Exam 3: The Adjusting Process

Prepare adjusting entries for the following transactions: a) The beginning balance of the supplies account was $245. During the month the company bought additional supplies in the amount of $735. At the end of the month a physical inventory showed $343 of unused supplies. b) The company has a 12% note payable in the amount of $17,000 due in 6 months. The interest expense for the month has not been recorded. c) The company has two employees. The manager is paid on the 15th of every month for work performed during the first half of the month and on the 1st of the following month for the work performed during the second half of the month. His monthly salary is $5,500. The other employee is paid $650 for each 5-day work week Monday - Friday). The last day of the month fell on Thursday. d) The unearned revenue account shows a balance of $46,000. According to the manager 60% of that amount has been earned. e) At the end of the month $5,700 of services had been performed but not yet billed.

The term used to describe an expense that has not been paid and has not yet been recognized in the accounts by a routine entry is

Adjusting entries affect balance sheet accounts at the exclusion of income statement accounts.

Identify the effect a-h) that omitting each of the following items would have on the balance sheet. -A tenant paid 6 months' rent in advance when he moved in on the first day of the month. No entry was made on the last day of the month.

Prepare the December 31 adjusting entries for the following transactions. Omit explanations. 1. Fees accrued but not billed, $6,300 2. The Supplies account balance on December 31, $4,750; Supplies on hand, $960 3. Wages accrued but not paid, $2,700 4. Depreciation of office equipment, $1,650 5. Rent expired during year, $10,800

Accumulated depreciation is reported on the income statement.

Depreciation Expense is reported on the balance sheet as an addition to the related asset.

The supplies account has a balance of $4,400 at the beginning of the year and was debited during the year for $2,400, representing the total of supplies purchased during the year. If $400 of supplies are on hand at the end of the year, the supplies expense to be reported on the income statement for the year is

When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net income.

Deferrals are recorded transactions that delay the recognition of an expense or revenue.

The cash basis of accounting records revenues and expenses when the cash is exchanged while the accrual basis of accounting

The entry to adjust the accounts for salaries accrued at the end of the accounting period is

A business pays biweekly salaries of $20,000 every other Friday for a ten-day period ending on that day. The last payday of December is Friday, December 27. Assume the next pay period begins on Monday, December 30 and the proper adjusting entry is journalized at the end of the fiscal period December 31). Journalize the entry for the payment of the payroll on Friday, January 10. Date Description Post. Ref. Debit Credit

At the end of April, the first month of the year, the usual adjusting entry transferring rent earned to a revenue account from the unearned rent account was omitted. Indicate which items will be incorrectly stated, because of the error, on a) the income statement for April and b) the balance sheet as of April 30. Also indicate whether the items in error will be overstated or understated.

Vertical analysis compares each item in a financial statement with a total amount from the same statement.

REM Consulting is completing the accounting information processing at the end of the fiscal year, December 31. The following trial balances are available. ​ ​ a) Reconstruct the adjusting entries and give a brief explanation of each. b) What is the amount of net income?

Which of the following is considered to be an accrued expense?

The adjustment for accrued fees was debited to Accounts Payable instead of Accounts Receivable. This error will be detected when the adjusted trial balance is prepared.

Two income statements for Midnight Enterprises are shown below: a) Prepare a vertical analysis of Midnight Enterprises' income statements. b) Does the vertical analysis indicate a favorable or unfavorable trend?

Buster Industries pays weekly salaries of $30,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is