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Ch04 - Test Bank for Financial Accounting: IFRS Edition,
3eCHAPTER 4
Financial Accounting (Abu Dhabi University)
COMPLETING THE
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CHAPTER 4
COMPLETING THE ACCOUNTING CYCLE
CHAPTER LEARNING OBJECTIVES
1. Prepare a worksheet. The steps in preparing a worksheet are as follows: (a) Prepare a trial
balance on the worksheet. (b) Enter the adjustments in the adjustments columns. (c) Enter
adjusted balances in the adjusted trial balance columns. (d) Extend adjusted trial balance
amounts to appropriate financial statement columns. (e) Total the statement columns,
compute net income (or net loss), and complete the worksheet.
2. Explain the process of closing the books. Closing the books occurs at the end of an
accounting period. The process is to journalize and post closing entries and then underline
and balance all accounts. In closing the books, companies make separate entries to close
revenues and expenses to Income Summary, Income Summary to Retained Earnings, and
Dividends to Retained Earnings. Only temporary accounts are closed.
3. Describe the content and purpose of a post-closing trial balance. A post-closing trial
balance contains the balances in permanent accounts that are carried forward to the next
accounting period. The purpose of this trial balance is to prove the equality of these
balances.
4. State the required steps in the accounting cycle. The required steps in the accounting
cycle are (1) analyze business transactions, (2) journalize the transactions, (3) post to
ledger accounts, (4) prepare a trial balance, (5) journalize and post adjusting entries, (6)
prepare an adjusted trial balance, (7) prepare financial statements, (8) journalize and post
closing entries, and (9) prepare a post-closing trial balance.
5. Explain the approaches to preparing correcting entries. One way to determine the
correcting entry is to compare the incorrect entry with the correct entry. After comparison,
the company makes a correcting entry to correct the accounts. An alternative to a correcting
entry is to reverse the incorrect entry and then prepare the correct entry.
6. Identify the sections of a classified statement of financial position. A classified
statement of financial position categorizes assets as intangibles; property, plant, and
equipment; long-term investments; and current assets. Liabilities are classified as either
non-current or current. There is also an equity section, which varies with the form of
business organization.
a
7. Prepare reversing entries. Reversing entries are the opposite of the adjusting entries
made in the preceding period. Some companies choose to make reversing entries at the
beginning of a new accounting period to simplify the recording of later transactions related to
the adjusting entries. In most cases, only accrued adjusting entries are reversed.
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4-2
Test Bank for Financial Accounting: IFRS Edition, 3e
TRUE-FALSE STATEMENTS
1.
A worksheet is a mandatory form that must be prepared along with an income statement
and statement of financial position.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
2.
If a worksheet is used, financial statements can be prepared before adjusting entries are
journalized.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
3.
If total credits in the income statement columns of a worksheet exceed total debits, the
enterprise has net income.
Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
4.
It is not necessary to prepare formal financial statements if a worksheet has been
prepared because financial position and net income are shown on the worksheet.
Ans: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
5.
The adjustments on a worksheet can be posted directly to the accounts in the ledger from
the worksheet.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
6.
The adjusted trial balance columns of a worksheet are obtained by subtracting the
adjustment columns from the trial balance columns.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
7.
The balance of the depreciation expense account will appear in the income statement
debit column of a worksheet.
Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
8.
The procedures used to prepare the worksheet are the same under both IFRS and GAAP.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
9.
The last 2 columns on a worksheet prepared under IFRS contains data for the Retained
Earnings Statements.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
10.
The format of the data in the Statement of Financial Position columns of the worksheet is
the same as the format of the Statement of Financial Position.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
11.
No permanent account balances are changed in the closing process.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
12.
Closing entries are unnecessary if the business plans to continue operating in the future
and issue financial statements each year.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
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Completing the Accounting Cycle
13.
4-3
The Dividends account is closed to the Income Summary account in order to properly
determine net income (or loss) for the period.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
14.
After closing entries have been journalized and posted, all temporary accounts in the
ledger should have zero balances.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
15.
Closing revenue and expense accounts to the Income Summary account is an optional
bookkeeping procedure.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
16.
Closing the Dividends account to Retained Earnings is not necessary if net income is
greater than dividends paid during the period.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
17.
The Dividends account is a permanent account whose balance is carried forward to the
next accounting period.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
18.
Closing entries are journalized after adjusting entries have been journalized.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
19.
The amounts appearing on an income statement should agree with the amounts
appearing on the post-closing trial balance.
Ans: F, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
20.
The post-closing trial balance is entered in the first two columns of a worksheet.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
21.
The post-closing trial balance only contains Statement of Financial Position account
balances.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
22.
The purpose of the post-closing trial balances is to prove the equality of the Statement of
Financial Position.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
23.
The order of the accounts in the post-closing trial balance is the same order as the
accounts appearing in the Statement of Financial Position.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
24.
The preparation of a Statement of Financial Position is a required step in the accounting
cycle.
Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
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4-4
25.
Test Bank for Financial Accounting: IFRS Edition, 3e
Step number 6 in the accounting cycle includes preparation of the Statement of Financial
Position.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
26.
A business entity has only one accounting cycle over its economic existence.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
27.
Both correcting entries and adjusting entries always affect at least one statement of
financial position account and one income statement account.
Ans: F, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
28.
Correcting entries are made any time an error is discovered even though it may not be at
the end of an accounting period.
Ans: T, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
29.
An incorrect debit to Accounts Receivable instead of the correct account Notes
Receivable does not require a correcting entry because total assets will not be misstated.
Ans: F, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
30.
Correcting entries will never affect statement of financial position accounts.
Ans: F, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
31.
Current assets are the first category of assets reported on the Statement of Financial
Position.
Ans: F, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
32.
IFRS permits the noncurrent classifications to be reported before the current
classifications on the statement of financial position
Ans: T, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
33.
IFRS requires that current assets be reported on the statement of financial position in the
order of their liquidity.
Ans: F, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
34.
A company's operating cycle and fiscal year are usually the same length of time.
Ans: F, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
35.
Cash and office supplies are both classified as current assets.
Ans: T, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
36.
Long-term investments would appear in the property, plant, and equipment section of the
statement of financial position.
Ans: F, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
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Completing the Accounting Cycle
37.
4-5
A liability is classified as a current liability if the company is to pay it within the forthcoming
year.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
38.
A company's liquidity is concerned with the relationship between long-term investments
and long-term debt.
Ans: F, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: Problem Solving, IMA:
Business Economics
39.
Intangible assets are customarily the first items listed on a classified statement of financial
position.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
40.
The operating cycle of a company is determined by the number of years the company has
been operating.
Ans: F, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
a
41.
Reversing entries are an optional bookkeeping procedure.
Ans: T, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
a
42.
Reversing entries will always affect statement of financial position accounts.
Ans: T, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
a
43.
The use of reversing entries will change the amounts reported in the statement of financial
position.
Ans: F, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
44.
After a worksheet has been completed, the statement columns contain all data that are
required for the preparation of financial statements.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
45.
To close net income to Retained Earnings Income Summary is debited and Retained
Earnings is credited.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
46.
In one closing entry, the Dividends account is credited and Income Summary is debited.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
47.
The post-closing trial balance will contain only statement of equity accounts and statement
of financial position accounts.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
48.
The operating cycle of a company is the average time required to collect the receivables
resulting from producing revenues.
Ans: F, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: Business Economics
For Instructor Use Only
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4-6
49.
Test Bank for Financial Accounting: IFRS Edition, 3e
Current assets are listed in the reverse order of liquidity.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
50.
Current liabilities are obligations that the company is to pay within the coming year.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
Answers to True-False Statements
Item
1.
2.
3.
4.
5.
6.
7.
8.
Ans.
F
T
T
F
F
F
T
T
Item
9.
10.
11.
12.
13.
14.
15.
16.
Ans.
F
F
F
F
F
T
F
F
Item
17.
18.
19.
20.
21.
22.
23.
24.
Ans.
F
T
F
F
T
F
F
T
Item
25.
26.
27.
28.
29.
30.
31.
32.
Ans.
F
F
F
T
F
F
F
T
Item
33.
34.
35.
36.
37.
38.
39.
40.
Ans.
Item
F
F
T
F
T
F
T
F
a
41.
42.
43.
44.
45.
46.
47.
48.
Ans.
T
T
F
T
T
F
F
F
Item
49.
50.
Ans.
T
T
MULTIPLE CHOICE QUESTIONS
51.
Preparing a worksheet involves
a. two steps.
b. three steps.
c. four steps.
d. five steps.
Ans: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
52.
The adjustments entered in the adjustments columns of a worksheet are
a. not journalized.
b. posted to the ledger but not journalized.
c. not journalized until after the financial statements are prepared.
d. journalized before the worksheet is completed.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
53.
The information for preparing a trial balance on a worksheet is obtained from
a. financial statements.
b. general ledger accounts.
c. general journal entries.
d. business documents.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
For Instructor Use Only
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Completing the Accounting Cycle
54.
4-7
After the adjusting entries are journalized and posted to the accounts in the general
ledger, the balance of each account should agree with the balance shown on the
a. adjusted trial balance.
b. post-closing trial balance.
c. the general journal.
d. adjustments columns of the worksheet.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
55.
If the total debit column exceeds the total credit column of the income statement columns
on a worksheet, then the company has
a. earned net income for the period.
b. an error because debits do not equal credits.
c. suffered a net loss for the period.
d. to make an adjusting entry.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
56.
A worksheet is a multiple column form that facilitates the
a. identification of events.
b. measurement process.
c. preparation of financial statements.
d. analysis process.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
57.
Computing net income on the worksheet occurs in step
a. two.
b. three.
c. four.
d. five.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
58.
A worksheet can be thought of as a(n)
a. permanent accounting record.
b. optional device used by accountants.
c. part of the general ledger.
d. part of the journal.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
59.
The Supplies account appears in which of the following debit columns of the worksheet?
a. Trial balance
b. Adjusted trial balance
c. Statement of financial position
d. All of these answer choices are correct.
Ans: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
For Instructor Use Only
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4-8
60.
Test Bank for Financial Accounting: IFRS Edition, 3e
When constructing a worksheet, accounts are often needed that are not listed in the trial
balance already entered on the worksheet from the ledger. Where should these additional
accounts be shown on the worksheet?
a. They should be inserted in alphabetical order into the trial balance accounts already
given.
b. They should be inserted in chart of account order into the trial balance already given.
c. They should be inserted on the lines immediately below the trial balance totals.
d. They should not be inserted on the trial balance until the next accounting period.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
61.
When using a worksheet, adjusting entries are journalized
a. after the worksheet is completed and before financial statements are prepared.
b. before the adjustments are entered on to the worksheet.
c. after the worksheet is completed and after financial statements are prepared.
d. before the adjusted trial balance is extended to the proper financial statement
columns.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
62.
Assuming that there is a net loss for the period, debits equal credits in all but which
section of the worksheet?
a. Income statement columns
b. Adjustments columns
c. Trial balance columns
d. Adjusted trial balance columns
Ans: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
63.
Adjusting entries are prepared from
a. source documents.
b. the adjustments columns of the worksheet.
c. the general ledger.
d. last year's worksheet.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
64.
The net income (or loss) for the period
a. is found by computing the difference between the income statement credit column and
the statement of financial position credit column on the worksheet.
b. cannot be found on the worksheet.
c. is found by computing the difference between the income statement columns of the
worksheet.
d. is found by computing the difference between the trial balance totals and the adjusted
trial balance totals.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
For Instructor Use Only
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Completing the Accounting Cycle
65.
4-9
The worksheet does not show
a. net income or loss for the period.
b. revenue and expense account balances.
c. the ending balance in Retained Earnings .
d. the trial balance before adjustments.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
66.
If the total debits exceed total credits in the statement of financial position columns of the
worksheet, equity
a. will increase because net income has occurred.
b. will decrease because a net loss has occurred.
c. is in error because a mistake has occurred.
d. will not be affected.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
67.
The income statement and statement of financial position columns of Reed Company's
worksheet reflect the following totals:
Totals
Income Statement
Dr.
Cr.
$58,000
$45,000
Statement of Financial Position
Dr.
Cr.
$34,000
$47,000
The net income (or loss) for the period is
a. $45,000 income.
b. $13,000 income.
c. $13,000 loss.
d. not determinable.
Ans: C, LO: 1, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
68.
The income statement and statement of financial position columns of Reed Company's
worksheet reflect the following totals:
Totals
Income Statement
Dr.
Cr.
$58,000
$45,000
Statement of Financial Position
Dr.
Cr.
$34,000
$47,000
To enter the net income (or loss) for the period into the above worksheet requires an entry
to the
a. income statement debit column and the statement of financial position credit column.
b. income statement credit column and the statement of financial position debit column.
c. income statement debit column and the income statement credit column.
d. statement of financial position debit column and the statement of financial position
credit column.
Ans: B, LO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
Downloaded by fht reg (enf.internet@gmail.com)
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4 - 10
69.
Test Bank for Financial Accounting: IFRS Edition, 3e
The Statement of Financial Position columns of the worksheet contain data for what
financial statement?
a. Income Statement.
b. Retained Earnings Statement.
c. Statement of Cash Flows.
d. None of these answer choices are correct.
Ans: B, LO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
Use the following data, taken from the adjusted trial balance, for 70 and 71.
Debit
Cash
Accounts Receivable
Supplies
Accounts Payable
Unearned Service Revenue
Share Capital-Ordinary
Retained Earnings
Dividends
Service Revenue
Salaries and Wages Expense
Miscellaneous Expense
Supplies Expense
Salaries and Wages Payable
Total
70.
Credit
€ 5,712
3,904
480
€ 2,792
160
5,000
1,760
300
4,064
1,344
256
2,228
€14,224
448
€14,224
What amount will be reflected for Retained Earnings in the Statement of Financial Position
columns of the worksheet?
a. €1,996
b. €1,760
c. €1,696
d. €2,060
Ans: B, LO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
71.
What will be the total of the Statement of Financial Position credit column?
a. €14,224
b. €10,160
c. €13,988
d. €10,396
Ans: D, LO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
72.
Which of the following accounts is least likely to have its balance change on the
worksheet?
a. Salaries and Wages Payable.
b. Supplies.
c. Accumulated Depreciation.
d. Share Capital-Ordinary.
Ans: D, LO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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Completing the Accounting Cycle
73.
4 - 11
Which of the following permanent account is changed during the closing process?
a. Share Capital-Ordinary.
b. Retained Earnings.
c. Unearned Service Revenue.
d. None of these answer choices are correct.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
74.
The temporary account balances ultimately wind up in what account?
a. Income Summary.
b. Retained Earnings.
c. Share Capital-Ordinary.
d. Comprehensive Income.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
75.
The permanent accounts appear on which financial statement?
a. Statement of Financial Position.
b. Income Statement.
c. Retained Earnings Statement.
d. Statement of Cash Flows.
Ans: A, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
76.
Closing entries are necessary for
a. permanent accounts only.
b. temporary accounts only.
c. both permanent and temporary accounts.
d. permanent or real accounts only.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
77.
Each of the following accounts is closed to Income Summary except
a. Expenses.
b. Dividends.
c. Revenues.
d. All of these answer choices are correct.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA:
FSA
78.
Closing entries are made
a. in order to terminate the business as an operating entity.
b. so that all assets, liabilities, and equity accounts will have zero balances when the
next accounting period starts.
c. in order to transfer net income (or loss) and dividends to Retained Earnings.
d. so that financial statements can be prepared.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
For Instructor Use Only
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4 - 12
79.
Test Bank for Financial Accounting: IFRS Edition, 3e
Closing entries are
a. an optional step in the accounting cycle.
b. posted to the ledger accounts from the worksheet.
c. made to close permanent or real accounts.
d. journalized in the general journal.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
80.
The Income Summary account
a. is a permanent account.
b. appears on the statement of financial position.
c. appears on the income statement.
d. is a temporary account.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
81.
If Income Summary has a credit balance after revenues and expenses have been closed
into it, the closing entry for Income Summary will include a
a. debit to Retained Earnings.
b. debit to Dividends.
c. credit to Retained Earnings.
d. credit to Dividends.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
82.
Closing entries are journalized and posted
a. before the financial statements are prepared.
b. after the financial statements are prepared.
c. at management's discretion.
d. at the end of each interim accounting period.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
83.
Closing entries
a. are prepared before the financial statements.
b. reduce the number of permanent accounts.
c. cause the revenue and expense accounts to have zero balances.
d. summarize the activity in every account.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
84.
Which of the following is a true statement about closing the books of a corporation?
a. Expenses are closed to the Expense Summary account.
b. Only revenues are closed to the Income Summary account.
c. Revenues and expenses are closed to the Income Summary account.
d. Revenues, expenses, and the Dividends account are closed to the Income Summary
account.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
For Instructor Use Only
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Completing the Accounting Cycle
85.
4 - 13
Closing entries may be prepared from all but which one of the following sources?
a. Adjusted balances in the ledger
b. Income statement and statement of financial position columns of the worksheet
c. Statement of financial position
d. Income and retained earnings statements
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
86.
In order to close the Dividends account, the
a. income summary account should be debited.
b. income summary account should be credited.
c. retained earnings account should be credited.
d. retained earnings account should be debited.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
87.
In preparing closing entries
a. each revenue account will be credited.
b. each expense account will be credited.
c. the retained earnings account will be debited if there is net income for the period.
d. the dividends account will be debited.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
88.
The most efficient way to accomplish closing entries is to
a. credit the income summary account for each revenue account balance.
b. debit the income summary account for each expense account balance.
c. credit the dividends account balance directly to the income summary account.
d. credit the income summary account for total revenues and debit the income summary
account for total expenses.
Ans: D, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
89.
The closing entry process consists of closing
a. all asset and liability accounts.
b. out the retained earnings account.
c. all permanent accounts.
d. all temporary accounts.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
90.
The final closing entry to be journalized is typically the entry that closes the
a. revenue accounts.
b. dividends account.
c. retained earnings account.
d. expense accounts.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
For Instructor Use Only
Downloaded by fht reg (enf.internet@gmail.com)
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4 - 14
91.
Test Bank for Financial Accounting: IFRS Edition, 3e
An error has occurred in the closing entry process if
a. revenue and expense accounts have zero balances.
b. the retained earnings account is credited for the amount of net income.
c. the dividends account is closed to the retained earnings account.
d. the statement of financial position accounts have zero balances.
Ans: D, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
92.
The Income Summary account is an important account that is used
a. during interim periods.
b. in preparing adjusting entries.
c. annually in preparing closing entries.
d. annually in preparing correcting entries.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
93.
The balance in the income summary account before it is closed will be equal to
a. the net income or loss on the income statement.
b. the beginning balance in the retained earnings account.
c. the ending balance in the retained earnings account.
d. zero.
Ans: A, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
94.
After closing entries are posted, the balance in the retained earnings account in the ledger
will be equal to
a. the beginning retained earnings reported on the retained earnings statement.
b. the amount of the retained earnings reported on the statement of financial position.
c. zero.
d. the net income for the period.
Ans: B, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
95.
The income statement for the month of June, 2017 of Taylor Enterprises contains the
following information:
Revenues
Expenses:
Salaries and Wages Expense
Rent Expense
Supplies Expense
Advertising Expense
Insurance Expense
Total expenses
Net income
₤16,000
₤4,000
3,000
600
400
200
8,200
₤7,800
The entry to close the revenue account includes a
a. debit to Income Summary for ₤7,800.
b. credit to Income Summary for ₤7,800.
c. debit to Income Summary for ₤16,000.
d. credit to Income Summary for ₤16,000.
Ans: D, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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Completing the Accounting Cycle
96.
4 - 15
The income statement for the month of June, 2017 of Taylor Enterprises contains the
following information:
Revenues
Expenses:
Salaries and Wages Expense
Rent Expense
Supplies Expense
Advertising Expense
Insurance Expense
Total expenses
Net income
₤16,000
₤4,000
3,000
600
400
200
8,200
₤7,800
The entry to close the expense accounts includes a
a. debit to Income Summary for ₤7,800.
b. credit to Rent Expense for ₤3,000.
c. credit to Income Summary for ₤8,200.
d. debit to Salaries and Wages Expense for ₤2,000.
Ans: B, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
97.
The income statement for the month of June, 2017 of Taylor Enterprises contains the
following information:
Revenues
Expenses:
Salaries and Wages Expense
Rent Expense
Supplies Expense
Advertising Expense
Insurance Expense
Total expenses
Net income
₤16,000
₤4,000
3,000
600
400
200
8,200
₤7,800
After the revenue and expense accounts have been closed, the balance in Income
Summary will be
a. ₤0.
b. a debit balance of ₤7,800.
c. a credit balance of ₤7,800.
d. a credit balance of ₤16,000.
Ans: C, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
Downloaded by fht reg (enf.internet@gmail.com)
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4 - 16
98.
Test Bank for Financial Accounting: IFRS Edition, 3e
The income statement for the month of June, 2017 of Taylor Enterprises contains the
following information:
Revenues
Expenses:
Salaries and Wages Expense
Rent Expense
Supplies Expense
Advertising Expense
Insurance Expense
Total expenses
Net income
₤16,000
₤4,000
3,000
600
400
200
8,200
₤7,800
The entry to close Income Summary to Retained Earnings includes
a. a debit to Revenue for ₤16,000.
b. credits to Expenses totalling ₤8,200.
c. a credit to Income Summary for ₤7,800
d. a credit to Retained Earnings for ₤7,800.
Ans: D, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
99.
The income statement for the month of June, 2017 of Taylor Enterprises contains the
following information:
Revenues
Expenses:
Salaries and Wages Expense
Rent Expense
Supplies Expense
Advertising Expense
Insurance Expense
Total expenses
Net income
₤16,000
₤4,000
3,000
600
400
200
8,200
₤7,800
At June 1, 2017, Taylor reported Retained Earnings of ₤70,000. The company paid no
dividends during June. At June 30, 2017, the company will report Retained Earnings of
a. ₤70,000.
b. ₤86,000.
c. ₤77,800.
d. ₤62,200.
Ans: C, LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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Completing the Accounting Cycle
100.
4 - 17
The income statement for the year 2017 of Poole Co. contains the following information:
Revenues
Expenses:
Salaries and Wages Expense
Rent Expense
Advertising Expense
Supplies Expense
Utilities Expense
Insurance Expense
Total expenses
Net income (loss)
$150,000
$90,000
32,000
12,000
12,000
5,000
4,000
155,000
$ (5,000)
The entry to close the revenue account includes a
a. debit to Income Summary for $5,000.
b. credit to Income Summary for $5,000.
c. debit to Revenues for $150,000.
d. credit to Revenues for $150,000.
Ans: C, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
101.
The income statement for the year 2017 of Poole Co. contains the following information:
Revenues
Expenses:
Salaries and Wages Expense
Rent Expense
Advertising Expense
Supplies Expense
Utilities Expense
Insurance Expense
Total expenses
Net income (loss)
$150,000
$90,000
32,000
12,000
12,000
5,000
4,000
155,000
$ (5,000)
The entry to close the expense accounts includes a
a. debit to Income Summary for $5,000.
b. credit to Income Summary for $5,000.
c. debit to Income Summary for $155,000.
d. debit to Salaries and Wages Expense for $90,000.
Ans: C, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
Downloaded by fht reg (enf.internet@gmail.com)
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4 - 18
102.
Test Bank for Financial Accounting: IFRS Edition, 3e
The income statement for the year 2017 of Poole Co. contains the following information:
Revenues
Expenses:
Salaries and Wages Expense
Rent Expense
Advertising Expense
Supplies Expense
Utilities Expense
Insurance Expense
Total expenses
Net income (loss)
$150,000
$90,000
32,000
12,000
12,000
5,000
4,000
155,000
$ (5,000)
After the revenue and expense accounts have been closed, the balance in Income
Summary will be
a. $0.
b. a debit balance of $5,000.
c. a credit balance of $5,000.
d. a credit balance of $150,000.
Ans: B, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
103.
The income statement for the year 2017 of Poole Co. contains the following information:
Revenues
Expenses:
Salaries and Wages Expense
Rent Expense
Advertising Expense
Supplies Expense
Utilities Expense
Insurance Expense
Total expenses
Net income (loss)
$150,000
$90,000
32,000
12,000
12,000
5,000
4,000
155,000
$ (5,000)
The entry to close Income Summary to Retained Earnings includes
a. a debit to Revenue for $150,000.
b. credits to Expenses totalling $155,000.
c. a credit to Income Summary for $5,000.
d. a credit to Retained Earnings for $5,000.
Ans: C, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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Completing the Accounting Cycle
104.
4 - 19
The income statement for the year 2017 of Poole Co. contains the following information:
Revenues
Expenses:
Salaries and Wages Expense
Rent Expense
Advertising Expense
Supplies Expense
Utilities Expense
Insurance Expense
Total expenses
Net income (loss)
$150,000
$90,000
32,000
12,000
12,000
5,000
4,000
155,000
$ (5,000)
At January 1, 2017, Poole reported Retained Earnings of $100,000. Dividends for the
year totalled $20,000. At December 31, 2017, the company will report Retained Earnings
of
a. $35,000.
b. $75,000.
c. $80,000.
d. $85,000.
Ans: B, LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
105.
The income statement for the year 2017 of Poole Co. contains the following information:
Revenues
Expenses:
Salaries and Wages Expense
Rent Expense
Advertising Expense
Supplies Expense
Utilities Expense
Insurance Expense
Total expenses
Net income (loss)
$150,000
$90,000
32,000
12,000
12,000
5,000
4,000
155,000
$ (5,000)
After all closing entries have been posted, the Income Summary account will have a
balance of
a. $0.
b. $5,000 debit.
c. $5,000 credit.
d. $75,000 credit.
Ans: A, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
Downloaded by fht reg (enf.internet@gmail.com)
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4 - 20
106.
Test Bank for Financial Accounting: IFRS Edition, 3e
The income statement for the year 2017 of Poole Co. contains the following information:
Revenues
Expenses:
Salaries and Wages Expense
Rent Expense
Advertising Expense
Supplies Expense
Utilities Expense
Insurance Expense
Total expenses
Net income (loss)
$150,000
$90,000
32,000
12,000
12,000
5,000
4,000
145,000
$ (5,000)
After all closing entries have been posted, the revenue account will have a balance of
a. $0.
b. $150,000 credit.
c. $150,000 debit.
d. $5,000 credit.
Ans: A, LO: 2, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
107.
A post-closing trial balance is prepared
a. after closing entries have been journalized and posted.
b. before closing entries have been journalized and posted.
c. after closing entries have been journalized but before the entries are posted.
d. before closing entries have been journalized but after the entries are posted.
Ans: A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
108.
All of the following statements about the post-closing trial balance are correct except it
a. shows that the accounting equation is in balance.
b. provides evidence that the journalizing and posting of closing entries have been
properly completed.
c. contains only permanent accounts.
d. proves that all transactions have been recorded.
Ans: D, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
109.
A post-closing trial balance will show
a. only permanent account balances.
b. only temporary account balances.
c. zero balances for all accounts.
d. the amount of net income (or loss) for the period.
Ans: A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
110.
A post-closing trial balance should be prepared
a. before closing entries are posted to the ledger accounts.
b. after closing entries are posted to the ledger accounts.
c. before adjusting entries are posted to the ledger accounts.
d. only if an error in the accounts is detected.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
For Instructor Use Only
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Completing the Accounting Cycle
111.
4 - 21
A post-closing trial balance will show
a. zero balances for all accounts.
b. zero balances for statement of financial position accounts.
c. only statement of financial position accounts.
d. only income statement accounts.
Ans: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
112.
The purpose of the post-closing trial balance is to
a. prove that no mistakes were made.
b. prove the equality of the statement of financial position account balances that are
carried forward into the next accounting period.
c. prove the equality of the income statement account balances that are carried forward
into the next accounting period.
d. list all the statement of financial position accounts in alphabetical order for easy
reference.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
113.
The balances that appear on the post-closing trial balance will match the
a. income statement account balances after adjustments.
b. statement of financial position account balances after closing entries.
c. income statement account balances after closing entries.
d. statement of financial position account balances after adjustments.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
114.
Which account listed below would be double ruled in the ledger as part of the closing
process?
a. Cash
b. Retained Earnings
c. Dividends
d. Accumulated Depreciation
Ans: C, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
115.
A double rule applied to accounts in the ledger during the closing process implies that
a. the account is an income statement account.
b. the account is a statement of financial position account.
c. the account balance is not zero.
d. a mistake has been made, since double ruling is prescribed.
Ans: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
116.
The heading for a post-closing trial balance has a date line that is similar to the one found on
a. a statement of financial position.
b. an income statement.
c. a retained earnings statement.
d. a worksheet.
Ans: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
For Instructor Use Only
Downloaded by fht reg (enf.internet@gmail.com)
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4 - 22
117.
Test Bank for Financial Accounting: IFRS Edition, 3e
Which account balance will change between the adjusted trial balance and the postclosing trial balance?
a. Retained Earnings
b. Share Capital-Ordinary
c. Interest Payable
d. Accumulated Depreciation
Ans: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
118.
Which one of the following is usually prepared only at the end of a company's annual
accounting period?
a. Preparing financial statements
b. Journalizing and posting adjusting entries
c. Journalizing and posting closing entries
d. Preparing an adjusted trial balance
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
119.
The step in the accounting cycle that is performed on a periodic basis (i.e., monthly,
quarterly) is
a. analyzing transactions.
b. journalizing and posting adjusting entries.
c. preparing a post-closing trial balance.
d. posting to ledger accounts.
Ans: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
120.
Which one of the following is an optional step in the accounting cycle of a business
enterprise?
a. Analyze business transactions
b. Prepare a worksheet
c. Prepare a trial balance
d. Post to the ledger accounts
Ans: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
121.
The final step in the accounting cycle is to prepare
a. closing entries.
b. financial statements.
c. a post-closing trial balance.
d. adjusting entries.
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
122.
Which of the following steps in the accounting cycle would not generally be performed
daily?
a. Journalize transactions
b. Post to ledger accounts
c. Prepare adjusting entries
d. Analyze business transactions
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
For Instructor Use Only
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Completing the Accounting Cycle
123.
4 - 23
Which of the following steps in the accounting cycle may be performed most frequently?
a. Prepare a post-closing trial balance
b. Journalize closing entries
c. Post closing entries
d. Prepare a trial balance
Ans: D, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
124.
Which of the following depicts the proper sequence of steps in the accounting cycle?
a. Journalize the transactions, analyze business transactions, prepare a trial balance
b. Prepare a trial balance, prepare financial statements, prepare adjusting entries
c. Prepare a trial balance, prepare adjusting entries, prepare financial statements
d. Prepare a trial balance, post to ledger accounts, post adjusting entries
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
125.
The two optional steps in the accounting cycle are preparing
a. a post-closing trial balance and reversing entries.
b. a worksheet and post-closing trial balances.
c. reversing entries and a worksheet.
d. an adjusted trial balance and a post-closing trial balance.
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
126.
The first required step in the accounting cycle is
a. reversing entries.
b. journalizing transactions in the book of original entry.
c. analyzing transactions.
d. posting transactions.
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
127.
Correcting entries
a. always affect at least one balance sheet account and one income statement account.
b. affect income statement accounts only.
c. affect statement of financial position accounts only.
d. may involve any combination of accounts in need of correction.
Ans: D, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
128.
Topeka Bike Company received a $920 check from a customer for the balance due. The
transaction was erroneously recorded as a debit to Cash $290 and a credit to Service
Revenue $290. The correcting entry is
a. debit Cash, $920; credit Accounts Receivable, $920.
b. debit Cash, $630 and Accounts Receivable, $290; credit Service Revenue, $920.
c. debit Cash, $630 and Service Revenue, $290; credit Accounts Receivable, $920.
d. debit Accounts Receivable, $920; credit Cash, $630 and Service Revenue, $290.
Ans: C, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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4 - 24
129.
Test Bank for Financial Accounting: IFRS Edition, 3e
If errors occur in the recording process, they
a. should be corrected as adjustments at the end of the period.
b. should be corrected as soon as they are discovered.
c. should be corrected when preparing closing entries.
d. cannot be corrected until the next accounting period.
Ans: B, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
130.
A correcting entry
a. must involve one statement of financial position account and one income statement
account.
b. is another name for a closing entry.
c. may involve any combination of accounts.
d. is a required step in the accounting cycle.
Ans: C, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
131.
An unacceptable way to make a correcting entry is to
a. reverse the incorrect entry.
b. erase the incorrect entry.
c. compare the incorrect entry with the correct entry and make a correcting entry to
correct the accounts.
d. correct it immediately upon discovery.
Ans: B, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
132.
Farr Company paid the weekly payroll on January 2 by debiting Salaries and Wages
Expense for $75,000. The accountant preparing the payroll entry overlooked the fact that
Salaries and Wages Expense of $45,000 had been accrued at year end on December 31.
The correcting entry is
a. Salaries and Wages Payable...............................................
45,000
Cash.........................................................................
45,000
b. Cash....................................................................................
30,000
Salaries and Wages Expense..................................
30,000
c. Salaries and Wages Payable...............................................
45,000
Salaries and Wages Expense..................................
45,000
d. Cash....................................................................................
45,000
Salaries and Wages Expense..................................
45,000
Ans: C, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
For Instructor Use Only
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Completing the Accounting Cycle
133.
4 - 25
Stine Company paid €850 on account to a creditor. The transaction was erroneously
recorded as a debit to Cash of €580 and a credit to Accounts Receivable, €580. The
correcting entry is
a. Accounts Payable................................................................
850
Cash.........................................................................
850
b. Accounts Receivable...........................................................
580
Cash.........................................................................
580
c. Accounts Receivable...........................................................
580
Accounts Payable....................................................
580
d. Accounts Receivable...........................................................
580
Accounts Payable................................................................
850
Cash.........................................................................
1,430
Ans: D, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
134.
A lawyer collected $620 of legal fees in advance. He erroneously debited Cash for $260
and credited Accounts Receivable for $260. The correcting entry is
a. Cash....................................................................................
260
Accounts Receivable...........................................................
360
Unearned Service Revenue.....................................
620
b. Cash....................................................................................
620
Service Revenue......................................................
620
c. Cash....................................................................................
360
Accounts Receivable...........................................................
260
Unearned Service Revenue.....................................
620
d. Cash....................................................................................
360
Accounts Receivable................................................
360
Ans: C, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
135.
On May 25, Carlin Company received a $550 check from Andy Jeter for services to be
performed in the future. The bookkeeper for Carlin Company incorrectly debited Cash for
$550 and credited Accounts Receivable for $550. The amounts have been posted to the
ledger. To correct this entry, the bookkeeper should:
a. debit Cash $550 and credit Unearned Service Revenue $550.
b. debit Accounts Receivable $550 and credit Service Revenue $550.
c. debit Accounts Receivable $550 and credit Cash $550.
d. debit Accounts Receivable $550 and credit Unearned Service Revenue $550.
Ans: D, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
For Instructor Use Only
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4 - 26
136.
Test Bank for Financial Accounting: IFRS Edition, 3e
On March 8, Fernetti Company bought office supplies on account from the Flint Company for
$550. Fernetti Company incorrectly debited Equipment for $500 and credited Accounts
Payable for $500. The entries have been posted to the ledger. the correcting entry should be:
a. Supplies...............................................................................
550
Accounts Payable..........................................................
550
b. Supplies...............................................................................
550
Accounts Payable..........................................................
500
Equipment......................................................................
50
c. Supplies...............................................................................
550
Equipment......................................................................
550
d. Supplies...............................................................................
550
Equipment......................................................................
500
Accounts Payable..........................................................
50
Ans: D, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
137.
The following information (in thousands) is for Zháng Office Supplies:
Zháng Office Supplies
Statement of Financial Position
December 31, 2017
Trademark
Land
Buildings
Less:Accum.
Depreciation
Land Held for
Investment
Prepaid
Insurance
Inventory
Accounts
Receivable
Cash
Total Assets
¥360,000
¥280,000 Share Capital ¥480,000
Retained
Earnings
1,000,000
¥400,000
80,000
¥1,480,000
320,000
680,000
Accounts
300,000 Payable
Salaries
Wages
120,000 Payable
Mortgage
280,000 Payable
240,000
40,000
360,000
640,000
200,000
260,000
Total Equity
¥2,120,000 and Liabilities
¥ 2,120,000
The total amount of assets to be classified as current assets is
a. ¥1,160,000.
b. ¥860,000.
c. ¥720,000.
d. ¥580,000.
Ans: B, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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Completing the Accounting Cycle
138.
4 - 27
The following information (in thousands) is for Zháng Office Supplies:
Zháng Office Supplies
Statement of Financial Position
December 31, 2017
Trademark
Land
Buildings
Less:Accum.
Depreciation
Land Held for
Investment
Prepaid
Insurance
Inventory
Accounts
Receivable
Cash
Total Assets
¥360,000
¥280,000 Share Capital ¥480,000
Retained
Earnings
1,000,000
¥400,000
80,000
¥1,480,000
320,000
680,000
Accounts
300,000 Payable
Salaries
Wages
120,000 Payable
Mortgage
280,000 Payable
240,000
40,000
360,000
640,000
200,000
260,000
Total Equity
¥2,120,000 and Liabilities
¥ 2,120,000
The total amount of assets to be classified as property, plant, and equipment is
a. ¥1,280,000.
b. ¥680,000.
c. ¥980,000.
d. ¥760,000.
Ans: B, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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4 - 28
139.
Test Bank for Financial Accounting: IFRS Edition, 3e
The following information (in thousands) is for Zháng Office Supplies:
Zháng Office Supplies
Statement of Financial Position
December 31, 2017
Trademark
Land
Buildings
Less:Accum.
Depreciation
Land Held for
Investment
Prepaid
Insurance
Inventory
Accounts
Receivable
Cash
Total Assets
¥360,000
¥280,000 Share Capital ¥480,000
Retained
Earnings
1,000,000
¥400,000
80,000
¥1,480,000
320,000
680,000
300,000 Accounts
Payable
120,000 Salaries
Wages
Payable
280,000 Mortgage
Payable
200,000
240,000
40,000
360,000
640,000
260,000
¥2,120,000 Total Equity
and Liabilities
¥ 2,120,000
The total amount of assets to be classified as investments is
a. ¥0.
b. ¥600,000.
c. ¥300,000.
d. ¥720,000.
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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Completing the Accounting Cycle
140.
4 - 29
The following information (in thousands) is for Zháng Office Supplies:
Zháng Office Supplies
Statement of Financial Position
December 31, 2017
Trademark
Land
Buildings
Less:Accum.
Depreciation
Land Held for
Investment
Prepaid
Insurance
Inventory
Accounts
Receivable
Cash
Total Assets
¥360,000
¥280,000 Share Capital ¥480,000
Retained
Earnings
1,000,000
¥400,000
80,000
¥1,480,000
320,000
680,000
300,000 Accounts
Payable
120,000 Salaries
Wages
Payable
280,000 Mortgage
Payable
200,000
240,000
40,000
360,000
640,000
260,000
¥2,120,000 Total Equity
and Liabilities
¥ 2,120,000
The total amount of liabilities to be classified as current liabilities is
a. ¥280,000.
b. ¥240,000.
c. ¥600,000.
d. ¥640,000.
Ans: A, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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4 - 30
141.
Test Bank for Financial Accounting: IFRS Edition, 3e
The following information is for Acme Auto Supplies:
Acme Auto Supplies
Statement of Financial Position
December 31, 2017
Trademark
$
Land
420,000 Share Capital
Retained
Earnings
$570,000
Buildings
$720,000
1,500,000
$600,000
Less:Accum.
Depreciation
Land Held for
Investment
180,000
420,000
990,000
480,000
Prepaid Insurance
Accounts
240,000 Payable
Inventory
Salaries/Wages
420,000 Payable
Accounts
Receivable
Mortgage
300,000 Payable
Cash
360,000
Total Assets
Total Equity
$ 3,210,000 and Liabilities
390,000
60,000
540,000
990,000
$ 2,220,000
$ 3,210,000
The total dollar amount of assets to be classified as current assets is
a. $1,320,000.
b. $900,000.
c. $1,800,000.
d. $1,080,000.
Ans: A, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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Completing the Accounting Cycle
142.
4 - 31
The following information is for Acme Auto Supplies:
Acme Auto Supplies
Statement of Financial Position
December 31, 2017
Trademark
$
Land
420,000 Share Capital
$570,000
Buildings
Retained
Earnings
$720,000
1,500,000
$600,000
Less:Accum.
Depreciation
180,000 420,000
990,000
Land Held for
Investment
480,000
Prepaid Insurance
240,000 Accounts
Payable
Inventory
420,000 Salaries/Wages
Payable
Accounts
Receivable
300,000 Mortgage
Payable
Cash
360,000
Total Assets
$ 3,210,000 Total Equity
and Liabilities
390,000
60,000
540,000
990,000
$ 2,220,000
$ 3,210,000
The total dollar amount of assets to be classified as property, plant, and equipment is
a. $1,890,000.
b. $1,470,000.
c. $990,000.
d. $1,170,000.
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
Downloaded by fht reg (enf.internet@gmail.com)
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4 - 32
143.
Test Bank for Financial Accounting: IFRS Edition, 3e
The following information is for Acme Auto Supplies:
Acme Auto Supplies
Statement of Financial Position
December 31, 2017
Trademark
$
Land
420,000 Share Capital
$570,000
Buildings
Retained
Earnings
$720,000
1,500,000
$600,000
Less:Accum.
Depreciation
180,000 420,000
990,000
Land Held for
Investment
480,000
Prepaid Insurance
240,000 Accounts
Payable
Inventory
420,000 Salaries/Wages
Payable
Accounts
Receivable
300,000 Mortgage
Payable
Cash
360,000
Total Assets
$ 3,210,000 Total Equity
and Liabilities
390,000
60,000
540,000
990,000
$ 2,220,000
$ 3,210,000
The total dollar amount of assets to be classified as investments is
a. $0.
b. $900,000.
c. $480,000.
d. $1,080,000.
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
Downloaded by fht reg (enf.internet@gmail.com)
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Completing the Accounting Cycle
144.
4 - 33
The following information is for Acme Auto Supplies:
Acme Auto Supplies
Statement of Financial Position
December 31, 2017
Trademark
$
Land
420,000 Share Capital
$570,000
Buildings
Retained
Earnings
$720,000
1,500,000
$600,000
Less:Accum.
Depreciation
180,000 420,000
990,000
Land Held for
Investment
480,000
Prepaid Insurance
240,000 Accounts
Payable
Inventory
420,000 Salaries/Wages
Payable
Accounts
Receivable
300,000 Mortgage
Payable
Cash
360,000
Total Assets
390,000
60,000
540,000
$ 3,210,000 Total Equity
and Liabilities
990,000
$ 2,220,000
$ 3,210,000
The total dollar amount of liabilities to be classified as current liabilities is
a. $390,000.
b. $450,000.
c. $930,000.
d. $990,000.
Ans: B, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
145.
All of the following are property, plant, and equipment except
a. supplies.
b. machinery.
c. land.
d. buildings.
Ans: A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
146.
The first item listed under current liabilities is usually
a. accounts payable.
b. notes payable.
c. salaries and wages payable.
d. taxes payable.
Ans: B, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
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4 - 34
147.
Test Bank for Financial Accounting: IFRS Edition, 3e
Equipment is classified in the statement of financial position as
a. a current asset.
b. property, plant, and equipment.
c. an intangible asset.
d. a long-term investment.
Ans: B, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
148.
A current asset is
a. the last asset purchased by a business.
b. an asset which is currently being used to produce a product or service.
c. usually found as a separate classification in the income statement.
d. an asset that a company expects to convert to cash or use up within one year.
Ans: D, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
149.
An intangible asset
a. does not have physical substance, yet often is very valuable.
b. is worthless because it has no physical substance.
c. is converted into a tangible asset during the operating cycle.
d. cannot be classified on the statement of financial position because it lacks physical
substance.
Ans: A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
150.
Liabilities are generally classified on a statement of financial position as
a. small liabilities and large liabilities.
b. present liabilities and future liabilities.
c. tangible liabilities and intangible liabilities.
d. current liabilities and non-current liabilities.
Ans: D, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
151.
Which of the following would not be classified as a non-current liability?
a. Current maturities of long-term debt
b. Bonds payable
c. Mortgage payable
d. Lease liabilities
Ans: A, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
152.
Which of the following liabilities are not related to the operating cycle?
a. Salaries and wages payable
b. Accounts payable
c. Utilities payable
d. Bonds payable
Ans: D, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
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Completing the Accounting Cycle
153.
4 - 35
Intangible assets include each of the following except
a. copyrights.
b. goodwill.
c. land improvements.
d. patents.
Ans: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
154.
It is not true that current assets are assets that a company expects to
a. realize in cash within one year.
b. sell within one year.
c. use up within one year.
d. acquire within one year.
Ans: D, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
155.
The operating cycle of a company is the average time that is required to go from cash to
a. sales in producing revenues.
b. cash in producing revenues.
c. inventory in producing revenues.
d. accounts receivable in producing revenues.
Ans: B, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
156.
On a classified statement of financial position, current assets are customarily listed
a. in alphabetical order.
b. with the largest dollar amounts first.
c. in the reverse order of liquidity.
d. in the order of acquisition.
Ans: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
157.
Intangible assets are
a. listed under current assets on the statement of financial position.
b. not listed on the statement of financial position because they do not have physical
substance.
c. non-current resources.
d. listed as a long-term investment on the statement of financial position.
Ans: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
158.
The relationship between current assets and current liabilities is important in evaluating a
company's
a. profitability.
b. liquidity.
c. market value.
d. accounting cycle.
Ans: B, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Risk Analysis, AICPA PC: Problem
Solving, IMA: Business Economics
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4 - 36
159.
Test Bank for Financial Accounting: IFRS Edition, 3e
The most important information needed to determine if companies can pay their current
obligations is the
a. net income for this year.
b. projected net income for next year.
c. relationship between current assets and current liabilities.
d. relationship between short-term and non-current liabilities.
Ans: C, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Risk Analysis, AICPA PC: Problem
Solving, IMA: Business Economics
160.
The following items (in thousands) are taken from the financial statements of Huang
Company for the year ending December 31, 2017:
Accounts payable
Accounts receivable
Accumulated depreciation–equipment
Advertising expense
Cash
Share capital-ordinary
Dividends
Depreciation expense
Equipment
Insurance expense
Note payable, due 6/30/18
Prepaid insurance (12-month policy)
Rent expense
Retained earnings (1/1/17)
Salaries and wages expense
Service revenue
Supplies
Supplies expense
¥ 72,000
44,000
112,000
84,000
60,000
168,000
56,000
48,000
840,000
12,000
280,000
24,000
68,000
240,000
128,000
532,000
16,000
24,000
What is the company’s net income for the year ending December 31, 2017?
a. ¥532,000
b. ¥168,000
c. ¥112,000
d. ¥48,000
Ans: B, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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Completing the Accounting Cycle
161.
4 - 37
The following items (in thousands) are taken from the financial statements of Huang
Company for the year ending December 31, 2017:
Accounts payable
Accounts receivable
Accumulated depreciation – equipment
Advertising expense
Cash
Share capital-ordinary
Dividends
Depreciation expense
Equipment
Insurance expense
Note payable, due 6/30/18
Prepaid insurance (12-month policy)
Rent expense
Retained earnings (1/1/17)
Salaries and wages expense
Service revenue
Supplies
Supplies expense
¥ 72,000
44,000
112,000
84,000
60,000
168,000
56,000
48,000
840,000
12,000
280,000
24,000
68,000
240,000
128,000
532,000
16,000
24,000
What is the balance that would be reported for equity at December 31, 2017?
a. ¥408,000
b. ¥520,000
c. ¥576,000
d. ¥632,000
Ans: B, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
162.
The following items (in thousands) are taken from the financial statements of Huang
Company for the year ending December 31, 2017:
Accounts payable
Accounts receivable
Accumulated depreciation – equipment
Advertising expense
Cash
Share capital-ordinary
Dividends
Depreciation expense
Equipment
Insurance expense
Note payable, due 6/30/18
Prepaid insurance (12-month policy)
Rent expense
Retained earnings (1/1/17)
Salaries and wages expense
Service revenue
Supplies
Supplies expense
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¥ 72,000
44,000
112,000
84,000
60,000
168,000
56,000
48,000
840,000
12,000
280,000
24,000
68,000
240,000
128,000
532,000
16,000
24,000
lOMoARcPSD|9361320
4 - 38
Test Bank for Financial Accounting: IFRS Edition, 3e
Multiple Choice 162. (Cont.)
What are total current assets at December 31, 2017?
a. ¥104,000
b. ¥128,000
c. ¥144,000
d. ¥872,000
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
163.
The following items (in thousands) are taken from the financial statements of Huang
Company for the year ending December 31, 2017:
Accounts payable
Accounts receivable
Accumulated depreciation–equipment
Advertising expense
Cash
Share capital-ordinary
Dividends
Depreciation expense
Equipment
Insurance expense
Note payable, due 6/30/18
Prepaid insurance (12-month policy)
Rent expense
Retained earnings (1/1/17)
Salaries and wages expense
Service revenue
Supplies
Supplies expense
¥ 72,000
44,000
112,000
84,000
60,000
168,000
56,000
48,000
840,000
12,000
280,000
24,000
68,000
240,000
128,000
532,000
16,000
24,000
What is the book value of the equipment at December 31, 2017?
a. ¥952,000
b. ¥840,000
c. ¥728,000
d. ¥680,000
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
164.
The following items (in thousands) are taken from the financial statements of Huang
Company for the year ending December 31, 2017:
Accounts payable
Accounts receivable
Accumulated depreciation–equipment
Advertising expense
Cash
Share capital-ordinary
Dividends
Depreciation expense
Equipment
Insurance expense
Note payable, due 6/30/18
Prepaid insurance (12-month policy)
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¥ 72,000
44,000
112,000
84,000
60,000
168,000
56,000
48,000
840,000
12,000
280,000
24,000
lOMoARcPSD|9361320
Completing the Accounting Cycle
Multiple Choice 164.
4 - 39
(Cont.)
Rent expense
Retained earnings (1/1/17)
Salaries and wages expense
Service revenue
Supplies
Supplies expense
68,000
240,000
128,000
532,000
16,000
24,000
What are total current liabilities at December 31, 2017?
a. ¥72,000
b. ¥280,000
c. ¥352,000
d. ¥0
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
165.
The following items (in thousands) are taken from the financial statements of Huang
Company for the year ending December 31, 2017:
Accounts payable
Accounts receivable
Accumulated depreciation–equipment
Advertising expense
Cash
Share capital-ordinary
Dividends
Depreciation expense
Equipment
Insurance expense
Note payable, due 6/30/18
Prepaid insurance (12-month policy)
Rent expense
Retained earnings (1/1/17)
Salaries and wages expense
Service revenue
Supplies
Supplies expense
¥ 72,000
44,000
112,000
84,000
60,000
168,000
56,000
48,000
840,000
12,000
280,000
24,000
68,000
240,000
128,000
532,000
16,000
24,000
What are total non-current liabilities at December 31, 2017?
a. ¥0
b. ¥280,000
c. ¥352,000
d. ¥360,000
Ans: A, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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4 - 40
166.
Test Bank for Financial Accounting: IFRS Edition, 3e
The following items (in thousands) are taken from the financial statements of Huang
Company for the year ending December 31, 2017:
Accounts payable
Accounts receivable
Accumulated depreciation–equipment
Advertising expense
Cash
Share capital-ordinary
Dividends
Depreciation expense
Equipment
Insurance expense
Note payable, due 6/30/18
Prepaid insurance (12-month policy)
Rent expense
Retained earnings (1/1/17)
Salaries and wages expense
Service revenue
Supplies
Supplies expense
¥ 72,000
44,000
112,000
84,000
60,000
168,000
56,000
48,000
840,000
12,000
280,000
24,000
68,000
240,000
128,000
532,000
16,000
24,000
What is total equity and liabilities at December 31, 2017?
a. ¥704,000
b. ¥760,000
c. ¥872,000
d. ¥928,000
Ans: C, LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
167.
The following items (in thousands) are taken from the financial statements of Huang
Company for the year ending December 31, 2017:
Accounts payable
Accounts receivable
Accumulated depreciation–equipment
Advertising expense
Cash
Share capital-ordinary
Dividends
Depreciation expense
Equipment
Insurance expense
Note payable, due 6/30/18
Prepaid insurance (12-month policy)
Rent expense
Retained earnings (1/1/17)
Salaries and wages expense
Service revenue
Supplies
Supplies expense
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¥ 72,000
44,000
112,000
84,000
60,000
168,000
56,000
48,000
840,000
12,000
280,000
24,000
68,000
240,000
128,000
532,000
16,000
24,000
lOMoARcPSD|9361320
Completing the Accounting Cycle
Multiple Choice 167.
4 - 41
(Cont.)
The sub-classifications for assets on the company’s classified statement of financial
position would include all of the following except
a. Current Assets.
b. Property, Plant, and Equipment.
c. Intangible Assets.
d. Long-term Assets.
Ans: D, LO: 6, Bloom: K, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
168.
The following items (in thousands) are taken from the financial statements of Huang
Company for the year ending December 31, 2017:
Accounts payable
Accounts receivable
Accumulated depreciation–equipment
Advertising expense
Cash
Share capital-ordinary
Dividends
Depreciation expense
Equipment
Insurance expense
Note payable, due 6/30/18
Prepaid insurance (12-month policy)
Rent expense
Retained earnings (1/1/17)
Salaries and wages expense
Service revenue
Supplies
Supplies expense
¥ 72,000
44,000
112,000
84,000
60,000
168,000
56,000
48,000
840,000
12,000
280,000
24,000
68,000
240,000
128,000
532,000
16,000
24,000
The current assets should be listed on Huang’s statement of financial position in the
following order
a. accounts receivable, prepaid insurance, equipment, cash.
b. accounts receivable, prepaid insurance, supplies, cash.
c. prepaid insurance, supplies, accounts, receivable, cash.
d. equipment, supplies, prepaid insurance, accounts receivable, cash.
Ans: C, LO: 6, Bloom: K, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
169.
Which statement about long-term investments is not true?
a. They will be held for more than one year.
b. They are not currently used in the operation of the business.
c. They include investments in shares of other companies and land held for future use.
d. They can never include cash accounts.
Ans: D, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
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4 - 42
170.
Test Bank for Financial Accounting: IFRS Edition, 3e
What is the order in which assets are generally listed on a classified statement of financial
position?
a. Current and long-term.
b. Intangible assets; long-term investments; property, plant, and equipment; current.
c. Long-term investments; property, plant, and equipment; intangible assets; current
d. Intangible assets; property, plant, and equipment; long-term investments; current.
Ans: D, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
171. These are selected account balances on December 31, 2017.
Land (location of the corporation’s office building)
Land (held for future use)
Office Building
Inventory
Equipment
Office Furniture
Accumulated Depreciation
$400,000
600,000
2,900,000
800,000
1,800,000
400,000
1,200,000
What is the total amount of property, plant, and equipment that will appear on the
statement of financial position?
a. $5,700,000
b. $4,900,000
c. $6,900,000
d. $4,300,000
Ans: D, LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
172.
The following selected account balances appear on the December 31, 2017 statement of
financial position of Chen Co.
Land (location of the corporation’s office building)
Land (held for future use)
Office Building
Inventory
Equipment
Office Furniture
Accumulated Depreciation
$300,000
450,000
2,400,000
600,000
1,350,000
300,000
900,000
What is the total amount of property, plant, and equipment that will be reported on the
statement of financial position?
a. $4,500,000
b. $3,900,000
c. $5,400,000
d. $3,450,000
Ans: D, LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
173.
Which classification of assets will appear first in the Statement of Financial Position?
a. Current Assets.
b. Long-term investments.
c. Property,Plant and Equipment.
d. Intangible Assets.
Ans: D, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
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Completing the Accounting Cycle
174.
4 - 43
Which classification of assets will appear last in the Statement of Financial Position?
a. Intangible Assets.
b. Current Assets.
c. Long-term investments.
d. Property,Plant and Equipment.
Ans: B, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
175.
Which account will appear last under the current assets classification on the Statement of
Financial Position?
a. Accounts Receivable.
b. Prepaid Expenses.
c. Short-term investments.
d. Cash.
Ans: D, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
176.
Which of the following classification appears last in the Statement of Financial Position?
a. Non-current Liabilities.
b. Equity.
c. Current Liabilities.
d. Reserves.
Ans: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
177.
Which of the following is in the proper position?
a. Equity;Current Liabilities;Non-current Liabilities.
b. Equity;Non-current Liabilities;Current Liabilities.
c. Current Liabilities;Non-current Liabilities;Equity.
d. Non-Current Liabilities; Current Liabilities;Equity.
Ans: B, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
178.
The following data (in thousands) is available for Chang Company.
Debit
Credit
Mortgage payable
Prepaid expenses
Equipment
Patents
Short-term investments
Notes payable in 2018
Cash
Accumulated depreciation
Accounts payable
Notes payable after 2018
Share capital-ordinary
Retained earnings
Accounts receivable
Inventories
Total
¥ 2,829
¥ 2,640
34,500
792
11,070
1,443
8,004
16,965
4,332
1,104
30,000
9,189
5,088
3,768
¥ 65,862
¥ 65,862
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4 - 44
Test Bank for Financial Accounting: IFRS Edition, 3e
Multiple Choice 178.
(Cont.)
Total assets on the Statement of Financial Position for 2017 are:
a. ¥65,862.
b. ¥48,897.
c. ¥82,827.
d. ¥46,257.
Ans: B, LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
179.
The following data (in thousands) is available for Chang Company.
Credit
Debit
Mortgage payable
Prepaid expenses
Equipment
Patents
Short-term investments
Notes payable in 2018
Cash
Accumulated depreciation
Accounts payable
Notes payable after 2018
Share capital-ordinary
Retained earnings
Accounts receivable
Inventories
Total
¥ 2,829
¥ 2,640
34,500
792
11,070
1,443
8,004
16,965
4,332
1,104
30,000
9,189
5,088
3,768
¥ 65,862
¥ 65,862
The subtotal of the last asset classification on the 2014 Statement of Financial Position is:
a. ¥17,535.
b. ¥27,930.
c. ¥34,500.
d. ¥30,570.
Ans: D, LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
180.
The following data (in thousands) is available for Chang Company.
Debit
Credit
Mortgage payable
Prepaid expenses
Equipment
Patents
Short-term investments
Notes payable in 2018
Cash
Accumulated depreciation
Accounts payable
Notes payable after 2018
Share capital-ordinary
¥ 2,829
¥ 2,640
34,500
792
11,070
1,443
8,004
16,965
4,332
1,104
30,000
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lOMoARcPSD|9361320
Completing the Accounting Cycle
Multiple Choice 180.
4 - 45
(Cont.)
Retained earnings
Accounts receivable
Inventories
Total
9,189
5,088
3,768
¥ 65,862
¥ 65,862
The subtotal of the first asset classification on the 2017 Statement of Financial Position is:
a. ¥30,570
b. ¥27,930
c. ¥792
d. ¥11,070
Ans: C, LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
181.
The following data (in thousands) is available for Chang Company.
Debit
Credit
Mortgage payable
Prepaid expenses
Equipment
Patents
Short-term investments
Notes payable in 2018
Cash
Accumulated depreciation
Accounts payable
Notes payable after 2018
Share capital-ordinary
Retained earnings
Accounts receivable
Inventories
Total
¥ 2,829
¥ 2,640
34,500
792
11,070
1,443
8,004
16,965
4,332
1,104
30,000
9,189
5,088
3,768
¥ 65,862
¥ 65,862
The subtotal of the last equity and liabilities classification on the 2017 Statement of
Financial Position is:
a. ¥5,775.
b. ¥3,933.
c. ¥39,189.
d. ¥4,332.
Ans: A, LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
182.
Which of the following is in the proper order?
a. Cash; Short-term Investments; Accounts Receivable; Inventories; Supplies.
b. Cash; Short-term Investments; Inventories; Accounts Receivable; Supplies.
c. Supplies; Inventories; Accounts Receivables; Short-term Investments; Cash.
d. Supplies; Accounts Receivables; Inventories; Short-term Investments; Cash.
Ans: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
For Instructor Use Only
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4 - 46
183.
Test Bank for Financial Accounting: IFRS Edition, 3e
Which of the following accounts does not appear in the Statement of Financial Position?
a. Retained Earnings
b. Unearned Revenues
c. Dividends
d. Share Capital-Ordinary
Ans: c, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
a
184.
A reversing entry
a. reverses entries that were made in error.
b. is the exact opposite of an adjusting entry made in a previous period.
c. is made when a business disposes of an asset it previously purchased.
d. is made when a company sustains a loss in one period and reverses the effect with a
profit in the next period.
Ans: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
a
185. If a company utilizes reversing entries, they will
a. be made at the beginning of the next accounting period.
b. not actually be posted to the general ledger accounts.
c. be made before the post-closing trial balance.
d. be part of the adjusting entry process.
Ans: A, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
186.
The steps in the preparation of a worksheet do not include
a. analyzing documentary evidence.
b. preparing a trial balance on the worksheet.
c. entering the adjustments in the adjustment columns.
d. entering adjusted balances in the adjusted trial balance columns.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
187.
Statement of financial position accounts are considered to be
a. temporary owner's equity accounts.
b. permanent accounts.
c. capital accounts.
d. nominal accounts.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
188.
Income Summary has a credit balance of $12,000 in J. Wenger Co. after closing revenues
and expenses. The entry to close Income Summary is
a. credit Income Summary $12,000, debit Retained Earnings $12,000.
b. credit Income Summary $12,000, debit Dividends $12,000.
c. debit Income Summary $12,000, credit Dividends $12,000.
d. debit Income Summary $12,000, credit Retained Earnings $12,000.
Ans: D, LO: 2, Bloom: K, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
For Instructor Use Only
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Completing the Accounting Cycle
189.
4 - 47
The post-closing trial balance contains only
a. income statement accounts.
b. statement of financial position accounts.
c. statement of financial position and income statement accounts.
d. income statement, statement of financial position, and equity statement accounts.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
190.
Which of the following is an optional step in the accounting cycle?
a. Adjusting entries
b. Closing entries
c. Correcting entries
d. Reversing entries
Ans: D, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
191.
Which one of the following statements concerning the accounting cycle is incorrect?
a. The accounting cycle includes journalizing transactions and posting to ledger
accounts.
b. The accounting cycle includes only one optional step.
c. The steps in the accounting cycle are performed in sequence.
d. The steps in the accounting cycle are repeated in each accounting period.
Ans: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
192.
Correcting entries are made
a. at the beginning of an accounting period.
b. at the end of an accounting period.
c. whenever an error is discovered.
d. after closing entries.
Ans: C, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
193.
On September 23, Riley Company received a $350 check from Jack Colaw for services to
be performed in the future. The bookkeeper for Riley Company incorrectly debited Cash
for $350 and credited Accounts Receivable for $350. The amounts have been posted to
the ledger. To correct this entry, the bookkeeper should
a. debit Cash $350 and credit Unearned Service Revenue $350.
b. debit Accounts Receivable $350 and credit Unearned Service Revenue $350.
c. debit Accounts Receivable $350 and credit Cash $350.
d. debit Accounts Receivable $350 and credit Service Revenue $350.
Ans: B, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
194.
All of the following are equity accounts except
a. Retained Earnings.
b. Share Capital.
c. Investment in Share.
d. Dividends.
Ans: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
For Instructor Use Only
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4 - 48
195.
Test Bank for Financial Accounting: IFRS Edition, 3e
Current liabilities
a. are obligations that the company is to pay within the forthcoming year.
b. are listed in the statement of financial position in order of their expected maturity.
c. are listed in the statement of financial position starting with accounts payable.
d. should not include long-term debt that is expected to be paid within the next year.
Ans: A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
a
196.
The use of reversing entries
a. is a required step in the accounting cycle.
b. changes the amounts reported in the financial statements.
c. simplifies the recording of subsequent transactions.
d. is required for all adjusting entries.
Ans: C, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
Answers to Multiple Choice Questions
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70
71
72
d
c
b
a
c
c
d
b
d
c
c
a
b
c
c
a
c
b
b
b
d
d
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
89.
90.
91.
92
93
94
b
b
a
b
b
c
d
d
c
b
c
c
c
d
b
d
d
b
d
c
a
b
95
96.
97.
98.
99.
100.
101
102.
103.
104.
105.
106
107.
108.
109.
110.
111.
112.
113.
114
115
116
d
b
c
d
c
c
c
b
c
b
a
a
a
d
a
b
c
b
b
c
a
a
117.
118.
119.
120.
121.
122.
123.
124.
125.
126.
127.
128.
129.
130.
131.
132.
133.
134.
135.
136
137
138
a
c
b
b
c
c
d
c
c
c
d
c
b
c
b
c
d
c
d
d
b
b
139.
140.
141.
142.
143.
144.
145.
146.
147.
148.
149.
150.
151.
152.
153.
154.
155.
156.
157.
158
159
160
c
a
a
c
c
b
a
b
b
d
a
d
a
d
c
d
b
c
c
b
c
b
161.
162.
163.
164.
165.
166.
167.
168.
169.
170.
171.
172.
173.
174.
175.
176.
177.
178.
179.
180
181
182
b
c
c
c
a
c
d
c
d
d
d
d
d
b
d
c
b
b
d
c
a
c
183.
184.
185.
186.
187.
188.
189.
190.
191.
192.
193.
194.
195.
196.
c
b
a
a
b
d
b
d
b
c
b
c
a
c
For Instructor Use Only
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Completing the Accounting Cycle
4 - 49
BRIEF EXERCISES
BE 197
Use the following income statement for the year 2017 for Melges Company to prepare entries to
close the revenue and expense accounts for the company.
Service revenue
Expenses:
Salaries and wages expense
Rent expense
Insurance expense
Total expenses
Net income (loss)
€85,300
€40,000
25,000
6,500
71,500
€13,800
Ans: N/A, LO: 2, Bloom: AN, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: FSA
Solution 197
(5 min.)
Service Revenue...................................................................................
Income Summary......................................................................
85,300
Income Summary..................................................................................
Salaries and Wages Expense....................................................
Rent Expense............................................................................
Insurance Expense....................................................................
71,500
85,300
40,000
25,000
6,500
BE 198
The ledger of Hunter Company contains the following balances: Retained Earnings $60,000;
Dividends $4,000; Service Revenue $95,000; Salaries and Wages Expense $59,000; and Rent
Expense $18,000. Prepare the closing entries at December 31.
Ans: N/A, LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: FSA
Solution 198
(3 min.)
Service Revenue...................................................................................
Income Summary......................................................................
95,000
Income Summary..................................................................................
Salaries and Wages Expense....................................................
Rent Expense............................................................................
77,000
Income Summary..................................................................................
Retained Earnings.....................................................................
18,000
Retained Earnings.................................................................................
Dividends...................................................................................
4,000
For Instructor Use Only
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95,000
59,000
18,000
18,000
4,000
lOMoARcPSD|9361320
4 - 50
Test Bank for Financial Accounting: IFRS Edition, 3e
BE 199
At April 1, 2017, Rhodes Company reported a balance of $22,000 in the Retained Earnings
account. Rhodes Company earned revenues of $50,000 and incurred expenses of $35,000
during April 2017. The company paid dividends of $10,000 during the month.
(a) Prepare the entries to close Income Summary and the Dividends acccount at April 30, 2017.
(b) What is the balance in Retained Earnings on the April 30, 2017 post-closing trial balance?
Ans: N/A, LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: FSA
Solution 199
(3 min.)
(a) Income Summary...........................................................................
Retained Earnings............................................................
15,000
Retained Earnings.........................................................................
Dividends..........................................................................
10,000
15,000
10,000
(b) $22,000 + $15,000 – $10,000 = $27,000
BE 200
Identify which of the following are temporary accounts of San Juan Company.
(1) Retained Earnings
(2) Dividends
(3) Equipment
(4) Accumulated DepreciationEquipment
(5) Depreciation Expense
Ans: N/A, LO: 2, Bloom: K, Difficulty: Easy, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
Solution 200
(3 min.)
(2) Dividends, (5) Depreciation Expense
BE 201
Identify which of the following accounts would have balances on a post-closing trial balance.
(1) Service Revenue
(2) Income Summary
(3) Notes Payable
(4) Interest Expense
(5) Cash
Ans: N/A, LO: 3, Bloom: K, Difficulty: Easy, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
Solution 201
(3 min.)
(3) Notes Payable, (5) Cash
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Completing the Accounting Cycle
4 - 51
BE 202
At Westglow Company, the following errors were discovered after the transactions had been
journalized and posted. Prepare the necessary correcting entry for each of the following.
a. A collection on account of ₤500 was debited to Cash €500 and credited to Service Revenue
₤500.
b. The purchase of supplies on account for ₤1,270 was recorded as a debit to Supplies for
₤1,720 and a credit to Accounts Payable for ₤1,720.
Ans: N/A, LO: 5, Bloom: AN, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: FSA
Solution 202
(4 min.)
a. Service Revenue.............................................................................
Accounts Receivable...........................................................
b Accounts Payable............................................................................
Supplies ..............................................................................
500
500
450
450
BE 203
At Outersanctum Company, the following errors were discovered after the transactions had been
journalized and posted. Prepare the necessary correcting entry for each of the following.
a. A payment of $5,000 for salaries was recorded as a debit to Supplies Expense and a credit to
Cash.
b. A purchase of supplies on account for $1,000 was recorded as a debit to Equipment and a
credit to Accounts Payable.
Ans: N/A, LO: 5, Bloom: AN, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: FSA
Solution 203
(4 min.)
a. Salaries and Wages Expense..........................................................
Supplies Expense...................................................................
b. Supplies..........................................................................................
Equipment..............................................................................
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5,000
5,000
1,000
1,000
lOMoARcPSD|9361320
Test Bank for Financial Accounting: IFRS Edition, 3e
4 - 52
BE 204
The following accounts were included on Haircut 101’s adjusted trial balance at December 31,
2017:
Accounts payable
Accounts receivable
Cash
Share capital-ordinary
Retained earnings
Dividends
Interest expense
Note payable, due 8/31/20
Supplies
Service revenue
Equipment
$ 2,000
7,500
11,000
15,000
25,000
10,000
3,000
60,000
1,000
39,000
5,000
(a) What are total current assets?
(b) What are total current liabilities?
Ans: N/A, LO: 6, Bloom: AN, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
Solution 204
(4 min.)
(a) $7,500 + $11,000 + $1,000 = $19,500
(b) $2,000
BE 205
The following items are taken from the adjusted trial balance of Highlander Company for the
month ending July 31, 2017:
Accounts payable
$ 2,000
Accounts receivable
5,000
Accumulated depreciation – equipment
8,000
Cash
2,200
Share capital-ordinary
22,000
Depreciation expense
2,000
Equipment
54,000
Retained earnings, 7/1/17
30,000
Service revenue
33,000
Supplies
1,200
Prepare the current assets section of Highlander’s classified statement of financial position.
Ans: N/A, LO: 6, Bloom: AP, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
Solution 205
(4 min.)
Current assets:
Supplies
Accounts receivable
Cash
Total
$1,200
5,000
2,200
$8,400
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Completing the Accounting Cycle
4 - 53
BE 206
The following information (in thousands) is available for Wang Company for the year ended
December 31, 2017:
Accounts payable
¥2,700
Accumulated depreciationequipment
4,000
Share capital-ordinary
5,800
Retained earnings
4,000
Copyrights
4,500
Notes payable (due in 5 years)
7,500
Accounts receivable
1,500
Cash
2,600
Short-term investments
1,000
Equipment
7,500
Investment in long-term bonds
6,900
Instructions
Use the above information to prepare a classified statement of financial position for the year
ended December 31, 2017.
Ans: N/A, LO: 6, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution 206
(10 min.)
WANG COMPANY
Statement of Financial Position
December 31, 2017
Assets
Intangible assets
Copyrights
Property, plant, and equipment
Equipment
Less:Accumulated depreciation–equipment
Investments
Investment in long-term bonds
Current assets
Accounts receivable
Short-term investments
Cash
Total assets
Equity and Liabilities
Equity
Share capital-ordinary
Retained earnings
Non-current liabilities
Notes payable
Current liabilities
Accounts payable
Total equity and liabilities
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¥ 4,500
¥ 7,500
4,000
3,500
6,900
1,500
1,000
2,600
¥ 5,800
4,000
5,100
¥20,000
¥ 9,800
7,500
2,700
10,200
¥20,000
lOMoARcPSD|9361320
Test Bank for Financial Accounting: IFRS Edition, 3e
4 - 54
BE 207
The following lettered items represent a classification scheme for a statement of financial position
and the numbered items represent accounts found on balance sheets. In the blank next to each
account, write the letter indicating to which category it belongs.
A.
B.
C.
D.
Intangible assets
Property, plant, and equipment
Long-term investments
Current assets
E.
F.
G.
H.
Equity
Non-current liabilities
Current liabilities
Not on the statement of financial position
_____ 1.
Accumulated Depreciation
_____ 6.
Inventory
_____ 2.
Retained Earnings
_____ 7.
Patent
_____ 3.
Interest Expense
_____ 8.
Prepaid Insurance
_____ 4.
Income Taxes Payable
_____ 9.
Mortgage Payable
_____ 5.
Dividends
_____ 10.
Investment in long-term bonds
Ans: N/A, LO: 6, Bloom: K, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
Solution 207
1.
2.
3.
4.
5.
a
B.
E.
H.
G.
H.
(5 min.)
6.
7.
8.
9.
10.
D.
A.
D.
F.
C.
BE 208
F. Scot Company prepared the following adjusting entries at year end on December 31, 2016:
(a) Interest Expense..........................................................................
100
Interest Payable...................................................................
100
(b)
(c)
Interest Receivable.......................................................................
Interest Revenue.................................................................
150
Salaries and Wages Expense.......................................................
Salaries and Wages Payable...............................................
4,000
150
4,000
In an effort to minimize errors in recording transactions, F. Scot Company utilizes reversing
entries. Prepare reversing entries on January 1, 2017.
Ans: N/A, LO: 7, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: FSA
For Instructor Use Only
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Completing the Accounting Cycle
a
Solution 208
(a)
(b)
(c)
4 - 55
(5 min.)
Reverse the entry to accrue interest expense.
Interest Payable...........................................................................
Interest Expense..................................................................
100
Reverse the entry to accrue interest revenue.
Interest Revenue..........................................................................
Interest Receivable..............................................................
150
Reverse the entry to accrue salaries and wages expense.
Salaries and Wages Payable........................................................
Salaries and Wages Expense..............................................
4,000
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100
150
4,000
lOMoARcPSD|9361320
4 - 56
Test Bank for Financial Accounting: IFRS Edition, 3e
EXERCISES
Ex. 209
The worksheet for Norman Company has been completed through the adjusted trial balance. You are
ready to extend each amount to the appropriate financial statement column. Indicate for each account,
the financial statement column to which the account should be extended by placing a check mark ()
in the appropriate column.
———————————————————————————————————————————
Statement of
Income Statement
Financial Position
Account Title
Dr.
Cr.
Dr.
Cr.
———————————————————————————————————————————
(1) Cash
———————————————————————————————————————————
(2) Retained Earnings
———————————————————————————————————————————
(3) Income Taxes Payable
———————————————————————————————————————————
(4) Interest Receivable
———————————————————————————————————————————
(5) Supplies
———————————————————————————————————————————
(6) Accounts Payable
———————————————————————————————————————————
(7) Short-term Investments
———————————————————————————————————————————
(8) Supplies Expense
———————————————————————————————————————————
(9) Unearned Service Revenue
———————————————————————————————————————————
(10) Equipment
———————————————————————————————————————————
(11) Depreciation Expense
———————————————————————————————————————————
(12) Interest Revenue
———————————————————————————————————————————
(13) Salaries and Wages Expense
———————————————————————————————————————————
(14) Dividends
———————————————————————————————————————————
(15) Accum. Deprec.—Equipment
———————————————————————————————————————————
(16) Utilities Expense
———————————————————————————————————————————
(17) Salaries and Wages Payable
———————————————————————————————————————————
(18) Accounts Receivable
———————————————————————————————————————————
(19) Notes Payable
———————————————————————————————————————————
(20) Service Revenue
———————————————————————————————————————————
Ans: N/A, LO: 1, Bloom: C, Difficulty: Medium, Min: 10, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
For Instructor Use Only
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Completing the Accounting Cycle
Solution 209
4 - 57
(10 min.)
Statement of
Financial Position
Income Statement
Account Title
Dr.
Cr.
Dr.
Cr.
———————————————————————————————————————————
(1) Cash

———————————————————————————————————————————
(2) Retained Earnings

———————————————————————————————————————————
(3) Income Taxes Payable

———————————————————————————————————————————
(4) Interest Receivable

———————————————————————————————————————————
(5) Supplies

———————————————————————————————————————————
(6) Accounts Payable

———————————————————————————————————————————
(7) Short-term Investments

———————————————————————————————————————————
(8) Supplies Expense

———————————————————————————————————————————
(9) Unearned Service Revenue

———————————————————————————————————————————
(10) Equipment

———————————————————————————————————————————
(11) Depreciation Expense

———————————————————————————————————————————
(12) Interest Revenue

———————————————————————————————————————————
(13) Salaries and Wages Expense

———————————————————————————————————————————
(14) Dividends

———————————————————————————————————————————
(15) Accum. Deprec.—Equipment

———————————————————————————————————————————
(16) Utilities Expense

———————————————————————————————————————————
(17) Salaries and Wages Payable

———————————————————————————————————————————
(18) Accounts Receivable

———————————————————————————————————————————
(19) Notes Payable

———————————————————————————————————————————
(20) Service Revenue

———————————————————————————————————————————
Ex. 210
Indicate the worksheet column (income statement Dr., statement of financial position Cr., etc.) to
which each of the following accounts would be extended.
Worksheet Column
Account
a.
Accounts Receivable
________________
b.
Accumulated Depreciation
________________
c.
Service Revenue
________________
d.
Utilities Expense
________________
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lOMoARcPSD|9361320
4 - 58
e.
f.
Test Bank for Financial Accounting: IFRS Edition, 3e
Dividends
Retained Earnings
________________
________________
Ans: N/A, LO: 1, Bloom: C, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution 210
a.
b.
c.
d.
e.
f.
(5 min.)
Statement of financial position
Statement of financial position
Income statement
Income statement
Statement of financial position
Statement of financial position
Dr.
Cr.
Cr.
Dr.
Dr.
Cr.
Ex. 211
The worksheet for Boone Mailing Center appears below. Using the adjustment data below,
complete the worksheet. Add any accounts that are necessary.
Adjustment data:
(a)
(b)
(c)
(d)
Prepaid rent expired during August, $2.
Depreciation expense on equipment for the month of August, $8.
Supplies on hand on August 31 amounted to $4.
Salaries and wages expense incurred at August 31 but not yet paid amounted to $12.
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lOMoARcPSD|9361320
Completing the Accounting Cycle
Ex. 211
4 - 59
(Cont.)
BOONE MAILING CENTER
Worksheet
For the Month Ended August 31, 2017
Trial Balance
Account Titles
Debit
Cash
20
Accounts Receivable
12
Prepaid Rent
10
Equipment
50
Accum. Depreciation—
Equipment
Accounts Payable
Credit
Debit
Credit
Income
Statement
Debit
Credit
Statement of
Financial Position
Debit
Credit
10
20
Share Capital-Ordinary
15
2
Service Revenue
77
Depreciation Expense
6
Rent Expense
Retained Earnings
Salaries/Wages Expense
4
Totals
Debit
Adjusted
Trial Balance
8
Supplies
Dividends
Credit
Adjustments
10
20
132
132
Supplies Expense
Salaries/Wages Payable
Totals
Net Income
Totals
Ans: N/A, LO: 1, Bloom: AN, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
For Instructor Use Only
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lOMoARcPSD|9361320
4 - 60
Test Bank for Financial Accounting: IFRS Edition, 3e
Solution 211
(15 min.)
BOONE MAILING CENTER
Worksheet
For the Month Ended August 31, 2017
Trial Balance
Account Titles
Debit
Credit
Adjustments
Debit
Credit
Adjusted
Trial Balance
Debit
Credit
Income
Statement
Debit
Credit
Statement of
Financial
Position
Debit
Cash
20
20
20
Accounts Receivable
12
12
12
Prepaid Rent
8
(a) 2
6
6
Supplies
10
(c) 6
4
4
Equipment
50
50
50
Accum. Depreciation—
Equipment
Accounts Payable
10
20
Share Capital-Ordinary
Dividends
15
6
Rent Expense
Retained Earnings
Salaries/Wages Expense
4
Supplies Expense
(b) 8
14
(a) 2
6
20
15
20
2
77
14
6
10
10
(d) 12
32
32
(c) 6
6
6
132
Salaries/Wages Payable
Totals
20
77
10
132
18
2
77
Depreciation Expense
18
15
2
Service Revenue
Totals
(b) 8
Credit
(d) 12
28
28
12
152
152
12
58
Net Income
19
Totals
77
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77
94
75
19
77
94
94
lOMoARcPSD|9361320
Completing the Accounting Cycle
4 - 61
Ex. 212
The account balances (in thousands) appearing on the trial balance (below) were taken from the
general ledger of Yang Bakery at October 31.
Additional information (in thousands) for the month of October which has not yet been recorded in
the accounts is as follows:
(a) A physical count of supplies indicates ¥500 on hand at October 31.
(b) The amount of insurance that expired in the month of October was ¥200.
(c) Depreciation on equipment for October was ¥400.
(d) Salaries owed for the month of October was ¥1,100 but will not be paid until November.
Instructions
Using the above information, complete the worksheet on the following page for Yang Bakery for
the month of October.
YANG BAKERY
Worksheet
For the Month Ended October 31, 2017
Trial Balance
Account Titles
Debit
Cash
1,000
Supplies
1,100
Prepaid Insurance
2,200
Equipment
Adjustments
Credit
2,400
Notes Payable
4,000
Share Capital-Ordinary
5,300
Utilities Expense
Totals
Credit
Debit
Credit
Income
Statement
Debit
Credit
Statement of
Financial
Position
Debit Credit
24,000
Accum. Depreciation—
Equipment
Accounts Payable
Retained Earnings
Dividends
Service Revenue
Debit
Adjusted
Trial Balance
4,500
10,000
2,400
4,900
400
31,100
31,100
Supplies Expense
Insurance Expense
Depreciation Expense
Salaries/Wages Expense
Salaries/Wages Payable
Totals
Net Income
Totals
Ans: N/A, LO: 1, Bloom: AN, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
For Instructor Use Only
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lOMoARcPSD|9361320
Test Bank for Financial Accounting: IFRS Edition, 3e
4 - 62
Solution 212 (15 min.)
YANG BAKERY
Worksheet
For the Month Ended October 31, 2017
Trial Balance
Account Titles
Debit
Cash
1,000
Supplies
1,100
Prepaid Insurance
2,200
Equipment
Adjusted
Trial Balance
Debit
Credit
Adjustments
Credit
Debit
Credit
Income
Statement
Debit
Credit
Statement of
Financial Position
Debit
1,000
1,000
(a) 600
500
500
(b) 200
2,000
2,000
24,000
24,000
24,000
Credit
Accum. Depreciation—
Equipment
Accounts Payable
4,900
4,900
2,400
2,400
2,400
Notes Payable
4,000
4,000
4,000
Share Capital-Ordinary
5,300
5,300
5,300
Retained Earnings
Dividends
Revenue
4,500
(c) 400
10,000
10,000
2,400
4,900
Totals
31,100
2,400
4,900
400
Utilities Expense
10,000
2,400
400
4,900
400
31,100
Supplies Expense
(a) 600
600
600
Insurance Expense
(b) 200
200
200
Depreciation Expense
(c) 400
400
400
(d)
1,100
1,100
1,100
Salaries / Wages Expense
Salaries / Wages Payable
(d) 1,100
Totals
2,300
2,300
1,100
32,600
32,600
1,100
2,700
Net Income
2,200
Totals
4,900
4,900
4,900
The adjustments columns of the worksheet for Leonardo Company are shown below.
Adjustments
Debit
Credit
Accounts Receivable
Prepaid Insurance
Accumulated Depreciation
Salaries and Wages Payable
Service Revenue
Salaries and Wages Expense
Insurance Expense
Depreciation Expense
800
600
700
500
800
500
600
700
2,600
2,600
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27,700
2,200
Ex. 213
Account Titles
29,900
29,900
29,900
lOMoARcPSD|9361320
Completing the Accounting Cycle
Ex. 213
4 - 63
(Cont.)
Instructions
(a) Prepare the adjusting entries.
(b) Assuming the adjusted trial balance amount for each account is normal, indicate the financial
statement column to which each balance should be extended.
Ans: N/A, LO: 1, Bloom: AN, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 213
(10 min.)
(a)
Accounts Receivable.................................................................
Service Revenue.................................................................
800
Insurance Expense....................................................................
Prepaid Insurance................................................................
600
Depreciation Expense................................................................
Accumulated Depreciation...................................................
700
Salaries and Wages Expense....................................................
Salaries and Wages Payable...............................................
500
800
600
700
(b)
Statement of
Financial Position
Dr.
Cr.
X
X
X
X
Income Statement
Dr.
Cr.
Accounts Receivable
Prepaid Insurance
Accum. Depreciation
Salaries and Wages Payable
Service Revenue
Salaries and Wages Expense
Insurance Expense
Depreciation Expense
X
X
X
X
Ex. 214
Selected worksheet data for East Carolina Company are presented below.
Account Titles
Accounts Receivable
Prepaid Rent
Supplies
Accumulated Depreciation
Salaries and Wages Payable
Service Revenue
Rent Expense
Depreciation Expense
Supplies Expense
Salaries and Wages Expense
Trial Balance
Dr.
Cr.
?
24,000
7,000
12,000
?
86,000
?
Adjusted
Trial Balance
Dr.
Cr.
31,000
20,000
?
?
6,000
99,000
?
9,000
5,000
49,000
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500
lOMoARcPSD|9361320
Test Bank for Financial Accounting: IFRS Edition, 3e
4 - 64
Ex. 214
(Cont.)
Instructions
(a) Fill in the missing amounts.
(b) Prepare the adjusting entries that were made.
Ans: N/A, LO: 1, Bloom: AN, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 214
(a)
(10 min.)
Accounts Receivable—$18,000 ($31,000 – $13,000).
Supplies—$2,000 ($7,000 – $5,000).
Accumulated Depreciation—$21,000 ($12,000 + $9,000).
Salaries and Wages Payable—$0 No liability recorded until adjustments are made.
Rent Expense—$4,000 ($24,000 – $20,000).
Salaries and Wages Expense—$43,000 ($49,000 – $6,000).
(b)
Accounts Receivable.................................................................
Service Revenue.................................................................
13,000
Rent Expense............................................................................
Prepaid Rent........................................................................
4,000
Supplies Expense......................................................................
Supplies...............................................................................
5,000
Depreciation Expense................................................................
Accumulated DepreciationEquipment.................................
9,000
Salaries and Wages Expense....................................................
Salaries and Wages Payable...............................................
6,000
13,000
4,000
5,000
9,000
6,000
Ex. 215
These financial statement items (in thousands) are for Chen Company at year-end, July 31, 2017.
Salaries and wages payable
Salaries and wages expense
Utilities expense
Equipment
Accounts payable
Service revenue
Rent revenue
Share capital-ordinary
¥ 4,580
45,700
19,100
24,000
4,100
58,100
6,500
16,200
Note payable (Non-Current)
Cash
Accounts receivable
Accumulated depreciationequip.
Dividends
Depreciation expense
Retained earnings (8/1/2016)
¥ 3,300
22,200
9,780
6,000
4,000
4,000
30,000
Instructions
(a) Prepare an income statement and a retained earnings statement for the year.
(b) Prepare a classified statement of financial position at July 31, 2017.
Ans: N/A, LO: 1,6, Bloom: AP, Difficulty: Hard, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
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lOMoARcPSD|9361320
Completing the Accounting Cycle
Solution 215
4 - 65
(15 min.)
(a)
CHEN COMPANY
Income Statement
For the Year Ended July 31, 2017
———————————————————————————————————————————
Revenues
Service revenue........................................................................... ¥58,100
Rent revenue................................................................................
6,500
Total revenues.......................................................................
¥64,600
Expenses
Salaries and wages expense........................................................
45,700
Utilities expense...........................................................................
19,100
Depreciation expense...................................................................
4,000
Total expense........................................................................
68,800
Net loss.................................................................................................
¥ (4,200)
CHEN COMPANY
Retained Earnings Statement
For the Year Ended July 31, 2017
———————————————————————————————————————————
Retained Earnings, August 1, 2016.......................................................
¥30,000
Less: Net loss .......................................................................................
¥4,200
Dividends......................................................................................
4,000
8,200
Retained Earnings, July 31, 2017..........................................................
¥21,800
(b)
CHEN COMPANY
Statement of Financial Position
July 31, 2017
———————————————————————————————————————————
Assets
Property, plant, and equipment
Equipment.................................................................................... ¥24,000
Less: Accumulated depreciationequip.........................................
6,000
¥18,000
Current assets
Accounts receivable.....................................................................
9,780
Cash .............................................................................................
22,200
31,980
Total assets............................................................................
¥49,980
Equity and Liabilities
Equity
Share capital-ordinary…………………………………………………
Retained earnings........................................................................
Non-current liabilities
Note payable................................................................................
Current liabilities
Accounts payable.........................................................................
Salaries and wages payable..........................................................
Total equity and liabilities.........................................................
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¥16,200
21,800
¥37,000
3,300
¥4,100
4,580
8,680
¥49,980
lOMoARcPSD|9361320
Test Bank for Financial Accounting: IFRS Edition, 3e
4 - 66
Ex. 216
Latitudes Company had the following adjusted trial balance.
LATITUDES COMPANY
Adjusted Trial Balance
For the Month Ended June 30, 2017
Account Titles
Cash
Accounts Receivable
Supplies
Accounts Payable
Unearned Service Revenue
Share Capital-Ordinary
Retained Earnings
Dividends
Service Revenue
Salaries and Wages Expense
Miscellaneous Expense
Supplies Expense
Salaries and Wages Payable
Debits
$ 3,200
3,900
500
Credits
$ 1,800
200
4,000
800
300
5,100
1,800
300
2,300
$12,300
400
$12,300
(a) Prepare closing entries at June 30, 2017.
(b) Prepare a post-closing trial balance.
Ans: N/A, LO: 2,3 Bloom: AN, Difficulty: Medium, Min: 8, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 216
(8–10 min.)
(a)
Service Revenue...................................................................................
Income Summary......................................................................
5,100
5,100
Income Summary..................................................................................
Supplies Expense......................................................................
Miscellaneous Expense.............................................................
Salaries and Wages Expense....................................................
4,400
Income Summary..................................................................................
Retained Earnings.....................................................................
700
Retained Earnings.................................................................................
Dividends...................................................................................
300
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2,300
300
1,800
700
300
lOMoARcPSD|9361320
Completing the Accounting Cycle
Solution 216
(Cont.)
(b)
LATITUDES COMPANY
Post-closing Trial Balance
For the Month Ended June 30, 2017
Account Titles
Cash
Accounts Receivable
Supplies
Accounts Payable
Unearned Service Revenue
Share Capital-Ordinary
Retained Earnings
Dividends
Service Revenue
Salaries and Wages Expense
Miscellaneous Expense
Supplies Expense
Salaries and Wages Payable
Debits
$ 3,200
3,900
500
Credits
$ 1,800
200
4,000
1,200
$7,600
400
$7,600
Ex. 217
Vanguard Company had the following adjusted trial balance at December 31, 2017.
VANGUARD COMPANY
Adjusted Trial Balance
For the Year Ended December 31, 2017
Account Titles
Cash
Accounts Receivable
Equipment
Accounts Payable
Accumulated DepreciationEquip.
Share Capital - Ordinary
Retained Earnings
Dividends
Service Revenue
Unearned Rent Revenue
Rent Revenue
Salaries and Wages Expense
Depreciation Expense
Supplies Expense
Utilities Expense
Debits
₤ 12,800
8,800
15,900
Credits
₤ 4,400
7,400
17,000
25,500
16,000
68,000
1,800
6,500
55,700
6,000
200
14,900
₤130,300
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₤130,300
4 - 67
lOMoARcPSD|9361320
Test Bank for Financial Accounting: IFRS Edition, 3e
4 - 68
Ex. 217
(Cont.)
Instructions
(a) Journalize the entries required to close the accounts.
(b) Prepare a retained earnings statement for the year ended December 31, 2017.
Ans: N/A, LO: 2,6 Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 217
(b)
(10 min.)
(a) Service Revenue.......................................................................
Rent Revenue............................................................................
Income Summary...........................................................
68,000
6,500
Income Summary......................................................................
Supplies Expense..........................................................
Depreciation Expense....................................................
Salaries and Wages Expense........................................
Utilities Expense............................................................
76,800
Retained Earnings.....................................................................
Income Summary...........................................................
2,300
Retained Earnings.....................................................................
Dividends.......................................................................
16,000
74,500
200
6,000
55,700
14,900
2,300
16,000
VANGUARD COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2017
Retained Earnings, January 1
Less: Net loss
Less: Dividends
Retained Earnings, December 31
For Instructor Use Only
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₤25,500
2,300
23,200
16,000
₤ 7,200
lOMoARcPSD|9361320
Completing the Accounting Cycle
4 - 69
Ex. 218
At March 31, account balances after adjustments for Blowing Rock Stage Theatre are as follows:
Accounts
Cash
Supplies
Equipment
Accumulated Depreciation—Equipment
Accounts Payable
Share Capital-Ordinary
Retained Earnings
Dividends
Ticket Revenue
Service Revenue
Advertising Expense
Supplies Expense
Depreciation Expense
Miscellaneous Expense
Rent Expense
Salaries and Wages Expense
Utilities Expense
Account Balances
(After Adjustment)
$ 6,000
4,000
50,000
12,000
5,000
4,000
16,000
12,000
65,000
51,000
12,000
19,000
4,000
16,000
12,000
20,000
5,000
Instructions
Prepare the closing journal entries for Blowing Rock Stage Theatre.
Ans: N/A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 218
(10 min.)
Mar. 31 Ticket Revenue.....................................................................
Service Revenue...................................................................
Income Summary....................................................
(To close revenue accounts)
65,000
51,000
31 Income Summary..................................................................
Advertising Expense...................................................
Supplies Expense.......................................................
Depreciation Expense.................................................
Miscellaneous Expense..............................................
Rent Expense.............................................................
Salaries and Wages Expense.....................................
Utilities Expense.........................................................
(To close expense accounts)
88,000
31 Income Summary..................................................................
Retained Earnings.......................................................
(To transfer net income to retained earnings)
28,000
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116,000
12,000
19,000
4,000
16,000
12,000
20,000
5,000
28,000
lOMoARcPSD|9361320
Test Bank for Financial Accounting: IFRS Edition, 3e
4 - 70
Solution 218
(Cont.)
31 Retained Earnings.................................................................
Dividends....................................................................
(To close dividends to retained earnings)
12,000
12,000
Ex. 219
Presented below is an adjusted trial balance for Cowell Company, at December 31, 2017.
Cash
Accounts receivable
Prepaid insurance
Equipment
Depreciation expense
Dividends
Advertising expense
Rent expense
Salaries and wages expense
Insurance expense
€10,700
20,000
15,000
35,000
7,000
1,500
1,400
800
5,000
1,600
€98,000
Accounts payable
Notes payable
Accumulated depreciation—
equipment
Service revenue
Retained earnings
Unearned service revenue
Share capital-ordinary
€10,000
9,000
14,000
30,000
12,000
11,000
12,000
€98,000
Instructions
(a) Prepare closing entries for December 31, 2017.
(b) Determine the balance in the retained earnings account after the entries have been posted.
Ans: N/A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 219
(10 min.)
(a)
Dec. 31 Service Revenue.................................................................
Income Summary........................................................
(To close revenue account)
30,000
31 Income Summary.................................................................
Depreciation Expense.................................................
Advertising Expense...................................................
Rent Expense.............................................................
Salaries and Wages Expense.....................................
Insurance Expense.....................................................
(To close expense accounts)
15,800
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30,000
7,000
1,400
800
5,000
1,600
lOMoARcPSD|9361320
Completing the Accounting Cycle
Solution 219
4 - 71
(Cont.)
31 Income Summary.................................................................
Retained Earnings.......................................................
(To close net income to retained earnings)
14,200
31 Retained Earnings...............................................................
Dividends....................................................................
(To close dividends to retained earnings)
1,500
(b)
14,200
1,500
Retained Earnings
1,500
Bal.
12,000
14,200
24,700
Ex. 220
The adjusted account balances of the Quick-E Delivery Service at October 31 are as follows:
Accounts
Account Balances
Cash
$16,000
Accounts Receivable
15,000
Supplies
4,000
Prepaid Insurance
8,000
Equipment
300,000
Accumulated Depreciation—
Equipment
120,000
Accounts Payable
19,000
Retained Earnings
105,000
Share Capital-Ordinary
100,000
Accounts
Account Balances
Service Revenue
$90,000
Interest Revenue
8,000
Depreciation Expense
27,000
Insurance Expense
6,000
Salaries and Wages Expense
30,000
Supplies Expense
9,000
Utilities Expense
12,000
Dividends
15,000
Instructions
Prepare the end of the period closing entries for the Quick-E Delivery Service.
Ans: N/A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 220
Oct 31
(10 min.)
Service Revenue.................................................................
Interest Revenue.................................................................
Income Summary........................................................
(To close revenue accounts)
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90,000
8,000
98,000
lOMoARcPSD|9361320
4 - 72
Test Bank for Financial Accounting: IFRS Edition, 3e
Solution 220
31
31
31
(Cont.)
Income Summary.................................................................
Depreciation Expense.................................................
Insurance Expense.....................................................
Salaries and Wages Expense.....................................
Supplies Expense.......................................................
Utilities Expense.........................................................
(To close expense accounts)
84,000
Income Summary.................................................................
Retained Earnings.......................................................
(To close net income to retained earnings)
14,000
Retained Earnings...............................................................
Dividends....................................................................
(To close dividends to retained earnings)
15,000
27,000
6,000
30,000
9,000
12,000
14,000
15,000
Ex. 221
The income statement of Hall Marine Repairs is as follows:
HALL MARINE REPAIRS
Income Statement
For the Month Ended April 30, 2017
Revenue
Service Revenue..........................................................................
Expenses
Salaries and Wages Expense.......................................................
Supplies Expense.........................................................................
Insurance Expense.......................................................................
Utilities Expense...........................................................................
Depreciation Expense..................................................................
Total Expenses......................................................................
Net Income............................................................................................
₤8,500
₤3,900
1,050
600
400
350
6,300
₤2,200
On April 1, the retained earnings account had a balance of ₤12,900. During April, the company
paid ₤3,000 in dividends.
Instructions
(a) Prepare closing entries at April 30.
(b) Prepare a retained earnings statement for the month of April.
Ans: N/A, LO: 2,6 Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
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lOMoARcPSD|9361320
Completing the Accounting Cycle
Solution 221
4 - 73
(10 min.)
(a) Service Revenue............................................................................
Income Summary..................................................................
8,500
Income Summary...........................................................................
Salaries and Wages Expense...............................................
Depreciation Expense...........................................................
Utilities Expense....................................................................
Insurance Expense...............................................................
Supplies Expense.................................................................
6,300
Income Summary...........................................................................
Retained Earnings.................................................................
2,200
Retained Earnings.........................................................................
Dividends..............................................................................
3,000
(b)
8,500
3,900
350
400
600
1,050
2,200
3,000
HALL MARINE REPAIRS
Retained Earnings Statement
For the Month Ended April 30, 2017
Retained Earnings, April 1
Add: Net Income
₤12,900
2,200
15,100
3,000
₤12,100
Less: Dividends
Retained Earnings, April 30
Ex. 222
Identify which of the following accounts would appear in a post-closing trial balance.
Accumulated DepreciationEquip.
Dividends
Depreciation Expense
Service Revenue
Interest Payable
Equipment
Ans: N/A, LO: 3, Bloom: C, Difficulty: Easy, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
Solution 222
(3 min.)
The following accounts would appear in a post-closing trial balance:
Accumulated DepreciationEquip.
Interest Payable
Equipment
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lOMoARcPSD|9361320
4 - 74
Test Bank for Financial Accounting: IFRS Edition, 3e
Ex. 223
The trial balances of Barola Company follow with the accounts arranged in alphabetic order.
Analyze the data and prepare (a) the adjusting entries and (b) the closing entries made by Barola
Company.
Trial Balances
Unadjusted
Adjusted
Post-Closing
Accounts Payable
$10,000
$10,000
$10,000
Accounts Receivable
2,200
3,200
3,200
Accumulated DepreciationEquip.
13,000
17,000
17,000
Cash
60,000
60,000
60,000
Depreciation Expense
0
4,000
0
Dividends
11,000
11,000
0
Equipment
75,000
75,000
75,000
Insurance Expense
0
16,300
0
Prepaid Insurance
17,800
1,500
1,500
Prepaid Rent
15,000
11,000
11,000
Retained Earnings
52,200
52,200
72,400
Rent Expense
0
4,000
0
Salaries and Wages Expense
38,000
45,000
0
Salaries and Wages Payable
0
7,000
7,000
Service Revenue
96,000
105,000
0
Share Capital-Ordinary
30,000
30,000
30,000
Supplies
3,200
700
700
Supplies Expense
2,000
4,500
0
Unearned Service Revenue
23,000
15,000
15,000
Ans: N/A, LO: 2, Bloom: AN, Difficulty: Medium, Min: 20, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 223
(a)
(20 min.)
Adjusting Entries
Depreciation Expense..................................................................
Accumulated DepreciationEquip.........................................
4,000
4,000
Insurance Expense.......................................................................
Prepaid Insurance................................................................
16,300
Unearned Service Revenue..........................................................
Service Revenue.................................................................
8,000
Accounts Receivable....................................................................
Service Revenue.................................................................
1,000
Rent Expense...............................................................................
Prepaid Rent........................................................................
4,000
Supplies Expense.........................................................................
Supplies...............................................................................
2,500
Salaries and Wages Expense.......................................................
Salaries and Wages Payable...............................................
7,000
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16,300
8,000
1,000
4,000
2,500
7,000
lOMoARcPSD|9361320
Completing the Accounting Cycle
Solution 223
(b)
4 - 75
(Cont.)
Closing Entries
Service Revenue..........................................................................
Income Summary.................................................................
105,000
105,000
Income Summary.........................................................................
Insurance Expense..............................................................
Depreciation Expense..........................................................
Rent Expense......................................................................
Supplies Expense................................................................
Salaries and Wages Expense..............................................
73,800
Income Summary.........................................................................
Retained Earnings...............................................................
31,200
Retained Earnings........................................................................
Dividends............................................................................
11,000
16,300
4,000
4,000
4,500
45,000
31,200
11,000
Ex. 224
Indicate the proper sequence of the steps in the accounting cycle by placing numbers 1-8 in the
blank spaces.
____
a.
Analyze business transactions.
____
b.
Journalize and post adjusting entries.
____
c.
Journalize and post closing entries.
____
d.
Journalize the transactions
____
e.
Prepare a post-closing trial balance.
____
f.
Prepare a worksheet.
____
g.
Prepare financial statements.
____
h.
Post to ledger accounts.
Ans: N/A, LO: 4, Bloom: C, Difficulty: Easy, Min: 4, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
Solution 224
a.
b.
c.
d.
1
6
7
2
(4 min.)
e.
f.
g.
h.
8
4
5
3
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lOMoARcPSD|9361320
4 - 76
Test Bank for Financial Accounting: IFRS Edition, 3e
Ex. 225
Ridge Properties discovered the following errors made in January 2017. Prepare the necessary
correcting entry for each of the following.
a. A collection on account of €570 from a customer was credited to Accounts Receivable €750
and debited to Cash €750.
b. The purchase of supplies on account for €250 was recorded as a debit to Equipment €250
and a credit to Accounts Payable €250.
Ans: N/A, LO: 5, Bloom: AN, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 225
(5 min.)
a. Accounts Receivable.......................................................................
Cash.......................................................................................
180
b. Supplies..........................................................................................
Equipment..............................................................................
250
180
250
Ex. 226
An examination of the accounts of Zin Company for the month of June revealed the following
errors after the transactions were journalized and posted. Prepare correcting entries for each of
the above assuming the erroneous entries are not reversed.
1. A collection of $750 from R. Joseph, a customer on account, was debited to Cash $750 and
credited to Service Revenue, $750.
2. A payment for Advertising Expense costing $620 was debited to Utilities Expense, $260 and
credited to Cash $260.
3. A bill for $710 for Supplies purchased on account was debited to Equipment, $170 and
credited to Accounts Payable $170.
Ans: N/A, LO: 5, Bloom: AN, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 226
(10 min.)
1. Service Revenue...................................................................................
Accounts Receivable....................................................................
(To correct error in recording collection of accounts receivable)
750
2. Advertising Expense.............................................................................
Utilities Expense...........................................................................
Cash.............................................................................................
(To correct errors in recording advertising expense)
620
3. Supplies................................................................................................
Equipment....................................................................................
Accounts Payable.........................................................................
(To correct error in recording supplies)
710
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750
260
360
170
540
lOMoARcPSD|9361320
Completing the Accounting Cycle
4 - 77
Ex. 227
An examination of the accounts of Freeman Company for the month of October revealed the
following errors after the transactions were journalized and posted. Prepare correcting entries for
each of the above assuming the erroneous entries are not reversed.
(a)
A check for $700 was issued for goods previously purchased on account. The bookkeeper
debited Accounts Receivable and credited Cash for $700.
(b)
A check for $580 was received as payment on account. The bookkeeper debited Accounts
Payable for $850 and credited Accounts Receivable for $850.
(c)
When making the entry to record the year's depreciation expense, the bookkeeper debited
Accumulated Depreciation for $1,500 and credited Cash for $1,500.
(d)
When accruing interest on a note payable, the bookkeeper debited Interest Receivable for
$200 and credited Interest Payable for $200.
Ans: N/A, LO: 5, Bloom: AN, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 227
(a)
(b)
(c)
(d)
(5 min.)
Accounts Payable.........................................................................
Accounts Receivable...........................................................
700
Cash ............................................................................................
Accounts Receivable....................................................................
Accounts Payable................................................................
580
270
Cash ............................................................................................
Depreciation Expense..................................................................
Accumulated Depreciation...................................................
1,500
1,500
Interest Expense..........................................................................
Interest Receivable..............................................................
200
700
850
3,000
200
Ex. 228
Betty Wright, CPA, was asked by the controller of Gore Company to review the accounting
records before financial statements are prepared. Betty reviewed the records and found three
errors.
1. Cash paid on accounts payable for $910 was recorded as a debit to Accounts Payable $190
and a credit to Cash $190.
2. The purchase of supplies on account for $500 was debited to Equipment $500 and credited to
Accounts Payable $500.
3. The company paid dividends $1,500. The bookkeeper debited Accounts Receivable for $150
and credited Cash $150.
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lOMoARcPSD|9361320
4 - 78
Test Bank for Financial Accounting: IFRS Edition, 3e
(Cont.)
Ex. 228
Instructions
Prepare an analysis of each error showing the
(a) incorrect entry.
(b) correct entry.
(c) correcting entry.
Ans: N/A, LO: 5, Bloom: AN, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 228
1. (a)
(b)
(c)
2. (a)
(b)
(c)
3. (a)
(b)
(c)
(15 min.)
Incorrect Entry
Accounts Payable.............................................................
Cash.........................................................................
190
Correct Entry
Accounts Payable.............................................................
Cash.........................................................................
910
Correcting Entry
Accounts Payable.............................................................
Cash.........................................................................
720
Incorrect Entry
Equipment.........................................................................
Accounts Payable....................................................
500
Correct Entry
Supplies............................................................................
Accounts Payable....................................................
500
Correcting Entry
Supplies............................................................................
Equipment................................................................
500
Incorrect Entry
Accounts Receivable........................................................
Cash.........................................................................
150
Correct Entry
Dividends..........................................................................
Cash.........................................................................
1,500
Correcting Entry
Dividends..........................................................................
Accounts Receivable................................................
Cash.........................................................................
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190
910
720
500
500
500
150
1,500
1,500
150
1,350
lOMoARcPSD|9361320
Completing the Accounting Cycle
4 - 79
Ex. 229
Harken Company discovered the following errors made in January 2017.
1. A payment of Salaries and Wages Expense of $600 was debited to Equipment and credited to
Cash, both for $600.
2. A collection of $2,000 from a client on account was debited to Cash $200 and credited to
Service Revenue $200.
3. The purchase of equipment on account for $680 was debited to Equipment $860 and credited
to Accounts Payable $860.
Instructions
Correct the errors by reversing the incorrect entry and preparing the correct entry.
Ans: N/A, LO: 5, Bloom: AN, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
Solution 229
1.
2.
3.
(10 min.)
Cash.......................................................................................
Equipment..........................................................................
600
Salaries and Wages Expense.................................................
Cash..................................................................................
600
Service Revenue....................................................................
Cash..................................................................................
200
Cash .......................................................................................
Accounts Receivable.........................................................
2,000
Accounts Payable...................................................................
Equipment..........................................................................
860
Equipment...............................................................................
Accounts Payable..............................................................
680
600
600
200
2,000
860
680
Ex. 230
The following items (in thousands) were taken from the financial statements of Zhao Company.
(All dollars are in thousands.)
Mortgage payable
Prepaid insurance
Equipment
Long-term investments
Short-term investments
Notes payable (due in 2017)
Cash
¥2,443
880
13,500
764
3,690
981
3,168
Accumulated depreciationequip. 3,655
Accounts payable
1,444
Notes payable (due after 2017)
368
Share capital-ordinary
6,000
Accounts receivable
1,696
Inventories
1,756
Retained earnings
10,563
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lOMoARcPSD|9361320
4 - 80
Ex. 230
Test Bank for Financial Accounting: IFRS Edition, 3e
(Cont.)
Instructions
Prepare a classified statement of financial position in good form as of December 31, 2017.
Ans: N/A, LO: 6, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution 230
(10 min.)
ZHAO COMPANY
Statement of Financial Position
December 31, 2017
(in thousands)
———————————————————————————————————————————
Assets
Property, plant, and equipment
Equipment.................................................................................... ¥13,500
Less: Accumulated depreciationequip.........................................
(3,655)
¥ 9,845
Long-term investments..........................................................................
764
Current assets
Prepaid insurance.........................................................................
880
Inventories....................................................................................
1,756
Accounts receivable.....................................................................
1,696
Short-term investments................................................................
3,690
Cash.............................................................................................
3,168
11,190
Total assets............................................................................
¥21,799
Equity and Liabilities
Equity
Share capital-ordinary..................................................................
¥6,000
Retained earnings........................................................................
10,563
¥16,563
Non-current liabilities
Mortgage payable.........................................................................
2,443
Notes payable (due after 2018)....................................................
368
2,811
Current liabilities
Notes payable (due in 2018).........................................................
981
Accounts payable.........................................................................
1,444
2,425
Total equity and liabilities ......................................................
¥21,799
Ex. 231
Compute the dollar amount of current assets based on the following account balances.
Accounts Payable
Accounts Receivable
Equipment
Short-term Investments
$11,000
16,000
93,000
20,000
Accumulated DepreciationEquip.
Cash
Prepaid Rent
27,000
24,000
7,000
Ans: N/A, LO: 6, Bloom: AN, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
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lOMoARcPSD|9361320
Completing the Accounting Cycle
Solution 231
4 - 81
(4 min.)
Current assets amount = $67,000 ($16,000 + $24,000 + $7,000 + $20,000)
Ex. 232
The financial statement columns of the worksheet for The Coffee Pot at December 31, 2017, are
as follows:
THE COFFEE POT
Worksheet
For the Year Ended December 31, 2017
Statement of
Income Statement
Financial Position
Accounts
Debit
Credit
Debit
Credit
Cash
10,000
Accounts Receivable
7,000
Supplies
4,000
Prepaid Insurance
6,000
Equipment
219,000
Accumulated Depreciation—Equipment
29,000
Accounts Payable
19,000
Note Payable
60,000
Salaries and Wages Payable
13,000
Share Capital-Ordinary
50,000
Retained Earnings
62,000
Dividends
9,000
Service Revenue
123,000
Advertising Expense
21,000
Depreciation Expense
12,000
Insurance Expense
3,000
Rent Expense
17,000
Salaries and Wages Expense
42,000
Supplies Expense
6,000
Totals
101,000
123,000
255,000 233,000
Net Income
22,000
22,000
123,000
123,000
255,000 255,000
Instructions
(a) Calculate the retained earnings balance that would appear on a Statement of financial
position at December 31, 2017.
(b) Prepare a classified statement of financial position for The Coffee Pot at December 31,
2017 assuming the note payable is a long-term liability.
Ans: N/A, LO: 6, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution 232
(a)
(15 min.)
Retained Earnings, January 1
Add: Net Income
Less: Dividends
Retained Earnings, December 31
€62,000
22,000
84,000
9,000
€75,000
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lOMoARcPSD|9361320
4 - 82
Test Bank for Financial Accounting: IFRS Edition, 3e
Solution 232
(Cont.)
(b)
THE COFFEE POT
Statement of Financial Position
December 31, 2017
———————————————————————————————————————————
Assets
Property, plant, and equipment
Equipment............................................................................. €219,000
Less: Accumulated depreciation—equipment........................
29,000
Current assets
Prepaid insurance.................................................................
6,000
Supplies................................................................................
4,000
Accounts receivable..............................................................
7,000
Cash......................................................................................
10,000
Total assets....................................................................
Equity and Liabilities
Equity
Share capital-ordinary...........................................................
Retained earnings.................................................................
Non-current liabilities
Note payable.........................................................................
Current liabilities
Accounts payable..................................................................
Salaries and wages payable.................................................
Total equity and liabilities...............................................
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€50,000
75,000
€190,000
27,000
€217,000
€125,000
60,000
19,000
13,000
32,000
€217,000
lOMoARcPSD|9361320
Completing the Accounting Cycle
4 - 83
Ex. 233
The financial statement columns of the worksheet for Dr. Gumbo’s Catering Company as of
December 31, 2017 are as follows:
DR. GUMBO’S CATERING COMPANY
Worksheet
For the Year Ended December 31, 2017
Accounts
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Equipment
Accumulated DepreciationEquip.
Copyrights
Accounts Payable
Bonds Payable (due 2021)
Share Capital-Ordinary
Retained Earnings
Dividends
Service Revenue
Salaries and Wages Expense
Depreciation Expense
Insurance Expense
Income Tax Expense
Totals
Net Income
Income Statement
Debit
Credit
Statement of
Financial Position
Debit
Credit
15,000
6,000
4,500
7,000
60,000
4,800
7,500
23,500
18,000
25,000
26,000
4,200
25,400
5,200
4,800
5,000
3,500
18,500
6,900
25,400
25,400
104,200
25,400
104,200
97,300
6,900
104,200
Instructions
Prepare a classified statement of financial position for Dr. Gumbo’s Catering Company.
Ans: N/A, LO: 6, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
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lOMoARcPSD|9361320
4 - 84
Test Bank for Financial Accounting: IFRS Edition, 3e
Solution 233
(15 min.)
DR. GUMBO’S CATERING COMPANY
Statement of Financial Position
December 31, 2017
Assets
Current assets
Prepaid insurance.........................................................................
Supplies........................................................................................
Accounts receivable.....................................................................
Cash ............................................................................................
$ 7,000
4,500
6,000
15,000
32,500
Intangible assets
Copyrights....................................................................................
Property, Plant, and Equipment
Equipment....................................................................................
Less: Accumulated depreciation—equipment...............................
Total assets..........................................................................
Equity and Liabilities
Equity
Share capital-ordinary..................................................................
Retained earnings........................................................................
Non-current liabilities
Bonds payable..............................................................................
Current liabilities
Accounts payable.........................................................................
Total equity and liabilities.....................................................
7,500
$60,000
4,800
$25,000
28,700*
55,200
$95,200
$53,700
18,000
23,500
$95,200
* Retained earnings = $28,700 ($26,000 + $6,900 – $4,200).
Ex.234
The following are the major statement of financial position classification.
Intangible assets (IA)
Property, plant, and equipment (PPE)
Long-term investments (LTI)
Current assets (CA)
Equity (E)
Non-current liabilities (NCL)
Current Liabilities (CL)
Instructions
Classify each of the following accounts taken from Rivera Company 's statement of financial
position.
_____ Accounts receivable
_____ Building
_____ Copyrights
_____ Accounts payable
_____ Interest payable
_____ Retained earnings
_____ Mortgage payable
_____ Share capital-ordinary
_____ Accumulated depreciation
_____ Land held for investment
_____ Bonds payable
_____ Inventory
Ans: N/A, LO: 6, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
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lOMoARcPSD|9361320
Completing the Accounting Cycle
4 - 85
Solution 234 (5 min.)
CA
PPE
IA
CL
CL
E
Accounts receivable
Building
Copyrights
Accounts payable
Interest Payable
Retained earnings
NCL
E
PPE
LTI
NCL
CA
Mortgage payable
Share capital-ordinary
Accumulated depreciation
Land held for investment
Bonds payable
Inventory
Ex. 235
The following account balances appeared in the adjusted trial balance for Nguyen Inc.: Supplies
¥2,500; Inventories ¥3,000; Accounts Receivable ¥13,200; Cash ¥11,500; Prepaid Insurance
¥6,300; and Short-term Investments ¥7,600. Prepare the current assets section of the 2017
statement of financial position in proper format.
Ans: N/A, LO: 6, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
Solution 235 (5 min.)
Nguyen Inc.
Partial Statement of Financial Position
December 31, 2017
Current Assets
Prepaid insurance
Supplies
Inventories
Accounts receivable
Short-term investments
Cash
Total current assets
¥ 6,300
2,500
3,000
13,200
7,600
11,500
¥44,100
Ex. 236
The following items were taken from the post-closing trial balance of Aloma Macarty Company
(All pounds are in thousands):
Accumulated depreciationequip.
Accounts payable
Notes payable due after 2018
Share capital-ordinary
Retained earnings
Accounts receivable
Cash
£5,455
2,244
168
9,800
5,263
1,496
2,868
Mortgage payable
Patent
Equipment
Land held for investment
Short-term investments
Notes payable due in 2018
Inventories
£ 743
680
14,300
464
3,490
681
1,056
Prepare a classified statement of financial position in good form as of December 31, 2017.
Ans: N/A, LO: 6, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem
Solving, IMA: Reporting
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4 - 86
Test Bank for Financial Accounting: IFRS Edition, 3e
Solution 236
(15 min.)
Aloma Macarty Company
Statement of Financial Position
December 31, 2017
Assets
Intangible assets
Patent...........................................................................................
Property, plant and equipment
Equipment....................................................................................
Less: Accumulated depreciationequip.........................................
Long-term investments..........................................................................
Land held for investment..............................................................
Current assets.......................................................................................
Inventories....................................................................................
Accounts receivable.....................................................................
Short-term investments................................................................
Cash ............................................................................................
Total assets..........................................................................
Equity and Liabilities
Equity
Share capital-ordinary..................................................................
Retained earnings........................................................................
Non-current liabilities
Mortgage payable.........................................................................
Notes payable due after 2018.......................................................
Current liabilities
Notes payable due in 2018...........................................................
Accounts payable.........................................................................
Total equity and liabilities.....................................................
a
£ 680
£14,300
5,455
8,845
464
1,056
1,496
3,490
2,868
8,910
£18,899
£ 9,800
5,263
£15,063
743
168
911
681
2,244
2,925
£18,899
Ex. 237
North Company prepared the following adjusting entries at year end on December 31, 2017:
(a) Interest Expense..........................................................................
300
Interest Payable...................................................................
300
(b)
(c)
(d)
(e)
(f)
Unearned Service Revenue..........................................................
Service Revenue.................................................................
1,500
Insurance Expense.......................................................................
Prepaid Insurance................................................................
1,200
Interest Receivable.......................................................................
Interest Revenue.................................................................
100
Supplies Expense.........................................................................
Supplies...............................................................................
250
Salaries and Wages Expense.......................................................
Salaries and Wages Payable...............................................
3,000
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1,500
1,200
100
250
3,000
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Completing the Accounting Cycle
4 - 87
Ex. 237 (Cont.)
In an effort to minimize errors in recording transactions, North Company utilizes reversing entries.
Instructions
Prepare reversing entries on January 1, 2017, for the adjusting entries given where appropriate.
Ans: N/A, LO: 7, Bloom: AN, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
a
Solution 237
(15 min.)
Reversing entries are appropriate for adjusting entries related to accrued revenues and accrued
expenses. Three of the entries given are accruals and need to be reversed.
(a)
(d)
(f)
a
Reverse the entry to accrue interest expense.
Interest Payable...........................................................................
Interest Expense..................................................................
300
Reverse the entry to accrue interest revenue.
Interest Revenue..........................................................................
Interest Receivable..............................................................
100
Reverse the entry to accrue wages expense.
Salaries and Wages Payable........................................................
Salaries and Wages Expense..............................................
3,000
300
100
3,000
Ex. 238
On December 31, 2016 the adjusted trial balance of the High Country Match Service shows the
following selected data:
Accounts Receivable, $7,000
Service Revenue, $60,000
Salaries and Wages Expense, $10,500
Salaries and Wages Payable, $2,500
Insurance Expense, $4,800
Income Tax Expense, $6,400
Income Taxes Payable, $2,400
Analysis indicates that adjusting entries were made for (a) $7,000 of commission revenue earned
but not billed, (b) $2,500 of accrued but unpaid salaries and wages, and (c) $2,400 of income tax
expense accrued but not paid.
Instructions
(a) Prepare the closing entries at December 31, 2016.
(b) Prepare the reversing entries on January 1, 2017.
(c) Enter the adjusted trial balance data in T-accounts. Post the entries in (a) and (b) and rule
and balance the accounts.
(d) Prepare the entries to record (1) the collection of the accrued service revenue on January 8,
(2) payment of the income taxes on January 10, and (3) payment of all the salaries due
($3,000) on January 15.
(e) Post the entries in (d) to the temporary accounts.
(f)
What is the salaries and wages expense for the month of January 2017?
Ans: N/A, LO: 7, Bloom: AN, Difficulty: Medium, Min: 25, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
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4 - 88
a
Test Bank for Financial Accounting: IFRS Edition, 3e
Solution 238
(25 min.)
(a) (1) Service Revenue....................................................................
Income Summary...........................................................
60,000
(2) Income Summary....................................................................
Salaries and Wages Expense........................................
Insurance Expense........................................................
Income Tax Expense......................................................
21,700
(3) Income Summary....................................................................
Retained Earnings.........................................................
38,300
(b) (1) Service Revenue....................................................................
Accounts Receivable.....................................................
7,000
(2) Salaries and Wages Payable..................................................
Salaries and Wages Expense........................................
2,500
(3) Income Taxes Payable............................................................
Income Tax Expense......................................................
2,400
(c) and (e)
Accounts Receivable
(A)
7,000
10,500
3,000
(R)
7,000
(C)
(R)
(C)
(R)
10,500
2,500
60,000
7,000
6,400
2,400
(R)
(C)
(R)
2,500
4,800
(C)
7,000
2,500
2,400
(A)
(D)
60,000
7,000
(A)
2,500
Income Taxes Payable
6,400
2,400
(R)
2,400
Insurance Expense
(A)
38,300
Salaries and Wages Payable
Income Tax Expense
(A)
(D)
10,500
4,800
6,400
Service Revenue
Salaries and Wages Expense
(A)
(D)
60,000
4,800
Legend
A = Adjusted trial balance amount
C = Closing
R = Reversing
D = January Transaction entries
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(A)
2,400
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Completing the Accounting Cycle
a
Solution 238
(d)
(1) Jan. 8
(2) Jan. 10
(3) Jan. 15
(f)
a
4 - 89
(Cont.)
Cash......................................................................
Service Revenue..........................................
7,000
Income Tax Expense.............................................
Cash.............................................................
2,400
Salaries and Wages Expense...............................
Cash.............................................................
3,000
7,000
2,400
3,000
Salaries and wages expense for January is $500 ($3,000 – $2,500).
Ex. 239
Transaction and adjustment data for Alcortt Company for the calendar year end is as follows:
1. December 24 (initial salary entry): ₤18,000 of salaries and wages earned between December
1 and December 24 are paid.
2. December 31 (adjusting entry): Salaries and wages earned between December 25 and
December 31 are ₤3,000. These will be paid in the January 8 payroll.
3. January 8 (subsequent salary entry): Total salary payroll amounting to ₤11,000 was paid.
Instructions
Prepare two sets of journal entries as specified below. The first set of journal entries should
assume that the company does not use reversing entries, and the second set should assume that
reversing entries are utilized by the company.
Assume no reversing entries
(a)
Assume reversing entries
Initial Salary Entry
Dec. 24
(b)
Adjusting Entry
Dec. 31
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4 - 90
a
Test Bank for Financial Accounting: IFRS Edition, 3e
Ex. 239
(c)
(Cont.)
Closing Entry
Dec. 31
(d)
Reversing Entry
Jan. 1
(e)
Subsequent Salary Entry
Jan. 8
Ans: N/A, LO: 7, Bloom: AN, Difficulty: Medium, Min: 20, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
a
Solution 239
(20 min.)
Assume no reversing entries
(a)
Assume reversing entries
Initial Salary Entry
Dec. 24
Salaries and Wages Expense 18,000
Salaries and Wages Expense 18,000
Cash
18,000
Cash
18,000
(b)
Adjusting Entry
Dec. 31
Salaries and Wages Expense 3,000
Salaries and Wages Payable
3,000
(c)
Salaries and Wages Expense 3,000
Salaries and Wages Payable
3,000
Closing Entry
Dec. 31
Income Summary
21,000
Income Summary
21,000
Salaries and Wages Expense 21,000
Salaries and Wages Expense
21,000
(d)
Reversing Entry
Jan. 1
None
Salaries and Wages Payable 3,000
Salaries and Wages Expense
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3,000
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Completing the Accounting Cycle
Solution 239
4 - 91
(Cont.)
(e) Subsequent Salary Entry
Jan. 8
Salaries and Wages Payable
Salaries and Wages Expense
Cash
3,000
8,000
Salaries and Wages Expense 11,000
Cash
11,000
11,000
COMPLETION STATEMENTS
240.
The first step in preparing a worksheet is to prepare a ______________ from the general
ledger accounts.
Ans: N/A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
241.
The account balances appearing in the adjusted trial balance columns are extended to the
______________ columns and the ______________ columns.
Ans: N/A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
242.
The process of transferring net income (or loss) for the period to Retained Earnings is
accomplished by making ______________ entries.
Ans: N/A, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
243.
At the end of an accounting period, all revenue and expense accounts are closed to a
temporary account called ______________.
Ans: N/A, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
244.
The Dividends account is closed to the ______________ account at the end of the
accounting period.
Ans: N/A, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
245.
After all closing entries have been journalized and posted, the final step in the accounting
cycle is to prepare a ______________ trial balance.
Ans: N/A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
246.
The preparation of a ______________ and ______________ entries are two optional
steps in the accounting cycle.
Ans: N/A, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA
247.
Two permanent accounts that are part of the equity are ______________ and
______________.
Ans: N/A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
248.
The four major classifications of assets in a classified statement of financial position are:
________________, ________________, ________________ and ________________.
Ans: N/A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
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4 - 92
249.
Test Bank for Financial Accounting: IFRS Edition, 3e
The ______________ of a company is the average time that it takes to purchase
inventory, selll it on account, and then collect cash from customers.
Ans: N/A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: Business Economics
250.
Assets that do not have a physical substance yet often are very valuable are called
______________ assets.
Ans: N/A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
251.
Liabilities are generally classified as either ______________ or ______________ on a
classified statement of financial position.
Ans: N/A, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Reporting
Answers to Completion Statements
240. trial balance
241. income statement, statement of
financial position
242. closing
243. Income Summary
244. Retained Earnings
245. post-closing
246. worksheet, reversing
247. Share Capital-Ordinary, Retained
Earnings
248. Intangible Assets, Property, Plant, and
Equipment; Long-Term Investments;
Current Assets
249. operating cycle
250. intangible
251. current, non-current
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Completing the Accounting Cycle
4 - 93
MATCHING
252. Match the items below by entering the appropriate code letter in the space provided.
A.
B.
C.
D.
E.
Worksheet
Permanent accounts
Closing entries
Income Summary
Reversing entry
F.
G.
H.
I.
J.
Share CapitalOrdinary
Current assets
Operating cycle
Non-current liabilities
Correcting entries
______ 1. Obligations that a company expects to pay after one year.
______ 2. A part of equity in a corporation.
______ 3. An optional tool which facilitates the preparation of financial statements.
______ 4. A temporary account used in the closing process.
______ 5. Statement of financial position accounts whose balances are carried forward to the
next period.
______ 6. The average time that it takes to go from cash to cash in producing revenues.
______ 7. Entries to correct errors made in recording transactions.
______ 8. The exact opposite of an adjusting entry made in a previous period.
______ 9. Entries at the end of an accounting period to transfer the balances of temporary
accounts to Retained Earnings.
______ 10. Assets that a company expects to pay or convert to cash or use up within one year.
Ans: N/A, LO: 1-6, Bloom: K, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: Reporting
Answers to Matching
1.
2.
3.
4.
5.
I
F
A
D
B
6.
7.
8.
9.
10.
H
J
E
C
G
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4 - 94
Test Bank for Financial Accounting: IFRS Edition, 3e
SHORT-ANSWER ESSAY QUESTIONS
S-A E 253
A worksheet is an optional working tool used by accountants to facilitate the preparation of
financial statements. Consider the steps followed in preparing a worksheet. How does the use of
a worksheet assist the accountant. Could financial statements be prepared without a worksheet?
Evaluate how the process would differ. Consider factors such as timeliness, accuracy, and
efficiency in your evaluation.
Ans: N/A, LO: 1, Bloom: K, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:
Communication, IMA: FSA
Solution 253
The worksheet organizes the accountant's work in preparing the income statement and the
statement of financial position. The worksheet contains the general ledger trial balance, the
adjusting entries, and an adjusted trial balance (if 10-column). The columns for these trial
balances and entries allow the accountant to prove the equality of the debits and credits at each
step of the process. From the adjusted trial balance the statement of financial position and
income statement amounts are obtained and entered in the appropriate columns.
Preparing financial statements without the use of a worksheet would be less organized and
probably more prone to errors. And, if errors are made, they will probably be less easy to detect
and locate, and, therefore, less efficient and more time consuming.
S-A E 254
Journalizing and posting closing entries is a required step in the accounting cycle. Discuss why it
is necessary to close the books at the end of an accounting period. If closing entries were not
made, how would the preparation of financial statements be affected?
Ans: N/A, LO: 2, Bloom: K, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Communication,
IMA: Reporting
Solution 254
Closing entries are prepared to close the income statement accounts (the temporary accounts) of
the current year in order to start the next year. Income statement (temporary) accounts are
cumulative in nature but only for a year. The closing entries are what separate the accounting
periods. The next year's accumulation of income statement data can begin once the accounts are
cleared and the balances transferred through the closing entries to equity.
S-A E 255
Give the definition of current assets and current liabilities and provide two examples of each.
Ans: N/A, LO: 6, Bloom: K, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Reporting
Solution 255
Current assets are assets that a company expects to convert to cash or use up within one year.
Examples of current assets include cash, supplies, short-term investments, accounts receivable,
and inventory. Current liabilities are obligations that the company is to pay within the current year.
Examples of current liabilities are accounts payable, salaries and wages payable, and income
taxes payable.
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Completing the Accounting Cycle
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S-A E 256
Identify the two equity accounts in a corporation and indicate the purpose of each.
Ans: N/A, LO: 6, Bloom: K, Difficulty: Easy, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Reporting
Solution 256
The two accounts and the purpose of each are: (1) Share capital-ordinary is used to record
investments of assets in the business by the owners (shareholders). (2) Retained earnings is
used to record net income retained in the business.
S-A E 257
Distinguish between a reversing entry and an adjusting entry. Are reversing entries required?
Ans: N/A, LO: 7, Bloom: K, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Reporting
Solution 257
A reversing entry is the exact opposite, both in amount and in account titles, of an adjusting entry
and is made at the beginning of the new accounting period. Reversing entries are an optional
step in the accounting cycle.
S-A E 258
(Ethics)
Under Protection provides underground storage facilities for companies desiring off-site storage
of sensitive documents, computer records, and other items. They have developed a sophisticated
surveillance and security system which they initially used in their own facilities, and have recently
started to market elsewhere as well.
The underground storage facilities are made from natural caves in some instances (reinforced
and modified as appropriate) and from excavations of natural rock formations in others. The land
was purchased over ten years ago for a total of $2.5 million. The modifications have cost
approximately $15 million more. The company has never depreciated its storage facilities
because the market value of the property has continued to rise. Presently, the market price is
between $30 and $40 million.
Joe Goll, a new accounting manager, questioned this depreciation policy. Tim North, the
controller, has told him that he needn't worry about it. For one thing, he says, this is really a
special form of Land account, which should not be depreciated at all. For another, this is a
privately held company, and so they don't need to worry about misleading investors. All the
owners know about and approve the depreciation policy.
Required:
What are the ethical issues in this situation?
Ans: N/A, LO: 5, Bloom: K, Difficulty: Easy, Min: 5, AACSB: Ethics, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:
Communication, IMA: Business Economics
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Test Bank for Financial Accounting: IFRS Edition, 3e
Solution 258
The ethical issue is one of integrity. Even though the storage facilities are underground, that does
not mean that they can be accounted for simply as land. The structural improvements and
surveillance mechanisms will not last forever, and therefore their cost should be allocated over
the periods that are benefited. Net income is being overstated because the depreciation expense,
at zero, is being understated.
A second issue is the harm that may be incurred by outside parties because of the
misrepresentation in the financial statements. Even though the owners know about the (lack of)
depreciation, they may still use their financial statements to obtain loans. Private investors and
bankers should be able to rely on the financial statements.
A third issue is that of the integrity of the accountants themselves. If they are being asked to
ignore a basic principle of accounting so openly now, they should certainly ask themselves what
lies ahead.
S-A E 259 (Ethics)
You are the controller for WNC Home Media. During the beginning of January 2014, when the
company was adjusting and closing the accounting records for the calender year, you were home
sick with the flu. You therefore relied on your assistant to complete much of the work. The
company reported net income for 2014 of $125,000, down from $140,000 in 2013. In February,
after the financial statements have been issued and distributed to the company’s investors and
creditors, you discover that your assistant overlooked adjustments to insurance expense,
depreciation expense and utilties expense resulting in an overstatement of net income by
$12,500. You immediately inform the company president of the overstatement and suggest
correcting the errors and re-issuing the financial statements.The company president is concerned
that investors were not happy about the lower profits reported in 2014. He feels that 2015 is going
to be a better year for the company. Therefore he prefers to keep quiet about the financial
statement errors in 2014 and adjust the accounting records for the errors in 2015.
Required:
(a) Who are the stakeholders in this situation?
(b) What are the ethical issues in this situation?
(c) What would you do as controller in this situation?
Ans: N/A, LO: 6, Bloom: C, Difficulty: Medium, Min: 10, AACSB: Communication, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
Solution 259
(a) The stakeholders in this situation are the company investors and creditors as well as
anyone else who might rely on the 2014 financial statements to make an investing or
credit decision. The company president, controller and assistant controller are also
stakeholders.
(b) The ethical issue in this situation concerns misleading financial statement users. If the
errors are not corrected for the 2014 financial statements, investors and creditors will think
the company is more profitable that it actually is. Assets are likely overstated and
liabilities understated on the statement of financial position so that the company’s financial
position appears better than it actually is. The financial statement users, including
investors and banks from which the company may obtain additional financing, may be
harmed by reliance on the misleading financial statements. The integrity of the company,
its President and the controller are all at stake in this situation,
(c) The controller should insist that the President of the company allow the errors to be
corrected and revised financial statements issued. If the President refuses, the controller
should be prepared to resign.
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Completing the Accounting Cycle
S-A E 260
4 - 97
(Communication)
You have recently started to work for Payne Holmes, manufacturers of cemetery markers and
monuments. During your first month at work, you inadvertently recorded as revenue, about
$3,000 of prepayments from Tang Company. The financial statements had been released within
the company when you discovered your error. The month-end closing had not been completed,
however, and you were able to correct the accounts without incident.
Required:
Prepare a short note to accompany the re-released financial statements explaining the mistake.
Ans: N/A, LO: 5, Bloom: K, Difficulty: Easy, Min: 5, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Reporting
Solution 260
MEMO
TO:
Department Managers
FROM: Lisa Cross, Accounting
RE:
Month-End Reports
****ATTACHED FINANCIAL STATEMENTS REPLACE THOSE ISSUED JULY 5****
*****DESTROY ALL EARLIER COPIES OF JUNE 30 FINANCIAL STATEMENTS****
An error was made in the recording of Tang Company's prepayment. The entire
$3,000 was recorded as revenue. Since Tang's order had not been completed or
shipped, it should have been recorded as unearned revenue, which is a liability.
If you have sent any of your summary reports to corporate headquarters, please
contact the Accounting Department immediately for correction codes.
I am sincerely sorry for any inconvenience or delays caused by this error.
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4 - 98
Test Bank for Financial Accounting: IFRS Edition, 3e
GAAP QUESTIONS
1. Which of the following statements is false?
a. Under GAAP, the statement of financial position is usually referred to as the statement of
assets and equity.
b. The FASB and IASB are working on a joint conceptual framework project.
c. Under IFRS, companies sometimes net liabilities against assets to report "net assets".
d. Assets equals liabilities plus stockholders' equity.
Ans: A, LO: 7, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
2. A company has purchased a trust of land and expects to build a production plant on the land
in approximately 5 years. During the 5 years before construction, the land will be idle. Under
GAAP, the land should be reported as
a. a long-term investment.
b. an intangible asset.
c. property, plant, and equipment.
d. land expense.
Ans: A, LO: 7, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
3. Current assets under GAAP are listed generally
a. alphabetically.
b. by order of liquidity.
c. in the reverse order of their expected conversion to cash.
d. by importance.
Ans: B, LO: 7, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
4. Companies that use GAAP
a. do not have any guidelines as to what should be reported on their balance sheet.
b. generally reported current assets before non-current assets on their balance sheet.
c. often offset assets against liabilities and shown net assets and net liabilities on their
balance sheet rather than the underlying detailed line items.
d. may report all their assets on their balance sheet at fair value.
Ans: B, LO: 7, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving,
IMA: Reporting
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