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Test Bank for Accounting Principles, Eleventh Edition
4 - 3
Completing the Accounting Cycle
CHAPTER 4
COMPLETING THE ACCOUNTING CYCLE
Summary of Questions by Learning Objectives and Bloom’s Taxonomy
Item
LO
BT
Item
LO
BT
Item
LO
BT
Item
LO
BT
Item
LO
BT
True-False Statements
1.
1
K
9.
2
K
17.
4
K
25.
6
C
sg33.
2
K
2.
1
K
10.
2
K
18.
4
C
26.
6
K
sg34.
3
K
3.
1
C
11.
2
K
19.
5
C
27.
6
K
sg35.
6
C
4.
1
C
12.
2
K
20.
5
K
28.
6
K
sg36.
6
K
5.
1
K
13.
2
K
21.
5
C
29.
6
K
sg37.
6
K
6.
1
K
14.
2
K
22.
6
K
a30.
7
K
7.
1
C
15.
3
C
23.
6
C
sg31.
1
K
8.
2
K
16.
3
K
24.
6
C
sg32.
2
K
Multiple Choice Questions
38.
1
K
66.
2
K
94.
3
C
122.
6
AN
150.
6
AP
39.
1
K
67.
2
K
95.
3
C
123.
6
AN
151.
6
AP
40.
1
K
68.
2
C
96.
3
C
124.
6
K
a152.
7
K
41.
1
C
69.
2
K
97.
4
K
125.
6
K
a153.
7
K
42.
1
C
70.
2
K
98.
4
K
126.
6
C
sg154.
1
C
43.
1
K
71.
2
C
99.
4
K
127.
6
K
sg155.
2
K
44.
1
C
72.
2
K
100.
4
K
128.
6
K
sg156.
2
K
45.
1
K
73.
2
K
101.
4
K
129.
6
C
sg157.
3
K
46.
1
K
74.
2
C
102.
4
K
130.
6
C
st158.
4
K
47.
1
K
75.
2
C
103.
4
K
131.
6
K
sg159.
4
K
48.
1
K
76.
2
C
104.
4
K
132.
6
K
st160.
5
K
49.
1
K
77.
2
C
105.
4
K
133.
6
K
sg161.
5
AN
50.
1
K
78.
2
C
106.
5
K
134.
6
K
st162.
6
K
51.
1
C
79.
2
AN
107.
5
AN
135.
6
K
sg163.
6
K
52.
1
K
80.
2
C
108.
5
K
136.
6
K
st,a164.
7
K
53.
1
C
81.
2
C
109.
5
C
137.
6
K
165.
8
K
54.
1
AP
82.
2
C
110.
5
K
138.
6
C
166.
8
K
55.
1
C
83.
2
C
111.
5
AN
139.
1
AN
167.
8
K
56.
2
K
84.
2
AN
112.
5
AN
140.
6
AN
168.
8
K
57.
2
K
85.
2
C
113.
5
AN
141.
6
AN
169.
8
K
58.
2
K
86.
2
C
114.
5
AN
142.
6
AN
170.
8
K
59.
2
K
87.
3
K
115.
5
AN
143.
6
AN
171.
8
K
60.
2
K
88.
3
C
116.
6
AN
144.
6
AN
172.
8
K
61.
2
K
89.
3
K
117.
6
AN
145.
6
AN
173.
8
K
62.
2
K
90.
3
K
118.
6
AN
146.
6
K
174.
8
K
63.
2
K
91.
3
K
119.
6
AN
147.
6
K
175.
8
K
64.
2
K
92.
3
K
120.
6
AN
148.
6
K
65.
2
K
93.
3
K
121.
6
AN
149.
6
K
sg This question also appears in the Study Guide.
st This question also appears in a self-test at the student companion website.
a This question covers a topic in an appendix to the chapter.
Summary of Questions by Learning Objectives and Bloom’s Taxonomy
Brief Exercises
176.
2
AN
179.
2
K
182.
5
AN
185.
6
AP
177.
2
AN
180.
3
K
183.
6
AN
186.
6
K
178.
2
AN
181.
5
AN
184.
6
AP
a187.
7
AP
Exercises
188.
1
C
194.
1,6
AP
200.
2
AP
206.
5
AN
212.
6
AP
189.
1
C
194.
2
AN
201.
3
C
207.
5
AN
a213.
7
AN
190.
1
AN
196.
2
AP
202.
3
AN
208.
5
AN
a214.
7
AN
191.
1
AN
197.
2
AP
203.
4
C
209.
6
AP
a215.
7
AN
192.
1
AN
198.
2
AP
204.
5
AN
210.
6
AN
193.
1
AN
199.
2
AP
205.
5
AN
211.
6
AP
Completion Statements
216.
1
K
219..
2
K
222.
4
K
225.
6
K
217.
1
K
220.
2
K
223.
6
K
226.
6
K
218.
2
K
221.
3
K
224.
6
K
227.
6
K
Matching
228.
1-7
K
Short-Answer Essay
229.
1
K
231.
6
K
a233.
7
K
225.
5
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230.
2
K
232.
6
K
234.
5
K
SUMMARY OF Learning OBJECTIVES BY QUESTION TYPE
Item
Type
Item
Type
Item
Type
Item
Type
Item
Type
Item
Type
Item
Type
Learning Objective 1
1.
TF
7.
TF
42.
MC
48.
MC
54.
MC
190.
Ex
217.
C
2.
TF
31.
TF
43.
MC
49.
MC
55.
MC
191.
Ex
228.
MA
3.
TF
38.
MC
44.
MC
50.
MC
139.
MC
192.
Ex
229.
SA
4.
TF
39.
MC
45.
MC
51.
MC
154.
MC
193.
Ex
5.
TF
40.
MC
46.
MC
52.
MC
188.
Ex
194.
Ex
6.
TF
41.
MC
47.
MC
53.
MC
189.
Ex
216.
C
Learning Objective 2
8.
TF
33.
TF
63.
MC
71.
MC
79.
MC
155.
MC
197.
Ex
9.
TF
56.
MC
64.
MC
72.
MC
80.
MC
156.
MC
198.
Ex
10.
TF
57.
MC
65.
MC
73.
MC
81.
MC
176.
BE
199.
Ex
11.
TF
58.
MC
66.
MC
74.
MC
82.
MC
177.
BE
200.
Ex
12.
TF
59.
MC
67.
MC
75.
MC
83.
MC
178.
BE
218.
C
13.
TF
60.
MC
68.
MC
76.
MC
84.
MC
179.
BE
219/220.
C
14.
TF
61.
MC
69.
MC
77.
MC
85.
MC
195.
Ex
228.
MA
32.
TF
62.
MC
70.
MC
78.
MC
86.
MC
196.
Ex
230.
SA
Learning Objective 3
15.
TF
87.
MC
90.
MC
93.
MC
96.
MC
201.
Ex
228.
MA
16.
TF
88.
MC
91.
MC
94.
MC
157.
MC
202.
Ex
34.
TF
89.
MC
92.
MC
95.
MC
180.
BE
221.
C
SUMMARY OF Learning OBJECTIVES BY QUESTION TYPE
Learning Objective 4
17.
TF
98.
MC
101.
MC
104.
MC
159.
MC
228.
MA
18.
TF
99.
MC
102.
MC
105.
MC
203.
Ex
97.
MC
100.
MC
103.
MC
158.
MC
222.
C
Learning Objective 5
19.
TF
107.
MC
111.
MC
115.
MC
182.
BE
207.
Ex
235.
SA
20.
TF
108.
MC
112.
MC
160.
MC
204.
Ex
208.
Ex
21.
TF
109.
MC
113.
MC
161.
MC
205.
Ex
228.
MA
106.
MC
110.
MC
114.
MC
181.
BE
206.
Ex
234.
SA
Learning Objective 6
22.
TF
37.
TF
125.
MC
135.
MC
145.
MC
184.
BE
225.
C
23.
TF
116.
MC
126.
MC
136.
MC
146.
MC
185.
BE
226.
C
24.
TF
117.
MC
127.
MC
137.
MC
147.
MC
186.
BE
227.
C
25.
TF
118.
MC
128.
MC
138.
MC
148.
MC
183.
Ex
228.
MA
26.
TF
119.
MC
129.
MC
149.
MC
209.
Ex
231.
SA
27.
TF
120.
MC
130.
MC
140.
MC
150.
MC
210.
Ex
232.
SA
28.
TF
121.
MC
131.
MC
141.
MC
151.
MC
211.
Ex
29.
TF
122.
MC
132.
MC
142.
MC
162.
MC
212.
Ex
35.
TF
123.
MC
133.
MC
143.
MC
163.
MC
223.
C
36.
TF
124.
MC
134.
MC
144.
MC
183.
BE
224.
C
Learning Objective a7
a30.
TF
a153.
MC
a167.
MC
a213.
Ex
a215.
Ex
228.
MA
a152.
MC
a164.
MC
a187.
BE
a214.
Ex
233.
SA
Learning Objective a8
a165.
MC
a167.
MC
a169.
MC
a171.
MC
a173.
MC
a175.
MC
a166.
MC
a168.
MC
a170.
MC
a172.
MC
a174.
MC
Note: TF = True-False BE = Brief Exercise C = Completion
MC = Multiple Choice Ex = Exercise MA = Matching
SA = Short-Answer Essay
CHAPTER Learning OBJECTIVES
1. Prepare a worksheet. The steps in preparing a worksheet follows. (a) Prepare a trial balance on the worksheet, (b) Enter the adjustments in the adjustments columns, (c) Enter adjusted balances in the adjusted trial balance columns, (d) Extend adjusted trial balance amounts to appropriate financial statement columns, and (e) Total the statement columns, compute net income (or net loss), and complete the worksheet.
2. Explain the process of closing the books. Closing the books occurs at the end of an accounting period. The process is to journalize and post closing entries and then underline and balance all accounts. In closing the books, companies make separate entries to close revenues and expenses to Income Summary, Income Summary to Owner's Capital, and Owner's Drawings to Owner's Capital. Only temporary accounts are closed.
3. Describe the content and purpose of a post-closing trial balance. A post-closing trial balance contains the balances in permanent accounts that are carried forward to the next accounting period. The purpose of this trial balance is to prove the equality of these balances.
4. State the required steps in the accounting cycle. The required steps in the accounting cycle are (1) analyze business transactions, (2) journalize the transactions, (3) post to ledger accounts, (4) prepare a trial balance, (5) journalize and post adjusting entries, (6) prepare an adjusted trial balance, (7) prepare financial statements, (8) journalize and post closing entries, and (9) prepare a post-closing trial balance.
5. Explain the approaches to preparing correcting entries. One way to determine the correcting entry is to compare the incorrect entry with the correct entry. After comparison, the company makes a correcting entry to correct the accounts. An alternative to a correcting entry is to reverse the incorrect entry and then prepare the correct entry.
6. Identify the sections of a classified balance sheet. A classified balance sheet categorizes assets as current assets; long-term investments; property, plant, and equipment; and intangibles. Liabilities are classified as either current or long-term. There is also an owner's (owners’) equity section, which varies with the form of business organization.
a7. Prepare reversing entries. Reversing entries are the opposite of the adjusting entries made in the preceding period. Some companies choose to make reversing entries at the beginning of a new accounting period to simplify the recording of later transactions related to the adjusting entries. In most cases, only accrued adjusting entries are reversed.
TRUE-FALSE STATEMENTS
1. A worksheet is a mandatory form that must be prepared along with an income statement and balance sheet.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
2. If a worksheet is used, financial statements can be prepared before adjusting entries are journalized.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
3. If total credits in the income statement columns of a worksheet exceed total debits, the enterprise has net income.
Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
4. It is not necessary to prepare formal financial statements if a worksheet has been prepared because financial position and net income are shown on the worksheet.
Ans: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
5. The adjustments on a worksheet can be posted directly to the accounts in the ledger from the worksheet.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
6. The adjusted trial balance columns of a worksheet are obtained by subtracting the adjustment columns from the trial balance columns.
Ans: F, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem LOlving, IMA: FSA
7. The balance of the depreciation expense account will appear in the income statement debit column of a worksheet.
Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
8. Closing entries are unnecessary if the business plans to continue operating in the future and issue financial statements each year.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
9. The owner's drawings account is closed to the Income Summary account in order to properly determine net income (or loss) for the period.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
10. After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
11. Closing revenue and expense accounts to the Income Summary account is an optional bookkeeping procedure.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
12. Closing the drawings account to Owner’s Capital is not necessary if net income is greater than owner's drawings during the period.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
13. The owner's drawings account is a permanent account whose balance is carried forward to the next accounting period.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
14. Closing entries are journalized after adjusting entries have been journalized.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
15. The amounts appearing on an income statement should agree with the amounts appearing on the post-closing trial balance.
Ans: F, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
16. The post-closing trial balance is entered in the first two columns of a worksheet.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
17. A business entity has only one accounting cycle over its economic existence.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
18. The accounting cycle begins at the start of a new accounting period.
Ans: T, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
19. Both correcting entries and adjusting entries always affect at least one balance sheet account and one income statement account.
Ans: F, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
20. Correcting entries are made any time an error is discovered even though it may not be at the end of an accounting period.
Ans: T, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
21. An incorrect debit to Accounts Receivable instead of the correct account Notes Receivable does not require a correcting entry because total assets will not be misstated.
Ans: F, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
22. In a corporation, Retained Earnings is a part of owners' equity.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
23. A company's operating cycle and fiscal year are usually the same length of time.
Ans: F, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
24. Cash and supplies are both classified as current assets.
Ans: T, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
25. Long-term investments would appear in the property, plant, and equipment section of the balance sheet.
Ans: F, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
26. A liability is classified as a current liability if the company is to pay it within the forthcoming year.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
27. A company's liquidity is concerned with the relationship between long-term investments and long-term debt.
Ans: F, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: Problem Solving, IMA: Business Economics
28. Current assets are customarily the first items listed on a classified balance sheet.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
29. The operating cycle of a company is determined by the number of years the company has been operating.
Ans: F, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
a30. Reversing entries are an optional bookkeeping procedure.
Ans: T, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
31. After a worksheet has been completed, the statement columns contain all data that are required for the preparation of financial statements.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
32. To close net income to owner's capital, Income Summary is debited and Owner's Capital is credited.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
33. In one closing entry, Owner's Drawings is credited and Income Summary is debited.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
34. The post-closing trial balance will contain only owner's equity statement accounts and balance sheet accounts.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
35. The operating cycle of a company is the average time required to collect the receivables resulting from producing revenues.
Ans: F, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics
36. Current assets are listed in the order of liquidity.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
37. Current liabilities are obligations that the company is to pay within the coming year.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
Answers to True-False Statements
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
1.
F
7.
T
13.
F
19.
F
25.
F
31.
T
37.
T
2.
T
8.
F
14.
T
20.
T
26.
T
32.
T
3.
T
9.
F
15.
F
21.
F
27.
F
33.
F
4.
F
10.
T
16.
F
22.
T
28.
T
34.
F
5.
F
11.
F
17.
F
23.
F
29.
F
35.
F
6.
F
12.
F
18.
T
24.
T
a30.
T
36.
T
MULTIPLE CHOICE QUESTIONS
38. Preparing a worksheet involves
a. two steps.
b. three steps.
c. four steps.
d. five steps.
Ans: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
39. The adjustments entered in the adjustments columns of a worksheet are
a. not journalized.
b. posted to the ledger but not journalized.
c. not journalized until after the financial statements are prepared.
d. journalized before the worksheet is completed.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
40. The information for preparing a trial balance on a worksheet is obtained from
a. financial statements.
b. general ledger accounts.
c. general journal entries.
d. business documents.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
41. After the adjusting entries are journalized and posted to the accounts in the general ledger, the balance of each account should agree with the balance shown on the
a. adjusted trial balance.
b. post-closing trial balance.
c. the general journal.
d. adjustments columns of the worksheet.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
42. If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has
a. earned net income for the period.
b. an error because debits do not equal credits.
c. suffered a net loss for the period.
d. to make an adjusting entry.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
43. A worksheet is a multiple column form that facilitates the
a. identification of events.
b. measurement process.
c. preparation of financial statements.
d. analysis process.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
44. Which of the following companies would be least likely to use a worksheet to facilitate the adjustment process?
a. Large company with numerous accounts
b. Small company with numerous accounts
c. All companies, since worksheets are required under generally accepted accounting principles
d. Small company with few accounts
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
45. A worksheet can be thought of as a(n)
a. permanent accounting record.
b. optional device used by accountants.
c. part of the general ledger.
d. part of the journal.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
46. The account, Supplies, will appear in the following debit columns of the worksheet.
a. Trial balance
b. Adjusted trial balance
c. Balance sheet
d. All of these answer choices are correct
Ans: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
47. When constructing a worksheet, accounts are often needed that are not listed in the trial balance already entered on the worksheet from the ledger. Where should these additional accounts be shown on the worksheet?
a. They should be inserted in alphabetical order into the trial balance accounts already given.
b. They should be inserted in chart of account order into the trial balance already given.
c. They should be inserted on the lines immediately below the trial balance totals.
d. They should not be inserted on the trial balance until the next accounting period.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
48. When using a worksheet, adjusting entries are journalized
a. after the worksheet is completed and before financial statements are prepared.
b. before the adjustments are entered on to the worksheet.
c. after the worksheet is completed and after financial statements have been prepared.
d. before the adjusted trial balance is extended to the proper financial statement columns.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
49. Assuming that there is a net loss for the period, debits equal credits in all but which section of the worksheet?
a. Income statement columns
b. Adjustments columns
c. Trial balance columns
d. Adjusted trial balance columns
Ans: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
50. Adjusting entries are prepared from
a. source documents.
b. the adjustments columns of the worksheet.
c. the general ledger.
d. last year's worksheet.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
51. The net income (or loss) for the period
a. is found by computing the difference between the income statement credit column and the balance sheet credit column on the worksheet.
b. cannot be found on the worksheet.
c. is found by computing the difference between the income statement columns of the worksheet.
d. is found by computing the difference between the trial balance totals and the adjusted trial balance totals.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
52. The worksheet does not show
a. net income or loss for the period.
b. revenue and expense account balances.
c. the ending balance in the owner's capital account.
d. the trial balance before adjustments.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
53. If the total debits exceed total credits in the balance sheet columns of the worksheet, owner's equity
a. will increase because net income has occurred.
b. will decrease because a net loss has occurred.
c. is in error because a mistake has occurred.
d. will not be affected.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
54. The income statement and balance sheet columns of Iron and Wine Company's worksheet reflect the following totals:
Income Statement Balance Sheet
Dr. Cr. Dr. Cr.
Totals $72,000 $44,000 $60,000 $88,000
The net income (or loss) for the period is
a. $44,000 income.
b. $28,000 income.
c. $28,000 loss.
d. not determinable.
Ans: C, LO: 1, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
55. The income statement and balance sheet columns of Iron and Wine Company's worksheet reflect the following totals:
Income Statement Balance Sheet
Dr. Cr. Dr. Cr.
Totals $72,000 $48,000 $60,000 $84,000
To enter the net income (or loss) for the period into the above worksheet requires an entry to the
a. income statement debit column and the balance sheet credit column.
b. income statement credit column and the balance sheet debit column.
c. income statement debit column and the income statement credit column.
d. balance sheet debit column and the balance sheet credit column.
Ans: B, LO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
56. Closing entries are necessary for
a. permanent accounts only.
b. temporary accounts only.
c. both permanent and temporary accounts.
d. permanent or real accounts only.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
57. Each of the following accounts is closed to Income Summary except
a. Expenses.
b. Owner's Drawings.
c. Revenues.
d. All of these are closed to Income Summary.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
58. Closing entries are made
a. in order to terminate the business as an operating entity.
b. so that all assets, liabilities, and owner's capital accounts will have zero balances when the next accounting period starts.
c. in order to transfer net income (or loss) and owner's drawings to the owner's capital account.
d. so that financial statements can be prepared.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
59. Closing entries are
a. an optional step in the accounting cycle.
b. posted to the ledger accounts from the worksheet.
c. made to close permanent or real accounts.
d. journalized in the general journal.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
60. The income summary account
a. is a permanent account.
b. appears on the balance sheet.
c. appears on the income statement.
d. is a temporary account.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
61. If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a
a. debit to the owner's capital account.
b. debit to the owner's drawings account.
c. credit to the owner's capital account.
d. credit to the owner's drawings account.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
62. Closing entries are journalized and posted
a. before the financial statements are prepared.
b. after the financial statements are prepared.
c. at management's discretion.
d. at the end of each interim accounting period.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
63. Closing entries
a. are prepared before the financial statements.
b. reduce the number of permanent accounts.
c. cause the revenue and expense accounts to have zero balances.
d. summarize the activity in every account.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
64. Which of the following is a true statement about closing the books of a proprietorship?
a. Expenses are closed to the Expense Summary account.
b. Only revenues are closed to the Income Summary account.
c. Revenues and expenses are closed to the Income Summary account.
d. Revenues, expenses, and the owner's drawings account are closed to the Income Summary account.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
65. Closing entries may be prepared from all of the following except
a. Adjusted balances in the ledger
b. Income statement and balance sheet columns of the worksheet
c. Balance sheet
d. Income and owner's equity statements
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
66. In order to close the owner's drawings account, the
a. income summary account should be debited.
b. income summary account should be credited.
c. owner's capital account should be credited.
d. owner's capital account should be debited.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
67. In preparing closing entries
a. each revenue account will be credited.
b. each expense account will be credited.
c. the owner's capital account will be debited if there is net income for the period.
d. the owner's drawings account will be debited.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
68. The most efficient way to accomplish closing entries is to
a. credit the income summary account for each revenue account balance.
b. debit the income summary account for each expense account balance.
c. credit the owner's drawings balance directly to the income summary account.
d. credit the income summary account for total revenues and debit the income summary account for total expenses.
Ans: D, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
69. The closing entry process consists of closing
a. all asset and liability accounts.
b. out the owner's capital account.
c. all permanent accounts.
d. all temporary accounts.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
70. The final closing entry to be journalized is typically the entry that closes the
a. revenue accounts.
b. owner's drawings account.
c. owner's capital account.
d. expense accounts.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
71. An error has occurred in the closing entry process if
a. revenue and expense accounts have zero balances.
b. the owner's capital account is credited for the amount of net income.
c. the owner's drawings account is closed to the owner's capital account.
d. the balance sheet accounts have zero balances.
Ans: D, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
72. The Income Summary account is an important account that is used
a. during interim periods.
b. in preparing adjusting entries.
c. annually in preparing closing entries.
d. annually in preparing correcting entries.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
73. The balance in the income summary account before it is closed will be equal to
a. the net income or loss on the income statement.
b. the beginning balance in the owner's capital account.
c. the ending balance in the owner's capital account.
d. zero.
Ans: A, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
74. After closing entries are posted, the balance in the owner's capital account in the ledger will be equal to
a. the beginning owner's capital reported on the owner's equity statement.
b. the amount of the owner's capital reported on the balance sheet.
c. zero.
d. the net income for the period.
Ans: B, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
75. The income statement for the month of June, 2014 of Camera Obscura Enterprises contains the following information:
Revenues $7,000
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,500
Advertising Expense 800
Supplies Expense 300
Insurance Expense 100
Total expenses 5,700
Net income $1,300
The entry to close the revenue account includes a
a. debit to Income Summary for $1,300.
b. credit to Income Summary for $1,300.
c. debit to Income Summary for $7,000.
d. credit to Income Summary for $7,000.
Ans: D, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
76. The income statement for the month of June, 2014 of Camera Obscura Enterprises contains the following information:
Revenues $7,000
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,500
Advertising Expense 800
Supplies Expense 300
Insurance Expense 100
Total expenses 5,700
Net income $1,300
The entry to close the expense accounts includes a
a. debit to Income Summary for $1,300.
b. credit to Rent Expense for $1,500.
c. credit to Income Summary for $5,700.
d. debit to Salaries and Wages Expense for $3,000.
Ans: B, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
77. The income statement for the month of June, 2014 of Camera Obscura Enterprises contains the following information:
Revenues $7,000
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,500
Advertising Expense 800
Supplies Expense 300
Insurance Expense 100
Total expenses 5,700
Net income $1,300
After the revenue and expense accounts have been closed, the balance in Income Summary will be
a. $0.
b. a debit balance of $1,300.
c. a credit balance of $1,300.
d. a credit balance of $7,000.
Ans: C, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
Solution: $7,000 ( $5,700 ( $1,300
78. The income statement for the month of June, 2014 of Camera Obscura Enterprises contains the following information:
Revenues $7,000
Expenses:
Salaries and Wages Expense $3,000
Rent Expense 1,500
Advertising Expense 800
Supplies Expense 300
Insurance Expense 100
Total expenses 5,700
Net income $1,300
The entry to close Income Summary to Owner’s, Capital includes
a. a debit to Revenues for $7,000.
b. credits to Expenses totalling $5,700.
c. a credit to Income Summary for $1,300
d. a credit to Owner's Capital for $1,300.
Ans: D, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
79. The income statement for the month of June, 2014 of Camera Obscura Enterprises contains the following information:
Revenues $7,000
Expenses:
Salries and Wages Expense $3,000
Rent Expense 1,500
Advertising Expense 800
Supplies Expense 300
Insurance Expense 100
Total expenses 5,700
Net income $1,300
At June 1, 2014, Camera Obscura reported owner’s equity of $35,000. The company had no owner drawings during June. At June 30, 2014, the company will report owner’s equity of
a. $29,300.
b. $35,000.
c. $36,300.
d. $42,000.
Ans: C, LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
Solution: $35,000 + $1,300 = $36,300
80. The income statement for the year 2014 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)
The entry to close the revenue account includes a
a. debit to Income Summary for $7,500.
b. credit to Income Summary for $7,500.
c. debit to Revenues for $70,000.
d. credit to Revenues for $70,000.
Ans: C, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
81. The income statement for the year 2014 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)
The entry to close the expense accounts includes a
a. debit to Income Summary for $7,500.
b. credit to Income Summary for $7,500.
c. debit to Income Summary for $77,500.
d. debit to Utilities Expense for $2,500.
Ans: C, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
82. The income statement for the year 2014 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)
After the revenue and expense accounts have been closed, the balance in Income Summary will be
a. $0.
b. a debit balance of $7,500.
c. a credit balance of $7,500.
d. a credit balance of $70,000.
Ans: B, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
83. The income statement for the year 2014 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)
The entry to close Income Summary to Owner’s Capital includes
a. a debit to Revenue for $70,000.
b. credits to Expenses totalling $77,500.
c. a credit to Income Summary for $7,500.
d. a credit to Owner’s Capital for $7,500.
Ans: C, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
84. The income statement for the year 2014 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)
At January 1, 2014, Fugazi reported owner’s equity of $50,000. Owner drawings for the year totalled $10,000. At December 31, 2014, the company will report owner’s equity of
a. $17,500.
b. $32,500.
c. $40,000.
d. $42,500.
Ans: B, LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
Solution: $50,000 ( $10,000 ( $7,500 ( $32,500
85. The income statement for the year 2014 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)
After all closing entries have been posted, the Income Summary account will have a balance of
a. $0.
b. $7,500 debit.
c. $7,500 credit.
d. $77,500 credit.
Ans: A, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
86. The income statement for the year 2014 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)
After all closing entries have been posted, the revenue account will have a balance of
a. $0.
b. $70,000 credit.
c. $70,000 debit.
d. $7,500 credit.
Ans: A, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
87. A post-closing trial balance is prepared
a. after closing entries have been journalized and posted.
b. before closing entries have been journalized and posted.
c. after closing entries have been journalized but before the entries are posted.
d. before closing entries have been journalized but after the entries are posted.
Ans: A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
88. All of the following statements about the post-closing trial balance are correct except it
a. shows that the accounting equation is in balance.
b. provides evidence that the journalizing and posting of closing entries have been properly completed.
c. contains only permanent accounts.
d. proves that all transactions have been recorded.
Ans: D, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
89. A post-closing trial balance will show
a. only permanent account balances.
b. only temporary account balances.
c. zero balances for all accounts.
d. the amount of net income (or loss) for the period.
Ans: A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
90. A post-closing trial balance should be prepared
a. before closing entries are posted to the ledger accounts.
b. after closing entries are posted to the ledger accounts.
c. before adjusting entries are posted to the ledger accounts.
d. only if an error in the accounts is detected.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
91. A post-closing trial balance will show
a. zero balances for all accounts.
b. zero balances for balance sheet accounts.
c. only balance sheet accounts.
d. only income statement accounts.
Ans: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
92. The purpose of the post-closing trial balance is to
a. prove that no mistakes were made.
b. prove the equality of the balance sheet account balances that are carried forward into the next accounting period.
c. prove the equality of the income statement account balances that are carried forward into the next accounting period.
d. list all the balance sheet accounts in alphabetical order for easy reference.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
93. The balances that appear on the post-closing trial balance will match the
a. income statement account balances after adjustments.
b. balance sheet account balances after closing entries.
c. income statement account balances after closing entries.
d. balance sheet account balances after adjustments.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
94. Which account listed below would be double ruled in the ledger as part of the closing process?
a. Cash
b. Owner's Capital
c. Owner's Drawings
d. Accumulated Depreciation—Equipment
Ans: C, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
95. A double rule applied to accounts in the ledger during the closing process implies that
a. the account is a temporary account.
b. the account is a balance sheet account.
c. the account balance is not zero.
d. a mistake has been made, since double ruling is prescribed.
Ans: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
96. The heading for a post-closing trial balance has a date line that is similar to the one found on
a. a balance sheet.
b. an income statement.
c. an owner's equity statement.
d. the worksheet.
Ans: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
97. Which one of the following is usually prepared only at the end of a company's annual accounting period?
a. Preparing financial statements
b. Journalizing and posting adjusting entries
c. Journalizing and posting closing entries
d. Preparing an adjusted trial balance
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
98. The step in the accounting cycle that is performed on a periodic basis (i.e., monthly, quarterly) is
a. analyzing transactions.
b. journalizing and posting adjusting entries.
c. preparing a post-closing trial balance.
d. posting to ledger accounts.
Ans: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
99. Which one of the following is an optional step in the accounting cycle of a business enterprise?
a. Analyze business transactions
b. Prepare a worksheet
c. Prepare a trial balance
d. Post to the ledger accounts
Ans: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
100. The final step in the accounting cycle is to prepare
a. closing entries.
b. financial statements.
c. a post-closing trial balance.
d. adjusting entries.
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
101. Which of the following steps in the accounting cycle would not generally be performed daily?
a. Journalize transactions
b. Post to ledger accounts
c. Prepare adjusting entries
d. Analyze business transactions
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
102. Which of the following steps in the accounting cycle may be performed most frequently?
a. Prepare a post-closing trial balance
b. Journalize closing entries
c. Post closing entries
d. Prepare a trial balance
Ans: D, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
103. Which of the following depicts the proper sequence of steps in the accounting cycle?
a. Journalize the transactions, analyze business transactions, prepare a trial balance
b. Prepare a trial balance, prepare financial statements, prepare adjusting entries
c. Prepare a trial balance, prepare adjusting entries, prepare financial statements
d. Prepare a trial balance, post to ledger accounts, post adjusting entries
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
104. The two optional steps in the accounting cycle are preparing
a. a post-closing trial balance and reversing entries.
b. a worksheet and post-closing trial balances.
c. reversing entries and a worksheet.
d. an adjusted trial balance and a post-closing trial balance.
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
105. The first required step in the accounting cycle is
a. reversing entries.
b. journalizing transactions in the book of original entry.
c. analyzing transactions.
d. posting transactions.
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
106. Correcting entries
a. always affect at least one balance sheet account and one income statement account.
b. affect income statement accounts only.
c. affect balance sheet accounts only.
d. may involve any combination of accounts in need of correction.
Ans: D, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
107. Merriweather Post Pavillion received a $820 check from a customer for the balance due. The transaction was erroneously recorded as a debit to Cash $280 and a credit to Service Revenue $280. The correcting entry is
a. debit Cash, $820; credit Accounts Receivable, $820.
b. debit Cash, $540 and Accounts Receivable, $280; credit Service Revenue, $820.
c. debit Cash, $540 and Service Revenue, $280; credit Accounts Receivable, $820.
d. debit Accounts Receivable, $820; credit Cash, $560 and Service Revenue, $280.
Ans: C, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
Solution: $820 ( $280 ( $540
108. If errors occur in the recording process, they
a. should be corrected as adjustments at the end of the period.
b. should be corrected as soon as they are discovered.
c. should be corrected when preparing closing entries.
d. cannot be corrected until the next accounting period.
Ans: B, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
109. A correcting entry
a. must involve one balance sheet account and one income statement account.
b. is another name for a closing entry.
c. may involve any combination of accounts.
d. is a required step in the accounting cycle.
Ans: C, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
110. An unacceptable way to make a correcting entry is to
a. reverse the incorrect entry.
b. erase the incorrect entry.
c. compare the incorrect entry with the correct entry and make a correcting entry to correct the accounts.
d. correct it immediately upon discovery.
Ans: B, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
111. Zen Arcade paid the weekly payroll on January 2 by debiting Salaries and Wages Expense for $47,000. The accountant preparing the payroll entry overlooked the fact that Salaries and Wages Expense of $27,000 had been accrued at year end on December 31. The correcting entry is
a. Salaries and Wages Payable 27,000
Cash 27,000
b. Cash 20,000
Salaries and Wages Expense 20,000
c. Salaries and Wages Payable 27,000
Salaries and Wages Expense 27,000
d. Cash 27,000
Salaries and Wages Expense 27,000
Ans: C, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
112. Jawbreaker Company paid $940 on account to a creditor. The transaction was erroneously recorded as a debit to Cash of $490 and a credit to Accounts Receivable, $490. The correcting entry is
a. Accounts Payable 940
Cash 940
b. Accounts Receivable 490
Cash 490
c. Accounts Receivable 490
Accounts Payable 490
d. Accounts Receivable 490
Accounts Payable 940
Cash 1,430
Ans: D, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
Solution: $940 + $490 ( $1,430
113. A lawyer collected $710 of legal fees in advance. He erroneously debited Cash for $170 and credited Accounts Receivable for $170. The correcting entry is
a. Cash 170
Accounts Receivable 540
Unearned Service Revenue 710
b. Cash 710
Service Revenue 710
c. Cash 540
Accounts Receivable 170
Unearned Service Revenue 710
d. Cash 540
Accounts Receivable 540
Ans: C, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
Solution: $710 ( $170 = $540
114. On May 25, Yellow House Company received a $650 check from Grizzly Bean for services to be performed in the future. The bookkeeper for Yellow House Company incorrectly debited Cash for $650 and credited Accounts Receivable for $650. The amounts have been posted to the ledger. To correct this entry, the bookkeeper should:
a. debit Cash $650 and credit Unearned Service Revenue $650.
b. debit Accounts Receivable $650 and credit Service Revenue $650.
c. debit Accounts Receivable $650 and credit Cash $650.
d. debit Accounts Receivable $650 and credit Unearned Service Revenue $650.
Ans: D, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
115. On March 8, Black Candy Company bought supplies on account from the Arcade Fire Company for $550. Black Candy Company incorrectly debited Equipment for $500 and credited Accounts Payable for $500. The entries have been posted to the ledger. the correcting entry should be:
a. Supplies 550
Accounts Payable 550
b. Supplies 550
Accounts Payable 500
Equipment 50
c. Supplies 550
Equipment 550
d. Supplies 550
Equipment 500
Accounts Payable 50
Ans: D, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
Solution: $550 ( $500 ( $50
116. The following information is for Sunny Day Real Estate:
Sunny Day Real Estate
Balance Sheet
December 31, 2014
Cash $ 25,000 Accounts Payable $ 60,000
Prepaid Insurance 30,000 Salaries and Wages Payable 15,000
Accounts Receivable 50,000 Mortgage Payable 85,000
Inventory 70,000 Total Liabilities 160,000
Land Held for Investment 85,000
Land 120,000
Building $100,000
Less Accumulated Owner’s Capital 370,000
Depreciation (20,000) 80,000
Trademark 70,000 Total Liabilities and
Total Assets $530,000 Owner’s Equity $530,000
The total dollar amount of assets to be classified as current assets is
a. $105,000.
b. $175,000.
c. $190,000.
d. $260,000.
Ans: B, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
Solution: $25,000 ( $30,000 ( $50,000 ( $70,000 ( $175,000
117. The following information is for Sunny Day Real Estate:
Sunny Day Real Estate
Balance Sheet
December 31, 2014
Cash $ 25,000 Accounts Payable $ 60,000
Prepaid Insurance 30,000 Salaries and Wages Payable 15,000
Accounts Receivable 50,000 Mortgage Payable 85,000
Inventory 70,000 Total Liabilities 160,000
Land Held for Investment 85,000
Land 120,000
Building $100,000
Less Accumulated Owner’s Capital 370,000
Depreciation (20,000) 80,000
Trademark 70,000 Total Liabilities and
Total Assets $530,000 Owner’s Equity $530,000
The total dollar amount of assets to be classified as property, plant, and equipment is
a. $200,000.
b. $220,000.
c. $285,000.
d. $305,000.
Ans: A, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
Solution: $120,000 ( $80,000 ( $200,000
118. The following information is for Sunny Day Real Estate:
Sunny Day Real Estate
Balance Sheet
December 31, 2014
Cash $ 25,000 Accounts Payable $ 60,000
Prepaid Insurance 30,000 Salaries and Wages Payable 15,000
Accounts Receivable 50,000 Mortgage Payable 85,000
Inventory 70,000 Total Liabilities 160,000
Land Held for Investment 85,000
Land 120,000
Building $100,000
Less Accumulated Owner’s Capital 370,000
Depreciation (20,000) 80,000
Trademark 70,000 Total Liabilities and
Total Assets $530,000 Owner’s Equity $530,000
The total dollar amount of assets to be classified as investments is
a. $0.
b. $70,000.
c. $85,000.
d. $155,000.
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
119. The following information is for Sunny Day Real Estate:
Sunny Day Real Estate
Balance Sheet
December 31, 2014
Cash $ 25,000 Accounts Payable $ 60,000
Prepaid Insurance 30,000 Salaries and Wages Payable 15,000
Accounts Receivable 50,000 Mortgage Payable 85,000
Inventory 70,000 Total Liabilities 160,000
Land Held for Investment 85,000
Land 120,000
Building $100,000
Less Accumulated Owner’s Capital 370,000
Depreciation (20,000) 80,000
Trademark 70,000 Total Liabilities and
Total Assets $530,000 Owner’s Equity $530,000
The total dollar amount of liabilities to be classified as current liabilities is
a. $15,000.
b. $60,000.
c. $75,000.
d. $160,000.
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting
Solution: $60,000 ( $15,000 ( $75,000
120. The following information is for Bright Eyes Auto Supplies:
Bright Eyes Auto Supplies
Balance Sheet
December 31, 2014
Cash $ 40,000 Accounts Payable $ 130,000
Prepaid Insurance 80,000 Salaries and Wages Payable 50,000
Accounts Receivable 100,000 Mortgage Payable 150,000
Inventory 140,000 Total Liabilities 330,000
Land Held for Investment 180,000
Land 250,000
Building $200,000
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