Questions and Answers of College Accounting A Contemporary Approach 5th Edition

5. Where does the accountant obtain the data needed for the adjusting entries?
4. Why is a postclosing trial balance prepared?
3. What accounts appear on a postclosing trial balance?
2. What is the accounting cycle?
5. Is the following statement true or false? Why? “All owner’s equity accounts appear on the postclosing trial balance.”
4. What is the last step in the accounting cycle?
3. A firm has $90,000 in revenue for the period. Give the entry to close the Fees Income account.
2. A firm has the following expenses: Rent Expense, $3,600; Salaries Expense, $7,000;Supplies Expense, $1,500. Give the entry to close the expense accounts.
1. What three financial statements are prepared during the accounting cycle?
6. On which financial statement would you find the answer to each question?• Is there enough cash to purchase new equipment?• What were the expenses?• Do customers owe money to the business?•
5. After the revenue and expense accounts are closed, Income Summary has a credit balance of$60,000. What does this figure represent?a. net profit of $60,000b. net loss of $60,000c. owner’s
4. Which of the following accounts will not appear on the postclosing trial balance?a. Cashb. J. B. Edwards, Drawingc. Accounts Payabled. J. B. Edwards, Capital.
3. What accounts appear on the postclosing trial balance
2. Why is a postclosing trial balance prepared?
1. What are the last three steps in the accounting cycle?
6. The business owner removes supplies that are worth $1,200 from the company stockroom. She intends to take them home for personal use. What effect will this have on the company’s net income?
5. After closing, which accounts have zero balances?a. asset and liability accountsb. liability and capital accountsc. liability, drawing, and expense accountsd. revenue, drawing, and expense accounts
4. After the closing entries are posted, which account normally has a balance other than zero?a. Rent Expenseb. Income Summaryc. Fees Incomed. Capital
3. What are the four steps in the closing process?EXERCISES
2. How is the Income Summary account classified?
1. What is the journal entry to close the drawing account?
6-5 Define the accounting terms new to this chapter.
6-4 Review the steps in the accounting cycle.
6-3 Interpret financial statements.
6-2 Prepare a postclosing trial balance.
6-1 Journalize and post closing entries.
4. How does the worksheet help provide vital information to management?
3. Suppose the president of a company where you work as an accountant questions whether it is worthwhile for you to spend time making adjustments at the end of each accounting period.How would you
2. At the beginning of the year, Mandela Company purchased a new building and some expensive new machinery. An officer of the firm has asked you whether this purchase will affect the firm’s
1. A building owned by Hopewell Company was recently valued at $850,000 by a real estate expert. The president of the company is questioning the accuracy of the firm’s latest balance sheet because
14. Why is an accumulated depreciation account used in making the adjustment for depreciation?
13. How does a contra asset account differ from a regular asset account?
12. What is book value?
11. What three amounts are reported on the balance sheet for a long-term asset such as equipment?
10. Why is it necessary to journalize and post adjusting entries?
9. What effect does each item in Question 8 have on owner’s equity?
8. What effect does each of the following items have on net income?a. The owner withdrew cash from the business.b. Credit customers paid $3,000 on outstanding balances that were past due.c. The
7. A firm purchases machinery, which has an estimated useful life of 10 years and no salvage value, for $60,000 at the beginning of the accounting period. What is the adjusting entry for depreciation
6. What adjustment would be recorded for expired insurance?
5. What are prepaid expenses? Give four examples.
3. Give three examples of assets that are subject to depreciation.
2. How does the straight-line method of depreciation work?
1. Are the following assets depreciated? Why or why not?a. Prepaid Insuranceb. Delivery Truckc. Landd. Manufacturing Equipmente. Prepaid Rentf. Furniture g. Store Equipment h. Prepaid Advertising i.
5. The Supplies account has a debit balance of $9,000 in the Trial Balance column. The Credit column in the Adjustments section is $3,600. What is the new balance? The new balance will be extended to
4. Why are assets depreciated?
3. Is the normal balance for Accumulated Depreciation a debit or credit balance?
2. Why is the net income for a period recorded in the Balance Sheet section of the worksheet as well as the Income Statement section?
1. The Drawing account is extended to which column of the worksheet?
6. Beck Repair Shop purchased equipment for $40,000. Depreciation Expense for the month is $800. What is the balance of the Equipment account after posting the depreciation entry? Why?
5. On a worksheet, the adjusted balance of the Supplies account is extended to the:a. Balance Sheet Credit column.b. Balance Sheet Debit column.c. Income Statement Credit column.d. Income Statement
4. Accumulated Depreciation—Equipment is a(n):a. contra liability account.b. contra asset account.c. liability account.d. asset account.
3. What is the difference between a report form balance sheet and an account form balance sheet?
2. What amounts appear on the statement of owner’s equity?
1. Why is it necessary to journalize and post adjusting entries even though the data are already recorded on the worksheet?
6. Three years ago, Overnight Delivery bought a delivery truck for $80,000.The truck has no salvage value and a five-year useful life. What is the book value of the truck at the end of three years?
5. On January 1, a firm paid $30,000 for six months’ rent, January through June. What is the adjustment for rent expense at the end of January?a. Rent Expense is debited for$30,000 and Prepaid Rent
4. A firm paid $3,000 for supplies during the accounting period. At the end of the accounting period, the firm had $1,500 of supplies on hand.What adjustment is entered on the worksheet?a. Supplies
3. Why is the worksheet prepared?
2. Why are prepaid expenses adjusted at the end of an accounting period?
1. What are adjustments?
5-6 Define the accounting terms new to this chapter.
5-5 Journalize and post the adjusting entries.
5-4 Prepare an income statement, statement of owner’s equity, and balance sheet from the completed worksheet.
5-3 Complete the worksheet.
5-2 Prepare adjustments for unrecorded business transactions.
5-1 Complete a trial balance on a worksheet.
4. The owner of a new business recently questioned the accountant about the value of having both a journal and a ledger. The owner believes that it is a waste of effort to enter data about
3. Why should management insist that a firm’s accounting system have a strong audit trail?
2. Why should management be concerned about the efficiency of a firm’s procedures for journalizing and posting transactions?
1. How might a poor set of recording procedures affect the flow of information to management?
11. What is an audit trail? Why is it desirable to have an audit trail?
10. How should corrections be made in the general journal?
9. What procedure is used to record an entry in the general journal?
8. What is the value of having a description for each general journal entry?
7. What is a compound journal entry?
6. What is the accounting cycle?
5. What are posting references? Why are they used?
4. What is posting?
3. What is a ledger?
2. In what order are accounts arranged in the general ledger? Why?
1. What is the purpose of a journal?
5. Which of the following shows both the debits and credits of the entire transaction?a. An entry in the general journalb. A posting to a general ledger account
4. Give examples of items that might appear in an audit trail.
3. How do you correct an incorrect journal entry that has not been posted?
2. Why is the ledger called the “record of final entry”?
1. What is recorded in the Posting Reference column of a general journal?
6. Draw a diagram of the first three steps of the accounting cycle.
5. The general ledger organizes accounting information in:a. account order.b. alphabetical order.c. date order.ANALYSIS
4. The general journal organizes accounting information in:a. account order.b. alphabetical order.c. date order.
3. What is entered in the Posting Reference column of the general journal?EXERCISES
2. Are the following statements true or false? Why?a. “If a journal entry that contains an error has been posted, erase the entry and change the posting in the ledger accounts.”b. “Once an
1. Why are posting references made in ledger accounts and in the journal?
6. The accountant for Emerald Lawn Care never includes descriptions when making journal entries. What effect will this have on the accounting system?
5. In a compound journal entry, if two accounts are debited, must two accounts be credited?
4. Why is the journal referred to as the“record of original entry”?
3. Why are check and invoice numbers included in the journal entry description?
2. A general journal is like a(n):a. address book.b. appointment calendar.c. diary.d. to-do list.QUESTIONS
1. The part of the journal entry to be recorded first is the:a. asset.b. credit.c. debit.d. liability.
4-5 Define the accounting terms new to this chapter.
4-4 Correct errors made in the journal or ledger.

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