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Exam 3: Adjusting Accounts for Financial Statements

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Question 131

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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.

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Question 132

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Cash and office supplies are both classified as current assets.

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Question 133

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Flo's Flowers' current ratio is 1.3.The industry average for the current ratio is 1.2.This indicates that Flo's can cover its short term liabilities with its short term assets.

In accrual accounting,accrued revenues are recorded as liabilities.

Explain why temporary accounts are closed each period.

A company issued financial statements for the year ended December 31,but failed to include the following adjusting entries: A.Accrued interest revenue earned of $1,200. B.Depreciation expense of $4,000. C.Portion of prepaid insurance expired (an asset)used $1,100. D.Accrued taxes of $3,200. E.Revenues of $5,200,originally recorded as unearned,have been earned by the end of the year. Determine the correct amounts for the December 31 financial statements by completing the following table:

Using the table below,indicate the impact of the following errors made during the adjusting entry process.Use a "+" for overstatements,a "-" for understatements,and a "0" for no effect.The first one is provided as an example.

If accrued salaries were recorded on December 31 with a debit to Salaries Expense and a credit to Salaries Payable,and no reversing entries were made on January 1,the entry to record payment of these wages on the following January 5 would include:

On December 1,Milton Company borrowed $300,000,at 8% annual interest,from the Tennessee National Bank.Interest is paid when the loan matures one year from the issue date.What is the adjusting entry for accruing interest that Milton would need to make on December 31,the calendar year-end?

Revenue accounts are temporary accounts that should begin each accounting period with zero balances.

A company had no office supplies available at the beginning of the year.During the year,the company purchased $250 worth of office supplies.On December 31,$75 worth of office supplies remained.How much should the company report as office supplies expense for the year?

The Retained earnings account has a credit balance of $37,000 before closing entries are made.If total revenues for the period are $55,200,total expenses are $39,800,and dividends are $9,000. -What is the ending balance in the Retained earnings account after all closing entries are made?

The closing process is necessary in order to:

Depreciation expense for a period is the portion of a plant asset's cost that is allocated to that period.

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

On December 14,Branch Company received $3,000 cash for 30 days of consulting services that will be completed on January 13.Branch records all such prepayments by customers in a liability account.Prepare the December 31 adjusting entry.

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?

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.How much depreciation expense will be recorded for the furniture for the first year ended December 31?

Explain the purpose of reversing entries.

Current liabilities include accounts receivable,unearned revenues,and salaries payable.