Test Bank for Accounting Principles, Eighth Edition CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE

SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT True-False Statements 1. 1 K 9. 2 K 17. 4 K 25. 6 C sg33. 2 K 2. 1 K 10. 2 K 18. 4 C 26. 6 K sg34. 3 K 3. 1 C 11. 2 K 19. 5 C 27. 6 K sg35. 6 C 4. 1 C 12. 2 K 20. 5 K 28. 6 K sg36. 6 K 5. 1 K 13. 2 K 21. 5 C 29. 6 K sg37. 6 K 6. 1 K 14. 2 K 22. 6 K a 30. 7 K 7. 1 C 15. 3 C 23. 6 C sg31. 1 K 8. 2 K 16. 3 K 24. 6 C sg32. 2 K Multiple Choice Questions 38. 1 K 62. 2 K 86. 2 C 110. 5 K 134. 6 AN 39. 1 K 63. 2 K 87. 3 K 111. 5 AN 135. 6 AN 40. 1 K 64. 2 K 88. 3 C 112. 5 AN 136. 6 K 41. 1 C 65. 2 K 89. 3 K 113. 5 AN 137. 6 K 42. 1 C 66. 2 K 90. 3 K 114. 6 K 138. 6 K 43. 1 K 67. 2 K 91. 3 K 115. 6 K 139. 6 K 44. 1 C 68. 2 C 92. 3 K 116. 6 C 140. 6 AP 45. 1 K 69. 2 K 93. 3 K 117. 6 K 141. 6 AP 46. 1 K 70. 2 K 94. 3 C 118. 6 K a 142. 7 K 47. 1 K 71. 2 C 95. 3 C 119. 6 C a 143. 7 K 48. 1 K 72. 2 K 96. 3 C 120. 6 C sg144. 1 C 49. 1 K 73. 2 K 97. 4 K 121. 6 K sg145. 2 K 50. 1 K 74. 2 C 98. 4 K 122. 6 K sg146. 2 K 51. 1 C 75. 2 C 99. 4 K 123. 6 K sg147. 3 K 52. 1 K 76. 2 C 100. 4 K 124. 6 K st148. 4 K 53. 1 C 77. 2 C 101. 4 K 125. 6 K sg149. 4 K 54. 1 AP 78. 2 C 102. 4 K 126. 6 K st150. 5 K 55. 1 C 79. 2 AN 103. 4 K 127. 6 K sg151. 5 AN 56. 2 K 80. 2 C 104. 4 K 128. 6 C st152. 6 K 57. 2 K 81. 2 C 105. 4 K 129. 6 AN sg153. 6 K 58. 2 K 82. 2 C 106. 5 K 130. 6 AN st,a154. 7 K 59. 2 K 83. 2 C 107. 5 AN 131. 6 AN 60. 2 K 84. 2 AN 108. 5 K 132. 6 AN 61. 2 K 85. 2 C 109. 5 C 133. 6 AN Brief Exercises 155. 2 AN 158. 2 K 161. 5 AN 164. 6 AP 156. 2 AN 159. 3 K 162. 6 AN 165. 6 K 157. 2 AN 160. 5 AN 163. 6 AP a 166. 7 AP sg This question also appears in the Study Guide. st This question also appears in a self-test at the student companion website. a This question covers a topic in an appendix to the chapter. 4 - 2 Test Bank for Accounting Principles, Eighth Edition SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY Exercises 167. 1 C 172. 2 AP 177. 3 C 182. 5 AN a 187. 7 AN 168. 1 C 173. 2 AP 178. 3 AN 183. 5 AN a 188. 7 AN 169. 1 AN 174. 2 AP 179. 4 C 184. 6 AN a 189. 7 AN 170. 1 AN 175. 2 AP 180. 5 AN 185. 6 AP 171. 2 AN 176. 2 AP 181. 5 AN 186. 6 AP Completion Statements 190. 1 K 193. 2 K 196. 4 K 199. 6 K 191. 1 K 194. 2 K 197. 6 K 200. 6 K 192. 2 K 195. 3 K 198. 6 K 201. 6 K SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE Item Type Item Type Item Type Item Type Item Type Item Type Item Type Study Objective 1 1. TF 6. TF 40. MC 45. MC 50. MC 55. MC 170. Ex 2. TF 7. TF 41. MC 46. MC 51. MC 144. MC 190. C 3. TF 31. TF 42. MC 47. MC 52. MC 167. Ex 191. C 4. TF 38. MC 43. MC 48. MC 53. MC 168. Ex 5. TF 39. MC 44. MC 49. MC 54. MC 169. Ex Study Objective 2 8. TF 33. TF 63. MC 71. MC 79. MC 145. MC 173. Ex 9. TF 56. MC 64. MC 72. MC 80. MC 146. MC 174. Ex 10. TF 57. MC 65. MC 73. MC 81. MC 155. BE 175. Ex 11. TF 58. MC 66. MC 74. MC 82. MC 156. BE 176. Ex 12. TF 59. MC 67. MC 75. MC 83. MC 157. BE 192. C 13. TF 60. MC 68. MC 76. MC 84. MC 158. BE 193. C 14. TF 61. MC 69. MC 77. MC 85. MC 171. Ex 194. C 32. TF 62. MC 70. MC 78. MC 86. MC 172. Ex Study Objective 3 15. TF 87. MC 90. MC 93. MC 96. MC 177. Ex 16. TF 88. MC 91. MC 94. MC 147. MC 178. Ex 34. TF 89. MC 92. MC 95. MC 159. BE 195. C Study Objective 4 17. TF 98. MC 101. MC 104. MC 149. MC 18. TF 99. MC 102. MC 105. MC 179. Ex 97. MC 100. MC 103. MC 148. MC 196. C Study Objective 5 19. TF 106. MC 109. MC 112. MC 151. MC 180. Ex 183. Ex 20. TF 107. MC 110. MC 113. MC 160. BE 181. Ex 21. TF 108. MC 111. MC 150. MC 161. BE 182. Ex Completing the Accounting Cycle 4 - 3 SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE Study Objective 6 22. TF 35. TF 119. MC 127. MC 135. MC 153. MC 197. C 23. TF 36. TF 120. MC 128. MC 136. MC 162. BE 198. C 24. TF 37. TF 121. MC 129. MC 137. MC 163. BE 199. C 25. TF 114. MC 122. MC 130. MC 138. MC 164. BE 200. C 26. TF 115. MC 123. MC 131. MC 139. MC 165. BE 201. C 27. TF 116. MC 124. MC 132. MC 140. MC 184. Ex 28. TF 117. MC 125. MC 133. MC 141. MC 185. Ex 29. TF 118. MC 126. MC 134. MC 152. MC 186. Ex Study Objective a 7 a 30. TF a 143. MC a 166. BE a 188. Ex a 142. MC a 154. MC a 187. Ex a 189. Ex Note: TF = True-False BE = Brief Exercise C = Completion MC = Multiple Choice Ex = Exercise The chapter also contains one set of ten Matching questions and five Short-Answer Essay questions. CHAPTER STUDY OBJECTIVES 1. Prepare a worksheet. The steps in preparing a worksheet are: (a) Prepare a trial balance on the worksheet, (b) Enter the adjustments in the adjustments columns, (c) Enter adjusted balances in the adjusted trial balance columns, (d) Extend adjusted trial balance amounts to appropriate financial statement columns, and (e) Total the statement columns, compute net income (or net loss), and complete the worksheet. 2. Explain the process of closing the books. Closing the books occurs at the end of an accounting period. The process is to journalize and post closing entries and then rule and balance all accounts. In closing the books, companies make separate entries to close revenues and expenses to Income Summary, Income Summary to Owner's Capital, and Owner's Drawings to Owner's Capital. Only temporary accounts are closed. 3. Describe the content and purpose of a post-closing trial balance. A post-closing trial balance contains the balances in permanent accounts that are carried forward to the next accounting period. The purpose of this trial balance is to prove the equality of these balances. 4. State the required steps in the accounting cycle. The required steps in the accounting cycle are: (1) analyze business transactions, (2) journalize the transactions, (3) post to ledger accounts, (4) prepare a trial balance, (5) journalize and post adjusting entries, (6) prepare an adjusted trial balance, (7) prepare financial statements, (8) journalize and post closing entries, and (9) prepare a post-closing trial balance. 5. Explain the approaches to preparing correcting entries. One approach for determining the correcting entry is to compare the incorrect entry with the correct entry. After comparison, the company makes a correcting entry to correct the accounts. An alternative to a correcting entry is to reverse the incorrect entry and then prepare the correct entry. 4 - 4 Test Bank for Accounting Principles, Eighth Edition 6. Identify the sections of a classified balance sheet. A classified balance sheet categorizes assets as current assets; long-term investments; property, plant, and equipment; and intangibles. Liabilities are classified as either current or long-term. There is also an owner's (owners’) equity section, which varies with the form of business organization. a 7. Prepare reversing entries. Reversing entries are the opposite of the adjusting entries made in the preceding period. Some companies choose to make reversing entries at the beginning of a new accounting period to simplify the recording of later transactions related to the adjusting entries. In most cases, only accrued adjusting entries are reversed. TRUE-FALSE STATEMENTS 1. A worksheet is a mandatory form that must be prepared along with an income statement and balance sheet. 2. If a worksheet is used, financial statements can be prepared before adjusting entries are journalized. 3. If total credits in the income statement columns of a worksheet exceed total debits, the enterprise has net income. 4. It is not necessary to prepare formal financial statements if a worksheet has been prepared because financial position and net income are shown on the worksheet. 5. The adjustments on a worksheet can be posted directly to the accounts in the ledger from the worksheet. 6. The adjusted trial balance columns of a worksheet are obtained by subtracting the adjustment columns from the trial balance columns. 7. The balance of the depreciation expense account will appear in the income statement debit column of a worksheet. 8. Closing entries are unnecessary if the business plans to continue operating in the future and issue financial statements each year. 9. The owner's drawing account is closed to the Income Summary account in order to properly determine net income (or loss) for the period. 10. After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances. 11. Closing revenue and expense accounts to the Income Summary account is an optional bookkeeping procedure. 12. Closing the drawing account to Capital is not necessary if net income is greater than owner's drawings during the period.