Question 1

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

Accepted Answer

To find the amount to be closed to Retained Earnings, we need to calculate the total revenues minus the total expenses. 
Total revenues = $180,000 
Total expenses = $115,600 
$180,000 - $115,600 = $64,400 
Therefore, the correct answer is (B) $64,400.

Question 2

Use the information in the adjusted trial balance presented below:

-To calculate the current ratio for Wicked Wicker Company:

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. Wicked Wicker Company has current assets of $1,000,000 and current liabilities of $535,000. Therefore, the current ratio is $1,000,000 / $535,000 = 1.87.

Question 3

Permanent accounts include all of the following except:

Accepted Answer

Permanent accounts are those that carry their balances over into the next accounting period. Depreciation Expense-Equipment is a temporary account, not a permanent one, because it relates to expenses for a specific period and is closed to Income Summary at the end of that period.

Question 4

All of the following statements regarding the Income Statement columns on the worksheet are true except:

Accepted Answer

The balances in the Income Statement credit column are not unearned revenues. They are revenues earned during the accounting period. Unearned revenues are typically found in the Liability column of the worksheet.

Question 5

Flagg records adjusting entries at its December 31 year-end.At December 31,employees had earned $12,000 of unpaid and unrecorded salaries.The next payday is January 3,at which time $30,000 will be paid.
-Prepare the journal entry on January 3 to record payment assuming the adjusting and reversing entries were made on December 31 and January 1.

Accepted Answer

The answer of Flagg records adjusting entries at its December...

Question 6

For the year ended December 31,a company had revenues of $187,000 and expenses of $109,000.$37,000 in dividends were paid during the year.Which of the following entries could not be a closing entry?

Accepted Answer

The answer of For the year ended December 31,a company...

Question 7

Flagg records adjusting entries at its December 31 year end.At December 31,employees had earned $12,000 of unpaid and unrecorded salaries.The next payday is January 3,at which time $30,000 will be paid.
-Prepare the January 1 journal entry to reverse the effect of the December 31 salary expense accrual.

Accepted Answer

The best choice is to debit Salaries payable $12,000 and credit Salaries expense $12,000 to reverse the effect of the December 31 salary expense accrual. This is because the employees had earned $12,000 in unpaid and unrecorded salaries by December 31, and this expense needs to be recognized in the 2019 financial statements. Since the next payday is January 3, the $30,000 payment will be recorded in 2020, and thus no cash entry is needed at this time.

Question 8

Palmer Company is at the end of its annual accounting period.The accountant has journalized and posted all external transactions and all adjusting entries,has prepared an adjusted trial balance,and completed the financial statements.The next step in the accounting cycle is:

Accepted Answer

The next step in the accounting cycle after completing the financial statements is to close temporary accounts, such as revenue and expense accounts, to the retained earnings account in order to prepare for the next accounting period. This is done through the use of closing entries. Therefore, the correct answer is to close temporary accounts.

Question 9

Use the information in the adjusted trial balance presented below:

-To calculate current assets for Wicked Wicker Company:

Accepted Answer

The answer of Use the information in the adjusted trial...

Question 10

Reversing entries:

Accepted Answer

Reversing entries are made to undo or cancel out adjusting entries made in the prior period. As a result, they will often result in abnormal account balances in some accounts temporarily until the adjusting entries are made again in the current period. They are not necessary when journal entries are incorrectly recorded, but rather when adjusting entries have been made that need to be reversed. They are a required step in the accounting cycle and must be made before preparing the post-closing trial balance. They are not required only if the company uses accounting software, as they can be made manually as well.

Question 11

All of the following statements regarding a work sheet are true except:

Accepted Answer

A worksheet can be useful in planning and organizing an audit of financial statements, as it allows the auditor to review the company's accounts and make preliminary adjustments. Therefore, statement C is false. The other statements are true regarding a worksheet.

Question 12

Which of the following accounts would be included in a post-closing trial balance?

Accepted Answer

A post-closing trial balance includes all balance sheet accounts with balances after closing entries have been made. Accounts Receivable is a balance sheet account and retains its balance into the next period, whereas Dividends, Consulting Fees Earned, Depreciation Expense-Equipment, and Salaries Expense are temporary accounts that would have been closed to Retained Earnings.

Question 13

For the year ended December 31,a company has revenues of $317,000 and expenses of $196,000.The company paid $50,000 in dividends during the year.The balance in the Retained earnings account before closing is $81,000.Which of the following entries would be used to close the dividends account?

Accepted Answer

The answer of For the year ended December 31,a company...

Question 14

The following information is available for Cubic Company before closing the accounts.After all closing entries are made,what will be the balance in the Retained earnings account?

Accepted Answer

The answer of The following information is available for Cubic...

Question 15

Based on the following information from Scranton Company's balance sheet,calculate the current ratio.

Accepted Answer

The answer of Based on the following information from Scranton...

Question 16

Temporary accounts include all of the following except:

Accepted Answer

Prepaid rent is an asset account and not a temporary account. Temporary accounts are used to track revenues, expenses, gains, and losses for a specific accounting period and are closed at the end of that period. Consulting revenue, dividends, rent expense, and Income Summary are all temporary accounts.

Question 17

An adjusting entry that increases an asset and increases a revenue is known as a(n):

Accepted Answer

An adjusting entry that increases an asset and increases a revenue is known as an accrued revenue. This occurs when a company has earned revenue but has not yet received payment for it. The revenue is recorded as an asset (accounts receivable) until it is collected, and the adjusting entry recognizes the revenue as earned for the period.

Question 18

The purpose of reversing entries is to:

Accepted Answer

Reversing entries are made at the beginning of a new accounting period to simplify the recording of subsequent transactions related to accruals or deferrals from the previous period. They are not about correcting errors, ensuring closing entries, affecting which accounts are carried forward, or a required step in the accounting cycle, but rather about making future record-keeping easier.

Question 19

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

Accepted Answer

Non-current items are items that are not expected to come due within one year or the company's operating cycle. They are typically long-term assets or liabilities.

Question 20

Which of the following types of businesses might have an operating cycle longer than one year?

Accepted Answer

The answer of Which of the following types of businesses...

Quiz 3: Adjusting Accounts for Financial Statements