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Exam 3: Adjusting Accounts for Financial Statements

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Question 51

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A post-closing trial balance includes:

A) All ledger accounts with balances,none of which can be temporary accounts.
B) All ledger accounts with balances,none of which can be permanent accounts.
C) All ledger accounts with balances,which include some temporary and some permanent accounts.
D) Only revenue and expense accounts.
E) Only asset accounts.

F) All of the above
G) C) and D)

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Question 52

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The cash basis of accounting is an accounting system in which revenues are reported when cash is received and expenses are reported when cash is paid.

A) True
B) False

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Question 53

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Below is Adventure Travel's adjusted trial balance as of the end of its annual accounting period: a.Prepare the necessary closing entries. b.Prepare a post-closing trial balance.

What are the types of adjusting entries used for prepaid expenses,depreciation,and unearned revenues?

The revenue recognition principle is the basis for making adjusting entries that pertain to unearned and accrued revenues.

Compute the missing amounts: (1) The Prepaid Insurance account had a $455 debit balance at the beginning of the current year; $650 of insurance premiums were paid during the year; and the year-end balance sheet showed $420 of prepaid insurance; consequently,the income statement for the year must have shown $______________ of insurance expense. (2) The Office Supplies account began the current year with a $235 debit balance; the income statement for the year showed $475 of office supplies expense; and the year-end balance sheet showed the current asset,office supplies,at $225; consequently,if all supplies were accounted for,$____________ of office supplies must have been purchased during the year.

The adjusted trial balance of E.Pace,Consultant,is entered on the partial work sheet below.Complete the work sheet using the following information: a.Salaries earned by employees that are Unpaid and unrecorded,$500. b.An inventory of supplies showed $800 of Unused supplies still on hand. c.Depreciation on equipment,$1,300.

On June 30,2014,Apricot Co.paid $5,000 cash for management services to be performed over a two-year period.Apricot follows a policy of recording all prepaid expenses in asset accounts at the time of cash payment. On June 30,2014 Apricot should record a:

Adjusting entries are made after the preparation of financial statements.

Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle whichever is longer.

The current ratio:

Profit margin can also be called return on sales.

Recording revenues before they are earned overstates current-period income; recording revenues in periods after they have been earned understates the recording period's income.

A landscaping project was completed during December and the accrued revenue of $15,000 was recorded in an adjusting entry dated December 31,2014.A check in this amount was received from the customer on January 20,2015.How would the company record this receipt of cash?

The alternative method of accounting for prepayments

The periodic expense created by allocating the cost of plant and equipment to the periods in which they are used,representing the expense of using the assets,is called:

Compute profit margin ratio given the following information. Cost of goods sold: $28,000 Net income: $21,400 Gross profit: $400,000

What is the purpose of closing entries? Describe the closing process.

A company issued financial statements for the year ended December 31 but failed to include the following adjusting entries: A.Accrued service fees earned of $2,200. B.Depreciation expense of $8,000. C.Portion of office supplies (an asset) used,$3,100. D.Accrued salaries of $5,200. E.Revenues of $7,200,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:

On December 31,the balance in the Prepaid Subscription account was $648.This is the remaining balance of a 12-month subscription purchased on September 30 in the current year.How much did this subscription originally cost?