Exam 3: Adjusting Accounts and Preparing Financial Statements

Each letter below contains three of the steps found in the accounting cycle. Which presents the given steps in the proper sequence, first to last?

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

A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance and financial statements and which is an optional tool in the accounting process is a(n):

How is the current ratio calculated? How is it used to evaluate a company?

Describe the two alternate methods used to account for prepaid expenses.

Which of the following accounts would not be impacted by adjusting journal entries?

On December 31, the balance in the Prepaid Subscription account was $648. This is the remaining balance of a twelve-month subscription purchased on September 30 in the current year. How much did this subscription originally cost?

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.

Which of the following statements is incorrect?

Which of the following assets is not depreciated?

On December 31, 2009, a company forgot to record $7,000 of depreciation on office equipment. What would be the effect on the assets, net income and equity when it comes to the 2009 financial statements?

Which of the following identifies the proper order of the accounting cycle?

A post-closing trial balance is a list of permanent accounts and their balances from the ledger after all closing entries are journalized and posted.

What is the difference between GAAP and IFRS presentations of the current assets section on the balance sheet?

The Income Summary account is used to close the permanent accounts at the end of an accounting period.

ABC Co. leased a portion of its store to another company for eight months beginning on October 1, 2011 at a monthly rate of $800. This other company paid the entire $6,400 cash on October 1, which ABC Co. recorded as unearned revenue. The journal entry made by ABC Co. at year-end on December 31, 2011 would include:

The adjusted trial balance contains information pertaining to:

Unearned revenue is reported on the financial statements as:

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:

The matching principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid.