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Exam 3: The Financial Reporting Process

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Question 81

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The post-closing trial balance is a list of all accounts and their balances at a particular date after the account balances have been updated for closing entries.

A) True
B) False

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Question 82

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Prepare adjusting journal entries,as needed,for the following items. (a)The Supplies account shows a balance of $500,but a count of supplies reveals only $200 on hand at year-end. (b)The company initially records the payments of all insurance premiums as prepaid insurance.The unadjusted trial balance at year-end shows a balance of $500 in Prepaid Insurance.A review of insurance policies reveals that $100 of insurance is unexpired. (c)Employees work Monday through Friday,and salaries of $2,500 per week are paid each Friday.The company's year-end falls on Tuesday. (d)At year-end,the company received a utility bill for December's electricity usage of $200 that will be paid in early January.

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Question 83

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Accrual-basis accounting involves recording revenues when earned and recording expenses with their related revenues.

Describe what is meant by unearned revenues and give two examples.

A company paid $900 to workers during May.Of this amount,$600 was for work performed in April,while the other $300 was for work performed during May.What would the impact of this transaction be during May on each of the following three items?

Pawn Shops Unlimited recorded the following four transactions during April.Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?

Of the following six accounts,which ones have temporary balances? (1) Service Revenue (2) Dividends (3) Salaries Expense (4) Common Stock (5) Retained Earnings (6) Cash

The adjusting entry for an accrued revenue always includes a debit to a liability account and a credit to a revenue account.

According to the matching principle,if costs associated with producing revenue in the current year are not paid in cash until the following year,the costs should be expensed in the current year.

A company performs $2,800 of services during the month and bills customers.The customers are expected to pay next month.Record the customer billing using (a)accrual-basis accounting and (b)cash-basis accounting.

Under cash-basis accounting,we record revenues at the time we receive cash and expenses at the time we pay cash.

A post-closing trial balance is a list of all accounts and their balances after we have updated account balances for adjusting entries.

After closing entries are prepared,the balance of Retained Earnings is updated to reflect the activity in the revenue,expense,and dividend accounts for the period.

Long-term liabilities are liabilities due in more than one year.

The closing entry for expense accounts includes a debit to Retained Earnings and a credit to all expense accounts.

Pawn Shops Unlimited recorded the following four transactions during April.Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?

The adjusting entry for an accrued expense always includes a debit to an expense account and a credit to a liability account.

Because adjusting entries allow the proper application of the revenue recognition principle or the matching principle,they are a necessary part of cash-basis accounting.