Exam 3: The Accounting Information System

Murphy Company sublet a portion of its warehouse for five years at an annual rental of $60,000, beginning on May 1, 2014. The tenant, Sheri Charter, paid one year's rent in advance, which Murphy recorded as a credit to Unearned Rent Revenue. Murphy reports on a calendar-year basis. The adjustment on December 31, 2014 for Murphy should be

One purpose of a trial balance is to prove that debits and credits are equal in the general ledger.

At the time a company prepays a cost

Factors that shape an accounting information system include the

A reversing entry should never be made for an adjusting entry that

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 use reversing entries, what entry should be made on April 1, 2015 when the annual interest payment is received?

Definitions.Provide clear, concise answers for the following. 1. What is the accrual-basis of accounting? 2. What is an accrued expense? 3. What is accrued revenue? 4. What is a prepaid expense? 5. What is unearned revenue? 6. State the rule that indicates which adjusting entries for prepaid and unearned items should be reversed.

All liability accounts and stockholders' equity accounts are increased on the credit side and decreased on the debit side.

Unearned revenue on the books of one company is likely to be

Gregg Corp. reported revenue of $1,450,000 in its accrual basis income statement for the year ended June 30, 2015. Additional information was as follows: Under the cash basis, Gregg should report revenue of

Included in Allen Corp.'s balance sheet at June 30, 2013 is a 10%, $3,000,000 note payable. The note is dated October 1, 2013 and is payable in three equal annual payments of $1,500,000 plus interest. The first interest and principal payment was made on October 1, 2014. In Allen's June 30, 2015 balance sheet, what amount should be reported as accrued interest payable for this note?

Panda Corporation paid cash of $60,000 on June 1, 2014 for one year's rent in advance and recorded the transaction with a debit to Prepaid Rent. The December 31, 2014 adjusting entry is

Which of the following errors will cause an imbalance in the trial balance?

At December 31, 2014, Sue's Boutique had 1,000 gift certificates outstanding, which had been sold to customers during 2014 for $60 each. Sue's operates on a gross profit of 60% of its sales. What amount of revenue pertaining to the 1,000 outstanding gift certificates should be deferred at December 31, 2014?

Reversing entries are made at the end of the accounting cycle to correct errors in the original recording of transactions.

Adjusting entries.Reed Co. wishes to enter receipts and payments in such a manner that adjustments at the end of the period will not require reversing entries at the beginning of the next period. Record the following transactions in the indicated manner and give the adjusting entry on December 31, 2014. (Two entries for each part.)1. An insurance policy for two years was acquired on April 1, 2014 for $18,000.2. Rent of $12,000 for six months for a portion of the building was received on November 1, 2014.

A general journal

The accounting equation must remain in balance

The income statement of Dolan Corporation for 2014 included the following items: The following balances have been excerpted from Dolan Corporation's balance sheets: The cash paid for salaries and wages during 2014 was

The income statement of Dolan Corporation for 2014 included the following items: The following balances have been excerpted from Dolan Corporation's balance sheets: The cash received for interest during 2014 was