Exam 3: Adjusting the Accounts

What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, € 20,500, and unexpired amounts per analysis of policies of € 4,000?

The adjusted trial balance of Allen's Automotive Service Company on June 30, 2014 includes the following accounts: Supplies, $300; Accumulated Depreciation, $8,500; Salaries and Wages Payable, $550, Note Payable $5,000; Service Revenue, $24,100; Salaries and Wages Expense, $12,750; Depreciation Expense, $2,250; Supplies Expense, $1,000; Rent Expense, $400; Utilities Expense, $350; and Interest Expense $250. Prepare an income statement for the month of June.

Angus Insurance Agency prepares monthly financial statements. Presented below is an income statement for the month of June that is correct on the basis of information considered. Additional Data: When the income statement was prepared, the company accountant neglected to take into consideration the following information: 1. A utility bill for €2,000 was received on the last day of the month for electric and gas service for the month of June. 2. A company insurance salesman sold a life insurance policy to a client for a premium of €20,000. The agency billed the client for the policy and is entitled to a commission of 20%. 3. Supplies on hand at the beginning of the month were €4,000. The agency purchased additional supplies during the month for €3,500 in cash and €1,200 of supplies were on hand at June 30. 4. The agency purchased a new car at the beginning of the month for €24,000 cash. The car will depreciate €6,000 per year. 5. Salaries owed to employees at the end of the month total €5,300. The salaries will be paid on July 5. Instructions Prepare a correct income statement.

Wild Animal Presentations initiated operations on July 1, 2014. To manage the company, officers and managers have requested monthly financial statements starting July 31, 2014. The adjusted trial balance amounts at July 31 are shown below. (a) Determine the net income for the month of July. (b) Determine the total assets and total liabilities at July 31, 2014 for Wild Animal Presentations. (c) Determine the amount that appears for Retained earnings at July 31, 2014.

Depreciation is a ______________ allocation process rather than a process of ______________.

Betty Carson, an accountant, has billed her clients for services performed. She subsequently receives payments from her clients. What entry will Betty make upon receipt of the payments?

Which of the following is false?

In developing an accounting information system, it is important to establish procedures whereby all transactions that affect the components of the accounting equation are recorded. Why then, is it often necessary to adjust the accounts before financial statements are prepared even in a properly designed accounting system? Identify the major types of adjustments that are frequently made and give a specific example of each.

Which of the following reflect the balances of prepayment accounts prior to adjustment?

The adjusted trial balance of the Neighborly Lane Paving Company includes the following statement of financial position accounts that frequently require adjustment. For each account, indicate (a) the type of adjusting entry (prepaid expenses, unearned revenues, accrued revenues, or accrued expenses) and (b) the related account in the adjusting entry.

The following is selected information from Alpha-Beta-Gamma Corporation for the fiscal year ending October 31, 2014. Based on the accrual basis of accounting, what is Alpha-Beta-Gamma Corporation's net income for the year ending October 31, 2014?

Determine the impact on the statement of financial position accounts if the following information is not used to adjust the accounts of Fortress Company for the month of January, 2014. Round answers to the nearest dollar. 1. The company rents extra office space to B & J, CPAs. B & J pays the $24,000 rent annually on January 1. 2. The company has an outstanding loan to its President in the amount of $120,000. The loan accrues interest at the annual rate of 6%. Principal and interest are due January 1, 2017. 3. The company completed work on a project during January that was not yet billed to the client. The client will be charged $2,500.

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

A document prepared to prove the equality of debits and credits after all adjustments have been prepared is the

When a company receives cash for future service, it debits unearned revenue on the income statement and credits cash on the statement of financial position.

Y-B-2 Inc. pays its rent of $60,000 annually on January 1. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following will be true?

Sherman Air Charter signed a four-month note payable in the amount of $12,000 on September 1. The note requires interest at an annual rate of 6%. The amount of interest to be accrued at the end of September is

Unearned revenue is reported on the income statement whereas deferred revenue is reported on the statement of financial position.

Match the items below by entering the appropriate code letter in the space provided.

Financial statements are prepared directly from the