OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 5: Completing the Accounting Cycle
Full Name: ____________________________
Exercise Set A
EA1. LO 5.1 Identify whether each of the following accounts is nominal/temporary or
real/permanent.
A. Accounts Receivable
B. Fees Earned Revenue
C. Utility Expense
D. Prepaid Rent
Solution
A.
B.
C.
D.
EA2. LO 5.1 For each of the following accounts, identify whether it is nominal/temporary or
real/permanent, and whether it is reported on the Balance Sheet or the Income Statement.
A. Interest Expense
B. Buildings
C. Interest Payable
D. Unearned Rent Revenue
Solution
A.
B.
C.
D.
EA3. LO 5.1 For each of the following accounts, identify whether it would be closed at year-end
(yes or no) and on which financial statement the account would be reported (Balance Sheet,
Income Statement, or Retained Earnings Statement).
A. Accounts Payable
B. Accounts Receivable
C. Cash
D. Dividends
E. Fees Earned Revenue
F. Insurance Expense
G. Prepaid Insurance
H. Supplies
Solution
A.
B.
C.
D.
E.
F.
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 5: Completing the Accounting Cycle
G.
H.
EA4. LO 5.1 The following accounts and normal balances existed at year-end. Make the four
journal entries required to close the books:
Advertising expense $ 5,600
Dividends 4,000
Rent expense 6,000
Salaries expense 48,000
Service revenue 85,000
Utilities expense 7,500
Solution
A.
Service Revenue
Income Summary
B.
Income Summary
Advertising Expense
Rent Expense
Salaries Expense
Utilities Expense
C.
Income Summary
Retained Earnings
D.
Retained Earnings
Dividends
EA5. LO 5.1 The following accounts and normal balances existed at year-end. Make the four
journal entries required to close the books:
Retained earnings $22,000
Dividends 6,000
Fees earned revenue 90,000
Selling expenses 45,000
Administrative expenses 16,000
Miscellaneous expense 2,300
Solution
A.
90,000
90,000
B.
63,300
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 5: Completing the Accounting Cycle
45,000
16,000
2,300
C.
26,700
26,700
D.
6,000
6,000
EA6. LO 5.1 Use the following excerpts from the year-end Adjusted Trial Balance to prepare the
four journal entries required to close the books:
Adjusted Trial Balance
Debit Credit
Dividends $24,000
Sales Revenue $194,000
Automobile Expense 15,500
Insurance Expense 30,000
Salaries Expense 96,000
Supplies Expense 6,500
Solution
A.
Sales Revenue
Income Summary
B.
148,000
15,500
30,000
96,000
6,500
C.
Income Summary
Retained Earnings
D.
24,000
24,000
EA7. LO 5.1 Use the following T-accounts to prepare the four journal entries required to close
the books:
Debit Credit
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 5: Completing the Accounting Cycle
Cash
Bal. 75,000
Service Revenue
Bal. 220,000
Advertising Expense
Bal. 12,000
Rent Expense
Bal. 18,000
Salaries Expense
Bal. 120,000
Dividends
Bal. 25,000
Retained Earnings
Bal. 30,000
Solution
A.
220,000
220,000
B.
Income Summary
Advertising Expense
Rent Expense
Salaries Expense
C.
70,000
70,000
D.
Retained Earnings
Dividends
EA8. LO 5.1 Use the following T-accounts to prepare the four journal entries required to close
the books:
Debit Credit
Cash
Bal. 23,300
Revenue Earned
Bal. 43,000
Commission Expense
Bal. 6,000
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 5: Completing the Accounting Cycle
Supplies Expense
Bal. 3,200
Wages Expense
Bal. 28,000
Dividends
Bal. 4,000
Retained Earnings
Bal. 21,500
Solution
A.
Revenue Earned
Income Summary
B.
Income Summary
Commission Expense
Supplies Expense
Wages Expense
C.
5,800
5,800
D.
4,000
4,000
EA9. LO 5.2 Identify whether each of the following accounts would be listed in the company’s
Post-Closing Trial Balance.
A. Accounts Payable
B. Advertising Expense
C. Dividends
D. Fees Earned Revenue
E. Prepaid Advertising
F. Supplies
G. Supplies Expense
H. Unearned Fee Revenue
Solution
A.
B.
C.
D.
E.
F.
G.
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 5: Completing the Accounting Cycle
H.
EA10. LO 5.2 Identify which of the following accounts would not be listed on the company’s
Post-Closing Trial Balance.
Prepaid insurance $ 9,444
Land 34,000
Notes payable 48,000
Retained earnings 31,315
Insurance expense 12,689
Service revenue 82,500
Supplies 9,700
Salaries expense 51,500
Solution - The following accounts would not be included:
EA11. LO 5.3 For each of the following accounts, identify in which section of the classified
balance sheet it would be presented: current assets, property, intangibles, other assets, current
liabilities, long-term liabilities, or stockholder’s equity.
A. Accounts Payable
B. Accounts Receivable
C. Cash
D. Equipment
E. Land
F. Notes Payable (due two years later)
G. Prepaid Insurance
H. Supplies
Solution
A.
B.
C.
D.
E.
F.
G.
H.
EA12. LO 5.3 Using the following Balance Sheet summary information, calculate for the two
years presented:
A. working capital
B. current ratio
12/31/2018 12/31/2019
Current assets $76,000 $295,000
Current liabilities 48,000 163,500
Solution
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 5: Completing the Accounting Cycle
A.
12/31/2018 12/31/2019
Current Assets
Current Liabilities
Working Capital (CA – CL)
B.
12/31/2018 12/31/2019
Current Assets
Current Liabilities
Current Ratio (CA/CL)
EA13. LO 5.3 Using the following account balances, calculate for the two years presented:
A. working capital
B. current ratio
12/31/2018 12/31/2019
Accounts payable $2,000 $ 6,120
Accounts receivable 3,000 8,450
Cash 4,500 18,600
Prepaid advertising 1,200 4,000
Utilities payable 950 6,500
Wages payable 1,675 8,600
Solution
A.
12/31/2018 12/31/2019
8,700 31,050
4,625 21,220
4,075 9,830
B.
12/31/2018 12/31/2019
8,700 31,050
4,625 21,220
1.88 1.46
EA14. LO 5.3 Using the following Balance Sheet summary information, calculate for the two
companies presented:
A. working capital
B. current ratio
Then:
C. evaluate which company’s liquidity position appears stronger, and why.
Company J Company K
Current assets $158,500 $122,000
Current liabilities 141,000 104,000
Solution
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 5: Completing the Accounting Cycle
A.
Company J Company K
158,500 122,000
141,000 104,000
17,500 18,000
B.
Company J Company K
Current Assets
Current Liabilities
Current Ratio (CA/CL)
C. Which is stronger?
Why?
EA15.LO 5.3 Using the following account balances, calculate:
A. working capital
B. current ratio
Debit Credit
Cash $ 27 000
Accounts Receivable 7,300
Prepaid Insurance 17,000
Accounts Payable $ 14,900
Salaries Payable 16,200
Common Stock 12,000
Service Revenue 66,000
Administrative Expenses 57,800
$109,100 $109,100
Solution
A.
Current Assets
Current Liabilities
Working Capital (CA – CL)
B.
51,300
31,100
1.65
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