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Exam 3: Adjusting Accounts for Financial Statements

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Question 31

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The closing process is necessary in order to:

A) Calculate net income or net loss for an accounting period.
B) Ensure that all permanent accounts are closed to zero at the end of each accounting period.
C) Ensure that the company complies with state laws.
D) Ensure that net income or net loss and dividends for the period are closed into the retained earnings account.
E) Ensure that management is aware of how well the company is operating.

F) None of the above
G) A) and D)

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Question 32

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An adjusting entry could be made for each of the following except:

A) Prepaid expenses.
B) Depreciation.
C) Stockholder investments.
D) Unearned revenues.
E) Accrued expenses.

F) C) and D)
G) A) and D)

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Question 33

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A ________ account is an account linked with another account,having an opposite normal balance,and reported as a subtraction from that other account's balance.

Prior to recording adjusting entries at the end of an accounting period,some accounts may not show correct balances even though all transactions were properly recorded.

Which of the following accounts could not be classified as a current liability?

All of the following regarding the current ratio are true except:

Closing revenue and expense accounts at the end of the accounting period serves to make the revenue and expense accounts ready for use in the next period.

On December 1,Milton Company borrowed $300,000,at 8% annual interest,from the Tennessee National Bank.Interest is paid when the loan matures one year from the issue date.What is the adjusting entry for accruing interest that Milton would need to make on December 31,the calendar year-end?

The Retained earnings account has a credit balance of $37,000 before closing entries are made.If total revenues for the period are $55,200,total expenses are $39,800,and dividends are $9,000,what is the ending balance in the Retained earnings account after all closing entries are made?

If Regent Tax Services' office supplies account balance on March 1 was $1,400,the company purchased $675 of supplies during the month,and a physical count of supplies on hand at the end of March indicated $1,250 unused,what is the amount of the adjusting entry for office supplies on March 31?

The balances in the unadjusted columns of a work sheet will agree with:

Glisten Co.leases an office to a tenant at the rate of $3,000 per month.The tenant contacted Glisten and arranged to pay the rent for December on January 8 of the following year.Glisten agrees to this arrangement. a.)Prepare the journal entry that Glisten must make at year ended December 31 to record the accrued rent revenue. b.)Prepare the journal entry to record the receipt of the rent on January 8 of the following year (Assume no reversing entries were made).

A company pays each of its two office employees each Friday at the rate of $100 per day for a five-day week that begins on Monday.If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday,the month-end adjusting entry to record the salaries earned but unpaid is:

The unadjusted trial balance and the adjustment data for Porter Business Institute are shown below along with adjusting entry information.What is the impact of the adjusting entries on the balance sheet? Show the calculation for total assets,total liabilities,and equity without the adjustments; show the calculation for total assets,total liabilities,and equity with the adjustments.Which one provides the most accurate presentation of the balance sheet? Additional information items: a.The Prepaid Insurance account consists of a payment for a 1 year policy.An analysis of the insurance invoice indicates that one half of the policy has expired by the end of the December 31 year-end. b.A cash payment for space sublet for 8 months was received on July 1 and was credited to Unearned Rent. c.Accrued interest expense on the note payable of $1,000 has been incurred but not paid.

Which of the following statements regarding reporting under GAAP and IFRS is not true:

Rogers Company's employees are paid a total of $1,600 per day for a 5-day workweek.The employees are paid each Friday.This year the accounting period ends on Tuesday.Prepare the December 31 year-end adjusting journal entry Rogers Company should make to accrue salaries.

A work sheet contains all of the balances for each account and therefore may be used as a substitute for the set of financial statements.

Revenue accounts are temporary accounts that should begin each accounting period with zero balances.

Which of the following statements about a company's operating cycle is not true:

Use the information in the adjusted trial balance presented below to calculate the current ratio for Taron Company: $\begin{array}{lrr}\text {Account Title}&\text {Dr.}&\text {Cr} \\\text { Cash } & \$ 23,000 \\\text { Accounts receivable } & 16,000 \\\text { Prepaid insurance } & 6,600 \\\text { Equipment } & 100,000\\\text { Accumulated depreciation-Equipment } & & \$ 5,000 \\\text { Land } & 95,000 & \\\text { Accounts payable } & & 17,000 \\\text { Interest payable } & & 2,400 \\\text { Unearned revenue } & & 5,000 \\\text { Long-term notes payable } & & 30,000 \\\text { Retained earnings } & & 136,200 \\\text { Totals } & \$ 240,600 & \$ 240,600\end{array}$