Question Details

1.  Harley-Davidson's current assets are $400 million and its current liabilities are $250 million. Its current ratio is 0.63.  (Points :2)
        True
        False


2.  Harley-Davidson's current ratio is 1.3. The industry average for the current ratio is 1.2. This indicates that Harley-Davidson can cover its short term liabilities with its short term assets.  (Points :2)
        True
        False


3.  The current ratio:  (Points :2)
         Is calculated by dividing current assets by current liabilities. 
         Helps to assess a company's ability to pay its short term obligations. 
         Can reveal problems in a company if it is less than 1. 
         Can affect a creditor's decision about whether to lend a company money. 
         All of the above. 


4.  Accounts that appear in the balance sheet are often called temporary (nominal) accounts.  (Points :2)
        True
        False


5.  Revenue and expense accounts are permanent (real) accounts and should not be closed at the end of the accounting period.  (Points :2)
        True
        False


6.  Closing entries result in revenues and expenses being reflected in the owner's capital account.  (Points :2)
        True
        False


7.  The closing process is a two-step process. First revenue, expense, and withdrawals are set to a zero balance. Second, the process summarizes a period's assets and expenses.  (Points :2)
        True
        False


8.  Which of the following statements is incorrect?  (Points :2)
         Permanent accounts is another name for nominal accounts. 
         Temporary accounts carry a zero balance at the beginning of each accounting period. 
         The Income Summary account is a temporary account. 
         Real accounts remain open as long as the asset, liability, or equity items recorded in the accounts continue in existence. 
         The closing process applies only to temporary accounts. 


9.  The first step in the accounting cycle is to analyze transactions and events to prepare for journalizing.  (Points :2)
        True
        False


10.  The first five steps in the accounting cycle include analyzing transactions, journalizing, posting, preparing an unadjusted trial balance, and recording adjusting entries.  (Points :2)
        True
        False


11.  Which of the following is the usual final step in the accounting cycle?  (Points :2)
         Journalizing transactions. 
         Preparing an adjusted trial balance. 
         Preparing a post-closing trial balance. 
         Preparing the financial statements. 
         Preparing a work sheet.
  


12.  An unclassified balance sheet provides more information to users than a classified balance sheet.  (Points :2)
        True
        False


13.  Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle whichever is longer.  (Points :2)
        True
        False


14.  Current liabilities are cash and other resources that are expected to be sold, collected or used within one year or the company's operating cycle whichever is longer.  (Points :2)
        True
        False


15.  Two common subgroups for liabilities on a classified balance sheet are:  (Points :2)
         current liabilities and intangible liabilities. 
         present liabilities and operating liabilities. 
         general liabilities and specific liabilities. 
         intangible liabilities and long-term liabilities. 
         current liabilities and long-term liabilities. 


16.  The work sheet is a required financial statement.  (Points :2)
        True
        False


17.  All necessary numbers to prepare the income statement can be taken from the income statement columns of the work sheet, including the net income or net loss.  (Points :2)
        True
        False


18.  Closing entries are normally entered in the general journal and then posted to the work sheet.  (Points :2)
        True
        False


19.  The Unadjusted Trial Balance columns of a company's work sheet show the balance in the Office Supplies account as $750. The Adjustments columns show that $425 of these supplies were used during the period. The amount shown as Office Supplies in the Balance Sheet columns of the work sheet is:  (Points :2)
         $325 debit. 
         $325 credit. 
         $425 debit. 
         $750 debit. 
         $750 credit. 


20.  Accumulated Depreciation, Accounts Receivable, and Service Fees Earned would be sorted to which respective columns in completing a work sheet?  (Points :2)
         Balance Sheet or Statement of Owner's Equity-Credit; Balance Sheet or Statement of Owner's Equity Debit; and Income Statement-Credit. 
         Balance Sheet or Statement of Owner's Equity-Debit; Balance Sheet or Statement of Owner's Equity-Credit; and Income Statement-Credit. 
         Income Statement-Debit; Balance Sheet or Statement of Owner's Equity-Debit; and Income Statement-Credit. 
         Income Statement-Debit; Income Statement-Debit; and Balance Sheet or Statement of Owner's Equity-Credit. 
         Balance Sheet or Statement of Owner's Equity-Credit; Income Statement-Debit; and Income Statement-Credit. 


21.  A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $200. This adjusting entry results in:  (Points :2)
         $200 less in net income. 
         $200 more in net income. 
         $200 difference between the debit and credit columns of the Unadjusted Trial Balance. 
         $200 of prepaid insurance. 
         An error in the financial statements. 


22.  If the Balance Sheet and Statement of Owner's Equity columns of a work sheet fail to balance when the amount of the net income is added to the Balance Sheet and Statement of Owner's Equity Credit column, the cause could be:  (Points :2)
         An expense amount entered in the Balance Sheet and Statement of Owner's Equity Debit column. 
         A revenue amount entered in the Balance Sheet and Statement of Owner's Equity Credit column. 
         An asset amount entered in the Income Statement and Statement of Owner's Equity Debit column. 
         A liability amount entered in the Income Statement and Statement of Owner's Equity Credit column. 
         An expense amount entered in the Balance Sheet and Statement of Owner's Equity credit column. 


23.  In the process of completing a work sheet, you determine that the Income Statement debit column totals $83,000, while the Income Statement credit column totals $65,000. To enter net income (or net loss) for the period into the work sheet would require an entry to  (Points :2)
         the Adjustments debit column and the Adjustments credit column. 
         the Unadjusted Trial Balance debit column and the Adjustments credit column. 
         it is not practical to enter Net Income (or Net Loss) on the work sheet. 
         the Balance Sheet & Statement of Owner's Equity debit column and the Income Statement credit column. 
         the Income Statement debit column and the Balance Sheet & Statement of Owner's Equity credit column. 


24.  When expenses exceed revenues, there is a net loss and the Income Summary account would have a credit balance.  (Points :2)
        True
        False


25.  The steps in the closing process are (1) close credit balances in revenue accounts to Income Summary; (2) close credit balances in expense accounts to Income Summary; (3) close Income Summary to Owner's Capital; (4) close Withdrawals to Owner's Capital.  (Points :2)
        True
        False


26.  The following information is available for the Travis Travel Agency. After these closing entries what will be the balance in the Jay Travis, Capital account? 
    (Points :2)
         $ 65,000. 
         $ 80,000. 
         $130,000. 
         $145,000. 
         $280,000. 


27.  At the beginning of 2007, Beta Company's balance sheet reported Total Assets of $195,000 and Total Liabilities of $75,000. During 2007, the company reported total revenues of $226,000 and expenses of $175,000. Also, owner withdrawals during 2007 totaled $48,000. Assuming no other changes to owner's capital, the balance in the owner's capital account at the end of 2007 would be:  (Points :2)
         $174,000. 
         $78,000. 
         cannot be determined from the information provided. 
         $120,000. 
         $123,000. 


28.  A company's post-closing trial balance has a debit total of $40,350 and a credit total of $40,650. Accordingly, the company should review for errors in the closing process.  (Points :2)
        True
        False


29.  An error is indicated if the following account has a balance appearing on the post-closing trial balance:  (Points :2)
         Office Equipment. 
         Accumulated Depreciation-Office Equipment. 
         Depreciation Expense-Office Equipment. 
         Ted Nash, Capital. 
         Salaries Payable. 


30.  Which of the following statements is true?  (Points :2)
         Owner's capital must be closed each accounting period. 
         A post-closing trial balance should include only permanent accounts. 
         Information on the work sheet can be used in place of preparing financial statements. 
         By using a work sheet to prepare adjusting entries you need not post these entries to the ledger accounts. 
         Closing entries are only necessary if errors have been made.



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