The following is a previous exam. Please use this for your study purpose.

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1. Answer the following questions.
(a) What are the two main purposes of closing entries?

(b) Under what basis accounting does transactions that change a company’s financial statements are
recorded in the periods in which the event occur.

[2-10] Multiple Choice

2. XYZ Bike Company received a $920 cash from a customer for the balance due. The transaction was
recorded in error as a debit to Cash $290 and a credit to Service Revenue $290. The correcting entry
is

a. debit Cash, $920; credit Accounts Receivable, $920.

b. debit Cash, $630 and Accounts Receivable, $290; credit Service Revenue, $920.
c. debit Cash, $630 and Service Revenue, $290; credit Accounts Receivable, $920.
d. debit Accounts Receivable, $920; credit Cash, $630 and Service Revenue, $290.

3. Tony’s Market recorded the following events involving a recent purchase of merchandise:
Received goods for $90,000, terms 2/10, n/30. Returned $1,800 of the shipment for credit.
Paid $450 freight on the shipment. Paid the invoice within the discount period.
As a result of these events, the company’s inventory…
a. increased by $86,436.
b. increased by $88,650.
c. increased by $86,877.
d. increased by $86,886.

4. TT, Inc. sells component parts to AD Communications, Inc. a cell phone manufacturer. On December
10, 2020, TT, Inc. sold €1,700,000 of goods to AD Communications, Inc. on account for €2,200,000.
Terms of the sale were 2/10, net 30. AD Communications, Inc. paid €32,500 in freight charges. On
December 13, 2020, AD Communications, Inc. returned 5% of the goods due to inferior quality. On
December 18, 2020, AD Communications, Inc. paid the account in full. AD Communications, Inc. uses
a perpetual inventory system. If AD Communications, Inc. has not yet sold any of these goods, what is
the ending balance in the inventory account after the payment is made?

a. €0 b. €1,615,200. c. €2,080,700. d. €2,164,300.

5. Which of the following adjustments would require decreasing the liabilities reported on the statement
of financial position?

a. A company uses $400 worth of supplies during the year.

b. A company records $400 worth of depreciation on equipment.
c. A company has earned $400 of revenue collected at the beginning of the year.
d. A company records $400 of wages earned by employees that will be paid next year.

6. Korea's Car Shop follows the revenue recognition principle. Korea finish fixing the car on July 31.
The customer picks up the car on August 1 and sends the payment to Korea on August 5 using on-line
banking. When should Korea show that the revenue was earned?
a. July 31 b. August 1 c. August 5 d. August 31

[7-9] The following have been excerpted (일부 발췌) from statements of financial position of E
Company:
12/31/22 12/31/21

Interest Receivable €4,300 € -0-

Supplies 5,000 3,000
Salaries and Wages Payable 4,100 3,800
Unearned Service Revenue -0- 4,000
The income statement for 2022 shows the following:
Interest Revenue €16,400
Service Revenue 75,700
Supplies Expense 10,700
Salaries and Wages Expense 41,000

7. Cash received for interest during 2022 was:

a. €12,100. b. €16,400. c. €20,700. d. €16,400
8. The cash paid for salaries and wages during 2022 was:
a. €40,700. b. €44,800 c. €48,900. d. €41,000.
9. The cash paid for supplies during 2022 was:
a. €12,700. b. €7,700. c. €15,700. d. €13,700.

10. The following summaries of statement of financial position and income statement data for three
different corporations, X, Y, and Z.
X Y Z
Beginning of the Year:
Assets ₤380,000 ₤150,000 ₤199,000
Liabilities 270,000 105,000 168,000
End of the Year:
Assets 450,000 185,000 195,000
Liabilities 280,000 95,000 149,000
During the Year:

Issued new ordinary shares A 79,000 80,000

Dividends 90,000 83,000 C

Revenue 195,000 B 187,000

Expenses 170,000 113,000 175,000

Determine the amounts of (A) – (C).

1A
[11-20] The trial balances of BTS Co. as of Dec 31, 2022 with the accounts arranged in alphabetic
order. Analyze the data and prepare the following.
Trial Balances
Normal
Balance Unadjusted
(Before Adjusted Post-Closing
adjustment)
(a)
Accounts Payable $9,000 $9,000 $9,000
(b)
Accounts Receivable 2,200 3,200 3,200
Accumulated (c)
13,000 17,000 17,000
DepreciationEquipment
(d)
Depreciation Expense 0 4,000 (q)
(e)
Dividends 11,000 11,000 (r)

Cash Debit 75,000 75,000 75,000

(f)
Equipment 74,000 74,000 74,000
(g)
Insurance Expense 0 16,300 (s)

Prepaid Insurance (h) A 1,500 1,500

(j)
Retained Earnings 52,200 52,200 B
(l)
Salaries and Wages Expense 38,000 45,000 (t)
(k)
Salaries and Wages Payable 0 7,000 7,000
(l)
Service Revenue 96,000 105,000 (u)
(m)
Share Capital-Ordinary 30,000 30,000 30,000
(n)
Supplies 3,200 700 700
(o)
Supplies Expense 2,000 4,500 (v)
(p)
Unearned Service Revenue 23,000 15,000 15,000

11. [11 points] (1) Write the normal balance for each respective account (a-p), then (2) determine the
balance for prepaid insurance in A.

12. [4 points] Verify that Debit = Credit for the unadjusted trial balance.

(example answer: 12345 = 12345)

2A
13. [10 points] Prepare adjusting entries for December 31, 2022.

14. [4 points] Verify that Debit = Credit.

15. [6 points] Verify that Asset = Liabilities + Equity of your Statement of Financial Position.

16. [11 points] Prepare closing entries for December 31, 2022

17. [5 points] What are the values for (q) – (u)?

18. [5 points] Determine the balance for the retained earnings account B after the closing entries have
been posted. (Show your calculation)

19. [4 points] Verify that Debit = Credit for the Post-Closing Trial Balance

3A