Chapter 04 – The Accounting Cycle
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POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-03 – LO: 04–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
105. Which of the following accounts will not be closed to Income Summary at the end of the fiscal year?
a.
Utilities Expense
b.
Fees Earned
c.
Prepaid Insurance
d.
Insurance Expense
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-03 – LO: 04–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
106. Which of the following accounts will be closed to the retained earnings account at the end of the fiscal year?
a.
Rent Expense
b.
Fees Earned
c.
Income Summary
d.
Depreciation Expense
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-03 – LO: 04–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
Chapter 04 – The Accounting Cycle
Copyright Cengage Learning. Powered by Cognero.
Page 43
d.
$7,700
ANSWER:
c
RATIONALE:
Insurance expense for one month = $8,400 / 12 = $700
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-03 – LO: 04–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.07 – Adjusting Entries
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
110. The following accounts were taken from the Adjusted Trial Balance columns of the end-of-period spreadsheet:
Accumulated Depreciation
$ 3,200
Fees Earned
17,400
Depreciation Expense
1,300
Insurance Expense
400
Prepaid Insurance
4,800
Supplies
900
Supplies Expense
3,800
Net income for the period is
a.
$5,500
b.
$11,900
c.
$17,400
d.
$8,700
ANSWER:
b
RATIONALE:
Net income = Fees earned – (Depreciation expense + Insurance expense + Supplies
expense) = $17,400 – ($1,300 + $400 + $3,800) = $11,900
POINTS:
1
DIFFICULTY:
Challenging
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:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
111. A summary of selected ledger accounts appears below for Alberto’s Plumbing Services for the current calendar year-
Chapter 04 – The Accounting Cycle
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Page 44
end.
Common Stock
12/31
8,500
1/1
6,500
12/31
15,000
Retained Earnings
6/30
3,500
12/31
15,000
11/30
5,000
Income Summary
12/31
18,500
12/31
33,500
12/31
15,000
Net income for the period is
a.
$13,000
b.
$33,500
c.
$15,000
d.
$18,500
ANSWER:
c
RATIONALE:
As the credit side (total revenue) of Income Summary is more than its debit side (total
expenses), the difference shows net income.
Net income = $33,500 – $18,500 = $15,000
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:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
112. Shores Sports rents canoes and kayaks. Below is the adjusted trial balance at December 31.
Debit
Credit
Cash
1,500
Accounts Receivable
2,000
Interest Receivable
100
Prepaid Insurance
1,600
Notes Receivable (Long-Term)
2,800
Equipment
15,000
Accumulated Depreciation
3,000
Accounts Payable
2,400
Accrued Expenses Payable
3,920
Income Taxes Payable
2,700
Unearned Rent Fees
500
Chapter 04 – The Accounting Cycle
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Page 45
Common Stock
7,700
Dividends
2,000
Rental Revenue
37,000
Service Revenue
1,300
Wages Expense
19,000
Depreciation Expense
1,800
Utilities Expense
320
Insurance Expense
700
Maintenance Expense
9,000
Income Tax Expense
2,700
58,520
58,520
The entry required to close the revenue accounts at the end of the period includes a
a.
debit to Income Summary for $37,000
b.
credit to Income Summary for $38,300
c.
debit to Income Summary for $38,300
d.
credit to Income Summary for $37,000
ANSWER:
b
RATIONALE:
Total revenue = Rental Revenue + Service Revenue = $37,000 + $1,300 = $38,300
December 31
Debit
Credit
Rental Revenue
37,000
Service Revenue
1,300
Income Summary
38,300
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-03 – LO: 04–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:43 PM
113. The journal entry to close the Fees Earned, $750, and Rent Revenue, $175, accounts during the year-end closing
process would be:
a.
Dec. 31 Fees Earned 750
Rent Revenue 175
Income Summary 925
b.
Dec. 31 Income Summary 925
Fees Earned 750
Rent Revenue 175
c.
Dec. 31 Revenues 925
Income Summary 925
d.
Dec. 31 Income Summary 925
Revenues 925
ANSWER:
a
Chapter 04 – The Accounting Cycle
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Page 49
b.
debit Common Stock, $155,000; credit Fees Earned, $155,000
c.
debit Fees Earned, $155,000; credit Income Summary, $155,000
d.
credit Fees Earned, $155,000; credit Common Stock, $155,000
ANSWER:
c
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Finley Company
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-03 – LO: 04–03
FNMN.WAJO.19.04-APP1 – LO: 04-APP1
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
117. The entry to close Income Summary would be
a.
debit Common Stock, $50,000; credit Income Summary, $50,000
b.
debit Income Summary, $155,000; credit Common Stock, $155,000
c.
debit Income Summary, $50,000; credit Retained Earnings, $50,000
d.
debit Common Stock, $9,000; credit Income Summary, $9,000
ANSWER:
c
RATIONALE:
Net income = Total revenue – Total expenses = $155,000 – ($63,000 + $27,000
+ $15,000) = $50,000
December 31
Debit
Credit
Income Summary
50,000
Retained Earnings
50,000
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Finley Company
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-03 – LO: 04–03
FNMN.WAJO.19.04-APP1 – LO: 04-APP1
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
118. The entry to close the dividends account would be
Chapter 04 – The Accounting Cycle
Copyright Cengage Learning. Powered by Cognero.
Page 50
a.
debit Retained Earnings, $3,000; credit Dividends, $3,000
b.
debit Retained Earnings, $12,000; credit Dividends, $12,000
c.
debit Dividends, $3,000; credit Retained Earnings, $3,000
d.
debit Dividends, $12,000; credit Retained Earnings, $12,000
ANSWER:
a
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Finley Company
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-03 – LO: 04–03
FNMN.WAJO.19.04-APP1 – LO: 04-APP1
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
119. The ending balance of retained earnings is
a.
$53,000
b.
$47,000
c.
$3,000
d.
$50,000
ANSWER:
d
RATIONALE:
Ending balance of retained earnings = Beginning balance of retained earnings + Net
income – Dividends = $3,000 + $50,000 – $3,000 = $50,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Finley Company
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-03 – LO: 04–03
FNMN.WAJO.19.04-APP1 – LO: 04-APP1
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.05 – Accounting Cycle
ACCT.ACBSP.APC.08 – Closing Entries
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
120. Which of the following has steps of the accounting cycle in proper sequence (some steps may be missing)?
a.
analyze and record transactions, post transactions to the ledger, prepare a trial balance, prepare financial
statements, journalize closing entries, analyze adjustment data and prepare adjusting entries
b.
prepare a trial balance, analyze adjustment data, prepare adjusting entries, prepare financial statements,