Deck 4: Completing the Accounting Cycle

Question 1

The dividends account is closed to the Income Summary account in order to properly determine net income (or loss) for the period.

Answer 1

False

Question 2

Long-term investments would appear in the property, plant, and equipment section of the balance sheet.

Answer 2

False

Question 3

After the adjusting entries are journalized and posted to the accounts in the general ledger, the balance of each account should agree with the balance shown on the

A)adjusted trial balance.
B)post-closing trial balance.
C)the general journal.
D)adjustments columns of the worksheet.

Answer 3

A

Question 4

Each of the following accounts is closed to Income Summary except

A)Expenses.
B)Dividends.
C)Revenues.
D)All of these are closed to Income Summary.

Question 5

The balance in the Income Summary account before it is closed will be equal to

A)the net income or loss on the income statement.
B)the beginning balance in the retained earnings account.
C)the ending balance in the retained earnings account.
D)zero.

Question 6

A post-closing trial balance will show

A)only permanent account balances.
B)only temporary account balances.
C)zero balances for all accounts.
D)the amount of net income (or loss) for the period.

Question 7

The first required step in the accounting cycle is to

A)prepare reversing entries.
B)journalize transactions in the book of original entry.
C)analyze transactions.
D)post transactions.

Question 8

The following information is for Bright Eyes Auto Supplies: The total dollar amount of assets to be classified as property, plant, and equipment is

A)$390,000.
B)$450,000.
C)$570,000.
D)$630,000.

Question 9

The relationship between current assets and current liabilities is important in evaluating a company's

A)profitability.
B)liquidity.
C)market value.
D)accounting cycle.

Question 10

If a company utilizes reversing entries, they will

A)be made at the beginning of the next accounting period.
B)not actually be posted to the general ledger accounts.
C)be made before the post-closing trial balance.
D)be part of the adjusting entry process.

Question 11

Under IFRS and under GAAP, current assets are listed in IFRS.

Question 12

After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances.

Question 13

A liability is classified as a current liability if the company is to pay it within the forthcoming year.

Question 14

If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has

A)earned net income for the period.
B)an error because debits do not equal credits.
C)suffered a net loss for the period.
D)to make an adjusting entry.

Question 15

Closing entries are made

A)in order to terminate the business as an operating entity.
B)so that all assets, liabilities, and stockholders' equity accounts will have zero balances when the next accounting period starts.
C)in order to transfer net income (or loss) and dividends to the retained earnings account.
D)so that financial statements can be prepared.

Question 16

After closing entries are posted, the balance in the retained earnings account in the ledger will be equal to

A)the beginning retained earnings reported on the retained earnings statement.
B)the amount of the retained earnings reported on the balance sheet.
C)zero.
D)the net income for the period.

Question 17

A post-closing trial balance should be prepared

A)before closing entries are posted to the ledger accounts.
B)after closing entries are posted to the ledger accounts.
C)before adjusting entries are posted to the ledger accounts.
D)only if an error in the accounts is detected.

Question 18

Correcting entries

A)always affect at least one balance sheet account and one income statement account.
B)affect income statement accounts only.
C)affect balance sheet accounts only.
D)may involve any combination of accounts in need of correction.

Question 19

The following information is for Bright Eyes Auto Supplies: The total dollar amount of assets to be classified as investments is

A)$0.
B)$140,000.
C)$180,000.
D)$250,000.

Question 20

The most important information needed to determine if companies can pay their current obligations is the

A)net income for this year.
B)projected net income for next year.
C)relationship between current assets and current liabilities.
D)relationship between short-term and long-term liabilities.

Question 21

The steps in the preparation of a worksheet do not include

A)analyzing documentary evidence.
B)preparing a trial balance on the worksheet.
C)entering the adjustments in the adjustment columns.
D)entering adjusted balances in the adjusted trial balance columns.

Question 22

The subtotal net assets is used in

A)both GAAP and IFRS.
B)GAAP but not IFRS.
C)IFRS but not GAAP.
D)neither IFRS nor GAAP.
IFRS.

Question 23

Closing revenue and expense accounts to the Income Summary account is an optional bookkeeping procedure.

Question 24

A company's liquidity is concerned with the relationship between long-term investments and long-term debt.

Question 25

A worksheet is a multiple column form that facilitates the

A)identification of events.
B)measurement process.
C)preparation of financial statements.
D)analysis process.

Question 26

Closing entries are

A)an optional step in the accounting cycle.
B)posted to the ledger accounts from the worksheet.
C)made to close permanent or real accounts.
D)journalized in the general journal.

Question 27

The income statement for the month of June, 2021 of Camera Obscura Enterprises contains the following information: The entry to close the revenue account includes a

A)debit to Income Summary for $1,300.
B)credit to Income Summary for $1,300.
C)debit to Income Summary for $7,000.
D)credit to Income Summary for $7,000.

Question 28

A post-closing trial balance will show

A)zero balances for all accounts.
B)zero balances for balance sheet accounts.
C)only balance sheet accounts.
D)only income statement accounts.

Question 29

Merriweather Post Pavillion received a $820 check from a customer for the balance due.The transaction was erroneously recorded as a debit to Cash $280 and a credit to Service Revenue $280.The correcting entry is

A)debit Cash, $820; credit Accounts Receivable, $820.
B)debit Cash, $540 and Accounts Receivable, $280; credit Service Revenue, $820.
C)debit Cash, $540 and Service Revenue, $280; credit Accounts Receivable, $820.
D)debit Accounts Receivable, $820; credit Cash, $540 and Service Revenue, $280.

Question 30

The following information is for Bright Eyes Auto Supplies: The total dollar amount of liabilities to be classified as current liabilities is

A)$50,000.
B)$130,000.
C)$180,000.
D)$330,000.

Question 31

The following items are taken from the financial statements of Gray's Postal Service for the year ending December 31, 2021: What is the company's net income for the year ending December 31, 2021?

A)$12,000
B)$28,000
C)$42,000
D)$133,000

Question 32

Balance sheet accounts are considered to be

A)temporary stockholders' equity accounts.
B)permanent accounts.
C)equity accounts.
D)nominal accounts.

Question 33

Both IFRS and GAAP require disclosures about

A)accounting policies followed.
B)judgments that management has made in the process of applying the entity's accounting policies.
C)the key assumptions and estimation uncertainty.
D)All of these answer choices are correct.
IFRS.

Question 34

Closing the dividends account to Retained Earnings is not necessary if net income is greater than dividends during the period.

Question 35

Current assets are customarily the first items listed on a classified balance sheet.

Question 36

Which of the following companies would be least likely to use a worksheet to facilitate the adjustment process?

A)Large company with numerous accounts
B)Small company with numerous accounts
C)All companies, since worksheets are required under generally accepted accounting principles
D)Small company with few accounts

Question 37

The income summary account

A)is a permanent account.
B)appears on the balance sheet.
C)appears on the income statement.
D)is a temporary account.

Question 38

The income statement for the month of June, 2021 of Camera Obscura Enterprises contains the following information: The entry to close the expense accounts includes a

A)debit to Income Summary for $1,300.
B)credit to Rent Expense for $1,500.
C)credit to Income Summary for $5,700.
D)debit to Salaries and Wages Expense for $3,000.

Question 39

The purpose of the post-closing trial balance is to

A)prove that no mistakes were made.
B)prove the equality of the balance sheet account balances that are carried forward into the next accounting period.
C)prove the equality of the income statement account balances that are carried forward into the next accounting period.
D)list all the balance sheet accounts in alphabetical order for easy reference.

Question 40

If errors occur in the recording process, they

A)should be corrected as adjustments at the end of the period.
B)should be corrected as soon as they are discovered.
C)should be corrected when preparing closing entries.
D)cannot be corrected until the next accounting period.

Question 41

All of the following are property, plant, and equipment except

A)supplies.
B)machinery.
C)land.
D)buildings.

Question 42

The following items are taken from the financial statements of Gray's Postal Service for the year ending December 31, 2021: What is the amount that would be reported for stockholders' equity at December 31, 2021?

A)$158,000
B)$144,000
C)$130,000
D)$102,000

Question 43

Income Summary has a credit balance of $17,000 in S.Sufjan Co.after closing revenues and expenses.The entry to close Income Summary is

A)credit Income Summary $17,000, debit Retained Earnings $17,000.
B)credit Income Summary $17,000, debit Dividends $17,000.
C)debit Income Summary $17,000, credit Dividends $17,000.
D)debit Income Summary $17,000, credit Retained Earnings $17,000.

Question 44

Under IFRS,

A)comparative prior-period information must be presented, but financial statements need not be provided annually.
B)comparative prior-period information must be presented, and financial statements must be provided annually.
C)comparative prior-period information is not required, and financial statements need not be provided annually.
D)comparative prior-period information is not required, but financial statements must be provided annually.
IFRS.

Question 45

The dividends account is a permanent account whose balance is carried forward to the next accounting period.

Question 46

The operating cycle of a company is determined by the number of years the company has been operating.

Question 47

A worksheet can be thought of as a(n)

A)permanent accounting record.
B)optional device used by accountants.
C)part of the general ledger.
D)part of the journal.

Question 48

If Income Summary has a credit balance after revenues and expenses have been closed to it, the closing entry for Income Summary will include a

A)debit to the retained earnings account.
B)debit to the dividends account.
C)credit to the retained earnings account.
D)credit to the dividends account.

Question 49

The income statement for the month of June, 2021 of Camera Obscura Enterprises contains the following information: After the revenue and expense accounts have been closed, the balance in Income Summary will be

A)$0.
B)a debit balance of $1,300.
C)a credit balance of $1,300.
D)a credit balance of $7,000.

Question 50

The balances that appear on the post-closing trial balance will match the

A)income statement account balances after adjustments.
B)balance sheet account balances after closing entries.
C)income statement account balances after closing entries.
D)balance sheet account balances after adjustments.

Question 51

A correcting entry

A)must involve one balance sheet account and one income statement account.
B)is another name for a closing entry.
C)may involve any combination of accounts.
D)is a required step in the accounting cycle.

Question 52

The first item listed under current liabilities is usually

A)accounts payable.
B)notes payable.
C)salaries and wages payable.
D)taxes payable.

Question 53

The following items are taken from the financial statements of Gray's Postal Service for the year ending December 31, 2021: What are total current assets at December 31, 2021?

A)$26,000
B)$32,000
C)$36,000
D)$42,000

Question 54

The post-closing trial balance contains only

A)income statement accounts.
B)balance sheet accounts.
C)balance sheet and income statement accounts.
D)income statement, balance sheet, and retained earnings statement accounts.

Question 55

The use of fair value to report assets

A)is not allowed under GAAP or IFRS.
B)is required by GAAP and IFRS.
C)is increasing under GAAP and IFRS, but GAAP has adopted it more broadly.
D)is increasing under GAAP and IFRS, but IFRS has adopted it more broadly.
IFRS.

Question 56

Closing entries are journalized after adjusting entries have been journalized.

Question 57

Reversing entries are an optional bookkeeping procedure.

Question 58

The account, Supplies, will appear in the following debit columns of the worksheet.

A)Trial balance
B)Adjusted trial balance
C)Balance sheet
D)All of these answer choices are correct

Question 59

Closing entries are journalized and posted

A)before the financial statements are prepared.
B)after the financial statements are prepared.
C)at management's discretion.
D)at the end of each interim accounting period.

Question 60

The income statement for the month of June, 2021 of Camera Obscura Enterprises contains the following information: The entry to close Income Summary to Retained Earnings includes

A)a debit to Revenues for $7,000.
B)credits to Expenses totalling $5,700.
C)a credit to Income Summary for $1,300
D)a credit to Retained Earnings for $1,300.

Question 61

Which account listed below would be double ruled (double underline) in the ledger as part of the closing process?

A)Cash
B)Retained Earnings
C)Dividends
D)Accumulated Depreciation-Equipment

Question 62

An unacceptable way to make a correcting entry is to

A)reverse the incorrect entry.
B)erase the incorrect entry.
C)compare the incorrect entry with the correct entry and make a correcting entry to correct the accounts.
D)correct it immediately upon discovery.

Question 63

Equipment used in the company's operations is classified in the balance sheet as

A)a current asset.
B)property, plant, and equipment.
C)an intangible asset.
D)a long-term investment.

Question 64

The following items are taken from the financial statements of Gray's Postal Service for the year ending December 31, 2021: What is the book value of the equipment at December 31, 2021?

A)$170,000
B)$182,000
C)$210,000
D)$238,000

Question 65

Which of the following is an optional step in the accounting cycle?

A)Adjusting entries
B)Closing entries
C)Correcting entries
D)Reversing entries

Question 66

Under IFRS,

A)companies can apply fair value to property, plant, and equipment and natural resources.
B)companies can apply fair value to property, plant, and equipment but not to natural resources.
C)companies can apply fair value to neither property, plant, and equipment nor natural resources.
D)companies can apply fair value to natural resources but not to property, plant, and equipment.
IFRS.

Question 67

The amounts appearing on an income statement should agree with the amounts appearing on the post-closing trial balance.

Question 68

After a worksheet has been completed, the statement columns contain all data that are required for the preparation of financial statements.

Question 69

When constructing a worksheet, accounts are often needed that are not listed in the trial balance already entered on the worksheet from the ledger.Where should these additional accounts be shown on the worksheet?

A)They should be inserted in alphabetical order into the trial balance accounts already given.
B)They should be inserted in chart of account order into the trial balance already given.
C)They should be inserted on the lines immediately below the trial balance totals.
D)They should not be inserted on the trial balance until the next accounting period.

Question 70

Closing entries

A)are prepared before the financial statements.
B)reduce the number of permanent accounts.
C)cause the revenue and expense accounts to have zero balances.
D)summarize the activity in every account.

Question 71

The income statement for the month of June, 2021 of Camera Obscura Enterprises contains the following information: At June 1, 2021, Camera Obscura reported retained earnings of $35,000.The company had no dividends during June.At June 30, 2021, the company will report retained earnings of

A)$29,300.
B)$35,000.
C)$36,300.
D)$42,000.

Question 72

A double rule (double underline) applied to accounts in the ledger during the closing process implies that

A)the account is a temporary account.
B)the account is a balance sheet account.
C)the account balance is not zero.
D)a mistake has been made, since double ruling is prescribed.

Question 73

Zen Arcade paid the weekly payroll on January 2 by debiting Salaries and Wages Expense for $47,000.The accountant preparing the payroll entry overlooked the fact that Salaries and Wages Expense of $27,000 had been accrued at year end on December 31.

Question 74

A current asset is

A)the last asset purchased by a business.
B)an asset which is currently being used to produce a product or service.
C)usually found as a separate classification in the income statement.
D)an asset that a company expects to convert to cash or use up within one year.

Question 75

The following items are taken from the financial statements of Gray's Postal Service for the year ending December 31, 2021: What are total current liabilities at December 31, 2021?

A)$18,000
B)$70,000
C)$88,000
D)$120,000

Question 76

Which one of the following statements concerning the accounting cycle is incorrect?

A)The accounting cycle includes journalizing transactions and posting to ledger accounts.
B)The accounting cycle includes only one optional step.
C)The steps in the accounting cycle are performed in sequence.
D)The steps in the accounting cycle are repeated in each accounting period.

Question 77

The IASB and FASB are working on a converged statement of financial position using the headings of

A)assets, liabilities, and equity.
B)revenues and expenses.
C)assets, liabilities, revenues, expenses and equity.
D)operating, investing, and financing.
IFRS.

Question 78

The post-closing trial balance is entered in the first two columns of a worksheet.

Question 79

To close net income to retained earnings, Income Summary is debited and Retained Earnings is credited.

Question 80

When using a worksheet, adjusting entries are journalized

A)after the worksheet is completed and before financial statements are prepared.
B)before the adjustments are entered on to the worksheet.
C)after the worksheet is completed and after financial statements have been prepared.
D)before the adjusted trial balance is extended to the proper financial statement columns.