3) Permanent accounts are not closed at the end of the accounting period.
4) As a part of the closing process, revenues and expenses may be closed to a temporary account called
the Net Income (Loss).
5) In the closing process, the Dividends account is closed to the Retained Earnings account.
6) The permanent accounts—assets, liabilities, and stockholders’ equity—are closed to the Common Stock
account.
7) A business starts each new time period with a zero beginning balance in permanent accounts.
8) Asset and liability accounts may be closed to the Income Summary account.
9) The Cash account is a temporary account.
10) The Accounts Receivable account is a permanent account.
11) The Office Supplies account is a temporary account.
12) The Supplies Expense account is a temporary account.
13) The Accounts Payable account is a temporary account.
14) The Salaries Payable account is a permanent account.
15) The Common Stock account is a temporary account.
16) The Accumulated Depreciation account is a permanent account.
17) The Service Revenue account is a temporary account.
18) The Depreciation Expense account is a temporary account.
19) The Service Revenue account is a permanent account.
20) The Salaries Expense account is a temporary account.
21) The Dividends account is a permanent account.
22) The Common Stock account is a permanent account.
23) The beginning balance in the Common Stock account of a company was $10,000. The revenues and
expenses were $200,000 and $140,000, respectively. During the year, the company declared and paid
dividends of $5,000. The ending balance in the Retained Earnings was $55,000. (Assume that the
beginning balance of Retained Earnings was zero.)
24) The beginning balance in the Retained Earnings account of a company was $11,000. The revenues and
expenses were $240,000 and $160,000, respectively. During the year, the company paid dividends of
$6,000. The ending balance in Retained Earnings was $91,000.
25) At the beginning of the year, the total stockholders’ equity of Cutting Edge Technologies, Inc. was
$80,000. The revenues and expenses were $70,000 and $30,000, respectively. The company did not declare
dividends. No common stock was issued during the year. The total stockholders’ equity at the end of the
year will amount to $110,000.
26) The beginning balance in the Common Stock account of Woodlands Technologies, Inc. was $80,000.
The revenues and expenses amounted to $55,000 and $41,000, respectively. During the year, the company
did not declare any dividends or issue common stock. The Common Stock account will have $135,000 at
the end of the year.
27) An account that is not closed at the end of the period is called a(n) ________.
A) expense account
B) temporary account
C) permanent account
D) revenue account
28) The entries that transfer the revenue, expense, and dividends balances to the Retained Earnings
account to prepare the company‘s books for the next period are called ________ entries.
A) closing
B) opening
C) adjusting
D) end of period
29) Revenues and expenses may be transferred to the ________ account before their final transfer into the
Retained Earnings account.
A) Net Income
B) Income Summary
C) Dividends
D) Assets
30) Which of the following entries is necessary to close the appropriate depreciation account at the end of
the year?
A) debit Accumulated Depreciation and credit Income Summary
B) debit Depreciation Expense and credit Income Summary
C) debit Income Summary and credit Accumulated Depreciation
D) debit Income Summary and credit Depreciation Expense
31) Which of the following accounts’ balance is carried forward to the next accounting period?
A) Accumulated Depreciation
B) Depreciation Expense
C) Dividends
D) Service Revenue
32) Which of the following is a permanent account?
A) Wages Expense
B) Salaries Payable
C) Service Revenue
D) Utilities Expense
33) Which of the following accounts will be closed by debiting the Income Summary account?
A) Depreciation Expense
B) Accounts Payable
C) Service Revenue
D) Accumulated Depreciation
34) Which of the following accounts will be closed by crediting the Income Summary account?
A) Service Revenue
B) Depreciation Expense
C) Accounts Payable
D) Accumulated Depreciation
35) Which of the following accounts will be closed by debiting the Income Summary account?
A) Retained Earnings
B) Service Revenue
C) Accounts Receivable
D) Salaries Expense
36) Which of the following are temporary accounts that are closed at the end of the year?
A) assets, liabilities, and dividends
B) revenues, expenses, and dividends
C) assets, liabilities, and stockholders’ equity
D) revenues, expenses, and stockholders’ equity
37) To which of the following accounts should the balance in the Income Summary account be closed?
A) Dividends
B) Net Income
C) Retained Earnings
D) Service Revenue
38) Which of the following accounts will have an ending balance after the closing process is completed?
A) Dividends
B) Rent Expense
C) Accumulated Depreciation
D) Service Revenue
39) Which of the following entries will be necessary to close the Insurance Expense account at the end of
the year?
A) debit Insurance Expense and credit Income Summary
B) debit Insurance Expense and credit Common Stock
C) debit Retained Earnings and credit Insurance Expense
D) debit Income Summary and credit Insurance Expense
40) Which accounts are closed at the end of the accounting period? Why is it necessary to close these
accounts?
41) Martinville, Inc. earned revenues of $18,000 and incurred expenses of $4,000. The company declared
and paid cash dividends of $3,500. What is the balance in the Income Summary account prior to closing
net income or loss to the Retained Earnings account?
A) debit balance of $14,000
B) debit balance of $10,500
C) credit balance of $14,000
D) credit balance of $18,000