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Exam 3: The Accounting Cycle: End of the Period

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Question 1

True/False

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The closing entry for revenue accounts includes a debit to Retained Earnings and a credit to all revenue accounts.The closing entry for revenue accounts includes a debit to all revenue accounts and a credit to Retained Earnings.

A) True
B) False

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Question 2

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An accrued expense occurs when:

A) Cash payment (or an obligation to pay cash) occurs before the expense recognition.
B) An expense is recorded at the same time as the cash payment.
C) Cash payment occurs after the expense is recognized and a liability is recorded.

D) A) and B)
E) All of the above

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Question 3

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At December 31,2018,a company has received,but not paid,a utility bill for $250.The amount of utility expense for 2018 equals $250.

Which of the following trial balances shows account balances that incorporate current year deferrals and accruals?

A post-closing trial balance is a list of all accounts and their balances after we have updated account balances for adjusting entries.This is an adjusted trial balance.

Which of the following is a possible closing entry?

Which accounting principle states that a company should "record revenues when they provide goods and services to customers?"

Of the following six accounts,which ones have temporary balances: (1) Service Revenue (2) Dividends (3) Salaries Expense (4) Common Stock (5) Retained Earnings (6) Cash

The adjusted trial balance should be prepared ______ the financial statements are prepared in order to prove the ______ of the debits and credits.

The Supplies account is an example of an accrued expense.The Supplies account is an example of a prepaid expense.

The following financial information is from Bronco Company.All debt is due within one year unless stated otherwise.What is the amount of current liabilities? $\begin{array} { | l | r | } \hline \text { Retained Earnings } & \$ 52,000 \\\hline \text { Supplies } & 37,000 \\\hline \text { Equipment } & 72,000 \\\hline \text { Accounts Receivable } & 8,600 \\\hline \text { Deferred Revenue } & 6,000 \\\hline \text { Accounts Payable } & 15,000 \\\hline \text { Common Stock } & 25,000 \\\hline \text { Notes Payable (due in } 18 \text { months) } & 35,000 \\\hline \text { Interest Payable } & 7,000 \\\hline \text { Cash } & 22,400 \\\hline\end{array}$

Adjusting entries should be prepared after financial statements are prepared.Adjusting entries should be prepared before financial statements are prepared.

Air France collected cash on February 4 from the sale of a ticket to a customer on January 26.The flight took place on April 5.According to the revenue recognition principle,in which month should Air France have recognized this revenue?

On July 1,2018,Rents-A-Lot Inc.paid $72,000 for 36 months of advance rent on its warehouse.What would be the amount of rent expense in the 2019 financial statements for Rents-A-Lot under both cash-basis and accrual-basis accounting?

The post-closing trial balance does not include any assets or liabilities,because these accounts all have zero balances after closing entries.The post-closing trial balance does not include any revenues,expenses,or dividends,because these accounts all have zero balances after closing entries.

An example of an adjusting entry would not include:

Adjusting entries:

Accrued expenses involve the payment of cash before recording an expense and a liability.Accrued expenses involve the payment of cash after recording an expense and a liability.

The following table contains financial information for Trumpeter Inc.before closing entries: What is Trumpeter's net income? $\begin{array} { | l | r | } \hline \text { Cash } & \$ 12,000 \\\hline \text { Supplies } & 4,500 \\\hline \text { Prepaid Rent } & 2,000 \\\hline \text { Salary Expense } & 4,500 \\\hline \text { Equipment } & 65,000 \\\hline \text { Service Revenue } & 30,000 \\\hline \text { Miscellaneous Expenses } & 20,000 \\\hline \text { Dividends } & 3,000 \\\hline \text { Accounts Payable } & 5,000 \\\hline \text { Common Stock } & 68,000 \\\hline \text { Retained Earnings } & 8,000 \\\hline\end{array}$

The closing entry for dividends includes a debit to the Dividends account and a credit to Retained Earnings.The closing entry for dividends includes a debit to Retained Earnings and a credit to the Dividends account.