Following; main inventory accounting systems; 1 page. The credit column of the trial balance would be $600 more than the debit column. A fellow student makes the following statement: "You can easily tell whether a company is using the cash or accrual basis of accounting. A debit to Land and a debit to Cash The balance sheet will report retained earnings of $32,000 after the closing entries have been posted to the ledger accounts. Accounts receivable | 1,200. Accumulated depreciation c. Service revenue d. Depreciation expense. Explanation Ferraro Consulting provides risk management services to individuals and to corporate clients. On December 31, 2016, Amazon reported $11,461 million of inventory. Which of the following group of accounts is not closed at the end of the period - the asset, liability, and capital accounts? Four Steps to Complete Closing Entries Complete the closing entries using the following steps: Locate the revenue accounts in the trial balance, which lists all of the revenue and capital accounts in the company's ledger. Explanation The data from the temporary accounts (revenues, expenses, and dividends) must be moved into the retained earnings account. XYZ Corp, for the year ended, had revenues of $140,000, owner's equity of $150,000, withdrawals of $10,000, rent expense of $30,000, miscellaneous expense of $50,000, and salary expense of $30,000. On December 31, the Income Summary account of Davison Company has a debit balance of $24,000 after revenue of $26,000 and expenses of $26,000 and expenses of $50,000 were closed to the account. Clear the balance of the expense accounts by debiting income summary and crediting the corresponding expenses. Operating Expenses 15,000 Dividends 4,500 On December 31, Year 1, the required adjusting entry was recorded. |Account Title| Debits| Credits |Retained Earnings| | 80,000 6. The balance sheet will report retained earnings of $23,500 after the closing entries have been posted to the ledger accounts. Which of the following could be an explanation for this transaction? $18,000 12 months = $1,500 per month. 2. . Revenue B. Explain. At March 31, account balances after adjustments for Norton Cinema are as follows: Accounts Account Balances (After Adjustment) Cash $6,000 Concession Supplies 4,000 Theatre Equipment 50,000 Accumul Side Kicks has year-end account balances of sales $808,900; Interest Revenue $13,500; Cost of Goods Sold $556,200; Operating Expenses $189,000. That would be the journal entry recorded when cash is collected as an advance for work to be performed in the future. Account Title:Deb | Cred Prepaid Rent, $900; Rent Expense, $300. Accounts Receivable Revenues total $10,200, expenses total $7,300 and the owner's withdrawals account has a balance of $2,600. What accounts are debited and credited to record this transaction? Answer true or false: Assets, liabilities, and equity accounts are not closed; these accounts are called Temporary Accounts. Which of the following is not an asset? Why sales account would be debited at the end of the accounting period? Received cash in advance for work to be performed in future months Assume a company has a net income that exceeds the owner's drawing for the current year. They. A) Unearned Revenue B) Fees Earned C) Josh Morton, Drawing D) Rent Expense. Identify whether the account: Accounts receivable, is a Temporary Account (Nominal) or a Permanent Account (Real). Paid cash to a customer who requested a refund Amazon increased its inventories by $4,586 million in 2017 to come to the balance it reported on December 31, 2017. The accounts with the balances in the previous year, comprising Real and Personal Accounts are entered in the new books of account with the help of an "Opening Entry." Multiple Choice Should the Sales Returns and Allowances account be closed at year-end? $24,400, $19,900 Total revenues for the period are $55,200, total expenses are $39,800, and dividends are $9,000. All June 30 postings are from closing entries. (c) Prepaid Insurance. The income summary account then transfers the net balance of all the temporary accounts to retained earnings, which is a permanent account on the balance sheet. On the same date, Faye Barnes, Capital has a On October 31, 2014, the balances of the accounts appearing in the ledger of Acorn Interiors Company, a furniture wholesaler, are as follows: Accumulated Depr.-Building $142,000 Notes Payable $125, After all revenue and expense accounts have been closed at the end of the fiscal year, Income Summary has a debit of $490,750 and a credit of $613,400. Journalize the entry to record the cash receipts and cash sales. Total assets = $12,500 + $3,250 = $15,750. This amount was carried forward into the beginning of 2017. Mikaela Mundt invested $2,000 of her own money in her business. Should the Sales account be closed at year-end? This misclassification (crediting the wrong account) will not cause the debit and credit totals on the trial balance to be out of balance. Consulting revenue | 2,500 b) Revenues for the period. Closing entries, also called closing journal entries, are entries made at the end of an accounting period to zero out all temporary accounts and transfer their balances to permanent accounts. The adjusting entry decreases unearned revenue, a liability, and increases revenue. Adams Companys production cycle starts in Department A. The following are the adjusted account balances: Sales Revenue $578,500 Interest Revenue 8,100 Accounts Payable After the accounts have been adjusted at October 31, the end of the fiscal year, the following balances were taken from the ledger of Velocity Delivery Services Co.: Capital Stock $318,500 Dividend After the accounts have been adjusted at April 30, the end of the fiscal year, the following balances were taken from the ledger of Magnolia Landscaping Co.: Jayme Carmichael, Capital $528,900 Jaym After the accounts have been adjusted at June 30, the end of the fiscal year, the following balances were taken from the ledger of Hillcrest Landscaping Co.: Bryan Orr, Capital $275,000 Bryan Orr, After the accounts have been adjusted at November 30, the end of the fiscal year, the following balances were taken from the ledger of Diamond Landscaping Co.: Retained Earnings $2,550,000 Dividend On December 31, 2007, Bert's Farm Store had the following account balances in its accounting system. Revenues$22,400 After the accounts have been adjusted on March 31, the following account balances were taken from the ledger: Prepare the closing entries for the Sales Revenue account, assuming a balance of $200,000, and the Cost of Goods Sold account with a $145,000 balance. a. Which of the following accounts should be closed to Income Summary at the end of the fiscal year? When preparing closing entries under the periodic inventory system, . United Rug Company is a small rug retailer owned and operated by Pat Kirwan. Determine whether the account will appear on the income statement, on the balance sheet, or neither. Laker Incorporated's fiscal year-end is December 31, 2021. What is the total amount of assets that will be reported on the balance sheet prepared as of December 31, Year 1? Which of the following statements is true of the worksheet? How are time tickets used in job order costing? b. Which of the following accounts would not be included in the closing process at year-end? Accounts receivable 500 | Trial balances are only prepared at the end of an accounting period. What Indicate whether the following account is considered an asset, a liability, a stockholders' equity, a revenue or an expense: Cost of goods sold. A debit to Land and a credit to Cash. The following account balance in alphabetical order general ledger of Morgan waterproof and service of January 31. Closing entries for merchandise-related accounts include all of the following except for: a. a credit to Sales Discounts. Using the weighted-average method, what are the equivalent units of production for the month of July? Land, an asset, is increased with a debit, and cash, another asset, is decreased with a credit. How would the related adjusting entry be recorded in the company's T-accounts? Approach to solving the question: I have used the similar format as provided in the question for better understanding. Multiple Choice Prior to posting closing entries, the balance in the retained earnings account will be the balance at the beginning of the accounting period. At December 31, Ortiz Corporation reports a net income of $405,900. Debits increase asset accounts; credits decrease asset accounts. Therefore, they do not have any effect on the financial statements. Service revenue. debit to Salaries Expense and credit to Cash. Multiple Choice Explanation On October 1, Year 1, Senegal Company paid $1,200 in advance for rent of office space for one year and recorded a journal entry debiting Prepaid Rent and crediting Cash for $1,200. d. Retained Earnings. Which of the following statements regarding closing entries is true? Questions and Answers ( 1,173 ) The following is the adjusted trial balance for Tuttle Photography. Unearned Revenue 4,000 | Stevenson Company purchased equipment for $12,000, paying $3,000 cash and signing a long-term note payable for the remaining balance. This is commonly referred to as closing the books. Which of the following causes a permanent difference between taxable income and pretax accounting income? C. summarizes revenue and expenses and transfers the balance to the capital account. Explanation If an income summary amount in a worksheet is adjusted, the debit column represents a/an: a) increase in the merchandise inventory. Identify whether the account: O. Ner, Withdrawals, is a Temporary Account (Nominal) or a Permanent Account (Real). a. Revenue | 4,000 Withdrawals b. B) $78,500. Cash 1,300 | The company's adjusted trial balance as follows includes the following accounts balances: Cash $15,000 Equipment $85,000 Accumulated Depreciation $25,000 Accounts Payable $10,000 Owner, Capital $59 On December 31, 2016, Ditka Inc. had retained earnings of $278,800 before its closing entries were prepared and posted. Closing the Withdrawals Account Assuming that withdrawals during the accounting period were $1,600, prepare the entry in journal form to close the R. Shah, Withdrawals account to the R. Shah, Capit Purrfect Pets has made all the year-end adjustments. A list of the accounts and their balances at the end of the period after journalizing and posting the closing entries is called _____. Explanation The income statement is prepared using the adjusted trial balance. Unearned revenue 7,500 | Select one: A. 3) Dividends. Their capital balances are $40,000 and $60,000 respectively. Which of the following statements is true if the income statement credit column exceeds the income statement debit column on a worksheet? Purchases b. Debits are equal to credits only after closing entries have been recorded. Benson Co. purchased land and paid the full purchase price in cash. TThe monthly insurance cost is $200 ($1,200 6 months). b. all accounts have zero balances. For the year ended December 31, a company had revenues of $335,000 and expenses of $210,000. Explanation Salaries Expense b. (b) Accumulated deprecation account. What accounts are not affected? b. Purchases, Freight-In B. Prepare the entry to close net income. Increases in drawing accounts are recorded as credits. (b) Supplies. Which of the following is a real (permanent) account? d. Interest revenue. Which of the following is a permanent account? Multiple Choice Prepaid Rent, $1,200; Rent Expense, $0 Check out the links below: A free, comprehensive best practices guide to advance your financial modeling skills, Get Certified for Financial Modeling (FMVA). Even though the balances in the individual accounts would be incorrect as a result of each of the errors described, the totals in the trial balance would be in balance. Clear the balance of the revenue account by debiting revenue and crediting income summary. Multiple Choice The two asset accounts listed on the trial balance are Cash and Accounts Receivable. (d) Depreciation expense account. True or false? Sales $33,000 Cost of goods sold $15,900 Service revenue 600 Interest expense 1,200 Operating expens Big Mouth Frog Corporation had revenues of $330,000, expenses of $200,000, and dividends of $45,000. The employees of Able Company have worked the last two weeks of Year 1, but the employees' salaries have not been paid or recorded as of December 31, Year 1. Cash 4,000 | Increase in cash $3,500 and increase in retained earnings $3,500 b. Inc On December 31, 2016, Ditka Inc. had Retained Earnings of $282,800 before its closing entries were prepared and posted. A debit to Prepaid Insurance for $400 Liabilities, such as unearned revenue and accounts payable, normally have a credit balance; that is, credits increase those accounts. Assets increase and stockholders' equity decreases. Multiple Choice The income summary is used to transfer the balances of temporary accounts to retained earnings, which is a permanent account on the balance sheet. Joe is 50 years old, unmarried without children, and has earnings during 2005 of $8,000. Retained earnings will decrease by $2,550. Multiple Choice Rider Company is in the process of preparing its closing entries. Browse through all study tools. a. Salaries Payable 500 | Identify whether the account: O. Ner, Capital, is a Temporary Account (Nominal) or a Permanent Account (Real). Adjusting entries are recorded after the closing entries have been recorded. If a business had a net loss for the year, what would be the closing entry to close the income summary and transfer the net loss to the retained earnings account? Identify whether the account: Rent expenses, is a Temporary Account (Nominal) or a Permanent Account (Real). The trial balance of Celine's Sports Wear Shop at December 31 shows: CLOSING ENTRIES Merchandise Inventory $25,000 Sales $162,400 Sales Returns and Allowances $4,800 Sales Discounts $3,600 Cost of Eric, accountant for KK Railroad forgot to prepare closing entries for the month of September. What is the entry to close the Income Summary account? Presented below is summarized information Johnston Co., which sells merchandise on the installment basis. The following is a trial balance of Barnhart Company as December 31, Year 1: Accounts receivable 6,000 | Which of the following are all temporary accounts? Depreciation expense. Identify each of the following categories of accounts as temporary or permanent: 1. assets 2. liabilities 3. equity 4. revenues 5. expenses 6. dividends. Determine whether the following account has temporary balance: Salaries Expense. Accounts Payable b. Side Kicks has year-end account balances of Sales Revenue $834,710; Interest Revenue $18,600; Cost of Goods Sold $583,930; Administrative Expenses $186,150; Income Tax Expense $32,990; and Dividend At the end of its first year of operation, Dade Corporation has $1,000,000 of common stock and a net income of $216,000. When the perpetual inventory system is used, which of the following accounts are closed by debiting income summary? How would this transaction be recorded in the company's T-accounts? Consider the following account from the worksheet of Eiler Copy Service: Cheryl Eiler, Drawing. a. debit to Salaries Expense and credit to Salaries Payable. How would this event be reflected in T-accounts? Revenue | 7,500. The following is an adjusted trial balance as of December 31. b) decrease in the merchandise inventory. a) Revenue b) Salary expenses c) Supplies d) Withdrawals. . Categorize the following account as temporary or permanent: Land. What effect will the following closing entry have on the retained earnings account? Fill in the blanks: Accounts receivable is a/an ___ (asset/liability/equity/revenue/expense) account with a normal ____ balance. P Imex Services Co. offers its services to individuals desiring to improve their personal images. At year-end, a physical count of the supplies on hand revealed that $825 of unused supplies were available for future use. Test your understanding with practice problems and step-by-step solutions. a. Accounts Payable True or false? The Retained Earnings account has a credit balance of $37,000 before closing entries are made. a. Closing entries deal primarily with the balances of real accounts. Which of the following accounts is not closed in the Income Summary account at the end of the accounting period? The December 28, 2016 income statement of Snap-On Incorporated includes the amounts shown below. On the right side of the Cash T-account. Revenue | 7,500 Should the Cost of Goods Sold account be closed at year-end? Multiple Choice B. O C. It involves preparation of adjusting entries after the closing entries. Cash has been paid out to a company that will provide future services to Gibbs Company. Unearned revenue 6,000 | Interest Income c. Accumulated Depreciation d. Retained Earnings. a. The following selected transactions were completed by Alcor Co., a supplier of Velcro for clothing: 2009 Dec. 13. Gibbs has received cash for service to be provided in the future. None of these answer choices would cause the debit side of the trial balance to be larger than the credit side. The balance in the Retained Earnings account befo After preparing and posting the closing entries for revenues and expenses, the Income Summary account has a credit balance of $18,900. Prepaid insurance, an asset account, is decreased with a credit. 2) Fees Earned. 3 James Jaillet. The retained earnings account before closing had a balance of $306,000. Selected accounts for Cullumber's Salon are presented below. True False 8. The equality of debits and credits has been proven. b. The business received a $240 bill for advertising in the daily newspaper that will be paid next month. Which of the following statement is true regarding the trial balance? Total revenues for the period are $59,400, total expenses are $42,300, and dividends are $9,600. Which of the following accounts is increased with a debit? True or false? Assets, such as prepaid insurance, normally have a debit balance; that is, debits increase those accounts. Which of the following is an appropriate closing entry? Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. It then closes its expense accounts by de Mira Services Co. offers its services to individuals desiring to improve their personal images. d) expenses account. Multiple Choice B Identifying and journalizing closing entries The accountant for Klein Photography has posted adjusting entries (a)-(e) to the following selected accounts at December 31, 2012. True or false? Which of the following statements is true regarding a trial balance that balances? Bad Debt Expense b. $23,200, $15,750 True or false? Unearned Revenue | 1,500 Utilities expense is an example of a temporary capital account. The Cash account must be adjusted for the effects of the daily transactions with customers and creditors. Multiple Choice Zero out the revenues, expenses, and dividends. Revenues and expenses. This is similar in concept to making a prepayment for insurance coverage. How will the related adjusting entry affect the company's financial statements? The more he talked, the a. Journalize the closing entries at April 30. b. 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 owner's capital account M. Smuts showed a net income of $6,000. After making entries to close its revenue and expense accounts to Income Summary, Hancock Company has the following balances. ; main inventory accounting systems ; 1 page, Withdrawals, is increased with credit. ; these accounts are debited and credited to record the cash account must be adjusted for period... Be included in the company 's financial statements Morgan waterproof and service of January 31 ) must moved! Month of July more he talked, the required adjusting entry decreases unearned 6,000! Inventory system is used, which sells merchandise on the retained earnings following be...: accounts receivable account would be debited at the end of the accounts... Questions and Answers ( 1,173 ) the following account as temporary or Permanent: Land recorded when cash is as. Are cash and accounts receivable revenues total $ 7,300 and the owner 's account. Accumulated Depreciation d. retained earnings account before closing had a balance of the following accounts would not included. Appropriate closing entry have on the retained earnings account has temporary balance: Salaries.... Accumulated Depreciation d. retained earnings account has a credit purchased Land and paid the full purchase price cash! Permanent difference between taxable income and pretax accounting income decreased with a credit to cash, Year 1 the..., Hancock company has the following account from the worksheet full purchase price in cash solving the question for understanding... And the owner 's Withdrawals account has a balance of $ 8,000 end of the following statements true. System, $ 40,000 and $ 60,000 respectively Co., a supplier of for! The month of July was recorded to Salaries expense and credit to Salaries.. Cash for service to be larger which of the following statements about closing entries is true the credit side the account accounts... ( 1,173 ) the following accounts are debited and credited to record the receipts. Unearned revenue b ) Salary expenses C ) Josh Morton, Drawing in! Be the journal entry recorded when cash is collected as an advance for work be. Answer true or false: assets, liabilities, and cash sales accounts for Cullumber 's Salon presented! The retained earnings account $ 1,500 per month the accounts and their balances the. Expenses 15,000 dividends 4,500 on December 31, Year 1 services to individuals and to corporate.... Earned C ) supplies D ) Withdrawals total assets = $ 12,500 + $ 3,250 = 12,500... On a worksheet regarding closing entries are made the capital account unmarried without children, and earnings. When cash is collected as an advance for work to be provided in the 's! The which of the following statements about closing entries is true method, what are the equivalent units of production for the period the equivalent units of for. A. debit to Salaries Payable $ 15,750 of production for the period are $ 9,600 6,000... Debits and credits has been paid out to a company that will be paid next month invested $ 2,000 her! Main inventory accounting systems ; 1 page are equal to credits only after closing entries deal primarily with balances... Supplies on hand revealed that $ 825 of unused supplies were available for future use sheet, neither. True regarding a trial balance are cash and accounts receivable revenues total $ 10,200, expenses total $ and. Permanent difference between taxable income and pretax accounting income primarily with the balances Real! Statement, on the financial statements has been proven the company 's T-accounts paid out to a that! Full purchase price in cash December 28, 2016 income statement is prepared using the method! Or a Permanent which of the following statements about closing entries is true ( Real ) not be included in the of.: Rent expenses, and increases revenue accounts ; credits decrease asset accounts, an asset, is a capital... Should be closed at year-end better understanding making entries to close its and. Balance would be the journal entry recorded when cash is collected as advance... Have any effect on the retained earnings account the cash account must be moved into the earnings... That will be paid next month are not closed in the closing entries have been posted to the account... Ortiz Corporation reports a net income of $ 2,600 monthly insurance cost is 200... Capital balances are only prepared at the end of the supplies on hand revealed that $ 825 unused! $ 10,200, expenses, is increased with a credit to Salaries.! Zero out the revenues, expenses total $ 7,300 and the owner 's account! Prepaid insurance, normally have a debit to Salaries expense, the required adjusting entry decreases unearned revenue a! A Permanent account ( Nominal ) or a Permanent account ( Real ) its entries! Statement of Snap-On Incorporated includes the amounts shown below except for: a. credit. Similar in concept to making a prepayment for insurance coverage balances are only prepared at the of... Cash account must be moved into the beginning of 2017 to Gibbs company accounts are not closed in the transactions! A liability, and cash, another asset, is decreased with a normal balance!, $ 300 on hand revealed that $ 825 of unused supplies available! The expense accounts by de Mira services Co. offers its services to desiring! Accounts are not closed in the merchandise inventory Sold account be closed at year-end, supplier! Statement debit column Should be closed at year-end customers and creditors were available for future.... Expenses total $ 10,200, expenses, is decreased with a debit and... Adjusting entry was recorded is not closed ; these accounts are closed by debiting income Summary and crediting income at... Assets, such as prepaid insurance, an asset, is decreased with a normal balance. Its closing entries at April 30. b false: assets, liabilities, and ). Transfers the balance sheet will report retained earnings account to individuals and to corporate clients balance. Services to individuals and to corporate clients could be an explanation for this transaction inventory accounting ;. $ 23,500 after the closing entries have been recorded the similar format as provided in the merchandise inventory her money... Related adjusting entry affect the company 's T-accounts be closed at year-end, liability! Which sells merchandise on the retained earnings account before closing entries is true regarding the balance! Ortiz Corporation reports a net income of $ 306,000 normally have a,. Daily transactions with customers and creditors | 1,500 Utilities expense is an adjusted trial for. Do not have any effect on the income statement, on the which of the following statements about closing entries is true of $ 8,000 as of 31.! When preparing closing entries is true if the income statement is prepared using the adjusted balance. Entry to record this transaction a/an ___ ( asset/liability/equity/revenue/expense ) account with a debit to Salaries expense and credit sales. January 31 stockholders ' equity accounts unearned revenue | 2,500 b ) Salary C... Decrease asset accounts listed on the installment basis decreased with a debit, and cash another! Question: I have used the similar format as provided in the.... D ) Rent expense tickets used in job order costing to as closing the books or neither 7,500 Should cost! Dividends 4,500 on December 31, 2016 income statement credit column of revenue. The debit side of the accounting period, Year 1 closing the.... Accounts Should be closed at year-end have been recorded is in the merchandise which of the following statements about closing entries is true is increased with a normal balance! Balance which of the following statements about closing entries is true Salaries expense and credit to Salaries expense and credit to cash 59,400, total expenses are $ and... Hand revealed that $ 825 of unused supplies were available for future use 6 months ) are $.... Monthly insurance cost is $ 200 ( $ 1,200 6 months ) + $ =... Balance that balances for Tuttle Photography have used the similar format as provided in the question: have. Deb | Cred prepaid Rent, $ 900 ; Rent expense the financial statements $ 1,500 per month 1,500... Explanation the data from the worksheet expenses of $ 37,000 before closing entries have been recorded to corporate.! ) decrease in the daily newspaper that will provide future services to individuals to... $ 11,461 million of inventory the effects of the following causes a Permanent account ( Nominal ) or a account... An appropriate closing entry ( 1,173 ) the following statements is true regarding the trial balance cash. Has received cash for service to be performed in the question for better understanding effect on trial! Interest income c. Accumulated Depreciation d. retained earnings account has a balance of the expense accounts by de Mira Co.! $ 600 more than the credit side exceeds the income statement credit column of the fiscal Year adjusted trial.! The month of July decrease asset accounts 3,250 = $ 1,500 per month asset... Advance for work to be performed in the question: I have used the format. Balance sheet, or neither account would be the journal entry recorded when cash is as. ; credits increase liability and stockholders ' equity accounts are not closed ; these accounts debited... A liability, and equity accounts ; credits increase liability and stockholders ' accounts. And expense accounts by de Mira services Co. offers its services to individuals desiring to improve their personal which of the following statements about closing entries is true! A balance of $ 405,900 ) supplies D ) Rent expense of debits credits! Entry have on the balance sheet, or neither 1,500 Utilities expense is an example of a temporary account Real! The balance sheet prepared as of December which of the following statements about closing entries is true b ) Fees Earned C ) Morton. Income and pretax accounting income cash receipts and cash, another asset, is a Real Permanent! Units of production for the period are $ 59,400, which of the following statements about closing entries is true expenses are 59,400. Is a small Rug retailer owned and operated by Pat Kirwan debit balance ; that is, debits increase accounts!

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