Exam 3: Accruals and Deferrals: Timing Is Everything in Accounting

The profit margin on sales ratio equals net income divided by net sales.

On October 1,2009 CW Oil Drilling Company paid $2,400,000 for a two-year insurance policy that covers all of its drilling equipment around the world.The company recorded the purchase as prepaid insurance.Complete the chart below:

On May 1,2009 Canseco Oil Drilling Company paid $4,500,000 for a 3-year insurance policy that covers all of its drilling equipment around the world.The company recorded the purchase as prepaid insurance.Complete the chart below:

Delphi Desk,Inc.has the following unadjusted balances at December 31,2011: Part A: In the worksheet below,record the effect of these five adjustments on the accounting equation for the year ended December 31,2011.Show the correct dollar amounts,and write in the titles of the accounts affected. 1.$1,000 of the prepaid insurance has now expired 2.$3,200 of the rental income has not yet been earned. 3.The company must accrue $1,250 of salaries expense. 4.The company received a $300 bill for merchandise received in late December but not yet recorded. 5.The company has earned $300 of interest income,not yet received or recorded. Part B: Fill in the adjusted balances as of December 31,2011.Some of the accounts that have been adjusted are not included in this table.

Mariner,Inc.bought a lobster boat on November 1,2011 in exchange for a 2-month,6%,$80,000 note.The note plus interest will be repaid on January 1,2012,the maturity date.How much interest expense should the company report on its income statement for the month ended December 31,2011?

Maxine,Inc.bought a machine on January 1,2012 for $48,000.The machine is expected to last for 8 years,after which it will be worthless.How much depreciation expense will Maxine show on its income statement for the year ended December 31,2013?

Airing & Spelling,Inc.began operations on January 1,2011.The following amounts were obtained from its information system on December 31,2011.These amounts are before any year-end adjustments have been made: Part A: In the worksheet below,record the effect of these five adjustments on the accounting equation.Show the correct dollar amounts,and write in the titles of the accounts affected. 1.The truck,purchased on January 1,has a useful life of 5 years with no residual value.Record the depreciation for the year. 2.The 6%,two-year notes payable were issued on January 1.Interest and principal are due January 1,2013. 3.Insurance coverage used during the year was $6,000. 4.$500 worth of supplies were on hand at December 31. 5.Additional salaries of $10,000 were earned and will be paid next month. Part B: Fill in the missing information on the financial statements: Part C: Calculate the profit margin on sales ratio.______________________

Cal's Lawn Care prepared the following income statement before adjustments: Required: Determine the profit or loss after adjustment given the following additional information for the month of September: a.Salaries earned but unrecorded and unpaid equals $8,000. b.Depreciation for the month should be an additional $2,000. c.Additional supplies used up equals $100. d.Unearned revenue earned equals $1,000.

Which financial statement shows Revenues?

If a company's expenses for the period are greater than its revenues,then the company will report ________.

Enoch,Inc.began operations on July 1,2011.On August 1,it received $12,000 in advance for services to be performed evenly over the next 12 months.How much unearned revenue should the company report on its balance sheet at December 31,2011?

Rent a Wreck,Inc.began operations on July 1,2012.On July 1,the company paid $9,600 cash in advance for a one-year insurance policy beginning on that day.How much insurance expense will appear on the company's income statement for the year ended December 31,2012?

Slumbers,Inc.borrows $3,000 at 12% from a bank on September 1,2012 and agrees to pay the interest and principal in two years.What is the effect on the accounting equation of the adjusting entry to record interest for the year ended December 31,2012?

Why would the Unearned revenue account need to be adjusted at the end of the period?

Rent a Wreck,Inc.began operations on July 1,2012.On July 1,the company paid $9,600 cash in advance for a one-year insurance policy beginning on that day.What will the company report for prepaid insurance on its balance sheet at July 31,2012?

Selected data from BR Co.'s accounting system are provided below.All balances are before year-end adjustments and all data relate to the year ended December 31,2011.Determine the amount that will be reported for each of the items in the table below,after the appropriate adjustments have been made using the following information below.The table does NOT include all of the accounts that will be adjusted. a.A note payable of $10,000 has been unpaid all year and bears interest at 8%. b.Equipment with a cost of $20,000,a 5-year estimated useful life,and a $5,000 estimated residual value was owned and used all year. c.$50 of the supplies are unused at the end of the period. d.The Prepaid rent balance relates to a $1,500,12-month lease beginning on October 1,2011. e.$15,000 rent revenue has been earned but not yet collected from tenants. f.Employees have earned an additional $25,000 in salaries,but have not yet been paid.

Passwords and user IDs are controls that limit access to a company's computer information system.

Using the abbreviations below,indicate which financial statement(s)would report each of the following line items.Some items may appear on more than one statement. IS = Income statement OE = Statement of changes in shareholders' equity BS = Balance sheet CF = Statement of cash flows NONE = the item does not appear on any of the financial statements

Magic,Inc.collected $12,000 in October 2011 from customers in exchange for 12-month subscriptions to its monthly magazine Magic Times.The October issue was the first issue of the subscription.How much revenue should the company report on its income statement for the year ended December 31,2011?

Miss Happ of Ace Electronics forgot to make the adjusting entry for prepaid insurance that expired during the accounting period.As a result of this mistake ________.