Student

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5
Student: _______________________________________________________________________________________
1. A work sheet is a tool of the accountant for bringing together information needed in preparing the statements, adjusting the accounts, and
preparing closing entries.
True False
2. Financial statements prepared from a work sheet offer more information than if it is not used and statements are just prepared from an
adjusted trial balance.
True False
3. A work sheet is prepared before entering the adjustments in the accounts.
True False
4. The work sheet is used to record transactions as they occur.
True False
5. The work sheet is an important financial statement.
True False
6. A work sheet is a substitute for the financial statements.
True False
7. To prepare the income statement all necessary numbers can be found in the income statement columns of the work sheet, including the net
income or net loss.
True False
8. On the work sheet, a loss is indicated if the total of the Income Statement Debit column exceeds the total of the Income Statement Credit
column.
True False
9. If all columns balance upon completion of a work sheet, you can be sure that no errors were made in preparing the work sheet.
True False
10. Closing entries are normally entered in the General Journal and then recorded on the work sheet.
True False
11. Adjusting entries are normally entered in the General Journal before they are recorded on the work sheet.
True False
12. On a work sheet, adjusted balances of revenues and expenses are sorted to the Income Statement columns.
True False
13. On the work sheet, a net income is entered in the Income Statement Credit column and in the Statement of Changes in Equity or Balance
Sheet Debit column.
True False
14. If interim financial statements are required, adjusting entries must be journalized and posted to obtain the adjusted data needed for their
preparation.
True False
15. To prepare the balance sheet, all necessary numbers can be found in the balance sheet columns of the work sheet, including ending
capital.
True False
16. Revenue accounts should begin each accounting period with zero balances.
True False
17. Closing revenue and expense accounts at the end of the accounting period serves to make the revenue and expense accounts ready for use
the next period.
True False
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18. Accounts that appear in the balance sheet are often called permanent or nominal accounts.
True False
19. Revenue and expense accounts are permanent accounts and should not be closed at the end of the fiscal period.
True False
20. The closing process is a step in the accounting cycle that prepares accounts for the next accounting period.
True False
21. Asset, liability and revenue accounts are not closed as long as a company continues in business.
True False
22. Closing entries are needed at the end of the fiscal period to close all ledger accounts.
True False
23. Closing entries accomplish the goal of reflecting revenues and expenses in the owner's capital account.
True False
24. Income Summary is a temporary account.
True False
25. The closing process is a two-step process. First revenue, expense, and withdrawals are set to zero balance. Second, the process
summarizes a period's assets and expenses.
True False
26. An expense account is normally closed by debiting Income Summary and crediting the expense account.
True False
27. The withdrawals account is normally closed by debiting it.
True False
28. After posting the entries to close all revenue accounts and all expense accounts, the Income Summary account of Waif Services has a
$4,000 debit balance. This shows that Waif Services earned a net income of $4,000.
True False
29. After posting the entries to close all revenue and expense accounts, Hatfield Company's Income Summary account has a credit balance of
$6,000, and the Hatfield, Withdrawals account has a debit balance of $2,500. These balances indicate that net income for the accounting
period amounted to $3,500.
True False
30. Closing entries are designed to transfer the end-of-period balances in the revenue accounts, the expense accounts, and the withdrawals
account to a balance sheet equity account.
True False
31. In a sole proprietorship, the Income Summary account is closed to the capital account
True False
32. When expenses exceed revenues, there is a loss and the Income Summary account has a credit balance.
True False
33. The Income Summary account is used to close all other temporary accounts at the end of an accounting period.
True False
34. The Income Summary account is a permanent account that will be carried forward year after year.
True False
35. The steps in the closing process are (1) close credit balances in revenue accounts to Income Summary; (2) close credit balances in expense
accounts to Income Summary; (3) close Income Summary to Owner's Capital; (4) close Withdrawals to Owner's Capital.
True False
36. The third closing entry is to close Withdrawals to Income Summary.
True False
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37. A post-closing trial balance is a list of permanent accounts and their balances from the ledger after all closing entries are journalized and
posted.
True False
38. The aim of a post-closing trial balance is to verify that (1) total debits equal total credits for temporary accounts and (2) all temporary
accounts have zero balances.
True False
39. FastForward's post-closing trial balance has debit totals of $40,350 and credit totals of $40,650. The next step is to review for errors in the
closing process.
True False
40. The first step in the accounting cycle is to analyze and record transactions during the accounting period.
True False
41. The accounting cycle refers to the steps in preparing the work sheet for users.
True False
42. The first five steps in the accounting cycle include analyzing transactions, journalizing, posting, preparing an unadjusted trial balance, and
recording adjusting entries.
True False
43. In order, the last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements, preparing
adjusting entries and preparing closing entries.
True False
44. A classified balance sheet organizes assets and liabilities into important subgroups.
True False
45. An unclassified balance sheet provides more information to users than a classified balance sheet.
True False
46. Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle.
True False
47. Assets are classified into current assets, investments, property, plant and equipment, and intangible assets.
True False
48. Current liabilities are cash and other resources that are expected to be sold, collected, or used within the longer of one year or the
company's operating cycle.
True False
49. Long-term investments can include land not currently being used in operations.
True False
50. Property, plant and equipment and intangible assets are long-term assets used to produce or sell products and services.
True False
51. Current liabilities include accounts receivable, unearned revenues, and taxes owed.
True False
52. For a partnership, the equity section is called Shareholders Equity.
True False
53. Reversing entries are optional.
True False
54. Reversing entries are prepared to adjust accrued assets and liabilities that were created by adjusting entries at the end of the previous
reporting period.
True False
55. The current ratio is used to evaluate the ability of a business to meet its short-term obligations.
True False
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56. The current ratio is calculated by dividing current liabilities by current assets.
True False
57. Harley Davidson's current assets are $400 million and its current liabilities are $250 million. Its current ratio is .63 to 1.
True False
58. FastForward has current assets of $15,000 and current liabilities of $9,500. Its current ratio is 1.6 to 1.
True False
59. Harley Davidson's current ratio is .9 to 1. The industry average current ratio is 1.2. Harley Davidson does not have a problem in covering
its current liabilities because of its strong sales and position in its industry.
True False
60. The information on a work sheet can be used to prepare:
A. Year end financial statements.

B. Adjusting entries.
C. Closing entries.
D. Interim financial statements.
E. All of these answers are correct.
61. A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance, and financial
statements, and which is an optional step in the accounting process, is a(n):
A. Adjusted trial balance.

B. Work sheet.
C. Post-closing trial balance.
D. Unadjusted trial balance.
E. Book of final entry.
62. Internal documents prepared by accountants when organizing the information presented in formal reports to internal and external decision
makers are called:
A. Adjusting papers.
B. Statement papers.
C. Working papers.
D. Closing papers.
E. Business papers.
63. Accumulated Depreciation, Equipment, Accounts Receivable, and Service Fees Earned would be sorted to which respective columns in
completing a work sheet?
A. Statement of changes in equity or Balance Sheet—Credit; Statement of changes in equity or Balance Sheet—Debit; and Income
Statement—Credit.
B. Statement of changes in equity or Balance Sheet—Debit; Statement of changes in equity or Balance Sheet—Credit; and Income
Statement—Credit.
C. Income Statement—Debit; Statement of changes in equity or Balance Sheet—Debit; and Income Statement—Credit.
D. Income Statement—Debit; Income Statement—Debit; and Statement of changes in equity or Balance Sheet—Credit.
E. Statement of changes in equity or Balance Sheet—Credit; Income Statement—Debit; and Income Statement—Credit.
64. The Unadjusted Trial Balance columns of the work sheet show the balance in the Office Supplies account at $750. The Adjustments
columns show that $425 of these supplies were used during the period. The amount shown as Office Supplies in the Balance Sheet
columns is:
A. $325 debit.
B. $325 credit.
C. $425 debit.
D. $750 debit.
E. $750 credit.
65. Which of the following statements is incorrect?
A. Working papers are invaluable tools of the accountant.

B. The work sheet shows the effects of adjustments on the account balances.
C. After the work sheet is completed, the work sheet information is used to prepare the financial statements.
D. On the work sheet, the accountant sorts the adjusted amounts into columns according to whether the accounts are used in preparing the
unadjusted trial balance or the adjusted trial balance.
E. The work sheet is an optional step in the accounting cycle.
66. A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments
columns show expired insurance of $200. This adjusting entry results in:
A. $200 less net income.

B. $200 more net income.
C. $200 difference between the debit and credit columns of the unadjusted trial balance.
D. $400 in the Income Statement Debit column on the work sheet.
E. $400 in the Balance Sheet Credit column on the work sheet.
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67. If in preparing a work sheet an adjusted trial balance amount is sorted to the wrong work sheet column, the Balance Sheet columns will
balance on completing the work sheet, but with the wrong net income, if the amount sorted in error is:
A. An expense amount entered in the Balance Sheet Credit column.

B. A revenue amount entered in the Balance Sheet Debit column.
C. A liability amount entered in the Income Statement Credit column.
D. An asset amount entered in the Balance Sheet Credit column.
E. A liability amount entered in the Balance Sheet Debit column.
68. If the Balance Sheet columns of a work sheet fail to balance when the amount of the net income is added to the Balance Sheet Credit
column, the cause could be:
A. An expense amount entered in the Balance Sheet Debit column.

B. A revenue amount entered in the Balance Sheet Credit column.
C. An asset amount entered in the Income Statement Debit column.
D. A liability amount entered in the Balance Sheet Debit column.
E. A liability amount entered in the Income Statement Credit column.
69. The following items appeared on a December 31 work sheet. Based on the following information, what is net income for the year?
A. $1,855.
B. $1,905.
C. $2,060.
D. $4,125
E. $4,670.
70. Which of the following errors would cause the balance sheet columns of a work sheet to be out of balance?
A. Entering an asset amount in the Income Statement Debit column.

B. Entering a liability amount in the Income Statement Credit column.
C. Entering an expense amount in the Balance Sheet Debit column.
D. Entering a revenue amount in the Balance Sheet Debit column.
E. Entering a liability amount in the Balance Sheet Credit column.
71. The Unadjusted Trial Balance columns of a work sheet total $84,000. The Adjustments columns contain entries for the following:
(1) Office supplies used during the period, $1,200.
(2) Expiration of prepaid rent, $700.
(3) Accrued salaries expense, $500.
(4) Depreciation expense, $800.
(5) Accrued repair service fees receivable, $400.
The Adjusted Trial Balance columns total:
A. $80,400.
B. $84,000.
C. $85,700.
D. $85,900.
E. $87,600.
72. Another name for temporary accounts is:
A. Real accounts.
B. Contra accounts.
C. Accrued accounts.
D. Balance column accounts.
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E. Nominal accounts.
73. When closing entries are made:
A. All ledger accounts are closed to start the new fiscal period.
B. All temporary accounts are closed but not the permanent accounts.
C. All real accounts are closed but not the temporary accounts.
D. All permanent accounts are closed but not the temporary accounts.
E. All balance sheet accounts are closed.
74. Accounts that are used to describe revenues, expenses, and owner's withdrawals, and are closed at the end of the reporting period, are:
A. Real accounts.
B. Temporary accounts.
C. Closing accounts.
D. Permanent accounts.
E. Ledger accounts.
A. Permanent accounts are another name for nominal accounts.

B. Temporary accounts carry a zero balance at the beginning of each accounting period.
C. The Income Summary account is a temporary account.
D. Real accounts remain open as long as the asset, liability, or equity items recorded in the accounts continue in existence.
E. Permanent accounts are another name for real accounts.
76. Closing the temporary accounts at the end of each accounting period:
A. Serves to transfer the effects of these accounts to the proper equity account on the balance sheet.
B. Prepares the withdrawals account for use in the next period.
C. Gives the revenue and expense accounts zero balances.
D. Gives the withdrawals account a zero balance.
77. Accounts that are used to describe assets, liabilities, and equity, that are not closed as long as the company continues to own the assets,
owe the liabilities, or have equity, and whose balances appear on the balance sheet are called:
A. Nominal accounts.
C. Permanent accounts.
D. Contra accounts.
E. Accrued accounts.
78. Real accounts are:
A. Another name for temporary accounts.

B. Another name for permanent accounts.
C. Closed at the end of the accounting period.
D. Income statement accounts.
E. Not shown on the balance sheet.
79. Journal entries recorded at the end of each accounting period to prepare the revenue, expense, and withdrawals accounts for the upcoming
year and to update the owner's capital account for the events of the year just finished are:
A. Adjusting entries.
B. Closing entries.
C. Final entries.
D. Work sheet entries.
E. None of these answers is correct.
80. The Income Summary account is:
A. The account from which the amount of the net income or loss is transferred to the owner's capital accounts in a partnership.
B. A temporary account.
C. Used in the closing process to summarize the amounts of revenues and expenses.
D. Not a permanent account.
81. The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is
added to (or subtracted from) the owner's capital account is the:
A. Income Summary account.

B. Closing account.
C. Balance column account.
D. Contra account.
E. Nominal account.
82. J. Awn, the proprietor of Awn Services, withdrew $8,700 from his business during 2015. These withdrawals will result in which of the
following closing entries at the end of 2015?
A.
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B.
C.
D.
E.
83. Given the following accounts and their adjusted balances before closing entries are posted, what amount will be posted to Joe Cool,
Capital in the process of closing the Income Summary account? Assume all accounts have normal balances.
A. $ 7,180 credit.
B. $16,780 debit.
C. $16,780 credit.
D. $18,280 credit.
E. $23,780 credit.
84. A company had revenues of $75,000 and expenses of $62,000 during an accounting period. Which of the following entries should not be
journalized in the closing process?
A.
B.
C.
D.
E. All of these should be journalized in the closing process.
85. After all appropriate closing entries to the following accounts have been made, what will be the balance in the Jay Travis, Capital
account?
A. $ 65,000.
B. $ 80,000.
C. $130,000.
D. $145,000.
E. $280,000.
86. The J. Godfrey, Capital account has a debit balance of $1,200 before closing entries are made. If total revenues for the year are $55,200,
total expenses $39,800, and withdrawals are $9,000, what is the ending balance in the J. Godfrey, Capital account after all closing entries
have been made?
A. $ 5,200.
B. $ 7,600.
C. $14,200.
D. $16,600.
E. $23,200.
87. The Income Summary account is used:
A. To adjust and update asset accounts.

B. To close the revenue and expense accounts.
C. To determine the appropriate withdrawal amount.
D. To replace the income statement under certain circumstances.
E. To replace the capital account in some businesses.
88. Dina Kader, the proprietor of DK Services, withdrew a total of $350 for her personal expenses during the year. What is the entry needed
to close her withdrawals account?
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A. Debit Dina Kader, Capital and credit Cash for $350.

B. Debit Dina Kader, Withdrawals and credit Cash for $350.
C. Debit Dina Kader, Withdrawals and credit Dina Kader, Capital for $350.
D. Debit Dina Kader, Capital and credit Dina Kader, Withdrawals for $350.
E. Debit Cash and credit Dina Kader, Withdrawals for $350.
89. Which statement is incorrect?
A. Revenue accounts are closed to Income Summary.

B. Expense accounts are closed to Income Summary.
C. Income Summary is closed to Capital.
D. Withdrawals are closed to Income Summary.
E. Withdrawals are closed to Capital.
90. A trial balance prepared after the adjusting and closing entries have been posted, and which is the final step in the accounting cycle, is a
(n):
A. Unadjusted trial balance.

B. Post-closing trial balance.
C. Book of final entry.
D. Adjusted trial balance.
E. Work sheet.
91. An error is indicated if the following account has a balance appearing on the post-closing trial balance:
A. Office Equipment.
B. Accumulated Depreciation, Office Equipment.
C. Depreciation expense, Office Equipment.
D. Ted Nash, Capital.
E. Salaries Payable.
92. A post-closing trial balance shows:
A. All ledger accounts with a balance, none of which can be temporary accounts.
B. All ledger accounts with a balance, none of which can be real accounts.
C. All ledger accounts with a balance, which include some temporary and some real accounts.
D. Only revenue and expense accounts.
E. Only asset accounts.
93. Which of the following statements is true?
A. Journalizing consists of analyzing and recording transactions in T-accounts.

B. Preparing a post-closing trial balance helps to prove the accuracy of the adjusting and closing procedures.
C. The information on the work sheet can be used in place of preparing financial statements.
D. By using a work sheet to prepare adjusting entries you need not post these entries to the ledger accounts.
E. All of these statements are true.
94. The eight recurring steps performed each accounting period, starting with recording transactions in the journal and continuing through the
post-closing trial balance, is called the:
A. Accounting period.
B. Operating cycle.
C. Accounting cycle.
D. Closing cycle.
E. Natural business year.
95. Which of the following is the final step in the accounting cycle?
A. Journalizing
B. Preparing an adjusted trial balance
C. Preparing a post-closing trial balance
D. Preparing the statements
E. Preparing a work sheet
96. A classified balance sheet:
A. Measures a company's ability to pay its bills on time.

B. Organizes assets and liabilities into important subgroups.
C. Presents revenues, expenses and net income.
D. Shows operating, investing, and financing activities.
E. Shows the effect of net income and withdrawals on owner's capital.
97. The asset section of a classified balance sheet includes:
A. Current assets, long-term investments, property, plant and equipment, and intangible assets.
B. Current assets, long-term assets, equity, and intangible assets.
C. Current assets, long-term investments, property, plant and equipment, and withdrawals.
D. Current liabilities, long-term investments, property, plant and equipment, and intangible assets.
E. Current assets, liabilities, property, plant and equipment, and intangible assets.
98. Current liabilities become due:

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A. Within one year.

B. Within the operating cycle of a business.
C. When bills have to be paid.
D. A or B, whichever is longer.
99. The normal order for the asset section of a classified balance sheet is:
A. Current assets, prepaid expenses, long-term investments, intangible assets.

B. Long-term investments, current assets, property, plant and equipment, intangible assets.
C. Current assets, long-term investments, property, plant and equipment, intangible assets.
D. Intangible assets, current assets, long-term investments, property, plant and equipment.
E. Property, plant and equipment, intangible assets, long-term investments, current assets.
100. Statements that show the effects of the proposed transactions as if the transactions had already occurred are called:
A. Pro forma statements.

B. Projected statements.
C. Simplified statements.
D. Temporary statements.
101. Reversing entries:
A. Are optional.
B. Are mandatory.
C. Fix errors in journal entries.
D. Are required by CRA.
E. Are not posted to the ledger.
102. Reversing entries are:
A. Optional.
B. Linked to accrued assets and liabilities that were created by adjusting entries at the end of the previous accounting period.
C. Used to simplify a company's record keeping.
D. Dated the first day of the next accounting period.
103. The current ratio:
A. Is used to measure a company's profitability.

B. Is used to measure the relationship between assets and long-term debt.
C. Measures the effect of operating income on profit.
D. Is used to evaluate a company's ability to pay its short-term obligations.
E. Only relates to long term liabilities.
A. Is current assets divided by current liabilities.

B. Helps to assess a company's ability to pay its debts in the near future.
C. Suggests there may be problems in a business if it is less than 1.
D. Is a measure of a company's liquidity.
105. Match the following terms with the appropriate definition.
1. Working A list of permanent accounts and their balances from the ledger after all
papers closing entries are journalized and posted. ____
2. Temporary Accounts that are used to describe revenues, expenses, and owner's
accounts withdrawals for one accounting period. ____
Recurring steps performed each accounting period, starting with recording
transactions in the journal and continuing through the post-closing trial
3. Work sheet balance. ____
4. Income A 10-column spreadsheet used to draft a company's unadjusted trial
summary balance, adjusting entries, adjusted trial balance, and financial statements. ____
Analyses and other informal reports prepared by accountants when
organizing the useful information presented in formal reports to internal and
5. Closing entries external decision makers. ____
6. Pro forma A temporary account used only in the closing process to where the balances
statements of revenue and expense accounts are transferred. ____
7. Accounting Statements that show the effects of the proposed transactions as if the
cycle transactions had already occurred. ____
8. Post-closing Accounts that are used to report on activities related to one or more future
trial balance accounting periods. ____
9. Operating
cycle of a The average time between paying cash for employee salaries or
business merchandise and receiving cash from customers. ____
Journal entries recorded at the end of each accounting period that transfer
the end-of-period balances in revenue, expense, and withdrawals accounts to
the permanent owner's capital account in order to prepare for the upcoming
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10. Permanent period and update the owner's capital account for the events of the period just
accounts finished. ____
Journal entries recorded at the end of each accounting period that transfer
the end-of-period balances in revenue, expense, and withdrawals accounts to
the permanent owner's capital account in order to prepare for the upcoming
1. Classified period and update the owner's capital account for the events of the period just
balance sheet finished. ____
2. Current Cash or other assets that are expected to be sold, collected, or used within
liabilities the longer of one year or the company's operating cycle. ____
3. Equity A temporary account used only in the closing process. ____
4. Income
summary A balance sheet that broadly groups the assets, liabilities, and equity. ____
5. Closing entries Tangible long-lived assets used to produce or sell products and services. ____
6. Property, plant
and equipment The owner's claim on the assets of a company. ____
Obligations that are due to be paid within the longer of one year or the
7. Current assets operating cycle of a business. ____
8. Unclassified Assets such as notes receivable or investments in stocks which are held for
balance sheet more than one year or the operating cycle of the company. ____
9. Intangible Long-term assets used to produce or sell products or services; these assets
assets lack physical form and their benefits are uncertain. ____
10. Long-term A balance sheet that presents the assets and liabilities in relevant
investments subgroups. ____
107. (A) In a sole proprietorship, Income Summary is closed to what account? (B) In following the steps of the accounting cycle, what two
steps must be done before preparation of an unadjusted trial balance?
108. The following are the steps in the accounting cycle. List them in the order in which they are completed:
Completing the work sheet
Posting
Preparing an unadjusted trial balance
Journalizing
Preparing the statements
Closing the temporary accounts
Adjusting the ledger accounts
Preparing a post-closing trial balance
109.
The alphabetized adjusted trial balance for SimCo Electrical Outfitters as at August 31, 2015, is shown below. Identify how each account
balance would be classified on a balance sheet given the following classification symbols:
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110. In the blank space beside each numbered item, enter the letter of its balance sheet classification. If the item should not appear on the
balance sheet, enter "z" in the blank.
111. Calculate the current ratio in each of the following cases.
112. Describe a work sheet and explain why it is useful.
113.
Using the following partial work sheet for Potluck Lanes, prepare the Income Statement, the Statement of changes in equity, and an
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unclassified Balance Sheet. Assume the owner did not make any investments in the business during the year.
114. The adjusted trial balance of Edward Pace, CGA is entered on the work sheet below. Complete the work sheet using the following
information:
(a) Salaries earned by employees but unpaid and unrecorded, $500.
(b) An inventory of supplies showed $800 of unused supplies on hand.
(c) Estimated depreciation on equipment, $1,300.
115.
A work sheet is given below with portions of its data missing. Insert the missing amounts in the parentheses and complete the work
sheet.
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116. Shown below are data taken from the unadjusted and adjusted trial balances for Wallaby Company for the year ended December 31,
2015:
The differences between the unadjusted and adjusted trial balances can be explained by adjusting entries that were made for an
unrecorded sale, depreciation, expired insurance, office supplies expense, and accrued salaries expense. Determine the amounts that
should appear in the trial balance blanks labelled A through H and write your answers below. (Show credit amounts in parentheses.)
A. _____________ B. ____________ C. _____________ D. _____________ E. _____________ F. ____________ G. _____________
H. _____________
117.
Below is an alphabetical listing of General Ledger accounts with identifying numbers for Scott's Suntanning Parlour. Indicate the
accounts debited and credited in each of the following transactions by placing the proper account identifying number(s) in the columns to
the right of each transaction.
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118. Explain why closing entries are a necessary step in the accounting cycle.
119. Indicate beside each of the following accounts whether the account is a temporary or permanent account.
(a) Cash
(b) Prepaid insurance
(c) Unearned fees
(d) Accounts receivable
(e) Insurance expense
(f) Smith, capital
(g) Smith, withdrawals
(h) Rent expense
(i) Fees earned
(j) Supplies
(k) Supplies expense
(l) Depreciation expense, building
(m) Accumulated depreciation, building
120. Explain the purpose of closing entries and describe the closing process.
121. Explain why temporary accounts are closed each period.
122.
Presented below are the year-end balances at October 31 of Laura's Laundry Service. All accounts have normal balances.
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Prepare the necessary closing entries at October 31.
123. Shown below is Brady Wholesaler's adjusted trial balance as of the end of its annual accounting period.
Prepare the necessary closing entries.
124.
The adjusted trial balance of Sara's Laundry follows:
1. Prepare the necessary closing entries at December 31.

2. What is the balance of Sara's capital account after the bookkeeper posts the closing entries?
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125. The following are selected accounts and their balances after adjustments as of May 31, 2015, the end of Mark Company's fiscal year.
Prepare the necessary closing entries at May 31.
126. The adjusted trial balance of Cox Company at December 31, 2015 is as follows:
Prepare the necessary closing entries at December 31.
127. The items that follow appeared in the Income Statement columns of the work sheet prepared for a sole proprietorship at year-end,
December 31, 2015. Also, the owner's withdrawals account was debited for $12,000 during the year. Prepare the necessary closing
entries at December 31.
128. The amounts below appeared in the Income Statement and Balance Sheet columns of a company's December 31 work sheet. In the space
provided record the closing entries on December 31 (no explanations are necessary).
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129. Discuss the purpose of a post-closing trial balance.
130. Identify the steps in the accounting cycle.
131. Describe a classified balance sheet.
132. Classified balance sheets commonly include the following categories.
1. Current assets Margarita Acosta, capital ____

2. Equity Cash ____
3. Current assets Office supplies ____
4. Property, plant and equipment Accounts receivable ____
5. Current liabilities Prepaid expenses ____
6. Investments Merchandise inventory ____
7. Current assets Buildings used in business operations ____
8. Intangible assets Wages payable ____
9. Long-term liabilities Long-term note payable ____
10. Current assets Accounts payable ____
11. Current assets Patents ____
12. Current liabilities Land held for future plant expansion ____
Below is the year-end adjusted trial balance for Acosta Accounting.
133. Prepare a classified year-end balance sheet. A $7,000 installment on the long-term note payable is due within one year.
Page 18 of 48
134. Using the information from Acosta Accounting, calculate the current ratio.
135. Explain the purpose of reversing entries.
136. Explain the current ratio. Describe how it is used to evaluate a company.
137. Work sheet preparation is a(n) ____________ step in the accounting cycle.
________________________________________
138. The closing process resets _______, _________, and ________ account balances to zero at the end of every accounting period.
________________________________________
139. Listed below are a number of accounts for Melcier Industries. Use the schedule shown below to classify each account, and indicate if it is
included in the closing process and, if so, how it is closed.
140. ___________________ is an account used only in the closing process.
________________________________________
141. FastForward's post-closing trial balance has a debit total of $475,000 and a credit total of $457,000. This indicates that
_________________________.
________________________________________
142. The ______________ refers to the steps in preparing financial statements for users.
________________________________________
143. Intangible assets are long-term resources that are used to produce or sell products and services, that lack _____________, and whose
benefits are ___________.
________________________________________
144. Reversing entries are linked to ____________________ and _____________ that were created by adjusting entries at the end of a
reporting period.
Page 19 of 48
________________________________________
145. A current ratio of 1.1 suggests that a company has ____________ current assets to cover current liabilities.
________________________________________
Page 20 of 48
5 KEY
1. A work sheet is a tool of the accountant for bringing together information needed in preparing the statements, adjusting the accounts, and
preparing closing entries.
FALSE
Difficulty: Easy
Larson - Chapter 05 #1
Learning Objective: 1
Type: Knowledge
2. Financial statements prepared from a work sheet offer more information than if it is not used and statements are just prepared from an
adjusted trial balance.
FALSE
Difficulty: Easy
Type: Knowledge
3. A work sheet is prepared before entering the adjustments in the accounts.
TRUE
Difficulty: Easy
Type: Knowledge
4. The work sheet is used to record transactions as they occur.
FALSE
Difficulty: Easy
Type: Knowledge
5. The work sheet is an important financial statement.
FALSE
Difficulty: Easy
Type: Knowledge
6. A work sheet is a substitute for the financial statements.
FALSE
Difficulty: Easy
Type: Knowledge
7. To prepare the income statement all necessary numbers can be found in the income statement columns of the work sheet, including the net
income or net loss.
TRUE
Difficulty: Moderate
Type: Knowledge
8. On the work sheet, a loss is indicated if the total of the Income Statement Debit column exceeds the total of the Income Statement Credit
column.
TRUE
Type: Knowledge
9. If all columns balance upon completion of a work sheet, you can be sure that no errors were made in preparing the work sheet.
FALSE
Type: Knowledge
10. Closing entries are normally entered in the General Journal and then recorded on the work sheet.
FALSE
Type: Knowledge
11. Adjusting entries are normally entered in the General Journal before they are recorded on the work sheet.
FALSE
Page 21 of 48
Type: Knowledge
12. On a work sheet, adjusted balances of revenues and expenses are sorted to the Income Statement columns.
TRUE
Type: Knowledge
13. On the work sheet, a net income is entered in the Income Statement Credit column and in the Statement of Changes in Equity or Balance
Sheet Debit column.
FALSE
Type: Knowledge
14. If interim financial statements are required, adjusting entries must be journalized and posted to obtain the adjusted data needed for their
preparation.
FALSE
Type: Knowledge
15. To prepare the balance sheet, all necessary numbers can be found in the balance sheet columns of the work sheet, including ending
capital.
FALSE
Type: Knowledge
16. Revenue accounts should begin each accounting period with zero balances.
TRUE
Difficulty: Easy
Type: Knowledge
17. Closing revenue and expense accounts at the end of the accounting period serves to make the revenue and expense accounts ready for use
the next period.
TRUE
Difficulty: Easy
Type: Knowledge
18. Accounts that appear in the balance sheet are often called permanent or nominal accounts.
FALSE
Difficulty: Easy
Type: Knowledge
19. Revenue and expense accounts are permanent accounts and should not be closed at the end of the fiscal period.
FALSE
Type: Knowledge
20. The closing process is a step in the accounting cycle that prepares accounts for the next accounting period.
TRUE
Type: Knowledge
21. Asset, liability and revenue accounts are not closed as long as a company continues in business.
FALSE
Type: Knowledge
22. Closing entries are needed at the end of the fiscal period to close all ledger accounts.
Page 22 of 48
FALSE
Type: Knowledge
23. Closing entries accomplish the goal of reflecting revenues and expenses in the owner's capital account.
TRUE
Difficulty: Easy
Type: Knowledge
24. Income Summary is a temporary account.
TRUE
Difficulty: Easy
Type: Knowledge
25. The closing process is a two-step process. First revenue, expense, and withdrawals are set to zero balance. Second, the process
summarizes a period's assets and expenses.
FALSE
Type: Knowledge
26. An expense account is normally closed by debiting Income Summary and crediting the expense account.
TRUE
Difficulty: Easy
Type: Knowledge
27. The withdrawals account is normally closed by debiting it.
FALSE
Difficulty: Easy
Type: Knowledge
28. After posting the entries to close all revenue accounts and all expense accounts, the Income Summary account of Waif Services has a
$4,000 debit balance. This shows that Waif Services earned a net income of $4,000.
FALSE
Type: Knowledge
29. After posting the entries to close all revenue and expense accounts, Hatfield Company's Income Summary account has a credit balance of
$6,000, and the Hatfield, Withdrawals account has a debit balance of $2,500. These balances indicate that net income for the accounting
period amounted to $3,500.
FALSE
Type: Knowledge
30. Closing entries are designed to transfer the end-of-period balances in the revenue accounts, the expense accounts, and the withdrawals
account to a balance sheet equity account.
TRUE
Type: Knowledge
31. In a sole proprietorship, the Income Summary account is closed to the capital account
TRUE
Type: Knowledge
32. When expenses exceed revenues, there is a loss and the Income Summary account has a credit balance.
FALSE
Page 23 of 48
Type: Knowledge
33. The Income Summary account is used to close all other temporary accounts at the end of an accounting period.
FALSE
Type: Knowledge
34. The Income Summary account is a permanent account that will be carried forward year after year.
FALSE
Type: Knowledge
35. The steps in the closing process are (1) close credit balances in revenue accounts to Income Summary; (2) close credit balances in expense
accounts to Income Summary; (3) close Income Summary to Owner's Capital; (4) close Withdrawals to Owner's Capital.
FALSE
Difficulty: Hard
Type: Knowledge
36. The third closing entry is to close Withdrawals to Income Summary.
FALSE
Difficulty: Easy
Type: Knowledge
37. A post-closing trial balance is a list of permanent accounts and their balances from the ledger after all closing entries are journalized and
posted.
TRUE
Difficulty: Easy
Type: Knowledge
38. The aim of a post-closing trial balance is to verify that (1) total debits equal total credits for temporary accounts and (2) all temporary
accounts have zero balances.
FALSE
Difficulty: Easy
Type: Knowledge
39. FastForward's post-closing trial balance has debit totals of $40,350 and credit totals of $40,650. The next step is to review for errors in the
closing process.
TRUE
Type: Knowledge
40. The first step in the accounting cycle is to analyze and record transactions during the accounting period.
TRUE
Difficulty: Easy
Type: Knowledge
41. The accounting cycle refers to the steps in preparing the work sheet for users.
FALSE
Difficulty: Easy
Type: Knowledge
42. The first five steps in the accounting cycle include analyzing transactions, journalizing, posting, preparing an unadjusted trial balance, and
recording adjusting entries.
TRUE
Type: Knowledge
43. In order, the last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements, preparing
adjusting entries and preparing closing entries.
Page 24 of 48
FALSE
Difficulty: Hard
Type: Knowledge
44. A classified balance sheet organizes assets and liabilities into important subgroups.
TRUE
Difficulty: Easy
Type: Knowledge
45. An unclassified balance sheet provides more information to users than a classified balance sheet.
FALSE
Difficulty: Easy
Type: Knowledge
46. Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle.
TRUE
Difficulty: Easy
Type: Knowledge
47. Assets are classified into current assets, investments, property, plant and equipment, and intangible assets.
TRUE
Type: Knowledge
48. Current liabilities are cash and other resources that are expected to be sold, collected, or used within the longer of one year or the
company's operating cycle.
FALSE
Type: Knowledge
49. Long-term investments can include land not currently being used in operations.
TRUE
Type: Knowledge
50. Property, plant and equipment and intangible assets are long-term assets used to produce or sell products and services.
TRUE
Type: Knowledge
51. Current liabilities include accounts receivable, unearned revenues, and taxes owed.
FALSE
Type: Knowledge
52. For a partnership, the equity section is called Shareholders Equity.
FALSE
Difficulty: Easy
Type: Knowledge
53. Reversing entries are optional.
TRUE
Difficulty: Easy
Type: Knowledge
54. Reversing entries are prepared to adjust accrued assets and liabilities that were created by adjusting entries at the end of the previous
reporting period.
Page 25 of 48
TRUE
Type: Knowledge
55. The current ratio is used to evaluate the ability of a business to meet its short-term obligations.
TRUE
Difficulty: Easy
Type: Knowledge
56. The current ratio is calculated by dividing current liabilities by current assets.
FALSE
Difficulty: Easy
Type: Knowledge
57. Harley Davidson's current assets are $400 million and its current liabilities are $250 million. Its current ratio is .63 to 1.
FALSE
Type: Application
58. FastForward has current assets of $15,000 and current liabilities of $9,500. Its current ratio is 1.6 to 1.
TRUE
Type: Application
59. Harley Davidson's current ratio is .9 to 1. The industry average current ratio is 1.2. Harley Davidson does not have a problem in covering
its current liabilities because of its strong sales and position in its industry.
FALSE
Difficulty: Hard
Type: Application
60. The information on a work sheet can be used to prepare:
A. Year end financial statements.

B. Adjusting entries.
C. Closing entries.
D. Interim financial statements.
Difficulty: Easy
Type: Knowledge
61. A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance, and financial
statements, and which is an optional step in the accounting process, is a(n):
A. Adjusted trial balance.

B. Work sheet.
C. Post-closing trial balance.
D. Unadjusted trial balance.
E. Book of final entry.
Type: Knowledge
62. Internal documents prepared by accountants when organizing the information presented in formal reports to internal and external decision
makers are called:
A. Adjusting papers.
B. Statement papers.
C. Working papers.
D. Closing papers.
E. Business papers.
Type: Knowledge
63. Accumulated Depreciation, Equipment, Accounts Receivable, and Service Fees Earned would be sorted to which respective columns in
completing a work sheet?
A. Statement of changes in equity or Balance Sheet—Credit; Statement of changes in equity or Balance Sheet—Debit; and Income
Page 26 of 48
Statement—Credit.
B. Statement of changes in equity or Balance Sheet—Debit; Statement of changes in equity or Balance Sheet—Credit; and Income
Statement—Credit.
C. Income Statement—Debit; Statement of changes in equity or Balance Sheet—Debit; and Income Statement—Credit.
D. Income Statement—Debit; Income Statement—Debit; and Statement of changes in equity or Balance Sheet—Credit.
E. Statement of changes in equity or Balance Sheet—Credit; Income Statement—Debit; and Income Statement—Credit.
Type: Knowledge
64. The Unadjusted Trial Balance columns of the work sheet show the balance in the Office Supplies account at $750. The Adjustments
columns show that $425 of these supplies were used during the period. The amount shown as Office Supplies in the Balance Sheet
columns is:
A. $325 debit.
B. $325 credit.
C. $425 debit.
D. $750 debit.
E. $750 credit.
Type: Application
A. Working papers are invaluable tools of the accountant.

B. The work sheet shows the effects of adjustments on the account balances.
C. After the work sheet is completed, the work sheet information is used to prepare the financial statements.
D. On the work sheet, the accountant sorts the adjusted amounts into columns according to whether the accounts are used in preparing the
unadjusted trial balance or the adjusted trial balance.
E. The work sheet is an optional step in the accounting cycle.
Type: Knowledge
66. A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments
columns show expired insurance of $200. This adjusting entry results in:
A. $200 less net income.

B. $200 more net income.
C. $200 difference between the debit and credit columns of the unadjusted trial balance.
D. $400 in the Income Statement Debit column on the work sheet.
E. $400 in the Balance Sheet Credit column on the work sheet.
Type: Application
67. If in preparing a work sheet an adjusted trial balance amount is sorted to the wrong work sheet column, the Balance Sheet columns will
balance on completing the work sheet, but with the wrong net income, if the amount sorted in error is:
A. An expense amount entered in the Balance Sheet Credit column.

B. A revenue amount entered in the Balance Sheet Debit column.
C. A liability amount entered in the Income Statement Credit column.
D. An asset amount entered in the Balance Sheet Credit column.
E. A liability amount entered in the Balance Sheet Debit column.
Difficulty: Hard
Type: Knowledge
68. If the Balance Sheet columns of a work sheet fail to balance when the amount of the net income is added to the Balance Sheet Credit
column, the cause could be:
A. An expense amount entered in the Balance Sheet Debit column.

B. A revenue amount entered in the Balance Sheet Credit column.
C. An asset amount entered in the Income Statement Debit column.
D. A liability amount entered in the Balance Sheet Debit column.
E. A liability amount entered in the Income Statement Credit column.
Difficulty: Hard
Type: Knowledge
69.
The following items appeared on a December 31 work sheet. Based on the following information, what is net income for the year?
Page 27 of 48
A. $1,855.
B. $1,905.
C. $2,060.
D. $4,125
E. $4,670.
Difficulty: Hard
Type: Knowledge
70. Which of the following errors would cause the balance sheet columns of a work sheet to be out of balance?
A. Entering an asset amount in the Income Statement Debit column.

B. Entering a liability amount in the Income Statement Credit column.
C. Entering an expense amount in the Balance Sheet Debit column.
D. Entering a revenue amount in the Balance Sheet Debit column.
E. Entering a liability amount in the Balance Sheet Credit column.
Difficulty: Hard
Type: Knowledge
71. The Unadjusted Trial Balance columns of a work sheet total $84,000. The Adjustments columns contain entries for the following:
(1) Office supplies used during the period, $1,200.
(2) Expiration of prepaid rent, $700.
(3) Accrued salaries expense, $500.
(4) Depreciation expense, $800.
(5) Accrued repair service fees receivable, $400.
The Adjusted Trial Balance columns total:
A. $80,400.
B. $84,000.
C. $85,700.
D. $85,900.
E. $87,600.
Difficulty: Hard
Type: Application
72. Another name for temporary accounts is:
A. Real accounts.
B. Contra accounts.
C. Accrued accounts.
D. Balance column accounts.
E. Nominal accounts.
Difficulty: Easy
Type: Knowledge
73. When closing entries are made:
A. All ledger accounts are closed to start the new fiscal period.
B. All temporary accounts are closed but not the permanent accounts.
Page 28 of 48
C. All real accounts are closed but not the temporary accounts.
D. All permanent accounts are closed but not the temporary accounts.
E. All balance sheet accounts are closed.
Difficulty: Easy
Type: Knowledge
74. Accounts that are used to describe revenues, expenses, and owner's withdrawals, and are closed at the end of the reporting period, are:
A. Real accounts.
C. Closing accounts.
D. Permanent accounts.
E. Ledger accounts.
Type: Knowledge
A. Permanent accounts are another name for nominal accounts.

B. Temporary accounts carry a zero balance at the beginning of each accounting period.
C. The Income Summary account is a temporary account.
D. Real accounts remain open as long as the asset, liability, or equity items recorded in the accounts continue in existence.
E. Permanent accounts are another name for real accounts.
Type: Knowledge
76. Closing the temporary accounts at the end of each accounting period:
A. Serves to transfer the effects of these accounts to the proper equity account on the balance sheet.
B. Prepares the withdrawals account for use in the next period.
C. Gives the revenue and expense accounts zero balances.
D. Gives the withdrawals account a zero balance.
Type: Knowledge
77. Accounts that are used to describe assets, liabilities, and equity, that are not closed as long as the company continues to own the assets,
owe the liabilities, or have equity, and whose balances appear on the balance sheet are called:
A. Nominal accounts.
C. Permanent accounts.
D. Contra accounts.
E. Accrued accounts.
Type: Knowledge
78. Real accounts are:
A. Another name for temporary accounts.

B. Another name for permanent accounts.
C. Closed at the end of the accounting period.
D. Income statement accounts.
E. Not shown on the balance sheet.
Difficulty: Easy
Type: Knowledge
79. Journal entries recorded at the end of each accounting period to prepare the revenue, expense, and withdrawals accounts for the upcoming
year and to update the owner's capital account for the events of the year just finished are:
A. Adjusting entries.
B. Closing entries.
C. Final entries.
D. Work sheet entries.
Difficulty: Easy
Type: Knowledge
80. The Income Summary account is:
A. The account from which the amount of the net income or loss is transferred to the owner's capital accounts in a partnership.
B. A temporary account.
C. Used in the closing process to summarize the amounts of revenues and expenses.
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D. Not a permanent account.

Difficulty: Easy
Type: Knowledge
81. The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is
added to (or subtracted from) the owner's capital account is the:
A. Income Summary account.

B. Closing account.
C. Balance column account.
D. Contra account.
E. Nominal account.
Type: Knowledge
82. J. Awn, the proprietor of Awn Services, withdrew $8,700 from his business during 2015. These withdrawals will result in which of the
following closing entries at the end of 2015?
A.
B.
C.
D.
E.
Type: Application
83. Given the following accounts and their adjusted balances before closing entries are posted, what amount will be posted to Joe Cool,
Capital in the process of closing the Income Summary account? Assume all accounts have normal balances.
A. $ 7,180 credit.
B. $16,780 debit.
C. $16,780 credit.
D. $18,280 credit.
E. $23,780 credit.
Type: Application
84. A company had revenues of $75,000 and expenses of $62,000 during an accounting period. Which of the following entries should not be
journalized in the closing process?
A.
B.
C.
D.
E. All of these should be journalized in the closing process.
Type: Application
85. After all appropriate closing entries to the following accounts have been made, what will be the balance in the Jay Travis, Capital
Page 30 of 48
account?
A. $ 65,000.
B. $ 80,000.
C. $130,000.
D. $145,000.
E. $280,000.
Type: Application
86. The J. Godfrey, Capital account has a debit balance of $1,200 before closing entries are made. If total revenues for the year are $55,200,
total expenses $39,800, and withdrawals are $9,000, what is the ending balance in the J. Godfrey, Capital account after all closing entries
have been made?
A. $ 5,200.
B. $ 7,600.
C. $14,200.
D. $16,600.
E. $23,200.
Type: Application
87. The Income Summary account is used:
A. To adjust and update asset accounts.

B. To close the revenue and expense accounts.
C. To determine the appropriate withdrawal amount.
D. To replace the income statement under certain circumstances.
E. To replace the capital account in some businesses.
Type: Application
88. Dina Kader, the proprietor of DK Services, withdrew a total of $350 for her personal expenses during the year. What is the entry needed
to close her withdrawals account?
A. Debit Dina Kader, Capital and credit Cash for $350.

B. Debit Dina Kader, Withdrawals and credit Cash for $350.
C. Debit Dina Kader, Withdrawals and credit Dina Kader, Capital for $350.
D. Debit Dina Kader, Capital and credit Dina Kader, Withdrawals for $350.
E. Debit Cash and credit Dina Kader, Withdrawals for $350.
Type: Application
89. Which statement is incorrect?
A. Revenue accounts are closed to Income Summary.

B. Expense accounts are closed to Income Summary.
C. Income Summary is closed to Capital.
D. Withdrawals are closed to Income Summary.
E. Withdrawals are closed to Capital.
Type: Knowledge
90. A trial balance prepared after the adjusting and closing entries have been posted, and which is the final step in the accounting cycle, is a
(n):
A. Unadjusted trial balance.

B. Post-closing trial balance.
C. Book of final entry.
D. Adjusted trial balance.
E. Work sheet.
Difficulty: Easy
Type: Knowledge
91. An error is indicated if the following account has a balance appearing on the post-closing trial balance:
A. Office Equipment.
B. Accumulated Depreciation, Office Equipment.
C. Depreciation expense, Office Equipment.
D. Ted Nash, Capital.
Page 31 of 48
E. Salaries Payable.
Type: Knowledge
92. A post-closing trial balance shows:
A. All ledger accounts with a balance, none of which can be temporary accounts.
B. All ledger accounts with a balance, none of which can be real accounts.
C. All ledger accounts with a balance, which include some temporary and some real accounts.
D. Only revenue and expense accounts.
E. Only asset accounts.
Type: Knowledge
93. Which of the following statements is true?
A. Journalizing consists of analyzing and recording transactions in T-accounts.

B. Preparing a post-closing trial balance helps to prove the accuracy of the adjusting and closing procedures.
C. The information on the work sheet can be used in place of preparing financial statements.
D. By using a work sheet to prepare adjusting entries you need not post these entries to the ledger accounts.
E. All of these statements are true.
Type: Knowledge
94. The eight recurring steps performed each accounting period, starting with recording transactions in the journal and continuing through the
post-closing trial balance, is called the:
A. Accounting period.
B. Operating cycle.
C. Accounting cycle.
D. Closing cycle.
E. Natural business year.
Type: Knowledge
95. Which of the following is the final step in the accounting cycle?
A. Journalizing
B. Preparing an adjusted trial balance
C. Preparing a post-closing trial balance
D. Preparing the statements
E. Preparing a work sheet
Type: Knowledge
96. A classified balance sheet:
A. Measures a company's ability to pay its bills on time.

B. Organizes assets and liabilities into important subgroups.
C. Presents revenues, expenses and net income.
D. Shows operating, investing, and financing activities.
E. Shows the effect of net income and withdrawals on owner's capital.
Difficulty: Easy
Type: Knowledge
97. The asset section of a classified balance sheet includes:
A. Current assets, long-term investments, property, plant and equipment, and intangible assets.
B. Current assets, long-term assets, equity, and intangible assets.
C. Current assets, long-term investments, property, plant and equipment, and withdrawals.
D. Current liabilities, long-term investments, property, plant and equipment, and intangible assets.
E. Current assets, liabilities, property, plant and equipment, and intangible assets.
Difficulty: Easy
Type: Knowledge
98. Current liabilities become due:
A. Within one year.

B. Within the operating cycle of a business.
C. When bills have to be paid.
D. A or B, whichever is longer.
Page 32 of 48

Type: Knowledge
99. The normal order for the asset section of a classified balance sheet is:
A. Current assets, prepaid expenses, long-term investments, intangible assets.

B. Long-term investments, current assets, property, plant and equipment, intangible assets.
C. Current assets, long-term investments, property, plant and equipment, intangible assets.
D. Intangible assets, current assets, long-term investments, property, plant and equipment.
E. Property, plant and equipment, intangible assets, long-term investments, current assets.
Type: Knowledge
100. Statements that show the effects of the proposed transactions as if the transactions had already occurred are called:
A. Pro forma statements.

B. Projected statements.
C. Simplified statements.
D. Temporary statements.
Type: Knowledge
101. Reversing entries:
A. Are optional.
B. Are mandatory.
C. Fix errors in journal entries.
D. Are required by CRA.
E. Are not posted to the ledger.
Type: Knowledge
102. Reversing entries are:
A. Optional.
B. Linked to accrued assets and liabilities that were created by adjusting entries at the end of the previous accounting period.
C. Used to simplify a company's record keeping.
D. Dated the first day of the next accounting period.
Type: Knowledge
A. Is used to measure a company's profitability.

B. Is used to measure the relationship between assets and long-term debt.
C. Measures the effect of operating income on profit.
D. Is used to evaluate a company's ability to pay its short-term obligations.
E. Only relates to long term liabilities.
Type: Knowledge
A. Is current assets divided by current liabilities.

B. Helps to assess a company's ability to pay its debts in the near future.
C. Suggests there may be problems in a business if it is less than 1.
D. Is a measure of a company's liquidity.
Difficulty: Hard
Type: Knowledge
1. Working A list of permanent accounts and their balances from the ledger after all
papers closing entries are journalized and posted. 8
2. Temporary Accounts that are used to describe revenues, expenses, and owner's
accounts withdrawals for one accounting period. 2
Recurring steps performed each accounting period, starting with recording
3. Work sheet transactions in the journal and continuing through the post-closing trial balance. 7
4. Income A 10-column spreadsheet used to draft a company's unadjusted trial balance,
summary adjusting entries, adjusted trial balance, and financial statements. 3
Analyses and other informal reports prepared by accountants when organizing
Page 33 of 48
the useful information presented in formal reports to internal and external

5. Closing entries decision makers. 1
6. Pro forma A temporary account used only in the closing process to where the balances of
statements revenue and expense accounts are transferred. 4
7. Accounting Statements that show the effects of the proposed transactions as if the
cycle transactions had already occurred. 6
8. Post-closing Accounts that are used to report on activities related to one or more future
trial balance accounting periods. 10
9. Operating cycle The average time between paying cash for employee salaries or merchandise
of a business and receiving cash from customers. 9
Journal entries recorded at the end of each accounting period that transfer the
end-of-period balances in revenue, expense, and withdrawals accounts to the
10. Permanent permanent owner's capital account in order to prepare for the upcoming period
accounts and update the owner's capital account for the events of the period just finished. 5
Learning Objective: 1-6
Type: Knowledge
Journal entries recorded at the end of each accounting period that transfer the
end-of-period balances in revenue, expense, and withdrawals accounts to the
1. Classified permanent owner's capital account in order to prepare for the upcoming period
balance sheet and update the owner's capital account for the events of the period just finished. 5
2. Current Cash or other assets that are expected to be sold, collected, or used within the
liabilities longer of one year or the company's operating cycle. 7
3. Equity A temporary account used only in the closing process. 4
4. Income
summary A balance sheet that broadly groups the assets, liabilities, and equity. 8
5. Closing entries Tangible long-lived assets used to produce or sell products and services. 6
6. Property, plant
and equipment The owner's claim on the assets of a company. 3
Obligations that are due to be paid within the longer of one year or the
7. Current assets operating cycle of a business. 2
8. Unclassified Assets such as notes receivable or investments in stocks which are held for
balance sheet more than one year or the operating cycle of the company. 10
9. Intangible Long-term assets used to produce or sell products or services; these assets
assets lack physical form and their benefits are uncertain. 9
10. Long-term
investments A balance sheet that presents the assets and liabilities in relevant subgroups. 1
Type: Knowledge
107. (A) In a sole proprietorship, Income Summary is closed to what account? (B) In following the steps of the accounting cycle, what two
steps must be done before preparation of an unadjusted trial balance?
(A) Owner's capital account. (B) Journalizing and posting.

Difficulty: Easy
Type: Knowledge
108. The following are the steps in the accounting cycle. List them in the order in which they are completed:
Completing the work sheet
Posting
Preparing an unadjusted trial balance
Journalizing
Preparing the statements
Closing the temporary accounts
Adjusting the ledger accounts
Preparing a post-closing trial balance
(1) Journalizing
(2) Posting
(3) Preparing an unadjusted trial balance
(4) Completing the work sheet
(5) Adjusting the ledger accounts
(6) Preparing the statements
(7) Closing the temporary accounts
(8) Preparing a post-closing trial balance
Type: Knowledge
109.
The alphabetized adjusted trial balance for SimCo Electrical Outfitters as at August 31, 2015, is shown below. Identify how each account
balance would be classified on a balance sheet given the following classification symbols:
Page 34 of 48
Type: Knowledge
110.
In the blank space beside each numbered item, enter the letter of its balance sheet classification. If the item should not appear on the
balance sheet, enter "z" in the blank.
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Type: Knowledge
111. Calculate the current ratio in each of the following cases.
Type: Application
112. Describe a work sheet and explain why it is useful.
A work sheet is a useful tool for organizing the preparation and analysis of financial statements. It contains pairs of debit and credit columns
for the trial balance, adjusting entries, adjusted trial balance, income statement accounts, and balance sheet accounts.
Type: Knowledge
113.
Using the following partial work sheet for Potluck Lanes, prepare the Income Statement, the Statement of changes in equity, and an
unclassified Balance Sheet. Assume the owner did not make any investments in the business during the year.
Page 36 of 48
Page 37 of 48
Type: Application
114. The adjusted trial balance of Edward Pace, CGA is entered on the work sheet below. Complete the work sheet using the following
information:
(a) Salaries earned by employees but unpaid and unrecorded, $500.
(b) An inventory of supplies showed $800 of unused supplies on hand.
(c) Estimated depreciation on equipment, $1,300.
Difficulty: Hard
Type: Application
115.
A work sheet is given below with portions of its data missing. Insert the missing amounts in the parentheses and complete the work
sheet.
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Difficulty: Hard
Type: Application
116.
Shown below are data taken from the unadjusted and adjusted trial balances for Wallaby Company for the year ended December 31,
Page 39 of 48
2015:
The differences between the unadjusted and adjusted trial balances can be explained by adjusting entries that were made for an
unrecorded sale, depreciation, expired insurance, office supplies expense, and accrued salaries expense. Determine the amounts that
should appear in the trial balance blanks labelled A through H and write your answers below. (Show credit amounts in parentheses.)
A. _____________ B. ____________ C. _____________ D. _____________ E. _____________ F. ____________ G. _____________
H. _____________
(a) (8,100) (b) 10,000 (c) (113,420) (d) 49,600 (e) 220 (f) 6,800 (g) 464,700 (h) (540,000)
Difficulty: Hard
Type: Application
117. Below is an alphabetical listing of General Ledger accounts with identifying numbers for Scott's Suntanning Parlour. Indicate the
accounts debited and credited in each of the following transactions by placing the proper account identifying number(s) in the columns to
the right of each transaction.
Type: Application
118. Explain why closing entries are a necessary step in the accounting cycle.
Closing entries are a necessary step because we want the:

1. Revenue, expense, and withdrawals accounts (a) to be reflected in equity and (b) to begin with zero balances after measuring the results
Page 40 of 48
from the period just ending.

2. Owner's capital account to reflect (a) increases from net income and (b) decreases from net losses and withdrawals from the period just
ending.
Type: Knowledge
119. Indicate beside each of the following accounts whether the account is a temporary or permanent account.
(a) Cash
(b) Prepaid insurance
(c) Unearned fees
(d) Accounts receivable
(e) Insurance expense
(f) Smith, capital
(g) Smith, withdrawals
(h) Rent expense
(i) Fees earned
(j) Supplies
(k) Supplies expense
(l) Depreciation expense, building
(m) Accumulated depreciation, building
(a) permanent (b) permanent (c)permanent (d) permanent (e) temporary (f) permanent (g) temporary (h) temporary (i) temporary (j)
permanent (k) temporary (l) temporary (m) permanent
Type: Knowledge
120. Explain the purpose of closing entries and describe the closing process.
The purpose of closing entries is to transfer the end of period balances in the temporary accounts to the owner's capital account. The closing
process has four steps: (1) Close credit balances in revenue accounts to income summary, (2) close debit balances in expense accounts to
income summary, (3) close income summary to the capital account, (4) close withdrawals to the capital account.
Type: Knowledge
121. Explain why temporary accounts are closed each period.
Temporary accounts are closed at the end of each accounting period for two main reasons. First, the closing process updates the owner's
capital account to include the effects of all transactions and events recorded for the period. Second, it prepares revenue, expense and
withdrawal accounts for the next reporting period by bringing the balances in those accounts to zero.
Type: Knowledge
122. Presented below are the year-end balances at October 31 of Laura's Laundry Service. All accounts have normal balances.
Prepare the necessary closing entries at October 31.

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Type: Application
123. Shown below is Brady Wholesaler's adjusted trial balance as of the end of its annual accounting period.
Prepare the necessary closing entries.
Type: Application
124.
The adjusted trial balance of Sara's Laundry follows:
1. Prepare the necessary closing entries at December 31.

Page 42 of 48
2. What is the balance of Sara's capital account after the bookkeeper posts the closing entries?
Type: Application
125. The following are selected accounts and their balances after adjustments as of May 31, 2015, the end of Mark Company's fiscal year.
Prepare the necessary closing entries at May 31.
Type: Application
126. The adjusted trial balance of Cox Company at December 31, 2015 is as follows:
Prepare the necessary closing entries at December 31.

Page 43 of 48
Type: Application
127. The items that follow appeared in the Income Statement columns of the work sheet prepared for a sole proprietorship at year-end,
December 31, 2015. Also, the owner's withdrawals account was debited for $12,000 during the year. Prepare the necessary closing
entries at December 31.
Difficulty: Hard
Type: Application
128. The amounts below appeared in the Income Statement and Balance Sheet columns of a company's December 31 work sheet. In the space
provided record the closing entries on December 31 (no explanations are necessary).
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Type: Application
129. Discuss the purpose of a post-closing trial balance.
A post-closing trial balance is a list of permanent accounts and their balances after all the closing entries are journalized and posted. It is used
to verify the equality of debits and credits of the permanent account balances. It also verifies that the temporary accounts have zero balances.
Type: Knowledge
130. Identify the steps in the accounting cycle.
The accounting cycle consists of ten steps: (1) analyze transactions, (2) journalize entries, (3) post data to the ledger, (4) prepare an
unadjusted trial balance, (5) prepare and post adjusting entries, (6) prepare an adjusted trial balance, (7) prepare financial statements, (8)
prepare and post closing entries, (9) prepare a post-closing trial balance.
Type: Knowledge
131. Describe a classified balance sheet.
Classified balance sheets usually report four groups of assets: current assets, long-term investments, property, plant and equipment, and
intangible assets. Liabilities are divided into current and long-term. For sole proprietorships and partnerships capital accounts are reported
under Equity. For corporations, the equity section is called Shareholders Equity.
Type: Knowledge
132. Classified balance sheets commonly include the following categories.
1. Current assets Margarita Acosta, capital 2

2. Equity Cash 1
3. Current assets Office supplies 1
4. Property, plant and equipment Accounts receivable 1
5. Current liabilities Prepaid expenses 1
6. Investments Merchandise inventory 1
7. Current assets Buildings used in business operations 4
8. Intangible assets Wages payable 5
9. Long-term liabilities Long-term note payable 9
10. Current assets Accounts payable 5
11. Current assets Patents 8
12. Current liabilities Land held for future plant expansion 6
Type: Knowledge
Below is the year-end adjusted trial balance for Acosta Accounting.

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Larson - Chapter 05
133. Prepare a classified year-end balance sheet. A $7,000 installment on the long-term note payable is due within one year.
Difficulty: Hard
Type: Application
134. Using the information from Acosta Accounting, calculate the current ratio.
Page 46 of 48
$134,300  $29,800 = 4.5 to 1
Type: Application
135. Explain the purpose of reversing entries.
Reversing entries are an optional part of the accounting cycle. They apply to accrued assets and liabilities. The purpose of the reversing
entries is to simplify regular transaction journal entries made during the subsequent accounting period. Reversing entries have no effect on the
financial statements.
Difficulty: Hard
Type: Knowledge
136. Explain the current ratio. Describe how it is used to evaluate a company.
The current ratio is current assets divided by current liabilities. It is used to evaluate a company's ability to pay its current debts with the
amount of current assets available.
Type: Knowledge
137. Work sheet preparation is a(n) ____________ step in the accounting cycle.
optional
Type: Knowledge
138. The closing process resets _______, _________, and ________ account balances to zero at the end of every accounting period.
revenue, expense, withdrawals

Difficulty: Easy
Type: Knowledge
139. Listed below are a number of accounts for Melcier Industries. Use the schedule shown below to classify each account, and indicate if it is
included in the closing process and, if so, how it is closed.
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Type: Application
140. ___________________ is an account used only in the closing process.
Income Summary
Difficulty: Easy
Type: Knowledge
141. FastForward's post-closing trial balance has a debit total of $475,000 and a credit total of $457,000. This indicates that
_________________________.
an error was made involving either a debit or a credit number

Type: Knowledge
142. The ______________ refers to the steps in preparing financial statements for users.
accounting cycle
Difficulty: Easy
Type: Knowledge
143. Intangible assets are long-term resources that are used to produce or sell products and services, that lack _____________, and whose
benefits are ___________.
physical form; uncertain

Type: Knowledge
144. Reversing entries are linked to ____________________ and _____________ that were created by adjusting entries at the end of a
reporting period.
accrued assets, liabilities

Difficulty: Hard
Type: Knowledge
145. A current ratio of 1.1 suggests that a company has ____________ current assets to cover current liabilities.
sufficient
Type: Knowledge
Page 48 of 48
5 Summary
Category # of Questions
Difficulty: Easy 38
Difficulty: Hard 16
Difficulty: Moderate 91
Larson - Chapter 05 146
Learning Objective: 1 34
Learning Objective: 1-3 1
Type: Application 29
Type: Knowledge 116

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Page 1 of 48

3. A work sheet is prepared before entering the adjustments in the accounts.

4. The work sheet is used to record transactions as they occur.

5. The work sheet is an important financial statement.

6. A work sheet is a substitute for the financial statements.

24. Income Summary is a temporary account.

27. The withdrawals account is normally closed by debiting it.

36. The third closing entry is to close Withdrawals to Income Summary.

52. For a partnership, the equity section is called Shareholders Equity.

53. Reversing entries are optional.

60. The information on a work sheet can be used to prepare:

A. Year end financial statements.

A. Adjusted trial balance.

65. Which of the following statements is incorrect?

A. Working papers are invaluable tools of the accountant.

A. $200 less net income.

A. An expense amount entered in the Balance Sheet Credit column.

A. An expense amount entered in the Balance Sheet Debit column.

A. Entering an asset amount in the Income Statement Debit column.

72. Another name for temporary accounts is:

73. When closing entries are made:

75. Which of the following statements is incorrect?

A. Permanent accounts are another name for nominal accounts.

78. Real accounts are:

A. Another name for temporary accounts.

80. The Income Summary account is:

A. Income Summary account.

E. All of these should be journalized in the closing process.

87. The Income Summary account is used:

A. To adjust and update asset accounts.

A. Debit Dina Kader, Capital and credit Cash for $350.

89. Which statement is incorrect?

A. Revenue accounts are closed to Income Summary.

A. Unadjusted trial balance.

92. A post-closing trial balance shows:

93. Which of the following statements is true?

A. Journalizing consists of analyzing and recording transactions in T-accounts.

96. A classified balance sheet:

A. Measures a company's ability to pay its bills on time.

97. The asset section of a classified balance sheet includes:

98. Current liabilities become due:

A. Within one year.

A. Current assets, prepaid expenses, long-term investments, intangible assets.

A. Pro forma statements.

101. Reversing entries:

102. Reversing entries are:

103. The current ratio:

A. Is used to measure a company's profitability.

104. The current ratio:

A. Is current assets divided by current liabilities.

105. Match the following terms with the appropriate definition.

106. Match the following terms with the appropriate definition.

111. Calculate the current ratio in each of the following cases.

112. Describe a work sheet and explain why it is useful.

121. Explain why temporary accounts are closed each period.

Prepare the necessary closing entries at October 31.

Prepare the necessary closing entries.

The adjusted trial balance of Sara's Laundry follows:

1. Prepare the necessary closing entries at December 31.

Prepare the necessary closing entries at May 31.

Prepare the necessary closing entries at December 31.

129. Discuss the purpose of a post-closing trial balance.

130. Identify the steps in the accounting cycle.