Question 1

Temporary accounts would not include:

Accepted Answer

Temporary accounts are accounts that are used to collect revenues, expenses, gains, and losses for a specific accounting period. Salaries payable is a liability account and not a temporary account. Advertising expense and supplies expense are both temporary accounts as they collect expenses for a specific period, and dividends are not a temporary account as they are a distribution of profits and not an expense or revenue.

Question 2

Frosty Inc.has the following balances on December 31 prior to closing entries:
$$\begin{array} { | l | r | } 
\hline \text { Revenues } & \$ 35,000 \
\hline \text { Retained Earnings, Jan. 1 } & 10,000 \
\hline \text { Cash } & 7,000 \
\hline \text { Expenses } & 23,000 \
\hline \text { Accounts Payable } & 4,000 \
\hline \text { Dividends } & 1,000 \
\hline \text { Supplies } & 18,000 \
\hline
\end{array}$$
Based upon the balances above,what net adjustment would be made to Retained Earnings due to closing entries?

Accepted Answer

Net income is calculated as Revenues ($35,000) minus Expenses ($23,000), which equals $12,000. Dividends of $1,000 are subtracted from net income to determine the adjustment to Retained Earnings, resulting in an increase of $11,000.

Question 3

Which of the following is a possible closing entry?

Accepted Answer

Closing entries involve transferring balances from temporary accounts like revenues and expenses to permanent accounts like Retained Earnings. Debiting Service Revenue and crediting Retained Earnings is a correct closing entry.

Question 4

Of the following six accounts,which ones have temporary balances? 
(1)Service Revenue
(2)Dividends
(3)Salaries Expense
(4)Common Stock
(5)Retained Earnings
(6)Cash

Accepted Answer

Temporary accounts are accounts that are closed at the end of the accounting period and have a balance of zero. Service Revenue and Salaries Expense are examples of revenue and expense accounts, respectively, that have temporary balances. Dividends are also considered temporary accounts because they represent distributions of earnings to shareholders and are closed out at the end of the period. Common Stock, Retained Earnings, and Cash are all examples of permanent accounts that have balances that carry over from one accounting period to the next.

Question 5

For the first three years of operations,the company reports net income of $1,000,$2,000,and $3,000,and pays dividends of $500,$1,000,and $1,000.What is the balance of retained earnings at the end of the third year?

Accepted Answer

Year 1: 
Net Income = $1,000 
Dividends Paid = $500 
Retained Earnings = $500

Year 2: 
Net Income = $2,000 
Dividends Paid = $1,000 
Retained Earnings = $1,500

Year 3: 
Net Income = $3,000 
Dividends Paid = $1,000 
Retained Earnings = $2,500

Therefore, the balance of retained earnings at the end of the third year is $2,500.

The correct answer is (B).

Question 6

Permanent accounts would not include:

Accepted Answer

Permanent accounts are accounts on a company's balance sheet that are not closed at the end of the accounting period. These accounts include assets, liabilities, and equity accounts. Interest expense is a temporary account that is closed at the end of an accounting period, so it is not a permanent account. Salaries Payable, Prepaid Rent, and Unearned Revenues are all balance sheet accounts that are not closed at the end of an accounting period, so they are permanent accounts.

Question 7

Which of the following accounts is(are)listed in a post-closing trial balance?

Accepted Answer

The post-closing trial balance includes permanent accounts, such as Prepaid Rent and Accounts Payable, but not temporary accounts, such as Salaries Expense.

Question 8

A list of all accounts and their balances after posting closing entries is referred to as:

Accepted Answer

A post-closing trial balance is prepared after posting closing entries to check the equality of debit and credit balances in all accounts. It includes only permanent accounts, i.e. assets, liabilities, and equity accounts, and excludes all temporary accounts that were closed during the closing process.

Question 9

A post-closing trial balance:

Accepted Answer

A post-closing trial balance is prepared after all of the closing entries have been made, and therefore reflects the balances of all accounts after the temporary accounts have been closed out. It is not prepared before or after adjusting entries, and it is not specific to cash-basis accounting.

Question 10

When a company prepares closing entries,which one of the following is NOT a correct closing entry?

Accepted Answer

The answer of When a company prepares closing entries,which one...

Question 11

The closing process includes which of the following?

Accepted Answer

The closing process involves closing the balances of revenue, expense, and dividend accounts to zero. This is done to prepare the accounts for the next accounting period and to ensure accurate financial statements. The retained earnings account is not closed to zero as it is a cumulative account that carries over from period to period.

Question 12

In the first three years of operations,Lindsey Corporation earned net income/loss of -$150,000,$100,000,and $250,000.At the end of the third year,Lindsey Corporation has a balance of $120,000 for its Retained Earnings account.What is the total amount of dividends Lindsey Corporation paid over the three years?

Accepted Answer

The total net income for the first three years is (-$150,000) + $100,000 + $250,000 = $200,000. If we add this to the Retained Earnings balance of $120,000, we get the total equity earned by the company of $320,000. Dividends paid out would then be equal to earnings minus retained earnings or $320,000 - $240,000 (net income of first two years) = $80,000. Therefore, option C is correct.

Question 13

The purpose of closing entries is to transfer:

Accepted Answer

The purpose of closing entries is to transfer the balances in temporary accounts (revenue, expense, and dividend accounts) to a permanent account such as retained earnings. This process resets the temporary accounts to zero to prepare them to accumulate new transactions in the next accounting period. Closing entries are necessary to ensure accurate financial statements and prevent the mixing of income and expenses from different periods. The other options listed do not accurately describe the purpose of closing entries.

Question 14

The ending Retained Earnings balance of Juan's Mexican Restaurant chain increased by $3.2 million from the beginning of the year.The company declared a dividend of $1.3 million during the year.What was the net income earned during the year?

Accepted Answer

The net income earned during the year can be calculated as follows:

Net Income = Ending Retained Earnings - Beginning Retained Earnings + Dividends 
Net Income = $3.2 million - $0 + $1.3 million 
Net Income = $4.5 million

Therefore, the best choice is C, as it provides the correct net income earned during the year.

Question 15

Which of the following accounts will NOT be involved in closing entries?

Accepted Answer

Prepaid Insurance is a permanent account and is not closed at the end of the accounting period. Only temporary accounts like revenues, expenses, and dividends are closed.

Question 16

Which of the following is true concerning temporary and permanent accounts?

Accepted Answer

Temporary accounts represent activity during a specific period, usually one fiscal year, while permanent accounts represent activity over the entire life of the company. Permanent accounts are not closed at the end of a reporting period, while temporary accounts are closed to transfer their balances to the retained earnings account. Cash is a permanent account, as it represents an asset that the company holds over time. Option D is incorrect because the period covered by temporary accounts varies depending on the reporting period.

Question 17

Which of the following describes the purpose(s)of closing entries?

Accepted Answer

Closing entries are used to transfer the balances of temporary accounts (revenues, expenses, and dividends) to permanent accounts (retained earnings) and to reset the temporary accounts to zero for the next accounting period.

Question 18

The Retained Earnings account had a beginning credit balance of $26,000.During the period,the business had a net loss $12,000,and the company paid dividends of $8,000.The ending balance in the Retained Earnings account is:

Accepted Answer

The ending balance in the Retained Earnings account is calculated as follows:Beginning balance: $26,000Net loss: ($12,000)Dividends paid: ($8,000)Ending balance: $26,000 - $12,000 - $8,000 = $6,000

Question 19

Permanent accounts would not include:

Accepted Answer

The answer of Permanent accounts would not include:
...

Question 20

Which of the following is a permanent account?

Accepted Answer

Retained Earnings is a permanent account as it tracks the cumulative profits earned by a company over its entire existence. Dividends, Service Revenue, and Advertising Expense are all temporary accounts that are reset to zero at the end of each accounting period.

Quiz 3: The Financial Reporting Process

Temporary accounts would not include:

Which of the following is a possible closing entry?

Of the following six accounts,which ones have temporary balances? (1) Service Revenue (2) Dividends (3) Salaries Expense (4) Common Stock (5) Retained Earnings (6) Cash

For the first three years of operations,the company reports net income of $1,000,$2,000,and $3,000,and pays dividends of $500,$1,000,and $1,000.What is the balance of retained earnings at the end of the third year?

Permanent accounts would not include:

Which of the following accounts is(are) listed in a post-closing trial balance?

A list of all accounts and their balances after posting closing entries is referred to as:

A post-closing trial balance:

When a company prepares closing entries,which one of the following is NOT a correct closing entry?

The closing process includes which of the following?

The purpose of closing entries is to transfer:

The ending Retained Earnings balance of Juan's Mexican Restaurant chain increased by $3.2 million from the beginning of the year.The company declared a dividend of $1.3 million during the year.What was the net income earned during the year?

Which of the following accounts will NOT be involved in closing entries?

Which of the following is true concerning temporary and permanent accounts?

Which of the following describes the purpose(s) of closing entries?

The Retained Earnings account had a beginning credit balance of $26,000.During the period,the business had a net loss $12,000,and the company paid dividends of $8,000.The ending balance in the Retained Earnings account is:

Permanent accounts would not include:

Which of the following is a permanent account?