Exam (elaborations)
M02 Ch03 Financial Accounting
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M02 Ch03 Financial Accounting
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M02 Ch03 Financial AccountingReview the adjusted trial balance for Gumby Co. and determine the accounts that would
be transferred directly to the statement of retained earnings, assuming the income
statement was already prepared.
Cash - Dr. $2,500
Accounts receivable - Dr. $3,000
Accounts payable - Cr. $600
Retained earnings 12/1- Cr. 2,900
Dividends - Dr. 100
Service revenue - Cr. 3000
Supplies expense - Dr. 300
Wages expense - 600
Totals - Dr. 6500 Cr. 6500 - ANS-- Dividends
- Retained earnings 12/1
An adjusted trial balance is - ANS-a list of accounts and balances after adjusting entries
have been recorded and posted
In order to prepare the statement of retained earnings, the balance of the
____________ (retained earnings/cash) account balance as well as any debit balance
in the _________ (dividends/supplies) account is transferred from the adjusted trial
balance and is used along with the reported net income (loss) from the income
statement. - ANS-- retained earnings
- dividends
In order to prepare a balance sheet using the account balances on an adjusted trial
balance, all of the __________ (expenses/assets) and their debit balances are
transferred to the balance sheet as well as all of the _________ (liabilities/revenues)
and their __________ (debit/credit) balances. - ANS-- assets
- liabilities
- credit
Define an adjusting journal entry. - ANS-- Journal entry at the end of an accounting
period to bring an asset or liability account to its proper amount and update the related
expense or revenue account
- An adjusting journal entry is made at the end of an accounting period to reflect a
transaction or event that is not yet recorded.
, Choose the statement(s) below which is (are) true regarding adjusting journal entries.
(Check all that apply.) - ANS-- Cash is never affected.
- A balance sheet account is always affected.
- An income statement account is always affected.
Steps in the Accounting Cycle - ANS-1. Analyze transactions
2. Journalize
3. Post
4. Prepare unadjusted trial balance
5. Adjust and post
6. Prepare adjusted trial balance
7. Prepare financial statements
8. Close
9. Prepare post-closing trial balance
10. Reverse and post (optional step)
Some of the steps in the accounting cycle are listed below. Place them in the correct
order of use. - ANS-1. Journalize transactions into the journal
2. Journalize and post the adjusting entries
3. Prepare the adjusted trial balance
4. Prepare the financial statements
5. Journalize and post closing entries
6. Prepare post-closing trial balance
Current assets are: - ANS-cash and other resources that are expected to be sold,
collected or used within one year
A classified balance sheet can be described as a balance sheet that: (Check all that
apply.) - ANS-- lists current assets in the order of how quickly they can be converted to
cash
- is more useful to decision makers
- organizes assets and liabilities into important subgroups
Identify the accounts below that would be classified as current liabilities on a classified
balance sheet. (Check all that apply.) - ANS-- accounts payable
- notes payable (due in 3 months)
- wages payable
- taxes payable
- interest payable
- unearned revenues
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