Deck 4: Completing the Accounting Cycle

Question 1

A balance sheet prepared in the account form lists the assets at the top and the liabilities and stockholders' equity below.

Answer 1

False

Question 2

A balance sheet prepared in the report form lists the assets on the left and the liabilities and stockholders' equity on the right.

Answer 2

False

Question 3

A classified balance sheet can be presented in either a report or an account form. Although either is acceptable, the report form is more popular.

Answer 3

True

Question 4

The statement of retained earnings shows how retained earnings changed during the period due to acquiring assets and paying liabilities.

Question 5

In a balance sheet, prepared under IFRS guidelines, cash is often shown as one of the last assets listed.

Question 6

Revenue may be called Profit and Net Income may be called Turnover in an income statement prepared under IFRS.

Question 7

List the order in which the balance sheet, statement of retained earnings, and income statement are prepared. Briefly discuss why this order is necessary.

Question 8

The operating cycle is the time span required for a business to repay its long-term liabilities.

Question 9

In a classified balance sheet, assets are reported in the order of liquidity and liabilities are listed in the order in which they must be paid.

Question 10

The financial statements are prepared from the ________.

A) adjusted trial balance
B) chart of accounts
C) statement of retained earnings
D) unadjusted trial balance

Question 11

The financial statement that reports assets, liabilities, and stockholders' equity as of the last day of the period is called the ________.

A) income statement
B) statement of retained earnings
C) balance sheet
D) unadjusted trial balance

Question 12

Assets and liabilities are presented in a different order on a balance sheet prepared following IFRS than on a balance sheet prepared following U.S. GAAP.

Question 13

The balance sheet is the first financial statement that is prepared at the end of the period.

Question 14

Liquidity is a measure of how quickly an item can be converted to net income.

Question 15

Intangible assets are long-term assets that have no physical form and convey special rights.

Question 16

In a balance sheet, assets are classified as either current or long term, depending on their liquidity.

Question 17

Prepaid Rent is always classified as a long-term asset.

Question 18

Which of the following is NOT a balance sheet account?

A) Unearned Revenue
B) Prepaid Rent
C) Accumulated Depreciation - Building
D) Dividends

Question 19

Which financial statement is prepared last?

A) income statement
B) balance sheet
C) statement of retained earnings
D) The financial statements can be prepared in any order.

Question 20

A net loss from the balance sheet decreases Retained Earnings.

Question 21

A balance sheet that lists the assets above the liabilities and stockholders' equity sections is a(n) ________ balance sheet.

A) report form
B) unclassified form
C) account form
D) audited form

Question 22

Salaries Payable, Accounts Payable, and Unearned Revenue are examples of ________.

A) short-term investments
B) fixed assets
C) current liabilities
D) long-term liabilities

Question 23

Assets that are expected to be converted to cash, sold, or used up during the next 12 months, or within the business's normal operating cycle if the cycle is longer than a year, are called ________ assets.

A) intangible
B) plant
C) long-term
D) current

Question 24

Patents, copyrights, and trademarks are examples of ________.

A) short-term investments
B) fixed assets
C) long-term investments
D) intangible assets

Question 25

Which of the following is a measure of how quickly an item can be converted to cash?

A) Debt ratio
B) Return on assets ratio
C) Liquidity
D) Accounting cycle

Question 26

All assets that will not be converted to cash or used up within the business's operating cycle or one year, whichever is greater, are called ________.

A) long-term assets
B) fully depreciated assets
C) current assets
D) current liabilities

Question 27

Under which of the following categories would Accounts Receivable appear?

A) current assets
B) current liabilities
C) long-term assets
D) long-term liabilities

Question 28

Which of the following is a plant asset?

A) Equipment
B) Patents
C) Trademark
D) Accounts Receivable

Question 29

Which of the following is an example of an intangible asset?

A) Equipment
B) Plant
C) Property
D) Copyright

Question 30

Under which of the following categories would bonds held as an investment for more than a year appear?

A) current assets
B) long-term liabilities
C) long-term assets
D) current liabilities

Question 31

Notes Payable due within two years are classified as ________.

A) current liabilities
B) current assets
C) long-term liabilities
D) long-term assets

Question 32

The time span during which cash is paid for goods and services, which are then sold to customers from whom the business collects cash, is called the ________.

A) production time
B) operating cycle
C) accounting cycle
D) sales time

Question 33

Under which of the following categories would Accounts Payable appear?

A) long-term assets
B) current assets
C) long-term liabilities
D) current liabilities

Question 34

Assets with no physical form are ________.

A) current assets
B) intangible assets
C) not listed on the balance sheet because they have no value
D) included in stockholders' equity

Question 35

Buildings, land, and equipment are classified as ________.

A) current assets
B) long-term assets
C) current liabilities
D) long-term liabilities

Question 36

Which of the following is a current asset that is expected to be converted to cash, sold, or consumed during the next year (or the normal operating cycle, if longer)?

A) Land
B) Equipment
C) Building
D) Accounts Receivable

Question 37

Under which of the following categories would bonds held as an investment for less than a year appear?

A) long-term assets
B) current assets
C) long-term liabilities
D) current liabilities

Question 38

Property, plant, and equipment are ________.

A) presented in order of the category name, with Land being presented last
B) also called fixed or plant assets
C) either tangible or intangible assets
D) easily converted to cash

Question 39

Which of the following statements regarding intangible assets is incorrect?

A) Intangible assets have no physical form.
B) Intangible assets are valuable because of the special rights they carry.
C) Intangible assets are not reported on the balance sheet.
D) Intangible assets include the exclusive right to produce or sell an invention.

Question 40

Which of the following is the most liquid asset?

A) Building
B) Prepaid Expenses
C) Accounts Receivable
D) Cash

Question 41

The accounts from the Adjusted Trial Balance are listed in alphabetical order. Use this information for Lawrence Service Company to prepare the classified balance sheet at September 30, 2018. Use the report form. You must compute the ending balance of Retained Earnings.

Question 42

Assets are listed in the order of their ________ on the balance sheet.

A) magnitude
B) dates of purchase
C) liquidity
D) durability

Question 43

A worksheet can be used to help prepare adjusting entries and the financial statements.

Question 44

The balances of select accounts of McMurray, Inc. as of December 31, 2018 are given below: $$\begin{array} { | l | r | } \hline \text { Notes Payable-short-term } & \$ 1,300 \\\hline \text { Salaries Payable } & 3,000 \\\hline \text { Notes Payable-long-term } & 24,000 \\\hline \text { Accounts Payable } & 3,300 \\\hline \text { Unearned Revenue } & 1,000 \\\hline \text { Interest Payable } & 2,400 \\\hline\end{array}$$ The Unearned Revenue is the amount of cash received for services to be rendered in January 2019. Interest Payable will be paid on February 5, 2019. What are the total long-term liabilities shown on the balance sheet at December 31, 2018?

A) $1,300
B) $3,000
C) $4,300
D) $24,000

Question 45

The worksheet helps accountants to ________.

A) prepare the trial balance
B) prepare the financial statements
C) prepare the unadjusted trial balance
D) maintain books of accounts without a journal

Question 46

The ending balance in the Retained Earnings account is shown on the income statement columns of the worksheet.

Question 47

Which of the following would be considered a long-term asset?

A) Accounts Payable
B) Land
C) Office Supplies
D) Retained Earnings

Question 48

Regarding a classified balance sheet, which of the following statements regarding liabilities is incorrect?

A) Many Notes Payable are long-term.
B) Current liabilities include Accounts Payable and Unearned Revenue.
C) Long-term liabilities must be paid either with cash or with goods and services within one year or the entity's operating cycle, if the cycle is longer than one year.
D) Liabilities are listed in the order in which they must be paid.

Question 49

Which of the following statements concerning the worksheet is correct?

A) When a worksheet is used, there is no need to make journal entries.
B) A worksheet consists of seven sections.
C) Section 5 (Income Statement) and Section 6 (Balance Sheet) are optional.
D) A completed worksheet is a substitute for the financial statements.

Question 50

The balances of select accounts of Elliott, Inc. as of December 31, 2018 are given below: $$\begin{array} { | l | r | } \hline \text { Notes Payable-short-term } & \$ 1,200 \\\hline \text { Salaries Payable } & 6,000 \\\hline \text { Notes Payable-long-term } & 20,000 \\\hline \text { Accounts Payable } & 3,000 \\\hline \text { Unearned Revenue } & 1,000 \\\hline \text { Interest Payable } & 2,500 \\\hline\end{array}$$ The Unearned Revenue is the amount of cash received for services to be rendered in January, 2019. The Interest Payable is due on February 15, 2019. What are the total current liabilities shown on the balance sheet at December 31, 2018?

A) $5,500
B) $11,200
C) $13,700
D) $12,500

Question 51

A worksheet can be used to help prepare the financial statements.

Question 52

The balances of select accounts of Sandra, Inc. as of December 31, 2018 are given below: $$\begin{array} { | l | r | r | } \hline & { \text { Debit } } & \text { Credit } \\\hline \text { Building } & \$ 130,000 & \\\hline \text { Cash } & 5,000 & \\\hline \text { Office Supplies } & 800 & \\\hline \text { Furniture } & 5,000 & \\\hline \text { Prepaid Insurance } & 450 & \\\hline \text { Accumulated Depreciation-Furniture } & & \$ 1,000 \\\hline \text { Land } & 32,000 & \\\hline \text { Accumulated Depreciation-Building } & & 4,600 \\\hline \text { Accounts Receivable } & 2,300 & \\\hline\end{array}$$ The insurance has been prepaid until June 30, 2019. Determine the amount of total current assets reported on the balance sheet at December 31, 2018.

A) $12,300
B) $5,800
C) $8,550
D) $6,250

Question 53

A worksheet is a substitute for the financial statements.

Question 54

The balances of select accounts of Donovan, Inc. as of December 31, 2018 are given below. $$\begin{array} { | l | r | r | } \hline & { \text { Debit } } & \text { Credit } \\\hline \text { Building } & \$ 120,000 & \\\hline \text { Cash } & 9,000 & \\\hline \text { Office Supplies } & 1,000 & \\\hline \text { Furniture } & 4,000 & \\\hline \text { Prepaid Insurance } & 600 & \\\hline \text { Accumulated Depreciation-Furniture } & & \$ 2,000 \\\hline \text { Land } & 33,000 & \\\hline \text { Accumulated Depreciation-Building } & & 4,000 \\\hline \text { Accounts Receivable } & 2,000 & \\\hline\end{array}$$ What amount of total long-term assets would be shown on the balance sheet at December 31, 2018?

A) $120,000
B) $151,000
C) $153,000
D) $157,000

Question 55

In the worksheet, the adjusted balance of the Service Revenue account appears in the credit column of the income statement.

Question 56

Regarding a classified balance sheet, which of the following statements is correct?

A) Accounts are classified by their purchase dates.
B) Account balances are listed from the highest amount to the lowest amount.
C) Assets are listed in the order of their liquidity.
D) Assets are listed in alphabetical order.

Question 57

The last two columns generally found on the right side of the worksheet are the income statement columns.

Question 58

For each account listed, identify the category in which it would appear on a classified balance sheet.
$\begin{array}{|l|l|r|} \hline&&\text { Location on a} \\ &\text { Account} &\text { Classified Balance Sheet }\\ \hline\text {a } & \text { Retained Earnings } \\ \hline \text { } & \text {Accumulated Depreciation - } \\ \text { b} & \text { Equipment } \\ \hline \text { c} & \text {Notes Payable (due in twoyears) } \\ \hline \text { d } & \text {Unearned Revenue (short-term) } \\ \hline \text { e} & \text {Salaries Payable } \\ \hline \text { f} & \text {Accounts Receivable } \\ \hline \text {g } & \text { Trademark} \\ \hline \text {h } & \text {Prepaid Rent (prepaid for six months) } \\ \hline\end{array}$

Question 59

The Dividends account is included in the income statement section of the worksheet.

Question 60

Liquidity is a measure of how ________.

A) quickly an asset may be converted into cash
B) long an asset can be used
C) easily an asset can be exchanged for another asset
D) quickly an asset appreciates in value

Question 61

Where does net income appear on a worksheet?

A) Net income appears only in the income statement debit column.
B) Net income appears in the balance sheet credit column and in the income statement debit column.
C) Net income appears in the income statement credit column and in the balance sheet debit column.
D) Net income appears only in the balance sheet credit column.

Question 62

When preparing a worksheet, net income is recorded in the ________.

A) income statement credit column
B) adjusted trial balance debit column
C) income statement debit column
D) balance sheet debit column

Question 63

Which of the following accounts would appear in the balance sheet debit column of the worksheet?

A) Unearned Revenue
B) Accumulated Depreciation
C) Service Revenue
D) Prepaid Insurance

Question 64

The balance sheet section of the worksheet includes the asset and liability accounts and all equity accounts, including all revenues and expenses.

Question 65

The worksheet is an external tool that can be used to help in recording adjusting entries and preparing financial statements.

Question 66

The income statement section of the worksheet includes ________.

A) Land and Salaries Payable
B) Common Stock, Retained Earnings, and Dividends
C) Furniture and Cash
D) Service Revenue and Utilities Expense

Question 67

Which of the following statements is true of the worksheet?

A) The worksheet is a tool that takes the place of financial statement preparation.
B) The worksheet is a document used to summarize data to prepare financial statements.
C) The worksheet is a financial statement issued to the public to communicate the financial results of a company.
D) The worksheet is a type of journal.

Question 68

The balance sheet section of the worksheet includes the asset and liability accounts and all equity accounts except revenues and expenses.

Question 69

Which of the following statements is true if the income statement debit column exceeds the income statement credit column of a worksheet?

A) The company incurred a net loss.
B) The retained earnings account increased during the period.
C) The company made a net profit.
D) An error was made.

Question 70

Which of the following accounts would appear in the balance sheet credit column of the worksheet?

A) Prepaid Insurance
B) Buildings
C) Unearned Revenue
D) Service Revenue

Question 71

Which of the following adjusted balances would appear in the balance sheet credit column of a worksheet?

A) Rent Revenue
B) Insurance Expense
C) Salaries Payable
D) Equipment

Question 72

Prepaid Rent in the worksheet's unadjusted trial balance column is $7,000. Prepaid Rent in the balance sheet column is $6,000. Which of the following entries would have caused this difference?

A) a $1,000 debit entry to Prepaid Rent in the worksheet's adjustments column
B) a $1,000 credit entry to Rent Expense in the worksheet's adjustments column
C) a $1,000 credit entry to Prepaid Rent in the worksheet's adjustments column
D) a $1,000 credit entry to Rental Revenue in the worksheet's adjustments column

Question 73

The following is the adjusted trial balance columns from the worksheet for Picture Perfect Photography.
Using the information provided in the worksheet above, prepare an income statement for Picture Perfect Photography.

Question 74

Net income is entered as the balancing amount on the debit side of the income statement columns and the credit side of the balance sheet columns of the worksheet.

Question 75

Which of the following accounts would appear in the income statement debit column of the worksheet?

A) Unearned Revenue
B) Service Revenue
C) Depreciation Expense
D) Prepaid Insurance

Question 76

Which of the following accounts would appear in the income statement credit column of the worksheet?

A) Service Revenue
B) Prepaid Insurance
C) Unearned Revenue
D) Depreciation Expense

Question 77

Net income or net loss is the balancing amount on the worksheet and should always be entered on the side that makes the debit and credit columns balance.

Question 78

Which of the following is true of a completed worksheet?

A) The total debits in the unadjusted trial balance column equal the total debits in the adjusted trial balance column.
B) The total debits in the income statement column equal the total credits in the balance sheet column.
C) The total debits in the income statement column equal the total debits in the balance sheet column.
D) The total of all the debit columns is equal to the total of all the credit columns.

Question 79

The Interest Expense in the worksheet's unadjusted trial balance column is $1,000. Interest Expense in the income statement column is $12,000. Which of the following entries would have caused this difference?

A) a $12,000 credit to Interest Expense in the worksheet's adjustments column
B) a $12,000 credit to Interest Payable in the worksheet's adjustments column
C) a $11,000 debit to Interest Expense in the worksheet's adjustments column
D) a $11,000 credit to Interest Expense in the worksheet's adjustments column

Question 80

Net income (loss) is the difference between the total debits and the total credits in the income statement columns of the worksheet.