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Exam 4: Completing the Accounting Cycle

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Question 21

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Use the following partial work sheet from Carmelo Bowl to prepare its income statement, statement of owner's equity and a classified balance sheet (Assume the owner did not make any investments in the business this year.)

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Question 22

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The F. Mercury, Capital account has a credit balance of $37,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800, and withdrawals are $9,000, what is the ending balance in the F. Mercury, Capital account after all closing entries are made?

A) $28,000.
B) $35,400.
C) $52,400.
D) $37,000.
E) $43,400.

F) B) and E)
G) A) and B)

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Question 23

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The Income Summary account is a permanent account that will be carried forward period after period.

A worksheet can be helpful in showing the effects of proposed or "what if" transactions but not in helping to prepare interim financial statements.

If the Balance Sheet and Statement of Owner's Equity columns of a work sheet fail to balance when the net income is added to the Balance Sheet and Statement of Owner's Equity Credit column, the cause could be:

Compute Chase Company's current ratio using the following information: $\begin{array} { | l | l | l | l | } \hline \text { Cash } & \$ 20,000 & \text { Accounts Payable } & \$ 8,000 \\\hline \text { Accounts Receivable } & 5,000 & \text { Salaries Payable } & 12,000 \\\hline \text { Prepaid Rent } & 7,000 & \text { Note Payable (due in 2 years) } & 150,000 \\\hline \text { Equipment } & 12,000 & & \\\hline\end{array}$

After posting the entries to close all revenue and expense accounts, the Income Summary account of Cleaver Auto Services has a $4,000 debit balance. This result implies that Cleaver earned a net income of $4,000.

All necessary amounts to prepare the balance sheet, including ending owner's capital, can be found in the Balance Sheet columns of the work sheet.

A classified balance sheet differs from an unclassified balance sheet in that

Flagg records adjusting entries at its December 31 year end. At December 31, employees had earned $12,000 of unpaid and unrecorded salaries. The next payday is January 3, at which time $30,000 will be paid. Prepare the January 1 journal entry to reverse the effect of the December 31 salary expense accrual.

Reversing entries are optional.

Based on the following information from Schrute Company's balance sheet, calculate the current ratio. $\begin{array} { | l | r | } \hline \text { Current assets } & \$ 87,000 \\\hline \text { Investments } & 50,000 \\\hline \text { Plant assets } & 220,000 \\\hline \text { Current Liabilities } & 39,000 \\\hline \text { Long-term Liabilities } & 90,000 \\\hline \text { A. Schrute, Capital } & 228,000 \\\hline\end{array}$

The trial balance prepared after all closing entries have been journalized and posted is called the:

During the closing process, Owner's Capital is closed to the Owner's Withdrawals account.

All of the following regarding reversing entries are true except:

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the owner's capital account is the:

All of the following statements regarding the Income Statement columns on the worksheet are true except:

Adjusting entries are usually entered in the work sheet before they are entered in the general journal.

Closing entries are required at the end of each accounting period to close all ledger accounts.

After posting the entries to close all revenue and expense accounts, Marker Company's Income Summary account has a credit balance of $6,000, and its Marker, Withdrawals account has a debit balance of $2,500. These balances indicate that net income for the current accounting period amounted to $3,500.