3) In an accounting cycle, an analysis of transactions is performed at the end of each accounting period.
4) At the end of the period, the accounting cycle includes adjusting the accounts, preparing financial
statements, and closing the accounts.
5) Preparing the worksheet is a required step of the accounting cycle.
6) The process by which companies produce their financial statements for a specific period is called the
________.
A) operating cycle
B) closing process
C) opening process
D) accounting cycle
7) In an accounting cycle, which of the following steps takes place only at the end of the accounting
period?
A) start with the beginning account balances
B) journalize transactions that occur
C) analyze transactions as they occur
D) journalize adjusting entries
8) Closing entries are journalized and posted ________.
A) throughout the accounting period
B) before posting the adjusting entries
C) after preparing the post-closing trial balance
D) after preparing the financial statements
9) Adjusting journal entries are prepared ________.
A) after preparing the adjusted trial balance
B) after preparing the unadjusted trial balance
C) after posting the closing entries
D) after preparing the financial statements
10) Which of the following steps must be completed before preparing the adjusted trial balance?
A) Prepare the post-closing trial balance.
B) Post journal entries to the accounts.
C) Journalize and post the closing entries.
D) Prepare the financial statements.
11) Which of the following statements is true of the accounting cycle?
A) It takes place only at the end of an accounting period.
B) It involves preparation of adjusting entries after the closing entries.
C) It ignores the beginning balances of accounts.
D) It is a process by which financial statements for a period are produced.
12) List the steps of the accounting cycle that take place during the period.
13) List the steps of the accounting cycle that take place at the end of the period.
14) The ten steps of the accounting cycle are presented below. Identify the correct order of the steps by
placing the numbers 1 (first step) to 10 (last step) by each description.
______ Start with beginning account balances.
______ Prepare the post-closing trial balance.
______ Prepare the financial statements.
______ Compute the unadjusted balance in each account and prepare the unadjusted trial balance.
______ Post journal entries to the accounts.
______ Analyze and journalize transactions as they occur.
______ Prepare the adjusted trial balance.
______ Journalize and post adjusting entries.
______ Journalize and post the closing entries.
______ Enter the unadjusted trial balance on the worksheet and complete the worksheet (optional).
65
Copyright © 2018 Pearson Education, Inc.
4.6 Learning Objective 4-6
1) The current ratio is calculated using the values from the income statement.
2) The current ratio shows the profitability of a firm.
3) The smaller the current ratio, the higher the firm’s ability to repay its current debts.
4) A current ratio that has increased from the prior period indicates an improvement in the company’s
ability to pay its current debts.
5) An increase in the current ratio implies that the profitability of the company has increased from the
previous period.
6) The current ratio measures ________.
A) a company’s ability to sell its long-term assets
B) a company’s ability to pay current liabilities from its total assets
C) a company’s ability to pay current liabilities from current assets
D) a company‘s profitability during a particular period
7) Which of the following would be considered the weakest current ratio?
A) 0.55
B) 0.90
C) 1.25
D) 2.30
8) The formula for computing the current ratio is ________.
A) Current ratio = Total Current assets / Total assets
B) Current ratio = Total Current assets / Total liabilities
C) Current ratio = Total Current assets / Total Stockholders’ Equity
D) Current ratio = Total Current assets / Total Current liabilities
9) Brownstone, Inc. has a current ratio of 6.00. This indicates that the company has $6 in ________.
A) current liabilities for every $1 of current assets
B) total assets for every $1 of current liabilities
C) current assets for every $1 of current liabilities
D) total assets for every $1 of current assets
10) A company has $110,000 in current assets; $600,000 in total assets; $80,000 in current liabilities, and
$140,000 in total liabilities. Calculate the current ratio of the company. (Round your answer to two
decimal places.)
A) 1.38
B) 1.82
C) 1.73
D) 0.79
11) The current ratio measures a company’s ________.
A) overall ability to pay liabilities
B) ability to pay current liabilities from current assets
C) proportion of assets that are financed by debt
D) rate of cash flow
12) The following contains information from the records of Bourne Engineers and Architects.
Bourne Engineers and Architects
Selected Financial Information
December 31, 2019
Current Assets
$80,000
Current Liabilities
42,000
Long-Term Assets
98,000
Long-Term Liabilities
65,000
Total Revenues
55,000
Total Expenses
32,000
Calculate the current ratio. (Round your answer to two decimal places.)
A) 1.51
B) 2.25
C) 0.59
D) 1.90
13) The following contains information from the records of the Becker Architecture Firm.
Becker Architecture Firm
Selected Financial Information
December 31, 2019
Current Assets
$90,000
Current Liabilities
30,000
Long-Term Assets
99,000
Long-Term Liabilities
60,000
Total Revenues
55,000
Total Expenses
37,000
Which of the following statements is an accurate interpretation of the current ratio of the Becker
Architecture Firm? (Round your answer to two decimal places.)
A) The company has $2.53 of current assets for every $1.00 of liabilities.
B) The company has $3.00 of current assets for every $1.00 of current liabilities.
C) The company has $1.65 of current assets for every $1.00 of liabilities.
D) The company has $0.62 of current assets for every $1.00 of current liabilities.
14) Which of the following statements is an accurate interpretation of the current ratio?
A) A current ratio of 1.5 or higher is considered a high-risk ratio.
B) A current ratio below 1.00 is considered a good and safe ratio.
C) A current ratio of 2.0 indicates a strong ability to pay current liabilities.
D) A current ratio of 0.60 or lower is a good and safe ratio.
70
15) Pioneer‘s adjusted trial balance as of December 31, 2018 is given below:
Debit
Credit
Cash
$13,000
Accounts Receivable
8,000
Prepaid Rent
7,000
Prepaid Insurance
2,100
Office Supplies
3,300
Land
45,000
Building
57,000
Accumulated Depreciation—Building
$12,000
Equipment
32,000
Accumulated Depreciation—Equipment
7,500
Accounts Payable
5,500
Salaries Payable
4,500
Interest Payable
2,000
Mortgage Payable (long term)
5,000
Common Stock
14,000
Dividends
5,500
Service Revenue
229,500
Salaries Expense
46,500
Insurance Expense
3,000
Rent Expense
12,500
Utilities Expense
15,500
Advertising Expense
9,700
Depreciation Expense—Building
10,900
Depreciation Expense—Equipment
7,900
Supplies Expense
1,100
Total
$280,000
$280,000
Compute the current ratio. (Round your answer to two decimal places.)
A) 8.16
B) 2.36
C) 1.75
D) 2.78