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Exam 4: Completing the Accounting Cycle

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Question 1

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For the year ended December 31, a company has revenues of $317,000 and expenses of $196,000. The owner withdrew $50,000 during the year. The balance in the owner's capital account before closing is $81,000. Which of the following entries would be used to close the withdrawal account?

A) Debit Owner's Capital $81,000; credit Income Summary $81,000.
B) Debit Income Summary $50,000; credit Owner's, Capital $50,000.
C) Debit Income Summary $81,000, credit Owner's Withdrawals $81,000.
D) Debit Owner's Capital $50,000; credit Owner Withdrawals $50,000.
E) Debit Owner's Withdrawals $50,000; credit Owner's Capital $50,000.

F) C) and D)
G) D) and E)

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Question 2

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At the beginning of the year, Sigma Company's balance sheet reported Total Assets of $195,000 and Total Liabilities of $75,000. During the year, the company reported total revenues of $226,000 and expenses of $175,000. Also, owner withdrawals during the year totaled $48,000. Assuming no other changes to owner's capital, the balance in the owner's capital account at the end of the year would be:

A) $123,000.
B) $120,000.
C) $78,000.
D) $174,000.
E) $171,000.

F) B) and D)
G) A) and B)

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Question 3

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The calendar year-end adjusted trial balance for Blessinger Co. follows: Required: (a) Prepare a classified year-end balance sheet. (Note: A $9,000 installment on the long-term note payable is due within one year.) (b) Prepare the required closing entries.

The following information is available for Zephyr Company before closing the accounts. After all of the closing entries are made, what will be the balance in the Zephyr, Capital account? $\begin{array} { | l | r | } \hline \text { Net income } & \text { \$ } 115,000 \\\hline \text { Zephyr, Capital } & 110,000 \\\hline \text { Zephyr, Withdrawals } & 39,000 \\\hline\end{array}$

Two common subgroups for liabilities on a classified balance sheet are:

A classified balance sheet:

A current ratio of 2.1 suggests that a company has ________ current assets to cover current liabilities.

After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $33,000. The entry to close the income summary account will be:

Tara Westmont, the proprietor of Tiptoe Shoes, had annual revenues of $185,000, expenses of $103,700, and withdrew $18,000 from the business during the current year. The owner's capital account before closing had a balance of $297,000. - The entry to close the Income Summary account at the end of the year, after revenue and expense accounts have been closed, is:

The following adjusted trial balance is for Carla Co. at year-end December 31. The credit balance in Carla West, Capital at the beginning of the year, January 1, was $320,000. The owner, Carla West, invested an additional $100,000 during the current year. The land held for future expansion was also purchased during the current year. $\begin{array}{l|l|l}\hline\text { Sal aries payable } & & 10,500 \\\hline \text { Interest payable } & & 7,900 \\\hline \text { Long-term note payable } && 252,000 \\\hline \text { C. West, Capital } && 420,000\\\hline\text { C. West, Withdrawals } & 60,000 & \\ \hline \text { Service fees earned } & & 470,800 \\\hline \text { Sal aries expense } & 195,000 &\\\hline \text { Insurance expense } & 18,000 \\\hline \text { Rent expense } & 36,000 \\\hline \text { Depreciation expense-Equipment } & 12,000 \\\hline \text { Depreciation expense-Building } & 15,000 \\\hline \text { Totals } & \$ 1,436,000 & \$ 1,436,000 \\\hline \end{array}$ Required: Prepare a classified balance sheet as of December 31. (Note: A $21,000 installment on the long-term note payable is due within one year.)

The following information is available for the Noir Detective Agency. After closing entries are posted, what will be the balance in the G. Noir, Capital account? $\begin{array}{lr}\text { Net Loss } & \$ 17,600 \\\text { G. Noir, Capital } & 289,000 \\\text { G. Noir, Withdrawals } & 32,000\end{array}$

The purpose of reversing entries is to:

The Income Summary account is used to:

Which of the following statements regarding reporting under GAAP and IFRS is not true:

Reversing entries are recorded in response to external transactions that were created in error during the prior accounting period.

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

Income Summary is a temporary account only used for the closing process.

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

All necessary amounts needed to prepare the income statement can be taken from the income statement columns of the work sheet, including the net income or net loss.

Closing the temporary accounts at the end of each accounting period does all of the following except: