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Exam 3: Adjusting Accounts for Financial Statements

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Question 151

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Closing entries are required:

A) If management has decided to cease operating the business.
B) Only if the company adheres to the accrual method of accounting.
C) If a company's bookkeeper does not choose to prepare reversing entries.
D) If the temporary accounts are to reflect correct amounts for each accounting period.
E) In order to satisfy the Internal Revenue Service guidelines.

F) A) and B)
G) All of the above

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Question 152

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A classified balance sheet:

A) Measures a company's ability to pay its bills on time.
B) Organizes assets and liabilities into important subgroups that provide more information.
C) Broadly groups items into assets, liabilities and equity.
D) Reports operating, investing, and financing activities.
E) Reports the effect of profit and dividends on retained earnings.

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

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Question 153

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A company had revenues of $75,000 and expenses of $62,000 for the accounting period.Dividends of $8,000 were paid in cash during the same period.Which of the following entries could not be a closing entry?

A company purchased new furniture at a cost of $14,000 on September 30.The furniture is estimated to have a useful life of 8 years and a salvage value of $2,000.The company uses the straight-line method of depreciation. -What is the book value of the furniture on December 31 of the first year?

On April 1,Santa Fe,Inc.paid Griffith Publishing Company $1,548 for 36-month subscriptions to several different magazines.Santa Fe debited the prepayment to a Prepaid Subscriptions account,and the subscriptions started immediately.What amount should appear in the Prepaid Subscription account for Santa Fe,Inc.after adjustments on December 31 of the second year assuming the company is using a calendar-year reporting period and the previous year adjustment had been made?

In the process of completing a work sheet,the accountant determines that the Income Statement debit column totals $83,000,while the Income Statement credit column totals $65,000.To enter net income (or net loss) for the period into the work sheet would require an entry to

How is profit margin calculated? Discuss its use in analyzing a company's performance.

The Unadjusted Trial Balance columns of a company's work sheet shows the Store Supplies account with a balance of $750.The Adjustments columns shows a credit of $425 for supplies used during the period.The amount shown as Store Supplies in the Balance Sheet columns of the work sheet is:

Statements that show the financial statements as if proposed transactions had already occurred are called:

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. Match the typical classification of each item below with its correct balance sheet category (A through G) . -Wages Payable

The following information is available for Zephyr Company before closing the accounts.After all of the closing entries are made,what will be the balance in the Retained earnings account? $\begin{array} { l r } \text { Net income } & \$ 115,000 \\\text { Retained earnings } & 110,000 \\\text { Dividends } & 39,000\end{array}$

Match the following terms with the appropriate definition. -Any length of time that an organization's activities are divided into and reported by financial statements.

Profit margin is calculated by dividing net sales by net income.

On December 1,Casualty Insurance Company borrowed $50,000 at a 6.0% interest rate from One Mutual Bank.The note payable plus interest will not be paid until April 1 of the following year.The company's annual accounting period ends on December 31 and adjustments are only made at year-end.The adjusting entry needed on December 31 is:

The adjusted trial balance must be prepared before the adjusting entries are made.

Reversing entries overcome the disadvantage of more complex entries to pay accrued liabilities from the previous accounting period.

Explain the purpose of adjusting entries at the end of a period and provide an example of an adjusting entry.

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.

On April 1,Santa Fe,Inc.paid Griffith Publishing Company $1,548 for 36-month subscriptions to several different magazines.Santa Fe debited the prepayment to a Prepaid Subscriptions account,and the subscriptions started immediately.What amount should appear in the Prepaid Subscription account for Santa Fe,Inc.after adjustments on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustment has been made?

The recurring steps performed each reporting period in preparing financial statements,starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance,is referred to as the: