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Exam 4: Completing the Accounting Cycle

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Question 51

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A company had revenues of $75,000 and expenses of $62,000 for the accounting period. The owner withdrew $8,000 in cash during the same period. Which of the following entries could not be a closing entry?

A) Debit Income Summary $13,000; credit Owner's, Capital $13,000.
B) Debit Income Summary $75,000; credit Revenues $75,000.
C) Debit Revenues $75,000; credit Income Summary $75,000.
D) Debit Income Summary $62,000, credit Expenses $62,000.
E) Debit Owner's, Capital $8,000, credit Owner's, Withdrawals $8,000.

F) A) and D)
G) C) and D)

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Question 52

Multiple Choice

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Accumulated Depreciation, Accounts Receivable, and Service Fees Earned would be sorted to which respective columns in completing a work sheet?

A) Balance Sheet and Statement of Owner's Equity-Credit; Balance Sheet and Statement of Owner's Equity Debit; and Income Statement-Credit.
B) Balance Sheet and Statement of Owner's Equity-Debit; Balance Sheet and Statement of Owner's Equity-Credit; and Income Statement-Credit.
C) Income Statement-Debit; Balance Sheet and Statement of Owner's Equity-Debit; and Income Statement-Credit.
D) Income Statement-Debit; Income Statement-Debit; and Balance Sheet and Statement of Owner's Equity-Credit.
E) Balance Sheet and Statement of Owner's Equity-Credit; Income Statement-Debit; and Income Statement-Credit.

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

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Question 53

Multiple Choice

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All of the following regarding reversing entries are true except:

The following information is available for Crandall Company before closing the accounts. What will be the amount in the Income Summary account that should be closed to Crandall, Capital?

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

Use the information in the adjusted trial balance presented below to calculate current assets for Jones Company:

The closing process takes place after financial statements have been prepared.

The Unadjusted Trial Balance columns of a company's work sheet show the balance in the Office Supplies account as $750. The Adjustments columns show that $425 of these supplies were used during the period. The amount shown as Office Supplies in the Balance Sheet columns of the work sheet is:

The closing process is necessary in order to:

The withdrawals account is normally closed by debiting it.

Plant assets are tangible assets that are usually long-term assets used to produce or sell products and services.

Reversing entries are recorded in response to accrued assets and accrued liabilities that were created by adjusting entries at the end of the prior accounting period.

The closing process resets _______, _________, and ________ account balances to zero at the end of each accounting period.

Epee Inc. frequently has accrued revenues at the end of its fiscal year that should be recorded for proper financial statement presentation. Epee Inc.'s fiscal year ends on September 30 of the current year. Epee Inc. has determined through an evaluation of invoices and services rendered that $32,000 of services has been provided as of September 30, but not yet billed. The total contract to be billed for services when completed will be $60,000. Record the following entries: (a) Accrual of the revenues on September 30. (b) Receipt of payment from customers on October 9 for the services rendered, assuming that Epee does not prepare reversing entries. (c) Assuming that Epee prepares reversing entries, reverse the adjusting entry made on September 30. (d) Assuming that Epee prepares reversing entries, receipt of the payment for the total contract amount on October 9.

Based on the adjusted trial balance shown below, prepare a classified balance sheet for Focus Package Delivery. $2,000 of the long-term note payable is due during the next year.

Permanent accounts carry their balances into the next accounting period. Moreover, asset, liability and revenue accounts are not closed as long as a company continues in business.

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

The following year-end adjusted trial balance is for Tom Janes Co. at the end of December 31. The credit balance in Tom Janes, Capital at the beginning of the year, January 1, was $320,000. The owner, Tom Janes, invested an additional $300,000 during the current year. The land held for future expansion was also purchased during the current year. Required: 1. Prepare a classified year-end balance sheet. (Note: A $22,000 installment on the long-term note payable is due within one year.) 2. Using the information presented: (a) Calculate the current ratio. Comment on the ability of Tom Janes Co. to meets its short-term debts. (b) Calculate the debt ratio and comment on the financial position and risk analysis of Tom Janes Co. (c) Using the account balances to analyze the financial position of Tom Janes Co., why would the owner need to invest an additional $300,000 in the business when the business is already profitable and the owner had an existing capital balance of $320,000?

Temporary accounts include all of the following except:

The summary amounts below appear in the Income Statement and Balance Sheet columns of a company's December 31 work sheet. Prepare the necessary closing entries.