Question Details

ACCT/510 ACCT510 ACCT 510 CHAPTER 4 BRIEF EXERCISES PART 11

CHAPTER 4
COMPLETING THE ACCOUNTING CYCLE

MATCHING


202. Match the items below by entering the appropriate code letter in the space provided.
A. Worksheet F. Capital Stock
B. Permanent accounts G. Current assets
C. Closing entries H. Operating cycle
D. Income Summary I. Long-term liabilities
E. Reversing entry J. Correcting entries


____ 1. Obligations that a company expects to pay after one year.
____ 2. A part of owners' equity in a corporation.
____ 3. An optional tool which facilitates the preparation of financial statements.
____ 4. A temporary account used in the closing process.
____ 5. Balance sheet accounts whose balances are carried forward to the next period.
____ 6. The average time that it takes to go from cash to cash in producing revenues.
____ 7. Entries to correct errors made in recording transactions.
____ 8. The exact opposite of an adjusting entry made in a previous period.
____ 9. Entries at the end of an accounting period to transfer the balances of temporary
accounts to a permanent owner's equity account.
____ 10. Assets that a company expects to pay or convert to cash or use up within one year.


4 - 58 Test Bank for Accounting Principles, Eighth Edition


SHORT-ANSWER ESSAY QUESTIONS


S-A E 203
A worksheet is an optional working tool used by accountants to facilitate the preparation of
financial statements. Consider the steps followed in preparing a worksheet. How does the use of
a worksheet assist the accountant. Could financial statements be prepared without a worksheet?
Evaluate how the process would differ. Consider factors such as timeliness, accuracy, and
efficiency in your evaluation.


S-A E 204
Journalizing and posting closing entries is a required step in the accounting cycle. Discuss why it
is necessary to close the books at the end of an accounting period. If closing entries were not
made, how would the preparation of financial statements be affected?



S-A E 205
Give the definition of current assets and current liabilities and provide two examples of each.


S-A E 206 (Ethics)
Under Protection provides underground storage facilities for companies desiring off-site storage
of sensitive documents, computer records, and other items. They have developed a sophisticated
surveillance and security system which they initially used in their own facilities, and have recently
started to market elsewhere as well.
The underground storage facilities are made from natural caves in some instances (reinforced
and modified as appropriate) and from excavations of natural rock formations in others. The land
was purchased over ten years ago for a total of $2.5 million. The modifications have cost
approximately $15 million more. The company has never depreciated its storage facilities
because the market value of the property has continued to rise. Presently, the market price is
between $30 and $40 million.
Tom Carr, a new accounting manager, questioned this depreciation policy. Ken Hines, the
controller, has told him that he needn't worry about it. For one thing, he says, this is really a
special form of Land account, which should not be depreciated at all. For another, this is a
privately held company, and so they don't need to worry about misleading investors. All the
owners know about and approve the depreciation policy.

Required:
What are the ethical issues in this situation?




S-A E 207 (Communication)
You have recently started to work for Trent Holmes, manufacturers of cemetery markers and
monuments. During your first month at work, you inadvertently recorded as revenue, about
$3,000 of prepayments from Wynn Company. The financial statements had been released within
the company when you discovered your error. The month-end closing had not been completed,
however, and you were able to correct the accounts without incident.
Required:
Prepare a short note to accompany the re-released financial statements explaining the mistake.

4 - 60 Test Bank for Accounting Principles, Eighth Edition