Exam 3: Adjusting the Accounts

Consistent use of the same accounting principles and methods is necessary for meaningful analysis of trends within a company.

Betty Carson has performed $500 of accounting services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Betty make?

Wham Company accumulates the following adjustment data at December 31. 1. Revenue of $800 collected in advance has been earned. 2. Salaries of $600 are unpaid. 3. Prepaid rent totaling $450 has expired. 4. Supplies of $550 have been used. 5. Revenue earned but unbilled total $750. 6. Utility expenses of $400 are unpaid. 7. Interest of $150 has accrued on a note payable. Instructions (a) For each of the above items indicate: 1. The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense). 2. The account relationship (expense/asset, liability/revenue, etc.). 3. The status of account balances before adjustment (understatement or overstatement). 4. The adjusting entry. (b) Assume net income before the adjustments listed above was $12,500. What is the adjusted net income? Prepare your answer in the tabular form presented below.

The following ledger accounts are used by the Chicago Heights Dog Track: Instructions For each of the following transactions below, prepare the journal entry (if one is required) to record the initial transaction and then prepare the adjusting entry, if any, required on September 30, the end of the fiscal year. (a) On September 1, paid rent on the track facility for three months, $210,000. (b) On September 1, sold season tickets for admission to the racetrack. The racing season is year-round with 25 racing days each month. Season ticket sales totaled $840,000. (c) On September 1, borrowed $300,000 from First National Bank by issuing a 9% note payable due in three months. (d) On September 5, schedules for 20 racing days in September, 25 racing days in October, and 15 racing days in November were printed for $3,000. (e) The accountant for the concessions company reported that gross receipts for September were $160,000. Ten percent is due to the track and will be remitted by October 10.

The adjusted trial balance of C.S. Financial Planners appears below. Using the information from the adjusted trial balance, you are to prepare for the month ending December 31, 2014: 1. an income statement. 2. a retained earnings statement. 3. a statement of financial position.

The cash basis of accounting is not in accordance with IFRS.

If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be

Which one of the following is not a justification for adjusting entries?

A company usually determines the amount of supplies used during a period by

A company must make adjusting entries every time it prepares an income statement and a statement of financial position.

An adjusting entry

Comparability and consistency are qualitative characteristics that make accounting information useful for decision-making purposes. Briefly explain the difference between these two characteristics and explain how they are related to each other.

The going concern assumption is that the business will continue in operation long enough to carry out its existing objectives and commitments.

Under International Financial Reporting Standards (IFRS) the cash-basis of accounting requires companies to record transactions in the period in which the events occur.

Under accrual-basis accounting

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. Assuming all the games are played, the Unearned Ticket Revenue balance that will be reported on the December 31 statement of financial position will be

If a business has several types of Non-current assets such as equipment, buildings, and trucks,

As a result of the revenue recognition project by the FASB and IASB:

Depreciation expense for a period is an ______________ rather than a factual measurement of cost that has expired.

Ben Cartwright Pest Control has the following balances in selected accounts on December 31, 2014. All of the accounts have normal balances. The information below has been gathered at December 31, 2014. 1. Depreciation on the equipment for 2014 is €1,250. 2. Ben Cartwright Pest Control borrowed €20,000 by signing a 6%, one-year note on July 1, 2014. 3. Ben Cartwright Pest Control paid €3,000 for 12 months of insurance coverage on October 1, 2014. 4. Ben Cartwright Pest Control pays its employees total salaries of €10,000 every Monday for the preceding 5-day week (Monday-Friday). On Monday, December 27, 2014, employees were paid for the week ending December 24, 2014. All employees worked the five days ending December 31, 2014. 5. Ben Cartwright Pest Control performed disinfecting services for a client in December 2014. The client will be billed €3,000. 6. On December 1, 2014, Ben Cartwright Pest Control collected €36,000 for disinfecting processes to be performed from December 1, 2014, through May 31, 2015. 7. A count of supplies on December 31, 2014, indicates that supplies of €750 are on hand. Instructions Prepare in journal form with explanations, the adjusting entries for the seven items listed for Ben Cartwright Pest Control.