Question 1

Describe the adjusting entries,including the accounts used,for 1)prepaid expenses,2)depreciation and 3)unearned revenues.

Accepted Answer

1)Prepaid expenses are deferrals,or expe

Question 2

The current ratio is computed by dividing current liabilities by current assets.

Accepted Answer

A) True 
 B)False

Question 3

________ basis accounting means that revenues are recognized when cash is received and that expenses are recorded when cash is paid.________ basis accounting means that the financial effects of revenues and expenses are recorded when earned or incurred.

Accepted Answer

Cash; Accr

Question 4

On December 31,Jacoby Company's Prepaid Rent account had a balance before adjustment of $6,000.Three months' rent was paid in advance on December 1,the first day of the lease term.The adjusting entry needed on December 31 is:

Accepted Answer

A) Debit Prepaid Rent $6,000; credit Cash $6,000. 
B) Debit Rent Expense $2,000; credit Accounts Payable $2,000. 
C) Debit Rent Expense $2,000; credit Prepaid Rent $2,000. 
D) Debit Cash $2,000; credit Prepaid Rent $2,000. 
E) Debit Rent Expense $6,000; credit Accounts Payable $6,000. 
A) Debit Prepaid Rent $6,000; credit Cash $6,000. 
B) Debit Rent Expense $2,000; credit Accounts Payable $2,000. 
C) Debit Rent Expense $2,000; credit Prepaid Rent $2,000. 
D) Debit Cash $2,000; credit Prepaid Rent $2,000. 
E) Debit Rent Expense $6,000; credit Accounts Payable $6,000.

Question 5

Recording expenses early overstates current-period income; recording expenses late understates current period income.

Accepted Answer

A) True 
 B)False

Question 6

Adjusting entries always affect the cash account.

Accepted Answer

A) True 
 B)False

Question 7

On December 31,Carmack Company received a $215 utility bill for December that it will not pay until January 15.The adjusting entry needed on December 31 to accrue this expense is:

Accepted Answer

A) Debit Utilities Expense $215; credit Accounts Payable $215. 
B) Debit Accounts Payable $215; credit Utilities Expense $215. 
C) Debit Prepaid Utilities $215; credit Cash $215. 
D) Debit Utilities Expense $215; credit Prepaid Utilities $215. 
E) Debit Prepaid Utilities $215; credit Accounts Payable $215. 
A) Debit Utilities Expense $215; credit Accounts Payable $215. 
B) Debit Accounts Payable $215; credit Utilities Expense $215. 
C) Debit Prepaid Utilities $215; credit Cash $215. 
D) Debit Utilities Expense $215; credit Prepaid Utilities $215. 
E) Debit Prepaid Utilities $215; credit Accounts Payable $215.

Question 8

Companies experiencing seasonal variations in sales often choose a fiscal year corresponding to their ________ year.

Accepted Answer

The answer of Companies experiencing seasonal variations in sales often...

Question 9

Reversing entries:

Accepted Answer

A) Are necessary when journal entries have been incorrectly recorded. 
B) Are a required step in the accounting cycle. 
C) Will often result temporarily in abnormal account balances in some accounts. 
D) Are required only if the company uses accounting software to record journal entries. 
E) Must be made before preparing the post-closing trial balance. 
A) Are necessary when journal entries have been incorrectly recorded. 
B) Are a required step in the accounting cycle. 
C) Will often result temporarily in abnormal account balances in some accounts. 
D) Are required only if the company uses accounting software to record journal entries. 
E) Must be made before preparing the post-closing trial balance.

Question 10

The cash basis of accounting recognizes revenues when cash payments from customers are received.

Accepted Answer

A) True 
 B)False

Question 11

On a work sheet,if the Debit total exceeds the Credit total of the Income Statement columns,a net loss is indicated.

Accepted Answer

A) True 
 B)False

Question 12

How is profit margin calculated? Discuss its use in analyzing a company's performance.

Accepted Answer

Profit margin is calculated by dividing

Question 13

High Step Shoes,had annual revenues of $185,000,expenses of $103,700,and paid dividends of $18,000 during the current year.The retained earnings account before closing had a balance of $297,000.
-The ending retained earnings balance after closing is:

Accepted Answer

A) $185,000 
B) $63,300 
C) $81,300 
D) $360,300 
E) $378,300 
A) $185,000 
B) $63,300 
C) $81,300 
D) $360,300 
E) $378,300

Question 14

Describe the types of entries required in later periods that result from accruals.

Accepted Answer

Accrued revenues recorded in one period

Question 15

On April 1,Otisco,Inc.paid Garcia Publishing Company $1,548 for 36-month subscriptions to several different magazines.Otisco debited the prepayment to a Prepaid Subscriptions account,and the subscriptions started immediately.
-What is the amount of revenue that should be recorded by Garcia Publishing Company for the second year of the subscription assuming the company uses a calendar-year reporting period?

Accepted Answer

A) $0 
B) $516. 
C) $387. 
D) $129. 
E) $430. 
A) $0 
B) $516. 
C) $387. 
D) $129. 
E) $430.

Question 16

What is the purpose of a post-closing trial balance?

Accepted Answer

A post-closing trial balance is a list o

Question 17

On September 1,Kennedy Company loaned $100,000,at 12% annual interest,to a customer.Interest and principal will be collected when the loan matures one year from the issue date.Assuming adjustments are only made at year-end,what is the adjusting entry for accruing interest that Kennedy would need to make on December 31,the calendar year-end?

Accepted Answer

A) Debit Interest Expense,$12,000; credit Interest Payable,$12,000. 
B) Debit Interest Expense,$4,000; credit Interest Payable,$4,000. 
C) Debit Interest Receivable,$12,000; credit Cash,$12,000. 
D) Debit Interest Receivable,$4,000; credit Interest Revenue,$4,000. 
E) Debit Cash,$4,000; credit Interest Revenue,$4,000. 
A) Debit Interest Expense,$12,000; credit Interest Payable,$12,000. 
B) Debit Interest Expense,$4,000; credit Interest Payable,$4,000. 
C) Debit Interest Receivable,$12,000; credit Cash,$12,000. 
D) Debit Interest Receivable,$4,000; credit Interest Revenue,$4,000. 
E) Debit Cash,$4,000; credit Interest Revenue,$4,000.

Question 18

What is the proper adjusting entry at December 31,the end of the accounting period,if the balance in the prepaid insurance account is $7,750 before adjustment,and the unexpired amount per analysis of policies is $3,250?

Accepted Answer

A) Debit Insurance Expense,$3,250; credit Prepaid Insurance,$3,250. 
B) Debit Insurance Expense,$4,500; credit Prepaid Insurance,$4,500. 
C) Debit Prepaid Insurance,$4,500; credit Insurance Expense,$4,500. 
D) Debit Insurance Expense,$7,750; credit Prepaid Insurance,$7,750. 
E) Debit Cash,$7,750; Credit Prepaid Insurance,$7,750. 
A) Debit Insurance Expense,$3,250; credit Prepaid Insurance,$3,250. 
B) Debit Insurance Expense,$4,500; credit Prepaid Insurance,$4,500. 
C) Debit Prepaid Insurance,$4,500; credit Insurance Expense,$4,500. 
D) Debit Insurance Expense,$7,750; credit Prepaid Insurance,$7,750. 
E) Debit Cash,$7,750; Credit Prepaid Insurance,$7,750.

Question 19

Two accounting principles central to accrual accounting basis that are relied on in the adjusting process are:

Accepted Answer

A) Revenue recognition and monetary unit. 
B) Revenue recognition and going-concern. 
C) Expense recognition (matching)and cost. 
D) Expense recognition (matching)and business entity. 
E) Revenue recognition and Expense recognition (matching). 
A) Revenue recognition and monetary unit. 
B) Revenue recognition and going-concern. 
C) Expense recognition (matching)and cost. 
D) Expense recognition (matching)and business entity. 
E) Revenue recognition and Expense recognition (matching).

Question 20

Discuss the importance of periodic reporting and the time period assumption.

Accepted Answer

For information to be valuable to decisi

Exam 3: Adjusting Accounts for Financial Statements

Describe the adjusting entries,including the accounts used,for 1)prepaid expenses,2)depreciation and 3)unearned revenues.

The current ratio is computed by dividing current liabilities by current assets.

________ basis accounting means that revenues are recognized when cash is received and that expenses are recorded when cash is paid.________ basis accounting means that the financial effects of revenues and expenses are recorded when earned or incurred.

On December 31,Jacoby Company's Prepaid Rent account had a balance before adjustment of $6,000.Three months' rent was paid in advance on December 1,the first day of the lease term.The adjusting entry needed on December 31 is:

Recording expenses early overstates current-period income; recording expenses late understates current period income.

Adjusting entries always affect the cash account.

On December 31,Carmack Company received a $215 utility bill for December that it will not pay until January 15.The adjusting entry needed on December 31 to accrue this expense is:

Companies experiencing seasonal variations in sales often choose a fiscal year corresponding to their ________ year.

Reversing entries:

The cash basis of accounting recognizes revenues when cash payments from customers are received.

On a work sheet,if the Debit total exceeds the Credit total of the Income Statement columns,a net loss is indicated.

How is profit margin calculated? Discuss its use in analyzing a company's performance.

High Step Shoes,had annual revenues of $185,000,expenses of $103,700,and paid dividends of $18,000 during the current year.The retained earnings account before closing had a balance of $297,000. -The ending retained earnings balance after closing is:

Describe the types of entries required in later periods that result from accruals.

What is the purpose of a post-closing trial balance?

What is the proper adjusting entry at December 31,the end of the accounting period,if the balance in the prepaid insurance account is $7,750 before adjustment,and the unexpired amount per analysis of policies is $3,250?

Two accounting principles central to accrual accounting basis that are relied on in the adjusting process are:

Discuss the importance of periodic reporting and the time period assumption.

Accounting in Business

Accounting for Business Transactions

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

Filters

basis accounting means that revenues are recognized when cash is received and that expenses are recorded when cash is paid. basis accounting means that the financial effects of revenues and expenses are recorded when earned or incurred.