Question 1

Flagg, Inc. records adjusting entries at its December 31 year end. At December 31, employees had earned $12,000 of unpaid and unrecorded salaries. The next payday is January 3, at which time $30,000 will be paid. Prepare the journal on January 3 to record payment assuming the adjusting and reversing entries were made on December 31 and January 1.

Accepted Answer

A) Debit Salaries expense $12,000; debit Salaries payable $18,000; credit Cash $30,000. 
B) Debit Salaries expense $30,000; credit Cash $30,000. 
C) Debit Salaries payable $30,000; credit Cash $30,000. 
D) Debit Salaries expense $18,000; debit Salaries payable $12,000; credit Cash $30,000. 
E) Debit Salaries expense $18,000; credit Cash $18,000.

Question 2

The last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements, recording adjusting entries, and recording closing entries.

Accepted Answer

A) True 
 B)False

Question 3

Adjusting entries are made after the preparation of financial statements.

Accepted Answer

A) True 
 B)False

Question 4

If a company has current assets of $15,000 and current liabilities of $9,500, its current ratio is 1.6.
Current Ratio = Current Assets/Current Liabilities
Current Ratio = $15,000/$9,500 = 1.6

Accepted Answer

A) True 
 B)False

Question 5

The company paid $35,000 cash in dividends to the owner, Jen Rogers. The entry needed to close the dividends account is:

Accepted Answer

A) Debit Income Summary and credit Cash for $35,000. 
B) Debit Dividends and credit Cash for $35,000. 
C) Debit Income Summary and credit Dividends for $35,000. 
D) Debit Retained Earnings and credit Dividends for $35,000. 
E) Debit Dividends and credit Retained Earnings for $35,000.

Question 6

Reversing entries:

Accepted Answer

A) Are optional. 
B) Are mandatory. 
C) Correct errors in journal entries. 
D) Are required by GAAP. 
E) Are prepared on the worksheet.

Question 7

The steps in the closing process are (1) close credit balances in revenue accounts to Income Summary; (2) close debit balances in expense accounts to Income Summary; (3) close Income Summary to Retained Earnings; (4) close Dividends to Retained Earnings.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following assets is not depreciated?

Accepted Answer

A) Store fixtures. 
B) Computers. 
C) Land. 
D) Buildings. 
E) Equipment.

Question 9

Before an adjusting entry to recognize the cost of expired insurance for the period is made, Prepaid Insurance and Insurance Expense are both overstated.

Accepted Answer

A) True 
 B)False

Question 10

Assuming unearned revenues are originally recorded in balance sheet accounts, the adjusting entry to record earning of unearned revenue is:

Accepted Answer

A) Increase an expense; increase a liability. 
B) Increase an asset; increase revenue. 
C) Decrease a liability; increase revenue. 
D) Increase an expense; decrease an asset. 
E) Increase an expense; decrease a liability.

Question 11

A company shows a $600 balance in Prepaid Rent in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired rent of $200. This adjusting entry results in:

Accepted Answer

A) $200 decrease in net income. 
B) $200 increase in net income. 
C) $200 difference between the debit and credit columns of the Unadjusted Trial Balance. 
D) $200 of prepaid insurance. 
E) An error in the financial statements.

Question 12

Interim financial statements report a company's business activities for a one-year period.

Accepted Answer

A) True 
 B)False

Question 13

For each of the following two separate situations, present both the April 30 adjusting entry and the subsequent entry during May to record the payment of the accrued expenses or receipt of the accrued revenue.
a. Nicolas Company has 5 employees, who earn a total of $2,900 in salaries each working day. They are paid on Monday for the five-day workweek ending on the previous Friday. Assume that fiscal year ended April 30, is a Thursday and all employees worked each day and will be paid salaries for five full days on the following Monday.
b. Services of $3,000 have been performed for Clevenger Company through April 30. The client will pay the entire amount of the contract when services are completed on May 23.
c. Paid the employees' salaries on May 4.
d. Received payment from Clevenger Company for services that are now completed on May 23.

Accepted Answer

The answer of For each of the following two separate...

Question 14

When closing entries are made:

Accepted Answer

A) All ledger accounts are closed to start the new accounting period. 
B) All temporary accounts are closed but permanent accounts are not closed. 
C) All real accounts are closed but nominal accounts are not closed. 
D) All permanent accounts are closed but nominal accounts are not closed. 
E) All balance sheet accounts are closed.

Question 15

A company's December 31 work sheet appears below with summary amounts in the Income Statement and Balance Sheet columns. Prepare the four necessary closing entries.

Accepted Answer

The answer of A company's December 31 work sheet appears...

Question 16

Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.

Accepted Answer

A) True 
 B)False

Question 17

At the beginning of the year, a company's balance sheet reported the following balances: Total Assets = $225,000; Total Liabilities = $125,000; and Retained Earnings = $100,000. During the year, the company reported revenues of $46,000 and expenses of $30,000. In addition, dividends for the year totaled $20,000. Assuming no other changes to retained earnings, the balance in the retained earnings account at the end of the year would be:

Accepted Answer

A) $116,000. 
B) $136,000. 
C) $24,000. 
D) $96,000. 
E) $104,000.

Question 18

The purpose of reversing entries is to:

Accepted Answer

A) Simplify a company's recording of certain journal entries in the future. 
B) Correct errors made in previous journal entries. 
C) Ensure that closing entries have been properly posted to the ledger accounts. 
D) Make certain that only permanent accounts are carried forward into the next accounting period. 
E) Complete a required step in the accounting cycle.

Question 19

A company recorded 2 days of accrued salaries of $1,400 for its employees on January 31. On February 9, it paid its employees $7,000 for these accrued salaries and for other salaries earned through February 9. Assuming reversing entries were not made, the January 31 and February 9 journal entries are:

Accepted Answer

A)   
B)   
C)   
D)   
E)

Question 20

Prior to recording adjusting entries on December 31, a company's Office Supplies account had a $780 debit balance. A physical count of the supplies showed $425 of unused supplies available as of December 31. Prepare the required adjusting entry.

Accepted Answer

The answer of Prior to recording adjusting entries on December...

Exam 3: Adjusting Accounts for Financial Statements

The last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements, recording adjusting entries, and recording closing entries.

Adjusting entries are made after the preparation of financial statements.

If a company has current assets of $15,000 and current liabilities of $9,500, its current ratio is 1.6. Current Ratio = Current Assets/Current Liabilities Current Ratio = $15,000/$9,500 = 1.6

The company paid $35,000 cash in dividends to the owner, Jen Rogers. The entry needed to close the dividends account is:

Reversing entries:

The steps in the closing process are (1) close credit balances in revenue accounts to Income Summary; (2) close debit balances in expense accounts to Income Summary; (3) close Income Summary to Retained Earnings; (4) close Dividends to Retained Earnings.

Which of the following assets is not depreciated?

Before an adjusting entry to recognize the cost of expired insurance for the period is made, Prepaid Insurance and Insurance Expense are both overstated.

Assuming unearned revenues are originally recorded in balance sheet accounts, the adjusting entry to record earning of unearned revenue is:

A company shows a $600 balance in Prepaid Rent in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired rent of $200. This adjusting entry results in:

Interim financial statements report a company's business activities for a one-year period.

When closing entries are made:

A company's December 31 work sheet appears below with summary amounts in the Income Statement and Balance Sheet columns. Prepare the four necessary closing entries.

Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.

The purpose of reversing entries is to:

Prior to recording adjusting entries on December 31, a company's Office Supplies account had a $780 debit balance. A physical count of the supplies showed $425 of unused supplies available as of December 31. Prepare the required adjusting entry.