Exam 3: Adjusting Accounts and Preparing Financial Statements

On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year subscription for five different magazines. The subscriptions started immediately. What is the adjusting entry that should be recorded by Melanie Publishing Company on December 31 of the first year if the credit to record the collection was made to Unearned Fees?

Harrow Co. is a multi-million business. The business results for the year have been seriously impacted by a slowing economy. The company wants to improve its net income. It has incurred $2,500,000 in unpaid salaries at the end of the year and wants to leave those amounts unrecorded at the end of the year. (a) How would this omission affect the financial statements of Harrow? (b) Which accrual basis of accounting principles does this omission violate? (c) Would this be considered an ethical problem?

Black Company's unadjusted and adjusted trial balances on December 31 of the current year are as follows Present the four adjusting journal entries that were recorded by Black Company.

Profit margin is defined as:

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

An adjusting entry was made on year-end December 31 to accrue salary expense of $1,200. Which of the following entries would be prepared to record the $3,000 payment of salaries in January of the following year?

Adjusting is a three-step process (1) ____________________________, (2) __________________________, and (3) ____________________________.

Under the alternative method for accounting for unearned revenue, which of the following pairs of journal entry formats is correct?

The accrual basis of accounting:

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would:

Using the information given below, prepare a balance sheet for Martin Sky Taxi Services from the adjusted trial balance. Helena Martin did not make any additional investments in the company during the year.

The unadjusted trial balance and the adjustment data for Harris Training Institute are given below along with adjusting entry information. If these adjustments are not recorded, what is the impact on net income? Show calculation for net income without the adjustments and net income with the adjustments. Which one gives the most accurate net income? What accounting principles are being violated if the adjustments are not made? Additional information items: a. The Prepaid Insurance account consists of a payment for a 1 year policy. An analysis of the insurance invoice indicates that one half of the policy has expired by the end of the December 31 year-end. b. A cash payment for space sublet for 8 months was received on July 1 and was credited to Unearned Rent. c. Accrued interest expense on the note payable of $1,000 has been incurred but not paid.

If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show:

An adjusting entry could be made for each of the following except:

The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the:

Depreciation expense for a period is the portion of a plant asset's cost that is allocated to that period.

On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year subscription for five different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded by Melanie Publishing Company for each year of the subscription assuming Melanie uses a calendar reporting period?

A balance sheet that places the assets above the liabilities and equity is called a(n):

Assuming prepaid expenses are originally recorded in balance sheet accounts, the adjusting entry to record use of a prepaid expense is:

What is an adjusted trial balance? Why is it prepared?