Exam 3: Adjusting Accounts for Financial Statements

________ refer to costs incurred in a period that are both unpaid and unrecorded.________ refer to revenues earned in a period that are both unrecorded and not yet received in cash (or other assets).

Revenue and expense accounts are permanent (real)accounts and should not be closed at the end of the accounting period.

Current liabilities are cash and other resources that are expected to be sold,collected or used within one year or the company's operating cycle whichever is longer.

The time period assumption assumes that an organization's activities may be divided into specific reporting time periods including all of the following except:

A post-closing trial balance is a list of permanent accounts and their balances from the ledger after all closing entries are journalized and posted.

The unadjusted trial balance and the adjustment data for Porter Business Institute are given below along with adjusting entry information.What is the impact on net income if these adjustments are not recorded? Show the calculation for net income without the adjustments and net income with the adjustments.Which one gives the most accurate net income? Which accounting principles are being violated if the adjustments are not made? Additional information items: a.The Prepaid Insurance account consists of a payment for a 1 year policy.An analysis of the insurance invoice indicates that one half of the policy has expired by the end of the December 31 year-end. b.A cash payment for space sublet for 8 months was received on July 1 and was credited to Unearned Rent. c.Accrued interest expense on the note payable of $1,000 has been incurred but not paid.

A company purchased new furniture at a cost of $16,000 on January 1.The furniture is estimated to have a useful life of 6 years and a $1,000 salvage value.The company uses the straight-line method of depreciation.What is the book value of the furniture on December 31 of the first year?

If a company plans to continue business into the future,closing entries are not required.

Werner Company had $1,300 of store supplies at the beginning of the current year.During this year,Werner purchased $6,250 worth of store supplies.On December 31,$1,125 worth of store supplies remained.Calculate the amount of Werner Company's store supplies expense for the current year.

On a work sheet,the adjusted balances of revenues and expenses are sorted to the Income Statement columns of the work sheet.

Flagg records adjusting entries at its December 31 year end.At December 31,employees had earned $12,000 of unpaid and unrecorded salaries.The next payday is January 3,at which time $30,000 will be paid. -Prepare the January 1 journal entry to reverse the effect of the December 31 salary expense accrual.

How is a classified balance sheet different from an unclassified balance sheet? List the usual order of the categories on a classified balance sheet.

Accrued revenues at the end of one accounting period often result in cash ________ in the next period.

________ are required at the end of the accounting period because certain internal transactions and events remain unrecorded.

Which of the following errors would cause the Balance Sheet and Statement of Retained Earnings columns of a work sheet to be out of balance?

Farmers' net income was $740,000 and its net sales were $8,000,000.Calculate its profit margin ratio.

The work sheet is a required report made available to external decision makers.

Revenue and expense balances are transferred from the adjusted trial balance to the income statement.

Income Summary is a temporary account only used for the closing process.

An account linked with another account that has an opposite normal balance and is subtracted from the balance of the related account is a(n):