Semester Review Answer Key

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

Company Policy Date Term Premium Unexpired Insurancea. Bristol July 31, 20–3 1 year $ 420b. Maine October 31, 20–3 1 year $1 080c. Ipswich January 31, 20–4 1 year $ 576

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

K/U

2

7149583

6

$360

T

$ 35$336

3

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.

4. Indicate whether the following accounts would normally have a debit, credit, or nil balance after the books have been closed, by placing a checkmark (✓)in the appropriate space.

K/U

AccountsBalance

Debit Credit NilSalaries ✓Accounts Payable ✓C. Wilson, Capital ✓Fees Earned ✓Rent Expense ✓C. Wilson, Drawings ✓

5. 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.

YearStraight-line Depreciation

Depreciation Balance$24 000

1 $ 3 500 20 5002 3 500 17 0003 3 500 13 5004 3 500 10 0005 3 500 6 500

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%.

YearTrue Declining Balance

Depreciation Balance$24 000.00

1 $ 7 200.00 16 800.002 5 040.00 11 760.003 3 528.00 8 232.004 2 469.60 5 762.405 1 782.72 4 033.68

A

A