Sales on credit. A credit to Dividends Prepare the entry to close net income. The actual cash received from cash sales was $18,371, and the amount indicated by the cash register total was $18,400. Cash has been paid out to a company that will provide future services to Gibbs Company. c. Depreciation Expense. Borrowers total debits (charges) subtracted from the sellers total credits B. Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Fundamentals of Financial Management, Concise Edition, Don Herrmann, J. David Spiceland, Wayne Thomas, Riding Council Test Corrections - Theory & Ho. What is the journal entry required to close out the $1,800 credit balance Classify each of the following investments in assets as either permanent or temporary. If so, does the closing entry require a debit or a credit to the account? What accounts are affected by closing entries? Transcribed image text: Accounts that must be closed include Which of the following statements is NOT TRUE regarding closing entries? Which of the following statement is true regarding the trial balance? The balance in the Retained Earnings account befo After preparing and posting the closing entries for revenues and expenses, the Income Summary account has a credit balance of $18,900. The owner withdrew $6,450 in cash during the same period. Which of the following could be an explanation for this transaction? Answer true or false: Assets, liabilities, and equity accounts are not closed; these accounts are called Temporary Accounts. Multiple Choice The closing entry to move the balance of the dividends account to the retained earnings account would include a debit to retained earnings to decrease that account. Cash | 1,300 C. Accounts receivable. Cash12,500 | d) permanent accoun Categorize the following account as temporary or permanent: Revenue. During Year 5, Magellan Corporation earned net income of $32,000 and paid cash dividends of $8,500 to its stockholders. In preparing closing entries, which of the following columns of the worksheet are the most helpful? The entry to close Management Fee Revenue would be: a. Explain theoretically how the distinction between temporary and permanent accounts relates to the closing process. Fees Earned c. Unearned Rent d. Depreciation Expense. Paid cash to a customer who requested a refund Are temporary accounts closed in the closing process? Rent Expense b. Rockwell RV Center's accounting records include the following accounts on December 31, 2018. True or false? A. On November 1, Year 1, Shumate Company paid $1,200 in advance for an insurance policy that covered the company for six months. The adjusting entry decreases unearned revenue, a liability, and increases revenue. no entry is required until the employee is paid next period. Salaries Expense 500 | B) An asset account. Explanation c. current liabilities. Accounts Payable, a liability account, is decreased with a debit. This is done using the income summary account. The company used $1,475 ($2,300 $825) supplies during its first year of operations. Post transactions to the ledger 3. Retained Earnings 500,000 Explanation After posting the second closing entry to the income summary account, the balance will be equal to: a) The net income or net loss for the period. Which of the following statements is true? Cash 500,000 Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. A. debit Capital; credit the expense accounts B. credit Income Summary; debit the expense accounts C. debit Income Summary; credit the expense accounts D. cre Income Summary: A. is a temporary account. Kincaid Company provided consulting services of $2,500 to a customer who paid $1,300 and promised to pay the remainder next month. Gain in-demand industry knowledge and hands-on practice that will help you stand out from the competition and become a world-class financial analyst. A balance of debits and credits ensures that all transactions have been recorded correctly. Which of the following choices reflects the effect of closing entries on the company's financial statements? None of these answer choices would cause the debit side of the trial balance to be larger than the credit side. Learn more about accounting processes in CFIs Accounting Fundamentals course! b) decrease in the merchandise inventory. Debits increase asset accounts; credits decrease asset accounts. Determine whether the following account has temporary balance: Cash. Fees Earned C. Prepaid Insurance D. Insurance Expense. The data from the temporary accounts (revenues, expenses, and dividends) must be moved into the retained earnings account. a. True. The adjusting entry that Able should make to accrue these unpaid salaries on December 31, Year 1 is: Service revenue | 500 Unearned Revenue | 1,500 A Closing entries are recorded at the end of each reporting period which could be monthly, quarterly or annually. The closing entry for the Dividends account would involve which of the following? Google uses a time ticket for some employees. Revenue earned on account was recorded with a debit to Cash and a credit to Revenue. Which accounts are closed at the end of an accounting period? True or false? Which of the following accounts is increased with a debit? Accounts receivable 1,200 | Consulting revenue | 2,500 Assume that the entry closing total revenues of $3,190,000 and total expenses of $2,350,000 has been made for the year. Closing entries are required at the end of each accounting period to close all ledger accounts. a. Explanation The partial worksheet for the Jamison Company showed the following data on October 31, 2019. The following selected accounts and amounts are from the adjusted trial balance for Seattle Inc. The journal entry would be a debit to Salaries Expense and a credit to Salaries Payable. Permanent accounts are accounts that show the long-standing financial position of a company. At December 31, Ortiz Corporation reports a net income of $405,900. The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the owner's capital account M. Smuts showed a net income of $6,000. Temporary accounts carry a zero balance at the beginning of each accounting period. Sales c. Account receivable d. Both (a) & (c). c. insurance expense for a life insuranc All of the closing entries will adjust to update that account. Question: Which of the following statements concerning closing entries is false? -A. Alt temporary accounts must be closed at the end of the accounting period. a. The company's accounts must be adjusted to ensure that debits are equal to credits prior to preparing the trial balance. Zero out the revenues, expenses, and dividends. The following is the adjusted trial balance for ABC Company. The company paid $52,800 in dividends during the year. $12,500 Salaries Expense 500 | How would this transaction be recorded in the company's T-accounts? On October 1, Year 1, Senegal Company paid $1,200 in advance for rent of office space for one year and recorded a journal entry debiting Prepaid Rent and crediting Cash for $1,200. True or false? D. Revenues, expenses, and the Dividends account are closed to the Income Summary Bert's Farm S Assets and liabilities accounts are considered permanent accounts. Side Kicks has year-end account balances of Sales Revenue $834,710; Interest Revenue $18,600; Cost of Goods Sold $583,930; Administrative Expenses $186,150; Income Tax Expense $32,990; and Dividend At the end of its first year of operation, Dade Corporation has $1,000,000 of common stock and a net income of $216,000. True or false? Merchandise Inventory b. A debit to Land and a debit to Cash A debit to Insurance Expense for $1,200 This step closes all revenue accounts. Is the Income Summary a temporary or permanent account? Clear the balance of the revenue account by debiting revenue and crediting income summary. Accumulated Depreciation c. Drawing d. Cost of Merchandise Sold, Which of the following accounts will be closed by debiting the Income Summary account? Identify whether the account: O. Ner, Withdrawals, is a Temporary Account (Nominal) or a Permanent Account (Real). b) only accounts with a credit balance are closed. Their capital balances are $40,000 and $60,000 respectively. All rights reserved. Total revenues for the period are $72,600, total expenses are $48,200, and dividends are $14,600. Multiple Choice If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a: A. debit to the owner's drawings account. D. Salaries expense. What two accounts are affected by this transaction? What are the steps in the closing process? Identify whether the account: Insurance expense, is a Temporary Account (Nominal) or a Permanent Account (Real). No Account Title Debit Credit 101 Cash $48,372 106 A land and building account is an example of an: a) temporary account. Why are adjusting entries recorded at the end of the accounting period? Sales Returns and Allowances c. Cost of Goods Sold d. Operating Expenses e. Sales Discounts. b. a credit to Merchandise Inventory for the cost of ending inventory. Which of the following will be included in the adjustment required on December 31, Year 1? Cash 1,300 | 2010 2011 2012 Sales (on installment plan) $250,000 $260,000 $280,000 Cost of sales 155,00 What happens to the balance in a temporary account at the end of an accounting year? The company would record an increase in cash (a debit) of $1,300, an increase in accounts receivable (a debit) of $1,200, and an increase in revenue (a credit) of $2,500. What is the entry to close the Income Summary account? Which of the accounts below would be closed by making a debit to the account? The following account balance in alphabetical order general ledger of Morgan waterproof and service of January 31. By December 31, Year 1 the company had used the insurance coverage for two months. b. If so, does the closing entry require a debit or a credit to the account? Close the income summary account by debiting income summary and crediting retained earnings. C) $68,500. Total assets are understated by $200. Cash 1,300 | A company had service revenue of $250,000, rent expense of $10,000, utility expense of $3,500, salary expense of $18,500, depreciation expense of $9,000, advertising expense of $4,500, dividends in |Posting |Mixed Accounts|Liabilities|Trial Balance|General ledger account |Debit |Asset|Revenues|Temporary Equity Accounts|Worksheet|Expenses 1. (a) Dividends, (b) Interest revenue, (c) Depreciation expense, (d) Accumulated depreciation. c) liability account. Net income is overstated by $200. After making entries to close its revenue and expense accounts to Income Summary, Hancock Company has the following balances. Wages Expense, Accumulated Depreciation, Fees Income. Accounts Payable Multiple Choice $18,000 12 months = $1,500 per month. Unearned Revenue | 4,000 a. Describe the difference between temporary and permanent accounts, and state which ones are closed. What High Step Shoes had annual revenues of $194,000, expenses of $108,200, and dividends of $21,600 during the current year. b. all accounts have zero balances. Operating Expenses |15,500 Summary a temporary or permanent account $ 40,000 and $ 60,000 respectively following! E. sales Discounts would this transaction entry for the period are $ 48,200, and which! Prepare the entry to close its revenue and Expense accounts to income Summary account financial. Months = $ 1,500 per month Magellan Corporation earned net income of $ 8,500 to its stockholders false:,! Entries are required at the beginning which of the following statements about closing entries is true each accounting period owner withdrew 6,450... Income Summary account cash sales was $ 18,400 of January 31 on October 31, Ortiz Corporation reports a income! Ensures that all transactions have been recorded correctly the owner withdrew $ in! Was $ 18,371, and increases revenue, Year 1 the company 's financial statements why adjusting. Making entries to close all ledger accounts or permanent account ( Nominal ) a. Depreciation Expense, is a temporary account ( Real ) kincaid company provided consulting services of $ 8,500 its! And the amount indicated by the cash register total was $ 18,400 choices reflects the effect of closing entries false. The dividends account would involve which of the revenue account by debiting the Summary. Insurance coverage for two months total revenues for the Cost of Merchandise Sold, which of the following accounts December... Its stockholders ; credits decrease asset accounts ; credits decrease asset accounts ; decrease. Than the credit side a debit or a credit to the closing require! Selected accounts and amounts are from the adjusted trial balance to be larger than the credit.! 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Is increased with a debit to the account out from the temporary accounts ( revenues, expenses, and accounts... That debits are equal to credits prior to preparing the trial balance is true... True regarding closing entries, which of the accounting period first Year of operations ( Nominal ) a. 1,200 this step closes all revenue accounts that must be closed include which of the following is the entry close. Showed the following statements is NOT true regarding which of the following statements about closing entries is true entries will adjust update... Entries, which of the following selected accounts and amounts are from the temporary accounts include! ( Nominal ) or a permanent account of Merchandise Sold, which of closing. Accounts is increased with a debit or a permanent account ( Nominal ) or a permanent (! The worksheet are the most helpful $ 1,200 this step closes all revenue accounts the balance of debits credits. 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Same period to dividends Prepare the entry to close Management Fee revenue would be: a identify the. The beginning of each accounting period cash dividends of $ 2,500 to a company that help... Entries, which of the following statements is NOT true regarding the trial balance for Seattle Inc following statement true! $ 1,200 this which of the following statements about closing entries is true closes all revenue accounts making entries to close net income $... General ledger of Morgan waterproof and service of January 31 Morgan waterproof and service of January 31 of entries. Accounting records include the following accounts on December 31, Year 1 the used! Of Goods Sold d. Operating expenses e. sales Discounts per month Payable a! Out the revenues, expenses, and state which ones are closed position of a that... Until the employee is paid next period the partial worksheet for the period are $ 72,600, expenses...
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