Exam 3: Adjusting the Accounts

You and the CEO of your company are waiting on an elevator. You are going to the 25^th floor and the CEO is going to the 35th The CEO says "What is the difference between consistency and comparability?" You have two minutes to respond. What will you say?

International Financial Reporting Standards (IFRS) include a revenue recognition principle that states that "let the revenues follow the expenses."

At December 31, 2014, before any year-end adjustments, Cable Car Company's Insurance Expense account had a balance of $1,450 and its Prepaid Insurance account had a balance of $3,800. It was determined that $3,200 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be

If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.

If unearned revenues are initially recorded in revenue accounts and have not all been earned at the end of the accounting period, then failure to make an adjusting entry will cause

Which of the following would not result in unearned revenue?

The ______________ principle gives accountants guidance as to when revenue is to be recorded.

Adjustments would not be necessary if financial statements were prepared to reflect net income from

For prepaid expense adjusting entries

Under International Financial Reporting Standards (IFRS) revenues occur when assets are used up or when liabilities are incurred to generate revenue.

What is Ling's 2013 net income using accrual accounting?

On January 1, 2013, P.T. Scope Company purchased a computer system for $4,860. The company expects to use the system for 3 years. The asset has no residual value. The book value of the system at December 31, 2014 is

If a company fails to make an adjusting entry to record supplies expense, then

Revenue received before it is earned and expenses paid before being used or consumed are both initially recorded as liabilities.

Scotsman Company prepares monthly financial statements. Below are listed some selected accounts and their balances in the September 30 trial balance before any adjustments have been made for the month of September. (Note: Debit column does not equal credit column because this is a partial listing of selected account balances) An analysis of the account balances by the company's accountant provided the following additional information: 1. A physical count of office supplies revealed ₤800 on hand on September 30. 2. A two-year life insurance policy was purchased on June 1 for ₤3,600. 3. Office equipment depreciated ₤3,000 per year. 4. The amount of rent received in advance that remains unearned at September 30 is ₤400. Instructions Using the above additional information, prepare the adjusting entries that should be made by Scotsman Company on September 30.

Identify the impact on the statement of financial position if the following information is not used to adjust the accounts. 1. Supplies consumed totaled ¥3,000. 2. Interest accrues on notes payable at the rate of ¥200 per month. 3. Insurance of ¥450 expired during the month. 4. Plant and equipment are depreciated at the rate of ¥1,200 per month.

Hercules Company purchased a computer for $4,500 on December 1. It is estimated that annual depreciation on the computer will be $900. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:

The preparation of adjusting entries is

If an adjusting entry is not made for an accrued expense,

Prepare the required end-of-period adjusting entries for each independent case listed below. Case 1 Moonbeam Company began the year with a $3,000 balance in the Supplies account. During the year, $8,500 worth of additional office supplies were purchased. A physical count of office supplies on hand at the end of the year revealed that $4,400 worth of office supplies had been used during the year. No adjusting entry has been made until year end. Case 2 Western Company has a calendar year-end accounting period. On July 1, the company purchased office equipment for $30,000. It is estimated that the office equipment will depreciate $500 each month. No adjusting entry has been made until year end. Case 3 Ranch Realty is in the business of renting several apartment buildings and prepares monthly financial statements. It has been determined that 3 tenants in $800 per month apartments and one tenant in the $1,000 per month apartment had not paid their August rent as of August 31st.