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Exam 3: Adjusting Accounts for Financial Statements

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Question 111

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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?

A) Debit Salaries Payable and credit Salaries Expense.
B) Debit Salaries Expense and credit Cash.
C) Debit Accrued Salaries and credit Salaries Payable.
D) Debit Cash and credit Salaries Expense.
E) Debit Salaries Expense and credit Salaries Payable.

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

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Question 112

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The usual order for the asset subgroups of a classified balance sheet is:

A) Current assets, prepaid expenses, long-term investments, intangible assets.
B) Long-term investments, current assets, plant assets, intangible assets.
C) Current assets, long-term investments, plant assets, intangible assets.
D) Intangible assets, current assets, long-term investments, plant assets.
E) Plant assets, intangible assets, long-term investments, current assets.

F) A) and B)
G) A) and C)

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Question 113

Multiple Choice

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Two accounting principles central to accrual accounting basis that are relied on in the adjusting process are:

The work sheet is a required report made available to external decision makers.

A fiscal year refers to an organization's accounting period that spans twelve consecutive months or 52 weeks.

On October 1,Goodwell Company rented warehouse space to a tenant for $2,500 per month and received $12,500 for five months' rent in advance on that date,with the lease beginning immediately.The cash receipt was credited to the Unearned Rent account.The company's annual accounting period ends on December 31.The Unearned Rent account balance at the end of December,after adjustment,should be:

The following information is available from the adjusted trial balance of the Harris Vacation Rental Agency.After closing entries are posted,what will be the balance in the Retained earnings account? $\begin{array} { l r } \text { Total revenues } & \$ 125,000 \\\text { Total expenses } & 60,000 \\\text { Retained earnings } & 8 0 , 0 0 0 \\\text { Dividends } & 15,000\end{array}$

A company earned $3,000 in net income for October.Its net sales for October were $10,000.Its profit margin is:

On October 15,a company received $15,000 cash as a 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.

Accrued revenues:

On October 1,Goodwell Company rented warehouse space to a tenant for $2,500 per month.The tenant paid five months' rent in advance on that date,with the lease beginning immediately.The cash receipt was credited to the Unearned Rent account.The company's annual accounting period ends on December 31.The adjusting entry needed on December 31 is:

The following information is available for Brendon Company before closing the accounts.What will be the amount in the Income Summary account that should be closed to Retained earnings? $\begin{array} { l r } \text { Retained earnings } & \$ 112,000 \\\text { Dividends } & 32,000 \\\text { Fees earned } & 187,000 \\\text { Depreciation Expense-Equipment } & 12,000 \\\text { Wages expense } & 71,400 \\\text { Interest expense } & 3,300 \\\text { Insurarnce expense } & 11,700 \\\text { Rent expense } & 24,200\end{array}$

On December 31,Carmack Company's Prepaid Insurance account had a balance before adjustment of $6,000.The insurance was purchased on July 1 of the same year for one year of insurance coverage,with coverage beginning on that date.The adjusting entry needed on December 31 is:

A company purchased a new delivery van at a cost of $45,000 on July 1.The delivery van is estimated to have a useful life of 6 years and a salvage value of $3,000.The company uses the straight-line method of depreciation.How much depreciation expense will be recorded for the van during the first year ended December 31?

The unadjusted trial balance and the adjustment data for Porter Business Institute are given below along with adjusting entry information.What is the impact on net income if these adjustments are not recorded? Show the calculation for net income without the adjustments and net income with the adjustments.Which one gives the most accurate net income? Which accounting principles are being violated if the adjustments are not made? Additional information items: a.The Prepaid Insurance account consists of a payment for a 1 year policy.An analysis of the insurance invoice indicates that one half of the policy has expired by the end of the December 31 year-end. b.A cash payment for space sublet for 8 months was received on July 1 and was credited to Unearned Rent. c.Accrued interest expense on the note payable of $1,000 has been incurred but not paid.

Which of the following assets is not depreciated?

Tiptoe Shoes,had annual revenues of $185,000,expenses of $103,700,and paid dividends of $18,000 during the current year.The retained earnings account before closing had a balance of $297,000.The ending retained earnings balance after closing is:

Trekker Bikes' current assets are $300 million and its current liabilities are $125 million.Its current ratio is 0.417.

Match the following types of adjustments with the appropriate transactions. -Accrued revenue

A company purchased $6,000 worth of supplies in August and recorded the purchase in the Supplies account.On August 31,the fiscal year-end,the physical count of supplies indicates the cost of unused supplies is $3,200.The adjusting entry would include a $2,800 debit to Supplies.