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Explain why temporary accounts are closed each period.

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Temporary accounts accumulate data relat...

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The closing process is a step in the accounting cycle that prepares accounts for the next accounting period.

A) True
B) False

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Reversing entries are optional.

A) True
B) False

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On January 1, Eastern College received $1,200,000 from its students for the spring semester that it recorded in Unearned Tuition and Fees. The term spans four months beginning on January 2 and the college spreads the revenue evenly over the months of the term. What amount of tuition revenue should the college recognize on January 31?


A) $300,000.
B) $600,000.
C) $800,000.
D) $900,000.
E) $1,200,000.

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

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The following information is available for the Higgins Travel Agency, Inc. After recording these closing entries, what will be the balance in the Retained Earnings account? The following information is available for the Higgins Travel Agency, Inc. After recording these closing entries, what will be the balance in the Retained Earnings account? A) $75,500. B) $184,500. C) $99,500. D) $160,500. E) $130,000.


A) $75,500.
B) $184,500.
C) $99,500.
D) $160,500.
E) $130,000.

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

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The Unadjusted Trial Balance columns of a work sheet total $84,000. The Adjustments columns contain entries for the following: 1. Office supplies used during the period, $1,200. 2) Expiration of prepaid rent, $700. 3) Accrued salaries expense, $500. 4) Depreciation expense, $800. 5) Accrued service fees receivable, $400. The Adjusted Trial Balance columns total is:


A) $80,400.
B) $84,000.
C) $85,700.
D) $85,900.
E) $87,600.

F) None of the above
G) A) and B)

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On August 1, a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date. Assuming no previous adjustments have been made for the expired insurance, the correct adjusting entry on December 31 would be:


A) On August 1, a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date. Assuming no previous adjustments have been made for the expired insurance, the correct adjusting entry on December 31 would be: A) B) C) D) E)
B) On August 1, a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date. Assuming no previous adjustments have been made for the expired insurance, the correct adjusting entry on December 31 would be: A) B) C) D) E)
C) On August 1, a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date. Assuming no previous adjustments have been made for the expired insurance, the correct adjusting entry on December 31 would be: A) B) C) D) E)
D) On August 1, a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date. Assuming no previous adjustments have been made for the expired insurance, the correct adjusting entry on December 31 would be: A) B) C) D) E)
E) On August 1, a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date. Assuming no previous adjustments have been made for the expired insurance, the correct adjusting entry on December 31 would be: A) B) C) D) E)

F) C) and D)
G) C) and E)

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Closing entries are necessary so that retained earnings will begin each period with a zero balance.

A) True
B) False

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Prior to recording adjusting entries, the Office Supplies account had a $1,750 debit balance. A physical count of the supplies at the end of the period showed $925 of unused supplies on hand. The required adjusting entry is:


A) Prior to recording adjusting entries, the Office Supplies account had a $1,750 debit balance. A physical count of the supplies at the end of the period showed $925 of unused supplies on hand. The required adjusting entry is: A) B) C) D) E)
B) Prior to recording adjusting entries, the Office Supplies account had a $1,750 debit balance. A physical count of the supplies at the end of the period showed $925 of unused supplies on hand. The required adjusting entry is: A) B) C) D) E)
C) Prior to recording adjusting entries, the Office Supplies account had a $1,750 debit balance. A physical count of the supplies at the end of the period showed $925 of unused supplies on hand. The required adjusting entry is: A) B) C) D) E)
D) Prior to recording adjusting entries, the Office Supplies account had a $1,750 debit balance. A physical count of the supplies at the end of the period showed $925 of unused supplies on hand. The required adjusting entry is: A) B) C) D) E)
E) Prior to recording adjusting entries, the Office Supplies account had a $1,750 debit balance. A physical count of the supplies at the end of the period showed $925 of unused supplies on hand. The required adjusting entry is: A) B) C) D) E)

F) A) and E)
G) A) and C)

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Rogers Company's employees are paid a total of $1,600 per day for a 5-day workweek. The employees are paid each Friday. This year the accounting period ends on Tuesday. Prepare the December 31 year-end adjusting journal entry Rogers Company should make to accrue wages.

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The following unadjusted and adjusted trial balances are from the current year's accounting system for Excelsior Inc. Excelsior, Inc. Trial Balances For Year Ended December 31 Unadjusted Trial Balance Adjusted Trial Balance Debit Credit Debit Credit Cash 11,300 11,300 Accounts Receivable 16,340 17,140 Office supplies 1,145 645 Prepaid advertising 1,000 450 Building 26,700 26,700 Accumulated depreciation-Building 1,300 6,300 Accounts payable 3,320 3,500 Unearned services revenue 4,410 3,010 Common stock 1,000 1,000 Retained earnings 16,905 16,905 Services revenue 72,400 74,600 Salaries expense 34,500 34,500 Utilities expense 5,450 5,630 Advertising expense 2,900 3,450 Supplies expense 500 Depreciation expense-building 5,000 Total 99,335 99,335 105,315 105,315 Present the six adjusting entries in general journal form that explain the changes in the account balances from the unadjusted to the adjusted trial balance.

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_______________ are long-term resources used to produce or sell products and services; they generally lack physical form and their benefits are highly uncertain.

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The total amount of depreciation recorded against an asset over the entire time the asset has been owned:


A) Is referred to as depreciation expense.
B) Is referred to as accumulated depreciation.
C) Is shown on the income statement of the final period.
D) Is only recorded when the asset is disposed of.
E) Is referred to as an accrued asset.

F) D) and E)
G) None of the above

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Gracio Co., Inc. had the following transactions in the last two months of its year ended December 31. Prepare entries for these transactions under the method that records prepaid expenses as expenses and records unearned revenues as revenues. Also prepare adjusting entries at the end of the year. Gracio Co., Inc. had the following transactions in the last two months of its year ended December 31. Prepare entries for these transactions under the method that records prepaid expenses as expenses and records unearned revenues as revenues. Also prepare adjusting entries at the end of the year.

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A benefit of using a work sheet is that it aids in the preparation of the financial statements.

A) True
B) False

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Before an adjusting entry to accrue employee salaries is made, Salaries Expense and Salaries Payable are both understated.

A) True
B) False

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Interim financial statements refer to financial reports that:


A) Cover less than one year, usually spanning one, three, or six-month periods.
B) Are prepared before any adjustments have been recorded.
C) Show the assets above the liabilities and the liabilities above the equity.
D) Report revenues on the income statement when cash is received and expenses when cash is paid.
E) Use the adjustment process to assign revenues to the periods in which they are earned and to match expenses with revenues.

F) B) and E)
G) C) and D)

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How is the current ratio calculated? How is it used to evaluate a company?

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The current ratio is current assets divi...

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Closing the temporary accounts at the end of each accounting period does all of the following except:


A) Serves to transfer the effects of these accounts to the retained earnings account on the balance sheet.
B) Prepares the dividends account for use in the next period.
C) Brings the revenue and expense accounts to zero balances.
D) Has no effect on the retained earnings account.
E) Causes retained earnings to reflect increases from revenues and decreases from expenses and dividends.

F) A) and C)
G) All of the above

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Holman Company owns equipment with an original cost of $95,000 and an estimated salvage value of $5,000 that is being depreciated at $15,000 per year using the straight-line depreciation method. The adjusting entry needed to record annual depreciation is:


A) Debit Depreciation Expense, $15,000; credit Equipment, $15,000.
B) Debit Equipment, $15,000; credit Accumulated Depreciation, $15,000.
C) Debit Depreciation Expense, $10,000; credit Accumulated Depreciation, $10,000.
D) Debit Depreciation Expense, $10,000; credit Equipment, $10,000.
E) Debit Depreciation Expense, $15,000; credit Accumulated Depreciation, $15,000.

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

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