Exam 3: Adjusting the Accounts

O.K.C. Company collected $8,400 in May of 2010 for 4 months of service which would take place from October of 2010 through January of 2011. The revenue reported from this transaction during 2010 would be

Use the following information for questions 63-64. Lamb Company had the following transactions during 2010. $\bullet$ Sales of $4,500 on account $\bullet$ Collected $2,000 for services to be performed in 2011 $\bullet$ Paid $625 cash in salaries $\bullet$ Purchased airline tickets for $250 in December for a trip to take place in 2011 -What is Lamb's 2010 net income using accrual accounting?

A small company may be able to justify using a cash basis of accounting if they have

The ______________ principle gives accountants guidance as to when revenue is to be recorded.

On July 1, 2010, Patrick Company pays $8,000 to its insurance company for a 2-year insurance policy. Instructions Prepare the necessary journal entries for Patrick on July 1 and December 31.

Adjusting entries can be classified as

Trench and Fog Garment Company purchased equipment on June 1 for $81,000, paying $18,000 cash and signing a 12%, 2-month note for the remaining balance. The equipment is expected to depreciate $18,000 each year. Trench and Fog Garment Company prepares monthly financial statements. Instructions (a) Prepare the general journal entry to record the acquisition of the equipment on June 1st. (b) Prepare any adjusting journal entries that should be made on June 30th. (c) Show how the equipment will be reflected on Trench and Fog Garment Company's balance sheet on June 30th.

Determine the impact on the balance sheet accounts if the following information is not used to adjust the accounts of Fortress Company for the month of January, 2010. Round answers to the nearest dollar. 1. The company rents extra office space to B & J, CPAs. B & J pays the $12,000 rent annually on January 1. 2. The company has an outstanding loan to its President in the amount of $100,000. The loan accrues interest at the annual rate of 4%. Principal and interest are due January 1, 2014. 3. The company completed work on a project during January that was not yet billed to the client. The client will be charged $2,500.

James Corporation purchased a one-year insurance policy in January 2010 for $48,000. The insurance policy is in effect from May 2010 through April 2011. If the company neglects to make the proper year-end adjustment for the expired insurance

Use the following information for questions 63-64. Lamb Company had the following transactions during 2010. $\bullet$ Sales of $4,500 on account $\bullet$ Collected $2,000 for services to be performed in 2011 $\bullet$ Paid $625 cash in salaries $\bullet$ Purchased airline tickets for $250 in December for a trip to take place in 2011 -What is Lamb's 2010 net income using cash basis accounting?

The matching principle requires that efforts be matched with accomplishments.

Which one of the following is not a justification for adjusting entries?

Accrued revenues are

You are visiting with a friend, Jim Bede, who wants to start a new business. During discussions on forming the business, Jim makes this statement: Our business will have accounts receivable and accounts payable. It will also acquire a substantial amount of computers and equipment. Will it be acceptable to use the cash basis of accounting? Prepare a response for Jim.

The matching principle requires that expenses be matched with revenues.

Accrued revenues are revenues which have been received but not yet earned.

A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be earned?

The adjusted trial balance of Wilcox Company at December 31,2010 includes the following accounts: A. Wilcox, Capital $12,600; A. Wilcox, Drawing $6,000; Service Revenue $35,000; Salaries Expense $13,000; Insurance Expense $2,000; Rent Expense $3,500; Supplies Expense $500; and Depreciation Expense $1,000. Prepare an owner's equity statement for the year.

If a business has several types of long-term assets such as equipment, buildings, and trucks,

As prepaid expenses expire with the passage of time, the correct adjusting entry will be a