BAT Chapter 4 Review

When a loss has occurred, the journal entry to close the Income Summary account is:

• debit Income Summary; credit Capital

• debit Capital; credit Income Summary

• debit Income Summary; credit Drawings

• debit Drawings; credit Income Summary

After the closing entries have been posted, the balance in the owner's capital account should equal:

• the profit or loss reported on the income statement

• the opening capital balance reported on the statement of owner's equity

• the ending capital balance reported on the statement of owner's equity and balance sheet

• the opening capital balance plus any investments made by the owner during the period

Which accounts will appear in the post-closing trial balance?

• assets, liabilities, and owner's capital

• revenues, expenses, owner's drawings, and owner's capital

• assets, liabilities, revenues, and expenses

• all accounts

The proper order of the following steps in the accounting cycle is:

• prepare unadjusted trial balance, journalize transactions, post to ledger accounts, journalize and post adjusting entries

• journalize transactions, prepare unadjusted trial balance, post to ledger accounts, journalize and post adjusting entries

• journalize transactions, post to ledger accounts, prepare unadjusted trial balance, jouranlize and post adjusting entries

• prepare unadjusted trial balance, journalize and post adjusting entries, journalize transactions, post to ledger accounts

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

• journalizing closing entries

• journalizing adjusting entries

• posting closing entries

• none of the above

When Zander Company purchased supplies worth $500, it incorrectly recorded a credit to Supplies for $5000 and a debit to Cash for $5000. Before correcting this error:

• Cash is overstated and Supplies is overstated

• Cash is understated and Supplies is overstated

• Cash is understated and Supplies is overstated

• Cash is overstated and Supplies is understated

Cash of $550 is received at the time a service is provided. The transaction is journalized and posted as a debit to Accounts Receivable of $550 and a credit to Service Revenue of $550. The correcting entry is:

• DR Accounts Receivable 550

  CR Service Revenue 550

• DR Service Revenue 550

  CR Accounts Receivable 550

• DR Cash 550

  CR Service Revenue 550

• DR Cash 550

  CR Accounts Receivable 550

Which of the following statements about classifying assets is correct?

• Supplies are not current assets and should be included as part of property, plant, and equipment on the balance sheet

• Current assets normally are cash and other assets that will be converted to cash, sold, or used up within one year from the balance sheet date

• Some companies use a period shorter than one year to classify assets as current because they have an operating cycle that is shorter than one year

• Prepaid expenses are considered non-current assets because they are intangible assets

Non-current liabilities:

• are obligations that are expected to be paid before one year from the balance sheet date

• cannot be called long-term liabilities

• are sometimes listed on the balance sheet before current liabilities, if the company is following International Financial Reporting Standards

• include accounts payable, salaries payable, and interest payable

A company reports current assets of $10,000 and current liabilities of $8000. Its current ratio is:

• $2000

• 80%

• 1.25:1

• unknown without information about the amount of cash, short-term investments, and receivables, which is needed to calculate the ratio