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Exam 3: Adjusting Accounts for Financial Statements

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Question 181

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Prepare general journal entries on December 31 to record the following unrelated year-end adjustments. a.Estimated depreciation on equipment for the year,$4,500. b.The Prepaid Insurance account has a $3,680 debit balance before adjustment.An examination of insurance policies shows $600 of insurance expired. c.The Prepaid Insurance account has a $2,400 debit balance before adjustment.An examination of insurance policies shows $950 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 $1,000 per month has not paid his rent for December.

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Question 182

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Which of the following accounts showing a balance on the post-closing trial balance indicate an error?

A) Office Equipment.
B) Accumulated Depreciation-Office Equipment.
C) Depreciation Expense-Office Equipment.
D) Retained earnings.
E) Salaries Payable.

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

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Question 183

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A work sheet contains all of the balances for each account and therefore may be used as a substitute for the set of financial statements.

All necessary amounts to prepare the balance sheet,including ending retained earnings,can be found in the Balance Sheet columns of the work sheet.

A company's month-end adjusting entry for Insurance Expense is $1,000.If this entry is not made then expenses are understated by $1,000 and net income is overstated by $1,000.

A company's Office Supplies account shows a beginning balance of $600 and an ending balance of $400.If office supplies expense for the year is $3,100,what amount of office supplies was purchased during the period?

Using the information given below,prepare an income statement and statement of retained earnings for Rapid Car Services from the adjusted trial balance.

A worksheet can be helpful in showing the effects of proposed or "what if" transactions but not in helping to prepare interim financial statements.

For the year ended December 31,a company had revenues of $187,000 and expenses of $109,000.$37,000 in dividends were paid during the year.Which of the following entries could not be a closing entry?

Using the information presented below,prepare a statement of retained earnings and balance sheet from the adjusted trial balance of Dodson Containers.

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

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

After posting the entries to close all revenue and expense accounts,Marker Company's Income Summary account has a credit balance of $6,000,and its Dividends account has a debit balance of $2,500.These balances indicate that net income for the current accounting period amounted to $3,500.

On November 1,Jasper 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:

An unclassified balance sheet provides more information to users than a classified balance sheet.

Closing entries are necessary so that retained earnings will begin each period with a zero balance.

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

The calendar year-end adjusted trial balance for Required: (a)Determine the amounts of current assets and current liabilities.(Note: A $9,000 installment on the long-term note payable is due within one year.) (b)Calculate the current ratio.Comment on the ability of Blessinger Co.to meets its short-term debts.

All of the following statements regarding a work sheet are true except:

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31.This oversight would: