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

Four transactions are given below that were completed during 20A by Lucky Company.The annual accounting period ends December 31.Each transaction will require an adjusting entry at December 31,20A.Provide the adjusting entry required. A.On January 1,20A,Lucky Company purchased office equipment that cost $8,000.The estimated life of the office equipment was five years ($500 residual value). December 31,20A--Adjusting entry: B.On June 1,20A,Lucky Company paid $12,600 for one year's rent beginning on that date.The rent payment was recorded as follows: June 1,20A: December 31,20A--Adjusting entry: C.Lucky Company purchased office supplies during the year that cost $700 and placed the supplies in a storeroom for use as needed.The purchase was recorded as follows: February 1,20A: At the end of 20A,a count showed unused office supplies of $200 in the storeroom.There was no beginning inventory of supplies on hand. December 31,20A--Adjusting entry: D.On December 31,20A,Lucky Company owed employees $3,000 for wages earned during December.These wages had not been paid nor recorded.

The following trial balance of Lazy Corporation dated December 31,20A,developed by a clerk,contains errors. Required: Prepare a corrected Trial Balance

Which of the following is the essential difference between an unadjusted trial balance and an adjusted trial balance?

An expense incurred,but not yet recorded nor paid,creates a liability until the payment is made.

Profit would appear on which of the following?

The purpose of the post-closing trial balance is to

To compute amortization expense using the straight-line formula,the cost of a depreciable asset (i.e.,equipment)must be reduced by any estimated residual or salvage value.

On October 1,20A,Ethan Company borrowed $10,000 on a 4-month note with an annual interest rate of 9 percent.How much interest expense should be reported for 20A,assuming that the note is paid on time and Ethan Company's accounting year coincides with the calendar year?

Ten independent transactions for Scooter Corporation are listed below.A list of accounts used to record the economic effects of transactions in terms of the fundamental accounting model is given below.You are to indicate the accounts to be debited and credited for each transaction by entering the appropriate letter in each blank.

Closing entries are required by international financial reporting standards,while adjusting entries are optional.

On December 1,20A,Pest Company collected $1,200 in advance for three months of rent on some office space.It was credited in full to unearned rent revenue.Assuming the accounting year ends December 31,give the adjusting entry required on December 31,20A.

Service revenue earned but not yet collected by the end of the period was $200; therefore,the adjusting entry should be: Debit--Service revenue receivable,$200; Credit--Unearned service revenue,$200.

A trial balance is a list of all accounts with their debit or credit balances indicated in the appropriate column to provide a check on the equality of the debits and credits.

Profit under accrual timing is subject to more distortion than cash flow from operations because of large accruals and deferrals that can impact reported profit.

Amortization attempts to adjust the value of the assets to reflect the market value of those assets on the statement of financial position.

Of the following accounts,which one would not appear in the post-closing trial balance?

At the end of the accounting period,wages earned by employees but not yet recorded nor paid amounted to $400; therefore,the adjusting entry should be: Debit--Wages payable; Credit-- Wages expense.

Below,to the left,are listed several different account titles that you have studied.Under each column for each cell you are to enter one capital letter which indicates for each account its normal characteristics.

External auditors closely examine the adjustment process of a company because adjustments are the most complex part of the accounting process and therefore the most error prone.

The journal contains information that has been posted from the ledger.