Question 1

The adjusted trial balance of the Waterstone Company follows:
$\begin{array}{c}
 \text { Waterstone Company}\
 \text { Adjusted Trial Balance}\
 \text { December 31}\ 
\begin{array}{r|r|c|l} 
& \text { Debit } & \text { Credit } \
\hline \text { Cash } & 8,000 & \
\hline \text { Erepaid insurance }  & 2,400 & \
\hline \text { Equipment } & 18,000 &
\end{array}\end{array}$

$\begin{array}{r|c|c}
\hline \text { Accumulated depreciation-Equipment } & & 3,600 \
\hline \text { Salaries payable } & & 2,000 \
\hline \text { Unearned repar fees } & & 1,200 \
\hline \text { T. Waterstone, Capital } & & 11,400\
\hline \text { T. Waterstone, Withdrawals } & 4,000 & \
\hline \text { Repair fees earned } & & 27,500 \
\hline \text { Salaries expense } & 10,000 & \
\hline \text { Depreciation expense } & 1,800 & \
\hline \text { Insurance expense } & 1,500 & \
\hline \text { Totals } & 45,700 & 45,700\
\hline 
\end{array}$ Prepare the closing entries for Waterstone Company.

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Question 2

The following adjusted trial balance is for Carla Co. at year-end December 31. The credit balance in Carla West, Capital at the beginning of the year, January 1, was $320,000. The owner, Carla West, invested an additional $100,000 during the current year. The land held for future expansion was also purchased during the current year.

$\begin{array}{l|l|l}
\hline\text { Sal aries payable } & & 10,500 \
\hline \text { Interest payable } & & 7,900 \
\hline \text { Long-term note payable } && 252,000 \
\hline \text { C. West, Capital } && 420,000\
\hline\text { C. West, Withdrawals } & 60,000 & \ 
\hline \text { Service fees earned } & & 470,800 \
\hline \text { Sal aries expense } & 195,000 &\
\hline \text { Insurance expense } & 18,000 \
\hline \text { Rent expense } & 36,000 \
\hline \text { Depreciation expense-Equipment } & 12,000 \
\hline \text { Depreciation expense-Building } & 15,000 \
\hline \text { Totals } & \$ 1,436,000 & \$ 1,436,000 \
\hline 
\end{array}$
 Required: Prepare a classified balance sheet as of December 31. (Note: A $21,000 installment on the long-term note payable is due within one year.)

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Question 3

The following information has been gathered for Major Properties Co. to assist in preparing its year-end adjusting entries at December 31:
(a) The company has earned $2,500 of rental revenue that has not yet been received or recorded.
(b) Major had previously recorded $3,200 of unearned rental revenue. At year-end, $1,500 of this amount has been earned.
(c) Depreciation on equipment for the year is $7,800.
(d) Employees have earned but have not yet been paid $2,750 in salaries.
Identify which of the above accounting adjustment would be reversed assuming Major Properties Co. uses reversing entries.

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Question 4

Calculate the current ratio for each of the following companies and identify the company with the strongest liquidity position.
 $$\begin{array} { | l | l | l | } 
\hline & \text { Current Astets } & \text { Current Liabilities } \
\hline \text { Company A } & \$ 1,752,000 & \$ 1,267,000 \
\hline \text { Company I } & \$ 863,500 & \$ 481,000 \
\hline \text { Company T } & \$ 366,800 & \$ 419,000 \
\hline
\end{array}$$

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Question 5

The closing process resets ________, ________, and ________ account balances to zero at the end of each accounting period.

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Question 6

Paradise Travel's adjusted trial balance as of the end of its annual accounting period is shown below:

(a) Prepare the necessary closing entries.
(b) Prepare a post-closing trial balance.

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Question 7

The ________ account is a temporary account used only in the closing process.

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Question 8

Compute Chase Company's current ratio using the following information:
 $$\begin{array} { | l | l | l | l | } 
\hline \text { Cash } & \$ 20,000 & \text { Accounts Payable } & \$ 8,000 \
\hline \text { Accounts Receivable } & 5,000 & \text { Salaries Payable } & 12,000 \
\hline \text { Prepaid Rent } & 7,000 & \text { Note Payable (due in 2 years) } & 150,000 \
\hline \text { Equipment } & 12,000 & & \
\hline
\end{array}$$

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Question 9

__________ are long-term resources used to produce or sell products and services; they generally lack physical form and their benefits are highly uncertain.

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Question 10

Use the following partial work sheet from Carmelo Bowl to prepare its income statement, statement of owner's equity and a classified balance sheet (Assume the owner did not make any investments in the business this year.)

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Question 11

Tunica Company's fiscal year ends on September 30 of the current year. Tunica frequently has accrued revenues at the end of its fiscal year that are recorded for proper financial statement presentation. The company 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 Tunica does not prepare reversing entries.
(c) Assuming that Tunica prepares reversing entries, reverse the adjusting entry made on September 30.
(d) Assuming that Tunica prepares reversing entries, receipt of the payment for the total contract amount on October 9.

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Question 12

Compute Darling Company's current ratio using the following information:
 $$\begin{array} { | l | l | l | l | } 
\hline \text { Accounts receivable } & \$ 20,000 & \text { Long-term notes payable } & \$ 80,000 \
\hline \text { Salaries payable } & 5,000 & \text { Building } & 170,000 \
\hline \text { Prepaid Rent } & 7,000 & \text { Accounts payable } & 15,000 \
\hline \text { Cash } & 12,000 & \text { Land } & 75,000 \
\hline
\end{array}$$

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Question 13

Mandalay Company frequently has accrued expenses at the end of its fiscal year that should be recorded for proper financial statement presentation. Mandalay pays on a weekly basis and has
$50,000 of accrued salaries incurred but not paid for June 30, its fiscal year-end. This consists of one day's accrued salaries for the week. The company will pay its employees $250,000 on July 4; the one day of accrued salaries and the remaining four days for July salaries. Record the following entries:
(a) Accrual of the salaries on June 30.
(b) Payment of the salaries on July 4, assuming that Mandalay does not prepare reversing entries.
(c) Assuming that Mandalay prepares reversing entries, reverse the adjusting entry made on June 30.
(d) Assuming that Mandalay prepares reversing entries, payment of the salaries on July 4.

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Question 14

The calendar year-end adjusted trial balance for Blessinger Co. follows:
  Required:
(a) Prepare a classified year-end balance sheet. (Note: A $9,000 installment on the long-term note payable is due within one year.)
(b) Prepare the required closing entries.

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Question 15

The ________ refers to the steps in preparing financial statements for users.

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Question 16

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

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Question 17

Presented below are the year-end balances at December 31 of Becca's Dry Cleaning Service. (All accounts have normal balances.)
 $\begin{array}{ll}
\text { Accounts receivable } & \$ 12,000 \
\text { Accounts payable } & 25,000 \
\text { Accumul ated depreciation-equipment } & 30,000 \
\text { Cash } & 42,000 \
\text { Depreciation expense-equipment } & 12,000 \
\text { Insurance expense } & 7,000\
\text { Equipment } & 125,000 \
\text { Service revenue } & 200,000 \
\text { Notes payable } & 65,000 \
\text { B. Stanton, Capital } & 17,000 \
\text { B. Stanton, Withdrawals } & 18,000 \
\text { Prepaid insurance } & 1,500\
\text { Salaries payable } & 4,000 \
\text { Salary expense } & 97,000 \
\text { Supplies } & 1,500 \
\text { Supplies expense } & 16,000 \
\text { Unearned service revenues } & 500 \
\text { Utilities expense } & 9,500 
\end{array}$
 (a) Prepare the necessary closing entries at December 31.
(b) Prepare a post-closing trial balance at December 31.

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Question 18

Calculate the current ratio in each of the following separate cases and identify the company case with the strongest liquidity position.
 $$\begin{array} { | l | l | l | } 
\hline & \text { Current Assets } & \text { Current Liabilities } \
\hline \text { Case 1 } & \$ 55,000 & \$ 30,000 \
\hline \text { Case 2 } & \$ 141,500 & \$ 85,000 \
\hline \text { Case 3 } & \$ 45,000 & \$ 59,000 \
\hline & & \
\hline & & \
\hline
\end{array}$$

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Question 19

Balance sheet accounts are called__________ accounts because they carry their balances to the next accounting period, and are not closed as long as the company continues to own the asset, owe the liability and have equity.

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Question 20

The calendar year-end adjusted trial balance for Blessinger Co. follows:

$$\begin{array} { | l | r | r | } 
\hline \text { Rent expense } & 5,000 & \
\hline \text { Depreciation expense-Equipment } & 800 & \
\hline \text { Depreciation expense-Building } & \underline { 7,000 } & \
\hline \text { Totals } & \$ 1,500,800 & \$ 1,500,800 \
\hline
\end{array}$$ Required:
(a) Determine the amounts of current assets and current liabilities. (Note: A $9,000 installment on the long-term note payable is due within one year.)
(b) Calculate the current ratio. Comment on the ability of Blessinger Co. to meets its short-term debts.

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Quiz 4: Completing the Accounting Cycle

The closing process resets , , and account balances to zero at the end of each accounting period.

Paradise Travel's adjusted trial balance as of the end of its annual accounting period is shown below: (a) Prepare the necessary closing entries. (b) Prepare a post-closing trial balance.