Question 1

The purpose of closing entries is to transfer:

Accepted Answer

The purpose of closing entries is to transfer balances in temporary accounts (revenue, expenses, and dividends) to permanent accounts (retained earnings). This resets the temporary accounts to zero for the next accounting period. Accounts Receivable and Inventory are not temporary accounts and do not need to be transferred through closing entries.

Question 2

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 balances are accounts that are closed at the end of the accounting period to determine the net income or loss for that period. Service Revenue and Salaries Expense are both income statement accounts, while Dividends are a distribution of earnings to shareholders and also appear on the income statement. Therefore, (1), (2), and (3) are all temporary accounts. Common Stock and Retained Earnings are both equity accounts and are permanent accounts that are not closed at the end of the accounting period. Cash is also a permanent account as it represents an asset that is not closed at the end of the accounting period. Therefore, (4), (5), and (6) are all permanent accounts.

Question 3

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 by starting with the beginning balance, subtracting the net loss, and then subtracting the dividends paid. Therefore, $26,000 (beginning balance) - $12,000 (net loss) - $8,000 (dividends) = $6,000.

Question 4

The following table contains financial information for Trumpeter's Inc.before closing entries: What is the amount of Trumpeter's total stockholders' equity?
$\begin{array} { | l | r | } 
\hline \text { Cash } & \$ 12,000 \
\hline \text { Supplies } & 4,500 \
\hline \text { Prepaid Rent } & 2,000 \
\hline \text { Salaries Expense } & 4,500 \
\hline \text { Equipment } & 65,000 \
\hline \text { Service Revenue } & 30,000 \
\hline \text { Miscellaneous Expenses } & 20,000 \
\hline \text { Dividends } & 3,000 \
\hline \text { Accounts Payable } & 5,000 \
\hline \text { Common Stock } & 68,000 \
\hline \text { Retained Earnings } & 8,000 \
\hline
\end{array}$

Accepted Answer

Total stockholders' equity is calculated by adding Common Stock and Retained Earnings. In this case, Common Stock is $68,000 and Retained Earnings is $10,500 ($8,000 + $30,000 - $20,000 - $3,000 from Service Revenue, Miscellaneous Expenses, and Dividends, respectively). Therefore, total stockholders' equity is $68,000 + $10,500 = $78,500.

Question 5

The closing entry for expenses includes:

Accepted Answer

The closing entry for expenses involves debiting each expense account and crediting the retained earnings account. This transfer of balances from expense accounts to retained earnings is necessary to reset the accounts for the next accounting period. Option A is incorrect because dividends are not affected by expense accounts. Option C is incorrect because revenues are unrelated to the closing of expense accounts.

Question 6

Permanent accounts would not include:

Accepted Answer

Permanent accounts are those that carry their balances over into the next accounting period. Interest Expense is a temporary account because it relates to a specific period and is closed to Retained Earnings at the end of that period. Salaries Payable and Prepaid Rent are both examples of permanent accounts because they represent ongoing financial positions of the company that are carried forward into future accounting periods.

Question 7

Permanent accounts would not include:

Accepted Answer

Permanent accounts are those that carry their balances over into the next accounting period. Utilities Expense is a temporary account, not a permanent one, because its balance is closed to the income summary at the end of each period.

Question 8

Temporary accounts would not include:

Accepted Answer

Salaries Payable is a permanent account as it is a liability account that carries over from one accounting period to another. Advertising Expense and Supplies Expense are temporary accounts that get closed at the end of each accounting period.

Question 9

The following table contains financial information for Trumpeter's Inc.before closing entries: What is the amount of Trumpeter's total liabilities?
$\begin{array} { | l | r | } 
\hline \text { Cash } & \$ 12,000 \
\hline \text { Supplies } & 4,500 \
\hline \text { Prepaid Rent } & 2,000 \
\hline \text { Salaries Expense } & 4,500 \
\hline \text { Equipment } & 65,000 \
\hline \text { Service Revenue } & 30,000 \
\hline \text { Miscellaneous Expenses } & 20,000 \
\hline \text { Dividends } & 3,000 \
\hline \text { Accounts Payable } & 5,000 \
\hline \text { Common Stock } & 68,000 \
\hline \text { Retained Earnings } & 8,000 \
\hline
\end{array}$

Accepted Answer

The total liabilities of Trumpeter's Inc. can be identified directly from the table as the "Accounts Payable" amount, which is $5,000. None of the other items listed under assets, equity, or expenses represent liabilities.

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

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

Retained earnings are calculated by adding net income to the previous period's retained earnings and then subtracting any dividends paid out. Over three years, the company earns $1,000 + $2,000 + $3,000 = $6,000 and pays out $500 + $1,000 + $1,000 = $2,500 in dividends. Thus, the retained earnings at the end of the third year are $6,000 - $2,500 = $3,500.

Question 12

If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue,how will this error affect total assets for the current period?

Accepted Answer

Recording cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue does not affect the total assets for the current period because it increases both an asset (Cash) and a revenue (Service Revenue), leaving the total assets unchanged.

Question 13

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

Accepted Answer

Temporary accounts represent activity over a specific period of time, while permanent accounts represent activity over the entire life of the company. Permanent accounts do not need to be closed at the end of every reporting period, unlike temporary accounts which need to be zeroed out and closed to start fresh for the next period. Cash is actually a permanent account because it represents the company's ongoing cash balance.

Question 14

The primary purpose of closing entries is to:

Accepted Answer

The primary purpose of closing entries is to update the balance of Retained Earnings and prepare revenue, expense, and dividend accounts for the next period's transactions. This is done by transferring the balances of these accounts to the Retained Earnings account and setting them to zero for the next period. Closing entries do not directly relate to proving the equality of debit and credit entries or ensuring that assets and liabilities are recognized in the appropriate period.

Question 15

The ending balance of Retained Earnings can best be described as:

Accepted Answer

Retained Earnings is the portion of net income that a company chooses to keep rather than distribute as dividends to shareholders. Therefore, it represents the cumulative amount of earnings retained by the company over time. Option A is not correct because Retained Earnings does not include any cash received from stockholders. Option C is also not correct because it represents the portion of earnings that has been distributed to shareholders as dividends, not the amount retained by the company.

Question 16

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 in its Retained Earnings account.What is the total amount of dividends Lindsey Corporation paid over the three years?

Accepted Answer

To find the total amount of dividends paid over three years, we need to use the Retained Earnings equation:

Retained Earnings = Beginning Retained Earnings + Net Income/Loss - Dividends

We know that at the end of the third year, Lindsey Corporation had a balance of $120,000 in its Retained Earnings account. To find the total dividends paid, we need to calculate the beginning retained earnings for each year.

Year 1: 
Beginning Retained Earnings = 0 
Net Loss = -$150,000 
Dividends = ?

$120,000 = 0 - $150,000 - Dividends 
Dividends = $270,000

Year 2: 
Beginning Retained Earnings = $120,000 
Net Income = $100,000 
Dividends = ?

$220,000 = $120,000 + $100,000 - Dividends 
Dividends = $0

Year 3: 
Beginning Retained Earnings = $120,000 
Net Income = $250,000 
Dividends = ?

$370,000 = $120,000 + $250,000 - Dividends 
Dividends = $80,000

Therefore, the total amount of dividends paid over three years is $270,000 + $0 + $80,000 = $350,000. The answer choices only offer $80,000 or $130,000 as options, and since $350,000 is not one of the choices, the best answer is C, $80,000.

Question 17

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 increase in Retained Earnings is equal to Net Income minus dividends. 
Therefore, we have: 
Retained Earnings increase = Net Income - dividends 
$3.2 million = Net Income - $1.3 million 
Net Income = $4.5 million.
Therefore, the correct answer is C) $4.5 million.

Question 18

Which of the following are reported as stockholders' equity in a classified balance sheet?

Accepted Answer

Stockholders' equity is the residual interest in the assets of the company after liabilities are deducted. Therefore, it includes Common Stock (contributed capital) and Retained Earnings (earned capital). Debits and credits are not reported in stockholders' equity because they represent the recording process of transactions, while revenues and expenses are reported on the income statement as part of the company's performance during a period.

Question 19

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

Accepted Answer

The answer of Which of the following accounts will NOT...

Question 20

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

Accepted Answer

The answer of Which of the following describes the purpose(s)of...

Quiz 3: The Accounting Cycle: End of the Period

The purpose of closing entries is to transfer:

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

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:

The closing entry for expenses includes:

Permanent accounts would not include:

Permanent accounts would not include:

Temporary accounts would not include:

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

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?

If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue,how will this error affect total assets for the current period?

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

The primary purpose of closing entries is to:

The ending balance of Retained Earnings can best be described as:

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 are reported as stockholders' equity in a classified balance sheet?

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

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