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COMPLETION OF ACCTG. CYCLE

Multiple Choice
Identify the choice that best completes the statement or answers the question.

1. Once the adjusting entries are posted, the Adjusted Trial Balance will prepared to
a. verify that the debits and credits are in balance.
b. verify that all of the adjustments were posted in the correct accounts.
c. verify that the net income (loss) is correct for the period.
d. verify the correct flow of accounts into the financial statements.

2. Which of the statements below indicates that a company earned a net income for the period?
a. The sum of the debits exceeds the sum of the credits in the Balance Sheet
columns on the work sheet.
b. The sum of the credits exceeds the sum of the debits in the Income Statement
columns on the work sheet.
c. The sum of the debits exceeds the sum of the credits in the Income Statement
columns on the work sheet.
d. Cash inflows exceeded cash outflows.

3. Which of the following accounts ordinarily appears in the post-closing trial balance?
a. Bill Smith, Drawing
b. Supplies Expense
c. Fees Earned
d. Unearned Rent

4. Net income appears on the work sheet in the

a. debit column of the Balance Sheet columns
b. debit column of the Adjustments columns
c. debit column of the Income Statement columns
d. credit column of the Income Statement columns

5. The journal entry to close the Fees Earned, 100, and Rent Revenue, 25, accounts on December 31st
during the closing process would be:
a. Dec 31 Fees Earned 100
Rent Revenue 25
Income Summary 125
b. Dec 31 Income Summary 125
Fees Earned 100
Rent Revenue 25
c. Dec 31 Revenues 125
Income Summary 125
d. Dec 31 Income Summary 125
Revenues 125

6. When a work sheet is complete, the adjustment columns should have

a. total credits greater than total debits if a net income was earned
b. total debits greater than total credits if a net loss was incurred
c. total debits greater than total credits if a net income was earned
d. total debits equal total credits

7. A net loss appears on the work sheet in the

a. debit column of the Balance Sheet columns
b. credit column of the Balance Sheet columns
c. debit column of the Income Statement columns
d. credit column of the Adjustments columns
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8. Balance sheet accounts

a. represent amounts accumulated during a specific period of time
b. are called real accounts
c. have zero balances after the closing entries have been posted
d. are equal to assets and liabilities

9. The following accounts were taken from the Adjusted Trial Balance columns of the work sheet:

Accumulated Depreciation   2,000

Fees Earned 15,000
Depreciation Expense 1,000
Insurance Expense 500
Prepaid Insurance 4,500
Supplies 1,200
Supplies Expenses 3,500

Net income for the period is

a. 2,300
b. 10,000
c. 4,300
d. 5,000

10. The post-closing trial balance differs from the adjusted trial balance in that it
a. does not take into account closing entries
b. does not take into account adjusting entries
c. does not include balance sheet accounts
d. does not include income statement accounts

11. Which of the following accounts will not be closed to Income Summary at the end of the fiscal year?
a. Salaries Expense
b. Fees Earned
c. Unearned Rent
d. Depreciation Expense

12. When preparing the Statement of Owner’s Equity the beginning balance should be followed by ____ to
arrive and the ending balance of owner’s equity.
a. investments plus net income (loss)
b. investments less withdrawals
c. net income (loss) less withdrawals
d. investments plus net income (loss) less withdrawals

13. What is the major difference between the Unadjusted Trial Balance and the Adjusted Trial Balance?
a. The Adjusted Trial Balance will show the net income (loss) as an additional
account.
b. Both will need to be in balance in order to continue with the end-of-period
processing
c. The Adjusted Trial Balance includes the postings of the adjustments for the period
in the balance of the accounts.
d. The Unadjusted Trial Balance will be used to record the adjustments for the
period.

14. The income summary account is also called

a. the closing account
b. the clearing account
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c. the nominal account

d. the temporary account

15. The worksheet

a. is an integral part of the accounting cycle
b. eliminates the need to rewrite the financial statements
c. is a working paper that is required
d. is used to summarize account balances and adjustments for the financial
statements

16. Which of the items below does not appear on the work sheet?
a. adjusting entries
b. the unadjusted trial balance
c. closing entries
d. the drawing account

17. The difference between the totals of the debit and credit columns of the Adjusted Trial Balance columns
on a work sheet
a. is the amount of net income or loss
b. indicates there is an error on the work sheet
c. is not unusual when preparing the work sheet
d. is the net difference between revenue, expenses, and drawing

18. The entry to close the appropriate insurance account at the end of the accounting period is
a. debit Income Summary; credit Prepaid Insurance
b. debit Prepaid Insurance; credit Income Summary
c. debit Insurance Expense; credit Income Summary
d. debit Income Summary; credit Insurance Expense

19. Fees receivable would appear on the balance sheet as a(n)

a. asset
b. liability
c. fixed asset
d. unearned revenue

20. The net income reported on the income statement is 90,000. However, adjusting entries have not been
made at the end of the period for supplies expense of 2,700 and accrued salaries of 1,300. Net income,
as corrected, is
a. 87,300
b. 90,000
c. 88,700
d. 86,000

21. In the accounting cycle, the last step is

a. preparing the financial statements
b. journalizing and posting the adjusting entries
c. preparing a post-closing trial balance
d. journalizing and posting the closing entries
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22. During the end-of-period processing which of the following best describes the logical order of this
process
a. Preparation of adjustments, adjusted trial balance, financial statements
b. Preparation of Income Statement, adjusted trial balance, Balance Sheet
c. Preparation of adjusted trial balance, cross-referencing, journalizing
d. Preparation of adjustments, adjusted trial balance, posting

23. Unearned Fees appear on the

a. balance sheet in the current assets section
b. balance sheet as a current liability
c. balance sheet in the owner's equity section
d. income statement as revenue

24. The income statement is prepared from the

a. adjusted trial balance
b. income statement columns of the work sheet
c. either the adjusted trial balance or the income statement columns of the work
sheet
d. both the adjusted trial balance and the income statement columns of the work
sheet

25. The income statement should be prepared

a. before the statement of owner’s equity and balance sheet
b. after the statement of owner’s equity and before the balance sheet
c. after the statement of owner’s equity and balance sheet
d. after the balance sheet and before the statement of owner’s equity

26. The Balance Sheet should be prepared

a. before the income statement and the statement of owner’s equity
b. before the income statement and after the statement of owner’s equity
c. after the income statement and the statement of owner’s equity
d. after the income statement and before the statement of owner’s equity

27. The owner’s equity is

a. added to assets and the two are equal to liabilities
b. added to liabilities and the two are equal to assets
c. subtract from liabilities and the net amount is equal to assets
d. subtract from owner’s equity and the net amount is equal to net income

28. On which financial statement will Income Summary be shown?

a. Statement of Owner's Equity
b. Balance Sheet
c. Income Statement
d. No financial statement

29. After posting the second closing entry to the income summary account, the balance will be equal to
a. zero.
b. owner’s equity.
c. revenues for the period
d. the net income or (loss) for the period.

30. What is the last account that should be listed in the Post Closing Trial Balance?
a. Income Summary
b. Capital account
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c. Cash
d. Fees Earned

31. Which of the following account groups are all considered nominal accounts?
a. Cash, Fees Earned, Unearned Revenues
b. Prepaid Expenses, Unearned Revenues, Fees Earned
c. Capital Account, Drawing Account, Income Summary
d. Drawing Account, Fees Earned, Rent Expense

32. There are four closing entries. The first one is to close ____, the second one is to close ____, the third
one is to close ____, and the last one is to close ____.
a. Revenues, expenses, income summary, drawing account
b. Expenses, assets, income summary, capital account
c. Capital account, drawing account, income summary, assets
d. Drawing account, income summary, expenses, revenues

33. Closing entries are dated in the journal as of

a. the date they are actually journalized, although they are generally prepared after
the end of the accounting period
b. the last day of the accounting period, although they are actually journalized after
the end of the accounting period
c. the first day of the accounting period, although they are actually journalized after
the end of the accounting period
d. the first day of the subsequent accounting period

34. Which of the accounts below would be closed by posting a debit to the account?
a. Unearned Revenue
b. Fees Earned
c. Jeff Ritter, Drawing
d. Rent Expense

35. Which of the following accounts should be closed to Income Summary at the end of the fiscal year?
a. Supplies Expense
b. Accumulated Depreciation
c. Prepaid Insurance
d. Unearned Rent

36. Which of the following accounts will be closed to the Capital account at the end of the fiscal year?
a. Rent Expense
b. Fees Earned
c. Income Summary
d. Depreciation Expense

37. A summary of selected ledger accounts appear below for Ted's Auto Services for the 2007 calendar
year end.

Ted, Capital
12/31 7,000 1/1 5,000
12/31 17,000

Ted, Drawing
6/30 2,000 12/31 7,000
11/30 5,000
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Income Summary
12/31 15,000 12/31 32,000
12/31 17,000

Net income for the period is

a. 17,000
b. 22,000
c. 7,000
d. 15,000

38. The following are steps to the accounting cycle. Of the following, which step should be done first.
a. Closing entries are journalized and posted to the ledger.
b. Transactions are posted to the ledger.
c. Adjusting entries are journalized and posted to the ledger.
d. Financial statements are prepared.

39. The accounting cycle requires three trial balances be done. In what order should they be prepared?
a. Post-closing, unadjusted, adjusted
b. Unadjusted, post-closing, adjusted
c. Unadjusted, adjusted, post-closing
d. Post-closing, adjusted, unadjusted

40. A fiscal year

a. ordinarily begins on the first day of a month and ends on the last day of the
following twelfth month
b. for a business is determined by the federal government
c. always begins on January 1 and ends on December 31 of the same year
d. should end at the height of the business's annual operating cycle

Mantle Company
Worksheet
For the Year Ended December 31, 2008

Adjusted Trial Income Balance Sheet

Balance Statement
Account Title Debit Credit Debit Credit Debit Credit
Cash 16,000 16,000
Accounts Receivable 6,000 6,000
Supplies 2,000 2,000
Equipment 19,000 19,000
Accumulated Depr- 6,000 6,000
Equip
Accounts Payable 10,000 10,000
Wages Payable 2,000 2,000
L. Mantle, Capital 11,000 11,000
L. Mantle, Drawing 1,000 1,000
Fees Earned 47,000 47,000
Wages Expense 21,000 21,000
Rent Expense 6,000 6,000
Depreciation Expense 5,000 5,000
Totals 76,000 76,000 32,000 47,000 44,000 29,000
Net Income (Loss) 15,000 15,000
47,000 47,000 44,000 44,000

41. The journal entry to close revenues would be:

a. debit Income Summary 47,000, credit Fees Earned 47,000
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b. debit L. Mantle, Capital 47,000, credit Fees Earned 47,000

c. debit Fees Earned 47,000; credit Income Summary 47,000
d. credit Fees Earned 47,000; credit L. Mantle, Capital 47,000

42. Based on the preceding trial balance, the entry to close L. Mantle, Drawing would be:
a. debit L. Mantle, Capital 1,000, credit L. Mantle, Drawing 1,000
b. debit L. Mantle, Capital 4,000, credit L. Mantle, Drawing 4,000
c. debit L. Mantle, Drawing 1,000; credit L. Mantle, Capital 1,000
d. debit L. Mantle, Drawing 4,000; credit L. Mantle, Capital 4,000

43. Based on the preceding trial balance, the entry to close income summary would be:
a. debit Income Summary 15,000; credit Owner’s Equity 4,000
b. debit Income Summary 47,000; credit Owner’s Equity 47,000
c. debit Income Summary 15,000, credit Owner’s Equity 15,000
d. debit Owner’s Equity 4,000; credit Income Summary 4,000

44. Based on the preceding trial balance, the entry to close expenses would be:
a. Wages Expense 21,000
Rent Expense 6,000
Depreciation Expense 5,000
Income Summary 32,000
b. Expenses 32,000
Income Summary 32,000
c. Wages Expense 21,000
Rent Expense 6,000
Depreciation Expense 5,000
L. Mantle, Drawing 32,000
d. Income Summary 32,000
Wages Expense 21,000
Rent Expense 6,000
Depreciation Expense 5,000

45. Based on the preceding trial balance, the ending balance in L. Mantle, Capital is:
a. 0
b. 25,000
c. 4,000
d. 1,000

The following is the adjusted trial balance for Steely Company.

Steely Company
Adjusted Trial Balance
For the Year ended December 31, 2008

Cash 6,130
Accounts Receivable 2,300
Prepaid Expenses 750
Equipment 13,400
Accumulated Depreciation 1,200
Accounts Payable 1,700
Notes Payable 5,000
Bob Steely, Capital 12,000
Bob Steely, Withdrawals 870
Fees Earned 6,600
Wages Expense 1,450
Rent Expense 900
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Utilities Expense 475

Depreciation Expense 150
Miscellaneous Expense 75
Totals 26,500 26,500

46. Determine the net income (loss) for the period.

a. Net Income 26,500
b. Net Loss 870
c. Net Loss 3,550
d. Net Income 3,550

47. Determine the owner’s equity ending balance for the period.
a. 14,680
b. 11,130
c. 15,550
d. 2,680

48. Determine total assets.

a. 26,500
b. 15,380
c. 21,380
d. 22,580

49. Determine the current assets.

a. 22,580
b. 9,180
c. 21,380
d. 26,500

50. Determine the total liabilities for the period.

a. 6,700
b. 1,700
c. 5,000
d. 18,700