Question 1

Which of the following statements is incorrect?
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.

Accepted Answer

The incorrect statement is D because on the work sheet, the adjusted amounts are sorted into columns according to whether the accounts are used in preparing the income statement or the balance sheet, not the unadjusted trial balance or the adjusted trial balance.

Question 2

Statements that show the financial statements as if proposed transactions had already occurred are called:
A)Pro forma statements.
B)Professional statements.
C)Simplified statements.
D)Temporary statements.
E)Interim statements.

Accepted Answer

Pro forma statements show the financial statements as if proposed transactions had already occurred. These statements are used to estimate the potential effect of certain events or decisions on the financial statements of a business.

Question 3

A company shows a $600 balance in Prepaid Rent in the Unadjusted Trial Balance columns of the work sheet.The Adjustments columns show expired rent of $200.This adjusting entry results in:
A)$200 decrease in net income.
B)$200 increase in net income.
C)$200 difference between the debit and credit columns of the Unadjusted Trial Balance.
D)$200 of prepaid insurance.
E)An error in the financial statements.

Accepted Answer

The adjusting entry for the expired rent of $200 reduces the Prepaid Rent account by $200 and increases Rent Expense by $200. Therefore, the net income will decrease by $200.

Question 4

The balances in the unadjusted columns of a work sheet will agree with:
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.

Accepted Answer

The unadjusted columns of a work sheet are used to prepare adjusting journal entries, and therefore the balances will not agree with the company's financial statements or any management reports until those adjustments are made. However, the balances in the unadjusted columns should agree with the company's unadjusted trial balance, which is a list of all account balances compiled prior to making adjusting entries. It is important to ensure that the unadjusted trial balance matches the unadjusted columns of the work sheet, as any discrepancies may signal errors in the accounting records. The post-closing trial balance is prepared after all closing entries have been made and does not include any temporary accounts or adjusting entries, so it would not necessarily match the unadjusted columns of the work sheet.

Question 5

Castillo Services paid K.Castillo,the sole shareholder of Castillo Services,$5,700 in dividends during the current year.The entry to close the dividends account at the end of the year is:
A)Debit Dividends $5,700; credit Cash,$5,700
B)Debit Retained earnings $5,700; credit Dividends $5,700
C)Debit Dividends $5,700; credit Retained earnings $5,700
D)Debit Retained earnings $5,700,credit Salary Expense $5,700
E)Debit Income Summary $5,700; credit Retained earnings $5,700

Accepted Answer

The correct entry to close the dividends account involves debiting Retained Earnings and crediting Dividends. This reflects the reduction in retained earnings due to the payment of dividends.

Question 6

In the process of completing a work sheet,the accountant determines that the Income Statement debit column totals $83,000,while the Income Statement credit column totals $65,000.To enter net income (or net loss)for the period into the work sheet would require an entry to
A)the Adjustments debit column and the Adjustments credit column.
B)the Unadjusted Trial Balance debit column and the Adjustments credit column.
C)it is not practical to enter Net Income (or Net Loss)on the work sheet.
D)the Balance Sheet & Statement of Retained Earnings debit column and the Income Statement credit column.
E)the Income Statement debit column and the Balance Sheet & Statement of Retained Earnings credit column.

Accepted Answer

The answer of In the process of completing a work...

Question 7

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from)the retained earnings account is the:
A)Income Summary account.
B)Closing account.
C)Balance column account.
D)Contra account.
E)Nominal account.

Accepted Answer

The special account used in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the Income Summary account. This account helps summarize the company's revenues and expenses for the period and facilitates the closing process.

Question 8

The Unadjusted Trial Balance columns of a company's work sheet shows the Store Supplies account with a balance of $750.The Adjustments columns shows a credit of $425 for supplies used during the period.The amount shown as Store Supplies in the Balance Sheet columns of the work sheet is:
A)$325 debit.
B)$325 credit.
C)$425 debit.
D)$750 debit.
E)$425 credit.

Accepted Answer

The Store Supplies account starts with a balance of $750. After adjusting for $425 of supplies used (which reduces the balance), the new balance is $750 - $425 = $325, shown as a debit because supplies are an asset and the remaining balance represents the asset value.

Question 9

Which of the following errors would cause the Balance Sheet and Statement of Retained Earnings columns of a work sheet to be out of balance?
A)Entering an asset amount in the Income Statement Debit column.
B)Entering a liability amount in the Income Statement Credit column.
C)Entering an expense amount in the Balance Sheet and Statement of Retained Earnings Debit column.
D)Entering a revenue amount in the Balance Sheet and Statement of Retained Earnings Debit column.
E)Entering a liability amount in the Balance Sheet and Statement of Retained Earnings Credit column.

Accepted Answer

The answer of Which of the following errors would cause...

Question 10

High Step Shoes,had annual revenues of $185,000,expenses of $103,700,and paid dividends of $18,000 during the current year.The retained earnings account before closing had a balance of $297,000.
-The ending retained earnings balance after closing is:
A)$185,000
B)$63,300
C)$81,300
D)$360,300
E)$378,300

Accepted Answer

The ending retained earnings balance is calculated by adding net income (revenues - expenses) to the beginning retained earnings balance and then subtracting dividends. Net income is $185,000 - $103,700 = $81,300. Adding this to the beginning retained earnings of $297,000 gives $378,300, and then subtracting dividends of $18,000 results in an ending balance of $360,300.

Question 11

The Unadjusted Trial Balance columns of a work sheet total $84,000.The Adjustments columns contain entries for the following: 
1.Office supplies used during the period,$1,200.
2.Expiration of prepaid rent,$700.
3.Accrued salaries expense,$500.
4.Depreciation expense,$800.
5.Accrued service fees receivable,$400.
The Adjusted Trial Balance columns total is:
A)$80,400.
B)$84,000.
C)$85,700.
D)$85,900.
E)$87,600.

Accepted Answer

To find the Adjusted Trial Balance, we need to add the adjustments to the Unadjusted Trial Balance.

Adjusted Trial Balance = Unadjusted Trial Balance + Adjustments

Adjusted Trial Balance = $84,000 + $1,200 - $700 + $500 - $800 + $400

Adjusted Trial Balance = $85,700

Therefore, the answer is C, $85,700.

Question 12

An optional columnar working paper used to prepare a company's unadjusted trial balance,adjusting entries,adjusted trial balance,and financial statements is a(n):
A)Adjusted trial balance.
B)Work sheet.
C)Post-closing trial balance.
D)Unadjusted trial balance.
E)General ledger.

Accepted Answer

A work sheet is an optional columnar working paper used to prepare a company's unadjusted trial balance, adjusting entries, adjusted trial balance, and financial statements. The other options listed are actual financial statements or trial balances, not a preparatory document.

Question 13

The entry to close the Income Summary account at the end of the year,after revenue and expense accounts have been closed,is:
A)Debit Retained earnings $297,000; credit Income Summary $297,000
B)Debit Retained earnings $63,300; credit Income Summary $63,300
C)Debit Income Summary $63,300; credit Retained earnings $63,300
D)Debit Income Summary $81,300,credit Retained earnings $81,300
E)Debit Retained earnings $81,300; credit Income Summary $81,300

Accepted Answer

The answer of The entry to close the Income Summary...

Question 14

A company had revenues of $75,000 and expenses of $62,000 for the accounting period.Dividends of $8,000 were paid in cash during the same period.Which of the following entries could not be a closing entry?
A)Debit Income Summary $13,000; credit Retained earnings $13,000.
B)Debit Income Summary $75,000; credit Revenues $75,000.
C)Debit Revenues $75,000; credit Income Summary $75,000.
D)Debit Income Summary $62,000,credit Expenses $62,000.
E)Debit Retained earnings $8,000,credit Dividends $8,000.

Accepted Answer

Closing entries are made to transfer the balances of temporary accounts (revenues, expenses, and dividends) to the permanent account (Retained earnings). Option B cannot be a closing entry as it debits Income Summary with $75,000, which is the total revenue of the company for the period, and credits Revenues with the same amount. This entry suggests that the company is carrying over its revenue balance to the next accounting period, which is not correct. The correct entry would be to credit Income Summary with $13,000 (revenue - expenses) and debit Retained earnings with the same amount.

Question 15

If the Balance Sheet and Statement of Retained Earnings columns of a work sheet fail to balance when the net income is added to the Balance Sheet and Statement of Retained Earnings Credit column,the cause could be:
A)An expense entered in the Balance Sheet and Statement of Retained Earnings Debit column.
B)A revenue entered in the Balance Sheet and Statement of Retained Earnings Credit column.
C)An asset amount entered in the Income Statement and Statement of Retained Earnings Debit column.
D)A liability amount entered in the Income Statement and Statement of Retained Earnings Credit column.
E)An expense entered in the Balance Sheet and Statement of Retained Earnings Credit column.

Accepted Answer

The answer of If the Balance Sheet and Statement of...

Question 16

In preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column.The Balance Sheet columns will balance on completing the work sheet but with the wrong net income,if the amount sorted in error is:
A)An expense amount placed in the Balance Sheet Credit column.
B)A revenue amount placed in the Balance Sheet Debit column.
C)A liability amount placed in the Income Statement Credit column.
D)An asset amount placed in the Balance Sheet Credit column.
E)A liability amount placed in the Balance Sheet Debit column.

Accepted Answer

The answer of In preparing a work sheet an adjusted...

Question 17

High Step Shoes,had annual revenues of $185,000,expenses of $103,700,and paid dividends of $18,000 during the current year.The retained earnings account before closing had a balance of $297,000.
-The Net Income for the year is:
A)$185,000
B)$63,300
C)$81,300
D)$360,300
E)$378,300

Accepted Answer

The answer of High Step Shoes,had annual revenues of $185,000,expenses...

Question 18

A company's December 31 work sheet for the current period appears below.Based on the information provided,what is net income for the current period? 
A)$3,305.
B)$4,180.
C)$2,350.
D)$2,540.
E)$3,225.

Accepted Answer

The answer of A company's December 31 work sheet for...

Question 19

Accumulated Depreciation and Service Fees Earned would be sorted to which respective columns in completing a work sheet?
A)Balance Sheet and Statement of Retained Earnings-Credit and Income Statement-Credit.
B)Balance Sheet and Statement of Retained Earnings-Debit and Income Statement-Debit.
C)Income Statement-Debit and Income Statement-Credit.
D)Balance Sheet and Statement of Retained Earnings-Debit and Balance Sheet and Statement of Retained Earnings-Credit.
E)Balance Sheet and Statement of Retained Earnings-Debit; and Income Statement-Credit.

Accepted Answer

Accumulated Depreciation is a contra asset account and appears on the credit side of the Balance Sheet. Service Fees Earned is revenue and appears on the credit side of the Income Statement.

Question 20

A company's December 31 work sheet for the current period appears below.Based on the information provided,what is net income for the current period? 
A)$1,400.
B)$1,855.
C)$1,905.
D)$2,060.
E)$4,670.

Accepted Answer

The answer of A company's December 31 work sheet for...

Quiz 3: Adjusting Accounts for Financial Statements

Which of the following statements is incorrect?

Statements that show the financial statements as if proposed transactions had already occurred are called:

A company shows a $600 balance in Prepaid Rent in the Unadjusted Trial Balance columns of the work sheet.The Adjustments columns show expired rent of $200.This adjusting entry results in:

The balances in the unadjusted columns of a work sheet will agree with:

Castillo Services paid K.Castillo,the sole shareholder of Castillo Services,$5,700 in dividends during the current year.The entry to close the dividends account at the end of the year is:

In the process of completing a work sheet,the accountant determines that the Income Statement debit column totals $83,000,while the Income Statement credit column totals $65,000.To enter net income (or net loss) for the period into the work sheet would require an entry to

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the:

The Unadjusted Trial Balance columns of a company's work sheet shows the Store Supplies account with a balance of $750.The Adjustments columns shows a credit of $425 for supplies used during the period.The amount shown as Store Supplies in the Balance Sheet columns of the work sheet is:

Which of the following errors would cause the Balance Sheet and Statement of Retained Earnings columns of a work sheet to be out of balance?

High Step Shoes,had annual revenues of $185,000,expenses of $103,700,and paid dividends of $18,000 during the current year.The retained earnings account before closing had a balance of $297,000. -The ending retained earnings balance after closing is:

An optional columnar working paper used to prepare a company's unadjusted trial balance,adjusting entries,adjusted trial balance,and financial statements is a(n) :

The entry to close the Income Summary account at the end of the year,after revenue and expense accounts have been closed,is:

A company had revenues of $75,000 and expenses of $62,000 for the accounting period.Dividends of $8,000 were paid in cash during the same period.Which of the following entries could not be a closing entry?

If the Balance Sheet and Statement of Retained Earnings columns of a work sheet fail to balance when the net income is added to the Balance Sheet and Statement of Retained Earnings Credit column,the cause could be:

In preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column.The Balance Sheet columns will balance on completing the work sheet but with the wrong net income,if the amount sorted in error is:

High Step Shoes,had annual revenues of $185,000,expenses of $103,700,and paid dividends of $18,000 during the current year.The retained earnings account before closing had a balance of $297,000. -The Net Income for the year is:

A company's December 31 work sheet for the current period appears below.Based on the information provided,what is net income for the current period?

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

A company's December 31 work sheet for the current period appears below.Based on the information provided,what is net income for the current period?