Exam 3: Adjusting the Accounts

Crue Company had the following transactions during 2018: .Sales of $4,800 on account .Collected $2,000 for services to be performed in 2019 .Paid $1,625 cash in salaries .Purchased airline tickets for $250 in December for a trip to take place in 2019 What is Crue's 2018 net income using accrual accounting-basis after accrual?

Depreciation is the process of

Which of the following would not result in unearned revenue?

Bakesale Enterprises purchased equipment on May 1, 2018 for $6,300. The company expects to use the equipment for 5 years. It has no salvage value. 1. What adjusting journal entry should the company make at the end of each month if monthly financials are prepared (annual depreciation is $1,260)? 2. What is the book value of the equipment at May 31, 2018?

Adjusting entries are required

Which of the following is in accordance with generally accepted accounting principles?

Revaluation of land and buildings is permitted under

Hal Corp. prepared the following income statement using the cash basis of accounting: Additional data: 1. Depreciation on a company automobile for the year amounted to $6,000. This amount is not included in the expenses above. 2. On January 1, 2018, paid for a two-year insurance policy on the automobile amounting to $1,800. This amount is included in the expenses above. Instructions (a) Recast the above income statement on the accrual basis in conformity with generally accepted accounting principles. Show computations and explain each change. (b) Explain which basis (cash or accrual) provides a better measure of income.

Prepare adjusting entries for the following transactions. Omit explanations. 1. Depreciation on equipment is $900 for the accounting period. 2. There was no beginning balance of supplies and purchased $500 of supplies during the period. At the end of the period $150 of supplies were on hand. 3. Prepaid rent had a $1,000 normal balance prior to adjustment. By year end $400 was unexpired.

The book value of a depreciable asset is always equal to its market value because depreciation is a valuation technique.

The going concern assumption is that the business will continue in operation long enough to carry out its existing objectives and commitments.

Management usually desires ________ financial statements and the IRS requires all businesses to file _________ tax returns.

The adjusted trial balance of Rocky Acre Spread Inc. on December 31, 2018 includes the following accounts: Accumulated Depreciation, $6,000; Depreciation Expense, $2,000; Notes Payable $7,500; Interest Expense $150; Utilities Expense, $300; Rent Expense, $500; Service Revenue, $19,600; Salaries and Wages Expense, $6,000; Supplies, $200; Supplies Expense, $1,200; Salaries and Wages Payable, $600. Prepare an income statement for the month of December.

The preparation of adjusting entries is

Jay Farrar Company is a manufacturing company that specializes in writing instruments. The past year was a difficult one for the company, as it sought to retain its share in a market in which the largest competitors were also rapid innovators. Jay Farrar introduced a new product late in the year, even though testing was not complete. It was a pen designed with two cartridges: one supplying ink and the other correction fluid. A person could then switch easily between writing and correcting errors. It was priced fairly high, and was never heavily advertised. Even so, the Correct-O-Pen, as the product was named, was an overwhelming success. The success of the product has Josh Ritter, the manager of the New Products division, worried, however. He was concerned that quality problems would begin occurring, since the longevity of the pen and stability of the correction fluid formulation had not been tested. He did not want sales personnel to get the bonuses that appeared to be indicated, since they might aggressively promote a product that would fail in use. He preferred to complete testing of the pen first, so that more confidence could be placed in the results. Top management, however, declined the tests. Mr. Ritter then instructed you, the accountant, not to prorate payroll taxes or rent expense for the rest of the year, but to show them as current expenses in total. In this way, the new product would appear to be only slightly profitable. Required: 1. Describe the alternatives that you as an accountant would have in this situation. 2. Indicate which alternative is best.

The quality of consistency pertains to the use of the same accounting principles by firms in the same industry.

In general, adjusting entries are required each time financial statements are prepared.

Fugazi City College sold season tickets for the 2018 football season for $240,000. A total of 8 games will be played during September, October and November. Assuming all the games are played, the Unearned Ticket Revenue balance that will be reported on the December 31 balance sheet will be

Husker Du Supplies Inc. purchased a 12-month insurance policy on March 1, 2018 for $1,800. At March 31, 2018, the adjusting journal entry to record expiration of this asset will include a

A company using the same accounting principles from year to year is an application of