55) If a business has a net loss, the closing entry to close Income Summary would be a debit to Income
Summary and a credit to Retained Earnings.
56) Olsteen, Inc., earned revenues of $65,000 and incurred expenses of $73,000. No dividends were
declared. Which of the following statements is correct?
A) The entry to close Income Summary is the same regardless of a net income or a net loss.
B) Retained Earnings will be debited for $8,000 and Income Summary will be credited for $8,000.
C) The entries to close revenues and expenses will differ if there is a net loss.
D) The entry to close Income Summary requires a debit to the Income Summary account.
57) Jackson Services, Inc. earned revenues of $109,000, incurred expenses of $110,000, and paid dividends
of $5,000. Which of the following statements is correct?
A) A debit is needed to zero out the balance of the Income Summary account.
B) Retained Earnings will decrease $6,000.
C) Jackson has incurred a net loss of $4,000.
D) When compared to a business that earned net income, the only closing entry that differs is the one to
close dividends.
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58) Logan Service Company earned revenues of $100,000 and incurred expenses of $107,000. Prepare the
entry to close the Income Summary account. Omit explanation.
59) The Income Summary account shows:
a. What does this indicate?
b. Prepare the entry to close Income Summary. Omit explanation.
60) When a business uses a computerized accounting system, the closing entries must be manually
recorded.
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61) When a business uses a computerized accounting system, the software automatically closes the books.
62) After closing entries have been posted ________.
A) the ending balance of Retained Earnings has been properly updated
B) only permanent accounts carry balances
C) dividends have been closed into Retained Earnings
D) All of the statements are correct.
63) In regards to a company using a computerized accounting system, which of the following statements
is incorrect?
A) Closing entries are completed in a matter of seconds.
B) The accountant must manually prepare the closing entries.
C) The software identifies the temporary accounts.
D) The Retained Earnings balance is up-to–date.
64) The following is the adjusted trial balance as of December 31, 2019 of Hawkins Dental Lab, Inc.:
Accounts
Credit
Cash
Accounts Receivable
Prepaid Insurance
Office Supplies
Land
Building
Accumulated Depreciation—Building
$42,000
Equipment
Accumulated Depreciation—Equipment
75,000
Accounts Payable
40,000
Salaries Payable
4,000
Unearned Revenue
5,000
Mortgage Payable
70,000
Common Stock
20,000
Dividends
Service Revenue
235,000
Salaries Expense
Depreciation Expense—Building and Equipment
Supplies Expense
Insurance Expense
Utilities Expense
_______
Total
$491,500
Prepare the closing entries. Omit explanation.
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PE Question Type: Application
H2: Closing Temporary Accounts – Summary
4.4 Learning Objective 4-4
1) GAAP requires publicly traded companies to prepare a post-closing trial balance and publish it in their
annual report.
2) The post-closing trial balance shows the updated Retained Earnings balance.
3) The post-closing trial balance shows the net income for the period just ended.
4) Only permanent accounts appear on the post-closing trial balance.
5) Only temporary accounts appear on the post–closing trial balance.
6) Which of the following are NOT included in a post-closing trial balance?
A) Assets and liabilities
B) Retained Earnings and assets
C) Common Stock and liabilities
D) Revenues and expenses
7) A list of the accounts and their balances at the end of the period, after journalizing and posting the
closing entries, is called ________.
A) chart of accounts
B) adjusted trial balance
C) post-closing trial balance
D) pre-closing balance sheet
8) Which of the following accounts will be included in a post-closing trial balance?
A) Service Revenue
B) Interest Payable
C) Interest Expense
D) Utilities Expense
9) Which of the following accounts will be included in a post-closing trial balance?
A) Service Revenue
B) Rent Expense
C) Interest Expense
D) Unearned Revenue
10) Which of the following accounts will be included in a post-closing trial balance?
A) Accumulated Depreciation—Building
B) Rent Expense
C) Interest Expense
D) Service Revenue
11) Which of the following accounts will be included in a post-closing trial balance?
A) Dividends
B) Salaries Expense
C) Common Stock
D) Supplies Expense
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12) Which of the following should NOT be considered when comparing the Adjusted Trial Balance to the
Post-Closing Trial Balance to ensure that no errors were made in the closing process?
A) Account balances above Retained Earnings are the same.
B) The account balances on each of the trial balances are the same.
C) Account balances below Retained Earnings are zero.
D) The Retained Earnings account balance on the post-closing trial balance matches Retained Earnings on
the balance sheet.
13) The adjusted trial balance of Williams Landscaping at December 31, 2019 is as follows:
Accounts Debit Credit
Cash $15,000
Accounts Receivable 30,000
Prepaid Insurance 7,500
Supplies 3,200
Land 40,000
Building 160,000
Accumulated Depreciation—Building $12,000
Equipment 75,000
Accumulated Depreciation—Equipment 8,500
Accounts Payable 12,000
Salaries Payable 2,000
Unearned Revenue 25,000
Mortgage Payable 100,000
Common Stock 21,290
Dividends 23,000
Service Revenue 289,000
Salaries Expense 61,000
Depreciation Expense—Building and Equipment 6,150
Supplies Expense 14,040
Insurance Expense 14,000
Utilities Expense 20,900 _______
Total $469,790 $469,790
Using the information above, prepare a post-closing trial balance for Williams Landscaping (dated
December 31, 2019).
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Answer:
Williams Landscaping
Post-Closing Trial Balance
December 31, 2019
Debit Credit
Cash $15,000
Accounts Receivable 30,000
Prepaid Insurance 7,500
Supplies 3,200
Land 40,000
Building 160,000
Accumulated Depreciation—Building $12,000
Equipment 75,000
Accumulated Depreciation—Equipment 8,500
Accounts Payable 12,000
Salaries Payable 2,000
Unearned Revenue 25,000
Mortgage Payable 100,000
Common Stock 21,290
Retained Earnings _______ 149,910
Total $330,700 $330,700
Notes:
Beginning Retained Earnings $0
Add:
Service Revenue 289,000
Less:
Salaries Expense – 61,000
Depreciation Expense – 6,150
Supplies Expense – 14,040
Insurance Expense – 14,000
Utilities Expense – 20,900
Dividends – 23,000
Ending Retained Earnings $149,910
Diff: 3
LO: 4-4
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2: How Do We Prepare a Post-Closing Trial Balance? (H1)
14) To make sure that an error was not made in the closing process, compare the Adjusted Trial Balance
to the Post-Closing Trial Balance. List the three items that need to be considered in order to complete the
step.
15) Why are temporary accounts not included in the post-closing trial balance?
1) The steps of the accounting cycle are followed throughout the accounting period.
2) The operating cycle is the process by which companies produce their financial statements for a specific
period.