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Exam 4: Completing the Accounting Cycle

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Question 1

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The chart of accounts,the journal,and the ledger are essential parts of the accounting system.

A) True
B) False

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Question 2

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Daniel Corporation's end-of-period spreadsheet at the end of July has $4,950 in the Balance Sheet Credit column for Accumulated Depreciation.The end-of-period spreadsheet at the end of August has $7,600 in the Balance Sheet Credit column for Accumulated Depreciation.What was the amount of the depreciation expense adjustment for the month of August?

A) $12,550
B) $7,600
C) $4,950
D) $2,650

E) A) and B)
F) B) and D)

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Question 3

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The journal entry to close the Fees Earned,$750,and Rent Revenue,$175,accounts during the year-end closing process would be:

Land is an example of a plant asset.

Balance sheet accounts are not considered real accounts.

A fiscal year for a business

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { Stockton Company }$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { Adjusted Trial Balance }$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { December } 31$ $\begin{array}{|l|r|r|}\hline \text { Cash } & 7,530 & \\\hline \text { Accounts Receivable } & 2,100 & \\\hline \text { Prepaid Expenses } & 700 & \\\hline \text { Equipment } & 13,700 & \\\hline \text { Accumulated Depreciation } & & 1,100 \\\hline \text { Accounts Payable } & & 1,900 \\\hline \text { Notes Payable } & & 4,300 \\\hline \text { Common Stock } & & 1,000 \\\hline \text { Retained Earnings } & & 12,940 \\\hline \text { Dividends } & 790 & \\\hline \text { Fees Earned } & & 9,250 \\\hline \text { Wages Expense } & 2,500 & \\\hline \text { Rent Expense } & 1,960 & \\\hline \text { Utilities Expense } & 775 & \\\hline \text { Depreciation Expense } & 250 & \\\hline \text { Miscellaneous Expense } & 185 & \\\hline \text { Totals } & 30,490 & 30,490 \\\hline\end{array}$ -Determine total assets.

Which of the following is not an essential part of the accounting records?

The income statement columns in the end-of-period spreadsheet show that debits are equal to $55,800 and credits are $77,520.What does this information mean to the accountant?

On September 1,the company pays rent for twelve months in advance and debits an asset account.At year end,the adjusting entry on the work sheet would

$\begin{array}{c}\text { Finley Company }\\\text { End-of-Period Spreadsheet }\\\text { For the Year Ended December } 31\\\begin{array}{|l|r|r|}\hline {\text { Account Title }} & {\text { Debit }} & {\text { Credit }} \\\hline \text { Cash } & 48,000 & \\\hline \text { Accounts Receivable } & 18,000 & \\\hline \text { Supplies } & 6,000 & \\\hline \text { Equipment } & 57,000 & \\\hline \text { Accumulated Depr. } & & 18,000 \\\hline \text { Accounts Payable } & & 25,000 \\\hline \text { Wages Payable } & & 6,000 \\\hline \text { Common Stock } & & 30,000 \\\hline \text { Retained Earnings } & & 3,000 \\\hline \text { Dividends } & 3,000 & \\\hline \text { Fees Earned } & & 155,000 \\\hline \text { Wages Expense } & 63,000 & \\\hline \text { Rent Expense } & 27,000 & \\ \hline \text { Depreciation Expense } & 15,000 & \\\hline \text { Totals } & \underline{237,000} & \underline{237,000} \\\hline \text { Net Income Loss } & & \\\hline\\\hline\end{array}\begin{array}{r|r|r|r|}\hline \text { Debit } & \text { Credit } & \text { Debit } & \text { Credit } \\\hline & & 48,000 & \\\hline & & 18,000 & \\\hline & & 6,000 & \\\hline & & 57,000 & \\\hline & & & 18,000 \\\hline & & & 25,000 \\\hline & & & 6,000 \\\hline & & & 30,000 \\\hline & & & 3,000 \\\hline & & 3,000 & \\\hline & 155,000 & & \\\hline 3,000 & & & \\\hline 27,000 & & & \\\hline 15,000 & & & \\\hline 105,000 & 155,000 & 132,000 & 82,000 \\\hline 50,000 & & & 50,000 \\\hline 155,000 & \underline{155,000} & \underline{132,000} & \underline{132,000} \\\hline\end{array}\end{array}$ -The journal entry to close revenues would be:

You have just accepted your first job out of college,which requires you to evaluate loan requests at Eastwood National Bank.The first loan request you receive is from Richard Enterprises.Richard Tracy,the CEO,is requesting $105,000 and brings you the following trial balance or statement of accounts for the first year of operations ended December 31. Which of the following accounts do you think might need to be adjusted before an accurate set of financial statements could be prepared?

Unearned revenues that will be earned in a relatively short period of time are listed on the balance sheet as current assets.

Entries required to close the balances of the temporary accounts at the end of the period are called final entries.

The closing process is sometimes referred to as closing the books.

Examples of temporary accounts are Supplies and Prepaid Expenses,which are in the ledger for just a short time before they expire.

After all adjustments have been made,but before the accounts have been closed,the following balances were taken from the ledger of Ramona's Designs: $\begin{array}{l}\begin{array}{lll}\text { Accounts Payable } & \$ 27,600 \\\text { Accounts Receivable } & 64,500 \\\text { Accumulated Depreciation } & 73,325 \\\text { Cash } & 17,150 \\\text { Depreciation Expense } & 13,500 \\\text { Equipment } & 165,000 \\\text { Insurance Expense } & 2,510 \\\text { Prepaid Insurance } & 6,275\\\\\end{array}\begin{array}{lll}\text { Rent Expense } & \$ 32,700 \\\text { Salary Expense } & 41,390 \\\text { Salaries Payable } & 8,150 \\\text { Service Revenue } & 186,000 \\\text { Supplies } & 1,500 \\\text { Supplies Expense } & 2,500 \\\text { Common Stock } & 79,950 \\\text { Dividends } & 48,000 \\\text { Retained Earnings } & 20,000\end{array}\end{array}$ Journalize the entries to close the appropriate accounts.

Cash and other assets that may reasonably be expected to be realized in cash,sold,or consumed through the normal operations of a business,usually longer than one year,are called current assets.

Shores Sports rents canoes and kayaks.Below is the adjusted trial balance at December 31. $\begin{array}{lr}&\text { Debit }&\text { Credit }\\\text { Cash } & 1,500 \\\text { Accounts Receivable } & 2,000 \\\text { Interest Receivable } & 100 \\\text { Prepaid Insurance } & 1,600 \\\text { Notes Receivable Long-Term } & 2,800 \\\text { Equipment } & 15,000\\ \text { Accumulated Depreciation } &&3,000 \\ \text { Accounts Payable } &&2,400 \\ \text { Accrued Expenses Payable } &&3,920 \\ \text { Income Taxes Payable } &&2,700 \\ \text { Unearned Rent Fees } &&500 \\ \text {Common Stock} &&7,700 \\ \text { Dividends } &2,000\\ \text { Rent Fees Earned } &&37,000 \\ \text { Furniture Rental Revenue } &&1,200 \\ \text { Interest Revenue } &&100\\\text { Wages Expense } & 19,000 \\\text { Depreciation Expense } & 1,800 \\\text { Utilities Expense } & 320 \\\text { nsurance Expense } & 700 \\\text { Maintenance Expense } & 9,000 \\\text { ncome Tax Expense } & \underline { 2,700}& \underline { \quad \quad \quad } \\& \underline { 58,520}& \underline {58,520}\end{array}$ The entry required to close the revenue accounts at the end of the period includes a

The unadjusted,adjusted,and final trial balances are prepared during the accounting cycle of a period.