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

On December 31, 2016, Madison Company prepared an income statement and a balance sheet. In preparing the adjusting entries at year-end, Madison failed to record the adjusting entry for wages earned by employees, but not yet paid, amounting to $5,000 for the last four days of the year. The income statement reported net income of $52,000. The balance sheet reported total assets of $254,000, total liabilities of $170,000, and stockholders' equity of $84,000. Required: Complete the following tabulation to show the correct amounts for the financial statements (ignore income taxes).

Which of the following journal entries is created as the result of a deferral?

Which of the following account balances would be closed at year-end?

Assume Idaho Company recorded the following adjusting journal entry at year-end: If the beginning balance in prepaid insurance was $500, and $2,500 was paid for an insurance premium during the year, what is the ending balance in the prepaid insurance account after the above adjusting entry?

The adjusted trial balance of Tahoe Company at the end of the accounting year, December 31, 2016, showed the following: Account Titles Adjusted Trial Balance Debits Credits Cash $20,000 Machinery 90,000 Accumulated depreciation $16,000 Accounts payable 7,000 Capital stock 20,000 Retained earnings 59,000 Service revenue 40,000 Interest expense 4,000 Operating expenses 17,000 Depreciation expense 11,000 Total $142,000 $142,000 Required: A.Prepare all the required closing entries for Tahoe Company at December 31, 2016. B.Calculate the 2016 ending balance in retained earnings.

Which of the following transactions results in an increase in both net income and stockholders' equity?

Below are four transactions that were completed during 2016 by Timber Lodge. The annual accounting period ends on December 31. Each transaction will require an adjusting entry at December 31, 2016. Required: Prepare the 2016 adjusting entries required for Timber Lodge. A.On July 1, 2016, Timber Lodge paid a two-year insurance premium for a policy on its facilities.This transaction was recorded as follows: B.On December 31, 2016, a tenant renting some storage space from Timber Lodge had not paid the rent of $750 for December. C.On September 1, 2016, Timber Lodge borrowed $25,000 cash and gave a one-year, 6 percent, note payable.The interest is payable on the note's due date of August 31 2017.The September 1, 2016 transaction was recorded as follows: D.On October 1, 2016, Timber Lodge collected $10,000 from a tenant for two years rent beginning October 1, 2016.The $10,000 collection was recorded as follows:

Due to the relationship of financial statements, the statement of stockholders' equity links the income statement to the balance sheet.

Which of the following journal entries would not be used to record a deferral?

Which of the following does not correctly describe the following adjusting journal entry?

On October 1, 2016, Adams Company paid $4,800 for a two-year insurance policy with the insurance coverage beginning on that date. As of December 31, 2016, which of the following account balances are correct after adjusting entries have been made?

Morgan Company used supplies in the amount of $2,000. Due to an error in posting to the general ledger, the supplies account was credited for only $200 while supplies expense was debited for $2,000. During which phase of the accounting cycle would this error be first discovered?

Which of the following journal entries is created to adjust for a previously recorded deferral?

On April 1, 2016, the premium on a one-year insurance policy was purchased for $3,000 cash with the insurance coverage beginning on that date. The books are adjusted only at year-end. Which of the following correctly describes the effect on the financial statements of the December 31, 2016 adjusting entry?

The adjusting entry to record an accrued expense increases liabilities.

A list of the accounts of Medford Corporation is given below, followed by some selected transactions. Indicate the accounts that should be debited and credited for the transaction or the closing entry by placing the appropriate account codes in the debit and credit columns provided.

Adjusting entries do not involve cash and therefore do not impact the cash flow statement.

Which of the following is not an accrual?

What are the purposes of closing entries? Describe permanent and temporary accounts.

The journal entry to adjust the unearned revenue account when revenues are earned results in an increase in assets and a decrease in liabilities.