Questions

1. Signify the item that most accurately and completely describes the accounts that would be reflected on a post-closing trial balance. Assume that closed accounts are not reflected on the trial balance.

1. All temporary accounts
2. All income statement and balance sheet accounts
3. All temporary and permanent accounts
4. All permanent accounts
5. All general ledger accounts

2. Signify the item that most accurately and completely describes the current ratio.

1. A measurement of ability to pay short term debts
2. A measurement of ability to pay long term debts
3. A measurement of ability to generate cash
4. A measurement of ability to generate revenues
5. A comparison of cash basis to accrual basis accounting

3. Signify TRUE or FALSE as applicable for each of the following items as they pertain to the income summary account.

Just prior to being closed, the income summary account will have a credit balance if a net income exists.

1. True b) False

3.1. Just prior to being closed, the income summary account will have a debit balance if a net loss exists.

a) True b) False

3.2. Just prior to being closed, the income summary account will have a debit balance if the amount of owner's withdrawals is greater than the amount of net income.

a) True b) False

3.3 Just prior to being closed, the income summary account will have a credit balance if the amount of owner investments is greater than the amount of net loss.

1. True b) False

3.4. If a net income exists, the income summary account will be debited to CLOSE it.

1. True b) False

3.4. If a net loss exists, the income summary account will be credited to CLOSE it.

a) True b) False

4. Signify TRUE or FALSE as applicable for each of the following items as they pertain to closing entries.

4.1 Revenue account balances should be closed at the end of each accounting period

a) True b) False

4.2 Expense account balances should be closed at the end of each accounting period

a) True b) False

4.3 Asset account balances should be closed at the end of each accounting period

a) True b) False

4.4 Liability account balances should be closed at the end of each accounting period

a) True b) False

4.5 The owner's withdrawals account balance should be closed at the end of each accounting period

a) True b) False

4.5 The owner's capital account balance should be closed at the end of each accounting period

a) True b) False

4.6 The income summary account balance should be closed at the end of each accounting period

a) True b) False

4.6 If a net income exists, this will ultimately result in owner's capital being credited as closing entries are made (ignore owner's withdrawals in answering this question).

a) True b) False

4.7 If a net loss exists, this will ultimately result in owner's capital being debited as closing entries are made (ignore owner's withdrawals in answering this question).

a) True b) False

5. For each of the following accounts, signify which financial statement would contain the

account balance. If the account is contained on more than one financial statement, be sure

each financial statement is listed in your selection.

5.1 Merchandise inventory

a) Statement of owner's equity

b) Balance sheet

c) Income statement

d) Balance sheet and statement of owner's equity

e) Balance sheet and income statement

5.2 Freight out expense

a) Statement of owner's equity

b) Balance sheet

c) Income statement

d) Balance sheet and statement of owner's equity

e) Balance sheet and income statement

5.3 Sales revenue

a) Statement of owner's equity

b) Balance sheet

c) Income statement

d) Balance sheet and statement of owner's equity

e) Balance sheet and income statement

5.4 Cost of goods sold

a) Statement of owner's equity

b) Balance sheet

c) Income statement

d) Balance sheet and statement of owner's equity

e) Balance sheet and income statement

5.5 Sales returns and allowances

a) Statement of owner's equity

b) Balance sheet

c) Income statement

d) Balance sheet and statement of owner's equity

e) Balance sheet and income statement

5.6 Sales discounts

a) Statement of owner's equity

b) Balance sheet

c) Income statement

d) Balance sheet and statement of owner's equity

e) Balance sheet and income statement

5.7 Accounts receivable

a) Statement of owner's equity

b) Balance sheet

c) Income statement

d) Balance sheet and statement of owner's equity

e) Balance sheet and income statement

5.8 Owner's capital

a) Statement of owner's equity

b) Balance sheet

c) Income statement

d) Balance sheet and statement of owner's equity

e) Balance sheet and income statement

5.9 Owner's withdrawals

a) Statement of owner's equity

b) Balance sheet

c) Income statement

d) Balance sheet and statement of owner's equity

e) Balance sheet and income statement

5.10 Accounts payable

a) Statement of owner's equity

b) Balance sheet

c) Income statement

d) Balance sheet and statement of owner's equity

e) Balance sheet and income statement