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71. Which of the following is the usual final step in the accounting cycle?
A. Journalizing transactions.
B. Preparing an adjusted trial balance.
C. Preparing a post-closing trial balance.
D. Preparing the financial statements.
E. Preparing a work sheet.
72. A classified balance sheet:
A. Measures a company's ability to pay its bills on time.
B. Organizes assets and liabilities into important subgroups.
C. Presents revenues, expenses, and net income.
D. Reports operating, investing, and financing activities.
E. Reports the effect of profit and withdrawals on owner's capital.
73. The assets section of a classified balance sheet usually includes:
A. Current assets, long-term investments, plant assets, and intangible assets.
B. Current assets, long-term assets, revenues, and intangible assets.
C. Current assets, long-term investments, plant assets, and equity.
D. Current liabilities, long-term investments, plant assets, and intangible assets.
E. Current assets, liabilities, plant assets, and intangible assets.
74. The usual order for the asset section of a classified balance sheet is:
A. Current assets, prepaid expenses, long-term investments, intangible assets.
B. Long-term investments, current assets, plant assets, intangible assets.
C. Current assets, long-term investments, plant assets, intangible assets.
D. Intangible assets, current assets, long-term investments, plant assets.
E. Plant assets, intangible assets, long-term investments, current assets.
75. A classified balance sheet differs from an unclassified balance sheet in that
A. a unclassified balance sheet is never used by large companies.
B. a classified balance sheet normally includes only three subgroups.
C. a classified balance sheet presents information in a manner that makes it easier to calculate a
company's current ratio.
D. a classified balance sheet will include more accounts than an unclassified balance sheet for the
same company on the same date.
E. a classified balance sheet cannot be provided to outside parties.
76. Two common subgroups for liabilities on a classified balance sheet are:
A. current liabilities and intangible liabilities.
B. present liabilities and operating liabilities.
C. general liabilities and specific liabilities.
D. intangible liabilities and long-term liabilities.
E. current liabilities and long-term liabilities.
77. The current ratio:
A. Is used to measure a company's profitability.
B. Is used to measure the relation between assets and long-term debt.
C. Measures the effect of operating income on profit.
D. Is used to help evaluate a company's ability to pay its debts in the near future.
E. Is calculated by dividing current assets by equity.
78. All of the following regarding current ratio are true except:
A. Current ratio is calculated by dividing current assets by current liabilities.
B. Current ratio helps to assess a company's ability to pay its debts in the near future.
C. Current ratio does not affect a creditor’s decision on when to allow a company to buy on credit.
D. Current ratio can affect a creditor's decision about whether to lend money to a company.
E. Current ratio can reveal problems in a company if it is less than 1.
79. The Unadjusted Trial Balance columns of a company's work sheet show the balance in the
Office Supplies account as $750. The Adjustments columns show that $425 of these supplies were
used during the period. The amount shown as Office Supplies in the Balance Sheet columns of the
work sheet is:
A. $325 debit.
B. $325 credit.
C. $425 debit.
D. $750 debit.
E. $750 credit.
80. A columnar working paper used to prepare a company's unadjusted trial balance, adjusting
entries, adjusted trial balance, and financial statements, and which is an optional tool in the
accounting process is a(n) :
A. Adjusted trial balance.
B. Work sheet.
C. Post-closing trial balance.
D. Unadjusted trial balance.
E. General ledger.
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81. Accumulated Depreciation, Accounts Receivable, and Service Fees Earned would be sorted to
which respective columns in completing a work sheet?
A. Balance Sheet and Statement of Owner's Equity-Credit; Balance Sheet and Statement of
Owner's Equity Debit; and Income Statement-Credit.
B. Balance Sheet and Statement of Owner's Equity-Debit; Balance Sheet and Statement of Owner's
Equity-Credit; and Income Statement-Credit.
C. Income Statement-Debit; Balance Sheet and Statement of Owner's Equity-Debit; and Income
Statement-Credit.
D. Income Statement-Debit; Income Statement-Debit; and Balance Sheet and Statement of
Owner's Equity-Credit.
E. Balance Sheet and Statement of Owner's Equity-Credit; Income Statement-Debit; and Income
Statement-Credit.
82. Which of the following statements is incorrect?
A. Working papers are useful aids in the accounting process.
B. On the work sheet, the effects of the accounting adjustments are shown on the account balances.
C. After the work sheet is completed, it can be used to help prepare the financial statements.
D. On the work sheet, the adjusted amounts are sorted into columns according to whether the
accounts are used in preparing the unadjusted trial balance or the adjusted trial balance.
E. A worksheet is not a substitute for financial statements.
83. A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance
columns of the work sheet. The Adjustments columns show expired insurance of $200. This
adjusting entry results in:
A. $200 decrease in net income.
B. $200 increase in net income.
C. $200 difference between the debit and credit columns of the Unadjusted Trial Balance.
D. $200 of prepaid insurance.
E. An error in the financial statements.
84. Statements that show the effects of proposed transactions as if the transactions had already
occurred are called:
A. Pro forma statements.
B. Professional statements.
C. Simplified statements.
D. Temporary statements.
E. Interim statements.
85. If in preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong
work sheet column. The Balance Sheet columns will balance on completing the work sheet but
with the wrong net income, if the amount sorted in error is:
A. An expense amount placed in the Balance Sheet Credit column.
B. A revenue amount placed in the Balance Sheet Debit column.
C. A liability amount placed in the Income Statement Credit column.
D. An asset amount placed in the Balance Sheet Credit column.
E. A liability amount placed in the Balance Sheet Debit column.
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86. If the Balance Sheet and Statement of Owner's Equity columns of a work sheet fail to balance
when the amount of the net income is added to the Balance Sheet and Statement of Owner's Equity
Credit column, the cause could be:
A. An expense amount entered in the Balance Sheet and Statement of Owner's Equity Debit
column.
B. A revenue amount entered in the Balance Sheet and Statement of Owner's Equity Credit
column.
C. An asset amount entered in the Income Statement and Statement of Owner's Equity Debit
column.
D. A liability amount entered in the Income Statement and Statement of Owner's Equity Credit
column.
E. An expense amount entered in the Balance Sheet and Statement of Owner's Equity Credit
column.
87. The following items appeared on a company's December 31 work sheet for the current period.
Based on the following information, what is net income for the current period?
Cash Unadjusted
Trial Balance Adjustments
Debit Credit Debit Credit
975
Prepaid insurance 3,600 150
Supplies 180 70
Equipment 10,320
Accounts payable 1,140
Unearned fees 4,500 375
Owner, Capital 9,180
Owner, Withdrawals 1,650
Fees earned 5,850 375
300
Rent expense 1,500
Salaries expense 2,100 315
Utilities expense 345
Insurance expense 150
Supplies expense 70
Depreciation expense—equipment 190
Accumulated depreciation—equipment 190
Salaries payable 315
Accounts receivable 300
Totals 20,670 20,670 1,400 1,400
A. $1,400.
B. $1,855.
C. $1,905.
D. $2,060.
E. $4,670.
88. Which of the following errors would cause the Balance Sheet and Statement of Owner's Equity
columns of a work sheet to be out of balance?
A. Entering an asset amount in the Income Statement Debit column.
B. Entering a liability amount in the Income Statement Credit column.
C. Entering an expense amount in the Balance Sheet and Statement of Owner's Equity Debit
column.
D. Entering a revenue amount in the Balance Sheet and Statement of Owner's Equity Debit
column.
E. Entering a liability amount in the Balance Sheet and Statement of Owner's Equity Credit
column.
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89. The Unadjusted Trial Balance columns of a work sheet total $84,000. The Adjustments
columns contain entries for the following:
1. Office supplies used during the period, $1,200.
2. Expiration of prepaid rent, $700.
3. Accrued salaries expense, $500.
4. Depreciation expense, $800.
5. Accrued service fees receivable, $400.
The Adjusted Trial Balance columns total is:
A. $80,400.
B. $84,000.
C. $85,700.
D. $85,900.
E. $87,600.
90. The balances in the unadjusted columns of a work sheet will agree with:
A. the balances reflected in the company's financial statements.
B. the balances reflected in the company's unadjusted trial balance.
C. whatever balances management has decided to report.
D. the balances in the company's post-closing trial balance.
E. the balances management budgeted for the accounting period.
91. In the process of completing a work sheet, you determine that the Income Statement debit
column totals $83,000, while the Income Statement credit column totals $65,000. To enter net
income (or net loss) for the period into the work sheet would require an entry to
A. the Adjustments debit column and the Adjustments credit column.
B. the Unadjusted Trial Balance debit column and the Adjustments credit column.
C. it is not practical to enter Net Income (or Net Loss) on the work sheet.
D. the Balance Sheet & Statement of Owner's Equity debit column and the Income Statement
credit column.
E. the Income Statement debit column and the Balance Sheet & Statement of Owner's Equity
credit column.
92. The special account used only in the closing process to temporarily hold the amounts of
revenues and expenses before the net difference is added to (or subtracted from) the owner's
capital account is the:
A. Income Summary account.
B. Closing account.
C. Balance column account.
D. Contra account.
E. Nominal account.
93. J. Awn, the proprietor of Awn Services, withdrew $8,700 from the business during the current
year. The entry to close the withdrawals account at the end of the year is:
A. Debit J. Awn, Withdrawals $8,700; credit Cash, $8,700
B. Debit J. Awn, Capital $8,700; credit J. Awn, Withdrawals $8,700
C. Debit J. Awn, Withdrawals $8,700; credit J. Awn, Capital $8,700
D. Debit J. Awn, Capital $8,700, credit Salary Expense $8,700
E. Debit Income Summary $8,700; credit J. Awn, Capital $8,700
94. A company had revenues of $75,000 and expenses of $62,000 for the accounting period. The
owner withdrew $8,000 in cash during the same period. Which of the following entries could not
be a closing entry?
A. Debit Income Summary $13,000; credit Owner’s, Capital $13,000
B. Debit Income Summary $75,000; credit Revenues $75,000.
C. Debit Revenues $75,000; credit Income Summary $75,000.
D. Debit Income Summary $62,000, credit Expenses $62,000.
E. Debit Owner’s, Capital $8,000, credit Owner’s, Withdrawals $8,000.
95. The following information is available for the Travis Travel Agency. After these closing
entries what will be the balance in the Jay Travis, Capital account?
Total revenues………………. $125,000
Total expenses………………. 60,000
Jay Travis, Capital…………… 80,000
Jay Travis, Withdrawals……... 15,000
A. $ 65,000.
B. $ 80,000.
C. $130,000.
D. $145,000.
E. $280,000.
96. The J. Godfrey, Capital account has a credit balance of $17,000 before closing entries are
made. If total revenues for the period are $55,200, total expenses are $39,800, and withdrawals are
$9,000, what is the ending balance in the J. Godfrey, Capital account after all closing entries are
made?
A. $ 8,000.
B. $15,400.
C. $23,400.
D. $17,000.
E. $32,400.
97. The Income Summary account is used:
A. To adjust and update asset and liability accounts.
B. To close the revenue and expense accounts.
C. To determine the appropriate withdrawal amount.
D. To replace the income statement under certain circumstances.
E. To replace the capital account in some businesses.
98. Dina Kader withdrew a total of $35,000 from her business during the current year. The entry
needed to close the withdrawals account is:
A. Debit Income Summary and credit Cash for $35,000.
B. Debit Dina Kader, Withdrawals and credit Cash for $35,000.
C. Debit Income Summary and credit Dina Kader, Withdrawals for $35,000.
D. Debit Dina Kader, Capital and credit Dina Kader, Withdrawals for $35,000.
E. Debit Dina Kader, Withdrawals and credit Dina Kader, Capital for $35,000.
99. A company's ledger accounts and their end-of-period balances before closing entries are posted
are shown below. What amount will be posted to Tricia DeBarre, Capital in the process of closing
the Income Summary account? (Assume all accounts have normal balances.)
Tricia De Barre, Capital……….. $ 7,000
Tricia De Barre, Withdrawals 9,600
Revenue... ……………….. 29,000
Rent expense 3,600
Salaries expense ……. 7,200
Insurance expense 920
Depr. Expense-equipment 500
Accum depr.-equipment 1,500
A. $16,780 debit.
B. $ 7,180 credit.
C. $16,780 credit.
D. $18,280 credit.
E. $23,780 credit.
100. It is obvious that an error occurred in the preparation and/or posting of closing entries if:
A. all revenue and expense accounts have zero balances.
B. the owner's capital account is debited for the amount of the net loss for the period.
C. the income summary account is debited for the amount of net income for the period.
D. all balance sheet accounts have zero balances.
E. only permanent accounts appear on the post-closing trial balance.
101. At the beginning of the year, a company's balance sheet reported the following balances:
Total Assets = $125,000; Total Liabilities = $75,000; and Owner's Capital = $50,000. During the
year, the company reported revenues of $46,000 and expenses of $30,000. In addition, owner's
withdrawals for the year totaled $20,000. Assuming no other changes to owner's capital, the
balance in the owner's capital account at the end of the year would be:
A. $66,000.
B. $86,000.
C. $(4,000).
D. $46,000.
E. $54,000.
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102. At the beginning of the year, Beta Company's balance sheet reported Total Assets of
$195,000 and Total Liabilities of $75,000. During the year, the company reported total revenues of
$226,000 and expenses of $175,000. Also, owner withdrawals during the year totaled $48,000.
Assuming no other changes to owner's capital, the balance in the owner's capital account at the end
of the year would be:
A. $174,000.
B. $78,000.
C. cannot be determined from the information provided.
D. $120,000.
E. $123,000.
103. After preparing and posting the closing entries to close revenues (and gains) and expenses
(and losses), the income summary account has a debit balance of $33,000. The entry to close the
income summary account will include:
A. a debit of $33,000 to owner withdrawals.
B. a credit of $33,000 to owner withdrawals.
C. a debit of $33,000 to income summary.
D. a debit of $33,000 to owner capital.
E. a credit of $33,000 to owner capital.
104. A trial balance prepared after the closing entries have been journalized and posted is the:
A. Unadjusted trial balance.
B. Post-closing trial balance.
C. General ledger.
D. Adjusted trial balance.
E. Work sheet.
105. An error is indicated if the following account has a balance appearing on the post-closing trial
balance:
A. Office Equipment.
B. Accumulated Depreciation-Office Equipment.
C. Depreciation Expense-Office Equipment.
D. Ted Nash, Capital.
E. Salaries Payable.
106. A post-closing trial balance reports:
A. All ledger accounts with balances, none of which can be temporary accounts.
B. All ledger accounts with balances, none of which can be permanent accounts.
C. All ledger accounts with balances, which include some temporary and some permanent
accounts.
D. Only revenue and expense accounts.
E. Only asset accounts.
107. Which of the following statements is true?
A. Owner's capital must be closed each accounting period.
B. A post-closing trial balance should include only permanent accounts.
C. Information on the work sheet can be used in place of preparing financial statements.
D. By using a work sheet to prepare adjusting entries you need not post these entries to the ledger
accounts.
E. Closing entries are only necessary if errors have been made.
108. Reversing entries:
A. Are optional.
B. Are mandatory.
C. Correct errors in journal entries.
D. Are required by GAAP.
E. Are prepared on the worksheet.
109. All of the following regarding reversing entries are true except:
A. Reversing entries are optional.
B. Reversing entries are recorded in response to accrued assets and accrued liabilities that were
created by adjusting entries at the end of the previous accounting period.
C. Reversing entries are used to simplify a company's recordkeeping.
D. Reversing entries are dated the first day of the new accounting period.
E. Reversing entries are not the exact opposite of adjusting entries.
110. Reversing entries:
A. are necessary when journal entries have been incorrectly recorded.
B. are a required step in the accounting cycle.
C. will often result in abnormal account balances in some accounts.
D. are required only if the company uses accounting software to record journal entries.
E. must be made before preparing the post-closing trial balance.
111. The purpose of reversing entries is to:
A. simplify the recording of certain journal entries in the future.
B. correct an error made in a previous journal entry.
C. ensure that closing entries have been properly posted to the ledger accounts.
D. make certain that only permanent accounts are carried forward into the next accounting period.
E. complete a required step in the accounting cycle.
112. All of the following statements regarding a work sheet are true except:
A. A worksheet aids in the preparation of financial statements.
B. A worksheet reduces the possibility of errors when working with many accounts and
adjustments.
C. A worksheet does not assist in planning and organizing an audit of financial statements.
D. A worksheet helps in preparing interim financial statements.
E. A worksheet shows the effects of proposed or “what-if” transactions.
113. All of the following statements regarding the Income Statement columns on the worksheet
are true except:
A. The balances in the Income Statement credit column are revenues.
B. The balances in the Income Statement credit column are unearned revenues.
C. The balances in the Income Statement debit column are expenses.
D. The difference between the totals of the Income Statement columns is net income or net loss.
E. The net income or net loss from the Income Statement columns is entered in the Balance Sheet
& Statement of Owner’s Equity columns.
114. Temporary accounts include all of the following except:
A. Consulting revenue.
B. Withdrawals.
C. Rent expense.
D. Prepaid rent.
E. Income Summary.
