Financial Accounting chapter 4 part A

In preparing closing entries a. each revenue account will be credited. b. each expense account will be credited. c. the dividends account will be debited if there is net income for the period. d. the dividends account will be debited.

each expense account will be credited.

Preparing a worksheet involves a. two steps. b. three steps. c. four steps. d. five steps.

five steps.

A post-closing trial balance will show a. zero balances for all accounts. b. zero balances for balance sheet accounts. c. only balance sheet accounts. d. only income statement accounts.

only balance sheet accounts.

Assuming that there is a net loss for the period, debits equal credits in all but which section of the worksheet? a. Income statement columns b. Adjustments columns c. Trial balance columns d. Adjusted trial balance columns

Income statement columns

Closing entries a. are prepared before the financial statements. b. reduce the number of permanent accounts. c. cause the revenue and expense accounts to have zero balances. d. summarize the activity in every account.

cause the revenue and expense accounts to have zero balances.

The heading for a post-closing trial balance has a date line that is similar to the one found on a. a balance sheet. b. an income statement. c. a retained earnings statement. d. the worksheet.

a balance sheet.

The following information is available for Baker Industries Baker Industries Inc Trial Balance 12/31/13 Debit Credit Cash 16 Accounts Receivable 26 Supplies 4 Equipment 191 Accumulated Depreciation 13 Accounts Payable 21 Common stock 106 Retained Earnings 56 Dividends 11 Service Revenue 189 Salaries and Wages Expense 86 Depreciation Expense 39 Supplies Expense 12 385 385 What is the balance in Income Summary before it is closed to Retained Earnings for Baker Industries? a. $56 b. $52 c. $41 d. $248

$52

The account, Supplies, will appear in the following debit columns of the worksheet. a. Trial balance b. Adjusted trial balance c. Balance sheet d. All of these

All of these

Which of the following journal entries is required to close the Income Summary account of a profitable company? a. Debit Income Summary, credit Retained Earnings. b. Credit Income Summary, debit Retained Earnings. c. Debit Income Summary, credit Revenue. d. Credit Income Summary, debit Common Stock.

Debit Income Summary, credit Retained Earnings.

Each of the following accounts is closed to Income Summary except a. Expenses. b. Dividends c. Revenues. d. All of these are closed to Income Summary.

Dividends

If sales are $540,000, expenses are $440,000 and dividends are $50,000, what is the balance of income Summary prior to closing? a. It will have a credit balance of $50,000. b. It will have a debit balance of $50,000. c. It will have a debit balance of $100,000. d. It will have a credit balance of $100,000.

It will have a credit balance of $100,000.

In order to close the Dividends account, the a. income summary account should be debited. b. income summary account should be credited. c. Retained Earnings account should be credited. d. Retained Earnings account should be debited.

Retained Earnings account should be debited.

Which of the following is a true statement about closing the books of a corporation? a. Expenses are closed to the Expense Summary account. b. Only revenues are closed to the Income Summary account. c. Revenues and expenses are closed to the Income Summary account. d. Revenues, expenses, and the dividends account are closed to the Income Summary account.

Revenues and expenses are closed to the Income Summary account.

Closing entries are journalized and posted a. before the financial statements are prepared. b. after the financial statements are prepared. c. at management's discretion. d. at the end of each interim accounting period.

after the financial statements are prepared.

The income statement for the month of June, 2013 of Camera Obscura Enterprises contains the following information: Revenues $7,000 Expenses: Salaries and Wages Expense $3,000 Rent Expense 1,000 Advertising Expense 800 Supplies Expense 300 Insurance Expense 100 Total expenses 5,200 Net income $1,800 The entry to close the expense accounts includes a a. debit to Income Summary for $1,800. b. credit to Rent Expense for $1,000. c. credit to Income Summary for $5,200. d. debit to Wages Expense for $3,000.

credit to Rent Expense for $1,000.

If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a a. debit to the Retained Earnings account. b. debit to the Dividends account. c. credit to the Retained Earnings account. d. credit to the Dividends account.

credit to the Retained Earnings account.

The net income (or loss) for the period a. is found by computing the difference between the income statement credit column and the balance sheet credit column on the worksheet. b. cannot be found on the worksheet. c. is found by computing the difference between the income statement columns of the worksheet. d. is found by computing the difference between the trial balance totals and the adjusted trial balance totals.

is found by computing the difference between the income statement columns of the worksheet.

Closing entries are a. an optional step in the accounting cycle. b. posted to the ledger accounts from the worksheet. c. made to close permanent or real accounts. d. journalized in the general journal

journalized in the general journal

A worksheet is a multiple column form that facilitates the a. identification of events. b. measurement process. c. preparation of financial statements. d. analysis process.

preparation of financial statements.

The income statement for the year 2013 of Fugazi Co. contains the following information: Revenues $70,000 Expenses: Salaries and Wages Expense $45,000 Rent Expense 12,000 Advertising Expense 8,000 Supplies Expense 6,000 Utilities Expense 2,500 Insurance Expense 2,000 Total expenses 75,500 Net income (loss) $(5,500) At January 1, 2013, Fugazi reported retained earnings of $50,000. Divudends for the year totalled $10,000. At December 31, 2013, the company will report retained earning of a. $15,500. b. $34,500. c. $40,000. d. $45,500.

$34,500.

When constructing a worksheet, accounts are often needed that are not listed in the trial balance already entered on the worksheet from the ledger. Where should these additional accounts be shown on the worksheet? a. They should be inserted in alphabetical order into the trial balance accounts already given. b. They should be inserted in chart of account order into the trial balance already given. c. They should be inserted on the lines immediately below the trial balance totals. d. They should not be inserted on the trial balance until the next accounting period.

They should be inserted on the lines immediately below the trial balance totals.

A post-closing trial balance should be prepared a. before closing entries are posted to the ledger accounts. b. after closing entries are posted to the ledger accounts. c. before adjusting entries are posted to the ledger accounts. d. only if an error in the accounts is detected.

after closing entries are posted to the ledger accounts.

A post-closing trial balance is prepared a. after closing entries have been journalized and posted. b. before closing entries have been journalized and posted. c. after closing entries have been journalized but before the entries are posted. d. before closing entries have been journalized but after the entries are posted.

after closing entries have been journalized and posted.

The information for preparing a trial balance on a worksheet is obtained from a. financial statements. b. general ledger accounts. c. general journal entries. d. business documents.

general ledger accounts.

The income statement and balance sheet columns of Iron and Wine Company's worksheet reflect the following totals: Income Statement Balance Sheet Dr. Cr. Dr. Cr. Totals $72,000 $48,000 $60,000 $84,000 The net income (or loss) for the period is a. $48,000 income. b. $24,000 income. c. $24,000 loss. d. not determinable.

$24,000 loss.

After the adjusting entries are journalized and posted to the accounts in the general ledger, the balance of each account should agree with the balance shown on the a. adjusted trial balance. b. post-closing trial balance. c. the general journal. d. adjustments columns of the worksheet.

adjusted trial balance.

The income statement for the year 2013 of Fugazi Co. contains the following information: Revenues $70,000 Expenses: Salaries and Wages Expense $45,000 Rent Expense 12,000 Advertising Expense 8,000 Supplies Expense 6,000 Utilities Expense 2,500 Insurance Expense 2,000 Total expenses 75,500 Net income (loss) $(5,500) The entry to close the expense accounts includes a a. debit to Income Summary for $5,500. b. credit to Income Summary for $5,500. c. debit to Income Summary for $75,500. d. debit to Salaries and Wages Expense for $2,500.

debit to Income Summary for $75,500.

Closing entries are made a. in order to terminate the business as an operating entity. b. so that all assets, liabilities, and stock holder's equity accounts will have zero balances when the next accounting period starts. c. in order to transfer net income (or loss) and dividends to the retained earnings account. d. so that financial statements can be prepared.

in order to transfer net income (or loss) and dividends to the retained earnings account.

The income statement and balance sheet columns of Iron and Wine Company's worksheet reflect the following totals: Income Statement Balance Sheet Dr. Cr. Dr. Cr. Totals $72,000 $48,000 $60,000 $84,000 To enter the net income (or loss) for the period into the above worksheet requires an entry to the a. income statement debit column and the balance sheet credit column. b. income statement credit column and the balance sheet debit column. c. income statement debit column and the income statement credit column. d. balance sheet debit column and the balance sheet credit column.

income statement credit column and the balance sheet debit column.

The adjustments entered in the adjustments columns of a worksheet are a. not journalized. b. posted to the ledger but not journalized. c. not journalized until after the financial statements are prepared. d. journalized before the worksheet is completed.

not journalized until after the financial statements are prepared.

A worksheet can be thought of as a(n) a. permanent accounting record. b. optional device used by accountants. c. part of the general ledger. d. part of the journal.

optional device used by accountants.

The income statement for the year 2013 of Fugazi Co. contains the following information: Revenues $70,000 Expenses: Salaries and Wages Expense $45,000 Rent Expense 12,000 Advertising Expense 8,000 Supplies Expense 6,000 Utilities Expense 2,500 Insurance Expense 2,000 Total expenses 75,500 Net income (loss) $(5,500) After all closing entries have been posted, the revenue account will have a balance of a. $0. b. $70,000 credit. c. $70,000 debit. d. $5,500 credit.

$0.

If the total debits exceed total credits in the balance sheet columns of the worksheet, owner's equity a. will increase because net income has occurred. b. will decrease because a net loss has occurred. c. is in error because a mistake has occurred. d. will not be affected.

will increase because net income has occurred.

Only two adjustments appear in the adjustments column of a worksheet for Tempest Sailing Inc. One of these is to record $8,000 depreciation of equipment, and the other is to record the expiration of $1,500 of prepaid insurance. If the Trail Balance column totals are $145,320, what are the totals of the Adjusted Trial Balance columns? a. $145,320. b. $153,320. c. $151,820. d. $154,820.

$153,320.

The income summary account a. is a permanent account. b. appears on the balance sheet. c. appears on the income statement. d. is a temporary account.

is a temporary account.

Adjusting entries are prepared from a. source documents. b. the adjustments columns of the worksheet. c. the general ledger. d. last year's worksheet.

the adjustments columns of the worksheet.

The income statement for the year 2013 of Fugazi Co. contains the following information: Revenues $70,000 Expenses: Salaries and Wages Expense $45,000 Rent Expense 12,000 Advertising Expense 8,000 Supplies Expense 6,000 Utilities Expense 2,500 Insurance Expense 2,000 Total expenses 75,500 Net income (loss) $(5,500) After all closing entries have been posted, the Income Summary account will have a balance of a. $0. b. $5,500 debit. c. $5,500 credit. d. $34,500 credit.

$0.

The following information is available for Baker Industries Baker Industries Inc Trial Balance 12/31/13 Debit Credit Cash 16 Accounts Receivable 26 Supplies 4 Equipment 191 Accumulated Depreciation 13 Accounts Payable 21 Common stock 106 Retained Earnings 56 Dividends 11 Service Revenue 189 Salaries and Wages Expense 86 Depreciation Expense 39 Supplies Expense 12 385 385 What is the amount of total debits on the post-closing trial balance for Baker Industries? a. $237 b. $248 c. $289 d. $224

$237

The income statement for the month of June, 2013 of Camera Obscura Enterprises contains the following information: Revenues $7,000 Expenses: Salries and Wages Expense $3,000 Rent Expense 1,000 Advertising Expense 800 Supplies Expense 300 Insurance Expense 100 Total expenses 5,200 Net income $1,800 At June 1, 2013, Camera Obscura reported retained earnings of $35,000. The company paid no dividends during June. At June 30, 2013, the company will report retained earnings of a. $29,800. b. $35,000. c. $36,800. d. $42,000.

$36,800.

The following information is available for Baker Industries Baker Industries Inc Trial Balance 12/31/13 Debit Credit Cash 16 Accounts Receivable 26 Supplies 4 Equipment 191 Accumulated Depreciation 13 Accounts Payable 21 Common stock 106 Retained Earnings 56 Dividends 11 Service Revenue 189 Salaries and Wages Expense 86 Depreciation Expense 39 Supplies Expense 12 385 385 What is the balance in Retained Earnings after posting closing entries at December 31 for Baker Industries? a. $108 b. $97 c. $237 d. $4

$97

Closing entries may be prepared from all but which one of the following sources? a. Adjusted balances in the ledger b. Income statement and balance sheet columns of the worksheet c. Balance sheet d. Income and retained earnings statements

Balance sheet

Which account listed below would be double ruled in the ledger as part of the closing process? a. Cash b. Retained c. Dividends d. Accumulated Depreciation—Equipment

Dividends

The final closing entry to be journalized is typically the entry that closes the a. revenue accounts. b. Dividends account. c. Retained Earnings account. d. expense accounts.

Dividends account.

Which of the following accounts would not be debited in the process of preparing closing entries for Bargain World, Inc a. Income Summary. b. Service Revenue. c. Dividends. d. Retained Earnings.

Dividends.

Which of the following companies would be least likely to use a worksheet to facilitate the adjustment process? a. Large company with numerous accounts b. Small company with numerous accounts c. All companies, since worksheets are required under generally accepted accounting principles d. Small company with few accounts

Small company with few accounts

The income statement for the month of June, 2013 of Camera Obscura Enterprises contains the following information: Revenues $7,000 Expenses: Salaries and Wages Expense $3,000 Rent Expense 1,000 Advertising Expense 800 Supplies Expense 300 Insurance Expense 100 Total expenses 5,200 Net income $1,800 After the revenue and expense accounts have been closed, the balance in Income Summary will be a. $0. b. a debit balance of $1,800. c. a credit balance of $1,800. d. a credit balance of $7,000.

a credit balance of $1,800.

The income statement for the year 2013 of Fugazi Co. contains the following information: Revenues $70,000 Expenses: Salaries and Wages Expense $45,000 Rent Expense 12,000 Advertising Expense 8,000 Supplies Expense 6,000 Utilities Expense 2,500 Insurance Expense 2,000 Total expenses 75,500 Net income (loss) $(5,500) The entry to close Income Summary to Retained Earning includes a. a debit to Revenue for $70,000. b. credits to Expenses totalling $75,500. c. a credit to Income Summary for $5,500. d. a credit to Retained Earning for $5,500.

a credit to Income Summary for $5,500.

The income statement for the month of June, 2013 of Camera Obscura Enterprises contains the following information: Revenues $7,000 Expenses: Salaries and Wages Expense $3,000 Rent Expense 1,000 Advertising Expense 800 Supplies Expense 300 Insurance Expense 100 Total expenses 5,200 Net income $1,800 The entry to close Income Summary to Retained Earnings includes a. a debit to Revenues for $7,000. b. credits to Expenses totalling $5,200. c. a credit to Income Summary for $1,800 d. a credit to Retained Earnings for $1,800.

a credit to Retained Earnings for $1,800.

The income statement for the year 2013 of Fugazi Co. contains the following information: Revenues $70,000 Expenses: Salaries and Wages Expense $45,000 Rent Expense 12,000 Advertising Expense 8,000 Supplies Expense 6,000 Utilities Expense 2,500 Insurance Expense 2,000 Total expenses 75,500 Net income (loss) $(5,500) Multiple Choice 92. (Cont.) After the revenue and expense accounts have been closed, the balance in Income Summary will be a. $0. b. a debit balance of $5,500. c. a credit balance of $5,500. d. a credit balance of $70,000.

a debit balance of $5,500.

When using a worksheet, adjusting entries are journalized a. after the worksheet is completed and before financial statements are prepared. b. before the adjustments are entered on to the worksheet. c. after the worksheet is completed and after financial statements have been prepared. d. before the adjusted trial balance is extended to the proper financial statement columns.

after the worksheet is completed and after financial statements have been prepared.

The closing entry process consists of closing a. all asset and liability accounts. b. out the Retained Earnings account. c. all permanent accounts. d. all temporary accounts.

all temporary accounts.

The Income Summary account is an important account that is used a. during interim periods. b. in preparing adjusting entries. c. annually in preparing closing entries. d. annually in preparing correcting entries

annually in preparing closing entries.

The balances that appear on the post-closing trial balance will match the a. income statement account balances after adjustments. b. balance sheet account balances after closing entries. c. income statement account balances after closing entries. d. balance sheet account balances after adjustments

balance sheet account balances after closing entries.

The most efficient way to accomplish closing entries is to a. credit the income summary account for each revenue account balance. b. debit the income summary account for each expense account balance. c. credit the dividends balance directly to the income summary account. d. credit the income summary account for total revenues and debit the income summary account for total expenses.

credit the income summary account for total revenues and debit the income summary account for total expenses.

The income statement for the month of June, 2013 of Camera Obscura Enterprises contains the following information: Revenues $7,000 Expenses: Salaries and Wages Expense $3,000 Rent Expense 1,000 Advertising Expense 800 Supplies Expense 300 Insurance Expense 100 Total expenses 5,200 Net income $1,800 The entry to close the revenue account includes a a. debit to Income Summary for $1,800. b. credit to Income Summary for $1,800. c. debit to Income Summary for $7,000. d. credit to Income Summary for $7,000.

credit to Income Summary for $7,000.

The income statement for the year 2013 of Fugazi Co. contains the following information: Revenues $70,000 Expenses: Salaries and Wages Expense $45,000 Rent Expense 12,000 Advertising Expense 8,000 Supplies Expense 6,000 Utilities Expense 2,500 Insurance Expense 2,000 Total expenses 75,500 Net income (loss) $(5,500) The entry to close the revenue account includes a a. debit to Income Summary for $5,500. b. credit to Income Summary for $5,500. c. debit to Revenues for $70,000. d. credit to Revenues for $70,000.

debit to Revenues for $70,000.

A post-closing trial balance will show a. only permanent account balances. b. only temporary account balances. c. zero balances for all accounts. d. the amount of net income (or loss) for the period.

only permanent account balances.

The purpose of the post-closing trial balance is to a. prove that no mistakes were made. b. prove the equality of the balance sheet account balances that are carried forward into the next accounting period. c. prove the equality of the income statement account balances that are carried forward into the next accounting period. d. list all the balance sheet accounts in alphabetical order for easy reference.

prove the equality of the balance sheet account balances that are carried forward into the next accounting period.

All of the following statements about the post-closing trial balance are correct except it a. shows that the accounting equation is in balance. b. provides evidence that the journalizing and posting of closing entries have been properly completed. c. contains only permanent accounts. d. proves that all transactions have been recorded.

proves that all transactions have been recorded.

If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has a. earned net income for the period. b. an error because debits do not equal credits. c. suffered a net loss for the period. d. to make an adjusting entry.

suffered a net loss for the period.

Closing entries are necessary for a. permanent accounts only. b. temporary accounts only. c. both permanent and temporary accounts. d. permanent or real accounts only.

temporary accounts only.

A double rule applied to accounts in the ledger during the closing process implies that a. the account is a temporary account. b. the account is a balance sheet account. c. the account balance is not zero. d. a mistake has been made, since double ruling is prescribed

the account is a temporary account.

After closing entries are posted, the balance in the retained earnings account in the ledger will be equal to a. the beginning retained earnings reported on the retained earnings statement. b. the amount of the retained earnings reported on the balance sheet. c. zero. d. the net income for the period.

the amount of the retained earnings reported on the balance sheet.

An error has occurred in the closing entry process if a. revenue and expense accounts have zero balances. b. the Retained Earnings account is credited for the amount of net income. c. the Dividends account is closed to the Retained Earnings account. d. the balance sheet accounts have zero balances.

the balance sheet accounts have zero balances.

The worksheet does not show a. net income or loss for the period. b. revenue and expense account balances. c. the ending balance in the retained earnings account. d. the trial balance before adjustments.

the ending balance in the retained earnings account.

The balance in the income summary account before it is closed will be equal to a. the net income or loss on the income statement. b. the beginning balance in the retained earnings account. c. the ending balance in the retained earnings account. d. zero.

the net income or loss on the income statement.