Exam 3: The Basics of Record Keeping and Financial Statement Preparation: Income Statement

The post-closing trial balance of the Falisari Import Company at March 31 is as follows. Debit Credit Cash \ 321,000 Accounts Receivable 201,000 Inventory 504,000 Building and Equipment 1,560,000 Accumulated Depreciation \ 240,000 Accounts Payable 246,000 Salaries Payable 45,000 Common Stock 1,410,000 Retained Earnings 645,000 \2 ,586,000 \2 ,586,000 Transactions during April and additional information follow. 1. Sales on account \ 300,000 2. Cash sales 195,000 3. Cash collected on accounts receivable 240,000 4. Salaries paid in cash 150,000 5. Salaries eamed on April 29 and 30, but not yet paid 15,000 6. Miscellaneous expenses paid in cash 30,000 7. Merchandise purchased on account 330,000 8. Accounts payable paid in cash 270,000 9. Merchandise inventory, April 30 540,000 10. Depreciation expense in April 9,000 Required: Prepare an income statement for the month of April and a post-closing trial balance at April 30.

A manufacturing firm has manufacturing costs which become product costs. These manufacturing costs do not include:

The stockholders' equity of a firm can be defined as

Parson Services Corporation was organized on January 1, Year 8.The unadjusted trial balance on December 31, Year 8 after recording transactions that occurred during Year 8 is as follows. Parson Services Corporation Unadjusted Trial Balance December 31 , Year 8 Debit Credit Cash \ 125,000 Fees Receivable 112,000 Notes Receivable 115,000 Office Supplies Inventory 11,800 Prepaid Insurance 12,200 Furmiture and Equipment 155,000 Accumulated Depreciation 0 Accounts Payable \ 113,000 Common Stock 365,000 Fee Revenues 195,000 Rent Expense 19,500 Office Salaries Expense \6 73,000 Below is the income statement for Year 8 that was prepared after making appropriate adjusting entries for Year 8. Required: Give the adjusting entries that Parson Services Corporation must have made at the end of Year 8 for each of the seven income statement accounts.You may express the adjusting entries either in the form of journal entries or T accounts.

The result of closing entries is that balances in all temporary accounts

Expenses measure the outflow of net assets consumed in the process of generating revenues.

Once revenue and expense accounts serve their purpose of accumulating specific revenue and expense items for an accounting period, they have no further purpose for that period.

Before preparing the balance sheet and income statement, an accountant would use what accounting record to first record the firm's transactions?

The equation that describes the relationship between the balance sheet and the income statement through the Retained Earnings account is as follows: Retained Earnings (beginning) + Net Income - Dividends = Retained Earnings (ending)

Revenue and expense accounts

Solve for the unknown item for each of the following independent situations. CASE A CASE B CASE C Total assets A 400 600 Contributed capital 100 150 C Total revenues 400 300 400 Total liabilities 600 B 250 Beginning retained earnings (50) 100 100 Total expenses 250 350 200 Dividends 0 50 0

Failure to record depreciation expense at the end of an accounting period results in

Which of the following is not an example of a period expense?

Assume that a firm uses the accrual basis of accounting.For each of the following independent cases, indicate the amount of revenue the firm recognizes for the month of August. a. Collects $2,000 in July for merchandise to be delivered in August. b. Collects $1,200 in May for subscriptions that will be delivered during the next twelve months (beginning in May). c. Collects $800 in August for merchandise sold and delivered in July. d. Collects $2,400 interest on a 6-month certificate of deposit, which matures on August 15th. e. Sells $3,000 of merchandise on account in August. The firm allows a 2% discount for payment prior to 30 days and customers take the discount.

Manufacturing overhead include(s):

The records of Horner Corp.show the following information: (a)Purchased a three-year insurance policy for $10,800 on September 1, 2013, and recorded the premium payment in the asset account. (b)Borrowed $60,000 on a 1-year, 12% note on August 1, 2013. Interest is payable at maturity. (c)Collected $8,400 on September 1, 2013, to cover six months' rent paid in advance, and recorded the receipt in a revenue account. (d)Machinery purchased on January 1, 2013, for $600,000 is to be depreciated over four years, with no salvage value at the end of this period. Prepare journal entries to adjust the books of Horner Corp.at December 31, 2013.

For manufacturing firms, the cost of completed products remains on the balance sheet as __________ assets until the firm sells the products; upon sale, the cost of the assets becomes a cost of goods sold expense.

How are period expenses recognized and measured?

The net income for a period and the financial position at the end of the period are

The accrual basis of accounting is often contrasted with the cash basis of accounting.Which of the following is/are true of the cash basis of accounting?