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Exam 4: Completing the Accounting Cycle

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Question 41

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After posting the entries to close all revenue accounts and all expense accounts, the Income Summary account of Waif Services has a $4,000 debit balance. This result implies that Waif Services earned a net income of $4,000.

A) True
B) False

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Question 42

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Calculate the current ratio in each of the following separate cases.

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Question 43

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Presented below are the year-end balances at December 31 of Laura's Laundry Service. (All accounts have normal balances.) (a) Prepare the necessary closing entries at December 31. (b) Prepare a post-closing trial balance at December 31.

Use the information in the adjusted trial balance presented below to calculate the current ratio for Jones Company:

Journalizing and posting closing entries is a required step in the accounting cycle. Explain why it is necessary to close the books at the end of an accounting period.

The calendar year-end adjusted trial balance for Acosta Co. follows: Required: (a) Prepare a classified year-end balance sheet. (Note: A $7,000 installment on the long-term note payable is due within one year.) (b) Calculate the current ratio. Comment on the ability of Acosta Co. to meets its short-term debts.

Which of the following statements is incorrect?

The steps in the closing process are (1) close credit balances in revenue accounts to Income Summary; (2) close credit balances in expense accounts to Income Summary; (3) close Income Summary to Owner's Capital; (4) close Withdrawals to Owner's Capital.

Accounts that appear in the balance sheet are often called temporary (nominal) accounts.

The first five steps in the accounting cycle include analyzing transactions, journalizing, posting, preparing an unadjusted trial balance, and recording adjusting entries.

A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $200. This adjusting entry results in:

The J. Godfrey, Capital account has a credit balance of $17,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800, and withdrawals are $9,000, what is the ending balance in the J. Godfrey, Capital account after all closing entries are made?

The Income Summary account is a permanent account that will be carried forward period after period.

Long-term investments can include land held for future expansion.

Following are selected accounts and their balances for a company after the adjustments as of May 31, the end of its fiscal year. (All accounts have normal balances.) Prepare all the necessary closing entries for this company.

When closing entries are made:

Reversing entries are linked to ____________________ and _____________ that were created by adjusting entries at the end of the prior accounting period.

A company's ledger accounts and their end-of-period balances before closing entries are posted are shown below. What amount will be posted to Tricia DeBarre, Capital in the process of closing the Income Summary account? (Assume all accounts have normal balances.)

The purpose of reversing entries is to:

Revenue accounts should begin each accounting period with zero balances.