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Exam 3: Adjusting Accounts for Financial Statements

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Question 171

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A salary owed to employees is an example of an accrued expense.

A) True
B) False

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Question 172

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

A) True
B) False

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Question 173

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Before an adjusting entry is made to accrue employee salaries,Salaries Expense and Salaries Payable are both understated.

Accrued revenues at the end of one accounting period often result in cash ________ in the next period.

An adjusting entry often includes an entry to Cash.

The main purpose of adjusting entries is to:

After posting the entries to close all revenue and expense accounts,Marker Company's Income Summary account has a credit balance of $6,000,and its Dividends account has a debit balance of $2,500.These balances indicate that net income for the current accounting period amounted to $3,500.

Adjusting entries made at the end of an accounting period accomplish all of the following except:

On a work sheet,if the Debit total exceeds the Credit total of the Income Statement columns,a net loss is indicated.

An unclassified balance sheet provides more information to users than a classified balance sheet.

A company owes its employees $5,000 for the year ended December 31.It will pay employees on January 6 for the previous two weeks' salaries.The year-end adjusting entry on December 31 will include a debit to Salaries Expense and a credit to Cash.

On January 1,Imlay Company purchases manufacturing equipment costing $95,000 that is expected to have a five-year life and an estimated salvage value of $5,000.Imlay uses the straight-line depreciation method to allocate costs,and only prepares adjustments at year-end.The adjusting entry needed on December 31 of the first year is:

Andrew's net income was $280,000; its total assets were $1,050,000; and its net sales were $3,500,000.Calculate the company's profit margin ratio.

Since the revenue recognition principle requires that revenues be recorded when earned,there are no unearned revenues in accrual accounting.

The adjusting entry to record an accrued revenue is:

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

Complete the following by filling in the blanks: (1)The Prepaid Insurance account had a $545 debit balance at the beginning of the current year; $650 of insurance premiums were paid during the year; and the year-end balance sheet showed $420 of prepaid insurance; consequently,the income statement for the year must have shown $________ of insurance expense. (2)The Office Supplies account began the current year with a $235 debit balance; the income statement for the year showed $475 of office supplies expense; and the year-end balance sheet showed the current asset,office supplies,at $275; consequently,if all supplies were accounted for,$________ of office supplies must have been purchased during the year.

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

A company's December 31 work sheet for the current period appears below.Based on the information provided,what is net income for the current period?

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