Exam 2: A Review of the Accounting Cycle

Adjusting entries normally involve

Thompson Company sublet a portion of its office space for ten years at an annual rental of $36,000, beginning on May 1. The tenant is required to pay one year's rent in advance, which Thompson recorded as a credit to Rental Income. Thompson reports on a calendar-year basis. The adjustment on December 31 of the first year should be

At the beginning of the fiscal year, office supplies inventory amounted to $600. During the year, office supplies amounting to $8,800 were purchased. This amount was debited to office supplies expense. An inventory of office supplies at the end of the fiscal year showed $400 of supplies remaining. The beginning of the year balance is still reflected in the office supplies inventory account. What is the required amount of the adjustment to the office supplies expense account?

On June 30, a company paid $3,600 for insurance premiums for the current year and debited the amount to Prepaid Insurance. At December 31, the bookkeeper forgot to record the amount expired. The omission has the following effect on the financial statements prepared December 31:

An accrued expense can be described as an amount

Failure to record depreciation expense at the end of an accounting period results in

Which of the following is true?

The following balances have been excerpted from Edwards' balance sheets: Edwards Company paid or collected during 2011 the following items: The insurance expense on the income statement for 2011 was

Which of the following criteria must be met before an event should be recorded for accounting purposes?

On March 1, 2010, Forest Co. borrowed cash and signed a 36-month, interest-bearing note on which both the principal and interest are payable on February 28, 2013. At December 31, 2013, the liability for accrued interest should be

Caddis Co. had these unadjusted account balances on December 31, 2011: Assuming that the ending inventory is $88,400, prepare the entry to adjust the inventory accounts.

The following information is available for the Central Company: Determine the amount of cash flow associated with each of the following items:

For each of the journal entries below, write a description of the underlying event. Assume that for prepaid expenses original debits are made to an expense account.

Teller Inc. reported an allowance for doubtful accounts of $30,000 (credit) at December 31, 2011, before performing an aging of accounts receivable. As a result of the aging, Teller Inc. determined that an estimated $52,000 of the December 31, 2011, accounts receivable would prove uncollectible. The adjusting entry required at December 31, 2011, would be

Ryan Company purchased a machine on July 1, 2011. The machine cost $250,000 and has a salvage value of $10,000 and a useful life of eight years. The adjusting entry for the year ending December 31, 2012, would include a debit to Depreciation Expense of

Chips-n-Bits Company sells service contracts for personal computers. The service contracts are for a one-year, two-year, or three-year period. All sales are for cash and all receipts are credited to Unearned Service Contract Revenues. This account had a balance of $144,000 at December 31, 2010, before year-end adjustment. Service contract costs are charged as incurred to the Service Contract Expense account, which had a balance of $36,000 at December 31, 2010. Service contracts still outstanding at December 31, 2010, expire as follows: What amount should be reported as unearned service contract revenues in Chips-n-Bits December 31, 2010, balance sheet?

Kite Company paid $24,900 in insurance premiums during 2011. Kite showed $3,600 in prepaid insurance on its December 31, 2011, balance sheet and $4,500 on December 31, 2010. The insurance expense on the income statement for 2011 was

The following is a summary of the increases in the account categories of the balance sheet of Riley Company for the most recent fiscal year: The only change to retained earnings during the fiscal year was for $20,000 of dividends. What was the company's net income for the fiscal year?

On August 1 of the current year, Kyle Company borrowed $278,000 from the local bank. The loan was for 12 months at 9 percent interest payable at the maturity date. The adjusting entry at the end of the fiscal year relating to this obligation would include a

Winston Company sells magazine subscriptions for one- to three-year subscription periods. Cash receipts from subscribers are credited to Magazine Subscriptions Collected in Advance, and this account had a balance of $9,600,000 at December 31, 2011, before year-end adjustment. Outstanding subscriptions at December 31, 2011, expire as follows: In its December 31, 2011, balance sheet, what amount should Winston report as the balance for magazine subscriptions collected in advance?