Exam 3: Adjusting the Accounts

A company shows a balance in Salaries and Wages Payable of $38,000 at the end of the month. The next payroll amounting to $48,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries? a. Salaries and Wages Expense 48,000 Salaries and Wages Payable 48,000 b. Salaries and Wages Expense 48,000 Cash 48,000 c. Salaries and Wages Expense 10,000 Cash 10,000 d. Salaries and Wages Expense 10,000 Salaries and Wages Payable 38,000 Cash 48,000

Every adjusting entry affects one balance sheet account and one income statement account.

In a service-type business, revenue is considered recognized

Indicate (a) the type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense), and (b) the accounts before adjustment (overstated or understated) for each of the following: 1. Supplies of $200 have been used. 2. Salaries of $600 are unpaid. 3. Rent received in advance totaling $300 has been earned. 4. Services provided but not recorded total $500.

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

Which of the following statements related to the adjusted trial balance is incorrect?

REM Real Estate received a check for $27,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $27,000. Financial statements will be prepared on July 31. REM Real Estate should make the following adjusting entry on July 31:

Match the statements below with the appropriate terms by entering the appropriate letter code in the spaces provided. TERMS: A. Prepaid Expenses B. Unearned Revenues C. Accrued Revenues D. Accrued Expenses STATEMENTS: 1. A revenue not yet recognized; collected in advance. 2. Office supplies on hand that will be used in the next period. 3. Interest revenue collected; not yet recognized. 4. Rent not yet collected; already recognized. 5. An expense incurred; not yet paid or recorded. 6. A revenue recognized; not yet collected or recorded. 7. An expense not yet incurred; paid in advance. 8. Interest expense incurred; not yet paid.

A new accountant working for Spirit Walker Company records $900 Depreciation Expense on store equipment as follows: Depreciation Expense 900 Cash 900 The effect of this entry is to

The balance in the supplies account on June 1 was $5,200, supplies purchased during June were $3,500, and the supplies on hand at June 30 were $3,000. The amount to be used for the appropriate adjusting entry is

A company's calendar year and fiscal year are always the same.

Lake of Fire Company purchased supplies costing $7,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of supplies revealed $1,900 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be

Double Nickels Company purchased equipment for $9,000 on January 1, 2018. The company expects to use the equipment for 3 years. It has no salvage value. Monthly depreciation expense on the asset is

An adjusting entry always involves two balance sheet accounts.

The time period assumption is often referred to as the expense recognition principle.

Stone Roses Candies paid employee wages on and through Friday, January 26, and the next payroll will be paid in February. There are three more working days in January (29-31). Employees work 5 days a week and the company pays $1,500 a day in wages. What will be the adjusting entry to accrue wages expense at the end of January? a. Salaries and Wages Expense 1,500 Salaries and Wages Payable 1,500 b. Salaries and Wages Expense 7,500 Salaries and Wages Payable 7,500 c. Salaries and Wages Expense 4,500 Salaries and Wages Payable 4,500 d. No adjusting entry is required.

A flower shop makes a large sale for $1,200 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,200 considered to be recognized?

Soundgarden Company collected $18,200 in May of 2018 for 5 months of service which would take place from October of 2018 through February of 2019. The revenue reported from this transaction during 2018 would be

Can financial statements be prepared directly from the adjusted trial balance?

The White Stripes Animal Encounters operates a drive through tourist attraction. The company adjusts its accounts at the end of each month. The selected accounts appearing below reflect balances after adjusting entries were prepared on April 30. The adjusted trial balance shows the following: Prepaid Rent \ 16,000 Buildings 30,000 Accumulated Depreciation-Buildings 6,600 Unearned Ticket Revenue 600 Other data: 1. Three months' rent had been prepaid on April 1. 2. The buildings are being depreciated at $7,200 per year. 3. The unearned ticket revenue represents tickets sold for future visits. The tickets were sold at $5.00 each on April 1. During April, thirty of the tickets were used by customers. Instructions (a) Calculate the following: 1. Monthly rent expense. 2. The age of the buildings in months. 3. The number of tickets sold on April 1. (b) Prepare the adjusting entries that were made by the White Stripes Animal Encounters on April 30.