Learning Objective B-4
1) Which of the following will cause the unadjusted trial balance to be out of balance?
A) The temporary accounts were not closed.
B) An adjusting entry to record the $2,000 of unearned revenue now earned was recorded as a
debit to Unearned revenue and a debit to Revenue.
C) The permanent accounts were not closed.
D) All of these will cause the unadjusted trial balance to be out of balance.
2) Adjusting entries ________.
A) are prepared to prove that debits equal credits
B) are prepared after financial statements are prepared
C) get the temporary accounts ready for the next accounting period
D) are recorded after the unadjusted trail balance is prepared
3) Which of the following accounts are permanent accounts?
A) Common stock
B) Accounts payable
C) Accumulated depreciation
D) All of these are permanent accounts.
4) Which of the following accounts are temporary accounts?
A) Common stock
B) Accumulated depreciation
C) Depreciation expense
D) All of these are permanent accounts.
5) Which of the following accounts are temporary accounts?
A) Unearned revenue
B) Accounts receivable
C) Cash
D) Sales
6) Which of the following accounts are temporary accounts?
A) Prepaid insurance
B) Insurance expense
C) Accounts payable
D) Retained earnings
7) Which of the following accounts are permanent accounts?
A) Dividends
B) Insurance expense
C) Revenue
D) Retained earnings
8) T Ball, Inc. has the following accounts on its adjusted trial balance at December 31:
Debit
Credit
Cash
$ 700
Accounts receivable
300
Insurance expense
100
Equipment
800
Accumulated depreciation
$ 400
Depreciation expense
200
Sales
1,000
Wages expense
400
Common stock
1,000
Dividends
100
Retained earnings
200
How many of these accounts are temporary accounts and will be closed at the end of the account
period?
A) Seven
B) Six
C) Five
D) Four
9) Closem, Inc. has the following accounts with normal balances on its adjusted trial balance at
December 31, 2011:
Cash
$3,800
Unearned revenue
300
Insurance expense
200
Truck
1,000
Accumulated depreciation
300
Depreciation expense
100
Sales
1,000
Salary expense
400
Common stock
3,000
Dividends
100
Retained earnings
1,000
What will be the Retained earnings balance on the postclosing trial balance after closing the
temporary accounts listed above?
A) $5,500
B) $1,200
C) $1,500
D) $200
10) Closing entries are posted to the general ledger prior to posting adjusting entries.
11) Expense accounts are closed by crediting them and debiting Retained earnings.
12) The Utilities expense account is closed by debiting its balance and crediting Retained
earnings.
13) Dividends, revenues and expenses are temporary accounts.
14) Permanent accounts are closed into Retained earnings at the end of the accounting period.
15) The postclosing trial balance provides a check to see that the general ledger’s debits are equal
to its credits and to see that all temporary accounts have been closed.
16) All accounts begin each fiscal year with zero balances.
17) Clothes, Inc.’s adjusted trial balance is below:
Clothes, Inc.
Adjusted Trial Balance
December 31, 2011
Debit
Credit
Cash
$ 25,000
Unearned revenue
$ 10,000
Salary payable
5,000
Common stock
6,000
Dividends
6,000
Service revenue
80,000
Salary expense
60,000
Advertising expense
10,000
Totals
$101,000
$101,000
Record Clothes’ December 31, 2011 closing entries using the information above.
Date
Transaction
Debit
Credit
Date
Date
Date
18) A Cut Above, Inc. has the following accounts with normal balances on its December 31,
2011 adjusted trial balance after its first month of business.
Cash
$ 400
Accounts receivable
300
Insurance expense
200
Equipment
600
Accumulated depreciation
100
Depreciation expense
100
Service revenue
1,000
Wages payable
100
Wages expense
400
Supplies expense
100
Common stock
1,000
Dividends
100
A. Prepare A Cut Above’s income statement, statement of changes in shareholders’ equity, and
classified balance sheet for the month ended and at December 31, 2011.
19) Describe the accounting cycle by discussing each step’s purpose in chronological order.
20) Use the following code to identify each of the accounts listed below:
P: Permanent account
T: Temporary account
________ 1. Office supplies
________ 2. Supplies expense
________ 3. Factory equipment
________ 4. Accumulated depreciation
________ 5. Depreciation expense
________ 6. Accounts receivable
________ 7. Revenue
________ 8. Dividends
________ 9. Retained earnings
________ 10. Common stock
21) Indicate the normal balance of the account with a debit (DR) or credit (CR) and identify each
account as permanent (P) or temporary (T).
Account
Normal
balance
Permanent or
temporary
1.
Cash
2.
Accounts receivable
3.
Sales
4.
Unearned revenue
5.
Inventory
6.
Cost of goods sold
7.
Accounts payable
22) Indicate the normal balance of the account with a DR or CR and identify each account as
permanent (P) or temporary (T).
Account
Normal
balance
Permanent or
temporary
1.
Prepaid insurance
2.
Insurance expense
3.
Notes receivable
4.
Interest revenue
5.
Interest receivable
6.
Notes payable
7.
Interest expense
8.
Interest payable
23) Indicate the normal balance of the account with a DR or CR and identify each account as
permanent (P) or temporary (T).
Account
Normal
balance
Permanent or
temporary
1.
Equipment
2.
Depreciation expense
3.
Accumulated
depreciation
4.
Salary expense
5.
Salaries payable
6.
Common stock
7.
Dividends
8.
Prepaid rent
9.
Rent expense