Exam 3: Adjusting Accounts for Financial Statements

The following information is available for Hatter Co. From the information provided,calculate Hatter's profit margin ratio for each of the three years.In 2016,economic conditions and a slowing economy impacted the results of operations.Comment on the results,assuming that the industry average for the profit margin ratio is 7% for each of the three years.

High Step Shoes had annual revenues of $185,000,expenses of $103,700,and dividends of $18,000 during the current year.The retained earnings account before closing had a balance of $297,000.The entry to close the Income Summary account at the end of the year,after revenue and expense accounts have been closed,is:

When there is a net loss,the Income Summary account would have a credit balance.

Which of the following is classified as a plant asset?

On April 1,Garcia Publishing Company received $1,548 from Otisco,Inc.for 36-month subscriptions to several different magazines.The company credited Unearned Fees for the amount received and the subscriptions started immediately.Assuming adjustments are only made at year-end,What is the adjusting entry that should be recorded by Garcia Publishing Company on December 31 of the first year?

The Income Summary account is used to:

The accrual basis of accounting requires adjustments to recognize revenues in the periods they are earned and to match expenses with revenues.

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

The Retained earnings account has a credit balance of $37,000 before closing entries are made.Total revenues for the period are $55,200,total expenses are $39,800,and dividends are $9,000.What is the correct closing entry for the revenue accounts?

A company purchased $6,000 worth of supplies in August and recorded the purchase in the Supplies account.On August 31,the fiscal year-end,the physical count of supplies indicates the cost of unused supplies is $3,200.The adjusting entry would include a $2,800 debit to Supplies.

Adjusting entries are made after the preparation of financial statements.

Describe a work sheet and explain why it is useful.

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).

The cash basis of accounting is a system in which revenues are recorded when earned and expenses are recorded when incurred.

Closing entries result in the Dividends account being transferred into net income or net loss for the period ending.

Because it is a necessary financial statement,the work sheet must be prepared according to specified accounting procedures.

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

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

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

Statements that show the financial statements as if proposed transactions had already occurred are called: