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Exam 3: Adjusting Accounts and Preparing Financial Statements

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Question 41

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Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

A) True
B) False

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Question 42

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

A) Items that require contra accounts.
B) Items that require adjusting entries.
C) Asset and equity.
D) Asset accounts.
E) Income statement accounts.

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

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Question 43

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If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show:

On May 1, Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30 of the following year. The Cash receipt was recorded as unearned fees and at year-end on December 31, $1,000 of the fees had been earned. The adjusting entry on December 31 would include:

On April 1, 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?

Alex 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:

Using the information presented below, prepare a statement of changes in equity and balance sheet from the adjusted trial balance of Hanson Storage. Ms. Hanson's capital account balance of $40,340 consists of a $30,340 beginning-year balance plus a $10,000 investment during the current year. HANSON STORAGE Statement of Changes in Equity For Year Ended December 31

______________________ are required at the end of the accounting period because certain internal transactions and events remain unrecorded.

Interim statements report a company's business activities for a one-year period.

Which of the following does not require an adjusting entry at year-end?

Based on the unadjusted trial balance for Bella's Beauty Salon and the adjusting information given below, prepare the adjusting journal entries for Bella's Beauty Salon. After completing the adjusting entries, prepare the trial balance for Bella's Beauty Salon. Bella Beauty Salon's unadjusted trial balance for the current year follows: Additional information: a. An insurance policy examination showed $1,240 of expired insurance. b. An inventory count showed $210 of unused shop supplies still available. c. Depreciation expense on shop equipment, $350. d. Depreciation expense on the building, $2,220. e. A beautician is behind on space rental payments, and this $200 of accrued revenues was unrecorded at the time the trial balance was prepared. f. $800 of the Unearned Rent account balance was earned by year-end. g. The one employee, a receptionist, works a five-day workweek at $50 per day. The employee was paid last week but has worked four days this week for which she has not been paid. h. Three months' property taxes, totaling $450, have accrued. This additional amount of property taxes expense has not been recorded. i. One month's interest on the note payable, $600, has accrued but is unrecorded. Use the above information to prepare the adjusted trial balance for Bella's Beauty Salon.

Match the following types of adjustments (a though d) with the transactions (1 through 4).

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 on entry on December 31 will include a debit to Salaries Expense and a credit to Cash.

A _____________ account is an account linked with another account, having an opposite normal balance, and reported as a subtraction from that other account's balance.

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

From the information provided, calculate Wooden's profit margin ratio for each of the three years. Comment on the results, assuming that the industry average for the profit margin ratio is 6% for each of the three years.

__________________________ is the process of allocating the cost of to their expected useful lives.

On October 1, Haslip Company rented warehouse space to a tenant for $2,500 per month. The tenant paid five months' rent in advance on that date. The payment was recorded to the Unearned Rent account. The company's annual accounting period ends on December 31. The adjusting entry needed on December 31 is:

Profit margin is calculated by dividing net sales by net income.

Adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account.