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Exam 3: Adjusting Accounts for Financial Statements

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Question 171

True/False

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A company performs 20 days of work on a 30-day contract before the end of the year.The total contract is valued at $6,000 and payment is not due until the contract is fully completed.The required adjusting entry includes a $4,000 debit to Unearned Revenue.

A) True
B) False

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Question 172

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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:

A) Recognition principle.
B) Cost principle.
C) Cash basis of accounting.
D) Expense recognition (Matching) principle.
E) Time period principle.

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

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Question 173

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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

Reversing entries are recorded in response to external transactions that were created in error during the prior accounting period.

The purpose of reversing entries is to:

In its first year of operations,Grace Company reports the following: Earned revenues of $60,000 ($52,000 cash received from customers) ; Incurred expenses of $35,000 ($31,000 cash paid toward them) ; Prepaid $8,000 cash for costs that will not be expensed until next year.Net income under the accrual basis of accounting is:

On July 1,a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date.What will be the insurance expense on the annual income statement for the first year ended December 31?

Which of the following accounts would be included in a post-closing trial balance?

If a company failed to make the end-of-period adjustment to move the amount of management fees that were earned from the Unearned Management Fees account to the Management Fees Revenue account,this omission would cause:

The entry to record a cash receipt from a customer when the service is to be provided in a future period involves a debit to an unearned revenue account.

Record the December 31 adjusting entries for the following transactions and events in general journal form.Assume that December 31 is the end of the annual accounting period. a.The Prepaid Insurance account shows a debit balance of $2,340,representing the cost of a two-year fire insurance policy that was purchased on October 1 of the current year and has not been adjusted to-date. b.The Store Supplies account has a debit balance of $400; a year-end inventory count reveals $80 of supplies still on hand. c.On November 1 of the current year,Rent Earned was credited for $1,500.This amount represented the rent earned for a three-month period beginning November 1. d.Estimated depreciation on store equipment is $600. e.Accrued salaries amount to $1,400.

Accounts that appear in the balance sheet are often called temporary (nominal)accounts.

The adjusting entry to record an accrued revenue is:

Which of the following types of businesses might have an operating cycle longer than one year?

A company pays each of its two office employees each Friday at the rate of $100 per day for a five-day week that begins on Monday.If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday,the month-end adjusting entry to record the salaries earned but unpaid is:

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.

If Bojana 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?

Based on the following information from Scranton Company's balance sheet,calculate the current ratio.

All plant assets,including land,are depreciated.

The Income Summary account is a permanent account that will be carried forward period after period.