Multiple Choice1. Show
LO 5.1Which of the following accounts is considered a temporary or nominal account?
2. LO 5.1Which of the following accounts is considered a permanent or real account?
3. LO 5.1If a journal entry includes a debit or credit to the Cash account, it is most likely which of the following?
4. LO 5.1If a journal entry includes a debit or credit to the Retained Earnings account, it is most likely which of the following?
5. LO 5.1Which of these accounts would be present in the closing entries?
6. LO 5.1Which of these accounts would not be present in the closing entries?
7. LO 5.1Which of these accounts is never closed?
8. LO 5.1Which of these accounts is never closed?
9. LO 5.1Which account would be credited when closing the account for fees earned for the year?
10. LO 5.1Which account would be credited when closing the account for rent expense for the year?
11. LO 5.2Which of these accounts is included in the post-closing trial balance?
12. LO 5.2Which of these accounts is not included in the post-closing trial balance?
13. LO 5.2On which of the following would the year-end Retained Earnings balance be stated correctly?
14. LO 5.2Which of these accounts is included in the post-closing trial balance?
15. LO 5.3If current assets are $112,000 and current liabilities are $56,000, what is the current ratio?
16. LO 5.3If current assets are $100,000 and current liabilities are $42,000, what is the working capital?
Questions1. LO 5.1Explain what is meant by the term real accounts (also known as permanent accounts). 2. LO 5.1Explain what is meant by the term nominal accounts (also known as temporary accounts). 3. LO 5.1What is the purpose of the closing entries? 4. LO 5.1What would happen if the company failed to make closing entries at the end of the year? 5. LO 5.1Which of these account types (Assets, Liabilities, Equity, Revenue, Expense, Dividend) are credited in the closing entries? Why? 6. LO 5.1Which of these account types (Assets, Liabilities, Equity, Revenue, Expense, Dividend) are debited in the closing entries? Why? 7. LO 5.1The account called Income Summary is often used in the closing entries. Explain this account’s purpose and how it is used. 8. LO 5.1What are the four entries required for closing, assuming that the Income Summary account is used? 9. LO 5.1After the first two closing entries are made, Income Summary has a credit balance of $125,500. What does this indicate about the company’s net income or loss? 10. LO 5.1After the first two closing entries are made, Income Summary has a debit balance of $22,750. What does this indicate about the company’s net income or loss? 11. LO 5.2What account types are included in a post-closing trial balance? 12. LO 5.2Which of the basic financial statements can be directly tied to the post-closing trial balance? Why is this so? 13. LO 5.3Describe the calculation required to compute working capital. Explain the significance. 14. LO 5.3Describe the calculation required to compute the current ratio. Explain the significance. 15. LO 5.4Describe the progression of the three trial balances that a company would have during the period, and explain the difference between the three. Exercise Set AEA1. LO 5.1Identify whether each of the following accounts is nominal/temporary or real/permanent.
EA2. LO 5.1For each of the following accounts, identify whether it is nominal/temporary or real/permanent, and whether it is reported on the Balance Sheet or the Income Statement.
EA3. LO 5.1For each of the following accounts, identify whether it would be closed at year-end (yes or no) and on which financial statement the account would be reported (Balance Sheet, Income Statement, or Retained Earnings Statement).
EA4. LO 5.1The following accounts and normal balances existed at year-end. Make the four journal entries required to close the books: EA5. LO 5.1The following accounts and normal balances existed at year-end. Make the four journal entries required to close the books: EA6. LO 5.1Use the following excerpts from the year-end Adjusted Trial Balance to prepare the four journal entries required to close the books: EA7. LO 5.1Use the following T-accounts to prepare the four journal entries required to close the books: EA8. LO 5.1Use the following T-accounts to prepare the four journal entries required to close the books: EA9. LO 5.2Identify whether each of the following accounts would be listed in the company’s Post-Closing Trial Balance.
EA10. LO 5.2Identify which of the following accounts would not be listed on the company’s Post-Closing Trial Balance. EA11. LO 5.3For each of the following accounts, identify in which section of the classified balance sheet it would be presented: current assets, property, intangibles, other assets, current liabilities, long-term liabilities, or stockholder’s equity.
EA12. LO 5.3Using the following Balance Sheet summary information, calculate for the two years presented:
EA13. LO 5.3Using the following account balances, calculate for the two years presented:
EA14. LO 5.3Using the following Balance Sheet summary information, calculate for the two companies presented:
Then:
EA15. LO 5.3Using the following account balances, calculate:
Exercise Set BEB1. LO 5.1Identify whether each of the following accounts are nominal/temporary or real/permanent.
EB2. LO 5.1For each of the following accounts, identify whether it is nominal/temporary or real/permanent, and whether it is reported on the Balance Sheet or the Income Statement.
EB3. LO 5.1For each of the following accounts, identify whether it would be closed at year-end (yes or no) and on which financial statement the account would be reported (Balance Sheet, Income Statement, or Retained Earnings Statement).
EB4. LO 5.1The following accounts and normal balances existed at year-end. Make the four journal entries required to close the books: EB5. LO 5.1The following accounts and normal balances existed at year-end. Make the four journal entries required to close the books: EB6. LO 5.1Use the following excerpts from the year-end Adjusted Trial Balance to prepare the four journal entries required to close the books: EB7. LO 5.1Use the following T-accounts to prepare the four journal entries required to close the books: EB8. LO 5.1Use the following T-accounts to prepare the four journal entries required to close the books: EB9. LO 5.2Identify which of the following accounts would be listed on the company’s Post-Closing Trial Balance.
EB10. LO 5.2Identify which of the following accounts would not be listed on the company’s Post-Closing Trial Balance. EB11. LO 5.3For each of the following accounts, identify in which section of the classified balance sheet it would be presented: current assets, property, intangibles, other assets, current liabilities, long-term liabilities, or stockholder’s equity.
EB12. LO 5.3Using the following Balance Sheet summary information, calculate for the two years presented:
EB13. LO 5.3Using the following account balances, calculate for the two years presented:
EB14. LO 5.3Using the following Balance Sheet summary information, calculate for the two companies presented:
Then:
EB15. LO 5.3From the following Company B adjusted trial balance, prepare simple financial statements, as follows: Problem Set APA1. LO 5.1Identify whether each of the following accounts would be considered a permanent account (yes/no) and which financial statement it would be reported on (Balance Sheet, Income Statement, or Retained Earnings Statement).
PA2. LO 5.1The following selected accounts and normal balances existed at year-end. Make the four journal entries required to close the books: PA3. LO 5.1The following selected accounts and normal balances existed at year-end. Notice that expenses exceed revenuein this period. Make the four journal entries required to close the books: PA4. LO 5.1Use the following Adjusted Trial Balance to prepare the four journal entries required to close the books: PA5. LO 5.1Use the following Adjusted Trial Balance to prepare the four journal entries required to close the books: PA6. LO 5.1Use the following T-accounts to prepare the four journal entries required to close the books: PA7. LO 5.1Assume that the first two closing entries have been made and posted. Use the T-accounts provided as follows to:
PA8. LO 5.1Correct any obvious errors in the following closing entries by providing the four corrected closing entries. Assume all accounts held normal account balances in the Adjusted Trial Balance. PA9. LO 5.2Assuming the following Adjusted Trial Balance, create the Post-Closing Trial Balance that would result, after all closing journal entries were made and posted: PA10. LO 5.2The following Post-Closing Trial Balance contains errors. Prepare a corrected Post-Closing Trial Balance: PA11. LO 5.2Assuming the following Adjusted Trial Balance, recreate the Post-Closing Trial Balance that would result after all closing journal entries were made and posted: PA12. LO 5.3Use the following Adjusted Trial Balance to prepare a classified Balance Sheet: PA13. LO 5.3Using the following Balance Sheet summary information, for the two years presented calculate:
PA14. LO 5.3Using the following Balance Sheet summary information, calculate for the two companies presented:
PA15. LO 5.3Using the following account balances, calculate for the two years presented:
PA16. LO 5.4From the following Company R adjusted trial balance, prepare the following:
PA17. LO 5.4From the following Company T adjusted trial balance, prepare the following:
Problem Set BPB1. LO 5.1Identify whether each of the following accounts would be considered a permanent account (yes/no) and which financial statement it would be reported on (Balance Sheet, Income Statement, or Retained Earnings Statement).
PB2. LO 5.1The following selected accounts and normal balances existed at year-end. Make the four journal entries required to close the books: PB3. LO 5.1The following selected accounts and normal balances existed at year-end. Notice that expenses exceed revenuein this period. Make the four journal entries required to close the books: PB4. LO 5.1Use the following Adjusted Trial Balance to prepare the four journal entries required to close the books: PB5. LO 5.1Use the following Adjusted Trial Balance to prepare the four journal entries required to close the books: PB6. LO 5.1Use the following T-accounts to prepare the four journal entries required to close the books: PB7. LO 5.1Assume that the first two closing entries have been made and posted. Use the T-accounts provided below to:
PB8. LO 5.1Correct any obvious errors in the following closing entries by providing the four corrected closing entries. Assume all accounts held normal account balances in the Adjusted Trial Balance. PB9. LO 5.2Assuming the following Adjusted Trial Balance, create the Post-Closing Trial Balance that would result after all closing journal entries were made and posted: PB10. LO 5.2The following Post-Closing Trial Balance contains errors. Prepare a corrected Post-Closing Trial Balance: PB11. LO 5.2Assuming the following Adjusted Trial Balance, re-create the Post-Closing Trial Balance that would result after all closing journal entries were made and posted: PB12. LO 5.3Use the following Adjusted Trial Balance to prepare a classified Balance Sheet: PB13. LO 5.3Using the following Balance Sheet summary information, calculate for the two years presented:
PB14. LO 5.3Using the following Balance Sheet summary information, calculate for the two years presented:
PB15. LO 5.3Using the following account balances, calculate for the two years presented:
PB16. LO 5.4From the following Company S adjusted trial balance, prepare the following:
Thought ProvokersTP1. LO 5.1Assume you are the controller of a large corporation, and the chief executive officer (CEO) has requested that you refrain from posting closing entries at 20X1 year-end, with the intention of combining the two years’ profits in year 20X2, in an effort to make that year’s profits appear stronger. Write a memo to the CEO, to offer your response to the request to skip the closing entries for year 20X1. TP2. LO 5.1Search the Securities and Exchange Commission website (https://www.sec.gov/edgar/searchedga...anysearch.html) and locate the latest Form 10-K for a company you would like to analyze. Submit a short memo:
Provide the web link to the company’s Form 10-K, to allow accurate verification of your answers. TP3. LO 5.1Assume you are a senior accountant and have been assigned the responsibility for making the entries to close the books for the year. You have prepared the following four entries and presented them to your boss, the chief financial officer of the company, along with the company CEO, in the weekly staff meeting: As the CEO was reviewing your work, he asked the question, “What do these entries mean? Can we learn anything about the company from reviewing them?” Provide an explanation to give to the CEO about what the entries reveal about the company’s operations this year. TP4. LO 5.2Search the US Securities and Exchange Commission website (https://www.sec.gov/edgar/searchedga...anysearch.html) and locate the latest Form 10-K for a company you would like to analyze. Submit a short memo:
Provide the web link to the company’s Form 10-K, to allow accurate verification of your answers. TP5. LO 5.3Search the Securities and Exchange Commission website (https://www.sec.gov/edgar/searchedga...anysearch.html) and locate the latest Form 10-K for a company you would like to analyze. Submit a short memo:
Provide the web link to the company’s Form 10-K, to allow accurate verification of your answers. What accounts requires a debit to close the account at year end?Accounts that are Debited in the Closing Entries
Revenue accounts. Gain accounts. Contra expense accounts.
Which of the following accounts are closed at the end of the year?Nominal accounts are accounts that are closed at the end of the accounting period. These accounts are typically the income and expense accounts that are presented in the income statement.
Which of the following account is closed by a debit?Answer and Explanation: Explanation: Sales is a revenue account with a normal credit balance, so the accountant will debit it to close it out. Once the account is debited, the balance is zero.
Which of the following accounts should be closed at the end of the fiscal year?Answer: b.
Income statement accounts such as revenues and expenses, including depreciation are all closed to the Income Summary account at the end of the fiscal year as part of the closing process.
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