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Exam 4: Completing the Accounting Cycle

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Question 51

True/False

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Revenue and expense accounts are permanent (real)accounts and should not be closed at the end of the accounting period.

A) True
B) False

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Question 52

Multiple Choice

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Assets,liabilities,and equity accounts are not closed; these accounts are called:

A) Nominal accounts.
B) Temporary accounts.
C) Permanent accounts.
D) Contra accounts.
E) Accrued accounts.

F) C) and D)
G) A) and D)

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Question 53

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Explain the purpose of reversing entries.

The items that follow appeared in the Income Statement columns of the work sheet prepared for Armstrong Delivery Service at current year-end.In addition,L.Armstrong,Capital had a credit balance of $117,000 and L.Armstrong,Withdrawals had a debit balance of $30,000 at year end.Prepare closing journal entries for this company.

Excalibur frequently has accrued expenses at the end of its fiscal year that should be recorded for proper financial statement presentation.Excalibur pays on a weekly basis and has $50,000 of accrued salaries incurred but not paid for June 30,its fiscal year-end.This consists of one day's accrued salaries for the week.Excalibur will pay its employees $250,000 on July 4; the one day of accrued salaries and the remaining four days for July salaries.Record the following entries: (a)Accrual of the salaries on June 30. (b)Payment of the salaries on July 4,assuming that Excalibur does not prepare reversing entries. (c)Assuming that Excalibur prepares reversing entries,reverse the adjusting entry made on June 30. (d)Assuming that Excalibur prepares reversing entries,payment of the salaries on July 4.

The following information is available for the Travis Travel Agency.After these closing entries what will be the balance in the Jay Travis,Capital account? Total revenues………………. $125,000 Total expenses………………. 60,000 Jay Travis,Capital…………… 80,000 Jay Travis,Withdrawals……... 15,000

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

Another name for temporary accounts is:

Current liabilities include accounts receivable,unearned revenues,and salaries payable.

All of the following regarding current ratio are true except:

Accumulated Depreciation,Accounts Receivable,and Service Fees Earned would be sorted to which respective columns in completing a work sheet?

Employees of Artworld Co.have earned but have not been paid $3,500 in salaries for the last week of the current calendar year. (a)Prepare the necessary adjusting journal entry(ies)for Artworld at December 31 of the current year. (b)Assuming that Artworld makes reversing entries,prepare the necessary reversing entry.Include the appropriate date for the reversing entry(ies).

Explain why temporary accounts are closed each period.

Revenues,expenses,and withdrawals accounts,which are closed at the end of each accounting period are:

On a work sheet,the adjusted balances of revenues and expenses are sorted to the Income Statement columns of the work sheet.

All of the following statements regarding the Income Statement columns on the worksheet are true except:

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.)

A columnar working paper used to prepare a company's unadjusted trial balance,adjusting entries,adjusted trial balance,and financial statements,and which is an optional tool in the accounting process is a(n) :

All necessary numbers to prepare the balance sheet can be found in the balance sheet columns of the work sheet including ending owner's capital.

Since it is an important financial statement,the work sheet must be prepared according to specified accounting procedures.