Chapter 8: Completing the Accounting CycleKnow the following terms & how to perform the necessary tasks:

Accumulated Depreciation Net book valueAdjusting Entries Nominal account (temporary)Audit Post-closing trial balanceClosing an account Prepaid ExpenseContra account Real accountDeclining-balance method of depreciation Salvage ValueDepreciation Straight-line method of depreciationIncome Summary account Valuation account

8.1 Why do adjusting entries? Supplies Late bills Prepaid Expense (eg. Insurance)

8.2 Adjustments & the Work Sheet (page 287)

8.3 Closing Entries Accounting Cycle Journalizing & Posting Closing Entries Post-closing Trial Balance

8.4 Depreciation Straight-line Declining Balance

Financial Statements page 307

Test Outline – Tuesday November 18, 2014

Fill-in-the-blanks 7 marksShort Answers 9 marks Work Sheet with Adjustments 14 marksJournalizing Closing Entries 10 marks

40 marks TOTAL

BAF 3MI: Chapter 8 – Test ReviewCompleting the accounting cycle

1. The nine steps of the accounting cycle are listed below in random order. Number the steps in the order in which they occur in the accounting cycle.

Accounting entries are recorded in the journal.An income statement and a balance sheet are prepared.Adjusting entries are journalized and posted.

Transactions occur.The ledger is balanced by means of a trial balance.

A post-closing trial balance is prepared.

A worksheet is prepared.

Closing entries are journalized and posted.

Journal entries are posted to the ledger accounts.

2. The trial balance figures for Dennison Delivery Service appear on the following worksheet.

Using the additional information below, complete the eight-column worksheet for the fiscal year

ended June 30, 20–4. HST accounts are not to be considered.

Additional Information

1. Purchase invoices received in July, 20–4, pertaining to goods and services received in June 20–4, are for the following:

Supplies $280.00

Miscellaneous Expense 140.00

Utilities Expense 210.20

2. The supplies inventory taken on June 30, 20–4, amounted to $625.00.

3. The Prepaid Licences account showed that the value of unexpired licences on June 30, 20–4, amounted to $412.00.

4. The prepaid insurance schedule as of June 30, 20–4, showed a total of $215 in unexpired insurance.

B. Prepare the four closing entries for Dennison Delivery Service as of June 30, 20–4.

C. Assuming all entries have been posted, calculate the ending Capital balance for Dennison Delivery Service as of June 30, 20–4. Use the account provided below.

D. Prepare a post-closing trial balance for Dennison Delivery Service.

3. A company purchases equipment costing $24 000, which it expects to last 6 years and to have a salvage value of $3000.

A. Prepare a schedule of depreciation for the first five years using the straight-line method.

Year

Straight-line Depreciation

Depreciation Balance

$24 000

1

2

3

4

5

B. For the same equipment, prepare a schedule of depreciation for the first five years using the true declining-balance method.

Canada Revenue Agency’s prescribed rate for depreciation is 30%.

Year

Declining Balance

Depreciation Balance

$24 000.00

1

2

3

4

5

4. Indicate which of the accounts below are nominal accounts by placing a checkmark (✓) in the

space provided.

A. Accounts Receivable F. Salaries

B. Bank Charges G. Chris Vella, Capital

C. Miscellaneous Expense H. Fees Earned

D. Automobiles I. Chris Vella, Drawings

E. Accounts Payable J. Bank Loan

5. Calculate the value of the unexpired insurance on the following policies as of June 30, 20–4.

Company Policy Date Term Premium Unexpired Insurance

a. Bristol July 31, 20–3 1 year $ 420

b. Maine October 31, 20–3 1 year $1 080

c. Ipswich January 31, 20–4 1 year $ 576

6. For each account, which worksheet column would be extended? Place a checkmark (✓) in the appropriate column.

Trial Balance Income Statement Balance Sheet

Dr Cr Dr Cr Dr Cr

Example: Commission Earned ✓ ✓

A. Accounts Payable

B. Miscellaneous Expense

C. Advertising Expense

D. Equipment

E. G. Rojek, Capital

F. HST Recoverable

G. HST Payable

H. G. Rojek, Drawings

I. Bank Charges

J. Supplies