Exam 4: Adjustments,financial Statements,and the Quality of Earnings

Settler Service is completing the information processing cycle at the end of its annual accounting period,December 31,20A.Four adjusting entries must be made to update the accounts.The following accounts,selected from the company's chart of accounts,are to be used for this purpose.They are coded to the left for easy reference. You are to indicate the appropriate account code and amount for each required adjusting entry at December 31,20A.

Below are two related transactions for Tweet Corporation.The annual accounting period ends December 31.For each date listed,give the required entry in journal format. a.October 1,20A-- Tweet Corporation Borrowed $15,000 and signed a note providing for 10% interest.The principal and interest are due in one year (on September 30,20B). b.December 31,20A--end of the annual accounting period.(If no entry is required,explain why).

Adjusting entries are used to update income statement accounts and statement of financial position accounts.

Which of the following statements about a high net profit margin is FALSE?

Temporary accounts are closed to a zero balance at the end of the accounting period to allow for the accumulation of profit items in the following period.

Earnings per share is widely used in evaluating the operating performance and profitability of a company and is the only ratio required to be disclosed on the statement or in the notes to the financial statements.

Before the closing entries were made at the end of 20B,the following data were taken from the accounts of Joe Corporation: What is the amount of shareholders' equity that should appear on Joe Corporation's statement of financial position dated December 31,20B?

Below are four transactions that were completed during 20A by Doby Company.The annual accounting period ends on December 31.Each transaction will require an adjusting entry at December 31,20A.You are to provide the 20A adjusting entries required for Doby Company. A.On July 1,20A,Doby Company paid a two-year insurance premium for a policy on its equipment.This transaction was recorded as follows: July 1,20A: December 31,20A--Adjusting entry: B.On December 31,20A a tenant renting some office space from Doby Company had not paid the rent of $500 for December. December 31,20A--Adjusting entry: C.On September 1,20A,Doby Company borrowed $3,000 cash and gave a one-year,10 percent,note payable.The total interest of $300 is payable on the due date,August 31,20B.The note was recorded as follows: September 1,20A: Cash $3,000 Note payable $3,000 December 31,20A--Adjusting entry: D.Assume Doby Company publishes a magazine.On October 1,20A,the company collected $440 for subscriptions two years in advance.The $440 collection was recorded as follows:

Amortization expense is an example of the need for accountants to make estimates in order to record adjustments.

Which of the following errors would most likely lead to an overstatement of income?

At the end of 20D,Dallas Company made the following adjusting entry to record $10,000 accrued (unpaid)wages: A payroll of $40,000 (including the $10,000 accrued wages)was paid during the first week of January,20E.The entry to record the payment of this payroll should include a

An income statement reports which of the following?

On July 1,20A,Childe Company paid the premium in advance of $2,400 for a two-year fire insurance policy on machinery.At that time,the full amount paid was recorded as prepaid insurance.On December 31,20A,the end of the accounting year,the required adjusting entry should include which of the following?

Each adjusting entry affects at least one income statement account and at least one statement of financial position account.

A machine that cost $10,000 was purchased at the beginning of the current business year.Assuming that an equal amount of amortization will be recorded for each year of the machine's life at $800,the adjusting entry made at the end of the current business year should include which of the following?

Those firms that make relatively conservative estimates for their accrued and deferred adjustments are said to have financial reports disclosing a higher quality of earnings.

On June 1,20A,Global Services,Inc.,was started with $50,000 invested by the owners as share capital.On June 30,the accounting records contained the following amounts: Prepare a statement of changes in equity for June,the first month of operation.Ignore income taxes.

On January 1,20A,Thomas Company paid $1,000 for a two-year insurance policy on the building.The accounting period ends December 31.At the end of 20A,the financial statements should report which of the following?

The statement of changes in equity would not include which of the following?

The trial balance,prepared immediately after all transactions of the period have been recorded and posted,should show all account balances that are in the ledger (T-accounts).