Exam 4: Completing the Accounting Cycle

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A) Income Summary account.
B) Closing account.
C) Balance column account.
D) Contra account.
E) Nominal account.

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A) Permanent accounts is another name for nominal accounts.
B) Temporary accounts carry a zero balance at the beginning of each accounting period.
C) The Income Summary account is a temporary account.
D) Real accounts remain open as long as the asset, liability, or equity items recorded in the accounts continue in existence.
E) The closing process applies only to temporary accounts.

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Balance of Sara's capital acc...

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A) the balances reflected in the company's financial statements.
B) the balances reflected in the company's unadjusted trial balance.
C) whatever balances management has decided to report.
D) the balances in the company's post-closing trial balance.
E) the balances management budgeted for the accounting period.

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A) Both GAAP and IFRS define the initial asset value as historical cost for nearly all assets.
B) The definition of an asset under GAAP and IFRS involves three basic criteria.
C) Both GAAP and IFRS define the initial asset value as replacement value.
D) The definition of a liability under GAAP and IFRS involves three basic criteria.
E) After acquisition, one of two asset measurement systems is applied.

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A) Reversing entries are optional.
B) Reversing entries are recorded in response to accrued assets and accrued liabilities that were created by adjusting entries at the end of the previous accounting period.
C) Reversing entries are used to simplify a company's recordkeeping.
D) Reversing entries are dated the first day of the new accounting period.
E) Reversing entries are not the exact opposite of adjusting entries.

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A) Is used to measure a company's profitability.
B) Is used to measure the relation between assets and long-term debt.
C) Measures the effect of operating income on profit.
D) Is used to help evaluate a company's ability to pay its debts in the near future.
E) Is calculated by dividing current assets by equity.

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D

A) Debit Salaries expense $12,000; credit Salaries payable $12,000.
B) Debit Salaries expense $18,000; debit Salaries payable $12,000; credit Cash $30,000.
C) Debit Salaries payable $18,000; credit Cash $18,000.
D) Debit Salaries payable $12,000, credit Salaries expense $12,000.
E) Debit Salaries expense $18,000; credit Salaries payable $18,000.

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A) Office Equipment.
B) Accumulated Depreciation-Office Equipment.
C) Depreciation Expense-Office Equipment.
D) Ted Nash, Capital.
E) Salaries Payable.

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C

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True

A) $ 8,000.
B) $15,400.
C) $23,400.
D) $17,000.
E) $32,400.

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(b)
Adventure Trave...

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A) if management has decided to cease operating the business.
B) only if the company adheres to the accrual method of accounting.
C) if a company's bookkeeper forgets to prepare reversing entries.
D) if the temporary accounts are to reflect correct amounts for each accounting period.
E) in order to satisfy the Internal Revenue Service.

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A) Are optional.
B) Are mandatory.
C) Correct errors in journal entries.
D) Are required by GAAP.
E) Are prepared on the worksheet.

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A) Working papers are useful aids in the accounting process.
B) On the work sheet, the effects of the accounting adjustments are shown on the account balances.
C) After the work sheet is completed, it can be used to help prepare the financial statements.
D) On the work sheet, the adjusted amounts are sorted into columns according to whether the accounts are used in preparing the unadjusted trial balance or the adjusted trial balance.
E) A worksheet is not a substitute for financial statements.

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