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Exam 3: Adjusting Accounts and Preparing Financial Statements

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Question 21

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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?

A) Debit Insurance Expense,$3,250;credit Prepaid Insurance,$3,250.
B) Debit Insurance Expense,$4,500;credit Prepaid Insurance,$4,500.
C) Debit Prepaid Insurance,$4,500;credit Insurance Expense,$4,500.
D) Debit Insurance Expense,$7,750;credit Prepaid Insurance,$7,750.
E) Debit Cash,$7,750;Credit Prepaid Insurance,$7,750.

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

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Question 22

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Sanborn Company has 10 employees,who earn a total of $1,800 in salaries each working day.They are paid on Monday for the five-day workweek ending on the previous Friday.Assume that year ended December 31,is a Wednesday and all employees will be paid salaries for five full days on the following Monday.The adjusting entry needed on December 31 is:

A) Debit Salaries Expense,$5,400;credit Salaries Payable,$5,400.
B) Debit Salaries Expense,$3,600;credit Salaries Payable,$3,600.
C) Debit Salaries Expense,$9,000;credit Salaries Payable,$9,000.
D) Debit Salaries Payable,$5,400;credit Salaries Expense,$5,400.
E) Debit Salaries Expense,$5,400;credit Cash,$5,400.

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

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Question 23

Multiple Choice

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Assuming prepaid expenses are originally recorded in balance sheet accounts,the adjusting entry to record use of a prepaid expense is:

Financial statements are typically prepared in the following order:

Adjusting entries:

_____________ expenses are those costs that are incurred in a period but are both unpaid and unrecorded.

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 December 1,Casualty Insurance Company borrowed $50,000 at a 6.0% interest rate from One Mutual Bank.The note payable plus interest will not be paid until April 1 of the following year.The company's annual accounting period ends on December 31.The adjusting entry needed on December 31 is:

If accrued salaries were recorded on December 31 with a debit to Salaries Expense and a credit to Salaries Payable,the entry to record payment of these wages on the following January 5 would include:

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 adjusting entry includes a $4,000 debit to unearned revenue.

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:

Which of the following assets is not depreciated?

______________ revenues are liabilities requiring delivery of products and for services.

On July 1of the current calendar year,Plum Co.paid $7,500 cash for management services to be performed over a two-year period.Plum follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment.The adjusting entry on December 31 of the current year for Plum would include:

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.

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

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:

The unadjusted trial balance and the adjustment data for Porter Business Institute are shown below along with adjusting entry information.What is the impact of the adjusting entries on the balance sheet? Show the calculation for total assets,total liabilities,and owner's equity without the adjustments;show the calculation for total assets,total liabilities,and owner's equity with the adjustments.Which one provides the most accurate presentation of the balance sheet? Additional information items: a.The Prepaid Insurance account consists of a payment for a 1 year policy.An analysis of the insurance invoice indicates that one half of the policy has expired by the end of the December 31 year-end. b.A cash payment for space sublet for 8 months was received on July 1 and was credited to Unearned Rent. c.Accrued interest expense on the note payable of $1,000 has been incurred but not paid.

On November 1,Jovel Company loaned another company $100,000 at a 6.0% interest rate.The note receivable plus interest will not be collected until March 1 of the following year.The company's annual accounting period ends on December 31.The amount of interest revenue that should be reported in the first year is:

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