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Chapter 04 - The Accounting Cycle
202. Journalize the reversing entry on January 1 of the current year for the following adjusting journal entry from the prior
year:
Journal
Date
Description
Post Ref.
Debit
Credit
Dec. 31
Insurance Expense
2,500
Insurance Payable
2,500
ANSWER:
The reversing entry is the exact opposite of the related adjusting entry:
Journal
Date
Description
Post Ref.
Debit
Credit
Jan. 1
Insurance Payable
2,500
Insurance Expense
2,500
POINTS:
1
DIFFICULTY:
Bloom's: Applying
Easy
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-APP2 - LO: 04-APP2
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.05 - Accounting Cycle
ACCT.AICPA.FN-03 - Measurement
BUSPROG - Analytic
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
203. Zeta Company has 12 workers who each earn $15 per hour and generally work a 40-hour workweek, although at
times overtime work is required, for which workers are paid 1.5 times their regular hourly wage. Zeta pays wages in cash
on Friday of each week for work performed that week. Zeta's Wages Expense ledger account for May is shown below.
Account: Wages Expense
Account Number 65
Balance
Chapter 04 - The Accounting Cycle
You may omit posting references.
ANSWER:
If Zeta Company does not use reversing entries, no journal entry is made on June 1 to
reverse the May 31 adjusting entry. If Zeta does use reversing entries, the adjusting
entry of May 31 would be reversed as follows on June 1:
Journal
Date
Description
Post Ref.
Debit
Credit
Jun. 1
Wages Payable
4,320
Wages Expense
4,320
1. When a reversing entry is used, the journal entry to pay June 2 wages would be the
normal entry for a full week's wages ($7,200 = $15 per hour × 40 hours × 12 workers):
Journal
Date
Description
Post Ref.
Debit
Credit
Jun. 2
Wages Expense
7,200
Cash
7,200
2. When a reversing entry is not used, the journal entry to pay June 2 wages would be
as follows:
Journal
Date
Description
Post Ref.
Debit
Credit
Jun. 2
Wages Payable
4,320
Wages Expense
2,880
Cash
7,200
POINTS:
1
DIFFICULTY:
Bloom's: Applying
Chapter 04 - The Accounting Cycle
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Page 102
Dividends
3/31
2,500
12/31
5,000
9/30
2,500
The $18,000 debit to Retained Earnings on December 31 must represent
a.
dividends paid
b.
net income
c.
net loss
d.
sales of common stock
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
Bloom's: Applying
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-03 - LO: 04-03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.05 - Accounting Cycle
ACCT.ACBSP.APC.09 - Financial Statements
ACCT.AICPA.FN.03 - Measurement
BUSPROG - Analytic
DATE CREATED:
8/24/2017 3:41 PM
DATE MODIFIED:
10/16/2017 4:41 PM
205. A summary of selected ledger accounts appears below for Solomon’s Electrical Services for the current calendar
year-end.
Common Stock
12/31
8,500
1/1
90,000
12/31
30,000
Retained Earnings
12/31
5,000
1/1
62,000
12/31
18,000
Dividends
3/31
2,500
12/31
5,000
9/30
2,500
The balance in retained earnings that will appear on the financial statements is
a.
$62,000
b.
$57,000
c.
$205,500
d.
$85,500
ANSWER:
d
POINTS:
1
DIFFICULTY:
Bloom's: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
