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Exam 4: Completing the Accounting Cycle

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Question 51

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The accounting cycle refers to the sequence of steps used in preparing the work sheet.

A) True
B) False

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Question 52

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The first five steps in the accounting cycle include analyzing transactions, journalizing, posting, preparing an unadjusted trial balance, and recording adjusting entries.

A) True
B) False

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Question 53

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On a work sheet, the adjusted balances of revenues and expenses are sorted to the Income Statement columns of the work sheet.

Permanent accounts carry their balances into the next accounting period.

The ________ refers to the steps in preparing financial statements for users.

The Unadjusted Trial Balance columns of a company's work sheet shows the Store Supplies account with a balance of $750. The Adjustments columns shows a credit of $425 for supplies used during the period. The amount shown as Store Supplies in the Balance Sheet columns of the work sheet is:

The current ratio is computed by dividing current liabilities by current assets.

Closing entries are necessary so that owner's capital will begin each period with a zero balance.

A company's post-closing trial balance has a debit total of $475,000 and a credit total of $457,000. This indicates that ________.

Tara Westmont, the proprietor of Tiptoe Shoes, had annual revenues of $185,000, expenses of $103,700, and withdrew $18,000 from the business during the current year. The owner's capital account before closing had a balance of $297,000. - The ending owner's capital balance after closing is:

Which of the following statements is true?

The balances in the unadjusted columns of a work sheet will agree with:

What is the purpose of closing entries? Describe the closing process.

Long-term investments can include land held for future expansion.

Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

For the year ended December 31, a company had revenues of $187,000 and expenses of $109,000. The owner withdrew $37,000 during the year. Which of the following entries could not be a closing entry?

Which of the following accounts would be included in a post-closing trial balance?

An expense account is normally closed by debiting Income Summary and crediting the expense account.

Match the following terms with the appropriate definition. A. Permanent accounts F. Work sheet B. Accounting cycle G. Closing entries C. Temporary accounts H. Post-closing trial balance D. Working papers I. Operating cycle of a business E. Income summary J. Pro forma statements _____ 1. Various analyses and internal documents prepared by accountants when organizing information for internal and external decision makers. 2. The time span from when cash is used to acquire goods and services until cash is received from the sale of those goods and services. _____ 3. A temporary account only used for the closing process that contains a credit for the sum of all revenues and a debit for the sum of all expenses. _____ 4. A widely used working paper that is a useful tool for preparers in working with accounting information, usually not available to external decision makers. _____ 5. A list of permanent accounts and their balances from the ledger after all closing entries are journalized and posted. 6. Recurring steps in preparing financial statement performed each accounting period, beginning with analyzing transactions and ending with a post-closing trial balance or reversing entries. _____ 7. Entries used to transfer end-of-period balances in revenue, expense, and withdrawals accounts to the permanent owner's capital account. _____ 8. Statements that show the effects of proposed transactions as if the transactions had already occurred. 9. Accounts that report on activities related to one or more future accounting periods; they carry their ending balances into the next period. _____ 10. Accounts that accumulate data related to one accounting period only; they include income statement accounts, withdrawals, and the Income Summary account.

Trekker Bikes' current assets are $300 million and its current liabilities are $125 million. Its current ratio is 0.417.