Exam 3: The Accounting Information System

Adjusting entries are necessary to 1. obtain a proper matching of revenue and expense. 2. achieve an accurate statement of assets and equities. 3. adjust assets and liabilities to their fair market value.

In November and December 2014, Lane Co., a newly organized magazine publisher, received $60,000 for 1,000 three-year subscriptions at $20 per year, starting with the January 2015 issue. Lane included the entire $60,000 in its 2014 income tax return. What amount should Lane report in its 2014 income statement for subscriptions revenue?

Which of the following would not be a correct form for an adjusting entry?

Terminology.In the space provided at the right, write the word or phrase that is defined or indicated. 1. Revenue and expense accounts. 1." 2. An optional step in the accounting cycle. 2." 3. A revenue collected, but not recognized. 3. 4. A revenue recognized, but not collected. 4. 5. Asset, liability, and equity accounts. 5. 6. An expense paid, but not incurred. 6. 7. An expense incurred, but not paid. 7.

An accrued expense can best be described as an amount

A company receives interest on a $70,000, 8%, 5-year note receivable each April 1. At December 31, 2014, the following adjusting entry was made to accrue interest receivable: Interest Receivable 4,200 Interest Revenue 4,200 Assuming that the company does not use reversing entries, what entry should be made on April 1, 2015 when the annual interest payment is received?

Lopez Company received $14,400 on April 1, 2014 for one year's rent in advance and recorded the transaction with a credit to a nominal account. The December 31, 2014 adjusting entry is

An adjusted trial balance that shows equal debit and credit columnar totals proves the accuracy of the adjusting entries.

Gibson Company paid $12,000 on June 1, 2014 for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2014 adjusting entry is

Pappy Corporation received cash of $24,000 on September 1, 2014 for one year's rent in advance and recorded the transaction with a credit to Unearned Rent Revenue. The December 31, 2014 adjusting entry is

Adjusting entries that should be reversed include

An optional step in the accounting cycle is the preparation of

An accounting record into which the essential facts and figures in connection with all transactions are first recorded is called the

During the first year of Wilkinson Co.'s operations, all purchases were recorded as assets. Supplies in the amount of $25,800 were purchased. Actual year-end supplies amounted to $5,600. The adjusting entry for store supplies will

Eaton Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service Revenue. This account had a balance of $3,800,000 at December 31, 2014 before year-end adjustment. Service contract costs are charged as incurred to the Service Contract Expense account, which had a balance of $900,000 at December 31, 2014.Service contracts still outstanding at December 31, 2014 expire as follows: What amount should be reported as Unearned Service Revenue in Eaton's December 31, 2014 balance sheet?

Accrual accounting.Yates Company's records provide the following information concerning certain account balances and changes in these account balances during the current year. Transaction information is missing from each item below. InstructionsPrepare the entry to record the missing information for each account. (Consider each inde-pendently.)1. Accounts Receivable: Jan. 1, balance $41,000, Dec. 31, balance $55,000, uncollectible accounts written off during the year, $6,000; accounts receivable collected during the year, $139,000. Prepare the entry to record sales revenue.2. Allowance for Doubtful Accounts: Jan. 1, balance $4,000, Dec. 31, balance $7,500, uncollectible accounts written off during the year, $20,000. Prepare the entry to record bad debt expense.3. Accounts Payable: Jan. 1, balance $25,000, Dec. 31, balance $54,000, purchases on account for the year, $120,000. Prepare the entry to record payments on account.4. Interest Receivable: Jan. 1 accrued, $3,000, Dec. 31 accrued, $2,100, recognized for the year, $35,000. Prepare the entry to record cash interest received.

Jim Yount, M.D., keeps his accounting records on the cash basis. During 2015, Dr. Yount collected $350,000 from his patients. At December 31, 2014, Dr. Yount had accounts receivable of $40,000. At December 31, 2015, Dr. Yount had accounts receivable of $70,000 and unearned revenue of $10,000. On the accrual basis, how much was Dr. Yount's patient service revenue for 2015?

At the end of 2014, Drew Company made four adjusting entries for the following items:1. Depreciation expense, $25,000.2. Expired insurance, $2,200 (originally recorded as prepaid insurance.)3. Interest payable, $6,000."4. Rent receivable, $10,000.In the normal situation, to facilitate subsequent entries, the adjusting entry or entries that may be reversed is (are)"

Adjusting entries for prepayments record the portion of the prepayment that represents the expense incurred or the revenue recognized in the current accounting period.

An accrued revenue can best be described as an amount