Chapter 4: Completing the Accounting Cycle
64.
After Net Income or Loss is entered on the work sheet, the debit column total must equal the credit column
total
for the Balance Sheet pair of columns.
a.
True
b.
False
65.
A net loss is shown on the work sheet in the credit columns of both the Income Statement columns and the
Balance
Sheet columns.
a.
True
b.
False
66.
Net income is shown on the work sheet in the Income Statement debit column and the Balance Sheet
credit
column.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
67.
If the totals of the Income Statement debit and credit columns of a work sheet are $27,000 and
$29,000,
respectively, after all account balances have been extended, the amount of the net loss is
$2,000.
a.
True
b.
False
68.
The balance in the capital account on the worksheet will equal the amount presented in the balance sheet.
a.
True
b.
False
69.
Since the adjustments are entered on the work sheet, it is not necessary to record them in the journal or post
them
to the ledger.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
70.
The chart of accounts, the journal, and the ledger are essential parts of the accounting system.
a.
True
b.
False
71.
What is the major difference between the unadjusted trial balance and the adjusted trial balance?
a.
The adjusted trial balance will show the net income (loss) as an additional account.
b.
Unlike the adjusted trial balance, the unadjusted trial balance will continue with the end-of-period
processing
even if it is not in balance.
c.
The adjusted trial balance includes the postings of the adjustments for the period in the balance of
the
accounts.
d.
The adjusted trial balance will be used to record the adjustments for the period.
72.
Once the adjusting entries are posted, the Adjusted Trial Balance is prepared to
a.
verify that the debits and credits are in balance
b.
verify that the net income correctly flows into the statement of owner’s equity from the income statement
c.
verify that the net income (loss) is correct for the period
d.
verify the correct flow of accounts into the financial statements
Chapter 4: Completing the Accounting Cycle
73.
When preparing the statement of owner’s equity, the beginning capital balance can always be found
a.
in the Income Statement columns of the work sheet
b.
in the statement of cash flows
c.
in the general ledger
d.
in the Balance Sheet columns of the work sheet
74.
Accumulated Depreciation appears on the
a.
balance sheet in the current assets section
b.
balance sheet in the property, plant, and equipment section
c.
balance sheet in the long-term liabilities section
d.
income statement as an operating expense
75.
Notes receivable due in 390 days appear on the
a.
balance sheet in the current assets section
b.
balance sheet in the noncurrent assets section
c.
balance sheet in the current liabilities section
d.
income statement as an expense
Chapter 4: Completing the Accounting Cycle
76.
Unearned Fees appear on the
a.
balance sheet in the current assets section
b.
balance sheet as a current liability
c.
balance sheet in the owner’s equity section
d.
income statement as revenue
77.
Which one of the fixed asset accounts listed below will not have a related contra asset account?
a.
Office Equipment
b.
Land
c.
Delivery Equipment
d.
Building
78.
Prepaid insurance is reported on the balance sheet as a
a.
current asset
b.
fixed asset
c.
current liability
d.
long-term liability
Chapter 4: Completing the Accounting Cycle
79.
The income statement is prepared from
a.
the adjusted trial balance
b.
the Income Statement columns of the end–of-period spreadsheet
c.
either the Adjusted Trial Balance or the Income Statement columns of the end–of-period spreadsheet
d.
both the Adjusted Trial Balance and the Income Statement columns of the end–of-period spreadsheet
80.
The first item appearing on the statement of retained earnings is
a.
net income
b.
the ending balance of retained earnings
c.
owner withdrawals
d.
the beginning balance of retained earnings
81.
The statement of owner’s equity should be prepared
a.
before the income statement and after the balance sheet
b.
before the income statement and balance sheet
c.
after the income statement and balance sheet
d.
after the income statement and before the balance sheet
Chapter 4: Completing the Accounting Cycle
82.
The income statement should be prepared
a.
before the statement of owner’s equity and balance sheet
b.
after the statement of owner’s equity and before the balance sheet
c.
after the statement of owner’s equity and balance sheet
d.
after the balance sheet and before the statement of owner’s equity
Use the adjusted trial balance for Stockton Company below to answer the questions that follow.
Stockton Company
Adjusted Trial Balance
For the Year Ended December 31
Cash
6,530
Accounts Receivable
2,100
Prepaid Expenses
700
Equipment
13,700
Accumulated Depreciation
1,100
Accounts Payable
1,900
Notes Payable
4,300
Bob Steely, Capital
12,940
Bob Steely, Withdrawals
790
Fees Earned
9,250
Wages Expense
2,500
Rent Expense
1,960
Utilities Expense
775
Depreciation Expense
250
Miscellaneous Expense
185
Totals
29,490
29,490
Chapter 4: Completing the Accounting Cycle
83.
Determine the net income (loss) for the period.
a.
net income $9,250
b.
net loss $790
c.
net loss $5,670
d.
net income $3,580
84.
Determine the owner’s equity ending balance.
a. $12,150
b. $15,730
c. $6,480
d. $21,400
85.
Determine total assets.
a. $24,130
b. $15,830
c. $21,930
d. $23,030
Chapter 4: Completing the Accounting Cycle
86.
Determine the current assets.
a. $23,030
b. $9,330
c. $21,930
d. $8,630
87.
Determine the total liabilities for the period.
a. $1,900
b. $6,200
c. $4,300
d. $20,240
88.
The balance sheet should be prepared
a.
before the income statement and the statement of owner’s equity
b.
before the income statement and after the statement of owner’s equity
c.
after the income statement and the statement of owner’s equity
d.
after the income statement and before the statement of owner’s equity
Chapter 4: Completing the Accounting Cycle
89.
The statement of owner’s equity begins with the beginning balance followed by
a.
adding net income less withdrawals
b.
adding net income plus investments
c.
adding investments less withdrawals
d.
adding investments plus net income less withdrawals
90.
The income statement will present
a.
revenues less expenses (ordered largest to smallest amount) with miscellaneous expense listed last
b.
revenues less expenses (ordered smallest to largest amounts) with miscellaneous expense listed last
c.
revenues less expenses (ordered in alphabetical order)
d.
revenues less expenses (order is not important)
91.
The classified balance sheet will show which asset subsections?
a.
current assets and other equity
b.
current assets and property, plant, and equipment
c.
current liabilities and short-term assets
d.
other revenues and property, plant and equipment
Chapter 4: Completing the Accounting Cycle
92.
The classified balance sheet will show which liability subsections?
a.
current liabilities and long-term liabilities
b.
current liabilities and other liabilities
c.
other liabilities and long-term liabilities
d.
present liabilities and tomorrow’s liabilities
93.
Debts listed as current liabilities are those that
a.
will be paid in less than one year
b.
are due to be paid in 5 to 10 years
c.
are due to be paid in more than one year
d.
are owed to the owner and will never be paid
94.
Owner’s equity is
a.
added to assets and the two are equal to liabilities
b.
added to liabilities and the two are equal to assets
c.
subtracted from liabilities and the net amount is equal to assets
d.
equal to the total of assets and liabilities
Chapter 4: Completing the Accounting Cycle
95.
Balance sheet accounts
a.
represent amounts accumulated during a specific period of time
b.
are called real accounts
c.
have zero balances after the closing entries have been posted
d.
are not affected by adjustments
96.
On which financial statement will Income Summary be shown?
a.
statement of owner’s equity
b.
balance sheet
c.
income statement
d.
no financial statement
97.
Which of the following is not true about closing entries?
a.
There are four closing entries that update the owner’s equity account.
b.
After the second closing entry, the income summary account is equal to the net income or loss for the period.
c.
All real accounts are closed at the end of the period.
d.
By closing nominal accounts at the end of the period to zero, it is possible to isolate next period’s information
correctly.
Chapter 4: Completing the Accounting Cycle
98.
The income summary account is also called
a.
the imprest account
b.
the clearing account
c.
the adjustments account
d.
the zero-out account
99.
After posting the second closing entry to the income summary account, the balance will be equal to
a.
zero
b.
owner’s equity
c.
revenues for the period
d.
the net income or net loss for the period
100.
What is the first account that should be listed in the post-closing trial balance?
a.
Income Summary
b.
Owner, Capital
c.
Cash
d.
Fees Earned
Chapter 4: Completing the Accounting Cycle
101.
Which of the following account groups are nominal accounts?
a.
Cash, Dividends, Wages Payable
b.
Prepaid Insurance, Equipment, Fees Earned
c.
Common Stock, Dividends, Income Summary
d.
Rent Revenue, Fees Earned, Miscellaneous Expense
102.
There are four closing entries. The first one is to close revenues, the second one is to close expenses, the third one
is to close , and the last one is to close the .
a.
Income Summary, drawing account
b.
Income Summary, capital account
c.
Income Summary, assets
d.
drawing account; Income Summary
103.
Closing entries
a.
need not be journalized if adjusting entries are prepared
b.
need not be posted if the financial statements are prepared from the work sheet
c.
are not needed if adjusting entries are prepared
d.
must be journalized and posted
Chapter 4: Completing the Accounting Cycle
104.
Closing entries are dated in the journal as of
a.
the date they are actually journalized, although they are generally prepared after the end of the
accounting
period
b.
the last day of the accounting period, although they are actually journalized after the end of the
accounting
period
c.
the first day of the accounting period, although they are actually journalized well after the beginning of
the
accounting period
d.
the first day of the subsequent accounting period
105.
Which of the accounts below would be closed by posting a debit to the account?
a.
Unearned Revenue
b.
Fees Earned
c.
Josh Morton, Drawing
d.
Miscellaneous Expense
106.
Which of the following accounts should be closed to Income Summary at the end of the fiscal year?
a.
Service Revenue
b.
Equipment
c.
Prepaid Insurance
d.
Unearned Rent
Chapter 4: Completing the Accounting Cycle
107.
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
108.
Which of the following accounts will be closed to the capital account at the end of the fiscal year?
a.
Rent Expense
b.
Fees Earned
c.
Income Summary
d.
Depreciation Expense
109.
The entry to close the appropriate insurance account at the end of the accounting period is
a.
debit Income Summary; credit Prepaid Insurance
b.
debit Prepaid Insurance; credit Income Summary
c.
debit Insurance Expense; credit Income Summary
d.
debit Income Summary; credit Insurance Expense
Chapter 4: Completing the Accounting Cycle
110.
Which of the following accounts ordinarily appears in the post-closing trial balance?
a.
Fees Earned
b.
Supplies Expense
c.
Zane White, Drawing
d.
Unearned Rent
111.
The post-closing trial balance differs from the adjusted trial balance in that it does not
a.
take into account closing entries
b.
take into account adjusting entries
c.
include balance sheet accounts
d.
include income statement accounts
Chapter 4: Completing the Accounting Cycle
112.
The following accounts were taken from the Adjusted Trial Balance columns of the work sheet:
Accumulated Depreciation
Fees Earned
Depreciation Expense
Insurance Expense
Prepaid Insurance
Supplies
Supplies Expense
Net income for the period is
a. $5,500
b. $11,900
c. $17,400
d. $8,700
Chapter 4: Completing the Accounting Cycle
113.
A summary of selected ledger accounts appear below for Alberto’s Plumbing Services for the current calendar year-
end.
Alberto, Capital
12/31
8,500
1/1
6,500
12/31
15,000
Alberto, Drawing
6/30
3,500
12/31
8,500
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
114.
Diane’s Designs purchased a one-year liability insurance policy on March 1 of this year for $8,400 and recorded
it
as a prepaid expense. Which of the following amounts would be recorded for insurance expense during the
adjusting process at the end of Diane’s first month of operations on March 31?
a. $8,400
b. $840
c. $700
d. $7,700
Chapter 4: Completing the Accounting Cycle
115.
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
Income Summary
175
925
b. Dec. 31 Income Summary
Fees Earned
925
750
Rent Revenue
175
c. Dec. 31 Revenues
Income Summary
925
925
d. Dec. 31 Income Summary
Revenues
925
925