Chapter 8: Completing the Accounting Cycle
Know the following terms & how to perform the necessary tasks:
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Accumulated Depreciation
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Adjusting Entries
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Audit
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Closing an account
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Contra account
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Declining-balance method of depreciation 
Depreciation
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Income Summary account
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Net book value
Nominal account (temporary)
Post-closing trial balance
Prepaid Expense
Real account
Salvage Value
Straight-line method of depreciation
Valuation account
8.1
 Why do adjusting entries?
 Supplies
 Late bills
 Prepaid Expense (eg. Insurance)
8.2
 Adjustments & the Work Sheet (page 287)
8.3
 Closing Entries
 Accounting Cycle
 Journalizing & Posting Closing Entries
 Post-closing Trial Balance
8.4
 Depreciation  Straight-line
 Declining Balance
 Financial Statements page 307
Test Outline – Tuesday November 18, 2014
Fill-in-the-blanks
Short Answers
Work Sheet with Adjustments
Journalizing Closing Entries
7 marks
9 marks
14 marks
10 marks
40 marks TOTAL
BAF 3MI: Chapter 8 – Test Review
Completing the accounting cycle
1. The nine steps of the accounting cycle are listed below in random order. Number the steps in the order
in which they occur in the accounting cycle.
2.
_________
Accounting entries are recorded in the journal.
_________
An income statement and a balance sheet are prepared.
_________
Adjusting entries are journalized and posted.
________
Transactions occur.
_________
The ledger is balanced by means of a trial balance.
_________
A post-closing trial balance is prepared.
________
A worksheet is prepared.
________
Closing entries are journalized and posted.
________
Journal entries are posted to the ledger accounts.
The trial balance figures for Dennison Delivery Service appear on the following worksheet.
Using the additional information below, complete the eight-column worksheet for the fiscal year
ended June 30, 20–4. HST accounts are not to be considered.
Additional Information
1.
Purchase invoices received in July, 20–4, pertaining to goods and services received in
June 20–4, are for the following:
Supplies
$280.00
Miscellaneous Expense
140.00
Utilities Expense
210.20
2.
The supplies inventory taken on June 30, 20–4, amounted to $625.00.
3.
The Prepaid Licences account showed that the value of unexpired licences on June 30, 20–4, amounted to $412.00.
4.
The prepaid insurance schedule as of June 30, 20–4, showed a total of $215 in unexpired insurance.
Dennison Delivery Service
ACCOUNTS
Bank
Accounts Receivable
Worksheet
ADJUSTMENTS
Dr
Dr
Cr
1 074.00
1 400.00
17 000.00
Building
50 000.00
Furniture and Equipment
12 970.00
Trucks
48 472.00
Accounts Payable
Cr
BALANCE SHEET
Dr
3 417.40
J. Budd, Capital
114 273.68
8 900.00
Fees Earned
70 721.19
Bank Charges
115.25
Miscellaneous Expense
219.51
Truck Expense
Dr
1 146.00
Land
Telephone Expense
Cr
12 419.00
Prepaid Insurance
J. Budd, Drawings
INCOME STATEMENT
2 570.00
Supplies
Prepaid Licences
Year Ended June 30, 20–4
TRIAL BALANCE
316.25
11 901.32
Utilities Expense
2 506.00
Wages Expense
17 402.94
188 412.27
188 412.27
B. Prepare the four closing entries for Dennison Delivery Service as of June 30, 20–4.
GENERAL JOURNAL
DATE
PARTICULARS
P.R.
PAGE _____
DEBIT
CREDIT
C. Assuming all entries have been posted, calculate the ending Capital balance for Dennison
Delivery Service as of June 30, 20–4. Use the account provided below.
Cr
J. Budd, Capital
ACCOUNT
DATE
Jul. 20–3
D.
NO. 301
PARTICULARS
P.R.
DEBIT
1
CREDIT
114 2 7 3
Dr/Cr
68
Cr
BALANCE
114 2 7 3
Prepare a post-closing trial balance for Dennison Delivery Service.
___________________________________
___________________________________
____________________________________
ACCOUNTS
3.
DEBIT
CREDIT
A company purchases equipment costing $24 000, which it expects to last 6 years and to have a salvage value of $3000.
A.
Prepare a schedule of depreciation for the first five years using the straight-line method.
Straight-line Depreciation
Year
Depreciation
Balance
$24 000
1
2
3
4
5
B.
For the same equipment, prepare a schedule of depreciation for the first five years using the true declining-balance method.
Canada Revenue Agency’s prescribed rate for depreciation is 30%.
Declining Balance
Year
Depreciation
Balance
$24 000.00
1
2
3
4
5
4. Indicate which of the accounts below are nominal accounts by placing a checkmark (✓) in the
68
space provided.
A. Accounts Receivable
F. Salaries
B. Bank Charges
G. Chris Vella, Capital
C. Miscellaneous Expense
H. Fees Earned
D. Automobiles
I.
E. Accounts Payable
J. Bank Loan
Chris Vella, Drawings
5. Calculate the value of the unexpired insurance on the following policies as of June 30, 20–4.
Company
Policy Date
Term
Premium
Unexpired Insurance
a. Bristol
July 31, 20–3
1 year
$ 420
_______________________
b. Maine
October 31, 20–3
1 year
$1 080
________________________
c. Ipswich
January 31, 20–4
1 year
$ 576
_______________________
6. For each account, which worksheet column would be extended? Place a checkmark (✓) in the appropriate column.
Trial Balance
Dr
Example: Commission Earned
A. Accounts Payable
B. Miscellaneous Expense
C. Advertising Expense
D. Equipment
E. G. Rojek, Capital
F. HST Recoverable
G. HST Payable
H. G. Rojek, Drawings
I.
Bank Charges
J. Supplies
Cr
✓
Income Statement
Dr
Cr
✓
Balance Sheet
Dr
Cr