Accounting Chapter 4 - Connect

Which of the following statements correctly describes what a work sheet is? (Check all that apply.)

A worksheet is an aid used by accountants. A work sheet does not substitute for financial statements. A work sheet helps to organize financial data. A work sheet is prepared at the end of an accounting period.

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

Current assets divided by current liabilities

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.

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

Closing means to reset an account balance to zero.

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

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

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

Notes payable Mortgage payable Bonds payable

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

Notes receivable and stock and bond investments are assets that are expected to be held for more than one year. 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.

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

Blank 1: permanent Blank 2: ledger Blank 3: after Blank 4: closing

Given that a company reported net income for the year, determine how a company would complete its work sheet for the period by choosing the correct statement below.

The company would add the net income amount to the Credit column of the Balance Sheet & Owner's Equity columns of a work sheet.

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 Reason: $9,000 / $6,000 = 1.5

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 Reason: $15,000 / $9,000 = 1.67

How can you add multiple adjustments to one account in a work sheet?

A new line can be added below the affected account in the unadjusted trial balance.

Which of the statements below describe(s) a temporary account? (Check all that apply.)

A temporary account has a balance for only one period. A temporary account is closed at the end of an accounting period

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.

What is keying?

Adding an identifying letter to link the debit and the credit of an adjustment in the Adjustments columns

Which of the following statements is correct regarding a work sheet and the adjustment process?

Adjusting journal entries are prepared from the Adjustments columns of a work sheet.

Describe the general ledger after adjusting and closing entries have been posted. (Check all that apply.)

All expense accounts will show a $0 balance after closing. The abbreviations "adj." and "clos." have been entered in the explanation columns of the ledger. The Owner, Withdrawal account will have a $0 balance after closing. The Income Summary account will show three closing entries.

The Income Summary account can be defined as which of the following? (Check all that apply.)

An account used during the closing process A temporary account An account whose balance equals net income or net loss An account that contains a credit for the sum of all revenues

Which of the following accounts would be sorted from the Adjusted Trial Balance of a work sheet to the Balance Sheet & Statement of Owner's Equity columns on a work sheet?

Cash; Accounts payable; Owner, Withdrawals

Describe your understanding of the closing process by identifying the correct steps below. (Check all that apply.)

Close all expense accounts. Close the Income Summary account. Close all revenue accounts. Close the Withdrawals account.

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.

The following categories are on a classified balance sheet. List them in the order that they would appear.

Current Asset Long-term investment Plant asset Intangible asset Current Liabilities Long term liabilities

Which of the following statements is (are) correct about completing a work sheet? (Check all that apply.)

If a loss occurs, it is added to the Debit column of the Balance Sheet. If a net income occurs, it is added to the Debit column of the Income Statement. If a net income occurs, it is added to the Credit column of the Balance Sheet. Adding net income to the Credit column of the Balance Sheet & Owner's Equity columns implies that it is to be added to Owner, Capital.

Recall the column headings of a work sheet used to prepare financial statements. Which of the following items are on a worksheet. (Check all that apply.)

Income Statement columns Adjustment columns Unadjusted Trial Balance columns Adjusted Trial Balance columns Balance Sheet & Statement of Owner's Equity columns

Match the item on the left with the definition on the right.

Income statement: Reports a business's revenues and expenses for a period of time.Balance sheet: Reports a business's assets, liabilities and equity on a specific date.Work sheet: A useful tool in working with accounting information.Trial balance: A list of accounts and their balances at a point in time.Statement of cash flows: Reports the inflows and outflows of cash during a period of time.

What is a work sheet?

It can help with adjusting and closing accounts and with preparing financial statements.

Define the Income Summary account.

It is a temporary account used during the closing process to summarize revenues and expenses.

Select the statement(s) below which correctly describe how to use the work sheet in the adjustment process. (Check all that apply.)

Journalizing and posting adjusting entries is required after adjustments are entered in a work sheet. Information from the Adjustments columns are used for the adjusting journal entries.

Journalizing and posting adjusting entries from the work sheet is aided by which of the following?

Keying notations

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

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

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

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

Which of the lists below contains only permanent accounts?

Owner, Capital; Accounts Payable; Accumulated Depreciation

Demonstrate your knowledge of preparing a post-closing trial balance by selecting the accounts below that would be included on it. (Check all that apply.)

Permanent accounts Asset accounts Liability 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.

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

Prepaid rent Cash Office supplies Accounts receivable

What are the benefits of using a work sheet? (Check all that apply.)

Reduces the risk of errors when working with many accounts and adjustments Aids in the preparation of financial statements Links accounts and adjustments to financial statement

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

Reversing journal entries

Which of the statements below explains the accounting cycle?

The accounting cycle is repeated each reporting period and refers to the steps taken in preparing financial statements.

Explain how to add adjustments to a work sheet when more than one adjustment is required: (Check all that apply.)

The adjustment can be combined into one adjustment amount. The adjustment can be added to a blank line.

Which of the following statements correctly summarizes how to compute net loss or net income using a work sheet?

The difference between the totals of the debit and credit columns of the Income Statement columns is net income or net loss.

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.

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.

Which of the following lists contains only temporary accounts?

Wages Expense; Income Summary; Owner, Withdrawals

The (adjusted/unadjusted) trial balance is prepared by combining the adjustments in the Adjustments columns with the balances for each account listed on the (adjusted/unadjusted) trial balance.

adjusted, unadjusted

Before sorting/transferring amounts to the financial statement columns on a worksheet, the Trial Balance, (Income Statement, Adjustments) and Adjusted Trial Balance columns must (balance, clear). Listen to the complete question

adjustments balance

Current assets are:

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

A work sheet is an internal aid which is helpful in preparing financial (statements/reports). It reduces risk of _ (errors/effects) when working with many accounts and adjustments.

statements, errors

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

temporary zero

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.

temporary, capital

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

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

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.

year, quickly

The Supplies account in the Unadjusted Trial Balance columns has a debit balance of $4,000. There is a $1,500 credit adjustment in the Adjustments columns across from the Supplies account. Describe how to compute the Supplies account balance on the Adjusted Trial Balance.

The $1,500 credit adjustment would be subtracted from the $4,000 debit balance in the Unadjusted Trial Balance.

Which of the statements below is (are) correct regarding the accounting cycle? (Check all that apply.)

The accounting cycle refers to steps followed by a company to prepare its financial statements. The accounting cycle is a series of steps repeated each reporting period. The cycle contains steps for adjusting and closing accounts. The accounting cycle contains 10 steps.

Explain the required steps to complete a work sheet by placing the following steps in the correct order. (Put the first step at the top.)

1- enter unadjusted trial balance 2- enter adjustments 3- prepare adjusted trial balance 4- sort adjusted trial balance amounts to financial statements 5-total financial statement columns

Which of the statements below describe(s) a permanent account? (Check all that apply.)

A permanent account is reported on the balance sheet. A permanent account's balance is carried forward to the next accounting period.

When does the closing process take place?

At the end of an accounting period

In preparing a post-closing trial balance, which of the following statements are correct? (Check all that apply.)

The total of all debit balances will equal the total of all credit balances. All permanent accounts with a balance in the general ledger will be included. The capital account on the post-closing trial balance will include the net income or net loss for the period.

sing 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 Multiple choice question.

4.06 Reason: Current assets/current liabilities=$520/$128.

The closing process takes place at the (end/beginning) of an accounting period, after the (adjusted/unadjusted) trial balance is prepared and (after/before) the financial statements are prepared.

end adjusted after

A company had the following selected balances: Account Debit Credit Service Revenue $4,000 Rental Revenue $2,000 Wages Expense $500 Utilities Expense $100 Owner, Withdrawals $80 The first closing journal entry would include which of the following

A credit to Income Summary for $6,000. The first closing entry is to close the revenue accounts. To close revenue, the revenue accounts will be debited and Income Summary will be credited for $6,000.

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.

Review the following statements and select the ones that are correct regarding sorting accounts from the Adjusted Trial Balance columns of a work sheet to the Income Statement and Balance Sheet columns in order to prepare for our last step of completing the worksheet. (Check all that apply.)

Liabilities go to the Balance Sheet & Statement of Owner's Equity Credit column. Owner, Withdrawals go to the Balance Sheet & Statement of Owner's Equity Debit column. Expense accounts go to the Income Statement Debit column.

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

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. 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 Income Summary account is (debited/credited) for the sum of all revenue accounts and is (debited/credited) for the sum of all expense accounts and its balance will be transferred to the (Capital/Cash) account. Listen to the complete question

credited, debited, capital

Which of the accounts below would appear in the equity section of a classified balance sheet?

owner capital

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

Accounts payable Unearned rent Taxes payable

Describe an unclassified balance sheet.

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

Summarize the closing process by listing the closing entries in the order in which they would occur at the end of the accounting period. Step 1: Close Income Statement (credit/debit) balance accounts. Step 2: Close Income Statement (credit/debit) balance accounts. Step 3: Close (income summary/withdrawals) . Step 4: Close (income summary/withdrawals) .

Blank 1: credit Blank 2: debit Blank 3: income summary Blank 4: withdrawals

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

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

Which of the following is correct regarding a work sheet?

Each set of column totals must balance on the Trial Balance columns, Adjustments columns and the Adjusted Trial Balance columns.

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

Goodwill Copyrights Patent Trademark Franchise

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 bonds Investments in stocks

Review the statements below and select the items that are correct regarding the operating cycle for a business. (Check all that apply.)

The operating cycle is the time span from when cash is used to acquire goods and services until cash is received from the sale of goods or services. Most companies use a one-year period or operating cycle in deciding which assets and liabilities are current. The length of a company's operating cycle depends on its activities. Most operating cycles are less than one year.

The journal entry to close all of a company's expense accounts would include a (debit/credit) to each of the expense accounts and a corresponding (debit/credit) to the Income (statement/summary) account. Listen to the complete question

credit, debit, summary