and Statement of Changes in Equity columns of a work sheet to be out of balance?

Which of the following statements regarding presentation of financial statements under IFRS is not ?

Bentley records adjusting entries at its December 31 year end. At December 31, employees had earned $12,000 of unpaid and unrecorded salaries. The next payday is January 3, at which time $30,000 will be paid. Prepare the January 1 journal entry to reverse the effect of the December 31 salary expense accrual.

Excalibur frequently has accrued expenses at the end of its fiscal year that should be recorded for proper financial statement presentation. Excalibur pays on a weekly basis and has $50,000 of accrued salaries incurred but not paid for June 30, its fiscal year-end. This consists of one day's accrued salaries for the week. Excalibur will pay its employees $250,000 on July 4; the one day of accrued salaries and the remaining four days for July salaries. Record the following entries: (a) Accrual of the salaries on June 30. (b) Payment of the salaries on July 4, assuming that Excalibur does not prepare reversing entries. (c) Assuming that Excalibur prepares reversing entries, reverse the adjusting entry made on June 30. (d) Assuming that Excalibur prepares reversing entries, payment of the salaries on July 4.

If in preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column. The Balance Sheet columns will balance on completing the work sheet but with the wrong net income, if the amount sorted in error is:

The unadjusted trial balance of Bade Cleaning Service is entered on the partial work sheet below. Complete the work sheet using the following information: (a) Salaries earned by employees that are unpaid and unrecorded, $4,000. (b) An inventory of supplies showed $3,000 of unused supplies still on hand. (c) Depreciation on automobiles, $30,000. (d) Services paid in advance by customers of $12,000 have now been provided to customers. (e) Advertising for November and December in the amount of $8,000 remains unpaid and unrecorded.

Use the following partial work sheet from Matthews Lanes to prepare its income statement, statement of changes in equity and a classified balance sheet (Assume the owner did not make any investments in the business this year.)

Cash and office supplies are both classified as current assets.

Another name for temporary accounts is:

A company has current assets of $15,000 and current liabilities of $9,500. Its current ratio is 1.6.

All of the following statements regarding the Income Statement columns on the worksheet are except:

The last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements and recording closing and adjusting entries.

In the process of completing a work sheet, you determine that the Income Statement debit column totals $83,000, while the Income Statement credit column totals $65,000. To enter net income (or net loss) for the period into the work sheet would require an entry to

A company's ledger accounts and their end-of-period balances before closing entries are posted are shown below. What amount will be posted to Tricia DeBarre, Capital in the process of closing the Income Summary account? (Assume all accounts have normal balances.)