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Exam 3: Adjusting Accounts and Preparing Financial Statements

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Question 41

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The balances in Sanchez Accounting Services' office supplies account on February 1 and February 28 were $1,200 and $375, respectively. If the office supplies expense for the month is $1,900, what amount of office supplies was purchased during February?

A) $1,500
B) $2,325
C) $3,100
D) $1,525
E) $1,075

F) B) and D)
G) C) and E)

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Question 42

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Revenue and expense balances are transferred from the adjusted trial balance to the income statement.

A) True
B) False

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Question 43

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Adjusting entries result in a better matching of revenues and expenses for the period.

________ basis accounting means that revenues are recognized when cash is received and that expenses are recorded when cash is paid. ________ basis accounting means that the financial effects of revenues and expenses are recorded when earned or incurred.

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?

Which of the following assets is not depreciated?

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.

Accrued revenues at the end of one accounting period are expected to result in cash collections in a future period.

A company's month-end adjusting entry for Insurance Expense is $1,000. If this entry is not made then expenses are understated by $1,000 and net income is overstated by $1,000.

What is the proper adjusting entry at December 31, the end of the accounting period, if the balance in the prepaid insurance account is $7,750 before adjustment, and the unexpired amount per analysis of policies is, $3,250?

All of the following statements regarding profit margin are true except:

Adjusting entries are made after the preparation of financial statements.

All of the following are true regarding prepaid expenses except:

A trial balance prepared before any adjustments have been recorded is:

Asset and liability balances are transferred from the adjusted trial balance to the income statement.

Discuss how accrual accounting enhances the usefulness of financial statements.

The accrual basis of accounting recognizes expenses when cash is paid.

On April 1, Griffith Publishing Company received $1,548 from Santa Fe, Inc. for 36-month subscriptions to several different magazines. The company credited Unearned Fees for the amount received and the subscriptions started immediately. - Assuming adjustments are only made at year-end, What is the adjusting entry that should be recorded by Griffith Publishing Company on December 31 of the first year?

Using the information presented below, prepare a statement of owner's equity and balance sheet from the adjusted trial balance of Dodson Containers. Mr. Dodson's capital account balance of $40,340 consists of a $30,340 beginning-year balance plus a $10,000 investment during the current year. $\begin{array}{|l|r|l|}\hline\text { Utilities expense ... } & 2,900 & \\\hline \text { Property taxes expense ............. } & 2,400 & \\\hline \text { Insurance expense. } & 5,800 & \\\hline \text { Office supplies expense } & 250 & \\\hline \text { Depreciation expense-office equipment } & 400 & \\\hline \text { Depreciation expense-buildings........ } & 5,570 & \\\hline \text { Interest expense ... } & 3,000& \\& \$ 291,880 & \$ 291,880 \\\hline \text { Totals ............... } & &\\\hline\end{array}$

The expense recognition (matching) principle does not aim to record expenses in the same accounting period as the revenue earned as a result of these expenses.