Chapter 4 – Completing the Accounting Cycle
LEARNING OBJECTIVES:
126. Of the following steps of the accounting cycle, which step should be completed last?
a.
An adjusted trial balance is prepared.
b.
Transactions are posted to the ledger.
c.
An unadjusted trial balance is prepared.
d.
Adjusting entries are journalized and posted to the ledger.
LEARNING OBJECTIVES:
127. The accounting cycle requires three trial balances be done. In what order should they be prepared?
a.
post-closing, unadjusted, adjusted
b.
unadjusted, post-closing, adjusted
c.
unadjusted, adjusted, post-closing
d.
post-closing, adjusted, unadjusted
LEARNING OBJECTIVES:
128. During the end-of-period processing, which of the following best describes the logical order of steps?
a.
b.
c.
d.
LEARNING OBJECTIVES:
Chapter 4 – Completing the Accounting Cycle
129. A fiscal year for a business
a.
ordinarily begins on the first day of a month and ends on the last day of the following twelfth month
b.
is determined by the federal government
c.
always begins on January 1 and ends on December 31 of the same year
d.
should end at the height of the business’s annual operating cycle
130. The natural business year is a
a.
fiscal year that ends when business activities are at their lowest point
b.
calendar year that ends when business activities are at their lowest point
c.
fiscal year that ends when business activities are at their highest point
d.
calendar year that ends when business activities are at their highest point
131. A business’s current assets divided by its current liabilities is equal to its
a.
current ratio.
b.
working capital.
c.
current net income.
d.
current equity.
Chapter 4 – Completing the Accounting Cycle
132. The end-of-period spreadsheet
a.
is an integral part of the accounting cycle
b.
eliminates the need to rewrite the financial statements
c.
is a working paper that is required
d.
is used to summarize account balances and adjustments for the financial statements
133. Which one of the steps below is not aided by the preparation of the end-of-period spreadsheet?
a.
preparing the adjusted trial balance
b.
posting to the general ledger
c.
preparing the financial statements
d.
preparing the closing entries
134. An end-of-period spreadsheet includes columns for
a.
adjusting entries
b.
closing entries
c.
reversing entries
d.
adjusting and closing entries
Chapter 4 – Completing the Accounting Cycle
135. When the end-of-period spreadsheet is complete, the adjustment columns should have
a.
total credits greater than total debits if a net income was earned
b.
total debits greater than total credits if a net loss was incurred
c.
total debits greater than total credits if a net income was earned
d.
total debits are equal to total credits
136. The difference between the totals of the debit and credit columns of the Adjusted Trial Balance columns on the end-
of-period spreadsheet
a.
is the amount of net income or loss
b.
indicates there is an error on the end–of-period spreadsheet
c.
is the amount of retained earnings
d.
is the difference between revenue and expenses
137. Net income appears on the end–of-period spreadsheet in the
a.
debit column of the Balance Sheet columns
b.
debit column of the Adjustments columns
c.
debit column of the Income Statement columns
d.
credit column of the Income Statement columns
Chapter 4 – Completing the Accounting Cycle
138. A net loss appears on the end-of-period spreadsheet in the
a.
debit column of the Balance Sheet columns
b.
credit column of the Balance Sheet columns
c.
debit column of the Income Statement columns
d.
credit column of the Adjustments columns
139. After net income is entered on the end-of-period spreadsheet, the Balance Sheet Debit and Credit columns must
a.
be the same amount as the total amount of the Income Statement Debit and Credit columns
b.
equal each other
c.
be the same amount as the total amount in the Adjusted Trial Balance Debit and Credit columns
d.
not be equal to each other and need not be the same total amounts as any other pair of columns on the end–of–
period spreadsheet
140. Which of the statements below indicates that a company earned a net income for the period?
a.
The sum of the credits exceeds the sum of the debits in the Balance Sheet columns on the end-of-period
spreadsheet.
b.
The sum of the credits exceeds the sum of the debits in the Income Statement columns on the end-of-period
spreadsheet.
c.
The sum of the debits exceeds the sum of the credits in the Income Statement columns on the end-of-period
spreadsheet.
d.
Cash inflows exceed cash outflows.
Chapter 4 – Completing the Accounting Cycle
141. Which of these titles would appear in the Income Statement columns of the end-of-period spreadsheet?
a.
Cash
b.
Prepaid Insurance
c.
Unearned Revenue
d.
Net Loss
142. Which of the accounts below would not appear in the balance sheet columns of the end-of-period spreadsheet?
a.
Common Stock
b.
Service Revenue
c.
Unearned Revenue
d.
Cash
143. Which of these accounts would appear in the Balance Sheet columns of the end-of-period spreadsheet?
a.
Consulting Revenue
b.
Prepaid Insurance
c.
Rent Expense
d.
Fees Earned
Chapter 4 – Completing the Accounting Cycle
144. Daniel Corporation’s end-of-period spreadsheet at the end of July has $4,950 in the Balance Sheet Credit column for
Accumulated Depreciation. The end-of-period spreadsheet at the end of August has $7,600 in the Balance Sheet Credit
column for Accumulated Depreciation. What is the amount of the depreciation expense adjustment for the month of
August?
a.
$12,550
b.
$7,600
c.
$4,950
d.
$2,650
145. Which of the items below does not appear on the end-of-period spreadsheet?
a.
adjusting entries
b.
the unadjusted trial balance
c.
closing entries
d.
the dividends account
146. An indication that the end-of-period spreadsheet columns are in balance and the spreadsheet is complete is
a.
the word “Total” written at the bottom of each pair of columns
b.
the double rule under each pair of columns
c.
the circles around each total
d.
the final figures written in ink
Chapter 4 – Completing the Accounting Cycle
147. 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
148. 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
149. On September 1, the company pays rent for twelve months in advance and debits an asset account. At year end, the
adjusting entry on the end-of-period spreadsheet would
a.
increase an expense account
b.
decrease a liability account
c.
increase an asset account
d.
decrease an expense account
Chapter 4 – Completing the Accounting Cycle
150. On March 1, a company collects revenue in advance for the next twelve months and credits a liability account. The
adjusting entry at year end on the end-of-period spreadsheet would
a.
increase a liability account
b.
decrease an asset account
c.
decrease a revenue account
d.
decrease a liability account
151. Which of the following is not an essential part of the accounting records?
a.
the journal
b.
the ledger
c.
the chart of accounts
d.
the end-of-period spreadsheet
152. 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
Chapter 4 – Completing the Accounting Cycle
153. 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
154. 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.
Chapter 4 – Completing the Accounting Cycle
155. 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.
156. 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?
157. You have just accepted your first job out of college, which requires you to evaluate loan requests at Eastwood
National Bank. The first loan request you receive is from Richard Enterprises. Richard Tracy, the CEO, is requesting
$105,000 and brings you the following trial balance (or statement of accounts) for the first year of operations ended
December 31.
What three accounts do you think should be relabeled for greater clarity?
Chapter 4 – Completing the Accounting Cycle
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 Expenses
700
Miscellaneous Expenses
470
Totals
$110,000
$110,000
158. You have just accepted your first job out of college, which requires you to evaluate loan requests at Eastwood
National Bank. The first loan request you receive is from Richard Enterprises. Richard Tracy, the CEO, is requesting
$105,000 and brings you the following trial balance (or statement of accounts) for the first year of operations ended
December 31.
Which of the following accounts do you think might need to be adjusted before an accurate set of financial statements
could be prepared?
Chapter 4 – Completing the Accounting Cycle
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
159. The balances for the accounts listed below appear in the Adjusted Trial Balance columns of the end-of-period
spreadsheet. Indicate whether each balance should be extended to (a) an Income Statement column or (b) a Balance Sheet
column.
1. Retained Earnings
2. Common Stock
3. Depreciation Expense
4. Accumulated Depreciation
5. Fees Earned
6. Unearned Fees
7. Supplies
8. Supplies Expense
Chapter 4 – Completing the Accounting Cycle
160. The end-of-period spreadsheet for the current year for Jamal Company shows Balance Sheet columns with a debit
total of $630,430 and a credit total of $614,210. This is before the amount for net income or net loss has been included. In
preparing the income statement from the end-of-period spreadsheet, what is the amount of net income or net loss?
161. The end-of-period spreadsheet for the current year for Jamal Company shows Balance Sheet columns with a debit
total of $614,210 and a credit total of $630,430. This is before the amount for net income or net loss has been included. In
preparing the income statement from the work sheet, what is the amount of net income or net loss?
162. The following accounts appear in an adjusted trial balance of Blaine Auto Service Company. Indicate whether each
account would be reported in the (a) current assets, (b) property, plant, and equipment, (c) current liabilities, (d) long-term
liabilities, or (e) stockholders’ equity section of the December 31 balance sheet of Blaine Auto Service Company.
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
Chapter 4 – Completing the Accounting Cycle
163. Describe a classified balance sheet.
section.
LEARNING OBJECTIVES:
164. The balances for the accounts listed below appeared in the Adjusted Trial Balance columns of the end-of-period
spreadsheet. Indicate whether each balance should be extended to (a) the Income Statement columns or (b) the Balance
Sheet columns.
(1)
Salaries Payable
(7)
Retained Earnings
(2)
Fees Earned
(8)
Equipment
(3)
Accounts Payable
(9)
Accounts Receivable
(4)
Common Stock
(10)
Accumulated Depreciation
(5)
Supplies Expense
(11)
Salary Expense
(6)
Unearned Rent
(12)
Depreciation Expense
(a)
Income statement: 2, 5, 11, 12
(b)
Balance sheet: 1, 3, 4, 6, 7, 8, 9, 10
LEARNING OBJECTIVES:
(e) Stockholders’ equity
(b) Property, plant, and equipment
(c) Current liabilities
(d) Long-term liabilities
(b) Property, plant, and equipment
(d) Long-term liabilities
(a) Current assets
(a) Current assets
LEARNING OBJECTIVES:
Chapter 4 – Completing the Accounting Cycle
165. The following balance sheet contains errors.
Mark Brock Services Co.
Balance Sheet
For the Year Ended December 31
Assets
Current assets:
Cash
$ 7,170
Accounts payable
7,500
Supplies
2,590
Prepaid insurance
800
Land
24,000
Total current assets
$ 42,060
Property, plant, and
equipment:
Building
$43,700
Equipment
29,250
Total property, plant,
and equipment
72,950
Total assets
$131,510
Liabilities
Current liabilities:
Accounts receivable
$10,000
Accum. depr.—
building
12,525
Accum. depr.—
equipment
7,340
Net income
11,500
Total liabilities
$41,365
Stockholders’ Equity
Wages payable
$ 1,500
Common stock
86,645
Retained earnings
2,000
Total stockholders’ equity
90,145
Total liabilities and
stockholders’ equity
$131,510
(a) List the errors in the balance sheet above and (b) prepare a corrected balance sheet.
Chapter 4 – Completing the Accounting Cycle
Accounts payable should be a current liability.
Accounts receivable should be a current asset.
Wages payable should be a current liability.
Current assets:
Property, plant, and equipment:
Accum. depr.—equipment
Total assets
Current liabilities:
Total liabilities
Common stock
Retained earnings
$97,645
Chapter 4 – Completing the Accounting Cycle
166. Indicate whether each of the following would be reported in the financial statements as a (a) current asset, (b) current
liability, (c) revenue, or (d) expense:
(1)
Supplies
(5)
Supplies Expense
(2)
Unearned Fees
(6)
Prepaid Insurance
(3)
Prepaid Advertising
(7)
Accounts Payable
(4)
Advertising Expense
(8)
Fees Earned
(1)
current asset
(2)
current liability
(3)
current asset
(4)
expense
(5)
expense
(6)
current asset
(7)
current liability
(8)
revenue
167. The following accounts were taken from the Adjusted Trial Balance columns of the end-of-period spreadsheet for
April 30, for Finnegan Co.:
Accumulated Depreciation
$32,000
Fees Earned
78,000
Depreciation Expense
7,250
Rent Expense
34,000
Prepaid Insurance
6,000
Supplies
400
Supplies Expense
1,800
Prepare an income statement.
Fees earned
$78,000
Expenses:
$34,000
7,250
$34,950
Chapter 4 – Completing the Accounting Cycle
168. The following revenue and expense account balances were taken from the Income Statement columns of the end-of–
period spreadsheet for Fraser Services Co. for December 31:
Depreciation Expense
$ 4,950
Insurance Expense
2,900
Miscellaneous Expense
1,200
Rent Expense
24,000
Service Revenue
92,500
Supplies Expense
3,150
Utilities Expense
5,000
Wages Expense
63,750
Prepare an income statement.
Service revenue
Operating expenses:
Chapter 4 – Completing the Accounting Cycle
169. The following data were taken from the Adjusted Trial Balance columns of the end-of-period spreadsheet for April
30 for Abigail Company:
Accumulated Depreciation
$42,400
Prepaid Rent
6,800
Supplies
850
Unearned Fees
7,310
Trucks
49,300
Cash
3,400
Common Stock
2,000
Retained Earnings
?
Prepare a classified balance sheet.
Current assets:
Total assets
Current liabilities: