Deck 4: Completing the Accounting Cycle

Question 1

Accountants often use a work sheet-a document with several columns-to summarize data for the financial statements.

Answer 1

True

Question 2

first step in creating a work sheet is to enter the adjusting entries in the Adjustments columns.

Answer 2

False

Question 3

Additional capital is not recorded as an adjustment on the work sheet.

Answer 3

True

Question 4

Including the adjustments on the work sheet satisfies the matching principle.

Question 5

Accumulated depreciation and Depreciation expense are the two accounts in which we adjust a fixed asset's value at the end of each accounting cycle.

Question 6

debit total and the credit total in the Adjusted Trial Balance columns of the work sheet should equal each other.

Question 7

debit total and the credit total in the Income Statement columns of the work sheet should equal each other.

Question 8

of the following statements is a TRUE statement concerning the work sheet?

A) The work sheet is a ledger.
B) The work sheet is a document used to summarize data to prepare the financial statements.
C) The work sheet is a financial statement.
D) The work sheet is a journal.

Question 9

of the following is the correct order of the steps of preparing the work sheet?
I. Compute each account's adjusted balance by combining the trial balance and adjustment figures. Enter each account's adjusted amount in the Adjusted Trail Balance columns.
II. Enter the account titles and their unadjusted balances in the Trial Balance columns of the work sheet and total the columns.
III. Extend (copy) the asset, liability, and owner's equity amounts from the Adjusted Trial Balance to the Balance Sheet columns. Copy the revenue and expense amounts to the Income Statement columns. Total the statement columns.
IV. Enter the adjusting entries in the Adjustments columns, and total the amounts.
V. On the income statement column, compute net income. Enter net income as the balancing amount on the income statement and balance sheet columns. Total the income statement and balance sheet columns.

A) II, IV, I, III, V
B) I, II, III, IV, V
C) III, V, IV, I, II
D) IV, I, III, V, II

Question 10

The second step in the work sheet process is:

A) to extend the totals to the income statement and balance sheet columns.
B) to complete the adjusted trial balance.
C) to prepare the unadjusted trial balance.
D) none of the above.

Question 11

Which of the following statements is a TRUE statement about the work sheet?

A) Net income appears in the Income Statement credit column.
B) Net income appears in the Adjusted Trial Balance debit column.
C) Net income appears in the Income Statement debit column.
D) Net income appears in the Balance Sheet debit column.

Question 12

Which of the following columns are generally found on a work sheet?

A) Adjustments
B) Post-closing trial balance
C) Pre-adjusted trial balance
D) Adjusted balance sheet

Question 13

Which of the following is TRUE of a completed work sheet?

A) The total debits in the Trial Balance column equal the total credits in the Adjusted Trial Balance column.
B) The total debits in the Adjustments column equal the total credits in the Adjustments column.
C) The total debits in the Income Statement column equal the total credits in the Income Statement column.
D) The total debits in the Balance Sheet column equal the total credits in the Balance Sheet column.

Question 14

Which of the following is TRUE after net income has been entered in the appropriate balance sheet column?

A) Total debits in the Balance Sheet columns equals total credits.
B) Total credits in the Balance Sheet columns exceed total debits by the amount of net income.
C) Total debits in the Balance Sheet columns exceed total credits by the amount of net income.
D) It is impossible to determine with the information provided.

Question 15

Which of the following is TRUE if the total of the Adjusted Trial Balance debit column exceeds the total of the Adjusted Trial Balance credit column by $12,000?

A) The company has a net loss of $12,000.
B) The company has net income of $12,000.
C) There is an error.
D) None of the above.

Question 16

financial statements can be prepared directly from the Adjusted Trial Balance, which makes completion of the last four columns of the work sheet optional.

Question 17

account's Trial Balance amount can be determined by combining the Balance Sheet column and Income Statement column amounts.

Question 18

Owner's withdrawal account is extended to the Income Statement columns on the work sheet.

Question 19

of various columns from the work sheet are shown below. What is net income or loss?
$$\begin{array} { | l | l | l | l | } \hline \text { Income Statement } & & \text { Balance Sheet } & \\\hline \text { Debit } & \text { Credit } & \text { Debit } & \text { Credit } \\\hline \$ 6,800 & \$ 9,500 & \$ 7,400 & \$ 4,700 \\\hline\end{array}$$

A) Net loss of $6,800
B) Net loss of $2,700
C) Net income of $4,700
D) Net income of $2,700

Question 20

of various columns from the work sheet are shown below. What is the net income or loss?
$$\begin{array} { | l | l | l | l | } \hline \text { Income Statement } & & \text { Balance Sheet } & \\\hline \text { Debit } & \text { Credit } & \text { Debit } & \text { Credit } \\\hline \$ 8,500 & \$ 6,750 & \$ 4,300 & \$ 6,050 \\\hline\end{array}$$

A) Net loss of $4,300
B) Net income of $4,300
C) Net income of $1,750
D) Net loss of $1,750

Question 21

columns of a work sheet are used to compile the financial statements?

A) Income Statement Columns
B) Balance Sheet Columns
C) Trial Balance Columns
D) You can do them with just the adjusted trial balance columns.

Question 22

which of the columns of the work sheet would the Retained earnings account be found?

A) In the Trial Balance debit column, the Adjusted Trial Balance debit column and the Balance Sheet debit column
B) In the Trial Balance credit column, the Adjusted Trial Balance credit column and the Balance Sheet credit column
C) In the Balance Sheet debit column and the Income Statement credit column
D) In the Balance Sheet credit column and the Income Statement debit column

Question 23

which of the columns of the work sheet would the unearned fees account be found?

A) In the Balance Sheet credit column and the Income Statement debit column
B) In the Trial Balance credit column, the Adjusted Trial Balance credit column and the Balance Sheet credit column
C) In the Balance Sheet debit column and the Income Statement credit column
D) In the Trial Balance debit column, the Adjusted Trial Balance debit column and the Balance Sheet debit column

Question 24

In which of the columns of the work sheet would the Accumulated depreciation account be found?

A) In the Trial Balance credit column, the Adjusted Trial Balance credit column and the Balance Sheet credit column
B) In the Balance Sheet debit column and the Income Statement credit column
C) In the Trial Balance debit column, the Adjusted Trial Balance debit column and the Balance Sheet debit column
D) In the Balance Sheet credit column and the Income Statement debit column

Question 25

In which of the columns of the work sheet would the Depreciation expense account be found?

A) In the Trial Balance credit column, the Adjusted Trial Balance debit column and the Income Statement debit column
B) In the Trial Balance credit column, the Adjusted Trial Balance credit column and the Income Statement credit column
C) In the Adjusted Trial Balance debit column and the Income Statement debit column
D) In the Adjusted Trial Balance credit column and the Income Statement credit column

Question 26

In which of the columns of the work sheet would the Service revenue account be found?

A) In the Adjusted Trial Balance debit column and the Income Statement credit column
B) In the Trial Balance debit column, the Adjusted Trial Balance debit column and the Income Statement debit column
C) In the Adjusted Trial Balance debit column and the Income Statement debit column
D) In the Trial Balance credit column, the Adjusted Trial Balance credit column and the Income Statement credit column

Question 27

Which of the following does NOT appear on the work sheet?

A) Closing entries
B) The trial balance
C) The adjusted trial balance
D) Adjusting entries

Question 28

Which of the following situations would indicate that an error has been made?

A) The total of the debit column of the Balance Sheet does not equal the total of the debit column of the Income Statement.
B) The total of the debit column of Adjustments does not equal the total of the credit column of Adjustments.
C) The total of the debit column of the Trial Balance does not equal the total of the debit column of the Adjusted Trial Balance.
D) All of these situations are the result of an error.

Question 29

can closing entries be found?

A) In a company's general journal
B) On a company's statement of Owner's equity
C) On a company's work sheet
D) On a company's balance sheet

Question 30

net loss would be closed as a:

A) debit to Owner's capital.
B) credit to Owner's capital.
C) debit to Revenues.
D) credit to Expenses.

Question 31

Which of the following accounts will be closed by debiting the Income Summary?

A) Accounts payable
B) Retained earnings
C) Accounts receivable
D) None of the above

Question 32

To what account is the balance in the Income summary closed?

A) The Income summary is closed to the withdrawals account.
B) The Income summary is closed to the net income account.
C) The Income summary is closed to the capital account.
D) None of the above is correct.

Question 33

Which of the following accounts has a non-zero balance after the closing process is completed?

A) The Depreciation expense account has a zero balance.
B) The Expense accounts have non-zero balances.
C) The Accumulated depreciation account has a non-zero balance.
D) The Service revenue account has a non-zero balance.

Question 34

To what account is the balance in the owner's withdrawals account closed?

A) The withdrawals account is closed to the capital account.
B) The withdrawals account is closed to the net income account.
C) The withdrawals account is closed to the cash account.
D) The withdrawals account is not closed.

Question 35

what order should the categories below be placed on a post-closing trial balance?
I. Capital
II. Assets
III. Liabilities

A) III, II, I
B) II, III, I
C) I, II, III
D) III, I, II

Question 36

post-closing trial balance lists the accounts from the general ledger in:

A) alphabetical order.
B) category order beginning with assets and ending with expenses.
C) numerical order.
D) Assets are listed in order of liquidity.

Question 37

post-closing trial balance is completed:

A) after the work sheet, but before the closing entries.
B) after the financial statements.
C) after the adjusting entries, but before the closing entries.
D) before net income is determined.

Question 38

____________ is prepared after closing entries are posted to prove that debits equal credits.

A) balance sheet
B) income statement
C) post-closing trial balance
D) Owner's equity statement

Question 39

that begin with analyzing source documents and conclude with the post-closing trial balances are called the:

A) closing process.
B) accounting cycle.
C) adjusting entries.
D) posting process.

Question 40

__________ is the time span during which cash is paid for goods and services, which are then sold to customers from whom the business collects cash.

Question 41

debt due to be paid with cash or with goods and services within one year (or operating cycle if longer) is a current liability.

Question 42

of the following is an asset that is expected to be converted to cash, sold, or consumed during the next year (or normal operating cycle, if longer)?

A) Liquid asset
B) Long-term asset
C) Quick liability
D) Current asset

Question 43

Accounts that stay open during the course of business are called:

A) temporary accounts.
B) permanent accounts.
C) asset accounts.
D) liability accounts.

Question 44

Accounts that close after each completed accounting period are called:

A) temporary accounts.
B) permanent accounts.
C) equity accounts.
D) asset accounts.

Question 45

The first-year portion of a three-year note payable would be classified as a:

A) current liability.
B) long-term liability.
C) current asset.
D) long-term asset.

Question 46

Which of the following is a debt that is due to be paid with cash, or with goods and services within the next year (or normal operating cycle, if longer)?

A) Current liability
B) Long-term liability
C) Quick liability
D) Liquid liability

Question 47

The following is the Balance Sheet for Green Landscaping:
$\begin{array}{|l|l|l|l|l|}\hline & & \text { Greene Landscaping } & & \\\hline & & \text { Balance Sheet } & & \\\hline & & \text { December } 31,2008 & & \\\hline \text { Assets } & & & \text { Liabilities } & \\\hline \text { Cash } & & \$ 15,000 & \text { Accounts payable } & \$ 22,000 \\\hline \text { Accounts receivable } && 30,000 & \text { Salaries payable } & 12,000 \\\hline \text { Supplies } && 4,000 & \text { Unearned service revenue } & 25,000\\\hline \text { Prepaid Insurance } & & 8,000 & & \\\hline & & & \text { Total liabilities } & \\\hline \text { Equipment } & & & & 59,000 \\\hline & \$ 85,000 & & \text { Owner's equity } & \\\hline \begin{array}{l}\text { Less: Accumulated } \\\text { depreciation }\end{array} & 10,000 & 75,000 & \text { Green, Capital } & 73,000 \\\hline\\\hline \text { Total assets } & \underline{\$ 132,000} & \begin{array}{l}\text { Total liabilities and } \\\text { owner's equity }\end{array} & \underline{\$ 132,000} \\\hline\end{array}$ What is the total of current assets?

A) $ 45,000
B) $132,000
C) $ 57,000
D) $ 15,000

Question 48

The following is the Balance Sheet for Green Landscaping:
$\begin{array}{|l|l|l|l|l|}\hline & & \text { Greene Landscaping } & & \\\hline & & \text { Balance Sheet } & & \\\hline & & \text { December } 31,2008 & & \\\hline \text { Assets } & & & \text { Liabilities } & \\\hline \text { Cash } & & \$ 15,000 & \text { Accounts payable } & \$ 22,000 \\\hline \text { Accounts receivable } && 30,000 & \text { Salaries payable } & 12,000 \\\hline \text { Supplies } && 4,000 & \text { Unearned service revenue } & 25,000\\\hline \text { Prepaid Insurance } & & 8,000 & & \\\hline & & & \text { Total liabilities } & \\\hline \text { Equipment } & & & & 59,000 \\\hline & \$ 85,000 & & \text { Owner's equity } & \\\hline \begin{array}{l}\text { Less: Accumulated } \\\text { depreciation }\end{array} & 10,000 & 75,000 & \text { Green, Capital } & 73,000 \\\hline\\\hline \text { Total assets } & \underline{\$ 132,000} & \begin{array}{l}\text { Total liabilities and } \\\text { owner's equity }\end{array} & \underline{\$ 132,000} \\\hline\end{array}$ What is the total of current liabilities?

A) $ 59,000
B) $ 34,000
C) $132,000
D) $ 22,000

Question 49

The following is the Balance Sheet for Green Landscaping:
$\begin{array}{|l|l|l|l|l|}\hline & & \text { Greene Landscaping } & & \\\hline & & \text { Balance Sheet } & & \\\hline & & \text { December } 31,2008 & & \\\hline \text { Assets } & & & \text { Liabilities } & \\\hline \text { Cash } & & \$ 15,000 & \text { Accounts payable } & \$ 22,000 \\\hline \text { Accounts receivable } && 30,000 & \text { Salaries payable } & 12,000 \\\hline \text { Supplies } && 4,000 & \text { Unearned service revenue } & 25,000\\\hline \text { Prepaid Insurance } & & 8,000 & & \\\hline & & & \text { Total liabilities } & \\\hline \text { Equipment } & & & & 59,000 \\\hline & \$ 85,000 & & \text { Owner's equity } & \\\hline \begin{array}{l}\text { Less: Accumulated } \\\text { depreciation }\end{array} & 10,000 & 75,000 & \text { Green, Capital } & 73,000 \\\hline\\\hline \text { Total assets } & \underline{\$ 132,000} & \begin{array}{l}\text { Total liabilities and } \\\text { owner's equity }\end{array} & \underline{\$ 132,000} \\\hline\end{array}$ What is the total of long-term liabilities?

A) $59,000
B) $132,000
C) $25,000
D) $-0-

Question 50

of the most widely used decision aids in business are the current ratio and the debt ratio.

Question 51

company prefers to have a high debt ratio because that means that the company has plenty of current assets to pay current liabilities.

Question 52

debt ratio measures a company's overall ability to pay owners.

Question 53

current ratio and the debt ratio are computed numbers contained on the income statement.

Question 54

of the following is considered the highest current ratio?

A) .6
B) 1.0
C) .8
D) 1.5

Question 55

of the following would be considered the poorest current ratio?

A) 0.5
B) 1.1
C) 1.3
D) 1.8

Question 56

range for debt ratio would be indicative of a company approaching having too high a debt ratio?

A) 10 - 25%
B) 25 - 40%
C) 40 - 60%
D) This would depend upon the industry being evaluated.

Question 57

A current ratio above 2.00 would indicate that a company has:

A) $2 of current liabilities for every $1 of current assets.
B) $2 of total assets for every $1 of current liabilities.
C) at least $2 of current assets for every $1 of current liabilities.
D) excellent cash flow.

Question 58

The current ratio is a measure of:

A) a company's leverage.
B) a company's profitability.
C) a company's liquidity.
D) none of the above.

Question 59

Which of the following is a current ratio where there is more current debt than current assets?

A) 1.5
B) .6
C) 1.0
D) .8

Question 60

Which of the following does the current ratio measure?

A) The current ratio measures the company's overall ability to pay liabilities.
B) The current ratio measures the company's ability to pay current liabilities with current assets.
C) The current ratio measures the proportion of the company's assets that are financed with debt.
D) Both B and C are true.

Question 61

Which of the following does the debt ratio measure?

A) The debt ratio measures the company's overall ability to pay long-term liabilities.
B) The debt ratio measures the company's ability to pay current liabilities with current liabilities.
C) The debt ratio measures the proportion of the company's assets that are financed with debt.
D) Both A and C are true.

Question 62

Which of the following statements is an accurate interpretation of a current ratio of 2.5?

A) The company has $2.50 of current assets for every $1.00 of liabilities.
B) The company has $2.00 of current assets for every $.50 of liabilities.
C) The company has $2.00 of current assets for every $.50 of current liabilities.
D) The company has $2.50 of current assets for every $1.00 of current liabilities.

Question 63

The following contains information from the records of the Wellborn Engineers and Architects, PC
Wellborn Engineers and Architects, PC
Selected Financial Information
December 31, 2007
$$\begin{array} { | l | r | } \hline \text { Current assets } & \$ 74,000 \\\hline \text { Current liabilities } & 44,000 \\\hline \text { Long-term assets } & 95,000 \\\hline \text { Long-term liabilities } & 60,000 \\\hline \text { Total revenues } & 50,000 \\\hline \text { Total expenses } & 30,000 \\\hline\end{array}$$ What is the current ratio?

A) 1.58
B) 2.32
C) 0.59
D) 1.68

Question 64

Which of the following statements is an accurate interpretation of the current ratio?

A) A current ratio of less than 1.0 indicates that the company will probably have difficulty in paying its current liabilities on time.
B) A current ratio of more than 1.5 is a good current ratio and the company will probably be able to pay its current liabilities on time.
C) Both A and B are correct.
D) Both A and B are incorrect.

Question 65

Which of the following statements is an accurate interpretation of the debt ratio?

A) A debt ratio of below 0.60 is considered a high risk ratio.
B) A debt ratio of above 0.80 is considered safe for most businesses.
C) Both A and B are correct.
D) Both A and B are incorrect.