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Exam 3: Adjusting Accounts for Financial Statements

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Question 71

Multiple Choice

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A company earned $3,000 in net income for October. Its net sales for October were $10,000. Its profit margin is:

A) 3%.
B) 30%.
C) 33%.
D) 333%.
E) $7,000.

F) C) and D)
G) A) and E)

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Question 72

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

A) True
B) False

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Question 73

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Which of the following errors would cause the Balance Sheet columns of a work sheet to be out of balance?

Financial statements are typically prepared in the following order:

Discuss how accrual accounting enhances the usefulness of financial statements.

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?

Compute Darling Company's current ratio using the following information:

Under the alternative method for recording prepaid expenses, which is the correct set of journal entries?

Recording expenses early overstates current-period income; recording expenses late understates current period income.

A company's employees earn a total of $10,000 per week for a 5-day week that begins on Monday. December 31 of Year 1 is a Monday, and all 20 employees worked that day. a) Prepare the required adjusting journal entry to record accrued salaries on December 31, Year 1. b) Prepare the journal entry to record the payment of salaries on January 4, Year 2, assuming reversing entries were not made.

Which of the following accounts is a permanent (real) account?

Two main accounting principles used in accrual accounting are matching and full closure.

List the three-steps of the adjusting process.

Following are selected accounts and their balances for a company after the adjustments made on May 31, the end of its fiscal year. (All accounts have normal balances.) Prepare all the necessary closing entries for this company.

Journal entries recorded at the end of each accounting period to prepare the revenue, expense, and dividend accounts for the upcoming period and to update the retained earnings account for the events of the period just finished are referred to as:

Cash and office supplies are both classified as current assets.

The closing process is necessary in order to:

A partially completed work sheet is shown below. The unadjusted trial balance columns are complete. Complete the adjustments, adjusted trial balance, income statement, and balance sheet and statement of retained earnings columns.

The closing process resets ________, __________, and ________ account balances to zero at the end of each accounting period.

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?