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Exam 4: The Accounting Cycle

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Question 1

Multiple Choice

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When the end-of-period spreadsheet 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 to total credits

E) None of the above
F) B) and D)

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D

Question 2

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Prepare closing entries from the following end-of-period spreadsheet.

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Question 3

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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?

Accumulated Depreciation is a permanent account.

Which of the following accounts will not be closed to Retained Earnings at the end of the fiscal year?

Prepaid expenses that benefit a relatively short period of time are listed on the balance sheet as current assets.

After the accounts have been adjusted on January 31, the end of the fiscal year, the following balances are taken from the ledger of Harrison's Dog Walking Service Company: Journalize the two entries required to close the accounts

Which one of the fixed asset accounts listed below will not have a related contra asset account?

On March 1, a company collects revenue in advance for the next twelve months and credits a liability account. The adjusting entry at year end on the end-of-period spreadsheet would

What is the first account that should be listed in the post-closing trial balance?

Use the adjusted trial balance for Stockton Company below to answer the questions that follow. ​ -Determine the net income (loss) for the period.

Use this end-of-period spreadsheet to answer the questions that follow.​ -The journal entry to close revenues and expenses would involve:

Balance sheet accounts

What does working capital measure?

The following information is available for four companies.​ Which company has the best short-term solvency position?

The balances for the accounts listed below appeared in the Adjusted Trial Balance columns of the end-of-period spreadsheet. Indicate whether each balance should be extended to (a) the Income Statement columns or (b) the Balance Sheet columns.

The end-of-period spreadsheet

The current ratio for the past three years for Xpert Styling is: What does the change in the current ratio from Year 1 to Year 3 indicate?

Identify which of the following accounts should be closed with a debit or a credit to Retained Earnings at the end of the fiscal year. If it is not closed to Retained Earnings, mark as n/a.​ 1. Utilities Payable 2. Utilities Expense 3. Supplies 4. Supplies Expense 5. Fees Earned 6. Unearned Fees 7. Accounts Receivable 8. Dividends 9. Retained Earnings 10. Accumulated Depreciation-Equipment 11. Depreciation Expense-Equipment 12. Equipment 13. Prepaid Insurance 14. Insurance Expense

Moringa Products Corporation had common stock of $820,000 and retained earnings of $1,250,000 on January 1. During the year $75,000 of common stock was issued. Dividends of $48,000 were paid. For the year ended December 31, Moringa reported a net income of $287,500. What is the retained earnings balance on December 31?