True / False Questions1.Accounts that appear in the balance sheet are often called temporary (nominal) accounts.FALSE2.Income Summary is a temporary account only used for the closing process.TRUE3.Revenue accounts should begin each accounting period with zero balances.TRUE4.Closing revenue and expense accounts at the end of the accounting period serves to make the revenue and expense accounts ready for use in the next period・TRUE5.The closing process takes place after financial statements have been prepared. TRUE6.Revenue and expense accounts are permanent (real) accounts and should not be closed at the end of the accounting period・FALSE7.Closing entries result in revenues and expenses being reflected in the owner's capital account.TRUE8.The closing process is a step in the accounting cycle that prepares accounts for the next accounting period.TRUE9.The closing process is a two-step process. First revenue, expense, and withdrawals are set to a zero balance. Second, the process summarizes a period's assets and expenses. FALSE10.Closing entries are required at the end of each accounting period to close all ledger accounts.FALSE11.Closing entries are designed to transfer the end-of-period balances in the revenue accounts, the expense accounts, and the withdrawals account to ownefs capital TRUE12.The Income Summary account is a permanent account that will be carried forward period after period.FALSE13.Closing entries are necessary so that owner's capital will begin each period with a zero balance.FALSE14.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.FALSE15.The first step in the accounting cycle is to analyze transactions and events to prepare for journalizing.TRUE16.The accounting cycle refers to the sequence of steps in preparing the work sheet. FALSE17.The first five steps in the accounting cycle include analyzing transactions, journalizing, posting, preparing an unadjusted trial balance, and recording adjusting entries.TRUE18.The last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements and recording closing and adjusting entries. FALSE19・ A classified balance sheet organizes assets and liabilities into important subgroups that provide more information to decision makers.TRUE20.An unclassified balance sheet provides more information to users than a classified balance sheet.FALSE21.Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle whichever is longer.TRUE22.Intangible assets are long-term resources that benefit business operations that usually lack physical form and have uncertain benefits.TRUE23.Assets are often classified into current assets, long-term investments, plant assets, and intangible assets.TRUE24.Current liabilities are cash and other resources that are expected to be sold, collected or used within one year or the company's operating cycle whichever is longer.FALSE25.Long-term investments can include land held for future expansion.TRUE26.Plant assets and intangible assets are usually long-term assets used to produce or sell products and services.TRUE27.Current liabilities include accounts receivable, unearned revenues, and salaries payable.FALSE2& Cash and office supplies are both classified as current assets.TRUE29.Plant assets are also called fixed assets or property, plant, and equipment.TRUE30.The current ratio is used to help assess a company's ability to pay its debts in the near future.TRUEMultiple Choice Questions64.Another name for temporary accounts is:A.Real accounts.B.Contra accounts.C・ Accrued accounts.D. Balance column accounts.E・Nominal accounts.65.When closing entries are made:A.All ledger accounts are closed to start the new accounting period.K All temporary accounts are closed but not the permanent accounts.C.All real accounts are closed but not the nominal accounts.D.All permanent accounts are closed but not the nominal accounts.E.All balance sheet accounts are closed.66.Revenues, expenses, and withdrawals accounts, which are closed at the end of each accounting period are:A.Real accounts.K Temporary accounts-C.Closing accounts.D.Permanent accounts.E.Balance sheet accounts.67.Which of the following statements is incorrect?A.Permanent accounts is another name for nominal accounts.B・ Temporary accounts carry a zero balance at the beginning of each accounting period. C・ The Income Summary account is a temporary account.D.Real accounts remain open as long as the asset, liability, or equity items recorded in the accounts continue in existence.E.The closing process applies only to temporary accounts.68.Assets, liabilities, and equity accounts are not closed; these accounts are called:A.Nominal accounts.B.Temporary accounts.C.Permanent accounts.D.Contra accounts.E.Accrued accounts.69.Closing the temporary accounts at the end of each accounting period:A・ Serves to transfer the effects of these accounts to the owners capital account on the balance sheet.B.Prepares the withdrawals account for use in the next period.C・ Gives the revenue and expense accounts zero balances.D. Causes owner's capital to reflect increases from revenues and decreases from expenses and withdrawals.E・All of these.70.Journal entries recorded at the end of each accounting period to prepare the revenue, expense, and withdrawals accounts for the upcoming period and to update the ownefs capital account for the events of the period just finished are referred to as:A.Adjusting entries• K Closing entries.C.Final entries.D.Work sheet entries.E.Updating entries.71.The closing process is necessary in order to:A・ calculate net income or net loss for an accounting period.B.ensure that all permanent accounts are closed to zero at the end of each accounting period.CL ensure that the company complies with state laws.ensure that net income or net loss and owner withdrawals for the period are closed into the ownefs capital account.E. ensure that management is aware of how well the company is operating・72.Closing entries are required:A.讦management has decided to cease operating the business.B.only if the company adheres to the accrual method of accounting.C.if a compan/s bookkeeper forgets to prepare reversing entries.D・if the temporary accounts are to reflect correct amounts for each accounting period.E. in order to satisfy the Internal Revenue Service.73.The recurring steps performed each reporting period, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, is referred to as the:A・ Accounting period.B.Operating cycle.C.Accounting cycle.D.Closing cycle.E.Natural business year.74.Which of the following is the usual final step in the accounting cycle?A.Journalizing transactions.B.Preparing an adjusted trial balance・C.Preparing a post-closing trial balance.D.Preparing the financial statements.E.Preparing a work shee匚75.A classified balance sheet:A.Measures a company's ability to pay its bills on time.K Organizes assets and liabilities into important subgroups-C・ Presents revenues, expenses, and net income.D・ Reports operating, investing, and financing activities.E. Reports the effect of profit and withdrawals on ownefs capital.76.The assets section of a classified balance sheet usually includes:A.Current assets, long-term investments, plant assets, and intangible assets.B.Current assets, long-term assets, revenues, and intangible assets.C・ Current assets, long-term investments, plant assets, and equity.D.CuiTent liabilities, long-term investments, plant assets, and intangible assets.E.Current assets, liabilities, plant assets, and intangible assets.77.The usual order for the asset section of a classified balance sheet is:A.Current assets, prepaid expenses, long-term investments, intangible assets-B.Long-term investments, current assets, plant assets, intangible assets.C・Current assets, long-term investments, plant assets, intangible assets.D.Intangible assets, current assets, long-term investments, plant assets.E.Plant assets, intangible assets, long-term investments, current assets.78.A classified balance sheet differs from an unclassified balance sheet in thatA.a unclassified balance sheet is never used by large companies.B.a classified balance sheet normally includes only three subgroups.C.a classified balance sheet presents information in a manner that makes it easier to calculate a company's current ratio.D.a classified balance sheet will include more accounts than an unclassified balance sheet for the same company on the same date.E.a classified balance sheet cannot be provided to outside parties.79.Two common subgroups for liabilities on a classified balance sheet are:A.current liabilities and intangible liabilities.B.present liabilities and operating liabilities.C・ general liabilities and specific liabilities.D.intangible liabilities and long-term liabilities.E> current liabilities and long-term liabilities.8(). The current ratio:A.Is used to measure a company's profitability.B・ Is used to measure the relation between assets and long-term debt.C.Measures the effect of operating income on profit.De Is used to help evaluate a company's ability to pay its debts in the near future・E.Is calculated by dividing current assets by equity.81.The current ratio:A.Is calculated by dividing current assets by current liabilities.B.Helps to assess a company's ability to pay its debts in the near future.C・ Can reveal problems in a company if it is less than 1.D・ Can affect a creditors decision about whether to lend money to a company. E・All of these.AACSB: CommunicationsAICPA BB: IndustryAICPA FN: Risk AnalysisDifficulty: HardEarning Objective: Al82.The Unadjusted Trial Balance columns of a compan/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:A・$325 debit.B.$325 credit.C.$425 debit.D.$750 debit.E.$750 credit.83.A 10-column spreadsheet used to draft a company!s unadjusted trial balance, adjusting entries, adjusted trial balance, and financial statements, and which is an optional tool in the accounting process is a(n):A. Adjusted trial balance.B・Work sheet.C.Post-closing trial balance.D.Unadjusted trial balance.E.General ledger・84.Accumulated Depreciation, Accounts Receivable, and Service Fees Earned would be sorted to which respective columns in completing a work sheet?A.Balance Sheet or Statement of Ownefs Equity-Credit; Balance Sheet or Statement of Owner's Equity Debit; and Income Statement-Credit.B.Balance Sheet or Statement of Ownefs Equity-Debit; Balance Sheet or Statement of Ownefs Equity-Credit; and Income Statement-Credit.C.Income Statement-Debit; Balance Sheet or Statement of Owner's Equity-Debit; and Income Statement-Credit.D・ Income Statement-Debit; Income Statement-Debit; and Balance Sheet or Statement of Owner's Equity-Credit.E. Balance Sheet or Statement of Owner's Equity-Credit; Income Statement-Debit; and Income Statement-Credit.85.Which of the following statements is incorrect?A. Working papers are useful aids in the accounting process.B・ On the work sheet, the effects of the accounting adjustments are shown on the account balances・C.After the work sheet is completed, it can be used to help prepare the financial statements.De On the work sheet, the adjusted amounts are sorted into columns according to whether the accounts are used in preparing the unadjusted trial balance or the adjusted trial balance.E. A worksheet is not a substitute for financial statements86.A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $200. This adjusting entry results in:A・$200 decrease in net income.B. $200 increase in net income.C・ $200 difference between the debit and credit columns of the Unadjusted Trial Balance.D.$200 of prepaid insurance・E.An error in the financial statements.87.Statements that show the effects of proposed transactions as if the transactions had already occurred are called:A.Pro forma statements.B.Professional statements.C・ Simplified statements-D.Temporary statements.E.Interim statements.88.If in preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column. The Balance Sheet columns will balance on completing the work sheet but with the wrong net income, if the amount sorted in error is:A.An expense amount placed in the Balance Sheet Credit column.B.A revenue amount placed in the Balance Sheet Debit column.C.A liability amount placed in the Income Statement Credit column.D.An asset amount placed in the Balance Sheet Credit column.E.A liability amount placed in the Balance Sheet Debit column.89.If the Balance Sheet and Statement of Ownefs Equity columns of a work sheet fail to balance when the amount of the net income is added to the Balance Sheet and Statement of Ownefs Equity Credit column, the cause could be:A.An expense amount entered in the Balance Sheet and Statement of Ownefs Equity Debit column.B.A revenue amount entered in the Balance Sheet and Statement of Ownefs Equity Credit column.C.An asset amount entered in the Income Statement and Statement of Owner's Equity Debit column.D.A liability amount entered in the Income Statement and Statement of Owner's Equity Credit column.E・An expense amount entered in the Balance Sheet and Statement of Ownefs Equity Credit column.Problems129. In the table below, indicate with an n X H in the proper column whether the account is a (nominal) temporary account or a (real) permanent account.Account Temporary(Nominal)Permanent(Real)a. Cash .......................................................... b・Prepaid insurance ......................................c. Unearned fees ...........................................d. Accounts receivable ..................................e. Insurance expense .....................................f. O. Ner, Capital .......................................... g- O. Ner. Withdrawals ................................. h・Rent expense .............................................•1. Fees earned ...............................................j. Supplies .................................................... k・Supplies expense .......................................1. Depreciation expense 一Building ............ m. Accumulated depreciation 一Building ..132. Based on the adjusted trial balance shown below, prepare a classified balance sheet for Focus Package Delivery.Focus Package Delivery Classified Balance SheetDecember 31AssetsCuiTent assetsCash .......................................................................................... $ 1&200Accounts receivable ....................................................................... 34,200Supplies ........................................................................................... 2,100Total current assets .............................................................Long-term investments ............................................................Plant assetsDelivery equipment .................................................................... $45,000 Less: accumulated depreciation ......................................... 11.080 Intangible assets .......................................................................Total assets ...............................................................................LiabilitiesCurrent liabilitiesCurrent portion of long-term debt .............................................. $ 2?000 Accounts payable ................................................................ 16,200Wages payable .................................................................... 4」20Total current liabilities........................................................Long-term liabilitiesLong-term note payable ......................................................Total liabilities .........................................................................EquityK. Ferman. Capital ...................................................................Total liabilities and equity ........................................................■ ■ • ]• ■ ■ • ■■・••$2,000 of the long-term note payable is due during the next year.$54,50025,00033,9206000 $129.420$ 22,32018.000 $ 40,32089 J 00 $129.420135. Use the following partial work sheet from Matthews Lanes to prepare its income statement, statement of ownefs equity and a balance sheet (Assume the owner did not make any investments in the business this year.)MATTHEWS LANESWork SheetFor Year Ended June 30BalanceSheetand Statement ofOwneFs EquityCash ............................................... Dr Cn Dr11,275CnAccounts Receivable ..................... 1,750Office Supplies (800)Prepaid Insurance .......................... 3,400Scoring Equipment ........................ 130,000 Accumulated depreciation-Scoring equipment .................... 21,700 Salaries payable .. (200)M. Matthews. Capital ....................................................... 50,000M. Matthews. Withdrawals ....................................................... 46,425Bowling revenue ............................ 13Z675Depreciation expense-Scoring equipment .................... ，.…10.825Salaries expense ............................. .… 1,800Insurance expense .......................... ，• (200)Rent expense .................................. .... 1,600Office supplies expense ................. ，. (400)Repairs expense ............................. ，• (350)Telephone expense ........................ ，• (750)Totals ............................................. ....15,925137,675 193,650 71,900 Net income ..................................... (121550121550)Totals ............................................. ，•…137.675 137,675 193.650 193.650 Account Income StatementMATTHEWS LANESIncome Statement________________________ For Year Ended June 30Bowling Revenue __________ $137,675Expenses:Depreciation expense-Scoring equipment .............................................................. $10,825Salaries expense ............................................................. 1,800Insurance expense (200)Rent expense .................................................................. 1,600Office supplies expense (400)Repairs expense (350)Telephone expense (750)Total expenses .............................................................................................. 15.925 Net Income ..................................................................................................... $121.750MATTHEWS LANESStatement of Owner's EquityFor Year Ended June 30M. Matthews, Beginning Balance ....................................... $ 50,000Plus net income ................................................................... 121,750$171,750 Less (46-425) withdrawals ....................................................................M. Matthews, Ending balance........................................................................ $125.325MATTHEWS LANES Balance Sheet June 30 ASSETSCash $ 11,275 Accounts receivable 1,750 Office supplies 800 Prepaid Insurance 3,400 Scoring Equipment $ 13(X000Less: Accumulated Depr 2L700 108,300 Total Assets $125.525 LIABILITIESSalaries payable $ 200Total Liabilities $ 200 EQUITYM. Matthews, Capital $125,325 Total Liabilities & Owner9s Equity $125,525137. A partially completed work sheet is shown below・ The unadjusted trial balance columns are complete. Complete the adjustments, adjusted trial balance, income statement, and balance sheet and statement of ownefs equity columns.Platen Company Work SheetFor the year ended December 31AccountUnadjusted TrialBalance Adjustments Adjusted TrialBalanceIncome StatementBalance Sheet andStatement ofOwner EquityDebit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash (40)Accounts receivable ........Prepaid insurance (25)Supplies .......................... 14 8Ofiice equipment............. 340 340Accum. Depr., Officeequipment (45)Accounts payable ............ 57 57 Rent payable ..................C. Platen, Capital ............ 132 132 C. Platen, Withdrawals.・35 35Fees earned .............. 300 380Rent expense ................... 60 90Utilities expense (20)hisurance expense (10)Supplies expense .............Deprec・ exp, Officeequipment (45)Totals .............................. 534 534Net income ......................Totals ..............................Platen Company Work SheetFor the year ended December 31 AccountUnadjusted TrialBalance Adjustments Adjusted TrialBalance Income StatementBalance Sheet andStatement ofOwner's EquityDebit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash ............................... 40 4040 Accounts receivable ...... (a) 808080 Prepaid insurance .......... 25 (b) 101515 Supplies ......................... 14 (c) 688Office equipment ........... 340 340340 Accum. DeprOfficeequipment 45 (d) 459090 Accounts payable .......... 57 5757 Rent payable .................. 何303030 C. Platen. Capital ............ 132 132132 C. Platen, Withdrawals. 35 3535Fees earned ..................... 300 (a) 80380380Rent expense ................. 60 (e) 309090Utilities expense ............. 20 2020Insurance expense .......... (b) 10 1010Supplies expense ........... (c) 666Deprec. exp., Officeequipment ................... (d) 45 矩45Totals .............................. 534 534 171171689689171380518309 Net income (209209)Totals .............................. 380380518卫140. The adjusted trial balance of Saras Web Services follows:SARAS WEB SERVICESAdjusted Trial BalanceDecember 31Cash ................................................................................ S 1,170Supplies .............................................................................. 1,930Prepaid insurance (600)Computer equipment ........................................................ 20,600Accumulated depreciation-Computer equipment $ 5,40() Accounts payable (325)Sara Pollis, Capital ........................................................................... 13,925Sara Pollis, Withdrawals .................................................... 4,800Services revenue .............................................................................. 21,720 Salaries expense ................................................................. 6,920Depreciation expense ......................................................... 2.000Rent expense ...................................................................... 1,200Supplies expense (800)Utilities expense (950)Insurance expense ................................................................. 400 _____ Totals ............................................................................... $41370 $41370(a)Prepare the closing entries for Sara's Web Services・(b)What is the balance of Sara's capital account after the closing entries are posted?a) Closing entries:Dec.31 Services Revenue .............................................. 21,720Income Summary .......................................................... 21,72031 Income Summary .............................................. 12,270Salaries Expense ............................................................. 6,920 Depreciation Expense ..................................................... 2,000 Rent Expense .................................................................. 1,200 Supplies Expense ............................................................... 800 Utilities Expense ................................................................ 950 Insurance Expense ............................................................. 400 31 Income Summary ................................................ 9,450Sara Pollis, Capital .......................................................... 9,450 31 Sara Pollis, Capital ............................................. 4,800Sara Pollis, Withdrawals ................................................. 4,800Balance of Sara fs capital account after closing entries: b) Beginning Balance ..........Add Net Income ............ Less Withdrawals .......... Ending Balance .............Problems159. The unadjusted trial balance of Quick Delivery is entered on the partial work sheet below. Complete the work sheet using the following information:(a) Salaries earned by employees that are unpaid and unrecorded, $5,000. (b) An inventory of supplies showed $ 1,000 of unused supplies still on hand. (c) Depreciation on delivery vans, $24,000.(d) Services paid in advance by customers of $10,000 have now been provided to customers.$13,925 9,450 (4,800) $18,575Quick DeliveryWork SheetFor tlie year ended December 31AccountUnadjusted TrialBalance AdjustmentsAdjusted TrialBalance Income StatementBalance Sheet andStatement of Owner'sEquityDebit Credit Debit Credit Debit Credit Debit Credit Debit CreditCash ................................ 70,000 Accounts Receivable….・10,000 Supplies ........................... 3,000 Delivery Vans ................. 120,000Accum. Dep匚• Vans.・・・•48,000Accounts payable ........... 15,000 Unearned fees................. 20,000 Salaries payable ...............B. Rapid Capital ............... 55,000B. Rapid. Withdrawals.・・50,000Fees earned .................... 320,000 Salary expense ................ 177,000Rent expense ................... 2&000 Supplies expense .............Depreciation expense,...Totals .............................. 458.000 458.000Quick Delivery Work Sheet For the year ended December 31AccountUnadjusted TrialBalance AdjustmentsAdjusted TrialBalanceIncome StatementBalance Sheet andStatement ofOwner's Equity Debit Credit Debit Credit Debit Credit Debit Credit Debit CreditCash ............................. 70,000 70,000 70,000 Accounts Receivable,... 10,000 10,000 ]0,000 Supplies ....................... 3,000 2,000 1,000 1,000 Delivery Vans .............. 120,000 120,000 120,000Accum・ Depr.・Vans ... 48,000 24,000 72,000 72,000Accomits payable ......... ]5,000 15,000 15,000 Unearned fees .............. 20,000 10,000 10,000 ]0,000 Salaries payable ........... 5,000 5,000 5,000 B. Rapid. Capital 55,000 55,000 55,000 B. Rapid. Withdrawals.. 50,000 50,000 50,000Fees earned ................... 320,000 10,000 330,000 330,000Salary expense .............. 177,000 5,000 182,000 182,000Rent expense ................ 2&000 2&000 2&000Supplies expense .......... 2,000 2,000 2,000Depreciation expense.... 24.000 24,000 24.000Totals ........................... 458.0QQ 458.0QQ 4k000 41.0QQ 4g7.0QQ 4S7.0QQ 236,000 330000 157,000 Net income 94.000 94000 Totals 330.0QQ 330.000 251.000 251,000。
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