MULTIPLE CHOICES (10 marks; 1 each) Cincle the correct answer to each question 1 Which of the tollowing permanent account is changed during the closing process? b. Retained Eamings e Uneamed Revenue d None of the above 2 Closing entries are made a. in order to terminate the business as an operating entity b. so that all assets, liabilities, and equity accounts will have zero balances when the next accounting period starts. c in order to transfer net income (or loss) and dividends to Retained Earnings d so that financial statements can be prepared. 3. Which of the following is a true statement about closing the books of a corporation? a. Expenses are closed to the Expense Summary account. b. Only revenues are closed to the Income Summary account. c. Revenues and expenses are closed to the Income Summary account. d. Revenues, expenses, and the dividends account are closed to the Income Summary account 4. In preparing closing entries a. each revenue account will be credited. b. each expense account will be credited. c. the retained earnings account will be debited if there is net income for the period the dividends account will be debited. d. 5. An error has occurred in the closing entry process if a. revenue and expense accounts have zero balances. b. the retained earnings account is credited for the amount of net income. c. the dividends account is closed to the retained earnings account. d. the Statement of financial position accounts have zero balances. Supplies Expense 1,000 300 200 Advertising Expense Insurance Expense Total expenses Net income The entry to close the revenue account includes a a. debit to Income Summary for 3,400. b. credit to Income Summary for 3,400. c. debit to Income Summary for 7,000. d. credit to Income Summary for 7,000. The primary source of revenue for merchandising compani a. investment income. b. service fees. c. the sale of merchandise. d. the sale of fixed assets the company owns. Manufacturers usually classify inventory into all the fo categories except: a. work in process b. finished goods c. merchandise inventory d. raw materials . The entry to replenish a petty cash fund includes a creditt a. Petty Cash. b. Cash. c. Freight-in. d. Postage Expense. Two bases for estimating uncollectible accounts are: a. percentage of assets and percentage of sales b. percentage of receivables and percentage of total rev c. percentage of current assets and percentage of sales d. percentage of receivables and percentage of sales 10. MULTIPLE CHOICES (10 marks; 1 each) ircle the correct answer to each question Closing entries are necessary for a. permanent accounts only. b. temporary accounts only. c. both permanent and temporary accounts. d. permanent or real accounts only. If Income Summary has a credit balance after revenues and have been closed into it, the closing entry for Income Su include a a. debit to Retained Earnings. b. debit to Dividends c. credit to Retained Earnings. d. credit to Dividends. In order to close the Dividends account, the a. income summary account should be debited. b. income summary account should be credited. c. retained earnings account should be credited. d. retained earnings account should be debited. The Income Summary account is an important account that a. during interim periods. b. in preparing adjusting entries. c. annually in preparing closing entries. d. annually in preparing correcting entries. The balance in the income summary account before it equal to a. the net income or loss on the income statement. b. the beginning balance in the retained earnings accou c. the ending balance in the retained earnings account d. zero. EXERCISE 2 On September 1, XBM had an inventory of 15 bags at a cost of S40 each. The company uses a perpetual inventory system. During September, the tollgwing transactions and events occurred. Sept. 4 Purchased 70 bags at $40 each from HTR, terms 210.n30. Sept. 6 Received credit of $240 for the retun of 6 bags purchased on Sept. 4 that were defective. Sept. 9 Sold 40 bags for $60 each to OBS, terms 2/10, N30 Sept. 13 Sold 15 bags for $60 each to HOS, terms n/30. Sept. 14 Paid HTR in full, less discount. Instructions Journalize the September transactions for XBM. Credit Answer: Debit