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Exam 4: Completing the Accounting Cycle

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Question 21

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The majority of businesses end their fiscal year on December 31.

A) True
B) False

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Question 22

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Balance sheet accounts

A) represent amounts accumulated during a specific period of time
B) are called real accounts
C) have zero balances after the closing entries have been posted
D) are not affected by adjustments

E) C) and D)
F) None of the above

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Question 23

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The dividends account is closed to the income summary account.

The difference between a classified balance sheet and one that is not classified is that the classified one has subheadings.

On which financial statement will Income Summary be shown?

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { Stockton Company }$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { Adjusted Trial Balance }$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { December } 31$ $\begin{array}{|l|r|r|}\hline \text { Cash } & 7,530 & \\\hline \text { Accounts Receivable } & 2,100 & \\\hline \text { Prepaid Expenses } & 700 & \\\hline \text { Equipment } & 13,700 & \\\hline \text { Accumulated Depreciation } & & 1,100 \\\hline \text { Accounts Payable } & & 1,900 \\\hline \text { Notes Payable } & & 4,300 \\\hline \text { Common Stock } & & 1,000 \\\hline \text { Retained Earnings } & & 12,940 \\\hline \text { Dividends } & 790 & \\\hline \text { Fees Earned } & & 9,250 \\\hline \text { Wages Expense } & 2,500 & \\\hline \text { Rent Expense } & 1,960 & \\\hline \text { Utilities Expense } & 775 & \\\hline \text { Depreciation Expense } & 250 & \\\hline \text { Miscellaneous Expense } & 185 & \\\hline \text { Totals } & 30,490 & 30,490 \\\hline\end{array}$ -Determine the retained earnings ending balance.

Accumulated Depreciation is a permanent account.

On the basis of the following data taken from the Adjusted Trial Balance columns of the work sheet for the year ended March 31 for Banes Domino's Corporation, journalize the four closing entries.

You have just accepted your first job out of college,which requires you to evaluate loan requests at Eastwood National Bank.The first loan request you receive is from Richard Enterprises.Richard Tracy,the CEO,is requesting $105,000 and brings you the following trial balance or statement of accounts for the first year of operations ended December 31. What three accounts do you think should be relabeled for greater clarity?

Financial statements should be prepared before the closing entries are journalized and posted.

Of the following steps of the accounting cycle,which step should be completed first?

The income statement is prepared from the adjusted trial balance or the income statement columns on the work sheet.

The following balance sheet contains errors. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Mark Brock Services Co. }$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { For the Year Ended December } 31$ $\begin{array}{l}\hline \begin{array}{lll} \underline {\text { Assets }}\\\text { Current assets: }\\\text { Cash } & \$ 7,170 \\\text { Accounts payable } & 7,500 \\\text { Supplies } & 2,590 \\\text { Prepaid insurance } & 800 \\\text { Land } & \underline { 24,000} \\\text { Total current assets }&& \$ 42,060\end{array} \quad \quad \quad \quad\begin{array}{lll} \underline {\text { Liabilities }}\\\text { Current liabilities: }\\\text { Accounts receivable } & \$ 10,000 \\\text { Accum. depr.-building } & 12,525 \\\text { Accum. depr.-equipment } & 7,340 \\\text { Net income } & \underline {11,500 }\\\\\text { Total liabilities }&&\$ 41,365\end{array}\end{array}$ $\begin{array}{l}\begin{array}{lll}\\ \text { Property, plant, and } \\ \text { equipment: } \\ \text { Building}& \$ 43,700 \\ \text {Equipment} & \underline {29,250} \\ \text { Total property, plant, } \\ \text {and equipment } && \underline {72,950} \\\\ \text {Total assets } && \underline { \$ 131,510 } \\\end{array} \quad \quad \quad \quad \begin{array}{lll}\underline {\text { Stockholders' Equity }} \\\text { Wages payable } & \$ 1,500 \\\text { Common stock } & 86,645 \\\text { Retained Earnings } &\underline { 2,000}\\\\ \text { Total stockholders' equity } &\underline {90,145 }\\ \text {Total liabilities and } \\ \text { stockholders' equity } &\underline { \$ 131,510}\\\end{array}\end{array}$ a List the errors in the balance sheet above and b prepare a corrected balance sheet.

In the accounting cycle,the last step is

An end-of-period spreadsheet includes columns for

The accounting cycle requires three trial balances be done.In what order should they be prepared?

After Net Income or Loss is entered on the work sheet,the debit column total must equal the credit column total for the Balance Sheet pair of columns.

Accounts reported on the balance sheet that are carried forward from year to year are known as permanent accounts.

Prepaid insurance is reported on the balance sheet as a

It is not necessary to post the closing entries to the general ledger.