54.Closing entries would be prepared before:
A. Financial statements are prepared.
B. The after-closing trial balance.
C. An adjusted trial balance.
D. Adjusting entries.
55.The closing entry for an expense account would consist of a:
A. Debit to Income Summary and a credit to the expense account.
B. Debit to the expense account and a credit to Income Summary.
C. Credit to Retained Earnings and a debit to the expense account.
D. Credit to Revenue and a debit to the expense account.
56.The Income Summary account has debits of $85,000 and credits of $75,000. The company had which of the following:
A. Net income of $10,000.
B. Net income of $160,000.
C. Net loss of $10,000.
D. Net loss of $160,000.
57.During the closing process:
A. All income statement accounts are credited to income summary.
B. All income statement accounts are debited to income summary.
C. All revenue accounts are credited and expense accounts are debited.
D. All revenue accounts are debited and expense accounts are credited.
58.A debit balance in the income summary account indicates:
A. An error was made.
B. A Net Profit.
C. A Net Loss.
D. That revenues were greater than expenses.
59.If Income Summary has a net credit balance, it signifies:
A. A net loss.
B. Net income.
C. A reduction of net worth.
D. Dividends have been declared.
60.The balance in Income Summary:
A. Should equal retained earnings.
B. Will always be equal to the increase in retained earnings.
C. Will equal net income less dividends.
D. Will equal net income or net loss.
61.After preparing the financial statements for the current year, the accountant for Exquisite Gems closed the Dividends account at year-end by debiting Income Summary and crediting the Dividends account. What is the effect of this entry on current-year net income and the balance in the Retained Earnings account at year-end?
A. Net income is overstated and the balance in the Retained Earnings account is correct.
B. Net income is correct and the balance in the Retained Earnings account is overstated.
C. Net income is understated and the balance in the Retained Earnings account is correct.
D. Net income is understated and the balance in the Retained Earnings account is overstated.
62.Income Summary appears on which financial statement:
A. Income statement.
B. Balance sheet.
C. Retained Earnings statement.
D. Income summary does not appear on any financial statement.
63.The purpose of making closing entries is to:
A. Prepare revenue and expense accounts for the recording of the next period's revenue and expenses.
B. Enable the accountant to transfer the balances from all permanent accounts to the Income Summary account.
C. Establish new balances in the balance sheet accounts.
D. Reduce the number of expense accounts.