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Session:5 Completing the Accounting Cycle

Problem Set A

Principles of Accounting, Volume 1: Financial Accounting | Leadership Development – Micro-Learning Session

Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-financial-accounting

PA 1. 

LO 5.1Identify whether each of the following accounts would be considered a permanent account (yes/no) and which financial statement it would be reported on (Balance Sheet, Income Statement, or Retained Earnings Statement).

  1. Accumulated Depreciation
  2. Buildings
  3. Depreciation Expense
  4. Equipment
  5. Fees Earned Revenue
  6. Insurance Expense
  7. Prepaid Insurance
  8. Supplies Expense
  9. Dividends

PA 2. 

LO 5.1The following selected accounts and normal balances existed at year-end. Make the four journal entries required to close the books:

Accounts receivable $45,000, Prepaid insurance 4,500, Land 50,000, Accounts payable 39,000, Notes payable 55,000, Retained earnings 12,000, Dividends 2,000, Fees earned revenue 65,000, Selling expenses 34,500, Administrative expenses 12,750, Miscellaneous expense 1,250.

PA 3. 

LO 5.1The following selected accounts and normal balances existed at year-end. Notice that expenses exceed revenue in this period. Make the four journal entries required to close the books:

Accounts receivable $46,200, Prepaid insurance 5,800, Land 12,000, Accounts payable 29,900, Notes payable 32,500, Retained earnings 55,400, Dividends 8,000, Fees earned revenue 89,200, Selling expenses 62,000, Administrative expenses 29,500, Miscellaneous expense 4,140.

PA 4. 

LO 5.1Use the following Adjusted Trial Balance to prepare the four journal entries required to close the books:

Adjusted Trial Balance. Cash 38,750 debit. Prepaid insurance 4,500 debit. Equipment 35,000 debit. Notes Payable 32,000 credit. Common Stock 10,000 credit. Retained Earnings 17,325 credit. Dividends 22,000 debit. Sales revenue 200,000 credit. Automobile expense 24,575 debit. Insurance expense 18,000 debit. Salaries expense 110,000 debit. Supplies expense 6,500 debit. Total debits and total credits each are 259,325.

PA 5. 

LO 5.1Use the following Adjusted Trial Balance to prepare the four journal entries required to close the books:

Adjusted Trial Balance. Cash 22,900 debit. Prepaid insurance 4,000 debit. Fixed Assets 44,000 debit. Notes Payable 40,000 credit. Common Stock 25,000 credit. Retained Earnings 48,350 credit. Dividends 22,000 debit. Sales revenue 150,000 credit. Automobile expense 26,500 debit. Insurance expense 20,000 debit. Salaries expense 122,500 debit. Supplies expense 1,450 debit. Total debits and total credits each are 263,350.

PA 6. 

LO 5.1Use the following T-accounts to prepare the four journal entries required to close the books:

T-Accounts. Accounts Receivable debit balance 45,500. Fees Earned Revenue credit balance 60,000. Commission expense debit balance 7,200. Supplies Expense debit balance 5,500. Wages Expense debit balance 42,000. Dividends debit balance 3,500. Retained Earnings credit balance 51,000.

PA 7. 

LO 5.1Assume that the first two closing entries have been made and posted. Use the T-accounts provided as follows to:

  1. complete the closing entries
  2. determine the ending balance in the Retained Earnings account

T-Accounts. Income Summary debit 212,000 and credit 277,500. Retained Earnings credit balance 45,900. Dividends debit balance 7,500.

PA 8. 

LO 5.1Correct any obvious errors in the following closing entries by providing the four corrected closing entries. Assume all accounts held normal account balances in the Adjusted Trial Balance.


  1. Debit Income summary and credit Service Revenue 280,000.

  2. Debit Automobile expense 16,500, Insurance expense 24,000, Salaries expense 190,000, Supplies expense 18,500, and credit Income summary 249,000.

  3. Debit Retained earnings and credit Income summary 263,500.

  4. Debit Dividends and credit Retained earnings 10,000.

PA 9. 

LO 5.2Assuming the following Adjusted Trial Balance, create the Post-Closing Trial Balance that would result, after all closing journal entries were made and posted:

Adjusted Trial Balance. Cash 22,900 debit. Prepaid insurance 4,000 debit. Fixed assets 44,000 debit. Notes payable 40,000 credit. Common stock 25,000 credit. Retained earnings 48,350 credit. Dividends 22,000 debit. Sales revenue 150,000 credit. Automobile expense 26,500 debit. Insurance expense 20,000. Salaries expense 122,500. Supplies expense 1,450. Debit total 263,350, credit total 263,350.

PA 10. 

LO 5.2The following Post-Closing Trial Balance contains errors. Prepare a corrected Post-Closing Trial Balance:

Post-Closing Trial Balance. Cash 29,900 debit. Prepaid insurance 5,500 debit. Fixed assets 50,000 credit. Notes payable 46,000 credit. Common stock 32,000 debit. Retained earnings 7,400 credit. Debit total 67,400, credit total 103,400.

PA 11. 

LO 5.2Assuming the following Adjusted Trial Balance, recreate the Post-Closing Trial Balance that would result after all closing journal entries were made and posted:

Adjusted Trial Balance. Cash 17,900 debit. Accounts receivable 9,900 debit. Supplies 1,600 debit. Prepaid insurance 2,500 debit. Salaries payable 8,600 credit. Common stock 10,000 credit. Retained earnings 2,800 credit. Dividends 4,000 debit. Service fee revenue 37,050 credit. Salaries expense 16,900 debit. Supplies expense 4,200 debit. Insurance expense 1,450 debit. Debit total 58,450, credit total 58,450.

PA 12. 

LO 5.3Use the following Adjusted Trial Balance to prepare a classified Balance Sheet:

Adjusted Trial Balance. Cash 16,500 debit. Accounts receivable 17,200 debit. Supplies 2,200 debit. Prepaid insurance 2,100 debit. Equipment 14,000 debit. Accounts payable 14,200 credit. Unearned fee revenue 4,300 credit. Common stock 30,000 credit. Service fee revenue 21,500 credit. Salaries expense 12,000 debit. Rent expense 6,000 debit. Total debits and total credits 70,000.

PA 13. 

LO 5.3Using the following Balance Sheet summary information, for the two years presented calculate:

  1. working capital
  2. current ratio

12/31/18 and 12/31/19, respectively: Current assets 101,600, 97,350. Current liabilities 33,650, 32,800.

PA 14. 

LO 5.3Using the following Balance Sheet summary information, calculate for the two companies presented:

  1. working capital
  2. current ratio

Company L and Company M, respectively: Current assets $124,680, $180,550. Current liabilities 63,250, 153,250.

PA 15. 

LO 5.3Using the following account balances, calculate for the two years presented:

  1. working capital
  2. current ratio

12/31/18 and 12/31/19, respectively: Unearned revenue $12,600, $6,000. Cash 33,200, 12,750. Prepaid rent 9,000, 6,000. Supplies 5,600, 2,500. Taxes payable 4,800, 5,500. Wages payable 8,500, 9,250.

PA 16. 

LO 5.4From the following Company R adjusted trial balance, prepare the following:

  1. Income Statement
  2. Retained Earnings Statement
  3. Balance Sheet (simple—unclassified)
  4. Closing journal entries
  5. Post-Closing Trial Balance

Adjusted Trial Balance. Cash 44,000 debit. Accounts receivable 13,800 debit. Prepaid insurance 6,400 debit. Land 16,000 debit. Accounts payable 14,900 credit. Salaries payable 4,500 credit. Common stock 31,000 credit. Retained earnings 10,200 credit. Dividends 12,000 debit. Service Revenue 86,000 credit. Insurance expense 7,600 debit. Salaries expense 32,000 debit. Miscellaneous expense 14,800 debit. Total debits and total credits 146,000.

PA 17. 

LO 5.4From the following Company T adjusted trial balance, prepare the following:

  1. Income Statement
  2. Retained Earnings Statement
  3. Balance Sheet (simple—unclassified)
  4. Closing journal entries
  5. Post-Closing Trial Balance

Adjusted Trial Balance. Cash 24,000 debit. Accounts receivable 14,900 debit. Prepaid insurance 5,300 debit. Land 13,500 debit. Accounts payable 12,400 credit. Salaries payable 1,500 credit. Common stock 34,000 credit. Retained earnings 10,200 credit. Dividends 5,000 debit. Service Revenue 56,300 credit. Insurance expense 7,900 debit. Salaries expense 39,000 debit. Miscellaneous expense 4,800 debit. Total debits and total credits 114,400.

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