Exam 3: Adjusting Accounts for Financial Statements

A company pays its employees $4,000 each Friday,which amounts to $800 per day for the five-day workweek that begins on Monday.If the monthly accounting period ends on Thursday and the employees worked through Thursday,the amount of salaries earned but unpaid at the end of the accounting period is:

Explain why temporary accounts are closed each period.

After posting the entries to close all revenue and expense accounts,the Income Summary account of Cleaver Auto Services has a $4,000 debit balance.This result implies that Cleaver earned a net income of $4,000.

________ basis accounting means that revenues are recognized when cash is received and that expenses are recorded when cash is paid.________ basis accounting means that the financial effects of revenues and expenses are recorded when earned or incurred.

The 12-month period that ends when a company's sales activities are at their lowest level is called the:

Closing entries are designed to transfer the end-of-period balances in the revenue accounts,the expense accounts,and the dividends account to retained earnings.

Reversing entries are recorded in response to external transactions that were created in error during the prior accounting period.

A roofing company collects fees when jobs are complete.The work for one customer,whose job was bid at $3,000,has been completed as of December 31,but the customer has not yet been billed.Assuming adjustments are only made at year-end,what is the adjusting entry the company would need to make on December 31,the calendar year-end?

In accrual accounting,accrued revenues are recorded as liabilities.

All of the following regarding reversing entries are true except:

Werner Company had $1,300 of store supplies at the beginning of the current year.During this year,Werner purchased $6,250 worth of store supplies.On December 31,$1,125 worth of store supplies remained.Calculate the amount of Werner Company's store supplies expense for the current year.

Adjusting entries:

All of the following statements regarding the Income Statement columns on the worksheet are true except:

Which of the following is classified as a current asset?

Asset and liability balances are transferred from the adjusted trial balance to the income statement.

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

Prepaid expenses,depreciation,accrued expenses,unearned revenues,and accrued revenues are all examples of:

The Unadjusted Trial Balance columns of a company's work sheet shows the Store Supplies account with a balance of $750.The Adjustments columns shows a credit of $425 for supplies used during the period.The amount shown as Store Supplies in the Balance Sheet columns of the work sheet is:

At the beginning of the year,Sigma Company's balance sheet reported Total Assets of $195,000; Total Liabilities of $15,000; and Total Paid-in capital of $60,000.During the year,the company reported total revenues of $226,000 and expenses of $175,000.Also,dividends during the year totaled $48,000.Assuming no other changes to Retained earnings,the balance in the Retained earnings account at the end of the year would be:

Temporary accounts include all of the following except: