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Exam 3: Adjusting Accounts and Preparing Financial Statements

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Question 101

True/False

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Plant assets and intangible assets are usually long-term assets that are used to produce or sell products and services.

A) True
B) False

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Question 102

Multiple Choice

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A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year?

A) $75
B) $125
C) $175
D) $250
E) $325

F) B) and C)
G) A) and B)

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Question 103

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The following unadjusted and adjusted trial balances were taken from the current year's accounting system for High Point, Inc. In general journal form, present the six adjusting entries that explain the changes in the account balances from the unadjusted to the adjusted trial balance.

A trial balance prepared after the closing entries have been journalized and posted is the:

The Unadjusted Trial Balance columns of a work sheet total $84,000. The Adjustments columns contain entries for the following: Office supplies used during the period, $1,200. Expiration of prepaid rent, $700. Accrued salaries expense, $500. Depreciation expense, $800. Accrued service fees receivable, $400. The Adjusted Trial Balance columns total is:

A trial balance prepared after adjustments have been recorded is called a(n) :

Financial statements are typically prepared in the following order:

An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account is a(n) :

Prepaid expenses, depreciation, accrued expenses, unearned revenues and accrued revenues are all examples of:

A company purchased a new truck at a cost of $42,000 on July 1, 2011. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. How much depreciation expense will be recorded for the truck for the year ended December 31, 2011?

On April 1, 2011, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31, 2011?

Discuss the importance of periodic reporting and the time period principle.

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

When preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column. The Balance Sheet columns will balance on completing the work sheet but with the wrong net income, if the amount sorted in error is:

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the:

Prepare general journal entries on December 31 to record the following unrelated year-end adjustments. a. Estimated depreciation on office equipment for the year, $4,000 b. The Prepaid Insurance account has a $3,680 debit balance before adjustment. An examination of insurance policies shows $950 of insurance expired c. The Prepaid Insurance account has a $2,400 debit balance before adjustment. An examination of insurance policies shows $600 of unexpired insurance d. The company has three office employees who each earn $100 per day for a five-day workweek that ends on Friday. The employees were paid on Friday, December 26 and have worked full days on Monday, Tuesday and Wednesday, December 29, 30 and 31 e. On November 1, the company received 6 months' rent in advance from a tenant whose rent is $700 per month. The $4,200 was credited to the Unearned Rent account f. The company collects rent monthly from its tenants. One tenant whose rent is $750 per month has not paid his rent for December

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

A current ratio of 2:1 suggests that a company has ____________ current assets to cover current liabilities.

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 Income Summary account is closed to the retained earnings account.