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Chapter 04 - Completing the Accounting Cycle
Chapter 4
Completing the Accounting Cycle
QUESTIONS
1. The four-step closing entry process is: (i) close the revenue (and gain) accounts to
2. Closing entries affect temporary accounts: revenues, expenses, withdrawals, and
income summary. Specifically, closing entries at the end of an accounting period
3. (i) Closing entries prepare the temporary accounts—revenue and expense
4. The Income Summary account is used to summarize the period’s revenues and
expenses. As a result, it temporarily has a balance equal to the net income (or net
5. Yes, an error would have occurred because a post-closing trial balance
6. A work sheet can be used to collect and organize data for preparing (i) adjusting
7. The adjustments in the Adjustments columns of a work sheet are identified
by letters to link the debits with the credits to ensure that the entries are complete
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Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Chapter 04 - Completing the Accounting Cycle
8. A company’s operating cycle is the normal time between paying cash for
9. Assets on a typical classified balance sheet include current assets and
10. Unearned revenue is reported as a liability—usually a current liability.
11. Plant assets (also called property, plant and equipment or long-lived
12.AReversing entries simplify subsequent entries for accrued expenses and
13.AThe following reversing entry could be made as of the first day of the next
accounting period, after the post-closing trial balance is completed and financial
statements are prepared.
14. The five main categories of noncurrent assets on Apple’s balance sheet are:
15. Samsung’s current assets are: Cash and cash equivalents; Short-term financial
16. Google has eight current liability accounts: Accounts payable; Short-term debt;
17. The closing entry likely recorded on December 31, 2013, to transfer the company’s
net income to its Retained Earnings account would have been (in millions of Korean
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Education.
Chapter 04 - Completing the Accounting Cycle
won)
QUICK STUDIES
Quick Study 4-1 (5 minutes)
a. 5 d. 3
Quick Study 4-2 (5 minutes)
a. BS d. IS
Quick Study 4-3 (10 minutes)
Computation of B. Warton, Capital for the Dec. 31, 2015, balance sheet
B. Warton, Capital (beginning).........................$ 72,000
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Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Chapter 04 - Completing the Accounting Cycle
Quick Study 4-4 (20 minutes)
CLAUDELL COMPANY
Work Sheet
Unadjusted
Trial Balance Adjustments
Adjusted
Trial Balance
Income
Statement Balance Sheet
Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Prepaid Rent....................1,000 (a) 200 800 800
Services Revenue............ 55,600 (b) 900 56,500 56,500
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Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter 04 - Completing the Accounting Cycle
Quick Study 4-5 (10 minutes)
3. “d”; Temporary accounts accumulate data related to one accounting
period.
Quick Study 4-6 (15 minutes)
To close the revenue account.
To close the expense accounts.
31 Income Summary......................................... 3,000
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Education.
Chapter 04 - Completing the Accounting Cycle
Quick Study 4-7 (5 minutes)
Quick Study 4-8 (5 minutes)
1. (e) Analyzing transactions and events.
2. (h) Journalizing transactions and events.
3. (a) Posting the journal entries.
Quick Study 4-9 (10 minutes)
1. B
2. F
Quick Study 4-10 (10 minutes)
a. The closing process is identical under U.S. GAAP and IFRS.
b. Under both U.S. GAAP and IFRS, the initial asset value is measured
using historical cost for nearly all assets.
Quick Study 4-11 (5 minutes)
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Education.
Chapter 04 - Completing the Accounting Cycle
Office supplies.......................................... 2,800
Quick Study 4-12A (10 minutes)
2014—NOT required (2014 shown for instructional purposes only)
Dec. 31 Accounts Receivable.......................................... 12,000
2015
16 Cash .............................................................. 26,700
EXERCISES
Exercise 4-1 (15 minutes)
1. B 5. D 9. C 13. C
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Education.
Chapter 04 - Completing the Accounting Cycle
Exercise 4-2 (20 minutes)
Planta Company
Work Sheet
Adjusted
Trial Balance
Income
Statement
Balance Sheet
& Statement of
Owner’s Equity
No. Account Dr. Cr. Dr. Cr. Dr. Cr.
10
1
Cash.................................... 7,000 7,000
10
6
Accounts receivable.......... 27,200 27,200
7
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Education.
Chapter 04 - Completing the Accounting Cycle
4-207
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Chapter 04 - Completing the Accounting Cycle
Exercise 4-3 (20 minutes)
Instructor note: Entries are shown without an account reference column because no posting is required.
(a) Insurance Expense—Office Equipment.................. 332
Insurance Expense—Store Equipment................... 568
Prepaid Insurance............................................ 900
To record expired insurance.
Exercise 4-4 (25 minutes)
WESTCOTT COMPANY
December 31, 2015
Unadjusted
Trial Balance
Dr. Cr.
Adjustments
Dr. Cr.
Adjusted
Trial Balance
Dr. Cr.
Cash................................................... 21 21
Accounts receivable......................... 12 12
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Education.
Chapter 04 - Completing the Accounting Cycle
Unearned revenue............................ 12 (c) 12
W. Westcott, Capital.......................... 42 42
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Education.
