Exam 3: Adjusting Accounts and Preparing Financial Statements

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.

__________ basis accounting means that revenues are recognized when cash is received and that expenses are recorded when cash is paid._____________ basis accounting means that the financial effects of revenues and expenses are recorded when earned or incurred.

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

Depreciation measures the decline in market value of an asset.

Accrued revenues at the end of one accounting period often result in cash _______________________ in the next period.

The _______________ depreciation method allocates equal amounts of an asset's cost to depreciation during its useful life.

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?

Net income for a period will be understated if accrued revenues are not recorded at the end of the accounting period.

Accrued revenues:

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

A company purchased new furniture at a cost of $16,000 on January 1.The furniture is estimated to have a useful life of 6 years and a $1,000 salvage value.The company uses the straight-line method of depreciation.What is the book value of the furniture on December 31 of the first year?

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 adjusted trial balance must be prepared before the adjusting entries are made.

A balance sheet that places the liabilities and equity to the right of the assets is a(n):

The difference between the cost of an asset and the accumulated depreciation for that asset is called

The adjusting entry to record an accrued expense is:

A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31.Which of the following statements is true?

Prior to recording adjusting entries,the Office Supplies account had a $359 debit balance.A physical count of the supplies showed $105 of unused supplies available.The required adjusting entry is:

Given the table below,indicate the impact of the following errors made during the adjusting entry process.Use a "+" followed by the amount for overstatements,a "-" followed by the amount for understatements,and a "0" for no effect.The first one is done as an example. Ex.Failed to recognize that $600 of unearned revenues,previously recorded as liabilities,had been earned by year-end. 1.Failed to accrue interest expense of $200. 2.Forgot to record $7,700 of depreciation on machinery. 3.Failed to accrue $1,300 of revenue earned but not collected.

A broad principle that requires identifying the activities of a business with specific time periods such as months,quarters,or years is the: