Closing enttries a. need not be journalized if adjusting entries are prepared b.

Question

Closing enttries

a. need not be journalized if adjusting entries are prepared

b.need not be posted if the financial statements are prepared from the work sheet

c.are not needed if adjusting entries are prepared

d.must be journalized and posted

Taking a physical count of inventory

a.is not necessary when a periodic inventory system is used

b.should be done near year-end

c.has no internal control relevance

d.is not necessary when a perpetual inventory system is used

Equipment with a cost of $130,000 has an estimated residual value of $10,000 and an estimated life of 5 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours?

a.24,000

b.32,500

c.32,000

d.30,000

Explanation / Answer

Answer-1:

Closing entries are journalized for the purpose of preparation of financial statements. Hence if the financial statements are prepared from the work sheet, then there is no need of closing entries.

Hence correct answer shall be :

b. need not be posted if the financial statements are prepared from the work sheet

Answer-2:

Calculation of amount of depreciation :

Depreciation as per straight line method = (Cost – salvage value ) / life in years

= (130000 – 10000) / 5 = $24000

Answer-3:

Physical count of inventory is needed when a periodic inventory system is used, because in a periodic inventory system inventory is recorded on periodic basis.

But in case of perpetual inventory system, Physical count of inventory is automatically done after each transaction.

Hence correct answer shall be :

d. is not necessary when a perpetual inventory system is used

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.