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Exam 4: Completing the Accounting Cycle

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Question 71

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The steps in the closing process are (1) close credit balances in revenue accounts to Income Summary; (2) close credit balances in expense accounts to Income Summary; (3) close Income Summary to Owner's Capital; (4) close Withdrawals to Owner's Capital.

A) True
B) False

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Question 72

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Revenues, expenses, withdrawals, and Income Summary are called _________________ accounts because they are closed at the end of each accounting period.

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Temporary ...

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Question 73

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The closing process is necessary in order to:

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

The items that follow appeared in the Income Statement columns of the work sheet prepared for Armstrong Delivery Service at current year-end. In addition, L. Armstrong, Capital had a credit balance of $117,000 and L. Armstrong, Withdrawals had a debit balance of $30,000 at year end. Prepare closing journal entries for this company.

Shown below are selected data taken from the unadjusted and adjusted trial balances for the Simonson Company for the current year ended December 31. Determine the items A through H below.

Intangible assets are long-term resources used to produce or sell products and services; they generally lack ______________ and their benefits are highly ___________.

Following are selected accounts and their balances for a company after the adjustments as of May 31, the end of its fiscal year. (All accounts have normal balances.) Prepare all the necessary closing entries for this company.

How is a classified balance sheet different from an unclassified balance sheet? List the order of the usual classifications on a classified balance sheet.

All of the following regarding reversing entries are 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?

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

Which of the following statements about a company's operating cycle is not ?

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.

Revenue and expense accounts are permanent (real) accounts and should not be closed at the end of the accounting period.

Reversing entries are optional.

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

At the beginning of the year, a company's balance sheet reported the following balances: Total Assets = $125,000; Total Liabilities = $75,000; and Owner's Capital = $50,000. During the year, the company reported revenues of $46,000 and expenses of $30,000. In addition, owner's withdrawals for the year totaled $20,000. Assuming no other changes to owner's capital, the balance in the owner's capital account at the end of the year would be:

When expenses exceed revenues, there is a net loss and the Income Summary account would have a credit balance.

All necessary numbers to prepare the income statement can be taken from the income statement columns of the work sheet, including the net income or net loss.