Exam 3: Adjusting the Accounts

The Aces, a semi-professional baseball team, prepare financial statements on a monthly basis. Their season begins in April, but in March the team engaged in the following transactions: (a) Paid $120,000 to Kansas City as advance rent for use of Kansas City Stadium for the six month period April 1 through September 30. (b) Collected $240,000 cash from sales of season tickets for the team's 20 home games. This amount was credited to Unearned Ticket Revenue. During the month of April, the Aces played four home games and five road games. Instructions Prepare the adjusting entries required at April 30 for the transactions above.

When a prepaid expense is initially debited to an expense account, expenses and assets are both overstated prior to adjustment.

Use the following information for questions Ling Company had the following transactions during 2013: • Sales of ¥18,000 on account • Collected ¥8,000 for services to be performed in 2014 • Paid ¥2,500 cash in salaries • Purchased airline tickets for ¥1,000 in December for a trip to take place in 2014 -What is Ling's 2013 net income using accrual accounting?

The revenue recognition principle dictates that revenue should be recognized in the accounting records

Southwestern City College sold season tickets for the 2014 football season for $300,000. A total of 8 games will be played during September, October and November. In September, two games were played. In October, three games were played. The balance in Unearned Ticket Revenue at October 31 is

For each of the following oversights, state whether total assets will be understated (U), overstated (O), or no affect (NA). ___1. Failure to record revenue earned but not yet received ___2. Failure to record expired prepaid rent. ___ 3. Failure to record accrued interest on the bank savings account ___ 4. Failure to record depreciation ___5. Failure to record accrued wages. ___6. Failure to recognize the earned portion of unearned revenues.

Accounting information should be verifiable in order to enhance

Wave Inn is a resort located in Canada. During December 2014 Spin Jammers held its annual conference at the resort. The charges related to the conference total $360,000, of which 25% has been paid by Spin Jammers. When Wave Inn makes the appropriate adjusting entry, which of the following is a part of the adjustment made to its December 31, 2014 statement of financial position?

An item is considered material if

The adjusted trial balance is prepared

Wave Inn is a resort located in Canada. Wave Inn collects cash when guests make a reservation. During December 2013, Wave Inn collected $75,000 of cash and recorded the receipt by recognizing unearned revenue. By the end of the month Wave Inn had earned one third of this amount, the other two thirds will be earned during January 2014. The adjusting entry required at December 31, 2013 would impact the statement of financial position by

Turner Company collected $13,000 in September of 2013 for 5 months of service which would take place from October of 2013 through February of 2014. The revenue reported from this transaction during 2013 would be

Accrued revenues are

Monthly and quarterly time periods are called

Depreciation is the process of

Wave Inn is a resort located in Canada. Wave Inn collects cash when guests make a reservation. During December 2013, Wave Inn collected $75,000 of cash and recorded the receipt by recognizing revenue. By the end of the month Wave Inn had earned one third of this amount, the other two thirds will be earned during January 2014. The adjusting entry required at December 31, 2013 would impact the statement of financial position by

The income statement is an important financial statement used by individuals who are interested in the operations of a business enterprise. Explain how the time period assumption and the revenue recognition and expense recognition principles provide guidance to accountants in preparing an income statement.

The fiscal year of a business is usually determined by

An adjusting entry requiring a credit to Insurance Expense indicates that the initial transaction was charged to an asset account.

The ______________ assumption divides the economic life of a business into artificial time periods.