accounting week 3

which statements are true regarding permanent and temporary accounts

- permanent accounts are reported on the balance sheet - retained earnings is a permanent account, but dividends are a temporary account - temp accounts have a balance for one period only - permanent accounts will appear on a post-closing trial balance - temp accounts are reported on the income statement

define plant assets by selecting the correct statements below

- plant assets are property, plant and equipment that are tangible - plant assets are difficult to convert to cash quickly - plant assets are equipment and other assets that have a life greater than one year

which of the following statements correctly define profit margin

- profit margin is also called return on sales - profit margin is a useful measure of a business's operating results - profit margin in the ratio of a business's net income to its net sales

which of the following statements correctly defines a profit margin

- profit margin is called return on sales - profit margin is the ratio of a business's net income to its net sales

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

- retained earnings

explain your understanding of the closing process

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

which of the statements below are correct regarding the accounting cycle

- the cycle contains steps for adjusting and closing accounts - the accounting cycle contains 10 steps (including an optional step) - the accounting cycle is a series of steps repeated each reporting period - the accounting cycle refers to steps followed by a company to prepare its financial statements

select the statements below that describe the purpose of a post-closing trial balance

- to verify that total debits equal total credit for permanent accounts - to verify that all temporary accounts have zero balance

all of the following subtotals and totals are shown on an unclassified balance sheet

- total assets - total liabilities

all of the following subtotals and totals are shown on an unclassified balance sheet:

- total assets - total liabilities

accounting cycle

1. analyze transactions 2. journalize 3. post 4. prepare unadjusted trial 5. adjust and post 6. prepare adjusted trial balance 7. prepare financial statements 8. close accounts 9. prepare post-closing trial balance 10. reverse and post (optional)

four-step closing process

1. close the revenue accounts 2. close the expense accounts 3. close the income summary account 4. close the dividends account

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

1. current assets 2. long-term investments 3. plant assets 4. intangible assets 5. current liabilities 6. long-term liabilities

the steps in the closing process are listed on the right. match them to the correct order in which they would be performed

1. identify accounts to be closed 2. journalize and post-closing trial balances 3. identify accounts to be closed.

some of the accounts in the accounting cycle are listed below. place them in the correct order of use

1. journalize transactions into the journal 2. journalize and post the adjusting entries 3. prepare the adjusted trial balance 4. prepare the financial statements 5. journalize and post-closing entries 6. prepare post-closing trial balance

Carlin Company has current assets of $100,000, total assets of $1,000,000, current liabilities of $50,000, total liabilities of $250,000 and total equity of $750,000. What is the current ratio (rounded to the nearest decimal point)?

2.0

Roselawn Company reported net sales of $90,000 and net income of $18,000 for the previous year ended December 31. The company reported net sales of $100,000 and net income of $20,000 for the current year ended December 31. Total assets amounted to $200,000 at December 31 of the previous year and $246,000 at December 31 of the current year. The company's profit margin for the current year ended December 31 (rounded to the nearest decimal point) is:

20.0%

describe an unclassified balance sheet

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

which of the statements is true regarding the difference between a temp account and a permanent account

a temp account will not appear on a post-closing trial balance

when does the closing process take place

at the end of an accounting period

current assets are:

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

identify the accounts that would appear on the post-closing trial balance

cash: included dividends: not included depreciation expense: not included retained earnings: included income summary: not included

summarize the steps in the closing process

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

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

closing means to bring an account to zero

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

current assets/ current liabilities

if a company's net income increased while its net sales remained constant, the company's profit margin would

increase

select the statement below that describes a post-closing trial balance

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

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

which of the following steps in the accounting cycle is optional

reversing journal entries

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

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

closing means to transfer account balances from temp accounts so that they will start with a zero balance at the beginning of the next period

true

define equity by completing the following statement. equity is the owners claim on assets of a business. in a corporation, this claim is reported in the equity section of a balance sheet in the retained earnings account.

true

the closing period takes place at the end of an accounting period, after the adjusted trial balance is prepared and after the financial statements are prepared

true

the closing period takes place at the end of an accounting period, after the trial balance is prepared and after the financial statement is prepared.

true

the formula to compute the profit margin of a company is net income divided by net sales

true

the income summary account is credited for the sum of all revenue accounts and is debited for the sum of all expense accounts and its balance will be transferred to the retained earnings account.

true

the journal entry to close all of a company's expense accounts would include a credit to each of the expense accounts and a corresponding debit to the income summary account

true

the purpose of the closing process is to reset temporary account balances to zero and to transfer the changes in all of these accounts to the retained earnings account.

true

current liabilities

- accounts payable - taxes payable (due in 5 weeks)

identify the accounts below that would be classified as current liabilities on a classified balance sheet

- accounts payable - unearned rent - taxes payable - notes payable (due in three months)

current assets

- accounts receivable - short-term investments - supplies - office supplies - store supplies - pre-paid insurance (due in 5 months) - cash - interest receivable - prepaid rent (2 months of rent)

describe the general ledger after adjusting and closing entries have been posted

- all expense accounts will show $0 balance after closing - the dividends account will have a $0 balance after closing - the abbreviations "adj." and "clos." have been entered in the explanation columns of the ledger - the income summary account will show three closing entries

in preparing a post-trial balance, which of the following statements are correct

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

identify which of the accounts below would be classified as a plant asset account

- building - equipment - machinery - land currently being used

what are current liabilities

- current liabilities are reported in the order of those to be settled first - current liabilities are obligations due to be paid within one year

intangible assets

- goodwill - franchises - copyrights - trademarks - patents

demonstrate your knowledge of preparing a post-closing trial balance by selecting the accounts below that would be included on it

- liability accounts - asset accounts - permanent accounts

identify the accounts below that would be classified as long-term liabilities on a classified balance sheet

- mortgage payable - bonds payable (due in five years)

identify which of the following would be classified as a current asset:

- office supplies - cash - prepaid rent - accounts receivable

a classified balance sheet can be described as a balance sheet that:

- organizes assets and liabilities into important subgroups - is more useful to decision makers - lists current assets in the order of how quickly they can be converted to cash