chapter 4 Completing the Accounting Cycle

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The balance of the accumulated depreciation account on the adjusted trial balance of the end-of-period spreadsheet would flow into which of the following financial statements?

The balance sheet.

The balance of the owner’s drawing account on the adjusted trial balance of the end-of-period spreadsheet flows into which of the following financial statements?

The statement of owner’s equity

Which of the following is not true regarding the flow of information from the adjusted trial balance on the end-of-period spreadsheet?

The income summary balance flows into the income statement.

When pulling the owner’s capital balance from the end-of-period spreadsheet into the statement of owner’s equity, why is it also important to check the owner’s capital account in the general ledger?

There may have been additional investments made during the year reflected in the balance.

Which of the following will be reported in the subsection of the balance sheet called current assets?

Cash, accounts receivable, supplies

Which of the following are examples of subsections found on a classified balance sheet?

Current assets; long-term liabilities; property, plant, and equipment

The following is the statement of owner’s equity for Cloud Computer Service Company.

$6,837

The clearing account used to close the temporary accounts and which will also be closed before the finish of the accounting cycle is

Income Summary

What is the purpose of the income summary account?

Income Summary is used as a temporary clearing account to transfer the nominal accounts to the capital account.

The purpose of the post-closing trial balance is

to verify that the ledger is in balance at the beginning of the next period.

After the first two closing entries have been made, the Income Summary account has a debit of $49,850 and a credit of $78,200. The third closing entry would include

a debit to Income Summary for $28,350.

Of the following steps of the accounting cycle, which step should be completed last?

Closing entries are journalized and posted to the ledger

Of the following, which step is not a requirement during the accounting cycle?

An end-of-period spreadsheet is prepared.

Which of the following is not an actual step in the accounting cycle?

Decisions are made after reviewing the financial statements.

In which of the following steps of the accounting cycle will the clearing account be used?

Step 9: Journalizing and posting closing entries

What is the major difference between the post-closing trial balance and the other two trial balances?

The post-closing trial balance is the only one to include only real accounts.

The following are reasons to close the accounts at the end of the year except

to close all real accounts.

The fiscal year selected by a company

is not characterized by any of these answer choices.

A calendar year ends

on December 31 of each year.

Why is it favorable to select a fiscal year that ends when the operating cycle is at its lowest point?

The business has more time to analyze the results of operations and to prepare financial statements.

A Vail, Colorado snow ski supplier would most likely pick which of the following dates to end its fiscal year?

June 30

The ability to convert assets into cash is called

liquidity.

Working capital is

the excess of the current assets of a business over its current liabilities.

The numerator in the current ratio calculation is

Current Assets.

the following data were taken from the records of Menendez Company: What is Menendez Company’s working capital?

$1,500

Which of the following is true regarding the end-of-period spreadsheet?

Amounts are read across a row and added or subtracted to determine the amounts to insert in the Adjusted Trial Balance columns.

Using an end-of-period spreadsheet, the flow of accounting information moves from the

adjusted trial balance to the financial statements.

Which of the following will increase owner’s equity on the statement of owner’s equity?

Owner’s investments, net income

Based on the following information, determine the amount of equipment on the balance sheet. Total liabilities and owner’s equity equals $44,750; total current assets equals $19,800; land equals $15,000; and accumulated depreciation–equipment equals $1,550.

11500

Which of the following accounts will be closed with a credit?

Depreciation Expense

Which of the following is the last step of the posting process?

Enter the ledger account number in the Post. Ref. column of the journal

A company’s net income or net loss for a period is determined during which of the following steps of the accounting cycle?

When financial statements are prepared.

The annual accounting period (fiscal year) most commonly adopted by businesses is

January 1 to December 31.

The ability of a business to pay its debts is called

solvency

The following data were taken from the records of Action Company and Brown Company:

would be more eager to extend credit to Brown Company.

Which of the following is true regarding the flow of information from the adjusted trial balance on the end-of-period spreadsheet?

The revenue and expense account balances flow into the income statement.

The following data were taken from the records of Menendez Company:

1,43

Which of the following is not true regarding the flow of information from the adjusted trial balance on the end-of-period spreadsheet?

The income summary balance flows into the income statement.

The listing of expenses on the income statement is ordered

by size, beginning with the largest item and putting miscellaneous expense as the last item.

When pulling the owner’s capital balance from the end-of-period spreadsheet into the statement of owner’s equity, why is it also important to check the owner’s capital account in the general ledger?

There may have been additional investments made during the year reflected in the balance.

Based on the following information, determine the amount of net income or net loss. Total revenues equal $25,700 and total expenses equal $17,500.

net income of $8,200

Which of the following accounts will be closed with a debit?

revenue

Which of the following steps is optional during the closing process?

An end-of-period spreadsheet is prepared.

The posting of depreciation expense will be done during which step of the accounting cycle?

Step 6: Journalizing and posting adjusting entries

The natural business year ends

when business activities have reached the lowest point in a company’s annual operating cycle.

Which of the following entries need not be posted to the ledger?

all must be posted to ledger

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