Exam 4: Review of the Accounting Cycle

Lucid Solutions Inc. has the following selected account balances from its unadjusted trial balance as of December 31, 2018, the company's year-end: • Prepaid Insurance: $75,000 • Prepaid Rent: $50,000 • Buildings: $3,600,000 • Wages Payable: $420,000 • Note Payable: $360,000 • Wage Expense: $1,120,000 • Insurance Expense: $120,000 • Interest Expense: $234,000 • Rent Expense: $260,000 At year-end, Lucid makes the necessary adjusting journal entries to properly record revenues and expenses for the year. The following information applies to the adjusting journal entries: a. The prepaid insurance balance relates to a two-year insurance policy purchased on June 1 that covers the period of 7/1/18-6/30/20. b. The prepaid rent balance relates to rent that was paid in January 2018 to cover the company's facilities for the year 2018. c. Wages for the last week of 2018 amount to $33,000 and will be paid after year-end and have not yet been recorded. d. Lucid purchased the buildings on January 1, 2018 and depreciates them on a yearly basis. It must record a full year of depreciation at the end of 2018. The buildings have no residual value, a 30-year estimated useful life, and will be depreciated on a straight-line basis. e. Lucid has not yet recorded accrued interest expense for 2018 on the note payable in the amount of $16,000. It will not be paid until 2019.

Which of the following accounts would be shown on the post-closing trial balance?

To close out the income summary ________.

Which of the following accounts has a normal debit balance?

Adjusting journal entries are made to ensure that all revenues and/or expenses are recognized in the period in which they are incurred.

Every adjusting journal entry will affect one balance sheet account and one income statement account.

Significant Technologies Corporation had the following transactions in the month of August. Record these transactions in proper form, including explanations. If an entry is not required, please write "No Entry." a. Significant Technologies received $100,000 cash in exchange for shares of Significant Technologies' common stock. b. Purchased store equipment for $11,000 cash c. Provided services for cash of $9,000. d. Provided services on credit for $20,000. e. Received bill and paid utilities of $5,000 f. Paid sales salaries of $8,000. Ignore withholding and related payroll taxes. g. Incurred legal fees of $6,000 to be paid later. h. Declared and paid dividends to stockholders of $2,000. i. Collected $15,000 for services to be provided over the coming year but has not yet provided those services j. Paid $12,000 for a three-year insurance policy with coverage starting on September 1. k. Paid $1,000 for rental of some servers which will be returned to the leasing company on August 30th. l. Collected $10,000 from the transaction described in part d. m. Paid $6,000 of the amount owed for legal fees incurred in the transaction described in part g.

The final step in the accounting cycle is the preparation of a post-closing trial balance.

Arnold Company provided services to its customers on credit for $25,000. This transaction ________.

Which of the following is an adjusting entry?

If a company initially records a deferred revenue as a liability, an adjusting entry must be made at the end of the period to increase the liability account.

List and define the elements of the accounting equation. Element Definition Assets Liabilities Shareholders' Equity Revenues Expenses Gains Losses Distributions to Owners Investments by Owners

Temporary accounts carry a balance from period to period.

Amazing Grapes wine store paid utilities and recorded the economic event in the general journal. When posting the related journal entries to the ledger, an impacted account or accounts would include ________.

The account number associated with an account in the general ledger refers to ________.

Bay Meadows Real Estate collected rentals of $600,000 during the year. The beginning balance in its rent receivable account was $60,000 and its ending balance was $40,000. What was total rent revenue for the year?

On November 1, Fisher and Sons Music Center loaned a customer $17,000 at a 2% annual interest rate for six months. What is the interest receivable on the note at December 31? (Do not round intermediary calculations. Only round your final answer to the nearest dollar.)

All of the following accounts have a normal debit balance except ________.

Which of the following recording errors will be revealed by the unadjusted trial balance?

If a company fails to adjust a deferred revenue recorded as a liability, revenues will be overstated on the income statement.