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Exam 4: Completing the Accounting Cycle

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Question 61

Multiple Choice

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Which of the following errors would cause the Balance Sheet and Statement of Changes in Equity 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 and Statement of Changes in Equity Debit column.
D) Entering a revenue amount in the Balance Sheet and Statement of Changes in Equity Debit column.
E) Entering a liability amount in the Balance Sheet and Statement of Changes in Equity Credit column.

F) B) and E)
G) A) and B)

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Question 62

Multiple Choice

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Which of the following statements regarding presentation of financial statements under IFRS is not ?

A) Assets can be listed from least liquid to most liquid, where liquid refers to the ease of converting an asset to cash.
B) Assets can be listed from most liquid to least liquid, where liquid refers to the ease of converting an asset to cash.
C) Assets must be listed from most liquid to least liquid, where liquid refers to the ease of converting an asset to cash.
D) Liabilities can be listed from furthest from maturity to nearest to maturity, where maturity refers to the nearness of paying off the liability.
E) Liabilities can be listed from nearest to maturity to furthest from maturity, where maturity refers to the nearness of paying off the liability.

F) A) and E)
G) A) and D)

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Question 63

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A company's ledger accounts and their end-of-period balances before closing entries are posted are shown below. What amount will be posted to Tricia DeBarre, Capital in the process of closing the Income Summary account? (Assume all accounts have normal balances.)

If in preparing a work sheet an adjusted trial balance amount is mistakenly 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:

The last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements and recording closing and adjusting entries.

All of the following statements regarding the Income Statement columns on the worksheet are except:

The unadjusted trial balance of Bade Cleaning Service is entered on the partial work sheet below. Complete the work sheet using the following information: (a) Salaries earned by employees that are unpaid and unrecorded, $4,000. (b) An inventory of supplies showed $3,000 of unused supplies still on hand. (c) Depreciation on automobiles, $30,000. (d) Services paid in advance by customers of $12,000 have now been provided to customers. (e) Advertising for November and December in the amount of $8,000 remains unpaid and unrecorded.

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

Reversing entries:

The following are the steps in the accounting cycle. List them in the order in which they are completed: Prepare adjusted trial balance Post transactions Prepare an unadjusted trial balance Journalize transactions Prepare the financial statements Close the temporary accounts Adjust the ledger accounts Prepare a post-closing trial balance Analyze transactions

The closing process is a step in the accounting cycle that prepares accounts for the next accounting period.

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.

Bentley records adjusting entries at its December 31 year end. At December 31, employees had earned $12,000 of unpaid and unrecorded salaries. The next payday is January 3, at which time $30,000 will be paid. Prepare the January 1 journal entry to reverse the effect of the December 31 salary expense accrual.

A company has current assets of $15,000 and current liabilities of $9,500. Its current ratio is 1.6.

Cash and office supplies are both classified as current assets.

The following year-end adjusted trial balance is for Tom Janes Co. at the end of December 31. The credit balance in Tom Janes, Capital at the beginning of the year, January 1, was $320,000. The owner, Tom Janes, invested an additional $300,000 during the current year. The land held for future expansion was also purchased during the current year. Required: 1. Prepare a classified year-end balance sheet. (Note: A $22,000 installment on the long-term note payable is due within one year.) 2. Using the information presented: (a) Calculate the current ratio. Comment on the ability of Tom Janes Co. to meets its short-term debts. (b) Calculate the debt ratio and comment on the financial position and risk analysis of Tom Janes Co. (c) Using the account balances to analyze the financial position of Tom Janes Co., why would the owner need to invest an additional $300,000 in the business when the business is already profitable and the owner had an existing capital balance of $320,000?

The unadjusted trial balance of Quick Delivery is entered on the partial work sheet below. Complete the work sheet using the following information: (a) Salaries earned by employees that are unpaid and unrecorded, $5,000. (b) An inventory of supplies showed $1,000 of unused supplies still on hand. (c) Depreciation on delivery vans, $24,000. (d) Services paid in advance by customers of $10,000 have now been provided to customers.

In the process of completing a work sheet, you determine that the Income Statement debit column totals $83,000, while the Income Statement credit column totals $65,000. To enter net income (or net loss) for the period into the work sheet would require an entry to

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

Another name for temporary accounts is: