Q: A company has current assets of $$50,000 and current liabilities of 25$$,000. What is its current ratio?

$$\text{Current Ratio} = \frac{\50$$,000}{\$$25,000} = 2.0$$

Q: A company earned $$10,000 in revenues, incurred 7$$,000 in expenses, and paid $$1,000 in dividends. What is the ending balance in Retained Earnings if the beginning balance was 2$$,000?

$$\text{Ending Retained Earnings} = \2$$,000 + (\$$10,000 - \7$$,000) - \$$1,000 = \$4,000$$

Q: A company’s adjusted trial balance shows Service Revenue of $$17,500 and total expenses of 8$$,950. What is the company’s net income?

$$\text{Net Income} = \17$$,500 - \$$8,950 = \$8,550$$

Question 1

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

Accepted Answer

To zero out all temporary accounts and transfer their balances to Retained Earnings

Question 2

A company has current assets of $$50,000 and current liabilities of 25$$,000. What is its current ratio?

Accepted Answer

$$	ext{Current Ratio} = \frac{\50$$,000}{\$$25,000} = 2.0$$

Question 3

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

Accepted Answer

Service Revenue

Question 4

What is the correct order for preparing financial statements from the adjusted trial balance?

Accepted Answer

Income Statement, Statement of Retained Earnings, Balance Sheet

Question 5

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

Accepted Answer

Liabilities are grouped as current or long-term

Question 6

A company earned $$10,000 in revenues, incurred 7$$,000 in expenses, and paid $$1,000 in dividends. What is the ending balance in Retained Earnings if the beginning balance was 2$$,000?

Accepted Answer

$$	ext{Ending Retained Earnings} = \2$$,000 + (\$$10,000 - \7$$,000) - \$$1,000 = \$4,000$$

Question 7

Which of the following is an example of a long-term asset?

Accepted Answer

Land

Question 8

What is the main purpose of the Income Summary account during the closing process?

Accepted Answer

To summarize revenues and expenses before transferring to Retained Earnings

Question 9

Which of the following best describes the operating cycle of a business?

Accepted Answer

The time span when cash is used to acquire goods and services, sold to customers, and cash is collected from customers

Question 10

If a company has a net loss for the period, how is the Income Summary account closed?

Accepted Answer

Debit Income Summary and credit Retained Earnings

Question 11

Which of the following is a temporary account that must be closed at the end of the period?

Accepted Answer

Dividends

Question 12

A company’s adjusted trial balance shows Service Revenue of $$17,500 and total expenses of 8$$,950. What is the company’s net income?

Accepted Answer

$$	ext{Net Income} = \17$$,500 - \$$8,950 = \$8,550$$

Question 13

Which of the following best explains why the current ratio is important for evaluating business performance?

Accepted Answer

It measures the company’s ability to pay its current liabilities with its current assets

Question 14

Which of the following is NOT a step in the accounting cycle?

Accepted Answer

Calculating the current ratio

Question 15

Which of the following accounts is classified as a current liability?

Accepted Answer

Accounts Payable

Question 16

After closing entries are posted, which of the following accounts will have a zero balance?

Accepted Answer

Utilities Expense

Question 17

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 beginning retained earnings

Question 18

Which of the following is the correct formula for the current ratio?

Accepted Answer

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

Question 19

Which of the following is an intangible asset?

Accepted Answer

Patent

Question 20

A worksheet helps in preparing financial statements by:

Accepted Answer

Organizing account balances and adjustments to facilitate preparation of the income statement and balance sheet

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

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