Question 1

Interim financial statements refer to financial reports:

Accepted Answer

A) That cover less than one year,usually spanning one,three,or six-month periods. 
B) That are prepared before any adjustments have been recorded. 
C) That show the assets above the liabilities and the liabilities above the equity. 
D) Where revenues are reported on the income statement when cash is received and expenses are reported when cash is paid. 
E) Where the adjustment process is used to assign revenues to the periods in which they are earned and to match expenses with revenues. 
A) That cover less than one year,usually spanning one,three,or six-month periods. 
B) That are prepared before any adjustments have been recorded. 
C) That show the assets above the liabilities and the liabilities above the equity. 
D) Where revenues are reported on the income statement when cash is received and expenses are reported when cash is paid. 
E) Where the adjustment process is used to assign revenues to the periods in which they are earned and to match expenses with revenues.

Question 2

During the current year ended December 31,clients paid fees in advance for accounting services amounting to $15,000.These fees were recorded in an account called Unearned Accounting Fees.If $3,500 of these fees remains unearned on December 31 of this year,present the December 31 adjusting entry to bring the accounts up to date.

Accepted Answer

The answer of During the current year ended December 31,clients...

Question 3

Depreciation expense is an example of an accrued expense.

Accepted Answer

A) True 
 B)False

Question 4

Abdulla Co.collected 6-months' rent in advance from a tenant on October 1 of the current year.When it collected the cash,it recorded the following entry:   Prepare the required adjusting entry at December 31 of the current year.

Accepted Answer

@#IMG-DLM& ($15,000/6 mo.= $2,

Question 5

On October 1,Goodwell Company rented warehouse space to a tenant for $2,500 per month.The tenant paid five months' rent in advance on that date.The collection was credited to the Unearned Rent account.The company's annual accounting period ends on December 31.The adjusting entry needed on December 31 is:

Accepted Answer

A) Debit Rent Receivable,$12,500;credit Rent Earned,$12,500. 
B) Debit Rent Receivable,$7,500;credit Rent Earned,$7,500. 
C) Debit Unearned Rent,$7,500;credit Rent Earned,$7,500. 
D) Debit Unearned Rent,$5,000;credit Rent Earned,$5,000. 
E) Debit Unearned Rent,$12,500;credit Rent Earned,$12,500. 
A) Debit Rent Receivable,$12,500;credit Rent Earned,$12,500. 
B) Debit Rent Receivable,$7,500;credit Rent Earned,$7,500. 
C) Debit Unearned Rent,$7,500;credit Rent Earned,$7,500. 
D) Debit Unearned Rent,$5,000;credit Rent Earned,$5,000. 
E) Debit Unearned Rent,$12,500;credit Rent Earned,$12,500.

Question 6

On November 1 of the current year,Salinger Company paid $9,600 cash for a one-year insurance policy that took effect on that day.On the date of the payment,Salinger recorded the following entry:   Prepare the required adjusting entry at December 31 of the current year.

Accepted Answer

@#IMG-DLM& ($9,600/12 mo.= $80

Question 7

On April 1,Santa Fe,Inc.paid Griffith Publishing Company $1,548 for 36-month subscriptions to several different magazines.Santa Fe debited the prepayment to a Prepaid Subscriptions account,and the subscriptions started immediately.What amount should appear in the Prepaid Subscription account for Santa Fe,Inc.after adjustments on December 31 of the second year assuming the company is using a calendar reporting period and the previous year adjustment had been made?

Accepted Answer

A) $1,548. 
B) $387. 
C) $516. 
D) $645. 
E) $0. 
A) $1,548. 
B) $387. 
C) $516. 
D) $645. 
E) $0.

Question 8

The accounting principle that requires revenue to be recorded when earned is the:

Accepted Answer

A) Matching principle. 
B) Revenue recognition principle. 
C) Time period assumption. 
D) Accrual reporting principle. 
E) Going-concern assumption. 
A) Matching principle. 
B) Revenue recognition principle. 
C) Time period assumption. 
D) Accrual reporting principle. 
E) Going-concern assumption.

Question 9

Earned but uncollected revenues are recorded during the adjusting process with a credit to a revenue account and a debit to an expense account.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Unearned revenue is reported in the financial statements as:

Accepted Answer

A) A revenue on the balance sheet. 
B) A liability on the balance sheet. 
C) An unearned revenue on the income statement. 
D) An asset on the balance sheet. 
E) A financing activity on the statement of cash flows. 
A) A revenue on the balance sheet. 
B) A liability on the balance sheet. 
C) An unearned revenue on the income statement. 
D) An asset on the balance sheet. 
E) A financing activity on the statement of cash flows.

Question 12

The time period assumption assumes that an organization's activities may be divided into specific reporting time periods including all of the following except:

Accepted Answer

A) Months. 
B) Quarters. 
C) Fiscal years. 
D) Calendar years. 
E) Days. 
A) Months. 
B) Quarters. 
C) Fiscal years. 
D) Calendar years. 
E) Days.

Question 13

On January 1,Fashion Forward Magazine received $15,000 from subscribers for the annual subscriptions that it recorded in Unearned Subscription Revenue.The issues of the magazine are mailed to subscribers quarterly.What amount of tuition revenue should the magazine recognize on March 31 when the first issue is sent in March?

Accepted Answer

A) $15,000. 
B) $1,250. 
C) $7,500. 
D) $3,750. 
E) $0. 
A) $15,000. 
B) $1,250. 
C) $7,500. 
D) $3,750. 
E) $0.

Question 14

An annual reporting period consisting of any twelve consecutive months is known as:

Accepted Answer

A) Fiscal year. 
B) Calendar year. 
C) Interim financial period. 
D) Natural business year. 
E) Seasonal year. 
A) Fiscal year. 
B) Calendar year. 
C) Interim financial period. 
D) Natural business year. 
E) Seasonal year.

Question 15

An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded.

Accepted Answer

A) True 
 B)False

Question 16

A company's Office Supplies account shows a beginning balance of $600 and an ending balance of $400.If office supplies expense for the year is $3,100,what amount of office supplies was purchased during the period?

Accepted Answer

A) $2,700. 
B) $2,900. 
C) $3,300. 
D) $3,500. 
E) $3,700. 
A) $2,700. 
B) $2,900. 
C) $3,300. 
D) $3,500. 
E) $3,700.

Question 17

All of the following statements regarding profit margin are true except:

Accepted Answer

A) Profit margin reflects the percent of profit in each dollar of revenue. 
B) Profit margin is also called return on sales. 
C) Profit margin can be used to compare a firm's performance to its competitors. 
D) Profit margin is calculated by dividing net income by net sales. 
E) Profit margin is not a useful measure of a company's operating results. 
A) Profit margin reflects the percent of profit in each dollar of revenue. 
B) Profit margin is also called return on sales. 
C) Profit margin can be used to compare a firm's performance to its competitors. 
D) Profit margin is calculated by dividing net income by net sales. 
E) Profit margin is not a useful measure of a company's operating results.

Question 18

Prepare adjusting entries for the year ended December 31,for each of these separate situations.Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance are initially recorded as liabilities.
a.The Prepaid Rent account has a debit balance of $8,000 before adjustment,representing a prepayment for four months' rent made on December 1 of the current year.
b.One-third of the work related to $18,000 of cash received in advance was performed during this period.
c.Unpaid accrued salaries at December 31 amounts to $15,000
d.Work was completed for a client on December 31 in the amount of $21,000,but was not previously billed or recorded.
e.Estimated depreciation on office equipment is $27,000.

Accepted Answer

The answer of Prepare adjusting entries for the year ended...

Question 19

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31.This oversight would:

Accepted Answer

A) Understate net income by $28,000. 
B) Overstate net income by $28,000. 
C) Have no effect on net income. 
D) Overstate assets by $28,000. 
E) Understate assets by $28,000. 
A) Understate net income by $28,000. 
B) Overstate net income by $28,000. 
C) Have no effect on net income. 
D) Overstate assets by $28,000. 
E) Understate assets by $28,000.

Question 20

It is acceptable to record prepayment of expenses as debits to expense accounts if an adjusting entry is made at the end of the period to bring the asset account balance to the correct unused or unexpired amount.

Accepted Answer

A) True 
 B)False

Exam 3: Adjusting Accounts and Preparing Financial Statements

Interim financial statements refer to financial reports:

Depreciation expense is an example of an accrued expense.

Abdulla Co.collected 6-months' rent in advance from a tenant on October 1 of the current year.When it collected the cash,it recorded the following entry: Prepare the required adjusting entry at December 31 of the current year.

On November 1 of the current year,Salinger Company paid $9,600 cash for a one-year insurance policy that took effect on that day.On the date of the payment,Salinger recorded the following entry: Prepare the required adjusting entry at December 31 of the current year.

The accounting principle that requires revenue to be recorded when earned is the:

Earned but uncollected revenues are recorded during the adjusting process with a credit to a revenue account and a debit to an expense account.

Unearned revenue is reported in the financial statements as:

The time period assumption assumes that an organization's activities may be divided into specific reporting time periods including all of the following except:

An annual reporting period consisting of any twelve consecutive months is known as:

An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded.

A company's Office Supplies account shows a beginning balance of $600 and an ending balance of $400.If office supplies expense for the year is $3,100,what amount of office supplies was purchased during the period?

All of the following statements regarding profit margin are true except:

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31.This oversight would:

It is acceptable to record prepayment of expenses as debits to expense accounts if an adjusting entry is made at the end of the period to bring the asset account balance to the correct unused or unexpired amount.

Accounting in Business

Analyzing and Recording Transactions

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Appendix B: Time Value of Money

Appendix C: Activity-Based Costing

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