Question

1. All of the following accounts must be closed at the end of the accounting period except:

		A) Utilities Expense
		B) Unearned (deferred) revenue
		C) Dividends
		D) Service Revenue

2).

Entity F has current assets of $1,600,000 and current liabilities of $750,000. If the company pays a $200,000 account payable what will its new current ratio be? (rounded)

		A) 1.89:1
		B) 2.91:1
		C) 2.55:1
		D) 1.87:1

3)  Entity E purchased land for a warehouse several years ago for $3 million.   Although a recent appraisal suggests a market value for the land of $7 million, the financial statements reflect a value of $3 million. This is an example of:

		Consistency
		Comparability
		Historical cost
		Full disclosure

Answer 1

Solution:1

At the ending of accounting period all income is transferred to income summary account. All the expenses also transferred to summary account.

Difference of income and expenses is transferred to retained earnings by debiting or crediting to income summary.

Any dividend payment Is there than retained earnings is debited and dividend account is credited and closed.

As per the above, It means all the expenses and revenue is closed at the end of period and in last dividend account is also closed because these are the temporary account

There is no closing of Assets & Liabilities account at the end of period because they are permanent accounts.

From the given data Unearned (deferred) revenue is came under current liabilities so this is not closed at the end of period.

Answer = Option 2 = Unearned (deferred) revenue

Solution: 2

Revise Current Ratio = Revise Current Assets / Revise Current Liability

Revise Current Ratio = ($ 1,600,000 - $ 200,000) / ($ 750,000 - $ 200,000)

Revise Current Ratio = $ 1,400,000 / $ 550,000

Revise Current Ratio = 2.55

Answer = Option C = 2.55 : 1

Solution: 3

Financial statement is showing the actual purchase value of land it means the financial statement is showing with historical cot.

Answer = Option 3 = Historical Cost