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Ch4

38. The information for preparing a trial balance on a work sheet is obtained from
b. general ledger accounts.

39. 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.

40. If the total debit column exceeds the total credit column of the income
statement columns on a work sheet, then the company has
c. suffered a net loss for the period.

41. A work sheet is a multiple column form that facilitates the


c. preparation of financial statements.

42. Which of the following companies would be least likely to use a work sheet to
facilitate the adjustment process?
d. Small company with few accounts

43. A work sheet can be thought of as a(n)


b. optional device used by accountants.

44.The account, Supplies, will appear in the following debit columns of the work
sheet.
d. All of these
45.When constructing a work sheet, accounts are often needed that are not listed in
the trial balance already entered on the work sheet from the ledger. Where should
these additional accounts be shown on the work sheet?
c. They should be inserted on the lines immediately below the trial
balance totals.

46. When using a work sheet, adjusting entries are journalized


c. after the work sheet is completed and after financial statements have
been prepared.

47. Assuming that there is a net loss for the period, debits equal credits in all but
which section of the work sheet?
a. Income statement columns

48. Adjusting entries are prepared from


b. the adjustment columns of the work sheet.

49. The net income (or loss) for the period


c. is found by computing the difference between the income statement
columns of the work sheet.

50. The work sheet does not show


c. the ending balance in the owner's capital account.

51.If the total debits exceed total credits in the balance sheet columns of the work
sheet, owner's equity
d. will not be affected.
Use the following information for questions 52–53.

The income statement and balance sheet columns of Pine Company's work sheet
reflects the following totals:

Income Statement Balance Sheet


Dr. Cr. Dr.
Cr.
Totals $58,000 $50,000 $34,000 $42,000

52. The net income (or loss) for the period is


b. $8,000 income.

53. To enter the net income (or loss) for the period into the above work sheet
requires an entry to the
d. balance sheet debit column and to the balance sheet credit column.

54. Closing entries are made


d. so that financial statements can be prepared.

55. Closing entries are


b. posted to the ledger accounts from the work sheet.

56. The income summary account


b. appears on the balance sheet.

57. 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
c. credit to the owner's capital account.

58. Closing entries are journalized and posted


b. after the financial statements are prepared.

59. Closing entries


c. cause the revenue and expense accounts to have zero balances.

60. Which of the following is a true statement about closing the books of a
proprietorship?
c. Revenues and expenses are closed to the Income Summary
account.

61. Closing entries may be prepared from all but which one of the following
sources?
c. Balance sheet

62. In order to close the owner's drawing account, the


d. owner's capital account should be debited.

63. In preparing closing entries


b. each expense account will be credited.
64. The most efficient way to accomplish closing entries is to

d. credit the income summary account for total revenues and debit the
income summary account for total expenses.
65. The closing entry process consists of closing
d. all temporary accounts.

66. The final closing entry to be journalized is typically the entry that closes the
b. owner's drawing account.

67. An error has occurred in the closing entry process if


d. the balance sheet accounts have zero balances.

68. The Income Summary account is an important account that is used


b. in preparing adjusting entries.

69. 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.

70. After closing entries are posted, the balance in the owner's capital account in
the ledger will be equal to
b. the amount of the owner's capital reported on the balance sheet.

71. A post-closing trial balance will show


b. only temporary account balances.

72. A post-closing trial balance should be prepared


b. after closing entries are posted to the ledger accounts.

73. A post-closing trial balance will show


c. only balance sheet accounts.

74. The purpose of the post-closing trial balance is to


b. prove the equality of the balance sheet account balances that are
carried forward into the next accounting period.

75. The balances that appear on the post-closing trial balance will match the
b. balance sheet account balances after closing entries.

76. Which account listed below would be double ruled in the ledger as part of the
closing process?
c. Owner's Drawing

77. A double rule applied to accounts in the ledger during the closing process
implies that
a. the account is an income statement account.

78. The heading for a post-closing trial balance has a date line that is similar to
the one found on
a. a balance sheet.

79. Which one of the following is an optional step in the accounting cycle of a
business enterprise?
b. Prepare a work sheet

80. The final step in the accounting cycle is to prepare


c. a post-closing trial balance.

81. Which of the following steps in the accounting cycle would not generally be
performed daily?
c. Prepare adjusting entries

82. Which of the following steps in the accounting cycle may be performed more
frequently than annually?
d. Prepare a trial balance

83. Which of the following depicts the proper sequence of steps in the accounting
cycle?
c. Prepare a trial balance, prepare adjusting entries, prepare financial
statements

84. The two optional steps in the accounting cycle are preparing
c. reversing entries and a work sheet.

85. The first required step in the accounting cycle is


c. analyzing transactions.

86. Speedy Bike Company received a $640 check from a customer for the
balance due. The transaction was erroneously recorded as a debit to Cash
$460 and a credit to Service Revenue $460. The correcting entry is

c. Debit Cash, $180 and Service Revenue, $460; Credit Accounts


Receivable, $640.

87. If errors occur in the recording process, they


b. should be corrected as soon as they are discovered.

88. A correcting entry


c. may involve any combination of accounts.

89. An unacceptable way to make a correcting entry is to


b. erase the incorrect entry.

90. Cole Company paid the weekly payroll on January 2 by debiting Wages
Expense for $50,000. The accountant preparing the payroll entry overlooked
the fact that Wages Expense of $40,000 had been accrued at year end on
December 31. The correcting entry is
c. Wages Payable .................................................................. 40,000
Wages Expense .....................................................
40,000

91. Tyler Company paid $430 on account to a creditor. The transaction was
erroneously recorded as a debit to Cash of $340 and a credit to Accounts
Receivable, $340. The correcting entry is

d. Accounts Receivable ........................................................ 340


Accounts Payable ............................................................. 430
Cash ....................................................................... 770

92. A lawyer collected $950 of legal fees in advance. He erroneously debited


Cash for $590 and credited Accounts Receivable for $590. The correcting
entry is
c. Cash .................................................................................360
Accounts Receivable ........................................................ 590
Unearned Revenue ................................................ 950

93. Office Equipment is classified in the balance sheet as


b. property, plant, and equipment.

94. A current asset is


d. expected to be realized in cash, sold or consumed within one year of
the balance sheet or the company's operating cycle, whichever is
longer.

95. An intangible asset


a. derives its value from the rights and privileges it provides the owner.

96. Liabilities are generally classified on a balance sheet as


d. current liabilities and long-term liabilities.

97. Which of the following would not be classified a long-term liability?


a. Current maturities of long-term debt

98. Which of the following liabilities are not related to the operating cycle?
d. Bonds payable

99. The report form of the balance sheet


c. shows assets above liabilities and owner's equity.

100. It is not true that current assets are resources that are expected to be
d. acquired within one year.

101. The operating cycle of a company is the average time that is required to go
from cash to
b. cash in producing revenues.

102. On a classified balance sheet, current assets are customarily listed


c. in the order of liquidity.

103. Intangible assets are


c. noncurrent resources.

104. The relationship between current assets and current liabilities is important in
evaluating a company's
b. liquidity.

105. The most important information needed to determine if companies can pay
their current obligations is the
c. relationship between current assets and current liabilities.
a
106. A reversing entry
b. is the exact opposite of an adjusting entry made in a previous
period.

a
107. If a company utilizes reversing entries, they will
a. be made at the beginning of the next accounting period.

The following questions are from the Study Guide


s
108. The steps in the preparation of a work sheet do not include
a. analyzing documentary evidence.

s
109. Balance sheet accounts are considered to be
b. permanent accounts.

s
110. Income Summary has a credit balance of $12,000 in J. Spencer` Co. after
closing revenues and expenses. The entry to close Income Summary is

d. debit Income Summary $12,000, credit J. Spencer, Capital $12,000.


s
111. The post-closing trial balance contains only
b. balance sheet accounts.
s
112. Which one of the following statements concerning the accounting cycle is
incorrect?
b. The accounting cycle includes only one optional step.

s
113. On September 23, the Polar Company received a $350 check from Mike
Moluf for services to be performed in the future. The bookkeeper for Polar
Company incorrectly debited Cash for $350 and credited Accounts
Receivable for $350. The amounts have been posted to the ledger. To
correct this entry, the bookkeeper should
b. debit Accounts Receivable $350 and credit Unearned Service
Revenue $350.
s
114. Current liabilities
a. must reasonably be expected to be paid from existing current assets
or through the creation of other current liabilities.