Accounting Closing Entries & Balances

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Questions and Answers

What is the total amount credited to Retained Earnings for the closing entries on December 31?

$24,200 (correct)

$23,600

$400

$23,000

What was the net income for the year based on the closing entries provided?

$23,000 thousand

$1,000 thousand

$24,200 thousand

$1,200 thousand (correct)

What amount of dividends was recorded in the closing entries?

$400 thousand (correct)

$23,000 thousand

$1,200 thousand

$600 thousand

Which of the following expenses is listed with the highest amount in the closing entries?

Cost of Services Sold Signup and view all the answers

What is the closing balance of Retained Earnings after the entries?

$2,700 thousand Signup and view all the answers

On what date was the first recorded entry in the Cash account?

January 2 Signup and view all the answers

What was the total balance of Accounts Receivable at the end of the period?

$1,700 Signup and view all the answers

Which account had an adjustment of $600 recorded?

Supplies Signup and view all the answers

What was the total amount debited to Cash from January 2 through January 18?

$5,800 Signup and view all the answers

Which account was credited for a total of $6,900 throughout the transactions from January 2 to January 18?

Service Revenue Signup and view all the answers

How much was recorded as Rent Expense on January 2?

$500 Signup and view all the answers

Which account is affected by the transaction on January 4 regarding furniture?

Accounts Payable Signup and view all the answers

What is the total amount of supplies purchased on January 5?

$900 Signup and view all the answers

What type of revenue is indicated by the entry on January 9?

Service Revenue Signup and view all the answers

What expense was recorded on January 12?

Utilities Expense Signup and view all the answers

What amount is recorded as Accounts Receivable on January 18?

$1,700 Signup and view all the answers

What is the total amount of expenses reported in the income statement?

$2,600 Signup and view all the answers

How much was the salary payable at the end of the period?

$1,000 Signup and view all the answers

Which expense accounted for the largest amount in the income statement?

Salary expense Signup and view all the answers

What is the net income for Web Marketing Services Inc. for January?

$1,200 Signup and view all the answers

What amount was recorded as accumulated depreciation for furniture?

$200 Signup and view all the answers

Which expense corresponds to the accumulated depreciation of equipment?

$100 Signup and view all the answers

What is the total service revenue reported in the income statement?

$3,800 Signup and view all the answers

How much was the supplies expense recorded?

$600 Signup and view all the answers

What is the total sales revenue reported under the accrual basis?

$4,100 million Signup and view all the answers

What are the accounts receivable and accounts payable reported on the cash basis?

$0 million and $0 million Signup and view all the answers

When should the $20,000 in wages be recorded according to accrual accounting?

At the end of the month Signup and view all the answers

What is the key principle of revenue recognition in accrual accounting?

Revenue is recognized when services are performed or earned Signup and view all the answers

How much should the insurance expense be adjusted based on the provided information?

$2,000 Signup and view all the answers

What factor is used to determine when to record utility expenses?

When the utilities are consumed Signup and view all the answers

Under which basis of accounting would accounts receivable be reported as zero?

Cash basis Signup and view all the answers

When should interest receivable be recorded?

When it has been earned regardless of receipt Signup and view all the answers

What is the total amount by which net income was overstated due to omitted expenses?

$18,600 Signup and view all the answers

Which of the following expenses was NOT mentioned as omitted, contributing to the overstatement of net income?

Rent expense Signup and view all the answers

Why would the omission of these expense adjustments be considered unethical?

It misleads users about the company's performance. Signup and view all the answers

What was the amount of the omitted income tax expense that contributed to the overstatement?

$5,000 Signup and view all the answers

How does omitting expenses affect the reported net income?

It increases the net income by showing lower total expenses. Signup and view all the answers

Which of the following is a result of the adjustments that were omitted by the accountant?

The income statement reflects a lower net income. Signup and view all the answers

What is the role of the adjustments in the financial statements?

To align expenses with revenue recognition. Signup and view all the answers

Which of the following actions by the accountant can be classified as fraudulent?

Omitting expense adjustments to report higher net income. Signup and view all the answers

Study Notes

Closing Entries

Revenue is debited for 23,600andOtherRevenueisdebitedfor23,600 and Other Revenue is debited for 23,600andOtherRevenueisdebitedfor600 thousand. The total debit is $24,200
Retained Earnings is credited for $24,200 thousand.
Retained Earnings is debited for $23,000 thousand.
Cost of Services Sold is credited for $11,600 thousand.
Selling, General, and Administrative Expense is credited for $6,900 thousand.
Depreciation Expense is credited for $4,100 thousand.
Income Tax Expense is credited for $400 thousand.
Retained Earnings is debited for $400 thousand.
Dividends are credited for $400 thousand.

Closing Balances

The Opening balance of Retained Earnings is $1,900
Closing expenses are $23,000
Closing Dividends are $400
Closing Revenue is $24,200
The Closing balance of Retained Earnings is $2,700

Web Marketing Services Inc. - Income Statement

Revenues:
- Service Revenue: $3,800
Expenses:
- Salary Expense: $1,000
- Supplies Expense: $600
- Rent Expense: $500
- Utilities Expense: $200
- Depreciation Expense - Furniture: $200
- Depreciation Expense - Equipment: $100
Total Expenses: $2,600
Net Income: $1,200

Adjusting Entries

Insurance Expense: $2,000
Prepaid Insurance: $2,000
Interest Receivable: $900
Interest Revenue: $900
Unearned Service Revenue: $500
Service Revenue: $500
Depreciation Expense: $6,200
Accumulated Depreciation: $6,200
Salary Expense: $5,400
Salary Payable: $5,400
Income Tax Expense: $5,000
Income Tax Payable: $5,000

Unethical Accounting Practices

By not making the adjusting entries, the accountant would have understated total expenses and overstated the net income, potentially misleading users of the financial statements.
The omission of these adjustments constitutes fraud.

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Description

This quiz covers the concepts of closing entries and balances in accounting, specifically focusing on retained earnings, expenses, and revenues. Test your knowledge on how to properly record and close entries at the end of an accounting period.