Exam 3: Adjusting Accounts and Preparing Financial Statements

On October 1 of the current year,Morton Company paid $9,600 cash for a one-year insurance policy that took effect on that day.On the date of the payment,Morton recorded the following entry: Oct. 01 Insurance Expense 9,600 Cash 9,600 Prepare the required adjusting entry at December 31 of the current year.

A publishing company records the subscriptions paid in advance by its customers in an account called Unearned Subscription Revenue.If the company fails to make the end-of-period adjusting entry to record the portion of the subscriptions that have been earned,one effect will be:

Before an adjusting entry is made to recognize expired insurance,Prepaid Insurance and Insurance Expense are both overstated.

What are some of the steps that Ashley Cook and Danielle Danker took to control ash&dans.com costs?

Western Company had $500 of store supplies available at the beginning of the current year.During the year Western Company purchased $2,750 worth of store supplies.On December 31 of this year,$375 worth of store supplies remained. a.Calculate the amount of Western Company's store supplies expense for the current year.(Show your calculations.) b.Prepare the journal entry to adjust the supplies account.

A company had service revenue of $250,000,rent expense of $10,000,utility expense of $3,500,salary expense of $18,500,depreciation expense of $9,000,advertising expense of $4,500,dividends in the amount of $18,000,and a beginning balance in retained earnings of $17,900.What is the balance in the income summary account before it is closed for the period?

______________________ 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.

Given the table below,indicate the impact of the following errors made during the adjusting entry process.Use a "+" followed by the amount for overstatements,a "-" followed by the amount for understatements and a "0" for no effect.The first one is done as an example. Ex.Failed to recognize that $600 of unearned revenues,previously recorded as liabilities; had been earned by year-end. 1.Failed to accrue salaries expense of $1,200. 2.Forgot to record $2,700 of depreciation on office equipment. 3.Failed to accrue $300 of interest on a note receivable. Error Revenues Expenses Assets Liabilites Equity Ex. -\ 600 0 0 \ 600 -\ 600 1. 2. 3.

If a prepaid expense account were not adjusted for the amount used,on the balance sheet assets would be _______________ and equity would be __________.

If accrued salaries were recorded on December 31 with a credit to Salaries Payable,the entry to record payment of these wages on the following January 5 would include:

On April 30,2014,a three-year insurance policy was purchased for $18,000 with coverage to begin immediately.What is the amount of insurance expense that would appear on the company's income statement for the year ended December 31,2014?

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

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

A classified balance sheet organizes assets and liabilities into important subgroups that are not found on an unclassified balance sheet.

In accrual accounting,accrued revenues are recorded as liabilities.

Based on the following information,what would be the ending balance in the Retained Earnings account,assuming all accounts have a normal balance? Cash \ 6,754 Dividends \ 2,000 Accounts receivable 13,733 Consulting fees earned 13,718 Office supplies 2,625 Rent expense 3,673 Land 37,153 Salaries expense 6,642 Office equipment 14,535 Telephone expense 560 Accounts payable 6,463 Miscellaneous expense 280 Common stock 54,490 Retained earnings ?

The cash basis of accounting requires that revenues be recognized when cash payments from customers are received.

The total amount of depreciation recorded against an asset or group of assets during the entire time the asset or assets have been used in the day-to-day operations of the business:

Adjustments must be entered in the journal and posted to the ledger after the work sheet is prepared.

Reebok'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.