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Exam 3: Adjusting Accounts for Financial Statements

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Question 121

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On November 1 of the current year, Salinger Company paid $9,600 cash for a one-year insurance policy that took effect on that day. On the date of the payment, Salinger recorded the following entry: Prepare the required adjusting entry at December 31 of the current year.

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($9,600/12 mo. = $8...

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Question 122

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On July 1 Plum Co. paid $7,500 cash for management services to be performed over a two-year period. Plum follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. On July 1 Plum should record:

A) A debit to an expense and credit to a prepaid expense for $7,500.
B) A debit to an expense and credit to Cash for $7,500.
C) A debit to a prepaid expense and a credit to Cash for $7,500.
D) A credit to a prepaid expense and a debit to Cash for $7,500.
E) A debit to Cash for $7,500 and a credit to an expense for $7,500.

F) A) and E)
G) B) and E)

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Question 123

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On December 31, the year end, a company forgot to record $6,000 of depreciation on machinery. In the current year financial statements, what is the effect of this error on assets, net income, and equity?

If a prepaid expense account was not adjusted for the amount used, on the balance sheet assets would be ___________________ and equity would be ___________________.

Prepare adjusting entries for the year ended December 31, for each of these separate situations. Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance are initially recorded as liabilities. a. The Prepaid Rent account has a debit balance of $8,000 before adjustment, representing a prepayment for four months' rent made on December 1 of the current year. b. One-third of the work related to $18,000 of cash received in advance was performed during this period. c. Unpaid accrued salaries at December 31 amounts to $15,000. d. Work was completed for a client on December 31 in the amount of $21,000, but was not previously billed or recorded. e. Estimated depreciation on office equipment is $27,000.

If Regent Tax Services' office supplies account balance on March 1 was $1,400, the company purchased $675 of supplies during the month, and a physical count of supplies on hand at the end of March indicated $1,250 unused, what is the amount of the adjusting entry for office supplies on March 31?

Temporary accounts include all of the following except:

The adjusting entry to record the salaries earned due to employees for services provided but unpaid at the end of the accounting period affects the accounts in which of the following ways?

Revenue and expense balances are transferred from the adjusted trial balance to the income statement.

Plant assets are usually listed in order from most liquid to least liquid.

The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the:

The _______________ depreciation method allocates equal amounts of an asset's cost to depreciation during its useful life.

An adjusting entry was made on year-end December 31 to accrue salary expense of $1,200. Which of the following entries would be prepared to record the $3,000 payment of salaries in January of the following year assuming reversing entries were not made?

The aim of a post-closing trial balance is to verify that (1) total debits equal total credits for temporary accounts, and (2) all temporary accounts have zero balances.

Classified balance sheets commonly include the following categories. a. Current assets b. Long-term investments c. Plant assets d. Intangible assets e. Current liabilities f. Long-term liabilities g. Equity. Indicate the typical classification of each item below by placing the letter of the correct balance sheet category a through g in the blank space next to the item. 1) ____ Equipment used in business operations 2) ____ Store Supplies 3) ____ Investment maturing in two years 4) ____ Long-term Note Payable 5) ____ Prepaid Rent 6) ____ Retained earnings 7) ____ Accounts Payable 8) ____ Current portion of long-term debt 9) ____ Trademarks 10) ____ Wages Payable 11) ____ Accounts Receivable 12) ____ Cash

Use the information in the adjusted trial balance presented below to calculate the current ratio for Taron Company, Inc.:

Profit margin is defined as:

What is the purpose of closing entries? Describe the closing process.

On October 15, a company received $15,000 cash as a customer's down payment on a consulting contract. The amount was credited to Unearned Consulting Revenue. By October 31, 10% of the services required by the contract were completed. The company will record consulting revenue of $1,500 from this contract for October. Revenue = $15,000 * 10% = $1,500

K. Canopy, the stockholder of Canopy Services, Inc., The company paid $5,700 cash in dividends to the owner (sole stockholder) . The entry to close the dividends account at the end of the year is: