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Exam 4: Completing the Accounting Cycle

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Question 41

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Current liabilities are cash and other resources that are expected to be sold, collected or used within one year or the company's operating cycle whichever is longer.

A) True
B) False

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Question 42

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

A) True
B) False

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Question 43

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All of the following statements regarding a work sheet are true except:

The recurring steps performed each reporting period in preparing financial statements, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, is referred to as the:

Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

List the steps in the accounting cycle.

The aim of a post-closing trial balance is to verify that (1) total debits equal total credits for temporary accounts, and (2) all temporary accounts have zero balances.

Permanent accounts include all of the following except:

The calendar year-end adjusted trial balance for Blessinger Co. follows: $\begin{array} { | l | r | r | } \hline \text { Rent expense } & 5,000 & \\\hline \text { Depreciation expense-Equipment } & 800 & \\\hline \text { Depreciation expense-Building } & \underline { 7,000 } & \\\hline \text { Totals } & \$ 1,500,800 & \$ 1,500,800 \\\hline\end{array}$ Required: (a) Determine the amounts of current assets and current liabilities. (Note: A $9,000 installment on the long-term note payable is due within one year.) (b) Calculate the current ratio. Comment on the ability of Blessinger Co. to meets its short-term debts.

What is the purpose of a post-closing trial balance?

On a work sheet, if the Debit total exceeds the Credit total of the Income Statement columns, a net loss is indicated.

Which of the following accounts could not be classified as a current liability?

Another name for a temporary account is a(n) :

Match the following terms with the appropriate definition. A. Plant assets B. Owner's capital C. Classified balance sheet D. Intangible assets E. Current ratio F. Closing entries G. Current liabilities H. Long-term investments I. Current assets J. Unclassified balance sheet _____ 1. The owner's claim on the assets of a company. _____ 2. Tangible assets that are long-lived and used to produce or sell products or services. _____ 3. Cash and other resources that are expected to be sold, collected, or used within one year or the company's operating cycle, whichever is longer. _____ 4. Entries recorded at the end of each accounting period to transfer end-of-period balances in revenue, expense, and withdrawals accounts to the permanent owner's capital account. _____ 5. Long-term resources that benefit business operations, usually lack physical form, and have uncertain benefits. 6. Assets that are held for more than the longer of one year or the operating cycle of the company and are not used in operations. _____ 7. A balance sheet that organizes the assets and liabilities into important subgroups that provide more information to decision makers. _____ 8. Obligations due to be paid or settled within one year or the operating cycle of a business, whichever is longer. _____ 9. A balance sheet that broadly groups items into assets, liabilities and equity. _____ 10. A ratio that is used to help evaluate a company's ability to pay its short-term obligations, calculated by dividing current assets by current liabilities.

At the beginning of the year, a company's balance sheet reported the following balances: Total Assets = $225,000; Total Liabilities = $125,000; and Owner's Capital = $100,000. During the year, the company reported revenues of $46,000 and expenses of $30,000. In addition, owner's withdrawals for the year totaled $20,000. Assuming no other changes to owner's capital, the balance in the owner's capital account at the end of the year would be:

Match the following definitions with the appropriate term

In the table below, indicate with an "X" in the proper column whether the account is a temporary (nominal) account or a permanent (real) account. $\begin{array} { | l | l | l | l | } \hline & \text { Account } & \begin{array} { l } \text { Temporary } \\\text { Nominal) }\end{array} & \begin{array} { l } \text { Permanent } \\\text { (Real) }\end{array} \\\hline \text { a. } & \text { Cash } & & \\\hline \text { b. } & \text { Prepaid rent } & & \\\hline \text { c. } & \text { Unearned revenue } & & \\\hline \text { d. } & \text { Accounts recervable } & & \\\hline \text { e. } & \text { Insurance expense } & & \\\hline \text { f. } & \text { S. Holder, Capital } & & \\\hline \text { g. } & \text { S. Holder, Withdrawals } & & \\\hline \text { h. } & \text { Rent expense } & & \\\hline \text { i. } & \text { Fees earned } & & \\\hline \text { j. } & \text { Supplies } & & \\\hline \text { k. } & \text { Supplies expense } & & \\\hline \text { l. } & \text { Depreciation expense-Equipment } & \\\hline \text { m. } & \text { Accumulated depreciation -Equipment.... } & & \\\hline\end{array}$

If all columns of a completed work sheet balance, you can be sure that no errors were made in its preparation.

The closing process takes place before financial statements have been prepared.

If a company has current assets of $15,000 and current liabilities of $9,500, its current ratio is 1.6