chapter 4 practice quiz

The following is the statement of owner's equity for Cloud Computer Service Company. Calculate the net income to complete the statement. Cloud Computer Service Statement of Owner's Equity For the year Ended December 31, 2016 S. Cloud, Capital, January 1, 2016 $13,568 Investments during year $3,500 Net income $????? ​ Less withdrawals $5,000 Increase (decrease) in owner's equity $?????? S. Cloud, Capital, December 31, 2016 $18,905 a. $6,837 b. The amount cannot be determined from this information. c. $6,637 d. $1,837

a. $6,837

Of the following, which step is not a requirement during the accounting cycle? a. An end-of-period spreadsheet is prepared. b. A post-closing trial balance is prepared. c. An unadjusted trial balance is prepared. d. Transactions are posted to the ledger.

a. An end-of-period spreadsheet is prepared.

A Vail, Colorado snow ski supplier would most likely pick which of the following dates to end its fiscal year? a. June 30 b. December 31 c. November 30 d. January 31

a. June 30

In which of the following steps of the accounting cycle will the clearing account be used? a. Step 9: Journalizing and posting closing entries b. Step 10: Preparing a post-closing trial balance c. Step 5: Preparing an optional end-of-period spreadsheet d. Step 3: Preparing an unadjusted trial balance

a. Step 9: Journalizing and posting closing entries

Which of the following entries need not be posted to the ledger? a. Entries of routine business transactions b. All journal entries must be posted to the ledger c. Adjusting entries d. Closing entries

b. All journal entries must be posted to the ledger

Which of the following accounts will be closed with a credit? a. Fees Earned b. Depreciation Expense c. Accumulated Depreciation d. Notes Payable

b. Depreciation Expense

A calendar year ends a. at the end of the natural business cycle. b. on December 31 of each year. c. on any day on the calendar the business decides is best for it. d. one year from the date the business began operations.

b. on December 31 of each year.

The following are reasons to close the accounts at the end of the year except a. to prepare the accounts for the next accounting period. b. to close all real accounts. c. to close all nominal accounts. d. to update the capital account.

b. to close all real accounts.

The following data were taken from the records of Menendez Company: Current assets $5,000 Property, plant, and equipment 10,000 Current liabilities 3,500 Long-term liabilities 5,000 Owner's equity 6,500 What is Menendez Company's current ratio? a. 2.86 b. $5,000 c. 1.43 d. 1.00

c. 1.43

Which of the following is true regarding the end-of-period spreadsheet? a. Closing entries are entered in the Adjustments columns. b. The difference in the totals of the Adjustments columns indicate the net income or loss for the period. c. Amounts are read across a row and added or subtracted to determine the amounts to insert in the Adjusted Trial Balance columns. d. The Adjustments columns need not be totaled.

c. Amounts are read across a row and added or subtracted to determine the amounts to insert in the Adjusted Trial Balance columns.

The following are income and expense items on the adjusted trial balance of NW Company: Fees Earned 18,944 Rent Expense 4,500 Wages Expense 5,678 Miscellaneous Expense 340 Which of the following will be included in the first closing entry? a. Debit to Income Summary for $10,518 b. Credit to Income Summary for $10,518 c. Credit to Income Summary for $18,944 d. Debit to Income Summary for $18,944

c. Credit to Income Summary for $18,944

Which of the following are examples of subsections found on a classified balance sheet? a. Liabilities; long-term liabilities; owner's equity b. Owner's equity; liabilities; property, plant, and equipment c. Current assets; long-term liabilities; property, plant, and equipment d. Assets; current assets; long-term liabilities

c. Current assets; long-term liabilities; property, plant, and equipment

The following are some of the steps in the accounting cycle. Which of the following reflects the steps in the correct order? A) Financial statements are prepared. B) An unadjusted trial balance is prepared. C) Closing entries are journalized and posted to the ledger. D) Journalized business transactions are posted to the ledger. E) A post-closing trial balance is prepared. a. C, B, A, E, D b. E, A, D, B, C c. D, B, A, C, E d. A, D, E, B, C

c. D, B, A, C, E

The balance of the owner's drawing account on the adjusted trial balance of the end-of-period spreadsheet flows into which of the following financial statements? a. The income statement b. All of these financial statements are correct. c. The statement of owner's equity d. The balance sheet

c. The statement of owner's equity

The ability to convert assets into cash is called a. currency. b. capitalization. c. liquidity. d. solvency.

c. liquidity.

Working capital is a. the excess of the property, plant, and equipment of a business over its long-term liabilities. b. None of these choices are correct. c. the excess of the current assets of a business over its current liabilities. d. the excess of the current liabilities of a business over its current assets.

c. the excess of the current assets of a business over its current liabilities.

The natural business year ends a. when the business has achieved a profit. b. six months after a company's fiscal year end. c. when business activities have reached the lowest point in a company's annual operating cycle. d. when business activities have reached the highest point in a company's annual operating cycle.

c. when business activities have reached the lowest point in a company's annual operating cycle.

The numerator in the current ratio calculation is a. Current Liabilities. b. Long-term Liabilities. c. Property, Plant and Equipment. d. Current Assets.

d. Current Assets.

What is the purpose of the income summary account? a. Income Summary is used to report all transactions to the capital account. b. Income Summary is a clearing account used to zero out all real accounts. c. Income Summary is used to verify that net income or loss is reported correctly. d. Income Summary is used as a temporary clearing account to transfer the nominal accounts to the capital account.

d. Income Summary is used as a temporary clearing account to transfer the nominal accounts to the capital account.

The balance of the accumulated depreciation account on the adjusted trial balance of the end-of-period spreadsheet would flow into which of the following financial statements? a. The statement of owner's equity. b. All of these financial statements are correct. c. The income statement. d. The balance sheet.

d. The balance sheet.

Why is it favorable to select a fiscal year that ends when the operating cycle is at its lowest point? a. There will be fewer accounts that need to be closed at that time. b. The managers can evaluate the worst scenario of the business at its lowest point. c. It will result in lower taxes. d. The business has more time to analyze the results of operations and to prepare financial statements.

d. The business has more time to analyze the results of operations and to prepare financial statements.

When pulling the owner's capital balance from the end-of-period spreadsheet into the statement of owner's equity, why is it also important to check the owner's capital account in the general ledger? a. There may have been additional income made during the year reflected in the balance. b. There may have been additional losses incurred during the year reflected in the balance. c. There may have been additional withdrawals made during the year reflected in the balance. d. There may have been additional investments made during the year reflected in the balance.

d. There may have been additional investments made during the year reflected in the balance.

The listing of expenses on the income statement is ordered a. by account number in the general ledger. b. alphabetically. c. by size, beginning with the smallest item. d. by size, beginning with the largest item and putting miscellaneous expense as the last item.

d. by size, beginning with the largest item and putting miscellaneous expense as the last item.

The purpose of the post-closing trial balance is a. to verify that the end-of-period spreadsheet is in balance. b. All of these choices are correct. c. to verify that the financial statements are prepared. d. to verify that the ledger is in balance at the beginning of the next period.

d. to verify that the ledger is in balance at the beginning of the next period.