Question 1

Under the alternative method for recording prepaid expenses, which is the correct set of journal entries?

Accepted Answer

A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
E)  Choice E 
A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
E)  Choice E

Question 2

On December 1, Miller Company borrowed $300,000, at 8% annual interest, from the Nomo Bank. Miller has 60 days before the first payment is required. What is the adjusting entry that Miller would need to make on December 31, the calendar year-end?

Accepted Answer

A)  Debit Interest Payable, $2,000; credit Interest Expense, $2,000. 
B)  Debit Interest Expense, $2,000; credit Interest Payable, $2,000. 
C)  Debit Interest Expense, $2,000; credit Cash, $2,000. 
D)  Debit Interest Expense, $4,000; credit Interest Payable, $4,000. 
E)  Debit Interest Expense, $24,000; credit Interest Payable, $24,000. 
A)  Debit Interest Payable, $2,000; credit Interest Expense, $2,000. 
B)  Debit Interest Expense, $2,000; credit Interest Payable, $2,000. 
C)  Debit Interest Expense, $2,000; credit Cash, $2,000. 
D)  Debit Interest Expense, $4,000; credit Interest Payable, $4,000. 
E)  Debit Interest Expense, $24,000; credit Interest Payable, $24,000.

Question 3

How is profit margin calculated? Discuss its use in analyzing a company's performance.

Accepted Answer

Profit margin is calculated by dividing

Question 4

It is acceptable to record prepayment of expenses as debits to expense accounts.

Accepted Answer

A) True 
 B)False

Question 5

Identify the types of adjusting entries and explain the purpose of each type.

Accepted Answer

Adjusting entries can be grouped into tw

Question 6

A trial balance prepared before any adjustments have been recorded is:

Accepted Answer

A)  An adjusted trial balance. 
B)  Used to prepare financial statements. 
C)  An unadjusted trial balance. 
D)  Correct with respect to proper balance sheet and income statement amounts. 
E)  Only prepared once a year. 
A)  An adjusted trial balance. 
B)  Used to prepare financial statements. 
C)  An unadjusted trial balance. 
D)  Correct with respect to proper balance sheet and income statement amounts. 
E)  Only prepared once a year.

Question 7

The balance in Tee Tax Services' office supplies account on February 1 and February 28 was $1,200 and $375, respectively. If the office supplies expense for the month is $1,900, what amount of office supplies was purchased during February?

Accepted Answer

A)  $1,075 
B)  $1,500 
C)  $1,525 
D)  $2,325 
E)  $3,100 
A)  $1,075 
B)  $1,500 
C)  $1,525 
D)  $2,325 
E)  $3,100

Question 8

An _______________________ is a listing of all of the accounts in the ledger with their account balances after adjustments are made.

Accepted Answer

Adjusted t

Question 9

A company purchased a new truck at a cost of $42,000 on July 1. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. The company uses the straight-line method of depreciation. How much depreciation expense will be recorded for the truck during the first year ended December 31?

Accepted Answer

A)  $3,250. 
B)  $3,500. 
C)  $4,000. 
D)  $6,500. 
E)  $7,000. 
A)  $3,250. 
B)  $3,500. 
C)  $4,000. 
D)  $6,500. 
E)  $7,000.

Question 10

A trial balance prepared after adjustments have been recorded is called a(n)

Accepted Answer

A)  Balance sheet. 
B)  Adjusted trial balance. 
C)  Unadjusted trial balance. 
D)  Classified balance sheet. 
E)  Unclassified balance sheet. 
A)  Balance sheet. 
B)  Adjusted trial balance. 
C)  Unadjusted trial balance. 
D)  Classified balance sheet. 
E)  Unclassified balance sheet.

Question 11

A fiscal year refers to an organization's accounting period that spans twelve consecutive months or 52 weeks.

Accepted Answer

A) True 
 B)False

Question 12

The time period assumption assumes that an organization's activities can be divided into specific time periods.

Accepted Answer

A) True 
 B)False

Question 13

Based on the unadjusted trial balance for Bella's Beauty Salon and the adjusting information given below, prepare the adjusting journal entries for Bella's Beauty Salon.
Bella Beauty Salon's unadjusted trial balance for the current year follows:   Additional information:
a. An insurance policy examination showed $1,240 of expired insurance
b. An inventory count showed $210 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,220.
e. A beautician is behind on space rental payments, and this $200 of accrued revenues was unrecorded at the time the trial balance was prepared.
f. $800 of the Unearned Rent account balance was earned by year-end.
g. The one employee, a receptionist, works a five-day workweek at $50 per day. The employee was paid last week but has worked four days this week for which she has not been paid.
h. Three months' property taxes, totaling $450, have accrued. This additional amount of property taxes expense has not been recorded
i. One month's interest on the note payable, $600, has accrued but is unrecorded.

Accepted Answer

The answer of Based on the unadjusted trial balance for...

Question 14

Two accounting principles that are relied on in the adjusting process are:

Accepted Answer

A)  Revenue recognition and monetary unit. 
B)  Revenue recognition and going-concern. 
C)  Matching and cost. 
D)  Matching and business entity. 
E)  Revenue recognition and matching. 
A)  Revenue recognition and monetary unit. 
B)  Revenue recognition and going-concern. 
C)  Matching and cost. 
D)  Matching and business entity. 
E)  Revenue recognition and matching.

Question 15

If a company reporting on a calendar year basis, paid $18,000 cash on January 1 for one year of rent in advance and adjusting entries are made at the end of each month, the balance of Prepaid Rent as of December 1 should be $1,500.
$18,000 x 1/12 = $1,500

Accepted Answer

A) True 
 B)False

Question 16

An adjusting entry often includes an entry to Cash.

Accepted Answer

A) True 
 B)False

Question 17

Accrued expenses at the end of one accounting period are expected to result in cash payments in a future period.

Accepted Answer

A) True 
 B)False

Question 18

The 12-month period that ends when a company's sales activities are at their lowest level is called the:

Accepted Answer

A)  Fiscal year. 
B)  Calendar year. 
C)  Natural business year. 
D)  Accounting period. 
E)  Interim period. 
A)  Fiscal year. 
B)  Calendar year. 
C)  Natural business year. 
D)  Accounting period. 
E)  Interim period.

Question 19

Using the selected information given below for Bliss Company, calculate return on assets, debt ratio, and profit margin. Comment on the results of operations and the financial position of the company for the year.   Return on assets = ($950,000-795,000)/((1,900,000+1,500,000)/2) =9.1%
Debt ratio=$850,000/1,900,000=44.7%
Profit margin=$155,000/950,000=16.3%

Accepted Answer

The answer of Using the selected information given below for...

Question 20

Which of the following statements is incorrect?

Accepted Answer

A)  An income statement reports revenues earned less expenses incurred. 
B)  An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments. 
C)  Interim financial reports can be based on one-month or three-month accounting periods. 
D)  The fiscal year is any 12 consecutive months (or 52 weeks) used by a business as its annual accounting period. 
E)  Property, plant, and equipment are referred to as plant assets. 
A)  An income statement reports revenues earned less expenses incurred. 
B)  An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments. 
C)  Interim financial reports can be based on one-month or three-month accounting periods. 
D)  The fiscal year is any 12 consecutive months (or 52 weeks) used by a business as its annual accounting period. 
E)  Property, plant, and equipment are referred to as plant assets.

Exam 3: Adjusting Accounts and Preparing Financial Statements

Under the alternative method for recording prepaid expenses, which is the correct set of journal entries?

On December 1, Miller Company borrowed $300,000, at 8% annual interest, from the Nomo Bank. Miller has 60 days before the first payment is required. What is the adjusting entry that Miller would need to make on December 31, the calendar year-end?

How is profit margin calculated? Discuss its use in analyzing a company's performance.

It is acceptable to record prepayment of expenses as debits to expense accounts.

Identify the types of adjusting entries and explain the purpose of each type.

A trial balance prepared before any adjustments have been recorded is:

The balance in Tee Tax Services' office supplies account on February 1 and February 28 was $1,200 and $375, respectively. If the office supplies expense for the month is $1,900, what amount of office supplies was purchased during February?

An _______________________ is a listing of all of the accounts in the ledger with their account balances after adjustments are made.

A trial balance prepared after adjustments have been recorded is called a(n)

A fiscal year refers to an organization's accounting period that spans twelve consecutive months or 52 weeks.

The time period assumption assumes that an organization's activities can be divided into specific time periods.

Two accounting principles that are relied on in the adjusting process are:

If a company reporting on a calendar year basis, paid $18,000 cash on January 1 for one year of rent in advance and adjusting entries are made at the end of each month, the balance of Prepaid Rent as of December 1 should be $1,500. $18,000 x 1/12 = $1,500

An adjusting entry often includes an entry to Cash.

Accrued expenses at the end of one accounting period are expected to result in cash payments in a future period.

The 12-month period that ends when a company's sales activities are at their lowest level is called the:

Which of the following statements is incorrect?

Accounting in Business

Analyzing and Recording Transactions

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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