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Exam 4: Completing the Accounting Cycle

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Question 71

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An examination of the accounts of Savage Company for the month of June revealed the following errors after the transactions were journalized and posted. 1. A check for $800 from R. Wright, a customer on account, was debited to Cash $800 and credited to Service Revenue, $800. 2. A payment for Advertising Expense costing $630 was debited to Utilities Expense, $360 and credited to Cash $360. 3. A bill for $850 for Supplies purchased on account was debited to Equipment, $580 and credited to Accounts Payable $580. Instructions Prepare correcting entries for each of the above assuming the erroneous entries are not reversed. Explain how the transaction as originally recorded affected net income for the month of June.

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Question 72

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Reversing entries are an optional bookkeeping procedure.

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B) False

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Question 73

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The most efficient way to accomplish closing entries is to

IFRS requires the use of

Which one of the following is an optional step in the accounting cycle of a business?

Cash and supplies are both classified as current assets.

To close net income to retained earnings, Income Summary is debited and Retained Earnings is credited.

Distinguish between a reversing entry and an adjusting entry. Are reversing entries required?

Closing revenue and expense accounts to the Income Summary account is an optional bookkeeping procedure.

After the adjusting entries are journalized and posted to the accounts in the general ledger, the balance of each account should agree with the balance shown on the

The worksheet for Gibler Rental Company appears below. Using the adjustment data below, complete the worksheet. Add any accounts that are necessary. Adjustment data: (a) Prepaid rent expired during August, $3. (b) Depreciation expense on equipment for the month of August, $8. (c) Supplies on hand on August 31 amounted to $6. (d) Salaries and wages expense incurred at August 31 but not yet paid amounted to $10.

The following information is for Sunny Day Real Estate: The total dollar amount of assets to be classified as investments is

Under Protection provides underground storage facilities for companies desiring off-site storage of sensitive documents, computer records, and other items. They have developed a sophisticated surveillance and security system which they initially used in their own facilities, and have recently started to market elsewhere as well. The underground storage facilities are made from natural caves in some instances (reinforced and modified as appropriate) and from excavations of natural rock formations in others. The land was purchased over ten years ago for a total of $2.5 million. The modifications have cost approximately $15 million more. The company has never depreciated its storage facilities because the market value of the property has continued to rise. Presently, the market price is between $30 and $40 million. Betsy Brantley, a new accounting manager, questioned this depreciation policy. Will Gray, the controller, has told her that she needn't worry about it. For one thing, he says, this is really a special form of Land account, which should not be depreciated at all. For another, this is a privately held company, and so they don't need to worry about misleading investors. All the owners know about and approve the depreciation policy. Required: What are the ethical issues in this situation?

All of the following are stockholders' equity accounts except

Closing entries may be prepared from all of the following except

Identify which of the following accounts would appear in a post-closing trial balance.

The post-closing trial balance will contain only retained earnings statement accounts and balance sheet accounts.

The relationship between current assets and current liabilities is important in evaluating a company's

A reversing entry

The operating cycle of a company is determined by the number of years the company has been operating.