Question 1

Refer to the information above. Net income for the period equals:

Accepted Answer

A)  $18,375. 
B)  $11,000. 
C)  $5,800. 
D)  $11,250. 
A)  $18,375. 
B)  $11,000. 
C)  $5,800. 
D)  $11,250.

Question 2

Indicate which of the following accounts will be closed to Income Summary at year-end.
(a) Cash
(b) Office Supplies Expense
(c) Unexpired Insurance
(d) Unearned Revenue
(e) Dividends
(f) Depreciation Expense
(g) Income Taxes Payable
(h) Accumulated Depreciation

Accepted Answer

(b) Office Supplies Expense an

Question 3

Assets are considered current assets if they are cash or will usually be converted into cash:

Accepted Answer

A)  Within a month or less. 
B)  Within 3 months. 
C)  Within a year or less. 
D)  Within 6 months or less. 
A)  Within a month or less. 
B)  Within 3 months. 
C)  Within a year or less. 
D)  Within 6 months or less.

Question 4

Return on equity is calculated by:

Accepted Answer

A)  Dividing net income by total revenue. 
B)  Dividing net income by average stockholders' equity. 
C)  Dividing net income by working capital. 
D)  Dividing dividends by stockholders' equity. 
A)  Dividing net income by total revenue. 
B)  Dividing net income by average stockholders' equity. 
C)  Dividing net income by working capital. 
D)  Dividing dividends by stockholders' equity.

Question 5

A debit balance in the income summary account indicates:

Accepted Answer

A)  An error was made. 
B)  A Net Profit. 
C)  A Net Loss. 
D)  That revenues were greater than expenses. 
A)  An error was made. 
B)  A Net Profit. 
C)  A Net Loss. 
D)  That revenues were greater than expenses.

Question 6

Dividends declared are an expense and reduce net income.

Accepted Answer

A) True 
 B)False

Question 7

After preparing the financial statements for the current year, the accountant for Exquisite Gems closed the Dividends account at year-end by debiting Income Summary and crediting the Dividends account. What is the effect of this entry on current-year net income and the balance in the Retained Earnings account at year-end?

Accepted Answer

A)  Net income is overstated and the balance in the Retained Earnings account is correct. 
B)  Net income is correct and the balance in the Retained Earnings account is overstated. 
C)  Net income is understated and the balance in the Retained Earnings account is understated. 
D)  Net income is understated and the balance in the Retained Earnings account is overstated. 
A)  Net income is overstated and the balance in the Retained Earnings account is correct. 
B)  Net income is correct and the balance in the Retained Earnings account is overstated. 
C)  Net income is understated and the balance in the Retained Earnings account is understated. 
D)  Net income is understated and the balance in the Retained Earnings account is overstated.

Question 8

The December 31, 2010 worksheet for Fran's Fine Dining showed the following amounts related to the Supplies Expense account: (a). In the Trial Balance debit column: $745
(b)) In the Adjustments debit column: $125
(c)) In the Adjusted Trial Balance debit column: $870
What is the proper balance in the Supplies Expense account on January 1, 2011, after all closing entries for 2010 have been posted, but before any 2011 transactions are recorded?

Accepted Answer

A)  $870. 
B)  $745. 
C)  $0. 
D)  $125. 
A)  $870. 
B)  $745. 
C)  $0. 
D)  $125.

Question 9

The Retained Earnings statement is based upon which of the following relationships?

Accepted Answer

A)  Retained Earnings - Net Income - Dividends. 
B)  Retained Earnings - Net Income + Dividends. 
C)  Retained Earnings + Net Income + Dividends. 
D)  Retained Earnings + Net Income - Dividends. 
A)  Retained Earnings - Net Income - Dividends. 
B)  Retained Earnings - Net Income + Dividends. 
C)  Retained Earnings + Net Income + Dividends. 
D)  Retained Earnings + Net Income - Dividends.

Question 10

Refer to the information above. The entry to close the Fees earned account will:

Accepted Answer

A)  Produce a zero balance in that account when posted. 
B)  Include a debit to Income Summary. 
C)  Include a credit to Fees Earned. 
D)  Include a debit to Capital Stock. 
A)  Produce a zero balance in that account when posted. 
B)  Include a debit to Income Summary. 
C)  Include a credit to Fees Earned. 
D)  Include a debit to Capital Stock.

Question 11

A statement of retained earnings shows:

Accepted Answer

A)  The changes in the Cash account occurring during the accounting period. 
B)  The revenue, expense, and dividends of the period. 
C)  The types of assets which have been purchased with the earnings retained during the accounting period. 
D)  The changes in the Retained Earnings account occurring during the accounting period. 
A)  The changes in the Cash account occurring during the accounting period. 
B)  The revenue, expense, and dividends of the period. 
C)  The types of assets which have been purchased with the earnings retained during the accounting period. 
D)  The changes in the Retained Earnings account occurring during the accounting period.

Question 12

Return on equity measures:

Accepted Answer

A)  Solvency. 
B)  Profitability. 
C)  Leverage. 
D)  All three of the above. 
A)  Solvency. 
B)  Profitability. 
C)  Leverage. 
D)  All three of the above.

Question 13

Which of the following accounts is not closed to the Income Summary at the end of the accounting period? (More than one answer may be correct).

Accepted Answer

A)  Rent expense. 
B)  Accumulated Depreciation. 
C)  Unearned Revenue. 
D)  Supplies Expense. 
A)  Rent expense. 
B)  Accumulated Depreciation. 
C)  Unearned Revenue. 
D)  Supplies Expense.

Question 14

Preparation of financial statements
Using the Adjusted Trial Balance shown below, prepare (a) an Income Statement and (b) a Statement of Retained Earnings for All Star Repairs.

Accepted Answer

The answer of Preparation of financial statements
Using the Adjusted Trial...

Question 15

Which accounts will appear on the balance sheet?

Accepted Answer

A)  Retained earnings of $56. 
B)  Dividends of $11. 
C)  Net income of $60. 
D)  None of the above. 
A)  Retained earnings of $56. 
B)  Dividends of $11. 
C)  Net income of $60. 
D)  None of the above.

Question 16

Accounting terminology
Listed below are eight technical accounting terms emphasized in this chapter:
 
In the space provided for each statement, indicate the accounting term described.
____ a. The generally accepted accounting principle of providing with financial statements any information that users need to interpret those statements properly.
____ b. A trial balance prepared after all closing entries have been posted. This trial balance consists only of accounts for assets, liabilities, and owners' equity.
____ c. Journal entries made at the end of the period for the purpose of closing temporary accounts (revenue, expense, and dividend accounts) and transferring balances to the Retained Earnings account.
____ d. Computer software used for recording transactions, maintaining journals and ledgers, and preparing financial statements. Also includes spreadsheet capabilities for showing the effects of proposed adjusting entries or transactions on the financial statements without actually recording these entries in the accounting records.
____ e. The summary account in the ledger to which revenue and expense accounts are closed at the end of the period. The balance (credit balance for a net income, debit balance for a net loss) is transferred to the Retained Earnings account.
____ f. Financial statements prepared for periods of less than one year (includes monthly and quarterly statements).
____ g Supplemental disclosures that accompany financial statements. These notes provide users with various types of information considered necessary for the proper interpretation of the statements.
____ h. A multicolumn schedule showing the relationships among the current account balances (a trial balance), proposed or actual adjusting entries or transactions, and the financial statements that would result if these adjusting entries or transactions were recorded. Used both at the end of the accounting period as an aid to preparing financial statements and for planning purposes.

Accepted Answer

(a) Adequate disclosure (b) After-closin

Question 17

Refer to the information above. Income Summary will have what balance before it is closed?

Accepted Answer

A)  $28,640. 
B)  $15,600. 
C)  $21,920. 
D)  $16,640. 
A)  $28,640. 
B)  $15,600. 
C)  $21,920. 
D)  $16,640.

Question 18

Closing entries should be made:

Accepted Answer

A)  Every year. 
B)  Only when an entity goes out of business. 
C)  Only if there is a profit. 
D)  Only if there is a loss. 
A)  Every year. 
B)  Only when an entity goes out of business. 
C)  Only if there is a profit. 
D)  Only if there is a loss.

Question 19

The purpose of making closing entries is to:

Accepted Answer

A)  Prepare revenue and expense accounts for the recording of the next period's revenue and expenses. 
B)  Enable the accountant to prepare financial statements at the end of the accounting period. 
C)  Establish new balances in the balance sheet accounts. 
D)  Reduce the number of expense accounts. 
A)  Prepare revenue and expense accounts for the recording of the next period's revenue and expenses. 
B)  Enable the accountant to prepare financial statements at the end of the accounting period. 
C)  Establish new balances in the balance sheet accounts. 
D)  Reduce the number of expense accounts.

Question 20

The adjusted trial balance contains income statement accounts and balance sheet accounts, while the after-closing trial balance will only have balance sheet accounts.

Accepted Answer

A) True 
 B)False

Exam 5: The Accounting Cycle: Reporting Financial Results

Refer to the information above. Net income for the period equals:

Indicate which of the following accounts will be closed to Income Summary at year-end. (a) Cash (b) Office Supplies Expense (c) Unexpired Insurance (d) Unearned Revenue (e) Dividends (f) Depreciation Expense (g) Income Taxes Payable (h) Accumulated Depreciation

Assets are considered current assets if they are cash or will usually be converted into cash:

Return on equity is calculated by:

A debit balance in the income summary account indicates:

Dividends declared are an expense and reduce net income.

The Retained Earnings statement is based upon which of the following relationships?

Refer to the information above. The entry to close the Fees earned account will:

A statement of retained earnings shows:

Return on equity measures:

Which of the following accounts is not closed to the Income Summary at the end of the accounting period? (More than one answer may be correct).

Preparation of financial statements Using the Adjusted Trial Balance shown below, prepare (a) an Income Statement and (b) a Statement of Retained Earnings for All Star Repairs.

Which accounts will appear on the balance sheet?

Refer to the information above. Income Summary will have what balance before it is closed?

Closing entries should be made:

The purpose of making closing entries is to:

The adjusted trial balance contains income statement accounts and balance sheet accounts, while the after-closing trial balance will only have balance sheet accounts.

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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