Deck 4: Completing the Accounting Cycle

Question 1

The financial statements are prepared from the ________.

A) adjusted trial balance
B) chart of accounts
C) statement of owner's equity
D) unadjusted trial balance

Answer 1

A

Question 2

The operating cycle is the time span required for a business to repay its long-term liabilities.

Answer 2

False

Question 3

The statement of owner's equity shows how the owner's equity changed during the period due to acquiring assets and paying liabilities.

Answer 3

False

Question 4

In a classified balance sheet,assets are reported in the order of liquidity and liabilities are listed in the order in which they must be paid.

Question 5

In a balance sheet,assets are classified as either current or long term,depending on their liquidity.

Question 6

The financial statement that reports assets,liabilities,and owner's equity as of the last day of the period is called the ________.

A) income statement
B) statement of owner's equity
C) balance sheet
D) unadjusted trial balance

Question 7

List the order in which the balance sheet,statement of owner's equity,and income statement are prepared.Briefly discuss why this order is necessary.

Question 8

Revenue may be called Profit and Net Income may be called Turnover in an income statement prepared under IFRS.

Question 9

A balance sheet prepared in the account form lists the assets at the top and the liabilities and owner's equity are positioned below the assets.

Question 10

A net loss from the Balance Sheet decreases Owner,Capital.

Question 11

Assets and liabilities are presented in a different order on a balance sheet prepared following IFRS than on a balance sheet prepared following U.S.GAAP.

Question 12

The balance sheet is the first financial statement that is prepared at the end of the period.

Question 13

A balance sheet prepared in the report form lists the assets on the left and the liabilities and owner's equity on the right.

Question 14

In a balance sheet,prepared under IFRS guidelines,cash is often shown as one of the last assets listed.

Question 15

A classified balance sheet can be presented in either a report or an account form.Although either is acceptable,the report form is more popular.

Question 16

Which financial statement is prepared last?

A) income statement
B) balance sheet
C) statement of owner's equity
D) The financial statements can be prepared in any order.

Question 17

Liquidity is a measure of how quickly an item can be converted to net income.

Question 18

Intangible assets are long-term assets that have no physical form and convey special rights.

Question 19

Which of the following is NOT a balance sheet account?

A) Unearned Revenue
B) Prepaid Rent
C) Accumulated Depreciation - Building
D) Owner, Withdrawals

Question 20

Prepaid Rent is always classified as a long-term asset.

Question 21

Which of the following is an example of an intangible asset?

A) Equipment
B) Plant
C) Property
D) Copyright

Question 22

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

A) production time
B) operating cycle
C) accounting cycle
D) sales time

Question 23

Under which of the following categories would Accounts Receivable appear?

A) Current assets
B) Current liabilities
C) Long-term assets
D) Long-term liabilities

Question 24

A balance sheet that lists the assets above the liabilities and owner's equity sections is a(n)________ balance sheet.

A) report form
B) unclassified form
C) account form
D) audited form

Question 25

Patents,copyrights,and trademarks are examples of ________.

A) short-term investments
B) fixed assets
C) long-term investments
D) intangible assets

Question 26

All assets that will not be converted to cash or used up within the business's operating cycle or one year,whichever is greater,are called ________.

A) long-term assets
B) fully depreciated assets
C) current assets
D) current liabilities

Question 27

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

A) Land
B) Equipment
C) Building
D) Accounts Receivable

Question 28

Property,plant,and equipment are ________.

A) presented in order of the category name, with Land being presented last
B) also called fixed or plant assets
C) either tangible or intangible assets
D) easily converted to cash

Question 29

Under which of the following categories would bonds held as an investment for more than a year appear?

A) Current assets
B) Long-term liabilities
C) Long-term assets
D) Current liabilities

Question 30

Under which of the following categories would bonds held as an investment for less than a year appear?

A) Long-term assets
B) Current assets
C) Long-term liabilities
D) Current liabilities

Question 31

Buildings,land,and equipment are classified as ________.

A) current assets
B) long-term assets
C) current liabilities
D) long-term liabilities

Question 32

Which of the following is a plant asset?

A) Equipment
B) Patents
C) Trademark
D) Accounts Receivable

Question 33

Under which of the following categories would Accounts Payable appear?

A) Long-term assets
B) Current assets
C) Long-term liabilities
D) Current liabilities

Question 34

Assets with no physical form are ________.

A) current assets
B) intangible assets
C) not listed on the balance sheet because they have no value
D) included in owner's equity

Question 35

Assets that are expected to be converted to cash,sold,or used up during the next 12 months,or within the business's normal operating cycle if the cycle is longer than a year,are called ________ assets.

A) intangible
B) plant
C) long-term
D) current

Question 36

Which of the following is a measure of how quickly an item can be converted to cash?

A) Debt ratio
B) Return on assets ratio
C) Liquidity
D) Accounting cycle

Question 37

Notes Payable due within two years are classified as ________.

A) current liabilities
B) current assets
C) long-term liabilities
D) long-term assets

Question 38

Which of the following is the most liquid asset?

A) Building
B) Prepaid Expenses
C) Accounts Receivable
D) Cash

Question 39

Salaries Payable,Accounts Payable,and Unearned Revenue are examples of ________.

A) short-term investments
B) fixed assets
C) current liabilities
D) long-term liabilities

Question 40

Which of the following statements regarding intangible assets is incorrect?

A) Intangible assets have no physical form.
B) Intangible assets are valuable because of the special rights they carry.
C) Intangible assets are not reported on the balance sheet.
D) Intangible assets include the exclusive right to produce or sell an invention.

Question 41

Which of the following statements concerning the worksheet is correct?

A) When a worksheet is used, there is no need to make journal entries.
B) A worksheet consists of seven sections.
C) Section 5 (Income Statement) and Section 6 (Balance Sheet) are optional.
D) A completed worksheet is a substitute for the financial statements.

Question 42

For each account listed,identify the category in which it would appear on a classified balance sheet.
$$\begin{array} { | l | l | l | } \hline&{ \text { Account } } &{ \begin{array} { c } \text { Location on a } \\\text { Classified Balance Sheet }\end{array} } \\\hline \text { a } & \text { Smith, Capital } & \\\hline \text { b } & \text { Accumulated Depreciation - } & \\&\text { Equipment }\\\hline \text { c } & \text { Notes Payable (due in two years) } & \\\hline \text { d } & \text { Unearned Revenue (short-term) } & \\\hline \text { e } & \text { Salaries Payable } & \\\hline \text { f } & \text { Accounts Receivable } & \\\hline \text { g } & \text { Trademark } & \\\hline \text { h} & \text { Prepaid Rent (prepaid for six } & \\& \text { months)}\\\hline\end{array}$$

Question 43

Regarding a classified balance sheet,which of the following statements is correct?

A) Accounts are classified by their purchase dates.
B) Account balances are listed from the highest amount to the lowest amount.
C) Assets are listed in the order of their liquidity.
D) Assets are listed in alphabetical order.

Question 44

The balances of select accounts of McMurray Company as of December 31,2018 are given below: $$\begin{array} { | l | r | } \hline \text { Notes Payable-short-term } & \$ 1,500 \\\hline \text { Salaries Payable } & 3,000 \\\hline \text { Notes Payable-long-term } & 23,000 \\\hline \text { Accounts Payable } & 3,000 \\\hline \text { Unearned Revenue } & 3,000 \\\hline \text { Interest Payable } & 2,400 \\\hline\end{array}$$ The Unearned Revenue is the amount of cash received for services to be rendered in January 2019.Interest Payable will be paid on February 5,2019.What are the total long-term liabilities shown on the balance sheet at December 31,2018?

A) $1,500
B) $3,000
C) $6,000
D) $23,000

Question 45

The Owner,Withdrawals account is included in the income statement section of the worksheet.

Question 46

The ending balance in the Owner,Capital account is shown on the income statement columns of the worksheet.

Question 47

The balances of select accounts of Sandra Company as of December 31,2018 are given below: $$\begin{array} { | l | r | r | } \hline & { \text { Debit } } & \text { Credit } \\\hline \text { Building } & \$ 140,000 & \\\hline \text { Cash } & 9,000 & \\\hline \text { Office Supplies } & 1,200 & \\\hline \text { Furniture } & 6,000 & \\\hline \text { Prepaid Insurance } & 550 & \\\hline \text { Accumulated Depreciation-Furniture } & & \$ 4,000 \\\hline \text { Land } & 31,000 & \\\hline \text { Accumulated Depreciation-Building } & & 4,000 \\\hline \text { Accounts Receivable } & 2,200 & \\\hline\end{array}$$ The insurance has been prepaid until June 30,2019.Determine the amount of total current assets reported on the balance sheet at December 31,2018.

A) $17,200
B) $10,200
C) $12,950
D) $10,750

Question 48

The last two columns generally found on the right side of the worksheet are the income statement columns.

Question 49

The balances of select accounts of Elliott Company as of December 31,2018 are given below: $$\begin{array} { | l | r | } \hline \text { Notes Payable-short-term } & \$ 1,200 \\\hline \text { Salaries Payable } & 3,000 \\\hline \text { Notes Payable-long-term } & 20,000 \\\hline \text { Accounts Payable } & 3,500 \\\hline \text { Unearned Revenue } & 3,000 \\\hline \text { Interest Payable } & 2,400 \\\hline\end{array}$$ The Unearned Revenue is the amount of cash received for services to be rendered in January,2019.The Interest Payable is due on February 15,2019.What are the total current liabilities shown on the balance sheet at December 31,2018?

A) $5,900
B) $10,700
C) $13,100
D) $11,900

Question 50

A worksheet is a substitute for the financial statements.

Question 51

Assets are listed in the order of their ________ on the balance sheet.

A) magnitude
B) dates of purchase
C) liquidity
D) durability

Question 52

Which of the following would be considered a long-term asset?

A) Accounts Payable
B) Land
C) Office Supplies
D) Owner, Capital

Question 53

The balances of select accounts of Donovan Company as of December 31,2018 are given below. $$\begin{array} { | l | r | r | } \hline & { \text { Debit } } & \text { Credit } \\\hline \text { Building } & \$ 130,000 & \\\hline \text { Cash } & 9,000 & \\\hline \text { Office Supplies } & 800 & \\\hline \text { Furniture } & 6,000 & \\\hline \text { Prepaid Insurance } & 450 & \\\hline \text { Accumulated Depreciation-Furniture } & & \$ 3,000 \\\hline \text { Land } & 30,000 & \\\hline \text { Accumulated Depreciation-Building } & & 4,300 \\\hline \text { Accounts Receivable } & 3,000 & \\\hline\end{array}$$ What amount of total long-term assets would be shown on the balance sheet at December 31,2018?

A) $130,000
B) $158,700
C) $160,000
D) $166,000

Question 54

Regarding a classified balance sheet,which of the following statements regarding liabilities is incorrect?

A) Many Notes Payable are long-term.
B) Current liabilities include Accounts Payable and Unearned Revenue.
C) Long-term liabilities must be paid either with cash or with goods and services within one year or the entity's operating cycle, if the cycle is longer than one year.
D) Liabilities are listed in the order in which they must be paid

Question 55

The worksheet helps accountants to ________.

A) prepare the trial balance
B) prepare the financial statements
C) prepare the unadjusted trial balance
D) maintain books of accounts without a journal

Question 56

Liquidity is a measure of how ________.

A) quickly an asset may be converted into cash
B) long an asset can be used
C) easily an asset can be exchanged for another asset
D) quickly an asset appreciates in value

Question 57

A worksheet can be used to help prepare adjusting entries and the financial statements.

Question 58

A worksheet can be used to help prepare the financial statements.

Question 59

The accounts from the Adjusted Trial Balance are listed in alphabetical order.Use this information for Lawrence Service Company to prepare the classified balance sheet at September 30,2018.Use the report form.You must compute the ending balance of Lawrence,Capital.There were no new capital contributions during the month.

Question 60

In the worksheet,the adjusted balance of the Service Revenue account appears in the credit column of the income statement.

Question 61

The worksheet is an external tool that can be used to help in recording adjusting entries and preparing financial statements.

Question 62

Which of the following statements is TRUE of the worksheet?

A) The worksheet is a tool that takes the place of financial statement preparation.
B) The worksheet is a document used to summarize data to prepare financial statements.
C) The worksheet is a financial statement issued to the public to communicate the financial results of a company.
D) The worksheet is a type of journal.

Question 63

Net income is entered as the balancing amount on the debit side of the income statement columns and the credit side of the balance sheet columns of the worksheet.

Question 64

The balance sheet section of the worksheet includes the asset and liability accounts and all equity accounts except revenues and expenses.

Question 65

Prepaid Rent in the worksheet's unadjusted trial balance column is $6,000.Prepaid Rent in the balance sheet column is $4,000.Which of the following entries would have caused this difference?

A) a $2,000 debit entry to Prepaid Rent in the worksheet's adjustments column
B) a $2,000 credit entry to Rent Expense in the worksheet's adjustments column
C) a $2,000 credit entry to Prepaid Rent in the worksheet's adjustments column
D) a $2,000 credit entry to Rental Revenue in the worksheet's adjustments column

Question 66

The balance sheet section of the worksheet includes the asset and liability accounts and all equity accounts,including all revenues and expenses.

Question 67

The Interest Expense in the worksheet's unadjusted trial balance column is $1,000.Interest Expense in the income statement column is $12,000.Which of the following entries would have caused this difference?

A) a $12,000 credit to Interest Expense in the worksheet's adjustments column
B) a $12,000 credit to Interest Payable in the worksheet's adjustments column
C) a $11,000 debit to Interest Expense in the worksheet's adjustments column
D) a $11,000 credit to Interest Expense in the worksheet's adjustments column

Question 68

Where does net income appear on a worksheet?

A) Net income appears only in the income statement debit column.
B) Net income appears in the balance sheet credit column and in the income statement debit column.
C) Net income appears in the income statement credit column and in the balance sheet debit column.
D) Net income appears only in the balance sheet credit column.

Question 69

Which of the following statements is TRUE if the income statement debit column exceeds the income statement credit column of a worksheet?

A) The company incurred a net loss.
B) Owner, Capital increased during the period.
C) The company made a net profit.
D) An error was made.

Question 70

The following is the adjusted trial balance columns from the worksheet for Picture Perfect Photography.
Picture Perfect Photography
Adjusted Trial Balance
December 31,2018
$\begin{array}{|l|c|c|}\hline \text { Accounts } & \text { Debit } & \text { Credit } \\\hline \text { Cash } & \$ 15,000 & \\\hline \text { Accounts Receivable } & 30,000 & \\\hline \text { Prepaid Insurance } & 7,500 & \\\hline \text { Office Supplies } & 3,200 & \\\hline \text { Land } & 40,000 & \\\hline \text { Building } & 160,000 & \\\hline \text { Accumulated Depreciation--Building } & & \$ 12,000 \\\hline \text { Equipment } & 75,000 & \\\hline \text { Accumulated Depreciation--Equipment } & & 8,500 \\\hline \text { Accounts Payable } & & 12,000 \\\hline \text { Salaries Payable } & & 2,000 \\\hline \text { Unearned Revenue } & & 25,000 \\\hline \text { Mortgage Payable } & & 100,000 \\\hline \text { Ramirez, Capital } & & 21,290 \\\hline \text { Ramirez, Withdrawals } & 23,000 & \\\hline \text { Service Revenue } & & 289,000 \\\hline \text { Salaries Expense } & 61,000 & \\\hline \begin{array}{l}\text { Depreciation Expense--Building and } \\\text { Equipment }\end{array} & 6,150 & \\\hline \text { Office Supplies Expense } & 14,040 & \\\hline \text { Insurance Expense } & 14,000 & \\\hline \text { Utilities Expense } & 20,900 & \\\hline \text { Total } & \$ 469,790 & \$ 469,790 \\\hline\end{array}$ Using the information provided in the worksheet above,prepare an income statement for Picture Perfect Photography.

Question 71

Which of the following accounts would appear in the balance sheet debit column of the worksheet?

A) Unearned Revenue
B) Accumulated Depreciation
C) Service Revenue
D) Prepaid Insurance

Question 72

Which of the following accounts would appear in the income statement credit column of the worksheet?

A) Service Revenue
B) Prepaid Insurance
C) Unearned Revenue
D) Depreciation Expense

Question 73

Which of the following adjusted balances would appear in the balance sheet credit column of a worksheet?

A) Rent Revenue
B) Insurance Expense
C) Salaries Payable
D) Equipment

Question 74

Which of the following accounts would appear in the income statement debit column of the worksheet?

A) Unearned Revenue
B) Service Revenue
C) Depreciation Expense
D) Prepaid Insurance

Question 75

When preparing a worksheet,net income is recorded in the ________.

A) income statement credit column
B) adjusted trial balance debit column
C) income statement debit column
D) balance sheet debit column

Question 76

Which of the following is TRUE of a completed worksheet?

A) The total debits in the unadjusted trial balance column equal the total debits in the adjusted trial balance column.
B) The total debits in the income statement column equal the total credits in the balance sheet column.
C) The total debits in the income statement column equal the total debits in the balance sheet column.
D) The total of all the debit columns is equal to the total of all the credit columns.

Question 77

The income statement section of the worksheet includes ________.

A) Land and Salaries Payable
B) Owner, Capital and Owner, Withdrawals
C) Furniture and Cash
D) Service Revenue and Utilities Expense

Question 78

Net income (loss)is the difference between the total debits and the total credits in the income statement columns of the worksheet.

Question 79

Which of the following accounts would appear in the balance sheet credit column of the worksheet?

A) Prepaid Insurance
B) Buildings
C) Unearned Revenue
D) Service Revenue

Question 80

Net income or net loss is the balancing amount on the worksheet and should always be entered on the side that makes the debit and credit columns balance.