Chapter 4—Completing the Accounting Cycle
13. List in order the seven steps of the accounting cycle in a manual accounting system.
ANS:
(1) Transactions are analyzed and recorded in the journal. (2) Transactions are posted to the ledger.
(3) A trial balance is prepared, adjustment data are assembled, and the work sheet
is completed.
(4) Financial statements are prepared.
(5) Adjusting entries are journalized and posted to the ledger. (6) Closing entries are journalized and posted to the ledger. (7) A post-closing trial balance is prepared.
DIF: 2 OBJ: 01
14. Compute working capital and the current ratio from the following information.
Roy Reed, Consultant
Balance Sheet December 31, 2005
Cash $50 Accounts receivable 8 Prepaid insurance 12 Land 25 Building 12 Equipment 14 Total assets $121 === Accounts payable $ 9 Wages payable 5 Mortgage payable (long term) 50 Roy Reed, capital 57 Total liabilities and owner's equity $121 ===
ANS:
Working Capital: $70 - $14 = $56 Current Ratio: $70 ÷ $14 = 5
DIF: 3 OBJ: 06
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Chapter 4—Completing the Accounting Cycle
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