Q: Which formula is used to calculate the current ratio?

$$ \text{Current Ratio} = \frac{\text{Total Current Assets}}{\text{Total Current Liabilities}} $$

Question 1

Which of the following best describes the purpose of the closing process in the accounting cycle?

Accepted Answer

To zero out all revenue and expense accounts and transfer their balances to Retained Earnings.

Question 2

A classified balance sheet organizes assets and liabilities into which categories?

Accepted Answer

Current and long-term for both assets and liabilities.

Question 3

Which formula is used to calculate the current ratio?

Accepted Answer

$$ 	ext{Current Ratio} = \frac{	ext{Total Current Assets}}{	ext{Total Current Liabilities}} $$

Question 4

After closing entries are posted, which accounts will have nonzero balances on the post-closing trial balance?

Accepted Answer

Only permanent accounts.

Question 5

Which of the following is NOT a current liability?

Accepted Answer

Bonds Payable (due in 10 years)

Question 6

If a company has total current assets of $$24,000 and total current liabilities of 12$$,000, what is its current ratio?

Accepted Answer

$$ \frac{24,000}{12,000} = 2.0 $$

Question 7

Which statement is prepared first in the sequence of preparing financial statements?

Accepted Answer

Income Statement

Question 8

What is the main purpose of reversing entries?

Accepted Answer

To simplify the recording of certain transactions in the next period.

Question 9

Which of the following accounts is closed at the end of the period?

Accepted Answer

Service Revenue

Question 10

A company earned $$8,550 in net income and paid 5$$,000 in dividends. What is the ending balance of Retained Earnings if the beginning balance was $0?

Accepted Answer

$$ 3,550 $$

Question 11

Which of the following best describes the relationship between the income statement and the statement of retained earnings?

Accepted Answer

Net income from the income statement is added to the beginning retained earnings.

Question 12

Which of the following is a characteristic of a classified balance sheet?

Accepted Answer

Liabilities are grouped by their due dates.

Question 13

Which of the following is the correct sequence of the accounting cycle?

Accepted Answer

Journalize transactions, post to ledger, prepare trial balance, adjust entries, prepare financial statements, close accounts, prepare post-closing trial balance

Question 14

If a company fails to make closing entries at the end of the period, which of the following is most likely to occur?

Accepted Answer

Temporary accounts will carry their balances into the next period.

Question 15

Which of the following journal entries correctly closes a revenue account with a $10,000 credit balance?

Accepted Answer

Debit Revenue $$10,000; Credit Income Summary 10$$,000

Question 16

A company’s worksheet shows total revenues of $$50,000 and total expenses of 35$$,000. What is the net income, and how is it reported?

Accepted Answer

Net income is $15,000 and is reported on the income statement and statement of retained earnings.

Question 17

Which of the following is true about reversing entries?

Accepted Answer

They are optional and used for convenience.

Question 18

Which of the following accounts would NOT appear on a post-closing trial balance?

Accepted Answer

Dividends

Question 19

If Smart Touch Learning accrued salaries expense of $$1,200 at year-end and then paid total salaries of 2$$,400 in January, what would be the journal entry to record the payment if a reversing entry was made?

Accepted Answer

Debit Salaries Expense $$2,400; Credit Cash 2$$,400

Completing the Accounting Cycle: Financial Statements, Closing Entries, and the Accounting Cycle

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