Indicate after each of the following statements whether the statement is True (T) or False (F).

T or F
1. Accrued expenses at the end of one period usually result in cash payments in the next period.
2. The entry to record a cash receipt from a customer when the service to be provided to earn the cash has not yet been performed involves a debit to an unearned revenue account.
3. The cash basis of accounting commonly results in financial statements that are not comparable from period to period.
4. An adjusting entry can only affect income statement accounts.
5. Ace Printing performs 20 days work on a 30-day contract. The total contract is valued at $6,000. The adjusting entry of $4,000 includes a credit to unearned revenue.
6. Permanent accounts carry their balances into the next accounting period. Asset, liability, and revenue accounts are not closed as long as a company continues in business.
7. After posting the entries to close all revenue accounts and all expense accounts, the Income Summary account has a $4,000 credit balance. This shows that the company has earned a net income of $4,000.
8. The steps in the closing process are (1) close credit balances in revenue accounts to Income Summary; (2) close credit balances in expense accounts to Income Summary; (3) close Income Summary to Owner’s Capital; (4) close Withdrawals to Owner’s Capital.
9. The work sheet is an important financial statement.
10. Plant and equipment and intangible assets are long-term assets used to produce or sell products and services.

Using the schedule below, indicate the impact of the following errors made during the adjusting entry process. Use a “OS” for overstatements, a “US” for understatements and a “NE” for no effect. An example is provided below:

Error Revenues Expenses Assets Liabilities Owner’s Equity
Ex Did not record amortization. NE US OS NE OS
1. Did not record unpaid utility bill.
2. Failed to adjust unearned revenue account for revenue earned.
3. Failed to adjust office supplies for supplied used.
4. Failed to accrue employee’s salaries.
5. Recorded accrued rent expense with a debit to salary expense.
6. Recorded accrued revenue with credit to revenue and a debit to Accounts Payable.
7. The Prepaid Rent account had a balance of $3,000 represent three months rent paid in advance. One month had actually been used.
8. $210 of accrued interest on a Note Payable was not recorded

Answer all of the questions by bolding and/or colouring the answer you think is correct. Questions with more than one (1) answer bolded and/or coloured will be marked as incorrect. Each question is worth one (1) mark.

In September, SAIT received $240,000 in Unearned Tuition Revenue from its students for the fall semester, which lasts four months. On September 30, SAIT should recognize what amount for tuition revenue?
$240,000
$160,000
$ 60,000
$120,000
$180,000


2. If accrued salaries were recorded on December 31, the entry to record payment of these salaries on January 3 would include:

A debit to Cash and a credit to Salaries Payable
A debit to Cash and a credit to Prepaid Salaries.
A debit to Salaries Payable and a credit Salaries Expense.
A debit to Salaries Payable and a credit to Cash.
No entry would be necessary on January 3.


3. The adjusted trial balance contains information pertaining to:

Asset accounts only.
Balance sheet accounts only.
Income statement accounts only.
All ledger accounts that have balances.
Revenue accounts only.


4. Equipment costing $18,000 was purchased three years ago. It has a four year expected life at which time it can be sold for $4,000. The amortization for this year using straight-line amortization should be:

$4,500
$4,000
$4,667
$6,000
$3,500


5. An error is indicated if the following account has a balance appearing on the post-closing trial balance:

Office Equipment
Amortization expense, Office Equipment
Accumulated Amortization, Office Equipment
John Hamilton, Capital
Interest Payable


6. The current ratio:

Is used to measure a company’s profitability.
Is used to measure the relationship between assets and long-term debt.
Measures the effect of operating income on profit.
Is used to evaluate a company’s ability to pay its short-term obligations.
Both a) and d).


7. Which of the following errors would cause the balance sheet columns of a worksheet to be out of balance?

Entering a revenue amount in the Balance Sheet debit column.
Entering a liability amount in the Income Statement credit column.
Entering an expense amount in the Balance Sheet debit column.
Entering an asset amount in the Income Statement debit column.
Entering a liability amount in the Balance Sheet credit column.


8. Which statement is incorrect?

Revenue accounts are closed to Income Summary.
Expense accounts are closed to Income Summary.
Income Summary is closed to Capital.
Withdrawals is closed to Income Summary.
None of the above.


9. If total assets are $120,000, liabilities are $90,000, current assets are $70,000, current liabilities are $60,000 and net income is $50,000, what is the debt ratio?

1.33
.75
.42
.86
.56


10. If an accountant forgot to accrue revenue at the end of an accounting period, the statements prepared at that time would show that:

The assets would be understated and the owner’s equity understated.
The assets would be overstated and the owner’s equity overstated.
The assets, net income, and owner’s equity would be understated.
The assets, net income, and owner’s equity would be overstated.
The assets would be understated and the owner’s equity overstated.


An inexperienced accountant prepared the closing entries for Brady Wholesaler’s on December 31, 2005 as follows:

Date Account Titles and Explanation PR Debit Credit
2005
Dec 31 Fees Earned 15,000
Accumulated Amortization, equipment 5,000
Interest Revenue 1,000
Income Summary 21,000
To close revenue accounts

Dec 31 Income Summery 19,000
Salaries Expense 12,000
Prepaid Advertising 5,000
Interest Payable 1,200
Office Supplies Expense 800
To close expense accounts

Dec 31 Tom Brady’s, Capital 2,000
Income Summary 2,000
To close income summary to capital

Dec 31 Tom Brady’s, Withdrawals 6,000
Tom Brady’s, Capital 6,000
To close the withdrawals account



Required:

List all the errors in the above closing entries. (5 marks)
Prepare all necessary journal entries to correct the above closing entries. Omit explanations.


Answers:

a)








b)

Date Account Titles and Explanation PR Debit Credit
2005

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9. If total assets are $120,000, liabilities are $90,000, current assets are $70,000, current liabilities are $60,000 and net income is $50,000, what is the debt ratio?

1.33
.75
.42
.86
.56
My answer is .75 can you please look if this is correct thanks

9. If total assets are $120,000, liabilities are $90,000, current assets are $70,000, current liabilities are $60,000 and net income is $50,000, what is the debt ratio?
a) 1.33
b) .75
c) .42
d) .86
e) .56
My answer is B).75 please can you see if this is correct Thanks

b) .75

I've taken your last question off here and moved it to its own thread. Please only do one problem per thread to prevent confusion. You also do not need to post more than once. People here are volunteers and do not always get to questions right away, or sometimes even a few days.

The .75 is correct.