Exam 3: Adjusting Accounts and Preparing Financial Statements

On December 31,the year end,a company forgot to record $7,000 of depreciation on office equipment.In the current year financial statements,what is the effect of this error on assets,net income,and equity?

(Essay)

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Question 161

Prior to recording adjusting entries at the end of an accounting period,some accounts may not show proper financial statement amounts even though all transactions were correctly recorded.

(True/False)

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Question 162

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

(Essay)

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Question 163

Since the revenue recognition principle requires that revenues be recorded when earned,there are no unearned revenues in accrual accounting.

(True/False)

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Question 164

Adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account.

(True/False)

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Question 165

A trial balance prepared after adjustments have been recorded is called a(n):

(Multiple Choice)

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Question 166

Match the following terms the appropriate definition.

The accounting system that recognizes revenues when earned and expenses when incurred.

Prepaid expenses

The accounting system where revenues are recognized when cash is received and expenses are recorded when cash is paid.

Accrued revenues

A principle that assumes that an organization's activities can be divided into specific time periods such as months, quarters, or years.

Straight-line depreciation

Correct Answer:

Verified

The accounting system that recognizes revenues when earned and expenses when incurred.

The accounting system where revenues are recognized when cash is received and expenses are recorded when cash is paid.

A principle that assumes that an organization's activities can be divided into specific time periods such as months, quarters, or years.

Revenues earned in a period that are both unrecorded and not yet received in cash or other assets.

Items paid for in advance of receiving their benefits.

Net income divided by net sales.

The principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses.

Allocates equal amounts of an asset's cost (less any salvage value) to depreciation expense during its useful life.

The expense created by allocating the cost of plant and equipment to the periods in which they are used.

(Matching)

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Question 167

Reed's net income was $180,000; its total assets were $1,050,000; and its net sales were $3,500,000.Calculate the company's profit margin ratio.

(Essay)

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Question 168

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

(True/False)

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Question 169

All plant assets,including land,eventually wear out or decline in usefulness.

(True/False)

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Question 170

Profit margin reflects the percent of profit in each dollar of revenue.

(True/False)

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Question 171

Accrued revenues at the end of one accounting period are expected to result in cash payments in a future period.

(True/False)

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Question 172

Which of the following statements related to U.S.GAAP and IFRS is incorrect:

(Multiple Choice)

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Question 173

The unadjusted trial balance and the adjustment data for Harris Training Institute are given below along with adjusting entry information.If these adjustments are not recorded,what is the impact on net income? Show calculation for net income without the adjustments and net income with the adjustments.Which one gives the most accurate net income? What 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.

(Essay)

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Question 174

Using the information given below,prepare an income statement and owner's equity statement for Martin Sky Taxi Services from the adjusted trial balance.Helena Martin did not make any additional investments in the company during the year.

(Essay)

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Question 175

The accrual basis of accounting requires adjustments to recognize revenues in the periods they are earned and to match expenses with revenues.

(True/False)

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Question 176

What are the types of adjusting entries used for prepaid expenses,depreciation and unearned revenues?

(Essay)

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Question 177

Discuss how accrual accounting enhances the usefulness of financial statements.

(Essay)

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Question 178

What is the usual order in which financial statements are prepared from the adjusted trial balance? Why are they prepared in that order?

(Essay)

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Question 179

Profit margin is calculated by dividing net sales by net income.

(True/False)

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Question 180

Showing 161 - 180 of 213

Exam 3: Adjusting Accounts and Preparing Financial Statements

On December 31,the year end,a company forgot to record $7,000 of depreciation on office equipment.In the current year financial statements,what is the effect of this error on assets,net income,and equity?

Prior to recording adjusting entries at the end of an accounting period,some accounts may not show proper financial statement amounts even though all transactions were correctly recorded.

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

Since the revenue recognition principle requires that revenues be recorded when earned,there are no unearned revenues in accrual accounting.

Adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account.

A trial balance prepared after adjustments have been recorded is called a(n):

Reed's net income was $180,000; its total assets were $1,050,000; and its net sales were $3,500,000.Calculate the company's profit margin ratio.

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

All plant assets,including land,eventually wear out or decline in usefulness.

Profit margin reflects the percent of profit in each dollar of revenue.

Accrued revenues at the end of one accounting period are expected to result in cash payments in a future period.

Which of the following statements related to U.S.GAAP and IFRS is incorrect:

Using the information given below,prepare an income statement and owner's equity statement for Martin Sky Taxi Services from the adjusted trial balance.Helena Martin did not make any additional investments in the company during the year.

The accrual basis of accounting requires adjustments to recognize revenues in the periods they are earned and to match expenses with revenues.

What are the types of adjusting entries used for prepaid expenses,depreciation and unearned revenues?

Discuss how accrual accounting enhances the usefulness of financial statements.

What is the usual order in which financial statements are prepared from the adjusted trial balance? Why are they prepared in that order?

Profit margin is calculated by dividing net sales by net income.

Accounting in Business

Analyzing and Recording Transactions

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

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