Question 1

Which of the following statements regarding financial statement preparation is false?

Accepted Answer

A)  Financial statements can be prepared from information in the adjusted trial balance. 
B)  The Sarbanes-Oxley Act requires that financial statements filed with the Securities and Exchange Commission include declarations by the CEO and CFO of the company. 
C)  It makes sense to prepare the balance sheet first because it contains information needed on the income statement. 
D)  When preparing financial statements an adjusted trial balance is easier to work with than the entire ledger. 
E)  The income statement is prepared first. 
A)  Financial statements can be prepared from information in the adjusted trial balance. 
B)  The Sarbanes-Oxley Act requires that financial statements filed with the Securities and Exchange Commission include declarations by the CEO and CFO of the company. 
C)  It makes sense to prepare the balance sheet first because it contains information needed on the income statement. 
D)  When preparing financial statements an adjusted trial balance is easier to work with than the entire ledger. 
E)  The income statement is prepared first.

Question 2

Based on the adjusted trial balance,prepare a balance sheet for Martin Sky Taxi Services.
 $\begin{array}{c}
\text { MARTIN SKY TAXI SERVICES}\
\text { Adjusted Trial Balance}\
\text { For the year ended December 31}\
\begin{array}{|l|r|r|}
\hline \text { Cash } & \$ 28,000 & \
\hline \text { Accounts receivable } & 14,200 & \
\hline \text { Office supplies } & 1,700 & \
\hline \text { Airplanes } & 100,000 &\
\hline \text { Accumulated depreciation - Airplanes } & & 45,000 \
\hline \text { Accounts payable } & & 11,500 \
\hline \text { Common stock } & & 25,000 \
\hline \text { Retained earnings } & & 46,900\
\hline\text { Dividends } & 40,000 & \
\hline \text { Fees earned } & & 150,000 \
\hline \text { Rent expense } & 13,000 & \
\hline \text { Office supplies expense } & 2,000 & \
\hline \text { Utilities expense } & 2,500 &\
\hline \text { Depreciation Expense - Airplanes } & 15,000 & \
\hline \text { Salary expense } & 50,000 & \
\hline \text { Fuel expense } & 12,000 & \
\hline \text { Totals } & \$ 278,400 & \$ 278,400 \
\hline
\end{array}\end{array}$

Accepted Answer

None

Question 3

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of an asset.

Accepted Answer

A) True 
 B)False

Question 4

What is an adjusted trial balance? Why is it prepared?

Accepted Answer

An adjusted trial balance is a list of a

Question 5

During the year,Able Co.purchased $39,600 worth of supplies,at the end of the year,the balance sheet showed a balance of $1,760 in the Supplies account.Prepare the necessary adjusting entry.

Accepted Answer

Supplies Expense…………

Question 6

The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is:

Accepted Answer

A)  Debit Unpaid Salaries and credit Salaries Payable 
B)  Debit Salaries Payable and credit Salaries Expense 
C)  Debit Salaries Expense and credit Cash 
D)  Debit Salaries Expense and credit Salaries Payable 
E)  Debit Cash and credit Salaries Expense 
A)  Debit Unpaid Salaries and credit Salaries Payable 
B)  Debit Salaries Payable and credit Salaries Expense 
C)  Debit Salaries Expense and credit Cash 
D)  Debit Salaries Expense and credit Salaries Payable 
E)  Debit Cash and credit Salaries Expense

Question 7

Classified balance sheets commonly include the following categories.
Indicate the typical classification of each item listed below by placing the correct balance sheet category in the blank space next to the item.

Accepted Answer

@#IMG-DLM&_TB6312_00

Question 8

The accrual basis of accounting is a system of accounting in which the adjustments are needed to assign revenues to periods in which they are earned and to match expenses with revenues.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

The answer of ______________________ are required at the end of...

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

On June 30,2014,Apricot Co.paid $5,000 cash for management services to be performed over a two-year period.Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment.
The adjusting entry on December 31,2014,for Apricot would include:

Accepted Answer

A)  A debit to Management Services Expense for $1,250. 
B)  A debit to Prepaid Management Services Expense for $1,250. 
C)  A credit to Management Services Expense for $3,750. 
D)  A debit to Prepaid Management Services Expense for $3,750. 
E)  A credit to Management Services Payable for $1,250. 
A)  A debit to Management Services Expense for $1,250. 
B)  A debit to Prepaid Management Services Expense for $1,250. 
C)  A credit to Management Services Expense for $3,750. 
D)  A debit to Prepaid Management Services Expense for $3,750. 
E)  A credit to Management Services Payable for $1,250.

Question 12

Awn Services paid a dividend of $8,700 during the current year.The entry to close the dividend account at the end of the year is:

Accepted Answer

A)  $$\begin{array} { | c | r | r | } 
\hline \text { Dividends } & 8,700 & \
\hline \text { Cash } & & 8,700 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | c | } 
\hline \text { Retained earnings } & \mathbf { 8 } , 700 & \
\hline \text { Dividends } & & \mathbf { 8 , 7 0 0 } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Dividends } & 8,700 & \
\hline \text { Retained earnings } & & 8,700 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | c | c | } 
\hline \text { Common Stock } & 8,700 & \
\hline \text { Dividends } & & 8,700 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | c | c | c | } 
\hline \text { Income Summuary } & 8,700 & \
\hline \text { Retained earnings } & & 8,700 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | r | r | } 
\hline \text { Dividends } & 8,700 & \
\hline \text { Cash } & & 8,700 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | c | } 
\hline \text { Retained earnings } & \mathbf { 8 } , 700 & \
\hline \text { Dividends } & & \mathbf { 8 , 7 0 0 } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Dividends } & 8,700 & \
\hline \text { Retained earnings } & & 8,700 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | c | c | } 
\hline \text { Common Stock } & 8,700 & \
\hline \text { Dividends } & & 8,700 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | c | c | c | } 
\hline \text { Income Summuary } & 8,700 & \
\hline \text { Retained earnings } & & 8,700 \
\hline
\end{array}$$

Question 13

The periodic expense created by allocating the cost of plant and equipment to the periods in which they are used,representing the expense of using the assets,is called:

Accepted Answer

A)  Accumulated depreciation 
B)  A contra account 
C)  The matching principle 
D)  Depreciation 
E)  An accrued account 
A)  Accumulated depreciation 
B)  A contra account 
C)  The matching principle 
D)  Depreciation 
E)  An accrued account

Question 14

It is acceptable to record prepayment of expenses as debits to expense accounts.

Accepted Answer

A) True 
 B)False

Question 15

Compute the missing amounts:
(1)The Prepaid Insurance account had a $455 debit balance at the beginning of the current year; $650 of insurance premiums were paid during the year; and the year-end balance sheet showed $420 of prepaid insurance; consequently,the income statement for the year must have shown $______________ of insurance expense.
(2)The Office Supplies account began the current year with a $235 debit balance; the income statement for the year showed $475 of office supplies expense; and the year-end balance sheet showed the current asset,office supplies,at $225; consequently,if all supplies were accounted for,$____________ of office supplies must have been purchased during the year.

Accepted Answer

(1)$685 = $455 + $65

Question 16

A company had revenue of $550,000,rent expense of $100,000,utility expense of $10,000,salary expense of $125,500,depreciation expense of $39,000,advertising expense of $40,200,dividends in the amount of $183,000,and an ending balance in retained earnings of $402,300.What is the beginning retained earnings for the period?

Accepted Answer

A)  $250,000 
B)  $235,300 
C)  $314,700 
D)  $367,000 
E)  $350,000 
A)  $250,000 
B)  $235,300 
C)  $314,700 
D)  $367,000 
E)  $350,000

Question 17

Match the following terms with the appropriate definition:

Accepted Answer

@#IMG-DLM&_TB6312_00

Question 18

Match between columns
                        Premises:  Used to record revenue earned but not received.
 Used to record wages owed, but not paid.
 Used to record expiration of prepaid insurance.
 Used to record revenue received in advance.

Accepted Answer

The Answer of Accrued expense and Accrued revenue and Prepaid is...

Question 19

During the current year ended December 31,clients paid fees in advance for accounting services amounting to $25,000.These fees were recorded in an account called Unearned Accounting Fees.If $3,500 of these fees are still unearned on December 31 of this year,prepare the December 31 adjusting entry .

Accepted Answer

None

Question 20

During the year,Able Co.purchased $23,750 worth of supplies,at the end of the year,the supplies expense on the adjusted trial balance was $29,340 and the balance sheet showed a balance of $810 in the supplies account.What was the supplies balance at the beginning of the year?

Accepted Answer

X + $23,75

Exam 3: Adjusting Accounts and Preparing Financial Statements

Which of the following statements regarding financial statement preparation is false?

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of an asset.

What is an adjusted trial balance? Why is it prepared?

During the year,Able Co.purchased $39,600 worth of supplies,at the end of the year,the balance sheet showed a balance of $1,760 in the Supplies account.Prepare the necessary adjusting entry.

The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is:

Classified balance sheets commonly include the following categories. Indicate the typical classification of each item listed below by placing the correct balance sheet category in the blank space next to the item.

The accrual basis of accounting is a system of accounting in which the adjustments are needed to assign revenues to periods in which they are earned and to match expenses with revenues.

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

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

On June 30,2014,Apricot Co.paid $5,000 cash for management services to be performed over a two-year period.Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31,2014,for Apricot would include:

Awn Services paid a dividend of $8,700 during the current year.The entry to close the dividend account at the end of the year is:

The periodic expense created by allocating the cost of plant and equipment to the periods in which they are used,representing the expense of using the assets,is called:

It is acceptable to record prepayment of expenses as debits to expense accounts.

Match the following terms with the appropriate definition:

During the current year ended December 31,clients paid fees in advance for accounting services amounting to $25,000.These fees were recorded in an account called Unearned Accounting Fees.If $3,500 of these fees are still unearned on December 31 of this year,prepare the December 31 adjusting entry .

During the year,Able Co.purchased $23,750 worth of supplies,at the end of the year,the supplies expense on the adjusted trial balance was $29,340 and the balance sheet showed a balance of $810 in the supplies account.What was the supplies balance at the beginning of the year?

Introducing Accounting in Business

Analyzing and Recording Transactions

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

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

Activity-Based Costing and Analysis

Cost-Volume-Profit Analysis

Variable Costing and Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Decentralization and Performance Measurement

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Accounting With Special Journals

Time Value of Money

Investments and International Operations

Accounting for Partnerships

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