Exam 3: Adjusting the Accounts

Niagara Corporation purchased a one-year insurance policy in January 2010 for $66,000. The insurance policy is in effect from March 2010 through February 2011. If the company neglects to make the proper year-end adjustment for the expired insurance

An adjusting entry recording accrued salaries for a period indicates that Salaries Expense has been ________________ but has not yet been ________________ or recorded.

Adjusting entries are not necessary if the trial balance debit and credit columns balances are equal.

Wham Company accumulates the following adjustment data at December 31. 1. Revenue of $900 collected in advance has been earned. 2. Salaries of $600 are unpaid. 3. Prepaid rent totaling $450 has expired. 4. Supplies of $550 have been used. 5. Revenue earned but unbilled total $750. 6. Utility expenses of $200 are unpaid. 7. Interest of $250 has accrued on a note payable. Instructions (a) For each of the above items indicate: 1. The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense). 2. The account relationship (asset/liability, liability/revenue, etc.). 3. The status of account balances before adjustment (understatement or overstatement). 4. The adjusting entry. (b) Assume net income before the adjustments listed above was $14,500. What is the adjusted net income? Prepare your answer in the tabular form presented below.

The fiscal year of a business is usually determined by

In general, the shorter the time period, the difficulty of making the proper adjustments to accounts

Can financial statements be prepared directly from the adjusted trial balance?

Arrow Company prepares monthly financial statements. On July 1, the Office Supplies account had a balance of $3,000. During July, additional office supplies were purchased for $3,800 and that amount was debited to Office Supplies Expense. On July 31, a physical count of office supplies revealed that there was $2,400 on hand. Prepare the adjusting journal entry that Arrow Company should make on July 31. 2. Fletching Rental Agency prepares monthly financial statements. On September 1, a check for $7,200 was received from a tenant for six months' rent. The full amount was credited to Rent Revenue. Prepare the adjusting entry the company should make on September 30.

The adjusted trial balance of the Neighborly Lane Paving Company includes the following balance sheet accounts that frequently require adjustment. For each account, indicate (a) the type of adjusting entry (prepaid expenses, unearned revenues, accrued revenues, or accrued expenses) and (b) the related account in the adjusting entry.

Revenue received before it is earned and expenses paid before being used or consumed are both initially recorded as liabilities.

Depreciation expense for a period is an ______________ rather than a factual measurement of cost that has expired.

Prepare the required end-of-period adjusting entries for each independent case listed below. Case 1 Moonbeam Company began the year with a $3,000 balance in the Office Supplies account. During the year, $8,500 worth of additional office supplies were purchased. A physical count of office supplies on hand at the end of the year revealed that $6,400 worth of office supplies had been used during the year. No adjusting entry has been made until year end. Case 2 Western Company has a calendar year-end accounting period. On July 1, the company purchased office equipment for $30,000. It is estimated that the office equipment will depreciate $500 each month. No adjusting entry has been made until year end. Case 3 Ranch Realty is in the business of renting several apartment buildings and prepares monthly financial statements. It has been determined that 3 tenants in $700 per month apartments and one tenant in the $1,000 per month apartment had not paid their August rent as of August 31st.

Ben Cartwright Pest Control has the following balances in selected accounts on December 31, 2010. All of the accounts have normal balances. The information below has been gathered at December 31, 2010. 1. Depreciation on the equipment for 2010 is $1,250. 2. Ben Cartwright Pest Control borrowed $12,500 by signing a 10%, one-year note on July 1, 2010. 3. Ben Cartwright Pest Control paid $1,980 for 12 months of insurance coverage on October 1, 2010. 4. Ben Cartwright Pest Control pays its employees total salaries of $10,000 every Monday for the preceding 5-day week (Monday-Friday). On Monday, December 27, 2010, employees were paid for the week ending December 24, 2010. All employees worked the five days ending December 31, 2010. 5. Ben Cartwright Pest Control performed disinfecting services for a client in December 2010. The client will be billed $3,000. 6. On December 1, 2010, Ben Cartwright Pest Control collected $36,000 for disinfecting processes to be performed from December 1, 2010, through May 31, 2010. 7. A count of supplies on December 31, 2010, indicates that supplies of $750 are on hand. Instructions Prepare in journal form with explanations, the adjusting entries for the seven items listed for Ben Cartwright Pest Control.

Daily Printings sold annual subscriptions to their magazine for $24,000 in December, 2009. The magazine is published monthly. The new subscribers received their first magazine in January, 2010. 1. What adjusting entry should be made in January if the subscriptions were originally recorded as a liability? 2. What amount will be reported on the January 2010 balance sheet for Unearned Revenue?

If business pays rent in advance and debits a Prepaid Rent account, the company receiving the rent payment will credit

Many business transactions affect more than one time period.

An accounting time period that is one year in length, but does not begin on January 1, is referred to as

Gwynn Company has an accounting fiscal year which ends on June 30. The company also has a policy of paying the weekly payroll on Friday. Payroll records indicate the following salary costs were incurred. Instructions (a) Prepare any necessary adjusting journal entries that should be made at year end on June 30. (b) Prepare the journal entry to record the payment of the weekly payroll on July 2.

Adjusting entries are required

On July 1, 2010, Jeffrey Underwriters Associates received $10,000 from a client for a 2-year insurance policy. Instructions Prepare the necessary journal entries for Jeffrey Underwriters Associates on July 1 and December 31.