Deck 13: Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Question 1

SEQ CHAPTER \h \r 1The account credited for a receipt of cash on account is

A) Cash.
B) Service Revenue.
C) Accounts Receivable.
D) Accounts Payable.

Answer 1

C

Question 2

SEQ CHAPTER \h \r 1Performing a service for a client on account will

A) increase one asset and decrease another asset.
B) decrease an asset and decrease a liability.
C) increase an asset and decrease equity.
D) increase an asset and increase equity.

Answer 2

D

Question 3

Which of the following criteria does NOT have to be met before an event or transaction should be recorded for accounting purposes?

A) The event or transaction must be an external event.
B) The event or transaction can be measured objectively in financial terms.
C) The event or transaction is relevant and reliable.
D) The event or transaction must meet the definition of an element.

Answer 3

A

Question 4

Which of the following criteria must be met before an event or item should be recorded for accounting purposes?

Question 5

An external event involving a transfer or exchange between two or more entities or parties is called a(n)

A) account.
B) transaction.
C) ledger.
D) accounting system.

Question 6

SEQ CHAPTER \h \r 1Which of the following equations is correct?

A) Assets plus Liabilities = Equity.
B) Assets = Liabilities minus Equity.
C) Liabilities = Assets plus Equity.
D) Equity = Assets minus Liabilities.

Question 7

Some events are NOT recorded in the accounting information system because

A) the service has been provided but the cash has not yet been received.
B) the service has not been provided but the cash has already been received.
C) their measurement is too complex.
D) the amounts are not material.

Question 8

Which of the following is an internal event?

A) sale of goods or services
B) payment of dividends
C) using raw materials in production
D) purchase of materials

Question 9

If, during an accounting period, an expense item has been incurred and consumed but not yet paid for or recorded, then the end-of-period adjusting entry would involve

A) a liability account and an asset account.
B) an asset or contra-asset and an expense account.
C) a liability account and an expense account.
D) a receivable account and a revenue account.

Question 10

The book of original entry where transactions and other selected events are first recorded is called the

A) ledger.
B) journal.
C) account.
D) statement of financial position.

Question 11

Adjusting entries are necessary to

A) 1
B) 2
C) 3
D) 1 and 2

Question 12

An example of a temporary account is

A) Unearned Revenue.
B) Salary Expense.
C) Inventory.
D) Retained Earnings.

Question 13

The accounting equation must remain in balance

A) throughout each step in the accounting cycle.
B) only when journal entries are recorded.
C) only at the time the trial balance is prepared.
D) only when formal financial statements are prepared.

Question 14

The debit and credit analysis of a transaction normally takes place

A) before an entry is recorded in a journal.
B) when the entry is posted to the ledger.
C) when the trial balance is prepared.
D) when the financial statements are prepared.

Question 15

Which of the following statements is true regarding accounting information systems?

A) Both large and small firms should use the same type of accounting system.
B) All firms should have the same types of transactions.
C) The volume of data to be handled should not vary between firms.
D) The kind of information that management requires of an accounting system will vary, depending on the type of firm.

Question 16

A trial balance will NOT balance if

A) an amount is posted to the wrong account.
B) a transaction has been entered twice.
C) a transaction has been omitted.
D) only the debit side of a journal entry has been posted.

Question 17

The double-entry accounting system means

A) each transaction is recorded with two journal entries.
B) each item is recorded in a journal entry, then in a general ledger account.
C) the dual effect of each transaction is recorded with debits and credits of equal amount.
D) None of these answer choices is correct.

Question 18

Factors that shape an accounting system include the

A) nature of the business.
B) size of the firm.
C) volume of data to be handled.
D) All of these answer choices are correct.

Question 19

The main purpose of a trial balance is

A) to serve as a basic internal control.
B) to assist in preparation of the financial statements.
C) to prove the mathematical equity of debits and credits after posting.
D) to uncover errors in journalizing and posting.

Question 20

A trial balance

A) is a list of all the accounts in the ledger.
B) is a list of all the accounts and their balances at a specific date.
C) cannot be used in the preparation of financial statements.
D) cannot be used as a basis for preparation of adjusting entries.

Question 21

Which of the following must be considered in estimating depreciation on an asset for an accounting period?

A) only the original cost of the asset
B) only the asset's useful life
C) both the original cost of the asset and its useful life
D) the decline in its fair market value

Question 22

Which of the following would NOT be a correct form for an adjusting entry?

A) a debit to a revenue and a credit to a liability
B) a debit to an expense and a credit to a liability
C) a debit to a liability and a credit to a revenue
D) a debit to an asset and a credit to a liability

Question 23

On November 1, 2020, Halton Corp. purchased equipment by signing a 6-month, 4% note for $ 180,000. The December 31, 2020, adjusting entry required in connection with this note is

A) debit Interest Expense and credit Interest Payable, $ 7,200.
B) debit Interest Expense and credit Interest Payable, $ 3,600.
C) debit Interest Expense and credit Interest Payable, $ 1,200.
D) debit Interest Expense and credit Cash, $ 1,200.

Question 24

Tabby Corp.'s account balances at December 31, 2020, included Accounts Receivable, $ 192,500 debit; Allowance for Doubtful Accounts, $ 1,250 credit. From a review of the receivables, Blue estimates that $ 7,000 of the December 31 receivables will be uncollectible. The required adjusting entry would include a credit to the allowance account for

A) $ 1,250.
B) $ 8,250.
C) $ 7,000.
D) $ 5,750.

Question 25

On September 1, 2020, Regal Corp. made the annual lease payment of $ 24,000 for its fleet of delivery trucks. The payment covered the period September 1, 2020 to August 31, 2021. Assuming the entire amount had originally been debited to Lease Expense, the required adjustment at December 31, 2020 is

A) debit Lease Expense and credit Prepaid Lease $ 8,000.
B) debit Prepaid Lease and credit Lease Expense $ 8,000.
C) debit Prepaid Lease and credit Lease Expense $ 16,000.
D) debit Lease Expense and credit Prepaid Lease $ 16,000.

Question 26

On May 15, 2020, Bagle Corp. purchased 1,000 common shares of Holter Inc. for $ 24,000, as a Fair Value through Other Comprehensive Income (FV-OCI) equity investment. At December 31, 2020, the fair value of these shares was $ 26,550. The required adjusting entry to reflect this fact is

A) debit Fair value-OCI Investment, credit Holding Gain on Investment (OCI) $ 26,550.
B) debit Holding Gain on Investment (OCI), credit Fair value-OCI Investment $ 26,550.
C) debit Fair value-OCI Investment, credit Holding Gain on Investment (OCI) $ 2,550.
D) debit Holding Loss on Investment (OCI), credit Fair value-OCI Investment $ 2,550.

Question 27

An accrued revenue can best be described as an amount

A) collected and currently matched with expenses.
B) collected and not currently matched with expenses.
C) not collected and currently matched with expenses.
D) not collected and not currently matched with expenses

Question 28

An adjusting entry for bad debts will generally

A) increase an expense account and decrease an asset account.
B) increase an expense account and increase an asset account.
C) increase an expense account and increase a contra-asset account.
D) increase an expense account and increase a liability account.

Question 29

On December 10, 2020, Bella Inc. received a cheque for $ 13,625 from a customer for services that Bella will be performing in December 2020 and January 2021. By December 31, 2020, Bella had earned 60% of that amount. Assuming the appropriate year-end adjustments were made, the 2020 balance in Bella Unearned Revenue account will be

A) $ 8,175.
B) $ 6,812.50.
C) $ 5,450.
D) zero.

Question 30

On September 1, 2020, Rudolph Corporation received $ 54,000 cash from a tenant for one year's rent in advance, and recorded the transaction with a credit to Rent Revenue. The December 31, 2020, required adjusting entry in connection with this would be

A) debit Rent Revenue and credit Unearned Rent, $ 18,000.
B) debit Rent Revenue and credit Unearned Rent, $ 36,000.
C) debit Unearned Rent and credit Rent Revenue, $ 18,000.
D) debit Cash and credit Unearned Rent, $ 9,000.

Question 31

Use the following information for the following questions:
Orange Corp reported the following items on its calendar 2020 statement of comprehensive income:
$\begin{array}{llcc} \text { Interest revenue..................... } &\$84,200 \\ \text { Salaries expense..................... } &72,000\\ \text { Insurance expense.................. } &10,600\\\end{array}$
As well, their statements of financial position showed the following balances:
$\begin{array}{llcc} &\underline{\text {December 31, 2019 } } &\underline{ \text {December 31. } } \\ \underline{\text {2020 }} & & \\ \text {Accrued interest receivable................ } &\$10,100&\$8,800\\ \text { Accrued salaries payable...................} &9,800&5,400\\ \text { Prepaid insurance..............................} &1,500&1,600\\\end{array}$


-The cash received for interest during 2020 was

A) $ 82,900.
B) $ 84,200.
C) $ 85,500.
D) $ 74,100.

Question 32

On October 31, 2020, Kiwi Inc. lent $ 63,000 to Plum Inc. in return for a three-month, 4% interest-bearing note. What adjusting entry should Kiwi Inc. make on December 31, 2020, in connection with this note?

A) Debit Interest Receivable and credit Interest Revenue, $ 630.
B) Debit Cash and credit Interest Revenue, $ 420.
C) Debit Interest Receivable and credit Interest Revenue, $ 420.
D) Debit Interest Revenue and credit Interest Receivable, $ 210.

Question 33

Siamese Corp.'s account balances at December 31, 2020, included Accounts Receivable, $ 360,000 debit; Allowance for Doubtful Accounts, $ 400 debit. Sales during 2020 were $ 920,000. It is estimated that 2% of sales will be uncollectible. The required adjusting entry would include a credit to the allowance account for

A) $ 14,400.
B) $ 18,400.
C) $ 7,200.
D) $ 15,300.

Question 34

Use the following information for the following questions:
Orange Corp reported the following items on its calendar 2020 statement of comprehensive income:
$\begin{array}{llcc} \text { Interest revenue..................... } &\$84,200 \\ \text { Salaries expense..................... } &72,000\\ \text { Insurance expense.................. } &10,600\\\end{array}$
As well, their statements of financial position showed the following balances:
$\begin{array}{llcc} &\underline{\text {December 31, 2019 } } &\underline{ \text {December 31. } } \\ \underline{\text {2020 }} & & \\ \text {Accrued interest receivable................ } &\$10,100&\$8,800\\ \text { Accrued salaries payable...................} &9,800&5,400\\ \text { Prepaid insurance..............................} &1,500&1,600\\\end{array}$


-The cash paid for salaries during 2020 was

A) $ 76,400.
B) $ 72,000.
C) $ 67,600.
D) $ 81,800.

Question 35

The type of account and normal balance of "Accumulated Depreciation, Equipment" is

A) Asset, Credit.
B) Contra-asset, Credit.
C) Contra-asset, Debit.
D) Liability, Credit.

Question 36

On May 15, 2020, Croissant Corp. purchased 1,000 common shares of Holter Inc. for $ 24,000, as a Fair Value through Net Income (FV-NI) equity investment. At December 31, 2020, the fair value of these shares was $ 23,100. The required adjusting entry to reflect this fact is

A) debit Fair value-Net Income Investment, credit Holding Gain on Investment (OCI) $ 23,100.
B) debit Holding Gain on Investment (OCI), credit Fair value-Net Income Investment $ 23,100.
C) debit Fair value-Net Income Investment, credit Investment Income $ 15,900.
D) debit Investment Loss, credit Fair value-Net Income Investment $ 900.

Question 37

Lime Limited has received its invoice for $ 75,000 for property taxes for the calendar year 2020. The invoice was received and paid in June 2020 and the entire amount was debited to Property Tax Expense. Assuming Lime does NOT prepare interim financial statements, the required adjustment on December 31, 2020, related to the property taxes is

A) debit Property Tax Expense and credit Prepaid Property Tax $ 31,250.
B) debit Prepaid Property Tax and credit Property Tax Expense $ 37,500.
C) debit Property Tax Expense and credit Prepaid Property Tax $ 37,500.
D) No adjusting entry is required.

Question 38

For adjusting entries relating to accrued revenues,

A) a liability-revenue account relationship exists.
B) the adjusting entry involves a credit to an asset account and a debit to a revenue account.
C) if an adjustment is not made, assets will be overstated.
D) before adjustment, both assets and revenues are understated.

Question 39

If the accountant forgets to record an adjustment for Accumulated Depreciation, Building at the end of the accounting period, this will cause

A) an overstatement of assets.
B) an understatement of assets.
C) an overstatement of expenses.
D) an overstatement of liabilities.

Question 40

Principle Place determines that it has NOT yet recorded the 2020 accrual for interest revenue to be received in 2021. Assuming the amount to be recorded for 2020 is $ 6,000, the required adjustment at December 31, 2020, is

A) debit Interest Receivable and credit Interest Revenue $ 6,000.
B) debit Interest Revenue and credit Interest Receivable $ 6,000.
C) debit Interest Payable and credit Interest Revenue $ 6,000.
D) No adjusting entry is required.

Question 41

Use the following information for the following questions:
Orange Corp reported the following items on its calendar 2020 statement of comprehensive income:
$\begin{array}{llcc} \text { Interest revenue..................... } &\$84,200 \\ \text { Salaries expense..................... } &72,000\\ \text { Insurance expense.................. } &10,600\\\end{array}$
As well, their statements of financial position showed the following balances:
$\begin{array}{llcc} &\underline{\text {December 31, 2019 } } &\underline{ \text {December 31. } } \\ \underline{\text {2020 }} & & \\ \text {Accrued interest receivable................ } &\$10,100&\$8,800\\ \text { Accrued salaries payable...................} &9,800&5,400\\ \text { Prepaid insurance..............................} &1,500&1,600\\\end{array}$


-The cash paid for insurance premiums during 2020 was

A) $ 9,100.
B) $ 9,000.
C) $ 10,700.
D) $ 10,600.

Question 42

On September 1, 2019, Culver Corp. issued a 9% note payable to National Bank for $ 750,000, payable in three equal annual principal payments of $ 250,000, plus interest. On this date, the bank's prime rate was 8%. The first payment for interest and principal was made on September 1, 2020. At December 31, 2020, Culver should record accrued interest payable of

A) $ 13,333.
B) $ 22,500.
C) $ 15,000.
D) $ 10,000.

Question 43

The salary expense on the 2020 statement of comprehensive income was

A) $ 118,400.
B) $ 133,100.
C) $ 131,300.
D) $ 129,500.

Question 44

A corporation's net income or loss is closed at year end to

A) Accumulated Other Comprehensive Income.
B) Common Shares.
C) Retained Earnings.
D) Other Comprehensive Income.

Question 45

Which type of account is always debited during the closing process?

Question 46

Which of the following is NOT an account appearing in the equity section of a corporation's statement of financial position?

A) Contributed Surplus
B) Common Shares
C) Owner's Equity
D) Accumulated Other Comprehensive Income

Question 47

On June 1, 2020, Carr Corp. loaned Farr Corp. $ 600,000 on a 5% note, payable in five annual instalments of $ 120,000 (plus interest), beginning January 2, 2021. Interest on the note is payable on the first day of each month beginning July 1, 2020. Farr made timely payments through November 1, 2020. On January 2, 2021, Carr received payment of the first principal instalment plus all interest due. At December 31, 2020, Carr's interest receivable on this loan is

A) $ 0.
B) $ 2,500.
C) $ 5,000.
D) $ 7,500.

Question 48

Which of the following statements is INCORRECT regarding fair value adjustments for investments?

A) Both FV-NI investments and FV-OCI investments could include equity investments or investments in debt securities.
B) FV-OCI investments exclude debt securities.
C) At each period end, an estimate is made of the fair value of both FV-NI and FV-OCI investments.
D) An adjusting entry is required to record a holding gain or loss on FV-NI investments.

Question 49

Amazing Company acquires a trade name from Fantastic Ltd. Amazing estimates it will receive $ 7,200 per year from the name over the next 9 years. Using a discount rate of 4%, what is the value in use to Amazing of this trade name?

A) $ 45,528
B) $ 58,398
C) $ 53,534
D) $ 55,676

Question 50

Use the following information for the following questions:
During the 2020 calendar year, Purple Corp. paid or collected the following items:
$\begin{array}{llcc} \text { Insurance premiums paid................... } &\$14,200 \\ \text { Interest collected................................ } &21,700\\ \text { Salaries paid....................................... } &131,300\\\end{array}$
As well, the comparative statement of financial position showed the following balances:
$\begin{array}{cccc}&\underline{ \text { December 31,2019 } }&\underline{ \text { December 31,2020} }\\ \text { Prepaid Insurance..................... } &\$1,400&\$1,500 \\ \text { Interest Receivable..................... } &2,800&2,100\\ \text {Salaries Payable.......................... } &14,700&12,900\\ \text { } &\\ \text { } &\\ \text { } &\\\end{array}$


-The insurance expense on the 2019 statement of comprehensive income was

A) $ 12,700.
B) $ 12,800.
C) $ 14,100.
D) $ 14,200.

Question 51

Mark-Wall Corp.'s trademark was licensed to Rodgers Inc. for royalties of 12% of sales of the trademarked items. Royalties are payable semi-annually on March 15 for sales in July through December of the previous year, and on September 15 for sales in January through June of the same year. Mark-Wall received the following royalties from Rodgers: $\begin{array}{ccc} & \underline{\text { March 15 }} & \underline{\text { September 15 }} \\\text { During 2019 } & \$ 5,000 & \$ 9,000 \\\text { During 2020 } & 8,000 & 6,000\end{array}$ Rodgers estimates that sales of the trademarked items would total $ 67,000 for July through December 2020. On their statement of comprehensive income for calendar 2020, Mark-Wall's royalty revenue should be

A) $ 8,040.
B) $ 14,000.
C) $ 14,040.
D) $ 21,000.

Question 52

Zack Jones operates a sole proprietorship, selling sporting equipment. He has recently prepared financial statements for the fiscal year end of the business. Which equity accounts would you expect to see on the balance sheet?

A) Common Shares, Dividends, and Owner's Equity
B) Common Shares, Capital, and Withdrawals
C) Capital and Withdrawals, grouped or added under Owner's Equity
D) Owner's Equity and Dividends, netted together as Retained Earnings

Question 53

Rathbone Corp. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service Revenues. This account had a balance of $ 1,100,000 at December 31, 2020, before year-end adjustment. Service contract costs are charged as incurred to the Service Contract Expense account, which had a balance of $ 325,000 at December 31, 2020.
Service contracts still outstanding at December 31, 2020, expire as follows:
$\begin{array} { l r } \text { During 2021 } & \$ 140,000 \\\text { During 2022 } & 210,000 \\\text { During 2023 } & 99,000\end{array}$
What amount should be reported as Unearned Service Revenues on Rathbone's December 31, 2020, statement of financial position?

A) $ 774,000
B) $ 325,000
C) $ 449,000
D) $ 124,000

Question 54

In the closing process, all the revenue and expense accounts are transferred to a clearing or suspense account called

A) Other Comprehensive Income.
B) Common Shares.
C) Retained Earnings.
D) Income Summary.

Question 55

What account are the net revenues and expenses transferred to at the end of the accounting cycle?

A) Comprehensive Income
B) Retained Earnings
C) Accumulated Other Comprehensive Income
D) Share Capital

Question 56

An unearned revenue can best be described as an amount

A) collected and currently matched with expenses.
B) collected and not currently matched with expenses.
C) not collected and currently matched with expenses.
D) not collected and not currently matched with expenses.

Question 57

Grant Limited pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the next biweekly period. Grant accrues salaries expense only at its December 31 year end. Data relating to salaries earned in December 2020 are as follows: Last payroll was paid on Dec 27, 2020, for the two-week period ended Dec 27, 2020.
Overtime pay earned in the two-week period ended Dec 27, 2020 was $ 7,000.
Remaining work days in 2020 were December 28, 29, 30, on which days there was no overtime.
The regular biweekly salaries total $ 100,000. Assuming a five-day work week, Grant should record a liability at December 31, 2020 for accrued salaries of

A) $ 24,000.
B) $ 29,000.
C) $ 37,000.
D) $ 53,000.

Question 58

Marvin holds 10% of the common shares of Pink Limited. For the 2020 fiscal year end, all shareholders received a cash payment to represent their share in the net income of Pink Limited. How would this cash payment be reported in the equity section of Pink Limited's financial statements?

A) as a reduction in the Owner's Equity account
B) as an owner withdrawal, reducing Shareholder's Equity of Pink Limited
C) as a dividend, reducing Shareholder's Equity of Pink Limited
D) This payment would not impact the equity section of the financial statements.

Question 59

Use the following information for the following questions:
During the 2020 calendar year, Purple Corp. paid or collected the following items:
$\begin{array}{llcc} \text { Insurance premiums paid................... } &\$14,200 \\ \text { Interest collected................................ } &21,700\\ \text { Salaries paid....................................... } &131,300\\\end{array}$
As well, the comparative statement of financial position showed the following balances:
$\begin{array}{cccc}&\underline{ \text { December 31,2019 } }&\underline{ \text { December 31,2020} }\\ \text { Prepaid Insurance..................... } &\$1,400&\$1,500 \\ \text { Interest Receivable..................... } &2,800&2,100\\ \text {Salaries Payable.......................... } &14,700&12,900\\ \text { } &\\ \text { } &\\ \text { } &\\\end{array}$


-The interest revenue on the 2020 statement of comprehensive income was

A) $ 22,400.
B) $ 21,700.
C) $ 19,600.
D) $ 21,000.

Question 60

On December 1, 2020, Flynn Consulting paid $ 27,000 for a three-year insurance policy (December 1, 2020 to November 30, 2023) and debited the entire amount to Prepaid Insurance. The December 31, 2020, required adjusting entry in connection with this policy would be

A) debit Prepaid Insurance and credit Insurance Expense $ 750.
B) debit Insurance Expense and credit Prepaid Insurance $ 750.
C) debit Insurance Expense and credit Prepaid Insurance $ 26,250.
D) debit Prepaid Insurance and credit Insurance Expense $ 26,250.

Question 61

A post-closing trial balance

A) includes temporary accounts only.
B) includes permanent accounts only.
C) includes both temporary and permanent accounts.
D) may include expense accounts.

Question 62

3-76 Journal entries
Jonathan Green owns Gopher Greenhouses, a gardening centre (as a sole proprietorship). His first year of operations included the following selected events and transactions:
January:
May:
June:
August:
Instructions
Prepare all required journal entries.

Question 63

3-68 The accounting cycle
Summarize the steps in the accounting cycle.

Question 64

3-66 Definitions
Provide clear, concise answers for the following:
1. What is the accrual basis of accounting?
2. What is an accrued expense?
3. What is accrued revenue?
4. What is a prepaid expense?
5. What is unearned revenue?

Question 65

Frog Corporation had revenues of $ 300,000, expenses of $ 200,000, and dividends of $ 45,000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a

Question 66

3-67 Recordable events
Before transactions are entered into a corporation's accounting system, the underlying event must be analyzed, to determine how (and if) it should be recorded. The situations below relate to Maxwell Corporation:
Instructions
Indicate whether the items below are recordable events.
1. A new mortgage contract for its new factory building is signed.
2. The first mortgage payment is made.
3. Wages for the current month are paid.
4. A new secretary is hired.
5. Property taxes are paid.
6. HST collections for the current month are forwarded to the CRA.

Question 67

3-77 Adjusting entries
The information shown below relates to Flower Corporation. At December 31, 2020, Flower's general ledger shows the following balances:
In addition, the following information is available:
1. The entire amount shown as prepaid lease has expired.
2. One-third of the amount shown as prepaid insurance has expired.
3. Half of the amount shown as unearned revenue has now been earned.
Instructions
Prepare all adjusting entries that are required at December 31, 2020.

Question 68

3-78 Adjusting entries
Part I - Maison Corp. has reported pre-tax income of $ 250,000 for calendar 2020, before considering the five items below. Prepare the adjusting entries needed at December 31, 2020 in order to correctly state the 2020 pre-tax income. If no entry is needed, write NONE.
1. Interest on a $ 42,000, 7%, six-year note payable was last paid on September 1, 2019.
2. On May 31, 2020, Maison entered into a contract to provide services to a customer for 18 months beginning June 1. The customer paid the $ 18,000 fee in full on June 1 and Maison credited it to Service Revenue.
3. On August 1, 2020, Maison paid a year's rent in advance on a warehouse, and debited the $ 48,000 payment to Prepaid Rent.
4. Depreciation on office equipment for 2020 is $ 17,000.
5. On December 18, 2020, Maison paid the local newspaper $ 1,000 for an advertisement to be run in January of 2021, debiting it to Prepaid Advertising.
Part II - Show the effect of each adjusting entry in Part I on previously reported pre-tax income, and indicate the correct amount of pre-tax income.

Question 69

3-74 Calculation of expense
Sales salaries paid during 2020 were $ 90,000. Advances to salesmen were $ 1,300 on January 1, 2020, and $ 800 on December 31, 2020. Sales salaries payable were $ 1,300 on January 1, 2020, and $ 1,400 on December 31, 2020.
Instructions
Calculate the Sales Salaries Expense for calendar 2020.

Question 70

3-69 Adjusting entries
Present, in journal form, the adjustments that would be made on July 31, 2020, the end of the fiscal year, for each of the following:
1. The supplies inventory on August 1, 2019, was $ 8,350. Supplies costing $ 16,650 were purchased during the fiscal year and debited to Supplies Inventory. A count on July 31, 2020, indicated supplies on hand of $ 6,810.
2. On April 30, a ten-month, 4% note for $ 40,000 was received from a customer.
3. On March 1, $ 8,400 was collected as rent for one year and a nominal (temporary) account was credited.

Question 71

3-65Definitions
Define the following terms:
1. Event
2. Work sheet
3. Permanent accounts
4. Temporary accounts
5. Income summary
6. General ledger

Question 72

3-70 Adjusting entries
Reed Co. wishes to record receipts and payments in such a manner that adjustments at the end of the period will NOT require reversing entries at the beginning of the next period.
Instructions
Record the following transactions in the desired manner; as well, record the adjusting entry on December 31, 2020. (Two entries for each part.)
1. An insurance policy for two years was purchased on April 1, 2020, for $ 18,000.
2. Rent of $ 12,000 for six months for a portion of the building was received on November 1, 2020.

Question 73

3-80 Adjusting and closing entries
1. Using the adjusted trial balance of Charles Corporation from Pr. 3-99, journalize the adjustments that were made.
2. Using the adjusted trial balance of Charles Corporation from Pr. 3-99, journalize the closing entries that are required.

Question 74

3-72 Calculation of revenue
The records for Oriole Corp. showed the following for 2020:
Instructions
Show the calculation of the amount of revenue that should be reported on the 2020 statement of comprehensive income.

Question 75

3-79 Adjusting and closing entries
The following trial balance was taken from the books of Kaslo Corporation at December 31, 2020:
At year end, the following items have not yet been recorded.
1. Insurance expired during the year, $ 3,000.
2. Estimated bad debts, 1 percent of gross sales.
3. Depreciation on furniture and equipment, 10% per year.
4. Interest at 9% is receivable on the note for one full year.
5. Rent paid in advance at December 31, $ 6,800 (originally debited to expense).
6. Accrued salaries at December 31, $ 6,200.
Instructions
a) Prepare the necessary adjusting entries.
b) Prepare the necessary closing entries.

Question 76

Which of the following statements about the trial balance is correct?

A) The debits and credits must balance.
B) The equality of credits and debits ensures that no errors were made.
C) The post-closing trial balance includes temporary accounts only.
D) The post-closing trial balance is used to prepare the financial statements.

Question 77

If the inventory account at the end of the year is understated, the effect will be to

A) overstate the cost of goods sold.
B) understate the net purchases.
C) overstate the gross profit on sales.
D) overstate the goods available for sale.

Question 78

3-75 Type of ownership structure
Explain whether the financial statement excerpt below is from the financial statements of a corporation, a sole proprietorship, or a partnership:

Question 79

3-71 Calculation of expense
The records for Jay Inc. showed the following for 2020:
Instructions
Calculate the total amount of expenses that should be reported on the 2020 statement of comprehensive income.

Question 80

3-73 Preparing financial statements
The adjusted trial balance of Ryan Financial Planners appears below.
Instructions
Using the information from the adjusted trial balance, you are to prepare for the month ended December 31:
Ryan Financial Planners
Adjusted Trial Balance
December 31, 2020