College Accounting, 14e (Slater)
Chapter 5 The Accounting Cycle Completed
5.1 Learning Objective 5-1
1) Adjusting journal entries:
A) need not be journalized since they appear on the worksheet.
B) need not be posted if the financial statements are prepared from the worksheet.
C) are not needed if closing entries are prepared.
D) must be journalized and posted.
2) Journal entries that are needed in order to update account balances for internal business transactions
(such as supplies and prepaid rent) at the end of the period are:
A) closing entries.
B) adjusting entries.
C) Balance Sheet entries.
D) adjusting Cash.
3) The adjusting entry to record depreciation for the company automobile would be:
A) debit Cash; credit Accumulated Depreciation, Automobile.
B) debit Accumulated Depreciation, Automobile; credit Automobile.
C) debit Depreciation Expense, Automobile; credit Accumulated Depreciation, Automobile.
D) debit Depreciation Expense, Automobile; credit Automobile.
4) The adjusting entry to record the expired rent would be to:
A) debit Prepaid Rent Expense; credit Cash.
B) debit Cash; credit Prepaid Rent.
C) debit Prepaid Rent; credit Cash.
D) debit Rent Expense; credit Prepaid Rent.
5) The adjusting entry for accrued salaries is to:
A) debit Salaries Expense; credit Salaries Payable.
B) debit Salaries Expense; credit Cash.
C) debit Salaries Payable; credit Salaries Expense.
D) debit Cash; credit Salaries Payable.
6) Each adjusting entry affects:
A) the income statement.
B) the balance sheet.
C) the cash account.
D) Both A and B are correct.
7) John’s Tree Service depreciation for the month is $500. The adjusting journal entry is:
A)
Equipment 500
Accumulated Depreciation 500
B)
Depreciation Expense 500
Accumulated Depreciation 500
C)
Depreciation Expense 500
Equipment 500
D)
Accumulated Depreciation 500
Depreciation Expense 500
3
8) Tom’s Electrical Service purchased tools for $6,000. They have an expected life of 30 months and no
residual value. The adjusting journal entry for the month is:
A)
Depreciation Expense 300
Tools 300
B)
Depreciation Expense 300
Accumulated Depreciation 300
C)
Accumulated Depreciation 300
Depreciation Expense 300
D)
Accumulated Depreciation 300
Equipment 300
9) Sandra’s Design Studio showed office supplies account showed a balance of $1,000. A count of the
supplies left on hand as of June 30 was $700. The adjusting journal entry is:
A)
Office Supplies 700
Office Supplies Expense 700
B)
Office Supplies Expense 300
Office Supplies 300
C)
Office Supplies 300
Office Supplies Expense 300
D)
Office Supplies Expense 700
Office Supplies 700
10) Eav’s Event Planning bought a computer on January 1st worth $5,000 with an expected life of 4 years
and a residual value of $1,500. What is the adjusting journal entry for December 31 at the end of the first
year?
A)
Computer 5,000
Depreciation Expense 5,000
B)
Computer 5,000
Accumulated Depreciation, Computer 5,000
C)
Depreciation Expense 5,000
Accumulated Depreciation, Computer 5,000
D)
Depreciation Expense 5,000
Computer 5,000
11) The income statement debit column of the worksheet showed the following expenses:
Supplies Expense $1,200
Depreciation Expense 400
Salaries Expense 200
The journal entry to close the expense accounts is:
A)
Income Summary 1,800
Supplies Expense 1,200
Depreciation Expense 400
Salaries Expense 200
B)
Income Summary 1,800
Capital 1,800
C)
Supplies Expense 1,200
Depreciation Expense 400
Salaries Expense 200
Income Summary 1,800
D)
Capital 1,800
Income Summary 1,800
12) The ending balances in the ledger after posting the adjusting entries will be the same amounts that are
found on the worksheet in the adjusted trial balance column.
For each of the following, identify in Column 1 the category to which the account belongs, in Column 2
the normal balance for the account, in Column 3 the financial statement on which the account balance is
reported, and in Column 4 the nature of the account (permanent/temporary).
Example:
Column 1 Column 2 Column 3 Column 4
Cash asset debit balance sheet permanent
13)
Column 1 Column 2 Column 3 Column 4
Supplies
14)
Column 1 Column 2 Column 3 Column 4
Accumulated Depreciation
15)
Column 1 Column 2 Column 3 Column 4
Salary Expense
16)
Column 1 Column 2 Column 3 Column 4
Capital
17)
Column 1 Column 2 Column 3 Column 4
Fees Earned
18)
Column 1 Column 2 Column 3 Column 4
Withdrawals
19)
Column 1 Column 2 Column 3 Column 4
Accounts Payable
5.2 Learning Objective 5-2
1) Closing entries are prepared:
A) to clear all temporary accounts to zero.
B) to update the Capital balance.
C) at the end of the accounting period.
D) All of the above are correct.
2) Income Summary:
A) is a temporary account.
B) is a permanent account.
C) summarizes revenues and expenses and transfers the balance to Capital.
D) Both A and C are correct.
3) Which of the following accounts is a temporary account?
A) Withdrawals
B) Accounts Receivable
C) Cash
D) Supplies
4) Which of the following accounts would NOT be considered a permanent account?
A) Accounts Receivable
B) Depreciation Expense
C) Accounts Payable
D) Prepaid Rent Expense
5) An account in which the balance is carried over from one accounting period to the next is called a:
A) permanent account.
B) nominal account.
C) temporary account.
D) zero account.
6) Accounts in which the balances are carried over from one accounting period to the next are called:
A) real accounts.
B) nominal accounts.
C) temporary accounts.
D) zero accounts.
7) Closing entries:
A) need not be journalized since they appear on the worksheet.
B) are prepared before adjusting entries.
C) are not needed if adjusting entries are prepared.
D) must be journalized and posted.
8) Closing entries will affect:
A) total assets.
B) Cash.
C) Owner’s Capital.
D) total liabilities.
9) Which of the following accounts should NOT be closed to Income Summary at the end of the fiscal
year?
A) Salaries Expense
B) Fees Earned
C) Utilities Expense
D) Withdrawals
10) To close the Withdrawals account:
A) debit Withdrawals; credit Revenue.
B) debit Capital; credit Withdrawals.
C) debit Withdrawals; credit Income Summary.
D) debit Income Summary; credit Withdrawals.
11) The correct order for closing accounts is:
A) revenue, expenses, income summary, withdrawals.
B) revenue, income summary, expenses, withdrawals.
C) revenue, expenses, capital, withdrawals.
D) revenue, capital, expenses, withdrawals.
12) To close the Fees Earned account:
A) debit Fees Earned; credit Capital.
B) debit Fees Earned; credit Withdrawals.
C) debit Fees Earned; credit Income Summary.
D) debit Capital; credit Fees Earned.
13) Which of the following accounts will be closed directly to Capital at the end of the fiscal year?
A) Salaries Expense
B) Fees Revenue
C) Withdrawals
D) Accumulated Depreciation
14) When the balance of the Income Summary account is a credit, the entry to close this account is:
A) debit Income Summary; credit Withdrawals.
B) debit Income Summary; credit Revenue.
C) debit Income Summary; credit Capital.
D) debit Revenue; credit Income Summary.
15) When the balance of the Income Summary account is a debit, the entry to close this account is:
A) debit Income Summary; credit Withdrawals.
B) debit Income Summary; credit Revenue.
C) debit Capital; credit Income Summary.
D) debit Income Summary; credit Capital.
16) When the balance in the Income Summary account is a debit, the company has:
A) incurred a net loss.
B) incurred a net income.
C) had more revenue than expenses.
D) made an error in their closing entries.
17) Which of the following columns of the worksheet are referred to when preparing closing entries to the
Income Summary?
A) Adjusted trial balance columns
B) Balance sheet columns
C) Adjustments columns
D) Income statement columns
18) After posting the closing entries, which of the following accounts is most likely NOT to have a zero
balance?
A) Prepaid Insurance Expense
B) Advertising Expense
C) J. Taylor, Withdrawals
D) Medical Fees Earned
19) When the balance in the Income Summary account is a credit, the company has:
A) incurred a net loss.
B) incurred a net income.
C) had more expenses than revenue.
D) no owner withdrawals during the period.
20) How do you close a revenue account?
A) Debit Capital; credit Revenue
B) Credit Withdrawals; debit Revenue
C) Credit Income Summary; debit Revenue
D) Debit Income Summary; credit Revenue
21) How do you close the expense accounts?
A) Debit Capital; credit the expense accounts
B) Credit Capital; debit the expense accounts
C) Credit Income Summary; debit the expense accounts
D) Debit Income Summary; credit the expense accounts
22) All permanent accounts can be found:
A) on the Income Statement.
B) on the Statement of Owner’s Equity.
C) on the Balance Sheet.
D) Permanent accounts do not appear on the financial statements.
23) Closing entries will:
A) decrease the Owner’s Capital.
B) increase the Cash balance.
C) either increase or decrease Owner’s Capital.
D) not affect the Owner’s Capital balance.
24) On Petro Company‘s worksheet, the Revenue account had a normal balance of $3,200. The entry to
close the account would include a:
A) debit to Cash for $3,200.
B) credit to Income Summary for $3,200.
C) debit to Capital for $3,200.
D) credit to Revenue for $3,200.
25) The Rent Expense account had a normal balance of $1,100. The entry to close the account would
include a:
A) debit to Rent Expense, $1,100.
B) debit to Income Summary, $1,100.
C) debit to Capital, $1,100.
D) credit to Income Summary, $1,100.
26) M. Sims showed a net income of $8,000. The entry to close the Income Summary account would
include a:
A) debit to M. Sims Capital, $8,000.
B) credit to M. Sims Capital, $8,000.
C) debit to Income Summary, $8,000.
D) Both B and C are correct.
27) J. Oakely showed a net loss of $5,500. The entry to close the Income Summary account would include
a:
A) debit to Oakely, Capital, $5,500.
B) debit to Income Summary, $5,500.
C) credit to Oakely, Capital, $5,500.
D) credit to Cash, $5,500.
28) The balance in the J. Higgins, Withdrawals account was $3,200. The entry to close the account would
include a:
A) debit to Income Summary, $3,200.
B) credit to Income Summary, $3,200.
C) debit to J. Higgins, Capital, $3,200.
D) debit to J. Higgins, Withdrawals, $3,200.
16
29) The balance in the Rent Expense account on the worksheet was $220. The journal entry to close the
Rent Expense account is:
A)
Rent Expense 220
Prepaid Rent Expense 220
B)
Rent Expense 220
Income Summary 220
C)
Rent Expense 220
Capital 220
D)
Income Summary 220
Rent Expense 220
30) B. Jensen’s worksheet showed the revenue account, Rental Fees, $1,800. The journal entry to close the
account is:
A)
Rental Fees 1,800
Income Summary 1,800
B)
Benson, Capital 1,800
Rental Fees 1,800
C)
Rental Fees 1,800
Jensen, Capital 1,800
D)
Income Summary 1,800
Rental Fees 1,800
31) The Income Summary account shows debits of $35,824 and credits of $25,977. This results in:
A) Withdrawals of $61,801.
B) a net loss of $61,801.
C) a net income of $9,847.
D) a net loss of $9,847.
32) After closing the revenue, expense, and withdrawal accounts, the capital increased by $2,500. Which
of the following situations could have occurred?
A) The company had a net loss.
B) The owner invested an additional amount.
C) The owner made a withdrawal.
D) All of these answers are correct.
33) The income statement credit column of the worksheet showed the following revenues:
Catering Fees Earned $670
Cleaning Fees Earned 820
The journal entry to close the revenue accounts is:
A)
Income Summary 1,490
Catering Fees Earned 670
Cleaning Fees Earned 820
B)
Catering Fees Earned 670
Cleaning Fees Earned 820
Income Summary 1,490
C)
Capital 1,490
Income Summary 1,490
D)
Catering Fees Earned 670
Cleaning Fees Earned 820
Capital 1,490
34) The business failed to close any of the revenue accounts. The result of this error is that:
A) revenues will be understated.
B) capital will be understated.
C) the assets will be overstated.
D) the liabilities will be overstated.
35) The entry to close the expense account(s) was entered in reverse—Income Summary was credited and
the expense account(s) was/were debited. The result of this error is that:
A) before closing it, Income Summary will have a credit balance.
B) before closing it, Income Summary will have a debit balance.
C) the assets will be understated.
D) the liabilities will be understated.
36) The entry to close the revenue account(s) was entered in reverse—Income Summary was debited and
the revenue account(s) was/were credited. The result of this error is that:
A) before closing it, Income Summary will have a credit balance.
B) before closing it, Income Summary will have a debit balance.
C) the assets will be overstated.
D) the liabilities will be overstated.
37) The following normal account balances were found on the general ledger before closing entries were
prepared:
Revenue $910 Cash $800
Expenses $550 Accounts Receivable $430
Capital $7,300 Withdrawals $1,700
After closing entries are posted, what is the balance in the Revenue account?
A) $910
B) $0
C) $360
D) Closing entries do not affect Revenue.
38) The following normal account balances were found on the general ledger before closing entries were
prepared:
Revenue $1,200 Cash $1,300
Expenses $640 Accounts Receivable $420
Capital $7,000 Withdrawals $1,000
After closing entries are posted, what is the balance in the Capital account?
A) $7,560
B) $7,000
C) $6,560
D) Closing entries do not affect the Capital account.
39) The following normal account balances were found on the general ledger before closing entries were
prepared:
Revenue $800 Cash $600
Expenses $410 Accounts Receivable $430
Capital $7,200 Withdrawals $1,300
After closing entries are posted, what is the balance in the Cash account?
A) $800
B) $0
C) $200
D) $600
40) The entry to close the Withdrawal account was entered in reverse—the Withdrawal account was
debited and Capital credited. The result of this error is that:
A) before closing it, Income Summary will have a credit balance.
B) before closing it, Income Summary will have a debit balance.
C) the end of period capital will be understated.
D) the end of period capital will be overstated.