Quiz Chapters 3 & 4

Question 1

Based on the image:
Prepare the closing entries for Sparrow at December 31. If an amount box does not require an entry, leave it blank.

Answer 1

Service revenue Debit: $99000
Retained earnings Credit: $99000

Retained earnings Debit: $78600
Salaries expense Credit: $49400
Rent expense Credit: $17250
Depreciation expense Credit: $4950
Insurance expense Credit: $2200
Income tax expense Credit: $4800

Retained earnings Debit: $10,500
Dividends Credit: $10500

Question 2

How does the closing process affect retained earnings?
The closing process BLANK temporary account balances to retained earnings.
If the account balances were not closed, BLANK and the accounting equation would not be in balance. In addition, these BLANK accounts would accumulate, making it difficult to identify when the effect of a business activity occured.

Answer 2

transfers
stockholders’ equity
income statement

Question 3

Firebird Corp. prepares monthly bank reconciliations of its checking account balance. The bank statement for February indicated the following:

Balance, February 28: $87,692
Service charge for February: $100
Interest earned during February: $850
NSF check from Valerie Corp. (deposited by Firebird): $620
Note ($16,000) and interest ($350) collected from a customer of Firebird’s: $16,350

Upon receiving the bank statement, Firebird’s accountants analyzed its cash transactions for possible reconciling items between its cash balance per books and the bank statement:

Checking account balance per Firebird’s books: $69,570
Outstanding checks as of February 28: $6,440
Deposit in transit at February 28: $4,780
Error in recording check 7853 issued by Firebird: $18

The correct amount of check 7853 is $697. It was recorded as a cash disbursement of $679 by mistake. The check was issued to pay for merchandise purchases. The check appeared on the bank statement correctly.

Prepare a bank reconciliation schedule in proper form at 2/28.

Answer 3

Cash balance from bank statement: $87692
Add:
Deposit in transit: $4780
Less:
Outstanding checks: $6440
Adjusted cash balance: $86032

Cash balance from company records: $69570
Add:
Interest earned: $850
Note and interest collected: $16350
Total add: $17200
Less:
Recording error: $18
Service charge: $100
NSF check: $620
Total less: $738
Adjusted cash balance: $86032

Question 4

Firebird Corp. prepares monthly bank reconciliations of its checking account balance. The bank statement for February indicated the following:

Balance, February 28: $87,692
Service charge for February: $100
Interest earned during February: $850
NSF check from Valerie Corp. (deposited by Firebird): $620
Note ($16,000) and interest ($350) collected from a customer of Firebird’s: $16,350

Upon receiving the bank statement, Firebird’s accountants analyzed its cash transactions for possible reconciling items between its cash balance per books and the bank statement:

Checking account balance per Firebird’s books: $69,570
Outstanding checks as of February 28: $6,440
Deposit in transit at February 28: $4,780
Error in recording check 7853 issued by Firebird: $18

The correct amount of check 7853 is $697. It was recorded as a cash disbursement of $679 by mistake. The check was issued to pay for merchandise purchases. The check appeared on the bank statement correctly.

Adjusted cash balance: $86032

Amount of cash reported on February 28 balance sheet?

Answer 4

$86032