chapter 4 accounting

Vito Co. had current assets of $9,000 and current liabilities of $6,000 at the end of the year. Net income during the year was $21,000. The current ratio for the period is:

1.5

Using the financial information of ABC Co. below, compute its current ratio for the period. $ in millions Current Year Current assets $ 520 Current liabilities $ 128 Long-term liabilities $ 250

4.06

Which of the statements below is correct regarding the difference between a temporary account and a permanent account?

A temporary account will not appear on a post-closing trial balance.

Describe an unclassified balance sheet.

An unclassified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity.

Review and complete the following statement regarding the Income Summary account. The Income Summary account is creditedBlank 1Blank 1 credited , Correct Unavailable (debited/credited) for the sum of all revenue accounts and is debitedBlank 2Blank 2 debited , Correct Unavailable (debited/credited) for the sum of all expense accounts and its balance will be transferred to the capitalBlank 3Blank 3 capital , Correct Unavailable (Capital/Cash) account.

Blank 1: credited Blank 2: debited Blank 3: capital

A post-closing trial balance is a list of (permanent/temporary) accounts and their balances (after/before) all (adjusting/closing) entries have been journalized and posted.

Blank 1: permanent Blank 2: after Blank 3: closing

Complete the following statement. The purpose of the closing process is to reset (temporary/permanent) account balances to zero and to transfer the changes in all of these accounts to the Owner, (Capital/Summary/Withdrawal) account.

Blank 1: temporary Blank 2: capital

Current items can be described as those expected to come due within one (month/year) and are listed in the order of how (quickly/slowly) they could be converted to or paid in cash.

Blank 1: year Blank 2: quickly

Identify which of the accounts below would be classified as a plant asset account. (Check all that apply.)

Building Machinery Land used to produce or sell products and services Equipment

Choose the statement below that explains what "closing" means.

Closing means to reset an account balance to zero.

Choose the formula below that is used to calculate the current ratio of a business

Current assets divided by current liabilities

What are current liabilities? (Check all that apply.)

Current liabilities are liabilities due to be paid within one year. Current liabilities are usually settled by paying out current assets such as cash.

Identify the accounts below that would be classified as a long-term investment. (Check all that apply.

Investments in stocks Investments in bonds Notes receivable due in 2 years

Select the statement below that describes a post-closing trial balance.

It is a listing of all permanent accounts and their balances after closing

What defines a long-term investment? (Check all that apply.)

Long-term investments are investments in stocks and bonds when they are expected to be held for more than one year or the operating cycle. Notes receivable and stock and bond investments are assets that are expected to be held for more than one year.

Which of the following defines long-term liabilities?

Long-term liabilities are debts of a business that are not due to be settled within one year.

Identify the accounts below that would be classified as long-term liabilities on a classified balance sheet. (Check all that apply.)

Mortgage payable Bonds payable Notes payable

Identify the accounts below that would be classified as a long-term investment. (Check all that apply.)

Notes receivable due in 2 years Investments in stocks Investments in bonds

Select the statements below that describe the purpose of a post-closing trial balance. (Check all that apply.

One purpose is to verify that all temporary accounts have zero balances. One purpose is to verify that total debits equal total credit for permanent accounts.

Define plant assets by selecting the correct statements below. (Check all that apply.)

Plant assets are equipment and other assets that have a life greater than one year. Plant assets are property, plant and equipment that are tangible. Plant assets are used to produce or sell products or services.

A classified balance sheet has several categories for assets and liabilities including: (Check all that apply.)

Plant assets. Long-term investments. Noncurrent (long-term) liabilities. Current assets.

The steps in the closing process are listed on the right. Match them to the correct order in which they would be performed (on the left).

Step #1 matches Choice Identify accounts to be closed. Step #2 matches Choice Journalize and post closing entries. Step #3 matches Choice Prepare a post closing trial balance.

Which statements below are true regarding permanent and temporary accounts? (Check all that apply.

Temporary accounts have a balance for one period only. Permanent accounts are reported on the balance sheet. Permanent accounts will appear on a post-closing trial balance. Owner, Capital is a permanent account, but Owner, Withdrawals is a temporary account. Most temporary accounts are reported on the income statement.

Select the statement below that explains how to use the Income Summary account.

The Income Summary account is used during the closing process to facilitate the closing of revenue and expense accounts.

Using the financial information of ABC Co. below, evaluate the company's current ratio. Select all answers which apply. $ in millions Current Year Current assets $ 620 Current liabilities $ 430 Current ratio 1.44 Industry current ratio 1.28

The company's ability to pay short-term obligations is not in doubt since its current ratio is greater than 1.0 The company's ratio is above the industry's ratio, so this company is able to cover its debt better than others in this industry.

What is an intangible asset? (Check all that apply.)

The value of intangible assets comes from the privileges or rights granted to or held by the owner. Intangible assets are long-term resources that benefit business operations, but lack physical form.

Identify the accounts below that would be classified as intangible assets on a classified balance sheet. (Check all that apply.)

Trademark Copyrights Patent Franchise Goodwill

Which of the following lists steps of the accounting cycle in the correct order (note that not all steps are listed)?

Trial balance, Adjusting journal entries, Post-closing trial balance.

Identify the accounts below that would be classified as current liabilities on a classified balance sheet. (Check all that apply.)

Unearned rent Taxes payable Accounts payable

Closing means to transfer account balances from temporaryBlank 1Blank 1 temporary , Correct Unavailable (asset/liability/permanent/temporary) accounts so that they will start with a zeroBlank 2Blank 2 zero , Correct Unavailable (contra/larger/zero) balance at the beginning of the next period.

Blank 1: temporary Blank 2: zero or 0

Identify which of the accounts below would be classified as a current asset. (Check all that apply.)

Prepaid rent Accounts receivable Cash Office supplies

Identify which of the following steps in the accounting cycle is optional.

Reversing journal entries

Determine which of the statements below are correct regarding the current ratio. (Check all that apply.)

The current ratio can affect interest rates charged by creditors when lending money to a business. The current ratio is one measure of a company's ability to pay its short-term debts. The current ratio helps a supplier determine whether it wants to extend credit to a customer. A current ratio of less than 1.0 would indicate that a company might have a problem paying off short term debt.

Some of the steps in the accounting cycle are listed below. Place them in the correct order of use.

journalize, unadjusted, adjust, adjusted trial, financial

A classified balance sheet can be described as a balance sheet that: (Check all that apply.)

lists current assets in the order of how quickly they can be converted to cash. organizes assets and liabilities into important subgroups.

Summarize the steps in the closing process by selecting the correct choice below.

Close income statement credit balance accounts; close income statement debit balance accounts; close income summary; close withdrawals.

Brown Co. had current assets of $15,000, total assets of $30,000 and current liabilities of $9,000 at the end of the year. The current ratio for the period is:

1.67

Define "current" as it applies to assets and liabilities on a classified balance sheet.

Current items are those expected to come due within one year or the company's operating cycle, whichever is longer.

Current assets are:

cash and other resources that are expected to be sold, collected or used within one year

Explain your understanding of the closing process by choosing the correct statements below. (Check all that apply.)

the closing process helps summarize a period's revenues and expenses. the closing process resets the balances in temporary accounts to zero.