Chapter 04 – The Accounting Cycle
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DATE MODIFIED:
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144. After all of the account balances have been extended to the Balance Sheet columns of the end-of-period spreadsheet,
the totals of the Debit and Credit columns are $36,755 and $32,735, respectively. What is the amount of net income or net
loss for the period?
a.
$4,020 net income
b.
$36,755 net loss
c.
$4,020 net loss
d.
$32,735 net income
ANSWER:
a
RATIONALE:
Net income (excess of revenues over expenses) = Total of Balance Sheet
Debit column – Total of Balance Sheet Credit column = $36,755 – $32,735 =
$4,020
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
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
145. After all of the account balances have been extended to the Income Statement columns of the end-of-period
spreadsheet, the totals of the Debit and Credit columns are $77,500 and $83,900, respectively. What is the amount of the
net income or net loss for the period?
a.
$6,400 net income
b.
$6,400 net loss
c.
$83,900 net income
d.
$77,500 net loss
ANSWER:
a
RATIONALE:
Net income (excess of revenues over expenses) = Total of Income Statement Credit
column (revenues) – Total of Income Statement Debit column (expenses) = $83,900 –
$77,500 = $6,400
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
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
Chapter 04 – The Accounting Cycle
Copyright Cengage Learning. Powered by Cognero.
Page 63
c.
the chart of accounts
d.
the end-of-period spreadsheet
ANSWER:
d
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-APP1 – LO: 04–APP1
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
149. After all of the account balances have been extended to the Balance Sheet columns of the end-of-period spreadsheet,
the totals of the debit and credit columns show debits of $37,686 and credits of $41,101. This indicates that
a.
neither net income or loss can be calculated because it is found on the income statement
b.
the company has a net loss of $3,415 for the period
c.
the company has a net income of $3,415 for the period
d.
the amounts are out of balance and need to be corrected
ANSWER:
b
RATIONALE:
Net income (excess of revenues over expenses) = Total of Balance Sheet Debit column
– Total of Balance Sheet Credit column = $37,686 – $41,101 = ($3,415)
Net loss = $3,415
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
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
150. The Income Statement columns in the end-of-period spreadsheet show that debits are equal to $55,800 and credits
are $77,520. What does this information mean to the accountant?
a.
net income of $21,720
b.
net loss of $21,720
c.
the accounts are out of balance, indicating an error has been made
d.
the accounts have not been updated
Chapter 04 – The Accounting Cycle
Copyright Cengage Learning. Powered by Cognero.
Page 64
ANSWER:
a
RATIONALE:
Net income (excess of revenues over expenses) = Total of Income Statement Credit
column (revenues) – Total of Income Statement Debit column (expenses) = $77,520 –
$55,800 = $21,720
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
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
151. The use of reversing entries is
a.
required.
b.
required whenever adjusting entries are omitted.
c.
optional.
d.
optional unless computerized accounting systems are used.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
Multiple Choice
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
152. If an adjusting entry is made on the last day of the current accounting period by debiting Wages Expense and
crediting Wages Payable for accrued wages earned but not yet paid, a reversing entry on the first day of the next
accounting period will
a.
debit Wages Expense and credit Wages Payable.
b.
debit Cash and credit Wages Expense.
c.
debit Miscellaneous Expense and credit Wages Expense.
d.
debit Wages Payable and credit Wages Expense.
ANSWER:
d
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Chapter 04 – The Accounting Cycle
Journal entries
b.
Adjusting journal entries
Closing journal entries
Bloom’s: Remembering
QUESTION TYPE:
Matching
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-05 – LO: 04–05
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
ANSWER:
a
POINTS:
1
ANSWER:
POINTS:
1
ANSWER:
a
POINTS:
1
159. Wages Expense 870
What is Alpha Company’s current ratio?
ANSWER:
1.24 = Current Assets/Current Liabilities = $74,524/$60,100
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
Numeric Response
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-06 – LO: 04–06
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.23 – Financial Statement Analysis
ACCT.AICPA.FN-03 – Measurement
BUSPROG – Analytic
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
Chapter 04 – The Accounting Cycle
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-01 – LO: 04–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
Wages Payable 870
ANSWER:
b
POINTS:
1
160. Unearned Revenue 985
Fees Earned 985
ANSWER:
b
POINTS:
1
161. Income Summary 597
Rent Expense 200
Supplies Expense 180
Utilities Expense 110
Miscellaneous Exp. 107
ANSWER:
c
POINTS:
1
162. Dividends 215
Cash 215
ANSWER:
a
POINTS:
1
163. Accounts Receivable 325
Fees Earned 325
(Customer billed for services performed.)
ANSWER:
a
POINTS:
1
164. You evaluate loan requests as part of your job at Eastwood National Bank. One loan request you received is from
Surfer Dude Supplies, a small company. Richard Tracy, the CEO, is requesting $105,000 and brings you a trial balance
(or statement of accounts) for his first year of operations ended December 31.
While you are willing to work with Richard, how would you explain to him that a complete set of financial statements
from his accountant would be more useful for evaluating the loan request?
ANSWER:
A set of financial statements provides useful information concerning the economic
condition of a company. For example, the balance sheet describes the financial
condition of the company as of a given date and is useful in assessing the company’s
financial soundness and liquidity. The income statement describes the results of
operations for a period and indicates the profitability of the company. The statement of
stockholders’ equity describes the changes in the stockholders’ interest in the company
for a period. Each of these statements is useful in evaluating whether to extend credit
to the company.
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Understanding
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
Chapter 04 – The Accounting Cycle
DATE CREATED:
7/22/2017 6:18 PM
DATE MODIFIED:
10/16/2017 4:41 PM
liabilities, or (e) stockholders’ equity section of the December 31 balance sheet of Blaine Auto Service Company.
Which of the following accounts do you think might need to be adjusted before an accurate set of financial statements
could be prepared?
Richard Enterprises
Statement of Accounts
December 31
Cash
$ 2,050
Billings Due from Others
15,070
Office Supplies
7,470
Trucks
36,370
Equipment
8,090
Amounts Owed to Others
$ 2,850
Investment in Business
33,500
Service Revenues
73,650
Wages Expense
30,050
Rent Expense
7,330
Insurance Expense
2,400
Utilities Expense
700
Miscellaneous Expenses
470
_______
$110,000
$110,000
ANSWER:
The following adjustments might be necessary before an accurate set of financial
statements can be prepared:
∙
No office supplies expense is shown. The office supplies account should be
adjusted for the supplies used during the year.
∙
No depreciation expense is shown for the trucks or equipment accounts. An
adjusting entry should be prepared for depreciation expense on each of these
assets.
∙
An inquiry should be made as to whether any accrued expenses, such as wages or
utilities, exist at the end of the year.
∙
An inquiry should be made as to whether any prepaid expenses, such as rent or
insurance, exist at the end of the year.
∙
An inquiry should be made as to whether any unearned revenue exists at the end
of the year.
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Remembering
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-01 – LO: 04–01
FNMN.WAJO.19.04-02 – LO: 04–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
Copyright Cengage Learning. Powered by Cognero.
Page 70
1.
Retained Earnings
2.
Accumulated Depreciation
3.
Unearned Revenues
4.
Mortgage Payable
5.
Equipment
6.
Notes Payable (due in two years)
7.
Cash
8.
Accounts Receivable
ANSWER:
1.
(e) Stockholders’ equity
2.
(b) Property, plant, and equipment
3.
(c) Current liabilities
4.
(d) Long-term liabilities
5.
(b) Property, plant, and equipment
6.
(d) Long-term liabilities
7.
(a) Current assets
8.
(a) Current assets
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-02 – LO: 04–02
ACCREDITING STANDARDS:
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
168. Describe a classified balance sheet.
ANSWER:
A classified balance sheet shows subsections for assets, such as current assets and
property, plant, and equipment. It also shows subsections for liabilities, such as
current liabilities and long-term liabilities. It also includes the stockholders’ equity
section.
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.04-02 – LO: 04–02
ACCREDITING STANDARDS:
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
Mark Brock Services Co.