Ch04 Completing The Accounting Cycle

Chapter 4
Completing the Accounting Cycle

OBJECTIVES
Obj 1
Obj 2
Obj 3
Obj 4
Obj 5
Obj 6
Describe the flow of accounting information from the unadjusted trial balance into
the adjusted trial balance and financial statements.
Prepare financial statements from adjusted account balances.
Prepare closing entries.
Describe the accounting cycle.
Illustrate the accounting cycle for one period.
Explain what is meant by the fiscal year and the natural business year.
QUESTION GRID
True / False
No Objective
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1
04-01
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04-01
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04-01
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04-02
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04-02
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04-02
24
04-02
Difficulty
No.
Objective
Difficulty
No.
Objective
Difficulty
Easy
Easy
Easy
Moderate
Moderate
Moderate
Easy
Moderate
Moderate
Moderate
Easy
Moderate
Easy
Easy
Easy
Moderate
Easy
Easy
Easy
Easy
Moderate
Easy
Easy
Easy
25
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30
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32
33
34
35
36
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38
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43
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48
04-02
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
Easy
Easy
Easy
Easy
Easy
Easy
Easy
Easy
Easy
Easy
Easy
Moderate
Easy
Easy
Easy
Easy
Easy
Easy
Easy
Easy
Easy
Easy
Easy
Moderate
49
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51
52
53
54
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56
57
58
59
60
61
62
63
64
65
66
67
68
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72
04-04
04-04
04-04
04-04
04-06
04-06
04-06
04-06
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
Easy
Easy
Moderate
Easy
Easy
Easy
Easy
Easy
Easy
Easy
Moderate
Easy
Moderate
Easy
Easy
Moderate
Moderate
Moderate
Moderate
Moderate
Easy
Moderate
Easy
Easy
167
Chapter 4/Completing the Accounting Cycle 168
Matching
No Objective
.
1
04-05
2
04-05
3
04-05
Difficulty
No.
Objective
Difficulty
No.
Objective
Difficulty
Moderate
Moderate
Moderate
4
5
6
04-05
04-05
04-05
Moderate
Moderate
Moderate
7
8
04-05
04-05
Moderate
Moderate
Multiple Choice
No. Objective
1
04-01
2
04-01
3
04-01
4
04-01
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6
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04-02
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04-02
25
04-02
26
04-02
27
04-02
28
04-03
Difficulty
Moderate
Difficult
Difficult
Moderate
Moderate
Moderate
Moderate
Easy
Easy
Easy
Moderate
Easy
Moderate
Moderate
Moderate
Moderate
Easy
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
No.
29
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31
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56
Objective
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
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04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-03
04-04
04-04
Difficulty
Moderate
Difficult
Easy
Easy
Easy
Moderate
Moderate
Easy
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Easy
Moderate
Difficult
Moderate
Difficult
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
No.
57
58
59
60
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62
63
64
65
66
67
68
69
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75
76
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81
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83
Objective
04-04
04-04
04-06
04-06
04-06
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
04-APP
Difficulty
Moderate
Easy
Moderate
Moderate
Moderate
Easy
Moderate
Easy
Easy
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Easy
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Easy
Difficult
Difficult
Difficulty
No.
Objective
Difficulty
No.
Objective
Difficulty
Easy
04-02
Easy
04-04
Difficult
Exercise/Other
No Objective
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1
04-01
2
04-02
3
04-02
4
04-02
Problem
No Objective
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7
04-02
8
04-02
Easy
Moderate
Easy
6
7
8
04-03
04-03
04-03
Difficulty
No
.
9
10
11
12
13
14
15
16
Objective
Difficulty
04-02
04-02
04-02|04-03
04-03
04-03
04-03
04-03
04-03
Difficult
Difficult
Difficult
Moderate
Difficult
Moderate
Moderate
Moderate
Easy
Easy
Moderate
Easy
Moderate
Easy
Difficult
Difficult
Easy
Moderate
Moderate
10
11
04-APP
04-APP
Moderate
Difficult
No
.
17
18
19
20
21
22
23
24
Objective
Difficulty
04-03
04-03
04-03
04-03
04-03
04-05
04-APP
04-APP
Difficult
Moderate
Difficult
Difficult
Difficult
Difficult
Difficult
Difficult
Chapter 4Completing the Accounting Cycle

TRUE/FALSE
1. After analyzing transactions, the next step would be to post the transactions in the ledger.
ANS: F
DIF: Easy OBJ: 04-01
NAT: AACSB Analytic | AICPA FN-Measurement
2. The most important output of the accounting cycle is the financial statements.
ANS: T
3. The work sheet is not considered a part of the formal accounting records.
ANS: T
4. Cross-referencing is useful in assuring that the debits and credits are in balance.
ANS: F
DIF: Moderate
OBJ: 04-01
5.
When accounts do not appear on the unadjusted trial balance but are needed to post
adjustments, they are simply added to the account title column.
ANS: T
DIF: Moderate
OBJ: 04-01
6.
Once the adjusted trial balance is in balance, the flow of accounts will now go into the
financial statements.
ANS: T
DIF: Moderate
OBJ: 04-01
170 Chapter 4/Completing the Accounting Cycle
7. There is really no benefit in preparing financial statements in any particular order.

ANS: F
8.
Round tripping is a fraudulent scheme where business A artificially inflates revenue by

lending money to customer B who uses that money to buy products from A.
ANS: T
DIF: Moderate
OBJ: 04-02
9.
On the income statement, miscellaneous expenses are usually presented as the last item
without regard to the dollar amount.
ANS: T
DIF: Moderate
OBJ: 04-02
10. The usual presentation of the statement of retained earnings is (1) Beginning retained
earnings, (2) Net income or loss, (3) Dividends, (4) Investment by Stockholder, (5) Ending
retained earnings.
ANS: F
DIF: Moderate
OBJ: 04-02
11. The difference between a classified balance sheet and one that is not classified is that the
classified one has subheadings.
ANS: T
12. Cash and other assets that may reasonably be expected to be realized in cash, sold, or
consumed through the normal operations of a business, usually longer than one year, are
called current assets.
ANS: F
DIF: Moderate
OBJ: 04-02
13. Prepaid Insurance is an example of a current asset.
ANS: T
14. Land is an example of a plant asset.
ANS: T
15. Liabilities that will be due within one year or less and that are to be paid out of current assets
are called current liabilities.
ANS: T
16. The amount of the net income for a period appears on both the income statement and the
balance sheet for that period.
ANS: F
DIF: Moderate
OBJ: 04-02
17. Accrued taxes payable are generally reported on the balance sheet as a current liability.
ANS: T
18. At the end of the fiscal period, prepaid expenses are reported on the Income Statement as
expenses.
ANS: F
19. Office Equipment is an example of a current asset account.
ANS: F
20. Capital Stock and Dividends are reported in the stockholders equity section of the balance
sheet.
ANS: F
21. Deferred expenses that benefit a relatively short period of time are listed on the balance
sheet as current assets.
ANS: T
DIF: Moderate
OBJ: 04-02
22. Unearned revenues that will be earned in a relatively short period of time are listed on the
balance sheet as current assets.
ANS: F
23. Accrued expenses are ordinarily listed on the balance sheet as current assets.
ANS: F
24. Accrued revenues are ordinarily listed on the balance sheet as current liabilities.
ANS: F
25. The income statement is prepared from the adjusted trial balance or the income statement
columns on the work sheet.
ANS: T
26. Examples of temporary accounts are supplies and prepaid expenses which are in the ledger
for just a short time before they expire.
ANS: F
27. Accumulated Depreciation is a permanent account.
ANS: T
28. The dividend account is a temporary account.
ANS: T
29. The balance sheet accounts are referred to as real or permanent accounts.
ANS: T
30. Journalizing and posting the adjustments and closing entries updates the ledger for the new
accounting period.
ANS: T
31. The income summary account is closed to the retained earnings account.
ANS: T
32. The accumulated depreciation account is closed to the income summary account.
ANS: F
33. The dividends account is closed to the income summary account.
ANS: F
34. The trial balance prepared after all the closing entries have been posted is called a preclosing trial balance.
ANS: F
35. Entries required to close the balances of the temporary accounts at the end of the period are
called final entries.
ANS: F
36. In a corporation, a closing entry for the dividends account may not be necessary.
ANS: F
DIF: Moderate
OBJ: 04-03
37. Journalizing and posting closing entries must be completed before financial statements can
be prepared.
ANS: F
38. During the closing process, some balance sheet accounts are closed and end the period with
a zero balance.
ANS: F
39. Closing entries are entered directly on to the work sheet.
ANS: F
40. The post-closing trial balance will generally have fewer accounts than the trial balance.
ANS: T
41. A post-closing trial balance contains only asset and liability accounts.
ANS: F
42. A post-closing trial balance should be prepared before the financial statements are prepared.
ANS: F
43. Assets, liabilities, and stockholders equity are real accounts and do not get closed at the end
of the period.
ANS: T
44. The income summary account is also known as the clearing account.
ANS: T
45. All income statement accounts will be closed at the end of the period.
ANS: T
46. Balance Sheet are not considered real accounts.

ANS: F
47. It is not necessary to post the closing entries to the general ledger.
ANS: F
48. Once an account has been closed for the period, inserting a line in the balance columns
zeros out the account making it ready for the following period.
ANS: T
DIF: Moderate
OBJ: 04-03
49. The last step of the accounting cycle is to prepare a post-closing trial balance.
ANS: T
50. The accounting cycle begins with preparing an unadjusted trial balance.
ANS: F
51. Financial statements should be prepared before the closing entries are journalized and
posted.
ANS: T
DIF: Moderate
OBJ: 04-04
52. The unadjusted, adjusted, and final trial balances are prepared during the accounting cycle of
a period.
ANS: F
53. Any twelve-month accounting period adopted by a company is known as its fiscal year.
ANS: T
NAT: AACSB Analytic | AICPA BB-Industry
54. A fiscal year that ends when business activities have reached their lowest point is called the
natural business year.
ANS: T
55. All companies must use a calendar year as their fiscal year.
ANS: F
56. The majority of businesses end their fiscal year on December 31.
ANS: T
57. The work sheet is not considered a part of the formal accounting records.
ANS: T
DIF: Easy OBJ: 04-App
58. The work sheet is a working paper that accountants can use to summarize adjusting entries
and the account balances for the financial statements.
ANS: T
59. In a computerized accounting system, a work sheet may not be necessary because the
software program automatically posts entries to the accounts and prepares financial
statements.
ANS: T
DIF: Moderate
OBJ: 04-App
60. The trial balance may be listed on the work sheet instead of being prepared separately.
ANS: T
61. The totals of the Adjusted Trial Balance columns on a work sheet will always be the sum of
the Trial Balance column totals and the Adjustments column totals.
ANS: F
DIF: Moderate
OBJ: 04-App
62. A work sheet heading is dated for a period of time.
ANS: T
63. On the work sheet, the retained earnings and dividend account balances are extended to the
Balance Sheet columns.
ANS: T
64. After the account balances have been extended from the Adjusted Trial Balance columns on
the work sheet, the difference between the initial totals of the Balance Sheet debit and credit
columns is Net Income or Net Loss.
ANS: T
DIF: Moderate
OBJ: 04-App
65. 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.
ANS: T
DIF: Moderate
OBJ: 04-App
66. A net loss is shown on the work sheet in the credit columns of both the Income Statement
columns and the Balance Sheet columns.
ANS: F
DIF: Moderate
OBJ: 04-App
67. Net income is shown on the work sheet in the Income Statement debit column and the
Balance Sheet credit column.
ANS: T
DIF: Moderate
OBJ: 04-App
68. If the totals of the Income Statement debit and credit columns of a work sheet are $22,750
and $25,000, respectively, after all account balances have been extended, the amount of the
net loss is $2,250.
ANS: F
DIF: Moderate
OBJ: 04-App
69. The worksheet and the financial statements both require dollar signs.
ANS: F
70. The balance in the retained accounts account on the worksheet will equal the amount
presented in the balance sheet.
ANS: F
DIF: Moderate
OBJ: 04-App
71. Since the adjustments are entered on the work sheet, it is not necessary to record them in the
journal or post them to the ledger.
ANS: F
72. The chart of accounts, the journal, and the ledger are essential parts of the accounting
system.
ANS: T
MATCHING
Identify the following transactions as either:
a. Journal entries
b. Adjusting journal entries
c. Closing journal entries
1.
Cash
500
Fees Earned
500
2. Income Summary 465
Retained earnings
465
3. Utilities Expense
123
Cash
123
4. Wages Expense
790
Wages Payable
790
5. Unearned revenue 498
Fees Earned
498
6. Income Summary
677
Rent Expense
240
Supplies Expense
220
Utilities Expense
130
Miscellaneous Exp
87
7. Dividends
175
Cash
175
8. Accounts Receivable 400
Fees earned
400
(Customer billed for services performed)
1. ANS:
A
DIF: Moderate
OBJ: 04-05
2. ANS:
C
DIF: Moderate
OBJ: 04-05
3. ANS:
A
DIF: Moderate
OBJ: 04-05
4. ANS:
B
DIF: Moderate
OBJ: 04-05
5. ANS:
B
DIF: Moderate
OBJ: 04-05
6. ANS:
C
DIF: Moderate
OBJ: 04-05
7. ANS:
A
DIF: Moderate
OBJ: 04-05
8. ANS:
A
DIF: Moderate
OBJ: 04-05
MULTIPLE CHOICE
1.
In the accounting cycle, the last step is

a. preparing the financial statements
b. journalizing and posting the adjusting entries
c. preparing a post-closing trial balance
d. journalizing and posting the closing entries
ANS: C
DIF: Moderate
OBJ: 04-01
2.
During the end-of-period processing which of the following best describes the logical order
of this process
a. Preparation of adjustments, adjusted trial balance, financial statements
b. Preparation of Income Statement, adjusted trial balance, Balance Sheet
c. Preparation of adjusted trial balance, cross-referencing, journalizing
d. Preparation of adjustments, adjusted trial balance, posting
ANS: A
DIF: Difficult
OBJ: 04-01
3.
What is the major difference between the Unadjusted Trial Balance and the Adjusted Trial
Balance?
a. The Adjusted Trial Balance will show the net income (loss) as an additional account.
b. Both will need to be in balance in order to continue with the end-of-period processing
c. The Adjusted Trial Balance includes the postings of the adjustments for the period in the
balance of the accounts.
d. The Unadjusted Trial Balance will be used to record the adjustments for the period.
ANS: C
DIF: Difficult
OBJ: 04-01
4.
Once the adjusting entries are posted, the Adjusted Trial Balance will prepared to
a. verify that the debits and credits are in balance.
b. verify that all of the adjustments were posted in the correct accounts.
c. verify that the net income (loss) is correct for the period.
d. verify the correct flow of accounts into the financial statements.
ANS: A
DIF: Moderate
OBJ: 04-01
5.
When preparing the statement of retained earnings, the beginning retained earnings balance
can always be found
a. in the Income Statement columns of the work sheet
b. in the statement of cash flows
c. in the general ledger
d. in the Balance Sheet columns of the work sheet
ANS: C
DIF: Moderate
OBJ: 04-02
6.
Accumulated Depreciation appears on the

a. balance sheet in the current assets section
b. balance sheet in the property, plant and equipment section
c. balance sheet in the long-term liabilities section
d. income statement as an operating expense
ANS: B
DIF: Moderate
OBJ: 04-02
7.
Notes Receivable due in 345 days appear on the

b. balance sheet in the fixed assets section
c. balance sheet in the current liabilities section
d. income statement as an expense
ANS: A
DIF: Moderate
OBJ: 04-02
8.
Unearned Fees appear on the

b. balance sheet as a current liability
c. balance sheet in the stockholders equity section
d. income statement as revenue
ANS: B
9.
Which one of the fixed asset accounts listed below will not have a related contra asset
account?
a. Office Equipment
b. Land
c. Delivery Equipment
d. Building
ANS: B
10. Prepaid insurance is reported on the balance sheet as a
a. current asset
b. fixed asset
c. current liability
d. long-term liability
ANS: A
11. The income statement is prepared from the

a. adjusted trial balance
b. income statement columns of the work sheet
c. either the adjusted trial balance or the income statement columns of the work sheet
d. both the adjusted trial balance and the income statement columns of the work sheet
ANS: C
DIF: Moderate
OBJ: 04-02
12. Round-tripping is when
a. a selling company sells to a customer company with huge discounts.
b. a selling company pretends to sell to a fictitious company with the intend of inflating
revenues
c. a selling company lends money to a customer company to increase assets.
d. a selling company lends money to a customer company to be used to purchase goods
from the selling company.
ANS: D
DIF: Difficult
OBJ: 04-02
13. The Statement of Retained Earnings should be prepared
a. before the income statement and after the balance sheet
b. before the income statement and balance sheet
c. after the income statement and balance sheet
d. after the income statement and before the balance sheet
ANS: A
DIF: Moderate
OBJ: 04-02
14. The income statement should be prepared
a. before the statement of retained earnings and balance sheet
b. after the statement of retained earnings and before the balance sheet
c. after the statement of retained earnings and balance sheet
d. after the balance sheet and before the statement of retained earnings
ANS: A
DIF: Moderate
OBJ: 04-02
15. When preparing the Statement of Retained Earnings the beginning balance should be
followed by ____ to arrive and the ending balance of retained earnings.
a. investments plus net income (loss)
b. investments less dividends
c. net income (loss) less dividends
d. investments plus net income (loss) less dividends
ANS: A
DIF: Moderate
OBJ: 04-02
The following is the adjusted trial balance for Steely Company.

Steely Company
Adjusted Trial Balance
For the Year ended December 31, 2008
Cash
Accounts Receivable
Prepaid Expenses
Equipment
Accumulated Depreciation
Accounts Payable
Notes Payable
Capital Stock
Dividends
Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Depreciation Expense
Miscellaneous Expense
Totals
6,130
2,300
750
13,400
1,200
1,700
5,000
12,000
870
6,600
1,450
900
475
150
75
26,500
16. Determine the net income (loss) for the period.

a. Net Income 26,500
b. Net Loss 870
c. Net Loss 3,550
d. Net Income 3,550
ANS: D
DIF: Moderate
OBJ: 04-02
17. Determine the stockholders equity ending balance for the period.
a. $14,680
b. $11,130
c. $15,550
d. $2,680
ANS: A
DIF: Difficult
OBJ: 04-02
26,500
18. Determine total assets.

a. $26,500
b. $15,380
c. $21,380
d. $22,580
ANS: C
DIF: Moderate
OBJ: 04-02
19. Determine the current assets.
a. $22,580
b. $9,180
c. $21,380
d. $26,500
ANS: B
DIF: Moderate
OBJ: 04-02
20. Determine the total liabilities for the period.
a. $6,700
b. $1,700
c. $5,000
d. $18,700
ANS: A
DIF: Moderate
OBJ: 04-02
21. The Balance Sheet should be prepared
a. before the income statement and the statement of retained earnings
b. before the income statement and after the statement of retained earnings
c. after the income statement and the statement of retained earnings
d. after the income statement and before the statement of retained earnings
ANS: C
DIF: Moderate
OBJ: 04-02
22. The Statement of Retained Earnings begins with the beginning balance followed by
a. plus Net Income (loss) less dividends
b. plus Net Income (loss) plus investments
c. plus investments less dividends
d. plus investments plus Net Income (loss) less dividends
ANS: A
DIF: Moderate
OBJ: 04-02
23. The Income Statement will include the following accounts

a. Revenues less Expenses (ordered largest to smallest amount) with Miscellaneous
Expense listed last
b. Revenues less Expenses (ordered smallest to largest amounts) with Miscellaneous
Expense listed last
c. Revenues less Expenses (ordered in alphabetical order)
d. Revenues less Expenses (order is not important)
ANS: A
DIF: Moderate
OBJ: 04-02
24. The classified Balance Sheet will subsection the assets section as follows
a. Current Assets and Other Assets
b. Current Assets and Property, Plant, and Equipment
c. Current Assets and Long-Term Assets
d. Other Assets and Property, Plant and Equipment
ANS: B
DIF: Moderate
OBJ: 04-02
25. The classified Balance Sheet will divide its Liabilities Section as the following subsections
a. Current Liabilities and Long-Term Liabilities
b. Current Liabilities and Other Liabilities
c. Other Liabilities and Long-Term Liabilities
d. Present Liabilities and Tomorrows Liabilities
ANS: A
DIF: Moderate
OBJ: 04-02
26. Long-term liabilities are those liabilities that
a. will be paid in less than one year
b. are due to paid in 5 to 10 years
c. are due to be paid in more than one year
d. are liabilities owed to the owner and will never be paid
ANS: C
DIF: Moderate
OBJ: 04-02
27. The stockholders equity is
a. added to assets and the two are equal to liabilities
b. added to liabilities and the two are equal to assets
c. subtracted from liabilities and the net amount is equal to assets
d. subtracted from stockholders equity and the net amount is equal to net income
ANS: B
DIF: Moderate
OBJ: 04-02
28. 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 equal to assets and liabilities
ANS: B
DIF: Moderate
OBJ: 04-03
29. On which financial statement will Income Summary be shown?
a. Statement of retained earnings
b. Balance Sheet
c. Income Statement
d. No financial statement
ANS: D
DIF: Moderate
OBJ: 04-03
30. Which is the following that is not true about closing entries?
a. There are four closing entries that update the stockholders equity account.
b. After the second closing entry, the income summary account is equal to the net income or
(loss) for the period.
c. All real accounts are closed at the end of the period.
d. By closing nominal accounts at the end of the period to zero, it is possible to isolate next
periods information correctly.
ANS: C
DIF: Difficult
OBJ: 04-03
31. The income summary account is also called
a. the closing account
b. the clearing account
c. the nominal account
d. the temporary account
ANS: B
32. After posting the second closing entry to the income summary account, the balance will be
equal to
a. zero.
b. stockholders equity.
c. revenues for the period
d. the net income or (loss) for the period.
ANS: D
33. What is the last account that should be listed in the Post Closing Trial Balance?
a. Income Summary
b. Retained Earnings
c. Cash
d. Fees Earned
ANS: B
34. Which of the following account groups are all considered nominal accounts?
a. Cash, Fees Earned, Unearned Revenues
b. Prepaid Expenses, Unearned Revenues, Fees Earned
c. Capital Stock, Dividends, Income Summary
d. Dividends, Fees Earned, Rent Expense
ANS: D
DIF: Moderate
OBJ: 04-03
35. There are four closing entries. The first one is to close ____, the second one is to close ____,
the third one is to close ____, and the last one is to close ____.
a. Revenues, expenses, income summary, dividends account
b. Expenses, assets, income summary, capital stock account
c. Capital stock account, dividends account, income summary, assets
d. Dividends account, income summary, expenses, revenues
ANS: A
DIF: Moderate
OBJ: 04-03
36. All of the closing entries will adjust ____ to update that account.
a. the dividends account
b. the retained earnings account
c. the cash account
d. the income summary account
ANS: B
37. Closing entries
a. need not be journalized if adjusting entries are prepared
b. need not be posted if the financial statements are prepared from the work sheet
c. are not needed if adjusting entries are prepared
d. must be journalized and posted
ANS: D
DIF: Moderate
OBJ: 04-03
38. Closing entries are dated in the journal as of

a. the date they are actually journalized, although they are generally prepared after the end
of the accounting period
b. the last day of the accounting period, although they are actually journalized after the end
c. the first day of the accounting period, although they are actually journalized after the end
d. the first day of the subsequent accounting period
ANS: B
DIF: Moderate
OBJ: 04-03
39. Which of the accounts below would be closed by posting a debit to the account?
a. Unearned Revenue
b. Fees Earned
c. Dividends
d. Rent Expense
ANS: B
DIF: Moderate
OBJ: 04-03
40. Which of the following accounts should be closed to Income Summary at the end of the
fiscal year?
a. Supplies Expense
b. Accumulated Depreciation
c. Prepaid Insurance
d. Unearned Rent
ANS: A
DIF: Moderate
OBJ: 04-03
41. Which of the following accounts will not be closed to Income Summary at the end of the
fiscal year?
a. Salaries Expense
b. Fees Earned
c. Unearned Rent
d. Depreciation Expense
ANS: C
DIF: Moderate
OBJ: 04-03
42. Which of the following accounts will be closed to the retained earnings account at the end of
the fiscal year?
a. Rent Expense
b. Fees Earned
c. Income Summary
d. Depreciation Expense
ANS: C
DIF: Moderate
OBJ: 04-03
43. The entry to close the appropriate insurance account at the end of the accounting period is
a. debit Income Summary; credit Prepaid Insurance
b. debit Prepaid Insurance; credit Income Summary
c. debit Insurance Expense; credit Income Summary
d. debit Income Summary; credit Insurance Expense
ANS: D
DIF: Moderate
OBJ: 04-03
44. Which of the following accounts ordinarily appears in the post-closing trial balance?
a. Dividends
b. Supplies Expense
c. Fees Earned
d. Unearned Rent
ANS: D
45. The post-closing trial balance differs from the adjusted trial balance in that it
a. does not take into account closing entries
b. does not take into account adjusting entries
c. does not include balance sheet accounts
d. does not include income statement accounts
ANS: D
DIF: Moderate
OBJ: 04-03
46. The following accounts were taken from the Adjusted Trial Balance columns of the work
sheet:
Fees Earned
Insurance Expense
Prepaid Insurance
Supplies
Supplies Expenses
Net income for the period is
a. $2,300
b. $10,000
c. $4,300
d. $5,000
ANS: B
DIF: Difficult
OBJ: 04-03
$ 2,000
15,000
1,000
500
4,500
1,200
3,500
47. A summary of selected ledger accounts appear below for Ted's Auto Services for the 2007
calendar year end.
12/31
Capital Stock
7,000
1/1
12/31
5,000
17,000
6/30
11/30
Dividends
2,000
12/31
5,000
7,000
12/31
12/31
Income Summary
15,000
12/31
17,000
32,000
Net income for the period is

a. $17,000
b. $22,000
c. $7,000
d. $15,000
ANS: A
DIF: Moderate
OBJ: 04-03
48. Red Rock Stone purchased a one-year liability insurance policy on January 1st of this year
for $3,600 and recorded it as a prepaid expense. From the selections of a. through d., select
the value that would be utilized in the closing entry for insurance expense and prepaid
insurance during the closing process at the end of the first fiscal period on January 31st.
a. $3,600.
b. $360.
c. $300.
d. $360.
ANS: C
DIF: Difficult
OBJ: 04-03
49. The journal entry to close the Fees Earned, $100, and Rent Revenue, $25, accounts on
December 31st during the closing process would be:
a. Dec 31 Fees Earned
100
Rent Revenue
25
Income Summary
125
b. Dec 31 Income Summary
125
Fees Earned
100
Rent Revenue
25
c. Dec 31 Revenues
125
Income Summary
125
d. Dec 31 Income Summary
125
Revenues
125
ANS: A
DIF: Moderate
OBJ: 04-03
Mantle Company
Worksheet
For the Year Ended December 31, 2008
Adjusted Trial Balance Income Statement
Account Title
Debit
Credit
Cash
16,000
Accounts Receivable
6,000
Supplies
2,000
Equipment
19,000
Accumulated Depr6,000
Equip
Accounts Payable
10,000
Wages Payable
2,000
Capital Stock
11,000
Dividends
1,000
Fees Earned
47,000
Wages Expense
21,000
Rent Expense
6,000
5,000
Totals
76,000
76,000
Net Income (Loss)
Debit
Balance Sheet
Credit
Debit
16,000
6,000
2,000
19,000
Credit
6,000
10,000
2,000
11,000
1,000
47,000
21,000
6,000
5,000
32,000
15,000
47,000
47,000
44,000
47,000
44,000
29,000
15,000
44,000
50. The journal entry to close revenues would be:

a. debit Income Summary $47,000, credit Fees Earned $47,000
b. debit Retained Earnings $47,000, credit Fees Earned $47,000
c. debit Fees Earned $47,000; credit Income Summary $47,000
d. credit Fees Earned $47,000; credit Capital Stock $47,000
ANS: C
DIF: Moderate
OBJ: 04-03
51. Based on the preceding trial balance, the entry to close expenses would be:
a. Wages Expense
$21,000
Rent Expense
6,000
Depreciation Expense 5,000
Income Summary
32,000
b. Expenses
32,000
Income Summary
32,000
c. Wages Expense
$21,000
Rent Expense
6,000
Retained Earnings
32,000
d. Income Summary
32,000
Wages Expense
$21,000
Rent Expense
6,000
ANS: D
DIF: Moderate
OBJ: 04-03
52. Based on the preceding trial balance, the entry to close income summary would be:
a. debit Income Summary $15,000; credit Retained Earnings $4,000
b. debit Income Summary $47,000; credit Retained Earnings $47,000
c. debit Income Summary $15,000, credit Retained Earnings $15,000
d. debit Retained Earnings $4,000; credit Income Summary $4,000
ANS: C
DIF: Moderate
OBJ: 04-03
53. Based on the preceding trial balance, the entry to close the dividends would be:
a. debit Retained Earnings $1,000, credit Dividends $1,000
b. debit Retained Earnings $4,000, credit Dividends $4,000
c. debit Dividends $1,000; credit Retained Earnings $1,000
d. debit Dividends $4,000; credit Retained Earnings $4,000
ANS: A
DIF: Moderate
OBJ: 04-03
54. Based on the preceding trial balance, the ending balance in Retained Earnings is:
a. $0
b. $25,000
c. $4,000
d. $1,000
ANS: B
DIF: Moderate
OBJ: 04-03
55. The proper sequence for the steps in the accounting cycle is a follows
a. analyze and record transactions, post transaction to the ledger, prepare a trial balance,
prepare financial statements, journalize closing entries, analyze adjustment data and
prepare adjusting entries
b. prepare a trial balance, analyze adjustment data, prepare adjusting entries, prepare
financial statements, journalize closing entries and post to the ledger, analyze and record
transactions, post transactions to the ledger
c. analyze and record transactions, post transactions to the ledger, prepare a trial balance,
analyze adjustment data, prepare adjusting entries, prepare financial statements,
journalize closing entries and post to the ledger
d. prepare financial statements, journalize closing entries and post to the ledger, analyze and
record transactions, post transactions to the ledger, prepare a trial balance, analyze
adjustment data, prepare adjusting entries
ANS: C
DIF: Moderate
OBJ: 04-04
56. The following are steps to the accounting cycle. Of the following, which step should be done
first.
a. Closing entries are journalized and posted to the ledger.
b. Transactions are posted to the ledger.
c. Adjusting entries are journalized and posted to the ledger.
d. Financial statements are prepared.
ANS: B
DIF: Moderate
OBJ: 04-04
57. The following are steps in the accounting cycle. Of the following, which would be prepared
last?
a. An adjusted trial balance is prepared.
b. Transactions are posted to the ledger.
c. An unadjusted trial balance is prepared.
d. Adjusting entries are journalized and posted to the ledger.
ANS: A
DIF: Moderate
OBJ: 04-04
58. The accounting cycle requires three trial balances be done. In what order should they be
prepared?
a. Post-closing, unadjusted, adjusted
b. Unadjusted, post-closing, adjusted
c. Unadjusted, adjusted, post-closing
d. Post-closing, adjusted, unadjusted
ANS: C
59. The fiscal year selected by companies
a. is the same as the calendar year
b. begins with the first day of the month and ends on the last day of the twelfth month
c. must always begin on January 1.
d. will change each year
ANS: B
DIF: Moderate
OBJ: 04-06
60. A fiscal year
a. ordinarily begins on the first day of a month and ends on the last day of the following
twelfth month
b. for a business is determined by the federal government
c. always begins on January 1 and ends on December 31 of the same year
d. should end at the height of the business's annual operating cycle
ANS: A
DIF: Moderate
OBJ: 04-06
61. The natural business year
a. is a fiscal year that ends when business activities are at its lowest point.
b. is a calendar year that ends when business activities are at its lowest point.
c. is a fiscal year that ends when business activities are at its highest point.
d. is a calendar year that ends when business activities are at its highest point.
ANS: A
DIF: Moderate
OBJ: 04-06
62. The worksheet
a. is an integral part of the accounting cycle
b. eliminates the need to rewrite the financial statements
c. is a working paper that is required
d. is used to summarize account balances and adjustments for the financial statements
ANS: D
63. Which one of the steps below is not aided by the preparation of the work sheet?
a. preparing the adjusted trial balance
b. posting to the general ledger
c. preparing the financial statements
d. preparing the closing entries
ANS: B
DIF: Moderate
OBJ: 04-App
64. A work sheet includes columns for
a. adjusting entries
b. closing entries
c. reversing entries
d. adjusting and closing entries
ANS: A
65. When a work sheet is complete, the adjustment columns should have
a. total credits greater than total debits if a net income was earned
b. total debits grater than total credits if a net loss was incurred
c. total debits greater than total credits if a net income was earned
d. total debits equal total credits
ANS: D
66. The difference between the totals of the debit and credit columns of the Adjusted Trial
Balance columns on a work sheet
a. is the amount of net income or loss
b. indicates there is an error on the work sheet
c. is not unusual when preparing the work sheet
d. is the net difference between revenue, expenses, and dividends
ANS: B
DIF: Moderate
OBJ: 04-App
67. Net income appears on the work sheet in the
a. debit column of the Balance Sheet columns
b. debit column of the Adjustments columns
c. debit column of the Income Statement columns
d. credit column of the Income Statement columns
ANS: C
DIF: Moderate
OBJ: 04-App
68. A net loss appears on the work sheet in the

a. debit column of the Balance Sheet columns
b. credit column of the Balance Sheet columns
c. debit column of the Income Statement columns
d. credit column of the Adjustments columns
ANS: A
DIF: Moderate
OBJ: 04-App
69. After net income is entered on the work sheet, the Balance Sheet debit and credit columns
must
a. be the same amount as the total amount of the Income Statement debit and credit columns
b. equal each other
c. be the same amount as the total amount in the Adjusted Trial Balance debit and credit
columns
d. not be equal to each other and need not be the same total amounts as any other pair of
columns on the work sheet
ANS: B
DIF: Moderate
OBJ: 04-App
70. Which of the statements below indicates that a company earned a net income for the period?
a. The sum of the debits exceeds the sum of the credits in the Balance Sheet columns on the
work sheet.
b. The sum of the credits exceeds the sum of the debits in the Income Statement columns on
the work sheet.
c. The sum of the debits exceeds the sum of the credits in the Income Statement columns on
the work sheet.
d. Cash inflows exceeded cash outflows.
ANS: B
DIF: Moderate
OBJ: 04-App
71. Which of the items below would appear in the Income Statement columns of the work
sheet?
a. Equipment
b. Unearned Fees
c. Prepaid Expense
d. Net Loss
ANS: D
DIF: Moderate
OBJ: 04-App
72. Which of the accounts below would appear in the balance sheet columns of the worksheet?
a. Rent Earned
b. Dividends
c. Unearned Revenue
d. Dividends and Unearned Revenue
ANS: D
73. Which of the accounts below would appear in the Balance Sheet columns of the work sheet?
a. Service Revenue
b. Prepaid Rent
c. Supplies Expense
d. None are correct
ANS: B
DIF: Moderate
OBJ: 04-App
74. The work sheet at the end of September has $4,000 in the Balance Sheet credit column for
Accumulated Depreciation. The work sheet at the end of October has $4,750 in the Balance
Sheet credit column for Accumulated Depreciation. What was the amount of the
depreciation expense adjustment for the month of October?
a. amount can not be determined
b. $4,750
c. $4,000
d. $750
ANS: D
DIF: Moderate
OBJ: 04-App
75. Which of the items below does not appear on the work sheet?
a. adjusting entries
b. the unadjusted trial balance
c. closing entries
d. dividends
ANS: C
DIF: Moderate
OBJ: 04-App
76. An indication that the work sheet columns are in balance and the work sheet is completed is
a. the word "Total" is written at the bottom of each pair of columns
b. each pair of columns is double underlined
c. each pair of columns has the totals circled
d. the final figures are written in ink
ANS: B
DIF: Moderate
OBJ: 04-App
77. After all of the account balances have been extended to the Balance Sheet columns of the
work sheet, the totals of the debit and credit columns are $25,250 and $21,825, respectively.
What is the amount of net income or net loss for the period?
a. $3,425 net income
b. $25,250 net loss
c. $3,425 net loss
d. $21,825 net income
ANS: A
DIF: Moderate
OBJ: 04-App
78. After all of the account balances have been extended to the Income Statement columns of
the work sheet, the totals of the debit and credit columns are $87,500 and $98,300,
respectively. What is the amount of the net income or net loss for the period?
a. $10,800 net income
b. $10,800 net loss
c. $98,300 net income
d. $87,500 net loss
ANS: A
DIF: Moderate
OBJ: 04-App
79. On October 1, the company pays rent for twelve months in advance and debits an asset
account. At year end, the adjusting entry on the work sheet would
a. increase an expense account
b. decrease a liability account
c. increase an asset account
d. decrease an expense account
ANS: A
DIF: Moderate
OBJ: 04-App
80. On August 1, a company collects revenue in advance for the next twelve months and credits
a liability account. The adjusting entry at year end on the work sheet would
a. increase a liability account
b. decrease an asset account
c. decrease a revenue account
d. decrease a liability account
ANS: D
DIF: Moderate
OBJ: 04-App
81. Which of the following is not an essential part of the accounting records?
a. The journal
b. The ledger
c. The chart of accounts
d. The work sheet
ANS: D
82. After totaling all of the columns in the work sheet, the Balance Sheet show debits of
$35,678 and the credits of $39,901. This indicates that
a. neither net income or loss can be calculated because that is found on the income
statement
b. the company recorded a net loss of $4,223
c. the company recorded a net income of $4,223
d. The amounts are out of balance and need to be corrected
ANS: A
DIF: Difficult
OBJ: 04-App
83. The column of the income statement show the debits are equal to $56,899 and credits are
$60,333. What do this information mean to the accountant?
a. Net income of $3,434
b. Net loss of $3,434
c. the accounts are out of balance
d. None are correct.
ANS: A
DIF: Difficult
OBJ: 04-App
EXERCISE/OTHER
1.
The balances for the accounts listed below appear in the Adjusted Trial balance columns of
the end-of-period spreadsheet (work sheet). Indicate whether each balance should be
extended to (a) an Income Statement column or (b) a Balance Sheet column.
(1) Retained Earnings

(2) Dividends
(3) Depreciation Expense
(4) Accumulated Depreciation
(5) Fees earned
(6) Unearned Fees
(7) Supplies
(8) Supplies Expense
ANS:
(1) Balance sheet column
(3) Income statement column
NAT: AACSB Analytic | AICPA FN-Measurement TOP: Example Exercise 4-1
2.
In the Balance Sheet columns of the end-of-period spreadsheet (work sheet) for Sugar
Company. for the current year, the Debit column total is $563,430, and the Credit column
total is $544,210 before the amount for net income or net loss has been included. In
preparing the income statement from the end-of-period spreadsheet (work sheet), what is the
amount of net income or net loss?
ANS:
A net income of $19,220
3.
Aaron Daniel owns and operates Reach It Baseball Batting Cages Company. On January 1,
2008, Aaron Daniel, the balance in capital stock was $100,000 and retained earnings had a
balance of $212,000 During the year Aaron invested an additional $20,000 and the
company paid cash dividends of $35,000. For the year ended December 31, 2008, Reach It
Baseball Batting Cages reported a net income of $56,780. Prepare a statement of retained
earnings for the year ended December 31, 2008.
ANS:
Reach It Baseball Batting Cages Company
Statement of Retained Earnings
Retained earnings January 1, 2008
Net Income
Less Dividends
Increase in retained earnings
Retained earnings, December 31, 2008
$212,000
$56,780
35,000
21,780
$233,780
DIF: Moderate
OBJ: 04-02
4.
The following accounts appear in an adjusted trial balance of Reach It Batting Cages
Company. Indicate whether each account would be reported in the (a) current asset, (b)
property, plant, and equipment, (c) current liabilities, (d) long-term liability, or (e)
stockholders equity section of the December 31, 2008, balance sheet of Reach It Batting
Cages Company.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Capital Stock
Unearned Revenues
Mortgage Payable
Equipment
Notes Payable (due in 2010)
Cash
Accounts Receivable
ANS:
(1) Stockholders equity
(2) Property, plant and equipment
(3) Current liabilities
(4) Long-term liabilities
(5) Property, plant and equipment
(6) Long-term liabilities
(7) Current assets
(8) Current assets
5. Compare the differences between a balance sheet and a classified balance sheet.
ANS:
A classified balance sheet subsections assets as current assets and property, plant, and equipment.
It also subsections liabilities as current liabilities and long-term liabilities, and stockholders
equity.
6. List and describe the purpose of the four closing entries.
ANS:
(1) Close revenues to income summary.
(2) Close expenses to income summary.
(3) Close income summary to retained earnings.
(4) Close dividend account to retained earnings.
7.
After the accounts have been adjusted at January 31, 2008, the end of the fiscal year, the
following balances are taken from the ledger of Reach It Batting Cages Company
Capital Stock
Dividends
Fees Earned
Wages Expense
Rent Expense
Supplies Expense
$356,000
12,000
123,400
36,000
50,000
14,300
1,050
Journalize the four entries required to close the accounts

ANS:
Jan 31 Fees Earned
Income Summary
31 Income Summary
Wages Expense
Rent Expense
Supplies Expense
123,400
123.400
101,350
36,000
50,000
14,300
1,050
31 Income Summary
Retained Earnings
22,050
31 Retained Earnings
Dividends
12,000
22,050
12,000
DIF: Moderate
OBJ: 04-03
8.
Prior to adjustment at July 31, 2007, Salary Expense has a debit balance of $300,500.
Salaries owed but not paid as of the same date total $1,500.
Present the entries to record the following:
(1) Accrued salaries as of July 31.
(2) Closing of Salary Expense as of July 31.
ANS:
(1) Salary Expense
Salaries Payable
(2)
Income Summary
Salary Expense
DIF: Moderate
OBJ: 04-03
1,500
1,500
302,000
302,000
9.
The following are all the steps in the accounting cycle. List them in the order in which they
should be done.
- Closing entries are journalized and posted to the ledger.

- An unadjusted trial balance is prepared.
- An optional end-of-period spreadsheet (work sheet) is prepared.
- A post-closing trial balance is prepared.
- Adjusting entries are journalized and posted to the ledger.
- Transactions are analyzed and recorded in the journal.
- Adjustment data are assembled and analyzed.
- Financial statements are prepared.
- An adjusted trial balance is prepared.
- Transactions are posted to the ledger.
ANS:
1.
Transactions are analyzed and recorded in the journal.
2.
Transactions are posted to the ledger.
3.
An unadjusted trial balance is prepared.
4.
Adjustment data are assembled and analyzed.
5.
An optional end-of-period spreadsheet (work sheet) is prepared.
6.
Adjusting entries are journalized and posted to the ledger.
7.
An adjusted trial balance is prepared.
8.
Financial statements are prepared.
9.
Closing entries are journalized and posted to the ledger.
10. A post-closing trial balance is prepared.
DIF: Difficult
OBJ: 04-04
10. If work papers are not considered a part of the formal accounting records, then why are they
used?
ANS:
Work papers are tools used by accounts to collect and summarize date for various analysis and
reports.
DIF: Moderate
OBJ: 04-App
11. Explain how net income or loss is determined by using the work sheet.
ANS:
The difference between the debits and credits from the Income Statement columns are compared
to the debits and credits from the Balance Sheet columns. They should be the same amounts but
opposite from each other. If the debits are more than the credits on the income statement
columns, signifying a net loss, then the credits should be higher than the debits on the balance
sheet columns by the same amount. If the credits are more than the debits on the income
statement columns, signifying a net income, then the debits should be higher than the credits on
the balance sheet columns by the same amount.
DIF: Difficult
OBJ: 04-App
PROBLEM
1.
The balances for the accounts listed below appeared in the Adjusted Trial Balance columns
of the work sheet. Indicate whether each balance should be extended to (a) the Income
Statement columns or (b) the Balance Sheet columns.
(1)
(2)
(3)
(4)
(5)
(6)
Salaries Payable
Fees Earned
Accounts Payable
Capital Stock
Supplies Expense
Unearned Rent
(7)
(8)
(9)
(10)
(11)
(12)
Dividends
Equipment
Accounts Receivable
Salary Expense
ANS:
(a) Income statement: 2, 5, 11, 12
(b) Balance sheet: 1, 3, 4, 6, 7, 8, 9, 10
2.
Indicate whether each of the following would be reported in the financial statements as a(n)
(a) current asset, (b) current liability, (c) revenue, or (d) expense:
(1)
(2)
(3)
(4)
Supplies
Unearned Fees
Prepaid Advertising
Advertising Expense
(5)
(6)
(7)
(8)
Supplies Expense
Prepaid Insurance
Accounts Payable
Fees Earned
ANS:
(1) current asset
(2) current liability
(3) current asset
(4) expense
(5) expense
(6) current asset
(8) revenue
3.
The following accounts were taken from the Adjusted Trial Balance columns of the work
sheet for June 30, 2007 for Brodie Co.:
Fees Earned
Rent Expense
Prepaid Insurance
Supplies
Supplies Expense
$ 25,000
85,000
9,500
44,000
7,000
500
2,500
Prepare an income statement.

ANS:
Brodie Co.
Income Statement
For the Year Ended June 30, 2007
Fees earned
Expenses:
Rent expense
Depreciation expense
Supplies expense
Total expenses
Net income
DIF: Moderate
OBJ: 04-02
$85,000
$44,000
9,500
2,500
56,000
$29,000
4.
The following revenue and expense account balances were taken from the Income Statement
columns of the work sheet for Marion Services Co. for December 31, 2007:
Insurance Expense
Rent Expense
Service Revenue
Supplies Expense
Utilities Expense
Wages Expense
$ 5,950
3,900
2,200
34,000
102,500
4,150
6,000
53,750
Prepare an income statement.

ANS:
Marion Services Co.
Income Statement
Service revenue
Operating expenses:
Wages expense
Rent expense
Utilities expense
Insurance expense
Supplies expense
Miscellaneous expense
Total operating expenses
Net loss
$ 102,500
$53,750
34,000
6,000
5,950
3,900
4,150
2,200
109,950
$ (7,450)

5.
The following data were taken from the Balance Sheet columns of the work sheet for
September 30, 2007 for Clayton Company:
Accumulated Depreciation-Trucks
Prepaid Rent
Supplies
Unearned Fees
Trucks
Cash
Capital Stock
Retained Earnings
$25,000
4,000
500
4,300
29,000
2,000
1,000
?
Prepare a classified balance sheet.

ANS:
Clayton Company
Balance Sheet
September 30, 2007
Assets
Current assets:
Cash
Supplies
Prepaid rent
Total current assets
Property, plant, and
equipment:
Trucks
Liabilities
$ 2,000
500
4,000
Current liabilities:
Unearned fees
$ 6,500
$29,000
Less accum.
depreciation
Total property, plant
and equipment
Total assets
Stockholders Equity
Capital Stock
1,000
Retained Earnings
5,200
Total Stockholders Equity
Total liabilities and owner's
equity
$ 4,300
6,200
$10,500
25,000
4,000
$10,500
DIF: Moderate
OBJ: 04-02
6.
Indicate whether each of the following would be reported in the section of financial
statements identified as (a) current asset, (b) property, plant, and equipment, (c) current
liability, (d) revenue, or (e) expense:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Automobile
Accumulated depreciation
Rent expense
Fees earned
Salaries payable
Prepaid rent
Store supplies
Advertising expense
Unearned rent
ANS:
(1) property, plant, and equipment
(2) property, plant, and equipment
(3) expense
(4) revenue
(6) current asset
(7) current asset
(8) expense
7.
The following balance sheet contains errors.

Billy Brown Services Co.
Balance Sheet
Assets
Current assets:
Cash
Accounts payable
Supplies
Prepaid insurance
Land
equipment:
Building
Equipment
Total property, plant,
and equipment
Total assets
Liabilities
Accounts receivable
Accum. depr-building
Accum. depr-equipment
Net income
$ 6,170
8,500
1,590
345
25,000
$ 41,605 Total liabilities
$45,500
28,250
9,000
13,525
6,340
12,500
$ 41,365
Stockholders Equity
Wages payable
Capital stock
Retained earnings
Total StockholdersEquity
40,000
$ 34,490
$74,990
500
73,750
Total liabilities and
$116,355
stockholders equity
$116,355
(a) List the errors in the balance sheet above and (b) prepare a corrected balance sheet.
ANS:
(a)
(1) Date of statement should be "December 31, 2007" and not "For the Year
Ended December 31, 2007."
(2) Accounts payable should be a current liability.
(3) Land should be a fixed asset and listed as Property, Plant and Equipment.
(4) Accumulated depreciation should be deducted from the related fixed asset in
the Property Plant, and Equipment section.
(5) An adding error was made in determining the amount of total assets.
(6) Accounts receivable should be a current asset.
(7) Net income would be reported on the income statement.
(8) Wages payable should be a current liability.
A corrected balance sheet would be as follows:

Billy Brown Services Co.
Balance Sheet
December 13, 2007
Assets
Current assets:
Cash
Accounts receivable
Supplies
Prepaid insurance
Property, plant, and equipment:
Land
Building
Less accum. depreciation
Equipment
Less accum. depreciation
Total property, plant, and equipment
Total assets
Liabilities
Accounts payable
Wages payable
Total liabilities
$ 6,170
9,000
1,590
345
$17,105
$25,000
$45,500
13,525
28,250
6,340
Stockholders Equity
Capital stock
Retained earnings
Total Stockholders equity
Total liabilities and stockholders equity
DIF: Difficult
OBJ: 04-02
31,975
21,910
78,885
$95,990
$8,500
500
$ 9,000
$40,000
46,990
86,990
$95,990
8.
The following is the adjusted trial balance for Steely Company.

Steely Company
Cash
Accounts Receivable
Prepaid Expenses
Equipment
Accounts Payable
Notes Payable - Due on June 30, 2009
Capital Stock
Retained Earnings
Dividends
Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Totals
6,130
2,300
750
13,400
1,200
1,700
5,000
6,000
6,000
870
6,600
1,450
900
475
150
75
26,500
26,500
Prepare an Income Statement, Balance Sheet, and Statement of Stockholders Equity.

ANS:
Steely Company
Income Statement
For Year Ended December 31, 2008
Fees Earned
Expenses:
Wages Expense
Rent Expense
Utilities Expense
Total Expenses
Net Income
$6,600
$1,450
900
475
150
75
3,050
$3,550
Steely Company
For Year Ended December 31, 2008
Retained earnings, January 1, 2008
Net Income
$6,000
3,550
Sub-Total
Less Dividends
$9,550
870
$8,680
Steely Company
Balance Sheet
December 31, 2008
Assets
Current Assets
Cash
Accounts Receivable
Prepaid Expenses
Total Current Assets
Property, Plant, & Equip.:
Equipment
Less: Accum Depre.
Total Prop., Plant, &

Equip
Total Assets
Liabilities
Current Liabilities
Accounts Payable
Notes Payable
$6,130
2,300
750
Total Liabilities
$1,700
5,000
$6,700
$9,180
$13,400
1,200
Stockholders Equity
Capital Stock
$6,000
Retained Earnings
8,680
Total Stockholders
Equity
$12,200 Total Liabilities and
$21,380 Stockholders Equity
DIF: Difficult
OBJ: 04-02
14,680
$21,380
9.
Prepare an income statement and a statement of retained earnings for MN Company, for the
month ended October 31, 2008, from the following T-Accounts.
Prepaid
Insurance
1200
100
Accounts
Receivable.
6000
500
Unearned
Revenues
1350
350
Capital Stock
Retained
Earnings
4515
3500
Dividends
Income
Summary
8850
4535
4515
Fees Earned
3500
3500
7000
8000
500
350
8850
Wages
Expense
2600
475
3075
Rent
Expense
1280
1280
Insurance
Expense
100
100
Utilities
Expense
80
80
ANS:
MN Company
Income Statement
For the Month Ended October 31, 2008
Fees Earned
Expenses:
Wages Expense
Rent Expense
Insurance Expense
Utilities Expense
Total Expenses
Net Income
$8,850
$3075
1,280
100
80
$4,535
$4,515
MN Company
Statement of Stockholders Equity
For the Month Ended October 31, 2008
Beginning balance
Add: Net Income Month Ended October 31, 2008
Less: Dividends
$0
$4,515
3,500
Increase in Retained Earnings

Ending Balance Retained Earnings, October 31, 2008
1,015
$1,015
DIF: Difficult
OBJ: 04-02
10. Prepare an income statement and a statement of retained earnings for the month ended
November 30, 2008 from the T-accounts below.
Prepaid
Insurance
1200
100
Accounts
Receivable.
2000
500
Unearned
Revenues
1350
350
Capital Stock
Retained
Earnings
3000
185
2600
Dividends
Income
Summary
5850
6035
185
Fees Earned
2600
2600
4000
3000
5000
500
350
5850
Wages
Expense
3600
475
4075
Rent
Expense
1780
1780
Insurance
Expense
100
100
Utilities
Expense
80
80
ANS:
MN Company
Income Statement
For the Month Ended November 30, 2008
Fees Earned
Expenses:
Wages Expense
Rent Expense
Insurance Expense
Utilities Expense
Total Expenses
$5,850
$4,075
1,780
100
80
$6,035
Net Loss
($185)
MN Company
For the Month Ended November 30, 2008
Beginning balance
Less: Net Loss Month Ended October 31, 2008
Dividends
$3,000
($185)
2,600
Decrease in Retained Earnings

Ending Balance Retained Earnings, October 31, 2008
2,785
$ 215
DIF: Difficult
OBJ: 04-02
11. Selected ledger accounts appear below for Construction Services for 2007.
Capital Stock
1/1
20,000
3/31
12/22
Dividends
12,000 12/31
3,000
15,000
Retained Earnings
12/3
1
12/31
12/31
15,000 12/31
Income Summary
19,000 12/31
45,000
45,000
64,000
Prepare a statement of retained earnings.

ANS:
Construction Services
Retained Earnings, 1/1/2007
Net income
$ 45,000
Less dividends
15,000
Retained Earnings, 12/31/2007
$0
30,000
$30,000
DIF: Difficult
OBJ: 04-02 | 04-03
12. On the basis of the following data taken from the Adjusted Trial Balance columns of the
work sheet for the year ended October 31 for Shore Co., journalize the four closing entries.
Cash
Accounts Receivable
Supplies
Equipment
Accounts Payable
Capital Stock
Dividends
Fees Earned
Salary Expense
Rent Expense
Supplies Expense
$ 21,500
45,200
5,000
169,900
$ 69,000
42,500
152,600
30,000
404,500
300,500
60,000
25,000
9,500
2,000
$668,600
$668,600
ANS:
Oct. 31
31
31
31
Fees Earned
Income Summary
404,500
Income Summary
Salary Expense
Rent Expense
Supplies Expense
397,000
404,500
300,500
60,000
25,000
9,500
2,000
Income Summary
Retained Earnings
7,500
Retained Earnings
Dividends
30,000
7,500
30,000
DIF: Moderate
OBJ: 04-03
13. After all adjustments have been made, but before the accounts have been closed, the
following balances were taken from the ledger:
Accounts Payable
Accounts Receivable
Cash
Equipment
Insurance Expense
Prepaid Insurance
$ 40,000
54,500
83,325
7,150
23,500
155,000
8,600
5,275
Rent Expense
Salary Expense
Salaries Payable
Service Revenue
Supplies
Supplies Expense
Capital Stock
Dividends
$ 21,400
66,000
150
151,000
2,500
3,500
100,950
28,000
Journalize the entries to close the appropriate accounts.

ANS:
Service Revenue
Income Summary
Income Summary
Insurance Expense
Rent Expense
Salary Expense
Supplies Expense
151,000
151,000
123,000
23,500
8,600
21,400
66,000
3,500
Income Summary
Retained Earnings
28,000
Retained Earnings
Dividends
28,000
28,000
28,000
DIF: Difficult
OBJ: 04-03
14. On the basis of the following information taken from the Adjusted Trial Balance columns of
the work sheet for the month ended November 30th, journalize the closing entries.
Cash
$12,500.00
Accounts Receivable
4,575.00
Office Supplies
1,850.00
Repair Parts
4,785.00
Machinery
14,750.00
2,950.00
Accounts Payable
1,750.00
Notes Payable
7,500.00
Capital Stock
2,750.00
Dividends
2,500.00
Service Revenue
32,500.00
Wages Expense
3,840.00
Office Supplies Expense
275.00
Repair Parts Expense
1,925.00
450.00
$47,450.00
$47,450.00
ANS:
Nov 30 Service Revenue
Income Summary
Closing Entry - Service Revenue
32,500.00
32,500.00
Nov 30 Income Summary

Wages Expense
Repair Parts Expense
Closing Entry - Expenses
Nov 30 Income Summary
Retained Earnings
Closing Entry - Income Summary
Nov 30
Retained Earnings
Dividends
Closing Entry - Dividends
6,490.00
3,840.00
275.00
1,925.00
450.00
26,010.00
26,010.00
2,500.00
2,500.00
DIF: Moderate
OBJ: 04-03
15. The following adjusted trial balance is the result of the adjustments made at the end of the
month of May for Jenni Linn Company. Utilize these adjusted values to perform the closing
entries for Jenni Linn Company.
Cash
$14,750.00
Accounts Receivable
3,750.00
Office Supplies
1,525.00
Store Supplies
4,785.00
Machinery
19,750.00
3,150.00
Accounts Payable
1,550.00
Notes Payable
5,500.00
Capital Stock
29,725.00
Dividends
3,250.00
Service Revenue
16,500.00
Wages Expense
4,425.00
465.00
Store Supplies Expense
3,150.00
575.00
________
$56,425.00
$56,425.00
ANS:
May 31
Service Revenue
Income Summary
16,500.00
16,500.00
May 31
May 31
May 31
Income Summary
Wages Expense
8,615.00
Income Summary
Retained Earnings
7,885.00
Retained Earnings
Dividends
3,250.00
4,425.00
465.00
3,150.00
575.00
7,885.00
3,250.00
DIF: Moderate
OBJ: 04-03
16. The following adjusted trial balance is the result of the adjustments made at the end of the
month of March for Jenni Linn Company. Utilize these adjusted values to perform the
closing entries for Jenni Linn Company.
Cash
$14,750.00
Accounts Receivable
3,750.00
Office Supplies
1,525.00
Store Supplies
4,785.00
Machinery
19,750.00
5,150.00
Accounts Payable
4,300.00
Notes Payable
9,500.00
Capital Stock
10,000.00
Retained Earnings
19,725.00
Dividends
3,250.00
Service Revenue
11,500.00
Wages Expense
4,425.00
Rent Expense
2,000.00
Advertising Expense
1,750.00
465.00
3,150.00
575.00
$60,175.00
$60,175.00
ANS:
May 31
Service Revenue
Income Summary
11,500.00
11,500.00
May 31
May 31
May 31
Income Summary
Wages Expense
Rent Expense
Advertising Expense
Retained Earnings
Income Summary
Retained Earnings
Dividends
DIF: Moderate
OBJ: 04-03
12,365.00
4,425.00
2,000.00
1,750.00
465.00
3,150.00
575.00
865.00
865.00
3,250.00
3,250.00
17. Based on the following worksheet, prepare and income statement, statement of retained
earnings, and balance sheet for Mantle Enterprises.
Mantle Enterprises
Worksheet
Balance Sheet
Account Title
Debit
Credit
Debit
Credit
Debit
Cash
16,000
16,000
Accounts Receivable
6,000
6,000
Supplies
2,000
2,000
Equipment
19,000
19,000
Equip
Accounts Payable
10,000
Wages Payable
2,000
Capital Stock
7,000
Retained Earnings
4,000
Dividends
1,000
1,000
Fees Earned
47,000
47,000
Wages Expense
21,000
21,000
Rent Expense
6,000
6,000
5,000
5,000
Totals
76,000
76,000
32,000 47,000 44,000
Net Income (Loss)
15,000
47,000 47,000 44,000
ANS:
Mantle Enterprises
Income Statement
Revenues Earned
Expenses:
Wages Expense
Rent Expense
Total Expenses
Net Income
$ 47,000
$ 21,000
6,000
5,000
32,000
$ 15,000
Credit
6,000
10,000
2,000
7,000
4,000
29,000
15,000
44,000
Mantle Enterprises
Retained Earnings, January 1, 2008
Net income for the Year Ended December 31, 2008
$ 15,000
Less dividends
1,000
Retained Earnings, December 31, 2008
Assets
Current Assets:
Cash
Accounts Receivable
Supplies
Property, plant and
equipment
Equipment
Less accum depr
Mantle Enterprises
Balance Sheet
December 31, 2008
Liabilities
Current liabilities
$16,00
Accounts Payable
0
6,000
Wages Payable
2,000
Total Liabilities
$
24,000
$19,00
0
6,000
Stockholders
Equity
Capital Stock
Total property, plant

and
$ 4,000
14,000
$ 18,000
$
10,000
2,000
$12,000
$7,000
13,000
equipment
Total assets
Retained Earning
Total Stockholders
Equity
$37,000 Total liabilities and
Stockholders
equity
DIF: Difficult
OBJ: 04-03
18,000
25,000
$37,000
18. Prepare closing entries from the following work sheet.

Mantle Enterprises
Worksheet
Adjusted Trial
Income Statement
Balance Sheet
Balance
Account Title
Debit
Credit
Debit
Credit
Debit
Credit
Cash
16,000
16,000
Accounts Receivable
6,000
6,000
Supplies
2,000
2,000
Equipment
19,000
19,000
6,000
Equip
Accounts Payable
10,000
10,000
Wages Payable
2,000
2,000
Capital Stock
7,000
7,000
Retained Earnings
4,000
4,000
Dividends
1,000
1,000
Fees Earned
47,000
47,000
Wages Expense
21,000
21,000
Rent Expense
6,000
6,000
5,000
5,000
Totals
76,000
76,000 32,000
47,000 44,000 29,000
Net Income (Loss)
15,000
15,000
47,000
47,000 44,000 44,000
ANS:
Journal
Post
Date
Description
Ref
Debit
Credit
Dec 31
Fees Earned
47,000
Income Summary
47,000
Dec 31
Dec 31
Dec 31
Income Summary
Wages Expense
Rent Expense
32,000
Income Summary
Retained Earnings
15,000
Retained Earnings
Dividends
DIF: Moderate
OBJ: 04-03
21,000
6,000
5,000
15,000
1,000
1,000
19. The following is the adjusted trial balance for Steely Company.
Steely Company
Cash
Accounts Receivable
Prepaid Expenses
Equipment
Accounts Payable
Notes Payable - Due on June 30, 2009
Capital Stock
Dividends
Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Totals
Prepare closing entries and the post closing trial balance.
ANS:
Fees Earned
Income Summary
6,130
2,300
750
13,400
1,200
1,700
5,000
12,000
870
6,600
1,450
900
475
150
75
26,500
6,600
6,600
Income Summary
Wages Expense
Rent Expense
Utilities Expense
3,050
Income Summary
Retained Earnings
3,550
Retained Earnings
Dividends
26,500
1450
900
475
150
75
3,550
870
870
Steely Company
Post Closing Trial Balance
Cash
Accounts Receivable
Prepaid Expenses
Equipment
Accounts Payable
Notes Payable
Capital Stock
6,130
2,300
750
13,400
1,200
1,700
5,000
12,000
Retained Earnings
2,680
Total
$22,580
$22,580
DIF: Difficult
OBJ: 04-03
20. Reconstruct the adjusting and closing entries from the following T-Accounts.
Prepaid
Insurance
1200
100
Accounts
Receivable.
6000
500
Unearned
Revenues
1350
350
Capital Stock
Retained
Earnings
4515
3500
Dividends
Income
Summary
8850
4535
4515
Fees Earned
3500
3500
7000
8000
500
350
8850
Wages
Expense
3075
3075
Rent
Expense
1280
1280
Insurance
Expense
100
100
Utilities
Expense
80
80
ANS:
Adjusting Entries:
1)
2)
3)
Insurance Expense
Prepaid Insurance
Accounts Receivable
Fees Earned
Unearned Revenue
Fees Earned
100
100
500
500
350
350
Closing Entries:
1)
Fees Earned
Income Summary
8850
2)
Income Summary
Wages Expense
Rent Expense
Insurance Expense
Utilities Expense
Income Summary
Retained Earnings
Retained Earnings
Dividends
4535
3075
3)
4)
DIF:
NAT:
Difficult
OBJ: 04-03
AACSB Analytic | AICPA FN-Measurement
8850
1280
100
80
4515
4515
3500
3500
21. Reconstruct adjusting and closing entries for the month ended November 30, 2008 from the Taccounts below.
Prepaid
Insurance
1200
100
Accounts
Receivable.
2000
500
Unearned
Revenues
1350
350
Capital Stock
Retained
Earnings
3000
185
2600
MN, Drawing
Income
Summary
5850
6035
185
Fees Earned
2600
2600
7000
5000
500
350
5850
Wages
Expense
4075
4075
Rent Expense
1780
1780
Insurance
Expense
100
100
Utilities
Expense
80
80
ANS:
Adjusting Entries:
1)
2)
3)
Insurance Expense
Prepaid Insurance
Accounts Receivable
Fees Earned
Unearned Revenue
Fees Earned
Closing Entries:
1)
Fees Earned
Income Summary
2)
Income Summary
Wages Expense
Rent Expense
Insurance Expense
Utilities Expense
3)
Retained Earnings
Income Summary
4)
Retained Earnings
Dividends
100
100
500
500
350
350
5850
5850
6035
4075
1780
100
80
185
185
2600
2600
DIF:
NAT:
Difficult
OBJ: 04-03
22.
(1)
Reconstruct the entries for the month ended February 28, 2008 from the T-accounts
below. Record them as follows:
A - L Journal Entries
M- R Adjusting Journal Entries
Balance and prepare the Income Statement, Statement of Retained Earnings, and the
Balance Sheet from the T-Accounts.
Prepare the four closing entries (S - V).
Prepare the Post-Closing Trial Balance.
(2)
(3)
(4)
Cash
360
Prepaid
Insurance
2400
200
Accumulated
Depreciation
30
Accounts
Payable
670
Wages
Payable
125
Unearned
Revenues
930
450
Capital Stock
Retained
Earnings
Fees Earned
Wages
Expense
360
125
Rent Expense
Depreciation
Miscellaneous
7000
700
Accounts
Receivable
1000
585
Supplies
670
600
350
2400
2500
50
400
930
Equipment
3000
700
1000
2500
585
450
Insurance
7000
3000
Dividends
400
600
Supplies
Expense
350
Expense
200
Expense
30
Expense
50
ANS:
(1)
Journal Entries:
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
Cash
Capital Stock
Equipment
Capital Stock
Rent Expense
Cash
Cash
Fees Earned
Accounts Receivable
Fees Earned
Supplies
Accounts Payable
Wages Expense
Cash
Prepaid Insurance
Cash
Cash
Fees Earned
Cash
Dividends
Cash
Cash
Unearned Revenue
7000
7000
3000
3000
600
600
700
700
1000
1000
670
670
350
350
2400
2400
2500
2500
50
50
400
400
930
930
Adjusting Entries:
m)
n)
o)
p)
q)
r)
Supplies Expense
Supplies
Accounts Receivable
Fees Earned
Insurance Expense
Prepaid Insurance
Wages Expense
Wages Payable
Unearned Revenues
Fees Earned
350
350
585
585
200
30
30
30
125
125
450
450
(2)
DL Company
Income Statement
For the Month Ended February 28, 2008
Fees Earned
Expenses:
Wages Expense
Rent Expense
Supplies Expense
Insurance Expense
Total Expenses
Net Income
$5,235
$485
600
350
200
30
50
1,715
$3,520
DL Company
Beginning Balance
Net Income for the Period
Less: Dividends
$0
$3,520
400
3,120
Retained Earnings
$3,120
DL Company
Balance Sheet
February 28, 2008
Assets:
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Equipment
Less: Accum Depre
Total Assets
$7,330
1,585
310
2,200
$3,000
30
2,970
$14,395
Liabilities:
Accounts Payable
Wages Payable
Unearned Revenues
Total Liabilities
Stockholders Equity
Capital Stock
10,000
Retained Earnings
13,120
$14,395
(3)
Closing Entries:
Fees earned
1,275
3,120
Total Stockholders
Equity
Total Liabilities and
Owners Equity
s)
$670
125
480
5235
t)
u)
v)
Income Summary
Income Summary
Wages Expense
Rent Expense
Supplies Expense
Insurance Expense
Income Summary
Retained Earnings
Retained Earnings
Dividends
5235
1715
485
600
350
200
30
50
3520
3520
400
400
(4)
DL Company
Post-Closing Trial Balance
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Equipment
Accounts Payable
Wages Payable
Unearned Revenues
Capital Stock
Retained Earnings
7330
1585
310
2200
3000
30
670
125
480
10,000
3,120
Total
DIF:
NAT:
$14,425 $14,425
Difficult
OBJ: 04-05
23. The balances in the ledger of Landscape Services as of December 31, 2007 before adjustments, are
as follows:
Cash
Supplies
Prepaid Insurance
Equipment
Accumulated
Depreciation
$ 4,500
4,150
8,700
42,000
10,200
Capital Stock
Dividends
Service Revenue
Salary Expense
Rent Expense
$33,050
2,900
52,500
26,600
5,000
1,900
Adjustment data are as follows: supplies on hand, December 31, $1,000; insurance expired for December,
$900; depreciation on equipment for December, $1,500; salaries accrued, December 31, $1,000.
(a)
(b)
Prepare a ten-column work sheet for Landscape Services for December, 2007.
On the basis of the work sheet in (a), present the following in good order: (1) income
(c)
statement, (2) statement of retained earnings, and (3) balance sheet.

On the basis of the work sheet in (a), journalize the closing entries as of December 31,
2007.
ANS:
(a)
Landscape Services
Work Sheet
For the Month Ended December 31, 2007
Account Title
Cash
Supplies
Prepaid Insurance
Equipment
Capital Stock
Dividends
Service Revenue
Salary Expense
Rent Expense
Supplies Expense
Insurance Expense
Salaries Payable
Net Income
Trial Balance
Dr.
Cr.
)
)
)
)
)
Dr.
4,500
4,150
8,700
42,000
.....
.....
2,900
.....
26,600
5,000
1,900
95,750
.....
.....
.....
.....
10,200
33,050
.....
52,500
.....
.....
.....
95,750
.....
.....
.....
.....
.....
.....
.....
.....
(d) 1,000
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
(a) 3,150
(b) 900
(c) 1,500
.....
6,550
Adjustments
Cr.)
.....)
(a) 3,150)
(b) 900)
.....)
(c) 1,500)
.....)
.....)
.....)
.....)
.....)
.....)
)
)
.....)
.....)
.....)
d) 1,000)
6,550)
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
(
Adjusted
Trial Balance
Dr.
4,500
1,000
7,800
42,000
.....
.....
2,900
.....
27,600
5,000
1,900
3,150
900
1,500
...........
98,250
Cr.
.....
.....
.....
.....
11,700
33,050
.....
52,500
.....
.....
.....
.....
.....
.....
1,000
98,250
Income Statement
Dr.
Cr.
.....
.....
.....
.....
.....
.....
.....
.....
27,600
5,000
1,900
3,150
900
1,500
...........
40,050
12,450
52,500
.....
.....
.....
.....
.....
.....
.....
52,500
.....
.....
.....
.....
.....
.....
...........
52,500
...........
52,500
Balance Sheet
Dr.
4,500
1,000
7,800
42,000
.....
.....
2,900
.....
.....
.....
.....
.....
.....
.....
...........
58,200
...........
58,200
Cr.
.....
.....
.....
.....
11,700
33,050
.....
.....
.....
.....
.....
.....
.....
.....
1,000
45,750
12,450
58,200
(b) (1)
Landscape Services
Income Statement
Service revenue
Operating expenses:
Salary expense
Rent expense
Supplies expense
Insurance expense
Miscellaneous expense
Total operating expenses
Net income
$52,500
$27,600
5,000
3,150
1,500
900
1,900
40,050
$12,450
(b) (2)
Landscape Services
Retained Earnings,December 1, 2007
Net income for the month
Less dividends
$0
$12,450
2,900
9,550
$9,550
(b) (3)
Landscape Services
Balance Sheet
December 31, 2007
Assets
Current assets:
Cash
Supplies
Prepaid insurance
Liabilities
$ 4,500
1,000
7,800
Salaries payable
$13,300 Stockholders Equity
Capital Stock
Retained Earnings

equipment:
Equipment
$42,000
Less accumulated
depreciation
Total property, plant,
and equipment
Total assets
Total liabilities and

stockholders equity
$ 1,000
33,050
9,550
$43,600
11,700
30,300
$43,600
(c)
Jan. 31
31
31
31
DIF:
NAT:
Closing Entries
Service Revenue
Income Summary
52,500
52,500
Income Summary
Salary Expense
Rent Expense
Supplies Expense
Insurance Expense
40,050
Income Summary
Retained Earnings
12,450
Retained Earnings
Dividends
Difficult
OBJ: 04-App
24. Complete the following worksheet for Mantle Enterprises.

Mantle Enterprises
Worksheet
27,600
5,000
1,900
3,150
900
1,500
12,450
2,900
2,900
Account Title
Cash
Accounts Receivable
Supplies
Equipment
Accumulated DeprEquip
Accounts Payable
Wages Payable
Mantle, Capital
Capital Stock
Dividends
Fees Earned
Wages Expense
Rent Expense
Totals
Net Income (Loss)

Debit
Credit
16,000
6,000
2,000
19,000
6,000
Income Statement
Debit
Credit
Balance Sheet
Debit
Credit
10,000
2,000
7,000
4,000
1,000
47,000
21,000
6,000
5,000
76,000
76,000
ANS:
Mantle Enterprises
Worksheet
Account Title
Debit
Credit
Debit
Credit
Cash
16,000
Accounts Receivable
6,000
Supplies
2,000
Equipment
19,000
Accumulated Depr-Equip
6,000
Accounts Payable
10,000
Wages Payable
2,000
Capital Stock
7,000
Dividends
4,000
Mantle, Drawing
1,000
Fees Earned
47,000
47,000
Wages Expense
21,000
21,000
Rent Expense
6,000
6,000
5,000
5,000
Totals
76,000
76,000
32,000
47,000
Net Income (Loss)
15,000
47,000
47,000
DIF:
NAT:
Difficult
OBJ: 04-App
Balance Sheet
Debit
Credit
16,000
6,000
2,000
19,000
6,000
10,000
2,000
7,000
4,000
1,000
44,000
29,000
15,000
44,000 44,000

Ch04 Completing The Accounting Cycle

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Ch04 Completing The Accounting Cycle

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Chapter 4

Completing the Accounting Cycle

Chapter 4/Completing the Accounting Cycle 168

Chapter 4/Completing the Accounting Cycle 169

Chapter 4Completing the Accounting Cycle

170 Chapter 4/Completing the Accounting Cycle

7. There is really no benefit in preparing financial statements in any particular order.

Round tripping is a fraudulent scheme where business A artificially inflates revenue by

Chapter 4/Completing the Accounting Cycle 171

172 Chapter 4/Completing the Accounting Cycle

Chapter 4/Completing the Accounting Cycle 173

174 Chapter 4/Completing the Accounting Cycle

46. Balance Sheet are not considered real accounts.

Chapter 4/Completing the Accounting Cycle 175

176 Chapter 4/Completing the Accounting Cycle

Chapter 4/Completing the Accounting Cycle 177

178 Chapter 4/Completing the Accounting Cycle

In the accounting cycle, the last step is

Chapter 4/Completing the Accounting Cycle 179

Accumulated Depreciation appears on the

Notes Receivable due in 345 days appear on the

Unearned Fees appear on the

180 Chapter 4/Completing the Accounting Cycle

11. The income statement is prepared from the

Chapter 4/Completing the Accounting Cycle 181

The following is the adjusted trial balance for Steely Company.

16. Determine the net income (loss) for the period.

182 Chapter 4/Completing the Accounting Cycle

18. Determine total assets.

Chapter 4/Completing the Accounting Cycle 183

23. The Income Statement will include the following accounts

184 Chapter 4/Completing the Accounting Cycle

28. Balance sheet accounts

Chapter 4/Completing the Accounting Cycle 185

186 Chapter 4/Completing the Accounting Cycle

38. Closing entries are dated in the journal as of

Chapter 4/Completing the Accounting Cycle 187

188 Chapter 4/Completing the Accounting Cycle

Net income for the period is

Chapter 4/Completing the Accounting Cycle 189

190 Chapter 4/Completing the Accounting Cycle

50. The journal entry to close revenues would be:

Chapter 4/Completing the Accounting Cycle 191

192 Chapter 4/Completing the Accounting Cycle

Chapter 4/Completing the Accounting Cycle 193

194 Chapter 4/Completing the Accounting Cycle

68. A net loss appears on the work sheet in the

Chapter 4/Completing the Accounting Cycle 195

196 Chapter 4/Completing the Accounting Cycle

Chapter 4/Completing the Accounting Cycle 197

(1) Retained Earnings

198 Chapter 4/Completing the Accounting Cycle

Chapter 4/Completing the Accounting Cycle 199

200 Chapter 4/Completing the Accounting Cycle

Journalize the four entries required to close the accounts

Chapter 4/Completing the Accounting Cycle 201

- Closing entries are journalized and posted to the ledger.

202 Chapter 4/Completing the Accounting Cycle

Chapter 4/Completing the Accounting Cycle 203

Prepare an income statement.

204 Chapter 4/Completing the Accounting Cycle

Prepare an income statement.