Exam 4: Adjusting the Accounts and Preparing Financial Statements

The Prepaid Insurance account of Stephen's Spas shows a balance of $3000, representing a two-year insurance premium paid on 1 February 2018. After recording the adjustment on 30 June 2018, the end of the accounting period:

During 2019 Annette's Mechanical paid out $85 000 in wages from its bank account. This $85 000 included $5 400 that was owing but unpaid at year-end for 2018. At year-end 2019 wages owing but unpaid were $12 300. The business uses accrual accounting. How much would be reported as wages expense for 2019?

Deferral type adjustments occur when cash for expenses is paid in advance or cash from income is received in advance. Which of the following will require a deferral type adjustment? I. Rent paid for in advance II. Plant and Equipment to be depreciated III. Rent collected in advance from tenants IV. Interest is owed to the bank

Hannah Ltd uses gardening supplies on a daily basis. Under the accrual method of accounting these supplies would be an expense of the period in which they are:

On 1 July 2018 Tandem Bicycles paid $4 800, representing a two-year insurance premium. The $4 800 was initially recorded in the Insurance expense account. After adjustment at 31 December 2018, the close of the annual accounting period:

The income statement columns on the worksheet are not equal because:

If an adjustment for depreciation is not recorded for the year the effect on the financial statements will be:

On 1 March 2018, Indiana Ltd rented out part of its manufacturing premises and collected $6000 in advance for a one year period. The receipt was credited to a liability account. At 31 December 2018, Indiana Ltd's end of financial year, the following adjusting journal should be recorded:

The cash approach to profit measurement will not give a reliable profit figure for an entity that conducts a significant portion of its business:

Penelope Company's employees carry out work to the value of $8 400. They are paid $6 000 immediately with the balance to be settled in the next accounting period. Under the accrual method of accounting, the amount of wages expense that will be recorded in the current period is:

At year-end the bookkeeper forgot to accrue an income item. This will result in an:

In preparing its 2019 adjusting entries, Zena Ltd forgot to adjust the Office Supplies (asset) account for the amount of supplies used during the year. As a result of this error:

On the first day of the financial year Merv's Boats purchased a truck for $16 000. The truck is to be depreciated by 25% each year and has a zero residual value. At the end of the first year the adjusting entry to record depreciation on the truck is:

On 1 October 2018 Tanya's Pools paid $2400 for a 12 month insurance premium. The $2400 was initially recorded in the insurance expense account. The adjusting entry required to accurately represent the expired insurance at 31 December 2018, the close of the annual accounting period, is:

Sampson Ltd.'s employees perform work to the value of $6500. They are paid $3500 immediately with the balance to be settled in the next accounting period. Under the cash approach to profit measurement, the amount of wages expense that will be recorded in the current period is:

Assets that have a physical subsistence and are expected to provide future benefits are known as:

On 1 November 2018 the publishers of 'Home' magazine received $198 (including GST) in advance for a 12-month subscription to their monthly issue. Which is the correct entry to be recorded on receipt of the subscription?

The portion of a non-current asset, such as machinery, which is transferred to an expense account during an accounting period, is known as:

The primary basis for classifying assets and liabilities in the balance sheet is:

On 1 May 2018, Dress in Style received a $2000 advance payment from a customer for the design and making of a formal gown. The gown is expected to be completed by the end of August 2018. By 30 June 2018, approximately half of the dress is complete. The correct adjusting entry to be recorded at 30 June 2018 is: