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Exam 4: Completing the Accounting Cycle

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Question 91

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Which of the statements below indicates that a company earned a net income for the period?

A) The sum of the credits exceeds the sum of the debits in the Balance Sheet columns on the end-of-period spreadsheet.
B) The sum of the credits exceeds the sum of the debits in the Income Statement columns on the end-of-period spreadsheet.
C) The sum of the debits exceeds the sum of the credits in the Income Statement columns on the end-of-period spreadsheet.
D) Cash inflows exceed cash outflows.

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

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Question 92

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Which of the following accounts should be closed to Income Summary at the end of the fiscal year?

A) Service Revenue
B) Equipment
C) Prepaid Insurance
D) Unearned Rent

E) B) and D)
F) C) and D)

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Question 93

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Beachside Realty rents condominiums and furnishings. Below is the adjusted trial balance at December 31. $\begin{array}{|l|l|l|}\hline & \text { Debit } & \text { Credit } \\\hline \text { Cash } & 1,500 & \\\hline \text { Accounts Receivable } & 2,000 & \\\hline \text { Interest Receivable } & 100 & \\\hline \text { Prepaid Insurance } & 1,600 & \\\hline \text { Notes Receivable long-term) } & 2,800 & \\\hline \text { Equipment } & 15,000 & \\\hline \text { Accumulated Depreciation } & 3,000 \\\hline \text { A.ccounts Payable } & & 2,400 \\\hline \text { Accrued Expenses Payable } & & 3,920 \\\hline \text { Income Taxes Payable } & & 2,700 \\\hline \text { Unearned Rent Fees } & & 500 \\\hline \text { Common Stock } & & 5,000 \\\hline \text { Retained Earnings } & & 2,700 \\\hline \text { Dividends } & 2,000 & \\\hline \text { Rent Fees Earned } & & 37,000 \\\hline \text { Furniture Rental Revenue } & & 1,200 \\\hline \text { Interest Revenue } & & 100 \\\hline \text { Wages Expense } & 19,000 & \\\hline \text { Depreciation Expense } & 1,800 & \\\hline \text { Utilities Expense } & 320 & \\\hline \text { Insurance Expense } & 700 & \\\hline \text { Maintenance Expense } & 9,000 & \\\hline \text { Income Tax Expense } & 2,700 & \\\hline & 58,520 & 58,520 \\\hline\end{array}$ Prepare the entry required to close the revenue accounts at the end of the period.

Match each journal entry that follows as one of the types of journal entries a-c) below. -Accounts Receivable 325 Fees Earned 325 Customer billed for services performed.)

You evaluate loan requests as part of your job at Eastwood National Bank. One loan request you received is from Surfer Dude Supplies, a small company. Richard Tracy, the CEO, is requesting $105,000 and brings you a trial balance or statement of accounts) for his first year of operations ended December 31. While you are willing to work with Richard, how would you explain to him that a complete set of financial statements from his accountant would be more useful for evaluating the loan request?

The last step of the accounting cycle is to prepare a post-closing trial balance.

Which of the following accounts will not be closed to Income Summary at the end of the fiscal year?

The following revenue and expense account balances were taken from the Income Statement columns of the work sheet for Fraser Services Co. for December 31: $\begin{array} { l l } \text { Depreciation Expense } & \$ 4,950 \\\text { Insurance Expense } & 2,900 \\\text { Miscellaneous Expense } & 1,200 \\\text { Rent Expense } & 24,000 \\\text { Service Revenue } & 92,500 \\\text { Supplies Expense } & 3,150 \\\text { Utilities Expense } & 5,000 \\\text { Wages Expense } & 63,750\end{array}$ Prepare an income statement.

On the basis of the following data taken from the Adjusted Trial Balance columns of the work sheet for the year ended March 31 for Banes Domino's Corporation, journalize the four closing entries.

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?

An indication that the end-of-period spreadsheet columns are in balance and the spreadsheet is complete is

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

Which of the accounts below would not appear in the balance sheet columns of the end-of-period spreadsheet?

After the account balances have been extended from the Adjusted Trial Balance columns on the work sheet, the difference between the initial totals of the Balance Sheet debit and credit columns is Net Income or Net Loss.

After Net Income or Loss is entered on the work sheet, the debit column total must equal the credit column total for the Balance Sheet pair of columns.

The income summary account is also known as the clearing account.

During the end-of-period processing, which of the following best describes the logical order of steps?

The post-closing trial balance will generally have fewer accounts than the trial balance.

Net income is shown on the work sheet in the Income Statement debit column and the Balance Sheet credit column.

Closing entries